March 31, 2024 UNITED BANKSHARES, INC. AND SUBSIDIARIES FORM10-Q 2 Assets Cash and due from banks Interest-bearing deposits with other banks Federal funds sold Total cash and cash equivalents Securities available for sale at estimated fair value (amortized cost-$1,654,657 at September 30, 2017 and $1,277,639 at December 31, 2016) Securities held to maturity (estimated fair value-$19,909 at September 30, 2017 and $31,178 at December 31, 2016) Other investment securities Loans held for sale (at fair value-$311,186 at September 30, 2017 and $0 at December 31, 2016) Loans Less: Unearned income Loans net of unearned income Less: Allowance for loan losses Net loans Bank premises and equipment Goodwill Accrued interest receivable Other assets TOTAL ASSETS Liabilities Deposits: Noninterest-bearing Interest-bearing Total deposits Borrowings: Federal funds purchased Securities sold under agreements to repurchase Federal Home Loan Bank borrowings Other long-term borrowings Reserve for lending-related commitments Accrued expenses and other liabilities TOTAL LIABILITIES Shareholders’ Equity Preferred stock, $1.00 par value;Authorized-50,000,000 shares, none issued Common stock, $2.50 par value;Authorized-200,000,000 shares;issued-105,011,878 and 81,068,252 at September 30, 2017 and December 31, 2016, respectively, including 28,752 and 28,278 shares in treasury at September 30, 2017 and December 31, 2016, respectively Surplus Retained earnings Accumulated other comprehensive loss Treasury stock, at cost TOTAL SHAREHOLDERS’ EQUITY TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY Interest income Interest and fees on loans Interest on federal funds sold and other short-term investments Interest and dividends on securities: Taxable Tax-exempt Total interest income Interest expense Interest on deposits Interest on short-term borrowings Interest on long-term borrowings Total interest expense Net interest income Provision for loan losses Net interest income after provision for loan losses Other income Fees from trust and brokerage services Fees from deposit services Bankcard fees and merchant discounts Other service charges, commissions, and fees Income from bank-owned life insurance Income from mortgage banking activities Other income Total other-than-temporary impairment losses Portion of loss recognized in other comprehensive income Net other-than-temporary impairment losses Net gains on sales/calls of investment securities Net investment securities gains Total other income Other expense Employee compensation Employee benefits Net occupancy expense Other real estate owned (OREO) expense Equipment expense Data processing expense Bankcard processing expense FDIC insurance expense Other expense Total other expense Income before income taxes Income taxes Net income Earnings per common share: Basic Diluted Dividends per common share Average outstanding shares: Basic Diluted Net income Change in net unrealized gain (loss) onavailable-for-sale (AFS) Accretion of the net unrealized loss on the transfer of AFS securities toheld-to-maturity (HTM) securities, net of tax Change in pension plan assets, net of tax Comprehensive income, net of tax Balance at January 1, 2017 Comprehensive income: Net income Other comprehensive income, net of tax: Total comprehensive income, net of tax Stock based compensation expense Acquisition of Cardinal Financial Corporation (23,690,589 shares) Purchase of treasury stock (82 shares) Distribution of treasury stock from deferred compensation plan (28 shares) Cash dividends ($0.99 per share) Grant of restricted stock (89,475 shares) Forfeiture of restricted stock (420 shares) Common stock options exercised (163,562 shares) Balance at September 30, 2017 NET CASH PROVIDED BY OPERATING ACTIVITIES INVESTING ACTIVITIES Proceeds from maturities and calls of securities held to maturity Proceeds from sales of securities available for sale Proceeds from maturities and calls of securities available for sale Purchases of securities available for sale Purchases of bank premises and equipment Proceeds from sales of bank premises and equipment Purchases of other investment securities Proceeds from sales and redemptions of other investment securities Proceeds from the sales of OREO properties Acquisition of subsidiaries, net of cash paid Net change in loans NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES FINANCING ACTIVITIES Cash dividends paid Acquisition of treasury stock Proceeds from exercise of stock options Repayment of long-term Federal Home Loan Bank borrowings Proceeds from issuance of long-term Federal Home Loan Bank borrowings Distribution of treasury stock for deferred compensation plan Changes in: Deposits Federal funds purchased, securities sold under agreements to repurchase and other short-term borrowings NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES Increase in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of period Supplemental information Noncash investing activities: Transfers of loans to OREO (Unaudite statements. proportional amortization method. Contractually required principal and interest at acquisition Contractual cash flows not expected to be collected Expected cash flows at acquisition Interest component of expected cash flows Basis in acquired loans at acquisition – estimated fair value Purchase price: Value of common shares issued (23,690,589 shares) Fair value of stock options assumed Cash for fractional shares Total purchase price Identifiable assets: Cash and cash equivalents Investment securities Loans held for sale Loans Premises and equipment Core deposit intangibles George Mason trade name intangible Other assets Total identifiable assets Identifiable liabilities: Deposits Short-term borrowings Long-term borrowings Unfavorable lease liability Other liabilities Total identifiable liabilities Preliminary fair value of net assets acquired including identifiable intangible assets Preliminary resulting goodwill Total Revenues (1) Net Income Contractually required principal and interest at acquisition Contractual cash flows not expected to be collected Expected cash flows at acquisition Interest component of expected cash flows Basis in acquired loans at acquisition – estimated fair value Purchase price: Value of common shares issued (6,527,746 shares) Fair value of stock options assumed Cash for fractional shares Total purchase price Identifiable assets: Cash and cash equivalents Investment securities Loans Premises and equipment Core deposit intangibles Other assets Total identifiable assets Identifiable liabilities: Deposits Short-term borrowings Long-term borrowings Other liabilities Total identifiable liabilities Fair value of net assets acquired including identifiable intangible assets Resulting goodwill Sale U.S. Treasury securities and obligations of U.S. Government corporations and agencies State and political subdivisions Residential mortgage-backed securities Agency Non-agency Commercial mortgage-backed securities Agency Asset-backed securities Trust preferred collateralized debt obligations Single issue trust preferred securities Other corporate securities Marketable equity securities Total U.S. Treasury securities and obligations of U.S. Government corporations and agencies State and political subdivisions Residential mortgage-backed securities Agency Non-agency Commercial mortgage-backed securities Agency Asset-backed securities Trust preferred collateralized debt obligations Single issue trust preferred securities Other corporate securities Marketable equity securities Total U.S. Treasury securities and obligations of U.S. Government corporations and agencies State and political subdivisions Residential mortgage-backed securities Agency Non-agency Commercial mortgage-backed securities Agency Asset-backed securities Trust preferred collateralized debt obligations Single issue trust preferred securities Marketable equity securities Total U.S. Treasury securities and obligations of U.S. Government corporations and agencies State and political subdivisions Residential mortgage-backed securities Agency Non-agency Commercial mortgage-backed securities Agency Asset-backed securities Trust preferred collateralized debt obligations Single issue trust preferred securities Marketable equity securities Total Proceeds from sales and calls Gross realized gains Gross realized losses Generally, the significant amount of gross unrealized losses on available for sale securities at March 31, 2024 was the result of rising interest rates. available to the municipality. The majority of the portfolio was rated AA or higher, and by type. March 31, 2024. March 31, 2024. Class Senior – Bank Mezzanine – Bank (now in senior position) Mezzanine – Bank Mezzanine – Bank & Insurance (combination) Totals Balance of cumulative credit losses at beginning of period Additional credit losses on securities for which OTTI was previously recognized Reductions during the period for securities for which the amount previously recognized in other comprehensive income was recognized in earnings Balance of cumulative credit losses at end of period at March 31, 2024. Due in one year or less Due after one year through five years Due after five years through ten years Due after ten years Marketable equity securities Total U.S. Treasury securities and obligations of U.S. Government corporations and agencies State and political subdivisions Residential mortgage-backed securities Agency Single issue trust preferred securities Other corporate securities Total U.S. Treasury securities and obligations of U.S. Government corporations and agencies State and political subdivisions Residential mortgage-backed securities Agency Single issue trust preferred securities Other corporate securities Total first quarter. There were no Due in one year or less Due after one year through five years Due after five years through ten years Due after ten years Total its cost method securities. AND LEASES Commercial, financial and agricultural: Owner-occupied commercial real estate Nonowner-occupied commercial real estate Other commercial loans Total commercial, financial & agricultural Residential real estate Construction & land development Consumer: Bankcard Other consumer Total gross loans Accretable yield at the beginning of the period Accretion (including cash recoveries) Additions Net reclassifications to accretable from non-accretable Disposals (including maturities, foreclosures, and charge-offs) Accretable yield at the end of the period United considers a loan to be past due when it is 30 days or more past its contractual payment due date. loan will not be placed on nonaccrual status. When interest accruals are discontinued, unpaid interest recognized in income in the current year is reversed, and unpaid interest accrued in prior years is charged to the allowance for Commercial real estate: Owner-occupied Nonowner-occupied Other commercial Residential real estate Construction & land development Consumer: Bankcard Other consumer Total Commercial real estate: Owner-occupied Nonowner-occupied Other commercial Residential real estate Construction & land development Consumer: Bankcard Other consumer Total Troubled Debt Restructurings Commercial real estate: Owner-occupied Nonowner-occupied Other commercial Residential real estate Construction & land development Consumer: Bankcard Other consumer Total Commercial real estate: Owner-occupied Nonowner-occupied Other commercial Residential real estate Construction & land development Consumer: Bankcard Other consumer Total Commercial real estate: Owner-occupied Nonowner-occupied Other commercial Residential real estate Construction & land development Consumer: Bankcard Other consumer Total loans and leases: Commercial real estate: Owner-occupied Nonowner-occupied Other commercial Residential real estate Construction & land development Consumer: Bankcard Other consumer Total nonaccrual loans was insignificant during the three months ended March 31, 2024 and 2023. As of September 30, 2017 Grade: Pass Special mention Substandard Doubtful Total As of December 31, 2016 Grade: Pass Special mention Substandard Doubtful Total As of September 30, 2017 Grade: Pass Special mention Substandard Doubtful Total As of December 31, 2016 Grade: Pass Special mention Substandard Doubtful Total With no related allowance recorded: Commercial real estate: Owner-occupied Nonowner-occupied Other commercial Residential real estate Construction & land Consumer: Bankcard Other consumer With an allowance recorded: Commercial real estate: Owner-occupied Nonowner-occupied Other commercial Residential real estate Construction & land Consumer: Bankcard Other consumer Total: Commercial real estate: Owner-occupied Nonowner-occupied Other commercial Residential real estate Construction & land Consumer: Bankcard Other consumer With no related allowance recorded: Commercial real estate: Owner-occupied Nonowner-occupied Other commercial Residential real estate Construction & land development Consumer: Bankcard Other consumer With an allowance recorded: Commercial real estate: Owner-occupied Nonowner-occupied Other commercial Residential real estate Construction & land development Consumer: Bankcard Other consumer Total: Commercial real estate: Owner-occupied Nonowner-occupied Other commercial Residential real estate Construction & land development Consumer: Bankcard Other consumer With no related allowance recorded: Commercial real estate: Owner-occupied Nonowner-occupied Other commercial Residential real estate Construction & land development Consumer: Bankcard Other consumer With an allowance recorded: Commercial real estate: Owner-occupied Nonowner-occupied Other commercial Residential real estate Construction & land development Consumer: Bankcard Other consumer Total: Commercial real estate: Owner-occupied Nonowner-occupied Other commercial Residential real estate Construction & land development Consumer: Bankcard Other consumer Land Development specific review. Allowance for Allowance for Loan Losses: Beginning balance Charge-offs Recoveries Provision Ending balance Allowance for Allowance for Loan Losses: Beginning balance Charge-offs Recoveries Provision Ending balance Ending Balance: individually evaluated for impairment Ending Balance: collectively evaluated for impairment Ending Balance: loans acquired with deteriorated credit quality Financing receivables: Ending balance Ending Balance: individually evaluated for impairment Ending Balance: collectively evaluated for impairment Ending Balance: loans acquired with deteriorated credit quality Allowance for Loan Losses: Beginning balance Charge-offs Recoveries Provision Ending balance Ending Balance: individually evaluated for impairment Ending Balance: collectively evaluated for impairment Ending Balance: loans acquired with deteriorated credit quality Financing receivables: Ending balance Ending Balance: individually evaluated for impairment Ending Balance: collectively evaluated for impairment Ending Balance: loans acquired with deteriorated credit quality Amortized intangible assets: Core deposit intangible assets Non-amortized intangible assets: George Mason trade name Goodwill not subject to amortization Amortized intangible assets: Core deposit intangible assets Goodwill not subject to amortization Goodwill at December 31, 2016 Addition to goodwill from Bank of Georgetown acquisition Preliminary addition to goodwill from Cardinal acquisition Goodwill at September 30, 2017 Year 2017 2018 2019 2020 2021 and thereafter 2023: March 31, 2024 to manage interest rate risk on its long-term debt. Year 2017 2018 2019 2020 2021 and thereafter Total March 31, 2024 and December 31, 2023. six years. the following table on a net basis. The related fair value on a net basis approximates zero. Derivatives designated as hedging instruments Fair Value Hedges: Interest rate swap contracts (hedging commercial loans) Total derivatives designated as hedging instruments Derivatives not designated as hedging instruments Interest rate swap contracts TBA mortgage-backed securities Interest rate lock commitments Total derivatives not designated as hedging instruments Total asset derivatives Derivatives designated as hedging instruments Fair Value Hedges: Interest rate swap contracts Total derivatives designated as hedging instruments Derivatives not designated as hedging instruments Interest rate swap contracts Forward loan sales commitments Interest rate lock commitments Total derivatives not designated as hedging instruments Total liability derivatives 2023. Derivatives in hedging relationships Fair Value Hedges: Interest rate swap contracts Total derivatives in hedging relationships Derivatives not designated as hedging instruments Forward loan sales commitments TBA mortgage-backed securities Interest rate lock commitments Total derivatives not designated as hedging instruments Total derivatives Derivatives in fair value hedging relationships Fair Value Hedges: Interest rate swap contracts Cash Flow Hedges: Forward loan sales commitments Total derivatives in hedging relationships Derivatives not designated as hedging instruments Forward loan sales commitments TBA mortgage-backed securities Interest rate lock commitments Total derivatives not designated as hedging instruments Total derivatives actual sale or immediate statements. which is measured using valuations from investors for loans with similar characteristics (“Level 2”) with some adjusted for the Company’s actual sales experience versus the investor’s indicated Description Assets Available for sale debt securities: U.S. Treasury securities and obligations of U.S. Government corporations and agencies State and political subdivisions Residential mortgage-backed securities Agency Non-agency Commercial mortgage-backed securities Agency Asset-backed securities Trust preferred collateralized debt obligations Single issue trust preferred securities Other corporate securities Total available for sale debt securities Available for sale equity securities: Financial services industry Equity mutual funds (1) Other equity securities Total available for sale equity securities Total available for sale securities Loans held for sale Derivative financial assets: Interest rate swap contracts Interest rate lock commitments TBA mortgage-backed securities Total derivative financial assets Liabilities Description Derivative financial liabilities: Interest rate swap contracts Forward sales commitments Interest rate lock commitments Total derivative financial liabilities Description Assets Available for sale debt securities: U.S. Treasury securities and obligations of U.S. Government corporations and agencies State and political subdivisions Residential mortgage-backed securities Agency Non-agency Asset-backed securities Commercial mortgage-backed securities Agency Trust preferred collateralized debt obligations Single issue trust preferred securities Other corporate securities Total available for sale debt securities Available for sale equity securities: Financial services industry Equity mutual funds (1) Other equity securities Total available for sale equity securities Total available for sale securities Derivative financial assets: Interest rate swap contracts Liabilities Derivative financial liabilities: Interest rate swap contracts 2023. Balance, beginning of period Total gains or losses (realized/unrealized): Included in earnings (or changes in net assets) Included in other comprehensive income Sales Balance, end of period The amount of total gains or losses for the period included in earnings (or changes in net assets) attributable to the change in unrealized gains or losses relating to assets still held at reporting date Balance, beginning of period Acquired in Cardinal merger Originations Sales Total gains or losses during the period recognized in earnings Transfers in and/or out of Level 3 Balance, end of period The amount of total gains or losses for the period included in earnings (or changes in net assets) attributable to the change in unrealized gains or losses relating to assets still held at reporting date Balance, beginning of period Acquired in Cardinal merger Transfers other Balance, end of period The amount of total gains or losses for the period included in earnings (or changes in net assets) attributable to the change in unrealized gains or losses relating to assets still held at reporting date value. The amount of total gains or losses for the period included in earnings (or changes in net assets) attributable to the change in unrealized gains or losses related to assets still held at the reporting date are recorded in Income from mortgage banking activities in the Consolidated Statements of Income. Description Assets Loans held for sale Income from mortgage banking activities Description Assets Loans held for sale statements if not considered significant using observable market data. Likewise, values for inventory and accounts receivables collateral are based on financial statement balances or aging reports 2023. Description Assets Impaired Loans OREO Description Assets Impaired Loans OREO September 30, 2017 Cash and cash equivalents Securities available for sale Securities held to maturity Other securities Loans held for sale Loans Derivative financial assets Deposits Short-term borrowings Long-term borrowings Derivative financial liabilities December 31, 2016 Cash and cash equivalents Securities available for sale Securities held to maturity Other securities Loans held for sale Loans Derivative financial assets Deposits Short-term borrowings Long-term borrowings Derivative financial liabilities during any calendar year is Outstanding at January 1, 2017 Assumed in Cardinal merger Granted Exercised Forfeited or expired Outstanding at September 30, 2017 Exercisable at September 30, 2017 Nonvested at January 1, 2017 Granted Vested Forfeited or expired Nonvested at September 30, 2017 2024: As of March 31, 2024, the total unrecognized compensation cost related to nonvested restricted stock awards was $10,971 with a weighted-average expense recognition period of 1.6 years. Outstanding at January 1, 2017 Granted Vested Forfeited Outstanding at September 30, 2017 2023. Service cost Interest cost Expected return on plan assets Recognized net actuarial loss Net periodic pension (benefit) cost Weighted-Average Assumptions: Discount rate Expected return on assets Rate of compensation increase (prior to age 45) Rate of compensation increase Net Income Available for sale (“AFS”) securities: AFS securities with OTTI charges during the period Related income tax effect Less: OTTI charges recognized in net income Related income tax benefit Reclassification of previous noncredit OTTI to credit OTTI Related income tax benefit Net unrealized (losses) gains on AFS securities with OTTI AFS securities – all other: Change in net unrealized gain on AFS securities arising during the period Related income tax effect Net reclassification adjustment for (gains) losses included in net income Related income tax expense (benefit) Net effect of AFS securities on other comprehensive income Held to maturity (“HTM”) securities: Accretion on the unrealized loss for securities transferred from AFS to the HTM investment portfolio prior to call or maturity Related income tax expense Net effect of HTM securities on other comprehensive income Pension plan: Recognized net actuarial loss Related income tax benefit Net effect of change in pension plan asset on other Total change in other comprehensive income Total Comprehensive Income Balance at January 1, 2017 Other comprehensive income before reclassification Amounts reclassified from accumulated other comprehensive income Net current-period other comprehensive income, net of tax Balance at September 30, 2017 March 31, 2024 Details about AOCI Components Affected Line Item in the Statement Where Net Income is Presented Available for sale (“AFS”) securities: Reclassification of previous noncredit OTTI Net reclassification adjustment for losses Related income tax effect Pension plan: Recognized net actuarial loss Related income tax effect Total reclassifications for the period Distributed earnings allocated to common stock Undistributed earnings allocated to common stock Net earnings allocated to common shareholders Average common shares outstanding Equivalents from stock options Average diluted shares outstanding Earnings per basic common share Earnings per diluted common share At March 31, 2024 and December 31, 2023, United’s investment (maximum exposure to loss) in these trusts w Description Issuance Date Interest Rate Maturity Date Century Trust United Statutory Trust III United Statutory Trust IV United Statutory Trust V United Statutory Trust VI Premier Statutory Trust II Premier Statutory Trust III Premier Statutory Trust IV Premier Statutory Trust V Centra Statutory Trust I Centra Statutory Trust II Virginia Commerce Trust II Virginia Commerce Trust III Cardinal Statutory Trust I UFBC Capital Trust I Trust preferred securities these low income housing and community development partnerships were $90,919 and $87,554, respectively, while related unfunded commitments were $65,039 and $63,539, respectively. As Net interest income Provision for loans losses Other income Other expense Income taxes Net income (loss) Total assets (liabilities) Average assets (liabilities) Net interest income Provision for loans losses Other income Other expense Income taxes Net income (loss) Total assets (liabilities) Average assets (liabilities) Net interest income Provision for loans losses Other income Other expense Income taxes Net income (loss) Total assets (liabilities) Average assets (liabilities) Net interest income Provision for loans losses Other income Other expense Income taxes Net income (loss) Total assets (liabilities) Average assets (liabilities) the approval by the stockholders of Piedmont. reports and filings, in press releases and in oral statements, involve numerous assumptions, risks and uncertainties. RECENT DEVELOPMENTS During the Based on this consolidation of INTRODUCTION The following discussion and analysis presents the significant changes in financial condition and the results of operations of United and its subsidiaries for the periods indicated below. This discussion and the unaudited consolidated financial statements and the notes to unaudited Consolidated Financial Statements include the accounts of United Bankshares, Inc. and its wholly-owned subsidiaries, unless otherwise indicated. Management has evaluated all significant events and transactions that occurred after This discussion and analysis should be read in conjunction with the unaudited Consolidated Financial Statements and accompanying notes thereto, which are included elsewhere in this document. USE OFNON-GAAP FINANCIAL MEASURES This discussion and analysis contains 56 Generally, United has presented 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, thisnon-GAAP information should be considered supplemental in nature and not as a substitute for related financial information prepared in accordance with GAAP. Where thenon-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 thenon-GAAP financial measure, can be found within this discussion and analysis. Investors should recognize that United’s presentation of thisnon-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,☒ September 30, 2017☐ 0-13322
Symbol(s)
on which registeredand posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation (§and post such files). Act:Act.Large accelerated filer ☒ Accelerated filer ☐ Non-accelerated filer ☐ (Do not check if a smaller reporting company) Smaller reporting company ☐ Emerging growth company ☐ Indicatenumber of registrant had outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.Class - Common Stock, $2.50 Par Value;104,992,423shares outstanding as ofOctober 31, 2017.par value per share, outstanding.September 30, 2017March 31, 2024 and December 31, 2016,2023, consolidated balance sheets of United Bankshares, Inc. and Subsidiaries (“United” or the “Company”), consolidated statements of income and comprehensive income for the three and nine months ended September 30, 2017March 31, 2024 and 2016,2023, the related consolidated statement of changes in shareholders’ equity for the ninethree months ended September 30, 2017,March 31, 2024 and 2023, the related condensed consolidated statements of cash flows for the ninethree months ended September 30, 2017March 31, 2024 and 2016,2023, and the notes to consolidated financial statements appear on the following pages.(Dollars in thousands, except par value) September 30
2017 December 31
2016 (Unaudited) (Note 1) $ 212,692 $ 175,468 1,533,558 1,258,334 787 725 1,747,037 1,434,527 1,649,634 1,259,214 20,335 33,258 166,756 111,166 315,031 8,445 13,156,854 10,356,719 (16,386 ) (15,582 ) 13,140,468 10,341,137 (74,926 ) (72,771 ) 13,065,542 10,268,366 104,311 75,909 1,487,607 863,767 51,607 39,400 522,118 414,840 $ 19,129,978 $ 14,508,892 $ 4,134,019 $ 3,171,841 9,741,278 7,625,026 13,875,297 10,796,867 25,800 22,235 316,236 237,316 1,272,115 897,707 242,131 224,319 804 1,044 133,752 93,657 15,866,135 12,273,145 0 0 262,530 202,671 2,126,914 1,205,778 909,556 872,990 (34,163 ) (44,717 ) (994 ) (975 ) 3,263,843 2,235,747 $ 19,129,978 $ 14,508,892
2024
2023 $ 238,148 $ 257,153 1,493,312 1,340,620 1,186 1,170 1,732,646 1,598,943 3,613,975 3,786,377 1,001 1,003 8,762 8,945 330,781 329,429 44,426 56,261 21,532,568 21,373,185 (12,492 ) (14,101 ) 21,520,076 21,359,084 (262,905 ) (259,237 ) 21,257,171 21,099,847 190,988 190,520 86,074 86,986 1,888,889 1,888,889 4,241 4,554 490,596 486,895 113,815 111,420 265,433 276,413 $ 30,028,798 $ 29,926,482 $ 6,017,349 $ 6,149,080 16,902,397 16,670,239 22,919,746 22,819,319 207,727 196,095 1,460,415 1,510,487 279,019 278,616 42,915 44,706 92,266 92,885 219,269 213,134 25,221,357 25,155,242 0 0 356,341 355,644 3,183,198 3,181,764 1,782,220 1,745,619 (260,992 ) (259,681 ) (253,326 ) (252,106 ) 4,807,441 4,771,240 $ 30,028,798 $ 29,926,482 (Dollars in thousands, except per share data) Three Months Ended Nine Months Ended September 30 September 30 2017 2016 2017 2016 $ 155,819 $ 112,273 $ 405,660 $ 314,936 4,874 1,107 11,345 2,371 9,406 8,764 26,226 24,728 1,484 993 4,057 2,685 171,583 123,137 447,288 344,720 14,227 7,723 35,281 21,278 430 553 1,149 1,132 6,650 3,792 16,717 10,232 21,307 12,068 53,147 32,642 150,276 111,069 394,141 312,078 7,279 6,988 21,429 18,690 142,997 104,081 372,712 293,388 5,052 4,891 14,683 14,552 8,744 8,306 24,978 24,669 1,332 1,551 3,432 3,754 535 500 1,533 1,725 1,403 2,541 3,878 4,913 20,385 982 43,597 2,499 311 249 1,626 1,050 0 0 (60 ) 339 0 0 0 (372 ) 0 0 (60 ) (33 ) 467 1 5,214 251 467 1 5,154 218 38,229 19,021 98,881 53,380 44,308 24,213 123,240 69,123 9,578 7,483 27,372 21,380 9,364 6,919 30,061 20,945 2,713 1,342 4,651 4,654 3,057 2,097 7,493 6,162 5,597 3,857 14,971 11,004 449 480 1,356 1,283 1,540 2,086 5,062 6,341 20,046 14,300 57,425 44,796 96,652 62,777 271,631 185,688 84,574 60,325 199,962 161,080 27,836 18,846 67,356 53,103 $ 56,738 $ 41,479 $ 132,606 $ 107,977 $ 320,991 $ 279,896 12,303 10,983 34,722 36,259 1,164 2,165 369,180 329,303 128,377 68,592 2,082 1,157 16,232 25,234 146,691 94,983 222,489 234,320 5,740 6,890 216,749 227,430 4,646 4,780 5,267 4,200 8,971 9,362 1,873 1,707 858 1,138 2,418 1,891 5,298 6,384 789 2,276 (99 ) (405 ) 2,191 1,411 32,212 32,744 59,293 55,414 14,671 13,435 12,343 11,833 159 667 (83 ) (43 ) 6,853 6,996 7,463 7,473 1,015 1,884 616 522 6,455 4,587 31,957 34,651 140,742 137,419 108,219 122,755 21,405 24,448 $ 86,814 $ 98,307 (Dollars in thousands, except per share data) Three Months Ended Nine Months Ended September 30 September 30 2017 2016 2017 2016 $ 0.54 $ 0.54 $ 1.39 $ 1.49 $ 0.54 $ 0.54 $ 1.39 $ 1.48 $ 0.33 $ 0.33 $ 0.99 $ 0.99 104,760,153 76,218,573 95,040,664 72,413,246 105,068,122 76,647,773 95,450,626 72,746,363 $ 0.64 $ 0.73 $ 0.64 $ 0.73 134,808,634 134,411,166 135,121,380 134,840,328 (Dollars in thousands) Three Months Ended Nine Months Ended September 30 September 30 2017 2016 2017 2016 $ 56,738 $ 41,479 $ 132,606 $ 107,977
securities, net of tax 1,964 (4,865 ) 8,443 7,944 2 2 4 4 717 777 2,107 2,235 $ 59,421 $ 37,393 $ 143,160 $ 118,160 $ 86,814 $ 98,307 (2,392 ) 45,157 657 (7,157 ) 424 602 $ 85,503 $ 136,909 Nine Months Ended September 30, 2017 Accumulated Common Stock Other Total Par Retained Comprehensive Treasury Shareholders’ Shares Value Surplus Earnings Income (Loss) Stock Equity 81,068,252 $ 202,671 $ 1,205,778 $ 872,990 ($ 44,717 ) ($ 975 ) $ 2,235,747 0 0 0 132,606 0 0 132,606 0 0 0 0 10,554 0 10,554 143,160 0 0 2,589 0 0 0 2,589 23,690,589 59,226 916,028 0 0 0 975,254 0 0 0 0 0 (1 ) (1 ) 0 0 0 0 0 1 1 0 0 (96,040 ) 0 0 (96,040 ) 89,475 224 (224 ) 0 0 0 0 0 0 19 0 0 (19 ) 0 163,562 409 2,724 0 0 0 3,133 105,011,878 $ 262,530 $ 2,126,914 $ 909,556 ($ 34,163 ) ($ 994 ) $ 3,263,843
Earnings
Other
Loss
Stock
Equity
Value 142,257,646 $ 355,644 $ 3,181,764 $ 1,745,619 $ (259,681 ) $ (252,106 ) $ 4,771,240 0 0 0 86,814 0 0 86,814 0 0 0 0 (1,311 ) 0 (1,311 ) 85,503 0 0 3,266 0 0 0 3,266 0 0 190 0 0 (190 ) 0 0 0 0 0 0 (1,030 ) (1,030 ) 0 0 0 (50,213 ) 0 0 (50,213 ) 278,723 697 (2,022 ) 0 0 0 (1,325 ) 142,536,369 $ 356,341 $ 3,183,198 $ 1,782,220 $ (260,992 ) $ (253,326 ) $ 4,807,441
Earnings
Other
(Loss) Income
Stock
Equity
Value 142,011,560 $ 355,029 $ 3,168,874 $ 1,575,426 $ (332,732 ) $ (250,404 ) $ 4,516,193 0 0 0 98,307 0 0 98,307 0 0 0 0 38,602 0 38,602 136,909 0 0 2,713 0 0 0 2,713 0 0 58 0 0 (58 ) 0 0 0 0 0 0 (1,374 ) (1,374 ) 0 0 0 (48,720 ) 0 0 (48,720 ) 226,486 566 250 0 0 0 816 142,238,046 $ 355,595 $ 3,171,895 $ 1,625,013 $ (294,130 ) $ (251,836 ) $ 4,606,537 (Dollars in thousands) Nine Months Ended September 30 2017 2016 $ 125,151 $ 125,948 12,929 5,039 245,065 103,411 386,496 264,834 (630,061 ) (385,030 ) (11,115 ) (4,150 ) 13 229 (51,941 ) (61,193 ) 14,393 47,285 4,908 15,435 44,531 29,330 369,233 (111,723 ) 384,451 (96,533 ) (86,709 ) (71,129 ) (1 ) (1 ) 3,296 4,668 (845,207 ) (725,077 ) 815,000 795,000 1 1 (269,742 ) 265,183 186,270 (36,889 ) (197,092 ) 231,756 312,510 261,171 1,434,527 857,335 $ 1,747,037 $ 1,118,506 $ 3,829 $ 19,228
March 31 $ 124,371 $ 118,154 93 1,689 416,317 184,059 (248,049 ) (7,855 ) 289 98 (205 ) (246 ) 46,739 21,547 (52,379 ) (52,217 ) (4,772 ) (3,447 ) 63 2,465 146 279 (160,675 ) (54,938 ) (2,433 ) 91,434 (50,137 ) (48,651 ) (1,030 ) (1,374 ) 702 1,559 0 (10,250 ) (1,500,000 ) (1,900,000 ) 1,450,000 2,500,000 100,598 (18,227 ) 11,632 9,396 11,765 532,453 133,703 742,041 1,598,943 1,176,652 $ 1,732,646 $ 1,918,693 $ 119 $ 2,919 3,671 10,192 (Unaudited)(GAAP)(“GAAP”) and with the instructions for FormSeptember 30, 2017March 31, 2024 and 20162023 and for the three-month and nine-month periods then ended have not been audited. The consolidated balance sheet as of December 31, 20162023 has been extracted from the audited financial statements included in United’s 20162023 Annual Report to Shareholders. The accounting and reporting policies followedNotes to Consolidated Financial Statements appearing in the presentation of these financial statements are consistent with those applied in the preparation of the 2016United’s 2023 Annual Report of United on Form10-K. To conform to the 2017 presentation, certain reclassifications have been made to prior period amounts, had no impact on net income, comprehensive income, or stockholders’ equity.includes descriptions of significant accounting policies, should be read in conjunction with these interim financial statements. In the opinion of management, allany adjustments necessary for a fair presentation of financial position and results of operations for the interim periods have been made. Such adjustments are of a normal and recurring nature.United considers all of its principal business activities to be bank related. All significant intercompany accounts and transactions have been eliminated in the consolidated financial statements. Dollars areInformation is presented in these notes to the unaudited consolidated interim financial statements with dollars expressed in thousands, except per share or unless otherwise noted.August 2017,December 2023, the FASBFinancial Accounting Standards Board (“FASB”) issued ASUNo. 2017-12, “Targeting ImprovementAccounting Standards Update (“ASU”)Accounting for Hedging Activities.Income Tax Disclosures.” This ASU amends ASC 815its objectives aregreater disaggregation of information in the rate reconciliation and (2) income taxes paid disaggregated by jurisdiction. ASUtransparency and understandabilityeffectiveness of information conveyed to financial statement users about an entity’s risk management activities by better aligning the entity’s financial reporting for hedging relationships with those risk management activities and reduce the complexity and simplify the application of hedge accounting by preparers.income tax disclosures. ASUNo. 2017-12interim andpublic business entities for annual reporting periods beginning after December 15, 2018;2024. For entities other than public business entities, the amendments are effective for annual periods beginning after December 15, 2025. Entities are permitted to early adopt the standard for annual financial statements that have not yet been issued or made available for issuance. The adoption is permitted. ofNo. 2017-12 2023-09materialsingle reportable segment, and contain other disclosure requirements. The purpose of the amendments will enable investors to better understand an entity’s overall performance and assess potential future cash flows. ASU2017,2023, the FASB issued ASU2017-11, “Part I,2023-03,Certain Financial Instruments with Down Round FeaturesSEC updates pursuant to SEC Staff Accounting Bulletin No. 120; SEC Staff Announcement at the March 24, 2022 Emerging Issues Task Force (“EITF”) Meeting; and Part II, ReplacementStaff Accounting Bulletin Topic 6.B, Accounting Series Release 280 - General Revision of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic EnticesRegulationCertain Mandatorily Redeemable Noncontrolling interests with a Scope Exception.” Part I of this ASU simplifies the accounting for financial instruments that include down round features while the amendments in Part II, which dodid not have an accounting effect, address the difficulty of navigating the guidance in ASC 480, “Distinguishing Liabilities from Equity”, due to the existence of extensive pending content in the Codification. ASUNo. 2017-11 is effective for interim and annual reporting periods beginning after December 15, 2018; early adoption is permitted. ASUNo. 2017-11 is not expected to have a materialsignificant impact on the Company’s financial condition or results of operations.May 2017,March 2023, the FASB issued Accounting ASUNo. 2017-09, “Stock Compensation, ScopeModification Accounting.” Thisthe tax credit program from which the income tax credits are received, using the proportional amortization method if certain conditions are met. The amendments in this ASU clarifies when changesapply to all reporting entities that holdterms of conditions offor and elect to account for them using the proportional amortization method or an investment in a share-based payment award must below income housing tax credit (“LIHTC”) structure through a limited liability entity that is not accounted for asmodifications. Companies willusing the proportional amortization method and to which certain LIHTC-specific guidance removed from Subtopicmodification accounting guidance ifproportional amortization method (including investments within that elected program that do not meet the value, vesting conditions or classification ofto apply the award changes. The new guidance should reduce diversity in practice and result in fewer changes to the terms of an award being accounted for as modifications, as the guidance will allow companies to make certainnon-substantive changes to awards without accounting for them as modifications. It does not change the accounting for modifications.proportional amortization method). ASUNo. 2017-09 is effective for interim and annual reporting periods beginning after December 15, 2017; early adoption is permitted. ASUNo. 2017-09 is not expected to have a material impact on the Company’s financial condition or results of operations.In March 2017, the FASB issued ASU2017-07, “Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.” ASU2017-07 amends ASC 715, “Compensation - Retirement Benefits” and will change how employers that sponsor defined benefit pension and/or other postretirement benefit plans present the net periodic benefit cost in the income statement. Employers will present the service cost component of net periodic benefit cost in the same income statement line item as other employee compensation costs arising from services rendered during the period. Only the service cost component will be eligible for capitalization in assets. Employers will present the other components of the net periodic benefit cost separately from the line item that includes the service cost and outside of any subtotal of operating income, if one is presented. These components will not be eligible for capitalization in assets. ASU2017-07 is2018, with early adoption permitted. Management is currently evaluating2024. The amendments in this update must be applied on either a modified retrospective or a retrospective basis except for LIHTC investments not accounted for using the possible impact this standard may have onproportional amortization method. At January 1, 2024, United chose not to elect to account for its tax equity investments using the Company’s financial condition or results of operations.January 2017,December 2022, the FASB issued ASU2017-04, “Intangibles – GoodwillOther (topic 350).” ASU2017-04 eliminateshedging transactions as a result of the requirementglobal markets’ anticipated transition away from the use of LIBOR and other interbank offered rates to calculatealternative reference rates. At the impliedtime ASUvaluevalue.goodwill toaccount, recognize and measure a goodwill impairment charge. Instead, entities will record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value. contractual sale restriction and requires certain new disclosures for equity securities subject to contractual sale restrictions.2017-04 is 2022-032020, with early adoption permitted, and management is currently evaluating the possible impact this standard may have on the Company’s financial condition or results of operations.In January 2017, the FASB issued ASU2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business.” ASU2017-01 changes the definition of a business to assist entities with evaluation when a set of transferred assets and activities is a business. The guidance requires an entity to evaluate if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets. The guidance also requires a business to include at least one substantive process and narrows the definition of outputs by more closely aligning it with how outputs are described in ASC 606. ASU2017-01 is effective for United on January 1, 2018, with early adoption permitted, and management is currently evaluating the possible impact this standard may have on the Company’s financial condition or results of operations.In August 2016, the FASB issued ASU2016-15, “Classification of Certain Cash Receipts and Cash Payments.” ASU2016-15 amends ASC topic 230 to add and clarify guidance on the classification of certain cash receipts and payments in the statement of cash flows as a result of diversity in practice and in certain circumstances, financial statement restatements. Entities should apply ASU2016-15 using a retrospective transition method to each period presented. ASU2016-15 is effective for United on January 1, 2018, with early adoption permitted, and management is currently evaluating the possible impact this standard may have on the Company’s financial condition or results of operations.In June 2016, the FASB issued ASU2016-13, “Financial Instruments – Credit Losses.” ASU2016-13 changes the impairment model for most financial assets and certain other instruments that aren’t measured at fair value through net income. The standard will replace today’s “incurred loss” approach with an “expected loss” model for instruments measured at amortized cost and require entities to record allowances foravailable-for-sale debt securities rather than reduce the carrying amount under the current other-than-temporary impairment (OTTI) model. ASU2016-13 also simplifies the accounting model for purchased credit-impaired debt securities and loans. Entities will apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reportingperiod in which the guidance is effective. ASU2016-13 is effective for United on January 1, 2020, with early adoption permitted, and management is currently evaluating the possible impact this standard may have on the Company’s financial condition or results of operations.In March 2016, the FASB issued ASU2016-09, “Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.” United adopted ASU2016-09 on January 1, 2017 utilizing the modified retrospective method. ASU2016-09 changes certain aspects of accounting for share-based payments to employees. The new guidance, amongst other things, requires all income tax effects of awards to be recognized in the income statement when the awards vest or are settled. The requirement to report those income tax effects in earnings was applied to settlements occurring on or after January 1, 2017 and the impact of applying that guidance reduced reporting income tax expense by $146 and $960 for the three and nine months ended September 30, 2017, respectively. ASU2016-09 also allows an employer to repurchase more of an employee’s shares than it could previously for tax withholding purposes without triggering liability accounting and make a policy election to account for forfeitures as they occur. The Company will continue to estimate the number of awards expected to be forfeited and adjust the estimate when it is no longer probable that the employee will fulfill the service condition, as was previously required. ASU2016-09 also requires that all incometax-related cash flows resulting from share-based payments be reported as operating activities in the statement of cash flows. Previously, income tax benefits at settlement of an award were reported as a reduction to operating cash flows and an increase to financing cash flows to the extent that those benefits exceeded the income tax benefits reported in earnings during the award’s vesting period. United elected to apply that change in cash flow classification on a retrospective basis, which resulted in an $2,083 increase to net cash from operating activities and a corresponding decrease to net cash from financing activities in the accompanying Consolidated Statement of Cash Flows for the first nine months of 2016. The recognition of excess tax benefits and deficiencies in the income statement was adopted prospectively.2024. The adoption of2016-09 2022-03In February 2016, the FASB issued ASU2016-02, “Leases (Topic 842)”. ASU2016-02 includes a lessee accounting model that recognizes two types of leases, finance leases and operating leases, while lessor accounting will remain largely unchanged from the current GAAP. ASU2016-02 requires, amongst other things, that a lessee recognize on the balance sheet aright-of-use asset and a lease liabilityleases with terms of more than twelve months. The recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee will depend on its classification as a finance or operating lease. ASU2016-02 is effective for United on January 1, 2019 and management is currently evaluating the impact this standard may have on the Company’s financial condition or results of operations.In January 2016, the FASB issued ASU2016-01, “Financial Instruments Overall: Recognition and Measurement of Financial Assets and Financial Liabilities.” ASU2016-01 makes changes to the classification and measurement of investments in equity securities, the presentation of certain fair value changes for financial liabilities measured at fair value under the fair value option and disclosure of fair value of instruments. In addition, ASU2016-01 clarifies guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses onavailable-for-sale debt securities. ASU2016-01 is effective for United on January 1, 2018 and is not expected to have a significant impact on the Company’s financial condition or results of operations.In May 2014, the FASB issued ASU2014-09, “Revenue from Contracts with Customers (Topic 606).” ASU2014-09 supersedes the revenue recognition requirements in ASC topic 605, “Revenue Recognition”, and most industry-specific guidance throughout the ASC. The amendments require an entity to recognize revenue upon the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. The new revenue recognition standard sets forth a five step principle-based approach for determining revenue recognition. ASU2014-09 will be effective for United on January 1, 2018. The Company intends to adopt the amendments of ASU2014-09 beginning January 1, 2018 through the modified-retrospective transition method with a cumulative effect adjustment to opening retained earnings. TheCompany’s revenue is comprised of net interest income and noninterest income. As the standard does not apply to revenue associated with financial instruments, net interest income and gains and losses from securities are not impacted by the standard. Thus far, we have identified revenue streams within the scope of the guidance and analyzed those revenue streams to determine the impact of the standard. We have reviewed and evaluated a number of revenue contracts to determine the impact the new recognition methods will have on revenue recognition. Based on this review, ASU2014-09 may require the Company to change how it recognizes certain recurring revenue streams related to noninterest income including fees from trust and brokerage services. Although we currently do not expect this standard to have a material impact on the timing or amount of revenue, we are still assessing the potential impact on the Company’s consolidated financial statements.2. MERGERS AND ACQUISITIONSCardinal Financial CorporationOn April 21, 2017 (Cardinal Acquisition Date), United acquired 100% of the outstanding common stock of Cardinal Financial Corporation (Cardinal), headquartered in Tysons Corner, Virginia. The acquisition of Cardinal expands United’s existing footprint in the Washington, D.C. Metropolitan Statistical Area. At consummation, Cardinal had assets of $4,136,008, loans of $3,313,033 and deposits of $3,344,740. Cardinal also operated George Mason Mortgage, LLC (George Mason), a residential mortgage lending company based in Fairfax, Virginia with offices located in Virginia, Maryland, North Carolina, South Carolina and the District of Columbia. As a result of the merger, George Mason became an indirectly-owned subsidiary of United.The merger was accounted for under the acquisition method of accounting. The results of operations of Cardinal are included in the consolidated results of operations from the Cardinal Acquisition Date.The aggregate purchase price was approximately $975,254, including common stock valued at $972,499, stock options assumed valued at $2,741, and cash paid for fractional shares of $14. The number of shares issued in the transaction was 23,690,589, which were valued based on the closing market price of $41.05 for United’s common shares on April 21, 2017. The preliminary purchase price has been allocated to the identifiable tangible and intangible assets resulting in preliminary additions to goodwill, core deposit intangibles and the George Mason trade name intangible of $622,513, $28,723 and $1,230, respectively. The core deposit intangibles are expected to be amortized over ten years. The George Mason trade name provides a source of market recognition to attract potential clients and retain existing relationships. United believes the George Mason trade name provides a competitive advantage and is likely going to be used into perpetuity and thus will not be subject to amortization, but rather be evaluated for impairment.Because the consideration paid was greater than the net fair value of the acquired assets and liabilities, the Company recorded goodwill as part of the acquisition. None of the goodwill from the Cardinal acquisition is expected to be deductible for tax purposes. United used an independent third party to help determine the fair values of the assets and liabilities acquired from Cardinal. As a result of the merger, United recorded preliminary fair value discounts of $144,434 on the loans acquired, $2,281 on leases and $8,738 on trust preferred issuances, respectively, and premiums of $4,408 on land acquired, $5,072 on interest-bearing deposits and $10,740 on long-term FHLB advances, respectively. The remaining discount and premium amounts are being accreted or amortized on an accelerated or straight-line basis over each asset’s or liability’s estimated remaining life at the time of acquisition except for loans and land. The discount on loans will be accreted into income based on the effective yield method. The premium on land will not be amortized. At September 30, 2017, the discounts on leases and trust preferred issuances had an average estimated remaining life of 6.00 years and 16.97 years, respectively, and the premiums on the interest-bearing deposits and the FHLB advances each had an average estimated remaining life of 5.00 years and 4.81 years, respectively. United assumed approximately $1,825 of liabilities to provide severance benefits to terminated employees of Cardinal, which has no remaining balance as of September 30, 2017. The estimated fair values of theacquired assets and assumed liabilities, including identifiable intangible assets are preliminary as of September 30, 2017 and are subject to refinement as additional information relative to closing date fair values becomes available. Any subsequent adjustments to the fair values of acquired assets and liabilities assumed, identifiable intangible assets, or other purchase accounting adjustments will result in adjustments to goodwill within the measurement period following the date of acquisition.In many cases, determining the estimated fair value of the acquired assets and assumed liabilities required United to estimate cash flows expected to result from those assets and liabilities and to discount those cash flows at appropriate rates of interest. The most significant of those determinations related to the fair valuation of acquired loans. The fair value of the acquired loans was based on the present value of the expected cash flows. Periodic principal and interest cash flows were adjusted for expected losses and prepayments, then discounted to determine the present value and summed to arrive at the estimated fair value. For such loans, the excess of cash flows expected at acquisition over the estimated fair value is recognized as interest income over the remaining lives of the loans. The difference between contractually required payments at acquisition and the cash flows expected to be collected at acquisition reflects the impact of estimated credit losses and other factors, such as prepayments. In accordance with GAAP, there was no carry-over of Cardinal’s previously established allowance for loan losses.The acquired loans were divided into loans with evidence of credit quality deterioration, which are accounted for under ASC topic310-30 (acquired impaired) and loans that do not meet this criteria, which are accounted for under ASC topic310-20 (acquired performing). Acquired impaired loans have experienced a deterioration of credit quality from origination to acquisition for which it is probable that United will be unable to collect all contractually required payments receivable, including both principal and interest. Subsequent decreases in the expected cash flows require United to evaluate the need for additions to the Company’s allowance for credit losses. Subsequent improvements in expected cash flows generally result in the recognition of additional interest income over the then remaining lives of the loans.In conjunction with the Cardinal merger, the acquired loan portfolio was accounted for at fair value as follows: April 21, 2017 $ 4,211,734 (56,176 ) 4,155,558 (986,959 ) $ 3,168,599 Included in the above table is information related to acquired impaired loans. Specifically, contractually required principal and interest, cash flows expected to be collected and estimated fair value of acquired impaired loans were $132,837, $108,275, and $86,696, respectively.The consideration paid for Cardinal’s common equity and the preliminary amounts of acquired identifiable assets and liabilities assumed as of the Cardinal Acquisition Date were as follows: $ 972,499 2,741 14 975,254 44,545 395,829 271,301 3,168,599 24,208 28,723 1,230 135,383 $ 4,069,818 $ 3,349,812 96,215 220,119 2,281 48,650 3,717,077 352,741 $ 622,513 The operating results of United for the nine months ended September 30, 2017 include operating results of acquired assets and assumed liabilities subsequent to the Cardinal Acquisition Date. The operations of United’s metropolitan Washington D.C. geographic area, which primarily includes the acquired operations of Cardinal, provided $157,326 in total revenues, which represents net interest income plus other income, and $81,817 in net income from the period from the Cardinal Acquisition Date to September 30, 2017. These amounts are included in United’s consolidated financial statements as of and for the nine months ended September 30, 2017. Cardinal’s results of operations prior to the Cardinal Acquisition Date are not included in United’s consolidated financial statements.The following table presents certain unaudited pro forma information for the results of operations for the nine months ended September 30, 2017 and 2016, as if the Cardinal merger had occurred on January 1, 2017 and 2016, respectively. These results combine the historical results of Cardinal into United’s consolidated statement of income and, while certain adjustments were made for the estimated impact of certain fair valuation adjustments and other acquisition-related activity, they are not indicative of what would have occurred had the acquisition taken place on the indicated date nor are they intended to represent or be indicative of future results of operations. In particular, no adjustments have been made to eliminate the amount of Cardinal’s provision for credit losses for 2017 and 2016 that may not have been necessary had the acquired loans been recorded at fair value as of the beginning of 2017 and 2016. Additionally, United expects to achieve operating cost savings and other business synergies as a result of the acquisition which are not reflected in the pro forma amounts. Proforma
Nine Months Ended
September 30 2017 2016 $ 573,790 $ 585,223 136,104 160,731 (1)Represents net interest income plus other incomeBank of GeorgetownAfter the close of business on June 3, 2016 (BOG Acquisition Date), United acquired 100% of the outstanding common stock of Bank of Georgetown, a privately held community bank headquartered in Washington, D.C. With this transaction, United continues to expand its existing footprint in the D.C. Metro Region. The results of operations of Bank of Georgetown are included in the consolidated results of operations from the BOG Acquisition Date.At consummation, Bank of Georgetown had assets of $1,278,837, loans of $999,773, and deposits of $971,369. The transaction was accounted for under the acquisition method of accounting and accordingly, assets acquired, liabilities assumed and consideration exchanged were recorded at estimated fair value on the BOG Acquisition Date.The aggregate purchase price was $264,505, including common stock valued at $253,799, stock options assumed valued at $10,696, and cash paid for fractional shares of $10. The number of shares issued in the transaction was 6,527,746, which were valued based on the closing market price of $38.88 for United’s common shares on June 3, 2016. The purchase price has been allocated to the identifiable tangible and intangible assets resulting in additions to goodwill and core deposit intangibles of $152,845 and $9,058, respectively. The core deposit intangibles are being amortized over ten years.Because the consideration paid was greater than the net fair value of the acquired assets and liabilities, the Company recorded goodwill as part of the acquisition. None of the goodwill from the Bank of Georgetown acquisition is expected to be deductible for tax purposes. United used an independent third party to help determine the fair values of the assets and liabilities acquired from the Bank of Georgetown. As a result of the merger, United recorded fair value discounts of $43,072 on the loans acquired and $1,550 on leasehold improvements, respectively, and premiums on interest-bearing deposits acquired of $316 and a premium on long-term FHLB advances of $2,659. The remaining discount and premium amounts are being amortized or accreted on an accelerated basis over each asset’s or liability’s estimated remaining life at the time of acquisition. At September 30, 2017, the premium on the interest-bearing deposits and the FHLB advances had an estimated remaining life of 0.33 years and 7.92 years, respectively. United assumed approximately $300 of liabilities to provide severance benefits to terminated employees of Bank of Georgetown, which has no remaining balance as of September 30, 2017. The measurement period has closed and the estimated fair values of the acquired assets and assumed liabilities, including identifiable intangible assets were considered final as of June 30, 2017.In many cases, determining the estimated fair value of the acquired assets and assumed liabilities required United to estimate cash flows expected to result from those assets and liabilities and to discount those cash flows at appropriate rates of interest. The most significant of those determinations related to the fair valuation of acquired loans. The fair value of the acquired loans was based on the present value of the expected cash flows. Periodic principal and interest cash flows were adjusted for expected losses and prepayments, then discounted to determine the present value and summed to arrive at the estimated fair value. For such loans, the excess of cash flows expected at acquisition over the estimated fair value is recognized as interest income over the remaining lives of the loans. The difference between contractually required payments at acquisition and the cash flows expected to be collected at acquisition reflects the impact of estimated credit losses and other factors, such as prepayments. In accordance with GAAP, there was no carry-over of Bank of Georgetown’s previously established allowance for loan losses.In conjunction with the Bank of Georgetown merger, the acquired loan portfolio was accounted for at fair value as follows: June 3, 2016 $ 1,275,398 (33,980 ) 1,241,418 (274,548 ) $ 966,870 Included in the above table is information related to acquired impaired loans. Specifically, contractually required principal and interest, cash flows expected to be collected and estimated fair value of acquired impaired loans were $138,125, $117,564, and $95,570, respectively.The consideration paid for Bank of Georgetown’s common equity and the fair value of acquired identifiable assets and liabilities assumed as of the BOG Acquisition Date were as follows: $ 253,799 10,696 10 264,505 29,340 219,783 966,870 5,574 9,058 31,605 $ 1,262,230 $ 971,685 101,021 67,659 11,532 1,151,897 110,333 $ 154,172 3. INVESTMENT SECURITIES and all marketable equity securities are classified as available for sale and carried at estimated fair value. The amortized cost, and estimated fair values, and allowance for credit losses of securities available for sale are summarized as follows. September 30, 2017 Gross Gross Estimated Cumulative Amortized Unrealized Unrealized Fair OTTI in Cost Gains Losses Value AOCI (1) $ 115,224 $ 864 $ 222 $ 115,866 $ 0 305,096 2,567 2,522 305,141 0 715,003 3,819 4,122 714,700 0 5,259 587 0 5,846 86 420,115 2,081 1,404 420,792 0 13,422 10 3 13,429 0 38,186 317 6,844 31,659 20,770 13,404 404 1,341 12,467 0 18,998 256 0 19,254 0 9,950 541 11 10,480 0 $ 1,654,657 $ 11,446 $ 16,469 $ 1,649,634 $ 20,856 December 31, 2016 Gross Gross Estimated Cumulative Amortized Unrealized Unrealized Fair OTTI in Cost Gains Losses Value AOCI (1) $ 95,247 $ 698 $ 159 $ 95,786 $ 0 196,350 1,364 4,902 192,812 0 585,208 3,999 5,111 584,096 0 6,629 426 12 7,043 86 304,635 1,948 1,242 305,341 0 217 0 0 217 0 48,558 729 15,735 33,552 25,952 13,363 284 2,170 11,477 0 14,996 66 0 15,062 0 12,436 1,398 6 13,828 0 $ 1,277,639 $ 10,912 $ 29,337 $ 1,259,214 $ 26,038 (1)Non-credit related other-than-temporary impairment in accumulated other comprehensive income. Amounts arebefore-tax.
Cost
Unrealized
Gains
Unrealized
Losses
For Credit
Losses
Fair $ 439,648 $ 45 $ 5,582 $ 0 $ 434,111 611,240 14 82,953 0 528,301 1,183,484 4 176,629 0 1,006,859 83,698 0 8,394 0 75,304 507,889 13 54,189 0 453,713 837,064 75 6,209 0 830,930 16,390 0 1,057 0 15,333 301,199 0 31,775 0 269,424 $ 3,980,612 $ 151 $ 366,788 $ 0 $ 3,613,975
Cost
Unrealized
Gains
Unrealized
Losses
For Credit
Losses
Fair $ 492,638 $ 4 $ 7,692 $ 0 $ 484,950 613,588 11 79,768 0 533,831 1,217,744 7 167,810 0 1,049,941 100,364 0 9,753 0 90,611 511,560 13 52,275 0 459,298 872,048 44 11,454 0 860,638 16,380 0 1,239 0 15,141 325,573 0 33,606 0 291,967 $ 4,149,895 $ 79 $ 363,597 $ 0 $ 3,786,377 available-for-sale available for sale which were in an unrealized loss position at September 30, 2017March 31, 2024 and December 31, 2016. Less than 12 months 12 months or longer Fair Unrealized Fair Unrealized Value Losses Value Losses September 30, 2017 $ 27,053 $ 128 $ 19,932 $ 94 83,310 896 38,004 1,626 351,936 3,410 31,690 712 0 0 0 0 228,307 1,218 12,272 186 6,760 3 0 0 0 0 29,544 6,844 0 0 4,365 1,341 0 0 352 11 $ 697,366 $ 5,655 $ 136,159 $ 10,814 Less than 12 months 12 months or longer Fair Unrealized Fair Unrealized Value Losses Value Losses December 31, 2016 $ 24,101 $ 159 $ 0 $ 0 116,300 4,902 0 0 309,376 5,111 0 0 0 0 218 12 162,479 1,242 0 0 0 0 0 0 0 0 28,579 15,735 0 0 8,185 2,170 357 6 0 0 $ 612,613 $ 11,420 $ 36,982 $ 17,917 Marketable equity securities consist mainly of equity securities of financial institutions and mutual funds within a rabbi trust for the payment of benefits under a deferred compensation plan for certain key officers of United and its subsidiaries. 2023.
Value
Losses
Losses
Losses $ 3,561 $ 12 $ 178,459 $ 5,570 $ 182,020 $ 5,582 4,089 196 512,438 82,757 516,527 82,953 6,791 95 999,081 176,534 1,005,872 176,629 0 0 72,662 8,394 72,662 8,394 0 0 451,366 54,189 451,366 54,189 79,624 175 656,712 6,034 736,336 6,209 0 0 15,333 1,057 15,333 1,057 2,422 78 261,891 31,697 264,313 31,775 $ 96,487 $ 556 $ 3,147,942 $ 366,232 $ 3,244,429 $ 366,788
Value
Losses
Losses
Losses $ 4,625 $ 11 $ 477,615 $ 7,681 $ 482,240 $ 7,692 2,050 193 517,186 79,575 519,236 79,768 9,755 51 1,038,632 167,759 1,048,387 167,810 8,964 101 81,647 9,652 90,611 9,753 0 0 456,866 52,275 456,866 52,275 15,866 216 829,778 11,238 845,644 11,454 2,922 182 12,219 1,057 15,141 1,239 0 0 274,308 33,606 274,308 33,606 $ 44,182 $ 754 $ 3,688,251 $ 362,843 $ 3,732,433 $ 363,597 thoseany sales and calls. Gains or losses on sales and calls of available for sale securities were recognized by the specific identification method. The realized losses relate to sales of securities within a rabbi trust for the payment of benefits under a deferred compensation plan for certain key officers of United and its subsidiaries. Three Months Ended
September 30 Nine Months Ended
September 30 2017 2016 2017 2016 $ 64,257 $ 174,015 $ 631,561 $ 368,246 1,781 3 2,840 259 1,314 1 1,396 7 $ 416,410 $ 185,748 0 0 0 420 September 30, 2017,March 31, 2024, gross unrealized losses on available for sale securities were $16,469$366,788 on 3751,071 securities of a total portfolio of 8221,124 available for sale securities. Securities in anwith the most significant gross unrealized loss positionlosses at September 30, 2017March 31, 2024 consisted primarily of pooled trust preferred collateralized debt obligations (“Trup Cdos”), single issue trust preferred securities and agency residential mortgage-backed securities. The Trup Cdos and the single issue trust preferred securities relate mainly to securities of financial institutions. The state and political subdivisions securities relate to securities issued by various municipalities. The agency residential mortgage-backed securities, relate to residential propertiesstate and provide a guaranty of fullpolitical subdivision securities, agency commercial mortgage-backed securities and timely payments of principal and interest by the issuing agency. other corporate securities.other-than-temporarily impaired, (“OTTI”), management considered the severity and the duration of the loss in conjunction with United’s positive intent and the more likely than not ability to hold these securities to recovery of their cost basis or maturity.$305,096$611,240 at September 30, 2017.March 31, 2024. As of September 30, 2017,March 31, 2024, approximately 75%48% of the portfolio was supported by the general obligation of the issuing municipality, which allows for the securities to be repaid by any meansless than one percent ofno securities within the portfolio waswere rated below investment grade as of September 30, 2017.March 31, 2024. In addition to monitoring the credit ratings of these securities, management also evaluates the financial performance of the underlying issuers on an ongoing basis. Based upon management’s analysis and judgment, it was determined that none of the state and political subdivision securities were other-than-temporarily impairedhad credit losses at September 30, 2017.AgencyMarch 31, 2024.$1,135,118$1,691,373 at September 30, 2017.March 31, 2024. Of the $1,135,118$1,691,373 amount, $420,115$507,889 was related to agency commercial mortgage-backed securities and $715,003$1,183,484 was related to agency residential mortgage-backed securities. Each of the agency mortgage-backed securities provides a guarantee of full and timely payments of principal and interest by the issuing agency. Based upon management’s analysis and judgment, it was determined that none of the agency mortgage-backed securities were other-than-temporarily impairedhad credit losses at September 30, 2017.Non-agency residential mortgage-backed securities$5,259$83,698 at September 30, 2017.March 31, 2024. Of the $5,259 amount, $627$83,698, 100% was rated above investment grade and $4,632 was rated below investment grade. Approximately 18% of the portfolio includes collateral that was originated during the year of 2005 or before. The remaining 82% includes collateral that was originated in the years of 2006 and 2007. The entire portfolio of thenon-agency residential mortgage-backed securities are either the senior or super-senior tranches of their respective structure.AAA. Based upon management’s analysis and judgment, it was determined that none of thewere other-than-temporarily impairedhad credit losses at September 30, 2017.thirdfirst quarter of 2017,2024, it was determined that none of the single issue trust preferred securities were other-than-temporarily impaired. All single issue trust preferredhad credit losses. are currently receiving interest payments. The available for sale single issue trust preferred securities’ ratings ranged fromlow of Ba1 to a high ofBBB-. Thetotal amortized cost balance of available for sale single issue trust preferred securities as$301,199. The majority of September 30, 2017the portfolio consisted of $3,017 indebt issuances of corporations representing a variety of industries, including financial institutions. Of the $301,199, 96% had at least one rating above investment grade, bonds, $4,680 in split-rated bonds and $5,707 in unrated bonds. All of the unrated bonds1% were in an unrealized loss position for twelve months or longer as of September 30, 2017.Trust preferred collateralized debt obligations (Trup Cdos)In order to determine how and when the Company recognizes OTTI, the Company first assesses its intentions regarding any sale of securities as well as the likelihood that it would be required to sell prior to recovery of the amortized cost. As of September 30, 2017, the Company has determined that it does not intend to sell any pooled trust preferred security and that it is not more likely than not that the Company will be required to sell such securities before recovery of their amortized cost.To determine a net realizable value and assess whether other-than-temporary impairment existed, management performed detailed cash flow analysis to determine whether, in management’s judgment, it was more likely that United would not recover the entire amortized cost basis of the security. The Company discounts the security-specificcash flow projection at the security-specific interest rate and compares the present value to the amortized cost. Management’s cash flow analysis was performed for each security and considered the current deferrals and defaults within the underlying collateral, the likelihood that current deferrals would cure or ultimately default, potential future deferrals and defaults, potential prepayments, cash reserves, excess interest spread, credit analysis of the underlying collateral and the priority of payments in the cash flow structure. The underlying collateral analysis for each issuer took into consideration multiple factors including capital adequacy, earnings trends and asset quality. After completing its analysis of estimated cash flows, management determined that none of the Trup Cdos experienced an adverse change in cash flows during the third quarter of 2017, as the expected discounted cash flows from these particular securities were greater than or equal to the discounted cash flows originally expected at purchase or from the previous date of other-than-temporary impairment (cash flows are discounted at the contractual coupon rate for purposes of assessing OTTI).There was no credit-related other-than-temporary impairment recognized in earnings for the third quarter of 2017 related to these securities. The balance of noncredit-related other-than-temporary impairment recognized on United’s Trup Cdos portfolio was $20,770 at September 30, 2017.The following is a summary of the available for sale Trup Cdos as of September 30, 2017: Amortized Cost Amortized
Cost Fair
Value Unrealized
Loss Investment
Grade Split
Rated Below
Investment
Grade $ 5,208 $ 5,287 $ (79 ) $ 3,410 $ 0 $ 1,798 6,428 5,518 910 0 0 6,428 22,656 17,918 4,738 0 0 22,656 3,894 2,936 958 0 0 3,894 $ 38,186 $ 31,659 $ 6,527 $ 3,410 $ 0 $ 34,776 While a large difference remains between the fair value and amortized cost, the Company believes the remaining unrealized losses are related to the illiquid market for Trup Cdos rather than an adverse change in expected cash flows. The expected future cash flow substantiates the return of the remaining amortized cost of the security. The Company believes the following evidence supports the position that the remaining unrealized loss is related to the illiquid market for Trup Cdos:The market for new issuance of Trup Cdos was robust from 2000 to 2007 with an estimated $60 billion in new issuance. The new market issuances came to an abrupt halt in 2007.The secondary market for Trup Cdos ultimately became illiquid and although the market has improved, trading activity remains limited on these securities. In making this determination, the Company holds discussions with institutional traders to identify trends in the number and type of transactions related to the Trup Cdos.The presence of a below-investment grade rating severely limits the pool of available buyers and contributes to the illiquidity of the market.Trup Cdos have a more complex structure than most debt instruments, making projections of tranche returns difficult fornon-specialists in the product. Deferral features available to the underlying issuers within each pool are unique to these securities. Additionally, it can be difficult for market participants to predict whether deferrals will ultimately cure or ultimately default. Due to the lack of transparency, market participants will require a higher risk premium, thus resulting in higher required discount rates.The variability of cash flows at the time the securities were originated was expected to be very limited. Due to the financial crisis, Trup Cdos have experienced more substantive variability of cash flows compared to expectations, resulting in a higher risk premium when evaluating discount rates.The limited, yet relevant, observable inputs indicate that market yield requirements for Trup Cdos, on a credit-adjusted basis, remained very high relative to discount rates at purchase and compared to other similarly rated debt securities.Overall, the Company believes the lack of new issuances, illiquid secondary market, limited pool of buyers, below investment grade ratings,rated, and complex structures are the key drivers of the remaining unrealized losses in the Company’s Trup Cdos and the robust expected cash flow analysis substantiates the return of the remaining amortized cost under ASC topic 320.Management also considered the ratings of the Company’s bonds in its portfolio and the extent of downgrades in United’s impairment analysis. However, management considered it imperative to independently perform its own credit analysis based on cash flows as described. The ratings of the investment grade Trup Cdos in the table above range from a low of AA to a high of Aaa. The below investment grade Trup Cdos range from a low of C to a high of Ba2.On the Trup Cdos that have not been deemed to be other-than-temporarily impaired, the collateralization ratios range from a low of 105.4% to a high of 414.5%, with a median of 260.0%, and a weighted average of 283.8%. The collateralization ratio is defined as the current performing collateral in a security, divided by the current balance of the specific tranche the Company owns, plus any debt which is senior or pari passu with the Company’s security’s priority level. Performing collateral excludes the balance of any issuer that has either defaulted or has deferred its interest payment. It is not uncommon for the collateralization of a security that is not other-than-temporarily impaired to be less than 100% due to the excess spread built into the securitization structure.Except for the debt securities that have already been deemed to be other-than-temporarily impaired, management does not believe any3% were unrated. For other individual security with an unrealized loss as of September 30, 2017 is other-than-temporarily impaired. For these securities, United believes the decline in value resulted from changes in market interest rates, credit spreads and liquidity, not a change in the expected contractual cash flows. Based on a review of each of the securities in the investment portfolio, management concluded that it expected to recover the amortized cost basis of the investment in such securities.Equity securitiesThe amortized cost of United’s equity securities was $9,950 at September 30, 2017. For equitycorporate securities, management has evaluated the near-term prospects of the investment in relation to the severity and duration of any impairmentunrealized loss. Based upon management’s analysis and based on that evaluation, managementjudgment, it was determined that no equity securities were other-than-temporarily impaired at September 30, 2017.Other investment securities (cost method)During the third quarter of 2017, United also evaluated all of its cost method investments to determine if certain events or changes in circumstances during the third quarter of 2017 had a significant adverse effect on the fair value of any of its cost method securities. United determined that there were no events or changes in circumstances during the third quarter which would have an adverse effect on the fair value of any of its cost method securities. Therefore, no impairment was recorded.Below is a progressionnone of the other corporate securities had credit losses on securities which United has recorded other-than-temporary charges. These charges were recorded through earnings and other comprehensive income. Three Months Ended
September 30 Nine Months Ended
September 30 2017 2016 2017 2016 $ 22,162 $ 22,162 $ 22,162 $ 23,773 0 0 0 33 (4,102 ) 0 (4,102 ) (1,644 ) $ 18,060 $ 22,162 $ 18,060 $ 22,162 September 30, 2017March 31, 2024 and December 31, 20162023 by contractual maturity are shown as follows. Expected maturities may differ from contractual maturities because the issuers may have the right to call or prepay obligations without penalties. September 30, 2017 December 31, 2016 Estimated Estimated Amortized Fair Amortized Fair Cost Value Cost Value $ 57,720 $ 57,622 $ 53,286 $ 53,330 370,020 371,007 296,181 297,385 342,176 343,326 213,094 213,791 874,791 867,199 702,642 680,880 9,950 10,480 12,436 13,828 $ 1,654,657 $ 1,649,634 $ 1,277,639 $ 1,259,214
Cost
Fair
Cost
Fair $ 431,832 $ 429,801 $ 497,555 $ 493,651 483,693 447,504 448,020 416,436 853,498 754,469 852,698 751,780 2,211,589 1,982,201 2,351,622 2,124,510 $ 3,980,612 $ 3,613,975 $ 4,149,895 $ 3,786,377 amortized cost and estimated fair values of securities held to maturity are summarized as follows: September 30, 2017 Gross Gross Estimated Amortized Unrealized Unrealized Fair Cost Gains Losses Value $ 5,215 $ 400 $ 0 $ 5,615 5,674 12 0 5,686 26 4 0 30 9,400 0 842 8,558 20 0 0 20 $ 20,335 $ 416 $ 842 $ 19,909 December 31, 2016 Gross Gross Estimated Amortized Unrealized Unrealized Fair Cost Gains Losses Value $ 5,295 $ 570 $ 0 $ 5,865 8,598 17 0 8,615 30 5 0 35 19,315 0 2,672 16,643 20 0 0 20 $ 33,258 $ 592 $ 2,672 $ 31,178 Even though the market value of theheld-to-maturityUnited’s equity securities was $
March 31 $ 0 82 (99 ) (67 ) $ (99) $ 15 portfolio is less thansecuritiesunrealized loss has no impactfirst quarter of 2024 had a significant adverse effect on the net worth or regulatory capital requirementsrecorded value of United. Asany of September 30, 2017,its cost method securities. United determined that there was no individual security that experienced an adverse event during the Company’s largestheld-to-maturity single-issue trust preferred exposure was to SunTrust Bank ($7,424). The twoheld-to-maturity single-issue trust preferred exposures with at least one rating below investment grade included SunTrust Bank ($7,424) and Royal Bank of Scotland ($976).gross realized gainsother events or losseschanges in circumstances during the first quarter which would have an adverse effect on calls and sales of held to maturity securities included in earnings for the third quarter and first nine months of 2017 and 2016.The amortized cost and estimatedrecorded fair value of debt securities held to maturity at September 30, 2017 and December 31, 2016 by contractual maturity are shown below. Expected maturities may differ from contractual maturities because the issuers may have the right to call or prepay obligations without penalties. September 30, 2017 December 31, 2016 Estimated Estimated Amortized Fair Amortized Fair Cost Value Cost Value $ 0 $ 0 $ 1,040 $ 1,041 9,189 9,600 8,268 8,850 5,726 5,382 3,585 3,589 5,420 4,927 20,365 17,698 $ 20,335 $ 19,909 $ 33,258 $ 31,178 $1,312,813$2,279,895 and $1,137,408$2,307,591 at September 30, 2017March 31, 2024 and December 31, 2016,2023, respectively.4. September 30,
2017 December 31,
2016 $ 1,364,757 $ 1,049,885 4,686,183 3,425,453 1,757,741 1,613,437 7,808,681 6,088,775 3,050,868 2,403,437 1,599,632 1,255,738 13,775 14,187 683,898 594,582 $ 13,156,854 $ 10,356,719 $ 1,624,746 $ 1,598,231 7,010,266 6,718,343 3,539,826 3,572,440 12,174,838 11,889,014 5,366,385 5,271,236 2,997,678 3,148,245 9,431 9,962 984,236 1,054,728 (12,492 ) (14,101 ) $ 21,520,076 $ 21,359,084 $315,031$44,426 and $8,445$56,261 at September 30, 2017March 31, 2024 and December 31, 2016,2023, respectively. The increase was due to the acquisition of Cardinal and it mortgage banking subsidiary, George Mason. Loans held for sale consist of single-family residential real estate loans originated for sale in the secondary market.The outstanding balances in the table above include previously acquired impaired loans with a recorded investment of $227,754 or 1.73% of total gross loans at September 30, 2017 and $171,596 or 1.66% of total gross loans at December 31, 2016. The contractual principal in these acquired impaired loans was $310,609 and $231,096 at September 30, 2017 and December 31, 2016, respectively. The balances above do not include future accretable net interest (i.e. the difference between the undiscounted expected cash flows and the recorded investment in the loan) on the acquired impaired loans.Activity for the accretable yield for the first nine months of 2017 follows: $ 29,165 (11,312 ) 17,444 2,727 (2,367 ) $ 35,657 banks havebank has made loans to the directors and officers of United and its subsidiaries, and to their affiliates. The aggregate dollar amount of these loans was $364,774$68,274 and $255,476$68,460 at September 30, 2017March 31, 2024 and December 31, 2016,2023, respectively.5.loancredit losses. United’s method of income recognition for loans and leases that are classified as nonaccrual is to recognize interest income on a cash basis or apply the cash receipt to principal when the ultimate collectibilitycollectability of principal is in doubt. Nonaccrual loans and leases will not normally be returned to accrual status unless all past due principal and interest has been paid and the borrower has evidenced their ability to meet the contractual provisions of the note.A loan is categorized as a troubled debt restructuring (“TDR”) if a concession is granted and there is deterioration in the financial condition of the borrower. TDRs can take the form of a reduction of the stated interest rate, splitting a loan into separate loans with market terms on one loan and concessionary terms on the other loan, receipts of assets from a debtor in partial or full satisfaction of a loan, the extension of the maturity date or dates at a stated interest rate lower than the current market rate for new debt with similar risk, the reduction of the face amount or maturity amount of the debt as stated in the instrument or other agreement, the reduction of accrued interest or any other concessionary type of renegotiated debt. As of September 30, 2017, United had TDRs of $46,132 as compared to $21,152 as of December 31, 2016. Of the $46,132 aggregate balance of TDRs at September 30, 2017, $29,717 was on nonaccrual status and included in the “Loans on Nonaccrual Status” on the following pages. Of the $21,152 aggregate balance of TDRs at December 31, 2016, $11,106 was on nonaccrual status and included in the “Loans on Nonaccrual Status” on the following page. As of September 30, 2017, there were no commitments to lend additional funds to debtors owing receivables whose terms have been modified in TDRs. At September 30, 2017, United had restructured loans in the amount of $2,043 that were modified by a reduction in the interest rate, $4,507 that were modified by a combination of a reduction in the interest rate and the principal and $39,582 that was modified by a change in terms.A loan acquired and accounted for under ASC topic310-30 “Loans and Debt Securities Acquired with Deteriorated Credit Quality” is reported as an accruing loan and a performing asset.No loans were restructured during the three months ended September 30, 2017. The following table sets forth United’s troubled debt restructurings that were restructured during the three months ended September 30, 2016, segregated by class of loans: Troubled Debt Restructurings For the Three Months Ended September 30, 2016 Number of
Contracts Pre-
Modification
Outstanding
Recorded
Investment Post-
Modification
Outstanding
Recorded
Investment 0 $ 0 $ 0 0 0 0 1 110 110 0 0 0 0 0 0 0 0 0 0 0 0 1 $ 110 $ 110 The following table sets forth United’s troubled debt restructurings that were restructured during the nine months ended September 30, 2017 and 2016, segregated by class of loans: Troubled Debt Restructurings For the Nine Months Ended September 30, 2017 September 30, 2016 Number of
Contracts Pre-
Modification
Outstanding
Recorded
Investment Post-
Modification
Outstanding
Recorded
Investment Number of
Contracts Pre-
Modification
Outstanding
Recorded
Investment Post-
Modification
Outstanding
Recorded
Investment 1 $ 5,333 $ 5,333 1 $ 1,190 $ 1,184 0 0 0 0 0 0 8 24,102 22,291 5 2,250 1,725 0 0 0 1 1,400 1,400 1 1,456 1,400 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 10 $ 30,891 $ 29,024 7 $ 4,840 $ 4,309 During the first nine months of 2017, $29,024 of restructured loans were modified by a change in terms. During the third quarter and first nine months of 2016, $110 and $2,909, respectively, of restructured loans were modified by a change in loan terms. In addition, during the first nine months of 2016, $1,400 of restructured loans were modified by a combination of a reduction in the interest rate and an extension of the maturity date. In some instances, the post-modification balance on the restructured loans is larger than thepre-modification balance due to the advancement of monies for items such as delinquent taxes on real estate property. The loans were evaluated individually for allocation within United’s allowance for loan losses. The modifications had an immaterial impact on the financial condition and results of operations for United.The following table presents troubled debt restructurings, by class of loan, that had charge-offs during the three months and nine months ended September 30, 2017. Three Months Ended
September 30, 2017 Nine Months Ended
September 30, 2017 (In thousands) Number of
Contracts Recorded
Investment Number of
Contracts Recorded
Investment 0 $ 0 0 $ 0 0 0 0 0 1 1,495 1 1,495 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 $ 1,495 1 $ 1,495 No loans restructured during the twelve-month period ended September 30, 2016 subsequently defaulted, resulting in a principalcharge-off during the three months and first nine months ended September 30, 2016.loans:Age Analysis of Past Due LoansAs of September 30, 2017 30-89
Days
Past Due 90 Days or
more Past
Due Total Past
Due Current &
Other (1) Total
Financing
Receivables Recorded
Investment
>90 Days
& Accruing $ 9,704 $ 6,912 $ 16,616 $ 1,348,141 $ 1,364,757 $ 0 7,686 20,797 28,483 4,657,700 4,686,183 0 13,589 79,342 92,931 1,664,810 1,757,741 802 33,654 25,564 59,218 2,991,650 3,050,868 5,298 3,351 17,852 21,203 1,578,429 1,599,632 14,828 385 210 595 13,180 13,775 210 8,087 1,305 9,392 674,506 683,898 1,111 $ 76,456 $ 151,982 $ 228,438 $ 12,928,416 $ 13,156,854 $ 22,249 (1)Other includes loans with a recorded investment of $227,754 acquired and accounted for under ASC topic310-30 “Loans and Debt Securities Acquired with Deteriorated Credit Quality”.Age Analysis of Past Due LoansAs of December 31, 2016(In thousands) 30-89
Days
Past Due 90 Days or
more Past
Due Total Past
Due Current &
Other (1) Total
Financing
Receivables Recorded
Investment
>90 Days
& Accruing $ 5,850 $ 3,981 $ 9,831 $ 1,040,054 $ 1,049,885 $ 94 9,288 20,847 30,135 3,395,318 3,425,453 172 15,273 42,766 58,039 1,555,398 1,613,437 2,518 29,976 25,991 55,967 2,347,470 2,403,437 4,216 3,809 7,779 11,588 1,244,150 1,255,738 33 422 141 563 13,624 14,187 141 10,015 1,712 11,727 582,855 594,582 1,412 $ 74,633 $ 103,217 $ 177,850 $ 10,178,869 $ 10,356,719 $ 8,586 (1)Other includes loans with a recorded investment of $171,596 acquired and accounted for under ASC topic310-30 “Loans and Debt Securities Acquired with Deteriorated Credit Quality”.
Past Due
more Past
Due
Due
Other
Receivables
More Past
Due &
Accruing $ 3,503 $ 8,840 $ 12,343 $ 1,612,403 $ 1,624,746 $ 95 10,041 6,950 16,991 6,993,275 7,010,266 0 4,108 33,979 38,087 3,501,739 3,539,826 582 27,179 12,881 40,060 5,326,325 5,366,385 6,981 957 6,027 6,984 2,990,694 2,997,678 0 122 138 260 9,171 9,431 138 23,483 5,567 29,050 955,186 984,236 3,533 $ 69,393 $ 74,382 $ 143,775 $ 21,388,793 $ 21,532,568 $ 11,329
Past Due
more Past
Due
Due
Other
Receivables
More Past
Due &
Accruing $ 6,361 $ 6,335 $ 12,696 $ 1,585,535 $ 1,598,231 $ 110 10,373 13,146 23,519 6,694,824 6,718,343 2,460 3,218 1,224 4,442 3,567,998 3,572,440 560 26,523 12,136 38,659 5,232,577 5,271,236 6,244 879 6,423 7,302 3,140,943 3,148,245 0 145 127 272 9,690 9,962 127 36,451 6,107 42,558 1,012,170 1,054,728 5,078 $ 83,950 $ 45,498 $ 129,448 $ 21,243,737 $ 21,373,185 $ 14,579 loans:Loansloans and leases:
Allowance for
Credit Losses
Related
Allowance
for Credit
Losses $ 8,745 $ 8,745 $ 6,225 $ 6,225 6,950 4,061 10,686 10,686 33,397 548 664 664 5,900 5,900 5,892 5,892 6,027 6,027 6,423 6,423 0 0 0 0 2,034 2,034 1,029 1,029 $ 63,053 $ 27,315 $ 30,919 $ 30,919 Nonaccrual Status September 30,
2017 December 31,
2016 $ 6,912 $ 3,887 20,797 20,675 78,540 40,248 20,266 21,775 3,024 7,746 0 0 194 300 $ 129,733 $ 94,631 assignswill modify a loan to a borrower experiencing financial difficulty by providing multiple types of concessions such as a term extension, principal forgiveness, an interest rate reduction or a combination thereof. The following table presents the amortized cost of loans and leases to borrowers experiencing financial difficulty modified during the first three months of 2024 and 2023, respectively, by class of financing receivable and by type of modification. The percentage of the amortized cost basis of loans and leases that were modified to borrowers experiencing financial difficulty as compared to the amortized cost basis of each class of financing receivable is also represented below.
Difficulty
Extension
Reduction
Interest Rate
Reduction
Payment Delay
Financing
Receivable $ 0 $ 0 $ 0 $ 0 0.00 % 5,726 0 0 0 0.08 % 0 0 2,316 0 0.07 % 8,750 0 0 170 0.17 % 300 0 0 0 0.01 % 0 0 0 0 0.00 % 0 0 0 0 0.00 % $ 14,776 $ 0 $ 2,316 $ 170 0.08 %
Difficulty
Extension
Reduction
Interest Rate
Reduction
Payment Delay
Financing
Receivable $ 0 $ 0 $ 0 $ 0 0.00 % 0 1,771 0 0 0.03 % 0 0 0 0 0.00 % 95 0 0 0 0.00 % 0 0 0 0 0.00 % 0 0 0 0 0.00 % 0 0 0 0 0.00 % $ 95 $ 1,771 $ 0 $ 0 0.01 % quality indicatorslosses uses a lifetime methodology, derived from modeled loan performance based on the extensive historical experience of pass, special mention, substandardloans with similar risk characteristics, adjusted to reflect current conditions and doubtfulreasonable and supportable forecasts. The historical loss experience used in United’s credit loss models includes the impact of loan modifications provided to borrowers experiencing financial difficulty, and also includes the impact of projected loss severities as a result of loan defaults.loans. modification efforts. The following table presents the performance in the 12 months after a modification made to borrowers experiencing financial difficulty presented by class of financing receivable:
Past Due
Past Due
Past Due
Past Due $ 474 $ 0 $ 0 $ 0 $ 0 $ 0 38,736 0 0 1,771 0 0 2,474 0 0 0 0 0 9,420 0 0 0 95 0 300 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 $ 51,404 $ 0 $ 0 $ 1,771 $ 95 $ 0
March 31, 2024
March 31, 2023
Average
Interest Rate
Reduction
Average Term
Extension
Average
Interest Rate
Reduction
Average Term
Extension 0.00 % 0 0.00 % 0 0.00 % 0.6 1.50 % 0 1.00 % 0.3 0.00 % 0 0.00 % 0.6 0.00 % 2.5 0.00 % 0.5 0.00 % 0 0.00 % 0 0.00 % 0 0.00 % 0 0.00 % 0 1.00 % 0.6 1.50 % 2.5
Property
Assets
Property $ 22 $ 0 $ 0 $ 4,834 $ 9,022 $ 13,878 6,909 0 0 27,163 1,575 35,647 0 33,611 0 5,168 251 39,030 9,132 0 0 0 0 9,132 954 0 3,395 0 3,164 7,513 0 0 0 0 0 0 0 0 0 0 0 0 $ 17,017 $ 33,611 $ 3,395 $ 37,165 $ 14,012 $ 105,200
Property
Assets
Property Commercial real estate: $ 27 $ 0 $ 0 $ 5,208 $ 9,272 $ 14,507 11,200 0 0 13,555 1,810 26,565 0 891 0 5,193 256 6,340 9,775 0 0 0 0 9,775 954 0 3,661 0 3,314 7,929 0 0 0 0 0 0 0 0 0 0 0 0 $ 21,956 $ 891 $ 3,661 $ 23,956 $ 14,652 $ 65,116 internally assigns a grade based onanalyzes loans individually to classify the creditworthinessloans as to credit risk. Review and analysis of criticized (special mention-rated loans in the borrower.amount of $1,000 or greater) and classified (substandard-rated and worse in the amount of $500 and greater) loans is completed once per quarter. Review of notes with committed exposure of $2,000 or greater is completed at least annually. For loans with a consumer credit exposure, United internally assigns a grade based upon an individual loan’s delinquency status. United reviews and updates, as necessary, these grades on a quarterly basis.questionable and improbable.questionable. A doubtful loan has a high probability of total or substantial loss, but because of specific pending events that may strengthen the loan, its classification as loss is deferred. Doubtful borrowers are usually in default, lack adequate liquidity or capital, and lack the resources necessary to remain an operating entity. Pending events can include mergers, acquisitions, liquidations, capital injections, the perfection of liens on additional collateral, the valuation of collateral, and refinancing. Generally, there are not any loans with a consumer credit exposure that are classified as doubtful. Usually, they are Loans classifieddoubtful are also considered impaired.The following tables set forth United’s credit quality indicators information,well as charge-offs and recoveries by class of loans:Credit Quality IndicatorsCorporate Credit Exposure Commercial Real Estate Other
Commercial Construction
& Land
Development Owner-
occupied Nonowner-
occupied $ 1,282,657 $ 4,544,799 $ 1,611,250 $ 1,498,656 23,827 44,080 47,450 19,872 58,273 97,304 98,933 81,104 0 0 108 0 $ 1,364,757 $ 4,686,183 $ 1,757,741 $ 1,599,632 Commercial Real Estate Other
Commercial Construction
& Land
Development Owner-
occupied Nonowner-
occupied $ 963,503 $ 3,284,497 $ 1,463,797 $ 1,126,742 20,490 36,462 26,537 52,327 65,892 104,494 122,893 76,669 0 0 210 0 $ 1,049,885 $ 3,425,453 $ 1,613,437 $ 1,255,738 Credit Quality IndicatorsConsumer Credit Exposure Residential
Real Estate Bankcard Other
Consumer $ 2,999,614 $ 13,180 $ 674,447 18,953 385 8,134 32,301 210 1,317 0 0 0 $ 3,050,868 $ 13,775 $ 683,898 Residential
Real Estate Bankcard Other
Consumer $ 2,348,017 $ 13,624 $ 582,704 18,240 422 10,132 36,995 141 1,746 185 0 0 $ 2,403,437 $ 14,187 $ 594,582 Loans are designatedloans is as impaired when, in the opinion of management, based on current informationfollows:
amortized cost
basis
term loans $ 46,413 $ 134,319 $ 315,027 $ 259,889 $ 243,586 $ 550,971 $ 24,909 $ 0 $ 1,575,114 0 0 0 0 0 17,068 0 0 17,068 0 881 1,733 265 459 28,413 449 127 32,327 0 0 0 0 0 237 0 0 237 $ 46,413 $ 135,200 $ 316,760 $ 260,154 $ 244,045 $ 596,689 $ 25,358 $ 127 $ 1,624,746 0 0 0 0 0 0 0 0 0 0 0 4 0 0 532 0 0 536 $ 0 $ 0 $ 4 $ 0 $ 0 $ 532 $ 0 $ 0 $ 536
amortized cost
basis
term loans $ 132,376 $ 316,117 $ 246,635 $ 248,861 $ 109,182 $ 465,223 $ 29,619 $ 0 $ 1,548,013 0 0 0 0 2,460 15,423 125 0 18,008 0 1,734 274 475 436 28,469 449 129 31,966 0 0 0 0 0 244 0 0 244 $ 132,376 $ 317,851 $ 246,909 $ 249,336 $ 112,078 $ 509,359 $ 30,193 $ 129 $ 1,598,231 0 0 0 0 0 (855 ) 0 0 (855 ) 0 13 0 0 0 174 0 0 187 Current-period net recoveries (charge-offs) $ 0 $ 13 $ 0 $ 0 $ 0 $ (681 ) $ 0 $ 0 $ (668 )
amortized cost
basis
term loans $ 115,786 $ 546,520 $ 1,517,166 $ 1,717,621 $ 678,954 $ 1,903,586 $ 241,589 $ 98 $ 6,721,320 0 0 4,569 2,371 25,121 161,110 30,774 0 223,945 0 0 0 4,020 363 60,618 0 0 65,001 0 0 0 0 0 0 0 0 0 $ 115,786 $ 546,520 $ 1,521,735 $ 1,724,012 $ 704,438 $ 2,125,314 $ 272,363 $ 98 $ 7,010,266 0 0 0 0 (751 ) (35 ) 0 0 (786 ) 0 0 0 0 0 195 0 0 195 Current-period net (charge-offs) recoveries $ 0 $ 0 $ 0 $ 0 $ (751 ) $ 160 $ 0 $ 0 $ (591 )
amortized cost
basis
term loans $ 455,399 $ 1,428,880 $ 1,587,315 $ 717,189 $ 695,492 $ 1,335,526 $ 228,743 $ 106 $ 6,448,650 0 4,614 2,381 25,437 43,017 104,997 30,651 0 211,097 0 0 4,020 4,736 3,493 46,347 0 0 58,596 0 0 0 0 0 0 0 0 0 $ 455,399 $ 1,433,494 $ 1,593,716 $ 747,362 $ 742,002 $ 1,486,870 $ 259,394 $ 106 $ 6,718,343 0 0 0 0 0 (24 ) 0 0 (24 ) 0 0 0 0 0 1,233 0 0 1,233 $ 0 $ 0 $ 0 $ 0 $ 0 $ 1,209 $ 0 $ 0 $ 1,209
and leases
amortized cost
basis
term loans $ 174,543 $ 547,168 $ 501,378 $ 458,070 $ 130,013 $ 786,592 $ 864,039 $ 7 $ 3,461,810 116 130 4,173 475 1,806 5,867 11,053 10 23,630 0 59 16,109 263 806 9,727 27,383 0 54,347 0 0 0 0 0 39 0 0 39 $ 174,659 $ 547,357 $ 521,660 $ 458,808 $ 132,625 $ 802,225 $ 902,475 $ 17 $ 3,539,826 0 0 0 (33 ) 0 (4 ) (179 ) 0 (216 ) 0 0 1 43 0 464 1 0 509 $ 0 $ 0 $ 1 $ 10 $ 0 $ 460 $ (178 ) $ 0 $ 293
and leases
amortized cost
basis
term loans $ 593,153 $ 596,258 $ 477,457 $ 197,173 $ 187,560 $ 447,430 $ 988,809 $ 13 $ 3,487,853 221 4,798 542 1,775 1,611 2,093 16,901 15 27,956 1,059 16,248 306 792 660 11,923 25,597 0 56,585 0 0 0 0 0 46 0 0 46 $ 594,433 $ 617,304 $ 478,305 $ 199,740 $ 189,831 $ 461,492 $ 1,031,307 $ 28 $ 3,572,440 (88 ) (163 ) (233 ) 0 (661 ) (567 ) (217 ) (78 ) (2,007 ) 0 0 0 0 25 1,699 5 0 1,729 $ (88 ) $ (163 ) $ (233 ) $ 0 $ (636 ) $ 1,132 $ (212 ) $ (78 ) $ (278 )
amortized cost
basis
term loans $ 130,784 $ 785,953 $ 1,630,062 $ 838,872 $ 433,662 $ 1,087,426 $ 425,977 $ 2,549 $ 5,335,285 170 0 0 0 8,750 3,847 1,700 0 14,467 0 50 73 376 0 15,213 833 88 16,633 0 0 0 0 0 0 0 0 0 $ 130,954 $ 786,003 $ 1,630,135 $ 839,248 $ 442,412 $ 1,106,486 $ 428,510 $ 2,637 $ 5,366,385 0 0 0 0 0 (127 ) 0 0 (127 ) 0 0 0 0 0 39 0 0 39 $ 0 $ 0 $ 0 $ 0 $ 0 $ (88 ) $ 0 $ 0 $ (88 )
amortized cost
basis
term loans $ 783,866 $ 1,618,774 $ 850,760 $ 443,514 $ 262,524 $ 863,186 $ 423,302 $ 2,568 $ 5,248,494 0 0 0 0 65 3,561 1,710 0 5,336 51 75 386 258 599 14,827 1,121 89 17,406 0 0 0 0 0 0 0 0 0 $ 783,917 $ 1,618,849 $ 851,146 $ 443,772 $ 263,188 $ 881,574 $ 426,133 $ 2,657 $ 5,271,236 0 0 0 0 (785 ) 0 0 0 (785 ) 0 0 8 0 688 1 0 0 697 $ 0 $ 0 $ 8 $ 0 $ (97 ) $ 1 $ 0 $ 0 $ (88 ) events, the collection of principal and interest in accordance with the loan contract is doubtful. Typically, United does not consider loans for impairment unless a sustained period of delinquency (i.e. 90 days or more) is noted or there are subsequent events that impact repayment probability (i.e. negative financial trends, bankruptcy filings, eminent foreclosure proceedings, etc.). Impairment is evaluated in total for smaller-balance loans of a similar nature and on an individual loan basis for other loans.Consistent with United’s existing method of income recognition for loans, interest on impaired loans, except those classified as nonaccrual, is recognized as income using the accrual method. Impaired loans, or portions thereof, are charged off when deemed uncollectible.The following table sets forth United’s impaired loans information, by class of loans: Impaired Loans September 30, 2017 December 31, 2016 Recorded
Investment Unpaid
Principal
Balance Related
Allowance Recorded
Investment Unpaid
Principal
Balance Related
Allowance $ 64,592 $ 65,355 $ 0 $ 46,575 $ 47,108 $ 0 143,100 143,552 0 92,654 93,104 0 55,022 58,785 0 46,064 48,308 0 20,873 22,546 0 22,747 24,404 0
development 30,959 33,225 0 19,863 21,746 0 0 0 0 0 0 0 16 16 0 36 36 0 $ 8,220 $ 8,220 $ 923 $ 1,787 $ 2,082 $ 815 12,182 12,182 1,786 17,938 17,938 2,524 70,344 80,415 21,890 43,774 46,188 13,441 13,743 15,082 1,659 12,066 12,801 3,431
development 1,411 5,910 488 4,940 7,899 3,206 0 0 0 0 0 0 0 0 0 0 0 0 $ 72,812 $ 73,575 $ 923 $ 48,362 $ 49,190 $ 815 155,282 155,734 1,786 110,592 111,042 2,524 125,366 139,200 21,890 89,838 94,496 13,441 34,616 37,628 1,659 34,813 37,205 3,431
development 32,370 39,135 488 24,803 29,645 3,206 0 0 0 0 0 0 16 16 0 36 36 0 Impaired Loans For the Three Months Ended September 30, 2017 September 30, 2016 Average
Recorded
Investment Interest
Income
Recognized Average
Recorded
Investment Interest
Income
Recognized $ 58,980 $ 376 $ 38,199 $ 531 108,959 312 71,154 321 57,317 306 45,028 1,221 19,553 74 27,214 170 23,846 552 28,730 46 Impaired Loans For the Three Months Ended September 30, 2017 September 30, 2016 Average
Recorded
Investment Interest
Income
Recognized Average
Recorded
Investment Interest
Income
Recognized 0 0 0 0 25 0 35 0 $ 11,624 $ 131 $ 3,353 $ 36 13,408 89 14,046 122 72,835 216 33,195 42 15,225 16 8,579 52 1,641 21 8,591 56 0 0 0 0 0 0 0 0 $ 70,604 $ 507 $ 41,552 $ 567 122,367 401 85,200 443 130,152 522 78,223 1,263 34,778 90 35,793 222 25,487 573 37,321 102 0 0 0 0 25 0 35 0 Impaired Loans For the Nine Months Ended September 30, 2017 September 30, 2016 Average
Recorded
Investment Interest
Income
Recognized Average
Recorded
Investment Interest
Income
Recognized $ 55,506 $ 1,011 $ 34,030 $ 715 93,254 811 70,081 714 55,891 895 37,805 1,446 19,634 206 26,737 406 20,706 563 26,559 112 0 0 0 0 29 0 32 0 $ 9,392 $ 424 $ 3,603 $ 92 14,595 363 10,416 360 65,142 1,410 34,755 270 15,186 89 9,129 77 2,872 64 10,300 146 0 0 0 0 0 0 0 0 $ 64,898 $ 1,435 $ 37,633 $ 807 107,849 1,174 80,497 1,074 121,033 2,305 72,560 1,716 34,820 295 35,866 483 23,578 627 36,859 258 0 0 0 0 29 0 32 0
amortized cost
basis
term loans $ 74,884 $ 651,658 $ 1,274,582 $ 656,065 $ 50,762 $ 51,936 $ 226,321 $ 0 $ 2,986,208 0 0 2,902 0 61 344 300 0 3,607 0 0 954 2,490 2,470 1,949 0 0 7,863 0 0 0 0 0 0 0 0 0 $ 74,884 $ 651,658 $ 1,278,438 $ 658,555 $ 53,293 $ 54,229 $ 226,621 $ 0 $ 2,997,678 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 1 $ 0 $ 0 $ 0 $ 0 $ 0 $ 1 $ 0 $ 0 $ 1
amortized cost
basis
term loans $ 628,047 $ 1,308,793 $ 827,138 $ 53,004 $ 16,062 $ 60,920 $ 239,390 $ 0 $ 3,133,354 0 2,902 0 62 3,386 258 0 0 6,608 0 1,091 2,490 2,470 0 2,232 0 0 8,283 0 0 0 0 0 0 0 0 0 $ 628,047 $ 1,312,786 $ 829,628 $ 55,536 $ 19,448 $ 63,410 $ 239,390 $ 0 $ 3,148,245 0 0 0 0 0 (14 ) 0 0 (14 ) 0 0 0 0 0 80 0 0 80 $ 0 $ 0 $ 0 $ 0 $ 0 $ 66 $ 0 $ 0 $ 66
amortized cost
basis
term loans $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 9,171 $ 0 $ 9,171 0 0 0 0 0 0 122 0 122 0 0 0 0 0 0 138 0 138 0 0 0 0 0 0 0 0 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 9,431 $ 0 $ 9,431 0 0 0 0 0 0 (87 ) 0 (87 ) 0 0 0 0 0 0 9 0 9 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ (78 ) $ 0 $ (78 )
amortized cost
basis
term loans $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 9,690 $ 0 $ 9,690 0 0 0 0 0 0 145 0 145 0 0 0 0 0 0 127 0 127 0 0 0 0 0 0 0 0 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 9,962 $ 0 $ 9,962 0 0 0 0 0 0 (263 ) 0 (263 ) 0 0 0 0 0 0 28 0 28 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ (235 ) $ 0 $ (235 )
amortized cost
basis
term loans $ 44,489 $ 177,286 $ 393,071 $ 185,076 $ 88,124 $ 64,619 $ 2,521 $ 0 $ 955,186 0 416 10,082 8,419 2,812 1,715 39 0 23,483 0 51 2,784 1,928 646 153 5 0 5,567 0 0 0 0 0 0 0 0 0 $ 44,489 $ 177,753 $ 405,937 $ 195,423 $ 91,582 $ 66,487 $ 2,565 $ 0 $ 984,236 0 (32 ) (1,366 ) (646 ) (172 ) (144 ) 0 0 (2,360 ) 0 5 73 37 41 61 0 0 217 $ 0 $ (27 ) $ (1,293 ) $ (609 ) $ (131 ) $ (83 ) $ 0 $ 0 $ (2,143 )
amortized cost
basis
to term
loans $ 192,184 $ 428,295 $ 205,015 $ 102,300 $ 62,861 $ 18,876 $ 2,638 $ 0 $ 1,012,169 674 16,031 12,220 4,454 2,050 977 46 0 36,452 0 3,010 2,207 647 126 96 21 0 6,107 0 0 0 0 0 0 0 0 0 $ 192,858 $ 447,336 $ 219,442 $ 107,401 $ 65,037 $ 19,949 $ 2,705 $ 0 $ 1,054,728 (9 ) (3,205 ) (2,699 ) (933 ) (319 ) (191 ) 0 0 (7,356 ) 0 219 125 54 54 235 0 0 687 $ (9 ) $ (2,986 ) $ (2,574 ) $ (879 ) $ (265 ) $ 44 $ 0 $ 0 $ (6,669 ) September 30, 2017March 31, 2024 and December 31, 2016,2023, other real estate owned (“OREO”) included in other assets in the Consolidated Balance Sheets was $26,826$2,670 and $31,510,$2,615, respectively. OREO consists of real estate acquired in foreclosure or other settlement of loans. Such assets are carried at the lower of the investment in the assets or the fair value of the assets less estimated selling costs. Any adjustment to the fair value at the date of transfer is charged against the allowance for loan losses. Any subsequent valuation adjustments as well as any costs relating to operating, holding or disposing of the property are recorded in other expense in the period incurred. At September 30, 2017March 31, 2024 and December 31, 2016,2023, the recorded investment of consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings are in process was $116$258 and $660,$142, respectively.6.management’san estimate of the probableexpected credit losses inherenton 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 creditloan portfolio.consolidated balance sheets. For purposesall classes of determiningloans and leases receivable, the general allowance,accrual of interest is discontinued when the contractual payment of principal or interest has become 90 days past due, unless the loan is well secured and in the process of collection. Interest received on nonaccrual loans and leases, generally is either applied against principal or reported as interest income, according to management’s judgment as to the collectability of principal. $ 4,662 $ 4,751 36,089 27,507 12,540 14,562 20,931 20,718 14,438 18,504 0 0 2,518 2,921 $ 91,178 $ 88,963
by Reversing Interest Income $ 168 $ 0 2 0 669 13 6 50 0 2 0 0 115 94 $ 960 $ 159 is segregated by product typemix, delinquency level or term as well as reasonable and supportable forecast adjustments for changes in environmental conditions, such as changes in unemployment rates, property values or other relevant factors. A reversion to recognize differing risk profiles among categories. It is further segregated by credit grade fornon-homogenous loan pools and delinquency for homogeneous loan pools. The outstanding principal balance within each pool is multiplied by historical loss data occurs via a straight-line method during the loss emergence period (which isyear following the periodtime between the event that triggers a loss and the confirmation and/or charge off of that loss) and certain qualitative factors to derive the general loss allocation per pool. Specific loss allocations are calculated for commercial loans in excess of $500,000 in accordance with ASC topic 310. Default/Loss Given Default (PD/LGD)owner-occupied commercial real estate owner-occupied loans and commercial other commercial loans and leases are similar in that they are normally dependent upon the borrower’s internal cash flow from operations to service debt. Nonowner-occupied commercialCommercial real estate nonowner-occupied loans differ in that cash flow to service debt is normally dependent on external income from third parties for use of the real estate such as rents, leases and room rates. Residential real estate loans are dependent upon individual borrowers who are affected by changes in general economic conditions, demand for housing and resulting residential real estate valuation. Construction and land development loans are impacted mainly by demand whether for new residential housing or for retail, industrial, office and other types of commercial construction within a given area. Consumer loan pool risk characteristics are influenced by general, regional and local economic conditions.deemedthat do not share risk characteristics are evaluated on an individual basis. Loans evaluated individually are not also included in the collective evaluation. When management determines that foreclosure is probable or when the borrower is experiencing financial difficulty at the reporting date and repayment is expected to be uncollectibleprovided substantially through the operation or sale of the collateral but may also include othercharged againstbased on the allowance for loan losses, while recoveries of previouslycharged-off amounts are credited to the allowance for loan losses. For commercial loans, when a loan or a portion of a loan is identified to contain a loss, acharge-off recommendation is directed to management tocharge-off all or a portion of that loan. Generally, any unsecured commercial loan more than six months delinquent in payment of interest must becharged-off in full. If secured, thecharge-off is generally made to reduce the loan balance to a level equal to the liquidationfair value of the collateral when payment of principalat the reporting date, adjusted for selling costs as appropriate. These individually evaluated loans are removed from their respective pools and interest is six months delinquent. Any commercial loan, secured or unsecured, on which a principal or interest payment has not been made within 90 days, is reviewed monthly for appropriate action.For consumer loans,closed-end retail loans thattypically represent collateral dependent loans.past due 120 cumulative days delinquent fromestimated over the contractual due date andopen-end loans 180 cumulative days delinquent from the contractual due date arecharged-off. Any consumer loan on which a principal or interest payment has not been made within 90 days is reviewed monthly for appropriate action. For aone-to-four familyopen-end orclosed-end residential real estate loan, home equity loan, orhigh-loan-to-value loan that has reached 180 or more days past due, management evaluates the collateral position andcharges-off any amount that exceeds the valueterm of the collateral. On retail creditsloans and leases, adjusted for whichexpected prepayments when appropriate. The contractual term excludes expected extensions, renewals and modifications unless management has a reasonable expectation at the borrowerreporting date that the extension or renewal options are included in the original or modified contract at the reporting date and are not unconditionally cancelable by United.in bankruptcy,estimated and recorded as credit loss expense. The subsequent measurement of expected credit losses for allamounts deemed unrecoverable are charged off within 60 days of acquired loans is the receipt of the notification. On retail credits effected by fraud, a loan ischarged-off within 90 days of the discovery of the fraud. In the event of the borrower’s death and if repayment within the required timeframe is uncertain, the loan is generallycharged-off as soonsame as the amount of the loss is determined.For loans acquired through the completion of a transfer, including loans acquired in a business combination, that have evidence of deterioration of credit quality since origination and for which it is probable, at acquisition, that United will be unable to collect all contractually required payments receivable are initially recorded at fair value (as determined by the present valuesubsequent measurement of expected future cash flows) with no valuation allowance. The difference betweencredit losses for originated loans. For allowance for credit losses under ASC Topic 326 calculation purposes, United includes its acquired loans and leases in their relevant pool unless they meet the undiscounted cash flows expected at acquisition and the investment in the loan, or the “accretable yield,” is recognized as interest income on a level-yield method over the life of the loan. Contractually required paymentscriteria for interest and principal that exceed the undiscounted cash flows expected at acquisition, or the “nonaccretable difference,” are not recognized as a yield adjustment or as a loss accrual or a valuation allowance. Increases in expected cash flows subsequent to the initial investment are recognized prospectively through adjustment of the yield on the loan over its remaining life. Decreases in expected cash flows are recognized as impairment. Valuation allowances on these impaired loans reflect only losses incurred after the acquisition (meaning the present value of all cash flows expected at acquisition that ultimately are not to be received). For the three and nine months ended September 30, 2017, there-estimation of the expected cash flows related to loans acquired that have evidence of deterioration of credit quality resulted in a reversal of provision for loan losses expense of $43 and $415, respectively, as compared to a reversal of provision for loan losses expense of $1,130 and provision for loan losses expense of $160, respectively, for the three and nine months ended September 30, 2016.$804$42,915 and $1,044$44,706 at September 30, 2017March 31, 2024 and December 31, 2016,2023, respectively, is separately classified on the balance sheet and is included in other liabilities.The combined allowance for loan losses and reserve for lending-related commitments are referred to asis considered the allowance for credit losses.Allowance for Loan LossesFor the Three Months Ended September 30, 2017 Commercial Real Estate Construction Owner-
occupied Nonowner-
occupied Other
Commercial Residential Real
Estate & Land
Development Consumer Estimated
Imprecision Total $ 5,129 $ 7,099 $ 37,287 $ 12,479 $ 7,514 $ 2,715 $ 760 $ 72,983 518 0 4,854 299 54 632 0 6,357 397 168 156 60 89 151 0 1,021 230 (472 ) 8,782 (1,385 ) 452 281 (609 ) 7,279 $ 5,238 $ 6,795 $ 41,371 $ 10,855 $ 8,001 $ 2,515 $ 151 $ 74,926 Allowance for Loan Losses and Carrying Amount of LoansFor the Nine Months Ended September 30, 2017 Commercial Real Estate Construction Owner-
occupied Nonowner-
occupied Other
Commercial Residential
Real Estate & Land
Development Consumer Estimated
Imprecision Total $ 5,273 $ 6,883 $ 33,087 $ 13,770 $ 10,606 $ 2,805 $ 347 $ 72,771 1,433 295 14,883 2,331 2,576 2,046 0 23,564 1,590 198 821 352 705 624 0 4,290 (192 ) 9 22,346 (936 ) (734 ) 1,132 (196 ) 21,429 $ 5,238 $ 6,795 $ 41,371 $ 10,855 $ 8,001 $ 2,515 $ 151 $ 74,926 $ 923 $ 1,786 $ 21,890 $ 1,659 $ 488 $ 0 $ 0 $ 26,746 $ 4,315 $ 5,009 $ 19,481 $ 9,196 $ 7,513 $ 2,515 $ 151 $ 48,180 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 1,364,757 $ 4,686,183 $ 1,757,741 $ 3,050,868 $ 1,599,632 $ 697,673 $ 0 $ 13,156,854 $ 32,888 $ 25,220 $ 89,559 $ 15,574 $ 16,879 $ 0 $ 0 $ 180,120 $ 1,297,668 $ 4,537,792 $ 1,636,037 $ 3,021,173 $ 1,558,653 $ 697,657 $ 0 $ 12,748,980 $ 34,201 $ 123,171 $ 32,145 $ 14,121 $ 24,100 $ 16 $ 0 $ 227,754 Allowance for Loan Losses and Carrying Amount of LoansFor the Year Ended December 31, 2016 Commercial Real Estate Other
Commercial Residential
Real Estate Construction Consumer Allowance
for Total Owner-
occupied Nonowner-
occupied & Land
Development Estimated
Imprecision $ 3,637 $ 5,309 $ 31,328 $ 15,148 $ 18,205 $ 1,995 $ 104 $ 75,726 5,281 419 20,430 4,597 2,659 2,794 0 36,180 3,071 675 3,452 639 433 446 0 8,716 3,846 1,318 18,737 2,580 (5,373 ) 3,158 243 24,509 $ 5,273 $ 6,883 $ 33,087 $ 13,770 $ 10,606 $ 2,805 $ 347 $ 72,771 Allowance for Loan Losses and Carrying Amount of LoansFor the Year Ended December 31, 2016 Commercial Real Estate Other
Commercial Residential
Real Estate Construction Consumer Allowance
for Total Owner-
occupied Nonowner-
occupied & Land
Development Estimated
Imprecision $ 815 $ 2,524 $ 13,441 $ 3,431 $ 3,206 $ 0 $ 0 $ 23,417 $ 4,458 $ 4,359 $ 19,646 $ 10,339 $ 7,400 $ 2,805 $ 347 $ 49,354 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 1,049,885 $ 3,425,453 $ 1,613,437 $ 2,403,437 $ 1,255,738 $ 608,769 $ 0 $ 10,356,719 $ 18,976 $ 26,835 $ 56,091 $ 14,766 $ 8,152 $ 0 $ 0 $ 124,820 $ 1,005,999 $ 3,323,117 $ 1,527,479 $ 2,373,969 $ 1,221,006 $ 608,733 $ 0 $ 10,060,303 $ 24,910 $ 75,501 $ 29,867 $ 14,702 $ 26,580 $ 36 $ 0 $ 171,596 7.
Commercial
Real
Estate
Development
occupied
occupied
Consumer $ 11,895 $ 57,935 $ 75,007 $ 41,167 $ 59,913 $ 810 $ 12,510 $ 259,237 0 (786 ) (216 ) (127 ) 0 (87 ) (2,360 ) (3,576 ) 536 195 509 39 1 9 217 1,506 (731 ) 5,491 (1,005 ) 4,879 (4,389 ) 80 1,413 5,738 $ 11,700 $ 62,835 $ 74,295 $ 45,958 $ 55,525 $ 812 $ 11,780 $ 262,905
Commercial
Real
Estate
Development
occupied
occupied
Consumer $ 13,945 $ 38,543 $ 79,706 $ 36,227 $ 48,390 $ 561 $ 17,374 $ 234,746 (855 ) (24 ) (2,007 ) (785 ) (14 ) (263 ) (7,356 ) (11,304 ) 187 1,233 1,729 697 80 28 687 4,641 (1,382 ) 18,183 (4,421 ) 5,028 11,457 484 1,805 31,154 $ 11,895 $ 57,935 $ 75,007 $ 41,167 $ 59,913 $ 810 $ 12,510 $ 259,237 September 30, 2017 Community Banking Mortgage Banking Total Gross
Carrying
Amount Accumulated
Amortization Gross
Carrying
Amount Accumulated
Amortization Gross
Carrying
Amount Accumulated
Amortization $ 98,358 ($ 52,062 ) $ 0 ($ 0 ) $ 98,358 ($ 52,062 ) $ 0 $ 1,230 $ 1,230 $ 1,466,152 $ 21,455 $ 1,487,607 December 31, 2016 Community Banking Total Gross Carrying
Amount Accumulated
Amortization Gross
Carrying
Amount Accumulated
Amortization $ 69,635 ($ 46,681 ) $ 69,635 ($ 46,681 ) $ 863,767 $ 863,767 The following table provides a reconciliation of goodwill: Community
Banking Mortgage
Banking Total $ 863,767 $ 0 $ 863,767 1,327 0 1,327 601,058 21,455 622,513 $ 1,466,152 $ 21,455 $ 1,487,607
Carrying
Amount
Amortization
Carrying
Amount
Amortization $ 105,165 ($ 93,570 ) $ 105,165 ($ 93,570 ) $ 1,888,889 $ 1,888,889
Carrying
Amount
Amortization
Carrying
Amount
Amortization
Carrying
Amount
Amortization $ 105,165 ($ 92,660 ) $ 0 $ 0 $ 105,165 ($ 92,660 ) $ 1,883,574 $ 5,315 $ 1,888,889 on intangible assets of $2,240$910 and $5,381$1,279 for the quarterquarters ended March 31, 2024 and nine months ended September 2023, respectively. 2017, respectively, and $1,122 and $2,786 for the quarter and nine months ended September 30, 2016, respectively.2016: Amount $ 7,772 8,039 7,015 6,309 22,542 $ 3,639 3,282 2,758 1,152 560 1,114 $ 4,554 $ 21,022 0 (235 ) 0 145 (313 ) (945 ) $ 4,241 $ 19,987 $ 0 $ 0 0 0 0 0 $ 0 $ 0 $ 4,241 $ 19,987 Net occupancy expense $ 5,671 $ 5,392 Net occupancy expense (84 ) (60 ) Net lease cost $ 5,587 $ 5,332 $ 86,074 $ 86,986 Operating lease liabilities $ 92,266 $ 92,885 7.79 years 3.25 % $ 5,378 $ 5,487 3,671 10,192 $ 13,586 16,007 14,469 12,598 10,616 38,715 105,991 (13,725 ) $ 92,266 $ 0 $ 0 207,727 196,095 $ 207,727 $ 196,095 arehave not been a significant source of funds for the Company. United has various unused lines of credit available from certain of its correspondent banks in the aggregate amount of $264,000. These lines of credit, which bear interest at prevailing market rates, permit United to borrow funds in the overnight market, and are renewable annually subject to certain conditions. At September 30, 2017, federal funds purchased were $25,800 while total securities sold under agreements to repurchase (“REPOs”) were$316,236. Included in the $316,236 of total REPOs is a wholesale REPOs of $50,000, assumed in the Virginia Commerce merger. This wholesale REPO is scheduled to mature in May of 2018.company. The securities sold under agreements to repurchase were accounted for as collateralized financial transactions. They were recorded at the amounts at which the securities were acquired or sold plus accrued interest.will beis renewable on a360-day 360 day basis and will carrycarries an indexed, floating-rate of interest. The line requires compliance with various financial and nonfinancial covenants. At September 30, 2017,March 31, 2024, United had no outstanding balance under this line of credit.9.banks are membersbank is a member of the Federal Home Loan Bank (“FHLB”). Membership in the FHLB makes available short-term and long-term borrowings from collateralized advances. All FHLB borrowings are collateralized by a mix of single-family residential mortgage loans, commercial loans and investment securities. At September 30, 2017,March 31, 2024, United had an unused borrowing amount of approximately $3,724,772$7,001,680 available subject to delivery of collateral after certain trigger points. Advances may be called by the FHLB or redeemed by United based on predefined factors and penalties.September 30, 2017, $1,272,115March 31, 2024, $1,460,415 of FHLB advances with a weighted-average contractual interest rate of 1.43%5.43% and a weighted-average effective interest rate of 3.70% are scheduled to mature within the next eighttwo years. Overnight fundsThe weighted-average effective rate considers the effect of $200,000 with anany interest rate of 1.27% are included in the $1,272,115 aboveswaps designated as cash flow hedges outstanding at September 30, 2017. Amount $ 815,000 131,776 187,809 42,247 95,283 $ 1,272,115 $ 1,450,000 10,415 0 0 0 $ 1,460,415 September 30, 2017,March 31, 2024, United had a total of fifteentwenty statutory business trusts that were formed for the purpose of issuing or participating in pools of trust preferred capital securities (“Capital Securities”) with the proceeds invested in junior subordinated debt securities (“Debentures”) of United. The Debentures, which are subordinate and junior in right of payment to all present and future senior indebtedness and certain other financial obligations of United, are the sole assets of the trusts and United’s payment under the Debentures is the sole source of revenue for the trusts. At September 30, 2017March 31, 2024 and December 31, 2016,2023, the outstanding balance of the Debentures was $242,131$279,019 and $224,319,$278,616, respectively, and was included in the category of long-term debt on the Consolidated Balance Sheets entitled “Other long-term borrowings.” The Capital Securities are not included as a component of shareholders’ equity in the Consolidated Balance Sheets. United fully and unconditionally guarantees each individual trust’s obligations under the Capital Securities.For reporting periods prior to June 30, 2017,Trust Preferred Securities qualified as Tier 1 regulatory capital under thefully-phased in “Basel III Capital Rules” as published by United’s primary federal regulator, the Federal Reserve, in July of 2013. The “Basel IIIUnited is unable to consider the Capital Rules” established a new comprehensive capital framework for U.S. banking organizations. Because United was lessthan $15 billion in total consolidated assets, the Basel III Capital Rules grandfathered United’s Trust Preferred Securities as Tier 1 capital, underbut rather the limitations for restricted capital elements in the general risk-based capital rules. As a result, beginning in 2015 (the adoption date), United’s Trust PreferredCapital Securities was subject to a limit of 25 percent of Tier 1 capital elements excluding anynon-qualifying capital instruments and after all regulatory capital deductions and adjustments applied to Tier 1 capital, which is substantially similar to the limit in the general risk-based capital rules. Trust preferred securities no longer included in United’s Tier 1 capital could beare included as a component of United’s Tier 2 capital. United can include the Capital Securities in its Tier 2 capital on a permanent basis withoutphase-out.However, with the acquisition of Cardinal on April 21, 2017, United’s total consolidated assets now exceeds $15 billion. As a result, United’s Trust Preferred Securities are no longer included in United’s Tier 1 capital but are included as a component of Tier 2 capital on a permanent basis withoutphase-out. This new requirement was reflected in United’s regulatory capital amounts for June 30, 2017, the first reporting period after the Cardinal acquisition.10.basis.$4,118,868$6,817,449 and $2,823,396$6,851,890 of loan commitments outstanding as of September 30, 2017March 31, 2024 and December 31, 2016,2023, respectively, approximately half41% of which contractually expire within one year. IncludedExcluded in the September 30, 2017December 31, 2023 amount areabove were commitments to extend credit of $407,610$416,095 related to George Mason’s mortgage loan funding commitments and areof United’s previous mortgage banking segment which were of a short-term nature.September 30, 2017,March 31, 2024 and December 31, 2023, United had no outstanding$16,113 and $16,233 of commercial letters of credit and $9 as of December 31, 2016.outstanding. A standby letter of credit is generally contingent upon the failure of a customer to perform according to the terms of an underlying contract with a third party. United has issued standby letters of credit of $148,742$155,354 and $121,584$147,705 as of September 30, 2017March 31, 2024 and December 31, 2016,2023, respectively. In accordance with the Contingencies Topic of the FASB Accounting Standards Codification, United has determined that substantially all of its letters of credit are renewed on an annual basis and the fees associated with these letters of credit are immaterial.George MasonGeorge Mason has aUnited’s reserve of $575was immaterial as of September 30, 2017.George Mason’sUnited’s mortgage banking third party investors to meet the terms of their forward sales contracts. George MasonUnited works with mortgage banking third-party investors that are generally well-capitalized, are investment grade and exhibit strong financial performance to mitigate this risk. United does not expect any third-party investor to fail to meet its obligation.position.11.statements.manageaid against adverse pricesprice changes or interest rate movements on the value of certain assets or liabilities and on future cash flows. These derivatives may consist of interest rate swaps, caps, floors, collars, futures, forward contracts, written and purchased options. United also executes derivative instruments with its commercial banking customers to facilitate its risk management strategies.United accounts for its derivative financial instruments in accordance with the Derivatives and Hedging topic of the FASB Accounting Standards Codification. The Derivatives and Hedging topic require all derivative instruments to be carried at fair value on the balance sheet. United has designated certain derivative instruments used to manage interest rate risk as hedge relationships with certain assets, liabilities or cash flows being hedged. Certain derivatives used for interest rate risk management are not designated in a hedge relationship.For a fairhedge,hedges may be eligible for offset on the fair value ofconsolidated balance sheets because they are subject to master netting arrangements or similar agreements. United has elected not to offset the assets and liabilities subject to such arrangements on the consolidated financial statements.is recognized on the balance sheetderivatives designated as either a freestanding asset or liability with a corresponding adjustment to the hedged financial instrument. Subsequent adjustments due to changes in the fair valuecash flow hedges. The notional amount of a derivative that qualifies as a fair value hedge are offset in current period earnings. For athese cash flow hedge the fair value of the interest rate swap is recognized on the balance sheet as either a freestanding asset or liability with a corresponding adjustmentderivatives totaled $500,000. The derivatives are intended to other comprehensive income within shareholders’ equity, net of tax. Subsequent adjustments due tohedge the changes in the fair valuecash flows associated with floating rate FHLB borrowings. As of a derivativeMarch 31, 2024, United has determined that qualifies as ano forecasted transactions related to its cash flow hedges resulted in gains or losses pertaining to cash flow hedge reclassification from AOCI to income because the forecasted transactions became probable of not occurring. United estimates that $16,625 will be reclassified from AOCI as a decrease to interest expense over the nextoffset to other comprehensive income, net of tax. The portion of a hedge thathedged is ineffective is recognized immediately in earnings.portiondaily settlement of the derivative exposure does not change or reset the contractual terms of the instrument. The total notional amount of interest rate swap derivatives designated as cash flow hedges cleared through the LCH include $500,000 for asset derivatives as of March 31, 2024. Balances related to LCH are presented as a hedge that is ineffective is recognized immediatelysingle unit of account with the fair value of the designated cash flow interest rate swap asset being reduced by variation margin posted by (with) the applicable counterparty and reported in earnings.George Masonits mortgage banking channel enters into interest rate lock commitments to finance residential mortgage loans with its customers. These commitments, which contain fixed expiration dates, offer the borrower an interest rate guarantee provided the loan meets underwriting guidelines and closes within the timeframe established by United. Interest rate risk arises on these commitments and subsequently closed loans if interest rates change between the time of the interest rate lock and the delivery of the loan to the investor. Market risk on interest rate lock commitments and mortgage loans held for sale is managed using corresponding forward mortgage loan sales contracts. United is a party to these forward mortgage loan sales contracts to sell loans with servicing either released or retained and short sales of mortgage-backed securities. When the interest rate is locked with the borrower, the rate lock commitment, forward sale agreement, and mortgage-backed security position are undesignated derivatives and marked to fair value through earnings. The fair value of the rate lock derivative includesis measured using valuations from investors for loans with similar characteristics as well as considering the servicing premium andprobability of the interest spreadloan closing (i.e. the “pull-through” rate) with some adjusted for the difference between retail and wholesale mortgage rates.Company’s actual sales experience versus the investor’s indicated pricing. Fair values of TBA mortgage-backed securities are measured using valuations from investors for mortgage-backed securities with similar characteristics. Income from mortgage banking activities includes the gain recognized for the period presented and associated elements of fair value.United sells mortgage loans on either a best efforts or mandatory delivery basis. For loans sold on a mandatory delivery basis, United enters into forward mortgage-backed securities (the “residual hedge”) to mitigate the effect of interest rate risk. Both the rate lock commitment under mandatory delivery and the residual hedge are recorded at fair value through earnings and are not designated as accounting hedges. At the closing of the loan, the loan commitment derivative expires and United records a loan held for sale at fair value and continues to mark these assets to market under the election of fair value option. United closes out of the trading mortgage-backed securities assigned within the residual hedge and replaces the securities with a forward sales contract once a price has been accepted by an investor and recorded at fair value.The derivative portfolio also includes derivative financial instruments not included in hedge relationships. These derivatives consist of interest rate swaps used for interest rate management purposes and derivatives executed with commercial banking customers to facilitate their interest rate management strategies. For derivatives that are not designated in a hedge relationship, changes in the fair value of the derivatives are recognized in earnings in the same period as the change in fair value. Gains and losses on other derivative financial instruments are included in noninterest income and noninterest expense, respectively.September 30, 2017March 31, 2024 and December 31, 2016. Asset Derivatives September 30, 2017 December 31, 2016 Balance
Sheet
Location Notional
Amount Fair
Value Balance
Sheet
Location Fair
Value Other assets $ 14,762 $ 40 Other assets $ 24 $ 14,762 $ 40 $ 24 Other assets $ 0 $ 0 Other assets $ 2,267 Other assets 322,500 501 Other assets 0 Other assets 169,588 7,027 Other assets 0 $ 492,088 $ 7,528 $ 2,267 $ 506,850 $ 7,568 $ 2,291 Liability Derivatives September 30, 2017 December 31, 2016 Balance
Sheet
Location Notional
Amount Fair
Value Balance
Sheet
Location Fair
Value
(hedging commercial loans) Other liabilities $ 76,869 $ 480 Other liabilities $ 338 $ 76,869 $ 480 $ 338 Other liabilities $ 0 $ 0 Other liabilities $ 2,267 Other liabilities 50,063 257 Other liabilities 0 Other liabilities 65,862 291 Other liabilities 0 $ 115,925 $ 548 $ 2,267 $ 192,794 $ 1,028 $ 2,605 Other assets $ 11,721 $ 761 Other assets $ 12,032 $ 611 $ 11,721 $ 761 $ 12,032 $ 611 Other assets $ 500,000 $ 0 Other assets $ 500,000 $ 0 $ 500,000 $ 0 $ 500,000 $ 0 $ 511,721 $ 761 $ 512,032 $ 611 Other assets $ 3,565 $ 5 Other assets $ 3,880 $ 93 Other assets 19,060 16 Other assets 0 0 Other assets 130,339 1,264 Other assets 99,278 1,144 $ 152,964 $ 1,285 $ 103,158 $ 1,237 $ 664,685 $ 2,046 $ 615,190 $ 1,848 Other liabilities $ 70,074 $ 23 Other liabilities $ 77,115 $ 678 Other liabilities 6,569 3 Other liabilities 0 0 $ 76,643 $ 26 $ 77,115 $ 678 $ 76,643 $ 26 $ 77,115 $ 678
of Condition
the Hedged
of Fair Value Hedging
in the Carrying
Hedge Accounting has
been Discontinued Loans, net of unearned
income $ 11,721 $ (777 ) $ 0
of Condition
the Hedged
of Fair Value Hedging
Adjustment Included
in the Carrying
Amount of the Hedged
Assets/(Liabilities)
Fair Value Hedging
Adjustment Remaining for
any Hedged Assets/
(Liabilities) for which
Hedge Accounting has
been Discontinued Loans, net of unearned
income $ 12,032 $ (632 ) $ 0 and nine months ended September 30, 2017March 31, 2024 and 20162023 are presented as follows: Three Months Ended Income Statement
Location September 30,
2017 September 30,
2016 Interest income/(expense ) $ (208 ) $ (385 ) $ (208 ) $ (385 ) Income from Mortgage
Banking Activities
(257 ) 0 Income from Mortgage
Banking Activities
123 0 Income from Mortgage
Banking Activities
(4,484 ) 0 $ (4,618 ) $ 0 $ (4,826 ) $ (385 ) Nine Months Ended Income Statement
Location September 30,
2017 September 30,
2016 Interest income/(expense ) $ (648 ) $ 353 Other income 0 0 $ (648 ) $ 353 Income from Mortgage
Banking Activities
(427 ) 0 Income from Mortgage
Banking Activities
2,907 0 Income from Mortgage
Banking Activities
(3,465 ) 0 $ (985 ) $ 0 $ (1,633 ) $ 353 12.
2023 Interest and fees on loans $ 5 $ 89 Interest on long-term borrowings 6,352 4,915 $ 6,357 $ 5,004 Income from Mortgage Banking Activities $ (89 ) $ (93 ) Income from Mortgage Banking Activities 671 (499 ) Income from Mortgage Banking Activities 252 607 $ 834 $ 15 $ 7,191 $ 5,019 byin ASC topicTopic 820, which also clarifies that fair value of certain assets and liabilities is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants.The Fair Value Measurements and Disclosures topicLevel 1 - Valuation is based on quoted prices in active markets for identical assets and liabilities. Level 2 - Valuation is based on observable inputs including quoted prices in active markets for similar assets and liabilities, quoted prices for identical or similar assets and liabilities in less active markets, and model-based valuation techniques for which significant assumptions can be derived primarily from or corroborated by observable data in the market. Level 3 - Valuation is based on prices, inputs and model-based techniques that use one or more significant inputs or assumptions that are unobservable in the market.Assets and Liabilities Measured at Fair Value on a Recurring BasistopicTopic 820, the following describes the valuation techniques used by United to measure certain financial assets and liabilities recorded at fair value on a recurring basis in the financial statements:(Level 1)(“Level 1”). If quoted market prices are not available, fair values are measured utilizing independent valuation techniques of identical or similar securities for which significant assumptions are derived primarily from or corroborated by observable market data. Using a market approach valuation methodology, third party vendors compile prices from various sources and may determine the fair value of identical or similar securities by using pricing models that considersbased on observable market data (Level 2)inputs, which include benchmark yields, reported trades, issuer spreads, benchmark securities, and “To Be Announced” prices (“Level 2”). Management internally reviews the fair values provided by third party vendors on a monthly basis. Management’s review consists of comparing fair values assignedManagement also performs a quarterly price testing analysis at the individual security level which compares the pricing provided by the third party vendors to trades and offerings observed by management. The review requires some degreean independent pricing source’s valuation of judgment as to the number or percentage of securities to review on the part of management which could fluctuate based on results of past reviews and in comparison to current expectations. Exceptionssame securities. Variances that are deemed to be material are reviewed by management. Additionally, to further assess the reliability of the information received from third party vendors, management obtains documentation from third party vendors related to the sources, methodologies, and inputs utilized in valuing securities classified as Level 2. Management analyzes this information to ensure the underlying assumptions appear reasonable. Management also obtains an independent service auditor’s report from third party vendors to provide reasonable assurance that appropriate controls are in place over the valuation process. Upon completing its review of the pricing from third party vendors at September 30, 2017,March 31, 2024, management determined that the prices provided by its third party pricing sourcesources were reasonable and in line with management’s expectations for the market values of these securities. Therefore, prices obtained from third party vendors that did not reflect forced liquidation or distressed sales were not adjusted materially by management at September 30, 2017.March 31, 2024. Management utilizes a number of factors to determine if a market is inactive, all of which may require a significant level of judgment. Factors that management considers include: a significant widening of theconsiders its valuation ofdoes not have any Trup Cdos The Fair Value Measurements and Disclosures topic assumes that fair values of financial assets are determined in an orderly transaction and not a forced liquidation or distressed sale at the measurement date. Based on financial market conditions, United feels that the fair values obtained from its third party vendor reflect forced liquidation or distressed sales for these Trup Cdos due to decreased volume and trading activity. Additionally, management held discussions with institutional traders to identify trends in the number and type of transactions related to the Trup Cdos sector. Based upon management’s review of the market conditions for Trup Cdos, it was determined that an income approach valuation technique (present value technique) that maximizes the use of relevant observable inputs and minimizes the use of unobservable inputs is more representative of fair value than the valuation technique used by United’s third party vendor. The present value technique discounts expected future cash flows of a security to arrive at a present value. Management considers the following items when calculating the appropriate discount rate: the implied rate of return when the market was last active, changes in the implied rate of return as markets moved from very active to inactive, recent changes in credit ratings, and recent activity showing that the market has built in increased liquidity and credit premiums. Management’s internal credit review of each security was also factored in to determine the appropriate discount rate. The credit review considered each security’s collateral, subordination, excessspread, priority of claims, principal and interest. Discount margins used in the valuation at September 30, 2017 ranged from LIBOR plus 3.25% to LIBOR plus 6.00%. Management completed a sensitivity analysis on the fair value of its Trup Cdos. Given a comprehensive 200 basis point increase in the discount rates, the total fair value of these securities would decline by approximately 18%, or $5,741. in the mortgage banking segment, the loans closed are recorded at fair value using the fair value option which is measured using valuations from investors for loans with similar characteristics (“Level 2”) with some adjusted for the Company’s actual sales experience versus the investor’s indicated pricing. These valuations fall into thepricing (“Level 3”). The unobservable input for Level 3 category. The unobservable inputvaluations is the Company’s historical sales prices. TheFor March 31, 2024, the range of historical sales prices increased the investor’s indicated pricing by a range of 0.27%0.001% to 0.40%0.392% with a weighted average increase of 0.36%0.140%.United’s derivative portfolio also includes derivative financial instruments not included in hedge relationships. These derivatives consist of interest rate swaps used for interest rate management purposes and derivatives executed with commercial banking customers to facilitate their interest rate management strategies. United utilizes third-party vendors for derivative valuation purposes. These vendors determine the appropriate fair value based on a net present value calculation of the cash flows related to the interest rate swaps using primarily observable market inputs such as interest rate yield curves (Level 2)(“Level 2”). Valuation adjustments to derivative fair values for liquidity and credit risk are also taken into consideration, as well as the likelihood of default by United and derivative counterparties, the net counterparty exposure and the remaining maturities of the positions. Values obtained from third party vendors are typically not adjusted by management. Management internally reviews the derivative values provided by third party vendors on a quarterly basis. All derivative values are tested for reasonableness by management utilizing a net present value calculation.tax. The portion of a hedge that is ineffective is recognized immediatelytax and reclassified into earnings in the same line associated with the forecasted transaction when the forecasted transaction affects earnings.George MasonUnited, through its mortgage banking channel, enters into contractual interest rate lock commitments to extend credit to borrowers with fixed expiration dates. The commitments become effective when the borrowersMarketInterest rate risk arises if interest rates move adversely between the time of the interest rate lock by the borrower and the sale date of the loan to the investor. To mitigate the effect of the interest rate risk inherent in providing rate lock commitments to borrowers, George MasonUnited, through its mortgage banking channel, enters into either a forward sales contract to sell loans to investors when using best efforts or a TBA mortgage-backed security under mandatory delivery. Assecurity. Fair values of TBA mortgage-backed securities are actively traded in an open market, TBAmeasured using valuations from investors for mortgage-backed securities fall into a with similar characteristics (“Level 1 category.2”). The forward sales contracts lock in an interest rate and price for the sale of loans similar to the specific rate lock commitments. Under the Company’s best efforts model, the rate lock commitments to borrowers and the forward sales contracts to investors through to the date the loan closes are undesignated derivatives and accordingly, are marked to fair value through earnings. These valuations fall into a Level 2 category. For residential mortgage loans sold in the mortgage banking segment, theThe interest rate lock commitments are recorded at fair valuepricing. These valuations fall into thepricing (“Level 3”). The unobservable input for Level 3 category. The unobservable inputvaluations is the Company’s historical sales prices. TheFor March 31, 2024, the range of historical sales prices increased the investor’s indicated pricing by a range of 0.27%0.001% to 0.40%0.392% with a weighted average increase of 0.36%0.140%.earningsincome from mortgage banking activities in the same period as the change in the fair value. Unrealized gains and losses due to changes in the fair value of other derivative financial instruments not in hedge relationshiprelationships are included in noninterest income and noninterest expense, respectively.September 30, 2017March 31, 2024 and December 31, 2016,2023, segregated by the level of the valuation inputs within the fair value hierarchy. Fair Value at September 30, 2017 Using Balance as of
September 30,
2017 Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1) Significant
Other
Observable
Inputs
(Level 2) Significant
Unobservable
Inputs
(Level 3) $ 115,866 $ 0 $ 115,866 $ 0 305,141 0 305,141 0 714,700 0 714,700 0 5,846 0 5,846 0 420,792 0 420,792 0 13,429 0 13,429 0 31,659 0 0 31,659 12,467 0 12,467 0 19,254 0 19,254 0 1,639,154 0 1,607,495 31,659 3,016 401 2,615 0 6,250 6,250 0 0 1,214 1,214 0 0 10,480 7,865 2,615 0 1,649,634 7,865 1,610,110 31,659 311,186 0 0 311,186 40 0 40 0 7,027 0 0 7,027 501 501 0 0 7,568 501 40 7,027 Fair Value at September 30, 2017 Using Balance as of
September 30,
2017 Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1) Significant
Other
Observable
Inputs
(Level 2) Significant
Unobservable
Inputs
(Level 3) 480 0 480 0 257 0 257 0 291 0 291 0 1,028 0 1,028 0 (1)The equity mutual funds are within a rabbi trust for the payment of benefits under a deferred compensation plan for certain keyofficers of United and its subsidiaries. Fair Value at December 31, 2016 Using Balance as of
December 31,
2016 Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1) Significant
Other
Observable
Inputs
(Level 2) Significant
Unobservable
Inputs
(Level 3) $ 95,786 $ 0 $ 95,786 $ 0 192,812 0 192,812 0 584,096 0 584,096 0 7,043 0 7,043 0 217 0 217 0 305,341 0 305,341 0 33,552 0 0 33,552 11,477 0 11,477 0 15,062 0 15,062 0 1,245,386 0 1,211,834 33,552 10,735 1,372 9,363 0 1,820 1,820 0 0 1,273 1,273 0 0 13,828 4,465 9,363 0 1,259,214 4,465 1,221,197 33,552 2,291 0 2,291 0 2,605 0 2,605 0 (1)The equity mutual funds are within a rabbi trust for the payment of benefits under a deferred compensation plan for certain key officers of United and its subsidiaries.
of $ 434,111 $ 0 $ 434,111 $ 0 528,301 0 528,301 0
of 1,006,859 0 1,006,859 0 75,304 0 75,304 0 Commercial mortgage-backed securities Agency 453,713 0 453,713 0 Asset-backed securities 830,930 0 830,930 0 15,333 0 15,333 0 269,424 5,111 264,313 0 3,613,975 5,111 3,608,864 0 168 168 0 0 3,439 3,439 0 0 5,155 5,155 0 0 8,762 8,762 0 0 44,426 0 4,164 40,262 761 0 761 0 5 0 0 5 16 0 0 16 1,264 0 128 1,136 2,046 0 889 1,157 23 0 0 23 3 0 0 3 26 0 0 26 $ 484,950 $ 0 $ 484,950 $ 0 533,831 0 533,831 0 1,049,941 0 1,049,941 0 90,611 0 90,611 0 459,298 0 459,298 0 860,638 0 860,638 0 15,141 0 15,141 0 291,967 5,159 286,808 0 Total available for sale securities 3,786,377 5,159 3,781,218 0 211 211 0 0 3,524 3,524 0 0 Fair Value at December 31, 2023 Using 5,210 5,210 0 0 8,945 8,945 0 0 56,261 0 4,283 51,978 611 0 611 0 93 0 60 33 1,144 0 139 1,005 1,848 0 810 1,038 678 0 11 667 678 0 11 667 ninethree months ended September 30, 2017March 31, 2024 and the year ended December 31, 2016.table presentstables present additional information about financial assets and liabilities measured at fair value at September 30, 2017March 31, 2024 and December 31, 20162023 on a recurring basis and for which United has utilized Level 3 inputs to determine fair value: Available-for-sale
Securities Trust preferred
collateralized debt obligations September 30,
2017 December 31,
2016 $ 33,552 $ 34,686 9 0 6,148 (1,134 ) (8,050 ) 0 $ 31,659 $ 33,552 $ 0 $ 0 Loans held for sale September 30,
2017 December 31,
2016 $ 0 $ 0 271,301 0 1,644,943 0 (1,639,737 ) 0 41,929 0 (7,250 ) 0 $ 311,186 $ 0 $ 0 $ 0 Derivative Financial Assets
Interest Rate Lock Commitments September 30,
2017 December 31,
2016 $ 0 $ 0 10,393 0 (3,366 ) 0 $ 7,027 $ 0 $ 0 $ 0
for Sale
Securities
Sales
Commitments
Lock
Commitments
Securities
Lock
Commitments $ 51,978 $ 0 $ 33 $ 1,005 $ 667 $ 0 149,142 0 0 0 0 0 (165,006 ) 0 0 0 0 0 0 16 (28 ) 131 (644 ) 3 4,148 0 0 0 0 0 $ 40,262 $ 16 $ 5 $ 1,136 $ 23 $ 3 $ (813 ) $ 16 $ 5 $ 1,136 $ 23 $ 3
for Sale
Securities
Sales
Commitments
Lock
Commitments
Securities
Lock
Commitments $ 44,871 $ 26 $ 6 $ 844 $ 213 $ 348 1,156,616 0 0 0 0 0 (1,179,612 ) 0 0 0 0 0 0 (26 ) 27 161 454 (348 ) 30,103 0 0 0 0 0 $ 51,978 $ 0 $ 33 $ 1,005 $ 667 $ 0 The amount of total gains for the period included in earnings (or changes in net assets) attributable to the change in unrealized gains or losses relating to assets still held at reporting date $ 1,142 $ 0 $ 33 $ 1,005 $ 667 $ 0 $ (836 ) $ 788
Principal
Balance
Value
Over/(Under)
Unpaid
Principal
Balance
Principal
Balance
Value
Over/(Under)
Unpaid
Principal
Balance $ 43,378 $ 44,426 $ 1,048 $ 54,377 $ 56,261 $ 1,884 Fair Value OptionUnited elected the fair value option for the loans held for sale in its mortgage banking segment to mitigate a divergence between accounting losses and economic exposure.The following table reflects the change in fair value included in earnings of financial instruments for which the fair value option has been elected: Three Months Ended
September 30, 2017 Nine Months Ended
September 30, 2017 $ (5,090 ) $ (7,529 ) The following table reflects the difference between the aggregate fair value and the remaining contractual principal outstanding for financial instruments for which the fair value option has been elected: September 30, 2017 December 31, 2016 Unpaid
Principal
Balance Fair
Value Fair Value
Over/(Under)
Unpaid
Principal
Balance Unpaid
Principal
Balance Fair
Value Fair Value
Over/(Under)
Unpaid
Principal
Balance $ 303,953 $ 311,186 $ 7,233 $ 0 $ 0 $ 0 Assets and Liabilities Measured at Fair Value on a Nonrecurring Basisheld for sale: Loans held for sale withinevaluated individually are not also included in the community banking segmentcollective evaluation. When management determines that are delivered on a best efforts basis are carriedforeclosure is probable or when the borrower is experiencing financial difficulty at the lower of costreporting date and repayment is expected to be provided substantially through the operation or fair value. The fair value is based on the price secondary markets are currently offering for similar loans using observable market data which is not materially different than cost due to the short duration between origination and sale (Level 2). As such, United records any fair value adjustments for these loans held for sale on a nonrecurring basis. No nonrecurring fair value adjustments were recorded on loans held for sale during the nine months ended September 30, 2017. Gains and losses on sale of loansthe collateral, expected credit losses are recorded within income from mortgage banking activities on the Consolidated Statements of Income.Impaired Loans: Loans are designated as impaired when, in the judgment of management based on current information and events, it is probable that all amounts due according to the contractual terms of the loan agreement will not be collected. Impairment is measured based upon the present value of expected future cash flows from the loan discounted at the loan’s effective rate and the loan’s observable market price or the fair value of the collateral ifat the loan is collateral dependent.reporting date, adjusted for selling costs as appropriate. Fair value is measured using a market approach based on the value of the collateral securing the loans. Collateral may be in the form of real estate or business assets including equipment, inventory, and accounts receivable. The vast majority of the collateral is real estate. The value of real estate collateral is determined utilizing an appraisal conducted by an independent, licensed appraiser outside of the Company using comparable property sales (Level 2)(“Level 2”). However, if the collateral is a house or building in the process of construction or if an appraisal of the real estate property is over two years old, then the fair value is considered Level 3. The value of business equipment is based upon an outside appraisal if deemed significant, or the net book value on the applicable business’ financial(Level 3)(“Level 3”). For impairedindividually assessed loans, a specific reserve is established through the Allowanceallowance for Loan Losses,loan losses, if necessary, by estimating the fair value of the underlying collateral on a nonrecurring basis. Any fair value adjustments are recorded in the period incurred as provision for credit losses expense on the Consolidated Statements of Income.OREO:(Level 2)(“Level 2”). In contrast, valuation of ongoing construction assets requires some degree of professional judgment. In conducting an appraisal for ongoing construction property, the appraiser develops two appraised amounts: an “as is” appraised value and a “completed” value. Based on professional judgment and their knowledge of the particular situation, management determines the appropriate fair value to be utilized for such property (Level 3)(“Level 3”). As a matter of policy, valuations are reviewed at least annually and appraisals are generally updated on aAssets:AssetsGoodwill impairment would be defined asUnited may elect to perform a qualitative analysis to determine whether or not it is more-likely-than not that the difference between the recorded value of goodwill (i.e. book value) and the implied fair value of goodwill. In determininga reporting unit is less than its carrying amount. If United elects to bypass this qualitative analysis, or concludes via qualitative analysis that it is implied fair value of goodwill for purposesa reporting unit is less than its carrying value, United may use either a market or income quantitative approach to determine the fair value of evaluating goodwill impairment, United determinesthe reporting unit. If the fair value of the reporting unit using a market approach and compares the fair value tois less than its carrying value. Ifvalue, an impairment charge would be recorded for the difference, not to exceed the amount of goodwill allocated to the reporting unit. At each reporting date, the Company considers potential indicators of impairment. United performed its annual goodwill impairment test on the Company’s reporting units as of September 30, 2023. The goodwill impairment test did not identify any goodwill impairment. In subsequent periods, economic uncertainty, market volatility and the performance of the Company’s stock as well as possible other impairment indicators could cause us to perform a goodwill impairment test which could result in an impairment charge being recorded for that period if the carrying value exceeds theof goodwill was found to exceed fair value, a step two test is performed whereby the implied fair value is computed by deducting the fair value of all tangible and intangible net assets from the fair value of the reporting unit.value. Core deposit intangibles relate to the estimated value of the deposit base of acquired institutions. Management reviews core deposit intangible assets on an annual basis, or sooner if indicators ofOther than those intangible assets recorded inDuring the acquisitions of Cardinal in the secondfourth quarter of 20172023, United’s management formulated a plan to consolidate its mortgage delivery channels by consolidating George Mason’s and BankCrescent’s mortgage banking business into United Bank. As a result of Georgetown inthis consolidation decision, United impaired the second quarter of 2016, no othertrade names intangibles at George Mason and Crescent to zero at December 31ninethree months of 20172024 and 2016. Carrying value at September 30, 2017 Balance as of
September 30,
2017 Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1) Significant
Other
Observable
Inputs
(Level 2) Significant
Unobservable
Inputs
(Level 3) YTD
Losses $ 105,900 $ 0 $ 74,852 $ 31,048 $ 9,045 26,826 0 26,743 83 2,904 Carrying value at December 31, 2016 Balance as of
December 31,
2016 Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1) Significant
Other
Observable
Inputs
(Level 2) Significant
Unobservable
Inputs
(Level 3) YTD
Losses $ 80,505 $ 0 $ 27,609 $ 52,896 $ 5,119 31,510 0 31,510 0 2,086
as of
2024 $ 53,018 $ 0 $ 52,450 $ 568 $ (881 ) 2,670 0 2,584 86 0
2023
Gains $ 45,308 $ 0 $ 44,722 $ 586 $ 314 2,615 0 2,615 0 (67 ) securities:securitiesconsidersconsider observable market data. Any securities held to maturity, not valued based upon the methods above, are valued based on a discounted cash flow methodology using appropriately adjusted discount rates reflecting nonperformance and liquidity risks. Other securities consist mainly of shares of Federal Home Loan Bank and Federal Reserve Bank stock that do not have readily determinable fair values and are carried at cost.Loans:impairedPCD loans, fair value is assumed to equal United’s carrying value, which represents the present value of expected future principal and interest cash flows, as adjusted for any Allowance for LoanCredit Losses recorded for these loans.Deposits: Fair Value Measurements Carrying
Amount Fair Value Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1) Significant
Other
Observable
Inputs
(Level 2) Significant
Unobservable
Inputs
(Level 3) $ 1,747,037 $ 1,747,037 $ 0 $ 1,747,037 $ 0 1,649,634 1,649,634 7,865 1,610,110 31,659 20,335 19,909 0 16,889 3,020 166,756 158,418 0 0 158,418 315,031 315,031 0 3,845 311,186 13,065,542 12,550,352 0 0 12,550,352 7,568 7,568 501 40 7,027 13,875,297 13,859,205 0 13,859,205 0 492,036 492,036 0 492,036 0 1,364,246 1,328,753 0 1,328,753 0 1,028 1,028 0 1,028 0 $ 1,434,527 $ 1,434,527 $ 0 $ 1,434,527 $ 0 1,259,214 1,259,214 4,465 1,221,197 33,552 33,258 31,178 0 28,158 3,020 111,166 105,608 0 0 105,608 8,445 8,445 0 8,445 0 10,268,366 10,122,486 0 0 10,122,486 2,291 2,291 0 2,291 0 10,796,867 10,785,294 0 10,785,294 0 209,551 209,551 0 209,551 0 1,172,026 1,142,782 0 1,142,782 0 2,605 2,605 0 2,605 0 13.
Amount $ 1,732,646 $ 1,732,646 $ 0 $ 1,732,646 $ 0 3,613,975 3,613,975 5,111 3,608,864 0 1,001 1,020 0 0 1,020 8,762 8,762 8,762 0 0
Amount 330,781 314,242 0 0 314,242 44,426 44,426 0 4,164 40,262 21,257,171 20,476,689 0 0 20,476,689 2,046 2,046 0 889 1,157 4,241 13,439 0 0 13,439 22,919,746 22,864,127 0 22,864,127 0 207,727 207,727 0 207,727 0 1,739,434 1,719,423 0 1,719,423 0 26 26 0 0 26 $ 1,598,943 $ 1,598,943 $ 0 $ 1,598,943 $ 0 3,786,377 3,786,377 5,159 3,781,218 0 1,003 1,020 0 0 1,020 8,945 8,945 8,945 0 0 329,429 312,958 0 0 312,958 56,261 56,261 0 4,283 51,978 21,099,847 20,463,710 0 0 20,463,710 1,848 1,848 0 810 1,038 4,554 13,427 0 0 13,427 22,819,319 22,760,310 0 22,760,310 0 196,095 196,095 0 196,095 0 1,789,103 1,769,123 0 1,769,123 0 678 678 0 11 667 18, 2016,12, 2020, United’s shareholders approved the 20162020 Long-Term Incentive Plan (2016(“2020 LTI Plan)Plan”). The 20162020 LTI Plan became effective as of May 18, 2016 and replaced the 2011 Long-Term Incentive Plan (2011 LTI Plan) which expired during the second quarter of 2016.13, 2020. An award granted under the 20162020 LTI Plan may consist of any(SARs)(“SARs”), restricted stock, restricted stock units, performance units or other-stock-based award. These awards all relate to the common stock of United. The maximum number of shares of United common stock which may be issued under the 20162020 LTI Plan is 1,700,000.2,300,000. The 20162020 LTI Plan will be administered by a board committee appointed by United’s Board of Directors (the Board)“Board”). Unless otherwise determined by the Board, the Compensation Committee of the Board (the Committee)“Committee”) shall administer the 20162020 LTI Plan. Any and all shares may be issued in respect of any of the types of awards, provided that (1) the aggregate number of shares that may be issued in respect of restricted stock awards, and restricted stock unit awards which are settled in shares is 500,000, and (2) the aggregate number of shares that may be issued pursuant to stock options is 1,200,000. The shares to be offered under the 2016 LTI Plan may be authorized and unissued shares or treasury shares. The maximum number of options and SARs,stock appreciation rights, in the aggregate, which may be awarded to any individual key employee during any calendar year is 100,000. The maximum number of stock options and SARs,stock appreciation rights, in the aggregate, which may be awarded to any10,000.10,000 or, if such Award is payable in cash, the Fair Market Value equivalent thereof. The maximum number of shares of restricted stock or shares subject to a restricted stock units award that may be granted50,000225,000 shares to any individual key employee and 5,00010,000 shares to any individual20162020 LTI Plan provides that all awards of restricted stock and restricted stock units will vest as the Committee determines in the award agreement, provided that no awards will vest sooner than 1/3 per year over the firstAwards grantedUnited adopted a clawback policy that applies to named executive officers ofand other executive officers and permits the Committee to cancel certain awards and to recoup gains realized from previous awards should United typically will havebe required to prepare an accounting restatement due to materially inaccurate performance based vesting conditions.metrics. A FormJulyMay 29, 20162020 with the Securities and Exchange Commission to register all the shares which were available for the 20162020 LTI Plan. During the first nine months of 2017, a total of 253,417non-qualified stock options and 89,475 shares of restricted stock were granted underThe 2020 LTI Plan replaces the 2016 LTI Plan.$909$3,266 and $2,589$2,713 related to the nonvested awards under United’s Long-Term Incentive Plans was incurred for the thirdfirst quarter of 2024 and first nine months of 2017, respectively, as compared to the compensation expense of $720 and $2,050 related to the nonvested awards under United’s Long-Term Incentive Plans incurred for the third quarter and first nine months of 2016,2023, respectively. Compensation expense was included in employee compensation in the unaudited Consolidated Statements of Income.20162020 LTI Plan (the Prior Plans)“Prior Plans”); however, no common shares of United stock are available for grants under the Prior Plans as these plans have expired. Awards outstanding under the Prior Plans will remain in effect in accordance with their respective terms. The maximum term for options granted under the plans is ten (10) years.September 30, 2017,March 31, 2024, and the changes during the first ninethree months of 20172024 are presented below: Nine Months Ended September 30, 2017 Weighted Average Shares Aggregate
Intrinsic
Value Remaining
Contractual
Term (Yrs.) Exercise
Price 1,411,735 $ 28.05 153,602 21.47 253,417 45.27 (163,562 ) 20.93 (2,962 ) 38.81 1,652,230 $ 12,602 5.8 $ 30.76 1,138,309 $ 11,964 4.5 $ 26.64
Intrinsic
Value
Contractual
Term (Yrs.)
Price 1,337,382 $ 35.47 (25,991 ) 27.15 (3,477 ) 27.49 1,307,914 $ 3,440 3.6 $ 35.66 1,307,914 $ 3,440 3.6 $ 35.66 ninethree months of 2017: Shares Weighted-Average
Grant Date Fair Value
Per Share 430,278 $ 6.84 253,417 8.85 (168,274 ) 6.64 (1,500 ) 8.85 513,921 $ 7.89
Grant Date Fair Value
Per Share 56,526 $ 5.65 (56,526 ) 5.65 0 0.00 0 $ 0.00 ninethree months ended September 30, 2017March 31, 2024 and 2016, 163,5622023, 25,991 and 248,67755,796 shares, respectively, were issued in connection with stock option exercises. All shares issued in connection with stock option exercises for the ninethree months ended September 30, 2017March 31, 2024 and 20162023 were issued from authorized and unissued stock. The total intrinsic value of options exercised under the Plans during the ninethree months ended September 30, 2017March 31, 2024 and 20162023 was $3,078$207 and $4,670$722 respectively.20112020 LTI Plan, United may award restricted common shares to key employees andhave a four-year time-based vesting period. Recipientswill vest no sooner than 1/3 per year over the first three anniversaries of the award. Unless determined by the Committee or the Board and provided in the award agreement, recipients of restricted shares do not pay any consideration to United for the shares, have the right to vote all shares subject to such grant and receive all dividends with respect to such shares, whether or not the shares have vested. Presently, these nonvested participating securities have an immaterial impact on diluted earnings per share.September 30, 2017: Number of
Shares Weighted-Average
Grant Date Fair Value
Per Share 137,268 $ 33.61 89,475 45.27 (53,950 ) 32.23 (420 ) 45.30 172,373 $ 40.07 14.March 31, 2024:
Grant Date Fair Value
Per Share 333,932 $ 37.75 183,908 34.36 (187,258 ) 36.60 (5,215 ) 36.48 325,367 $ 36.51
Grant Date Fair Value
Per Share 363,502 $ 37.53 254,592 32.80 (127,536 ) 36.28 (439 ) 34.72 490,119 $ 35.41 a majority of all employees.qualified employees hired prior to October 1, 2007. Pension benefits are based on years of service and the average of the employee’s highest five consecutive plan years of basic compensation paid during the ten plan years preceding the date of determination. Contributions are intended to provide not only for benefits attributed to service to date, but also for those expected to be earned in the future. DuringNo discretionary contributions were made during the thirdfirst quarter of 2017, United made a discretionary contribution of $10,000 to the Plan.In September of 2007, after a recommendation by United’s Pension Committee2024 and approval by United’s Board of Directors, the United Bankshares, Inc. Pension Plan (the Plan) was amended to change the participation rules. The decision to change the participation rules for the Plan followed current industry trends, as many large and medium size companies had taken similar steps. The amendment provides that employees hired on or after October 1, 2007, will not be eligible to participate in the Plan. However, new employees will be eligible to participate in United’s Savings and Stock Investment 401(k) plan. This change had no impact on current employees hired prior to October 1, 2007 as they will continue to participate in the Plan, with no change in benefit provisions, and will continue to be eligible to participate in United’s Savings and Stock Investment 401(k) plan.As of December 31, 2016, United changed the method used to estimate the interest cost component of net periodic benefit cost for the Plan. Under the previous method, appropriate spot rates were used to discount the projected benefit obligation (PBO) cash flows based on date of measurement. Then, a single aggregated discount rate was calculated such that the present value of the PBO remained the same. This rate is technically a weighted-average of the spot rates. This single discount rate was applied to the interest and service costs as well. Under the full yield curve approach, separate discount rates are used to calculate the present value for each projected cash flow. This does not have any impact on the present value of the PBO as the PBO was originally discounted with spot rates. The adoption of this method concerns the manner in which it affects interest and service costs. This new method constitutes a change in an accounting estimate under the provisions of ASC topic 250, “Accounting Changes and Error Corrections,” that is inseparable from a change in accounting principle and was accounted for prospectively, with the resulting change impacting the recognition of net periodic pension cost beginning January 1, 2017. The impact of this accounting change on United’s net periodic pension cost for the third quarter and first nine months of 2017 was a decline of $252 and $748, respectively, in expense from the amount that would have been recorded under the previous method.20162023 are unrecognized actuarial losses of $53,991$32,548 ($34,01420,817 net of tax) that have not yet been recognized in net periodic pension cost. The amortization of this item expected to be recognized in net periodic pension cost during the fiscal year ended December 31, 2017 is $4,411 ($2,779 net of tax).and nine months ended September 30, 2017March 31, 2024 and 20162023 included the following components: Three Months Ended
September 30 Nine Months Ended
September 30 2017 2016 2017 2016 $ 574 $ 614 $ 1,705 $ 1,829 1,293 1,471 3,837 4,383 (2,072 ) (2,034 ) (6,148 ) (6,058 ) 1,111 1,161 3,298 3,458 $ 906 $ 1,212 $ 2,692 $ 3,612 4.49 % 4.75 % 4.49 % 4.75 % 7.00 % 7.25 % 7.00 % 7.25 % 3.50 % 3.50 % 3.50 % 3.50 % 3.00 % 3.00 % 3.00 % 3.00 % 15. $ 391 $ 461 1,719 1,736 (2,650 ) (2,897 ) 550 775 $ 10 $ 75 5.07 % 5.25 % 6.25 % 7.25 % 5.00 % 5.00 % 4.00 % 4.00 % 3.50 % 3.50 % September 30, 2017, United has provided a liability for $2,405 of unrecognized tax benefits related to various federalMarch 31, 2024 and state income tax matters. The entire amount of unrecognized tax benefits, if recognized, would impact United’s effective tax rate. Over the next 12 months, the statute of limitations will close on certain income tax periods. However, at this time, United cannot reasonably estimate the amount of tax benefits it may recognize over the next 12 months.United is currently open to audit under the statute of limitations by the Internal Revenue Service for the years ended December 31, 2014, 2015 and 2016 and certain State Taxing authorities for the years ended December 31, 2014 through 2016.As of September 30, 2017 and 2016,2023, the total amount of accrued interest related to uncertain tax positions was $548$773 and $792,$525, respectively. United accounts for interest and penalties related to uncertain tax positions as part of its provision for federal and state income taxes.16.and nine months ended September 30, 2017March 31, 2024 and 20162023 are as follows: Three Months Ended
September 30 Nine Months Ended
September 30 2017 2016 2017 2016 $ 56,738 $ 41,479 $ 132,606 $ 107,977 0 0 (60 ) (77 ) 0 0 22 28 0 0 60 33 0 0 (22 ) (12 ) 0 0 0 415 0 0 0 (150 ) 0 0 0 237 3,584 (7,599 ) 14,846 12,356 (1,326 ) 2,735 (5,493 ) (4,489 ) (467 ) (1 ) (1,444 ) (251 ) 173 0 534 91 1,964 (4,865 ) 8,443 7,707 1,964 (4,865 ) 8,443 7,944 2 2 6 6 (0 ) (0 ) (2 ) (2 ) 2 2 4 4 1,111 1,161 3,298 3,458 (394 ) (384 ) (1,191 ) (1,223 )
comprehensive income 717 777 2,107 2,235 2,683 (4,086 ) 10,554 10,183 $ 59,421 $ 37,393 $ 143,160 $ 118,160
March 31 (3,119 ) 58,455 727 (13,620 ) Net reclassification adjustment for gains included in net income 0 420 Related income tax effect 0 (98 ) (2,392 ) 45,157
March 31 7,209 (4,416 ) (1,680 ) 1,029 (6,352 ) (4,915 ) 1,480 1,145 550 775 (126 ) (173 ) ninethree months ended September 30, 2017March 31, 2024 are as follows:NineThree Months Ended September 30, 2017 Unrealized
Gains/Losses
on AFS
Securities Accretion on
the unrealized
loss for
securities
transferred
from AFS to
the HTM Defined
Benefit
Pension
Items Total ($ 10,297 ) ($ 51 ) ($ 34,369 ) ($ 44,717 ) 9,353 4 0 9,357 (910 ) 0 2,107 1,197 8,443 4 2,107 10,554 ($ 1,854 ) ($ 47 ) ($ 32,262 ) ($ 34,163 )
Gains/Losses
on AFS
Securities
Gains/Losses
on Cash
Flow Hedges
Benefit
Pension $ (278,819 ) $ 39,955 $ (20,817 ) $ (259,681 ) (2,392 ) 5,529 0 3,137 0 (4,872 ) 424 (4,448 ) Net current-period other comprehensive (loss) income, net of tax (2,392 ) 657 424 (1,311 ) $ (281,211 ) $ 40,612 $ (20,393 ) $ (260,992 ) (a) NineThree Months Ended September 30, 2017March 31, 2024 Amount
Reclassified
from AOCI
to credit OTTI $ 0 Total other-than-temporary impairment losses
(gains) included in net income (1,444 ) Net gains on sales/calls of investment securities (1,444 ) Total before tax 534 Tax expense (910 ) Net of tax 3,298 (a) 3,298 Total before tax (1,191 ) Tax expense 2,107 Net of tax $ 1,197
Reclassified
from AOCI $ 0 Net investment securities gains 0 Total before tax 0 Income taxes 0 Net of tax $ (6,352 ) Interest expense (6,352 ) Total before tax 1,480 Income taxes (4,872 ) Net of tax
Reclassified
from AOCI Pension plan: 550 (a) 550 Total before tax (126 ) Income taxes 424 Net of tax $ (4,448 ) (a) This AOCI component is included in the computation of net periodic pension cost (see Note 14,15, Employee Benefit Plans)17. Three Months Ended Nine Months Ended September 30 September 30 2017 2016 2017 2016 $ 34,587 $ 25,174 $ 95,871 $ 73,242 22,065 16,234 36,518 34,545 $ 56,652 $ 41,408 $ 132,389 $ 107,787 104,760,153 76,218,573 95,040,664 72,413,246 307,969 429,200 409,962 333,117 105,068,122 76,647,773 95,450,626 72,746,363 $ 0.54 $ 0.54 $ 1.39 $ 1.49 $ 0.54 $ 0.54 $ 1.39 $ 1.48 18.
March 31 $ 50,374 $ 48,450 36,242 49,611 $ 86,616 $ 98,061 134,808,634 134,411,166 312,746 429,162 135,121,380 134,840,328 $ 0.64 $ 0.73 $ 0.64 $ 0.73 (VIEs)(“VIEs”) are entities that either have a total equity investment that is insufficient to permit the entity to finance its activities without additional subordinated financial support or whose equity investors lack the characteristics of a controlling financial interest (i.e., ability to make significant decisions, through voting rights, right to receive the expected residual returns of the entity, and obligation to absorb the expected losses of the entity). VIEs can be structured as corporations, trusts, partnerships, or other legal entities. United’s business practices include relationships with certain VIEs. For United, the business purpose of these relationships primarily consists of funding activities in the form of issuing trust preferred securities.fifteentwenty statutory business trusts that were created for the purpose of raising funds that originally qualified for Tier I regulatory capital. As previously discussed, with the acquisition of Cardinal, these trusts now are considered Tier II regulatory capital. These trusts, of which several were acquired through bank acquisitions, issued or participated in pools of trust preferred capital securities to third-party investors with the proceeds invested in junior subordinated debt securities of United. The Company, through a small capital contribution, owns 100% of the voting equity shares of each trust. The assets, liabilities, operations, and cash flows of each trust are solely related to the issuance, administration, and repayment of the preferred equity securities held by third-party investors. United fully and unconditionally guarantees the obligations of each trust and is obligated to redeem the junior subordinated debentures upon maturity. Amount of
Capital
Securities Issued March 23, 2000 $ 8,800 10.875% Fixed March 8, 2030 December 17, 2003 $ 20,000 3-month LIBOR + 2.85% December 17, 2033 December 19, 2003 $ 25,000 3-month LIBOR + 2.85% January 23, 2034 July 12, 2007 $ 50,000 3-month LIBOR + 1.55% October 1, 2037 September 20, 2007 $ 30,000 3-month LIBOR + 1.30% December 15, 2037 September 25, 2003 $ 6,000 3-month LIBOR + 3.10% October 8, 2033 May 16, 2005 $ 8,000 3-month LIBOR + 1.74% June 15, 2035 June 20, 2006 $ 14,000 3-month LIBOR + 1.55% September 23, 2036 December 14, 2006 $ 10,000 3-month LIBOR + 1.61% March 1, 2037 September 20, 2004 $ 10,000 3-month LIBOR + 2.29% September 20, 2034 June 15, 2006 $ 10,000 3-month LIBOR + 1.65% July 7, 2036 December 19, 2002 $ 15,000 6-month LIBOR + 3.30% December 19, 2032 December 20, 2005 $ 25,000 3-month LIBOR + 1.42% February 23, 2036 July 27, 2004 $ 20,000 3-month LIBOR + 2.40% September 15, 2034 December 30, 2004 $ 5,000 3-month LIBOR + 2.10% March 15, 2035
Capital
Securities Issued December 17, 2003 $ 20,000 3-month CME Term SOFR + 2.85% December 17, 2033 December 19, 2003 $ 25,000 3-month CME Term SOFR + 2.85% January 23, 2034 July 12, 2007 $ 50,000 3-month CME Term SOFR + 1.55% October 1, 2037 September 20, 2007 $ 30,000 3-month CME Term SOFR + 1.30% December 15, 2037 September 25, 2003 $ 6,000 3-month CME Term SOFR + 3.10% October 8, 2033 May 16, 2005 $ 8,000 3-month CME Term SOFR + 1.74% June 15, 2035 June 20, 2006 $ 14,000 3-month CME Term SOFR + 1.55% September 23, 2036 December 14, 2006 $ 10,000 3-month CME Term SOFR + 1.61% March 1, 2037 September 20, 2004 $ 10,000 3-month CME Term SOFR + 2.29% September 20, 2034 June 15, 2006 $ 10,000 3-month CME Term SOFR + 1.65% July 7, 2036 December 19, 2002 $ 15,000 6-month CME Term SOFR + 3.30% December 19, 2032 December 20, 2005 $ 25,000 3-month CME Term SOFR + 1.42% February 23, 2036 July 27, 2004 $ 20,000 3-month CME Term SOFR + 2.40% September 15, 2034 December 30, 2004 $ 5,000 3-month CME Term SOFR + 2.10% March 15, 2035 December 19, 2002 $ 5,000 Prime + 0.50% December 31, 2032 November 5, 2003 $ 10,000 3-month CME Term SOFR + 3.05% January 7, 2034 October 12, 2004 $ 6,000 3-month CME Term SOFR + 2.20% October 18, 2034 December 28, 2006 $ 5,000 3-month CME Term SOFR + 1.73% January 30, 2037 September 26, 2003 $ 10,000 3-month CME Term SOFR + 2.95% September 30, 2033 December 12, 2003 $ 4,000 3-month CME Term SOFR + 3.00% December 12, 2033 (1) subsidiaries,subsidiary, also makes limited partner equity investments in various low income housing and community development partnerships sponsored by independent third-parties. United invests in these partnerships to either realize tax credits on its consolidated federal income tax return or for purposes of earning a return on its investment. These partnerships are considered VIEs as the limited partners lack a controlling financial interest in the entities through their inability to make decisions that have a significant effect on the operations and success of the partnerships. United’s limited partner interests in these entities is immaterial, however;immaterial; however, these partnerships are not consolidated as United is not deemed to be the primary beneficiary.The following table summarizes quantitative information about At March 31, 2024 and December 31, 2023, United’s significant involvementinvestment (maximum exposure to loss) in unconsolidated VIEs: As of September 30, 2017 As of December 31, 2016 Aggregate
Assets Aggregate
Liabilities Risk Of
Loss(1) Aggregate
Assets Aggregate
Liabilities Risk Of
Loss(1) $ 266,560 $ 257,605 $ 8,955 $ 240,668 $ 232,583 $ 8,085 (1)Represents investment in VIEs.19. SEGMENT INFORMATIONa resultof March 31, 2024, United expects to recover its remaining investments through the use of the Cardinal acquisition,tax credits that are generated by the investments.now operates in two business segments: community bankingentered into an Agreement and mortgage banking. PriorPlan of Merger (the “Merger Agreement”) with Piedmont Bancorp, Inc., a Georgia corporation (“Piedmont”). The Merger Agreement provides that, upon the terms and subject to the Cardinal acquisition, United’s business activities were confined to just one reportable segment of community banking.Through its community banking segment,conditions set forth therein, Piedmont will merge with and into United offers a full range of products and services through various delivery channels. In particular,(the “Merger”), with United as the community banking segment includes both commercial and consumer lending and provides customers with such products as commercial loans, real estate loans, business financing and consumer loans. In addition, this segment provides customers with several choices of deposit products including demand deposit accounts, savings accounts and certificates of deposit as well as investment and financial advisory services to businesses and individuals, including financial planning, retirement/estate planning, and investment management. The mortgage banking segment engages primarilysurviving corporation in the originationMerger. Immediatelyacquisitioninto United’s wholly-owned subsidiary, United Bank, a state bank chartered under the laws of residential mortgagesthe Commonwealth of Virginia (the “Bank Merger”), with United Bank as the surviving bank in the Bank Merger. The Merger Agreement was approved and adopted by the board of directors of each of United and Piedmont.saleThe Piedmont Bank, a Georgia state-chartered bank, with sixteensecondary market though George Mason.The community banking segment providesright to receive, without interest, (a) 0.300 of a share (the “Exchange Ratio”) of common stock, $2.50 par value, of United (“United Common Stock” and such consideration is hereinafter referred to as the mortgage banking segment (George Mason) with short-term funds“Merger Consideration”) and (b) cash in lieu of fractional shares.originate mortgage loans throughpurchase shares of Piedmont Common Stock will fully vest and will be cashed out based on a warehouse lineformula that takes into account the difference between the exercise price and the volume-weighted average of creditthe closing sales price on Nasdaq of United Common Stock for the 10 full trading days ending on the second trading day immediately preceding the Effective Time and charges the mortgage banking segment interestExchange Ratio, (ii) each warrant to purchase shares of Piedmont Common Stock will fully vest and holders will have the option to convert into the right to receive shares of United Common Stock based on the prime rate. These transactionsexchange ratio or be cashed out based on the same formula applicable to option holders, and (iii) each restricted stock grant, restricted stock unit grant and any other outstanding equity award with respect to Piedmont Common Stock that is subject to vesting will fully vest and be entitled to receive the Merger Consideration. eliminated in the consolidation process.The Company does not have any operating segments other than those reported. The “Other” category consists of financial information not directly attributable to a specific segment, including interest income from investments and net securities gains or losses of parent companies and theirnon-banking subsidiaries, interest expense related to subordinated notes of unconsolidated subsidiaries as well as the elimination ofnon-segment related intercompany transactions such as management fees. The “Other” represents an overhead function rather than an operating segment.Information about the reportable segments and reconciliation of this informationconsolidated financial statements atsatisfaction of customary closing conditions, including receipt of regulatory approvals from the Board of Governors of the Federal Reserve System and for the threeVirginia Bureau of Financial Institutions, regulatory filings with the Georgia Department of Banking and nine months ended September 30, 2017Finance, and 2016 is as follows: At and For the Three Months Ended September 30, 2017 Community
Banking Mortgage
Banking Other Consolidated $ 152,886 $ (36 ) $ (2,574 ) $ 150,276 7,279 0 0 7,279 18,373 19,936 (80 ) 38,229 74,553 24,036 (1,937 ) 96,652 29,490 (1,332 ) (322 ) 27,836 $ 59,937 $ (2,804 ) $ (395 ) $ 56,738 $ 18,780,395 $ 350,483 $ (900 ) $ 19,129,978 18,620,035 321,744 (13,994 ) 18,927,785 At and For the Three Months Ended September 30, 2016 Community
Banking Other Consolidated $ 113,033 $ (1,964 ) $ 111,069 6,988 0 6,988 19,666 (645 ) 19,021 63,009 (232 ) 62,777 19,729 (883 ) 18,846 $ 42,973 $ (1,494 ) $ 41,479 $ 14,364,797 $ (20,101 ) $ 14,344,696 14,182,202 (22,633 ) 14,159,569 At and For the Nine Months Ended September 30, 2017 Community
Banking Mortgage
Banking Other Consolidated $ 401,044 $ 54 $ (6,957 ) $ 394,141 21,429 0 0 21,429 53,409 42,329 3,143 98,881 215,935 42,744 12,952 271,631 73,214 (39 ) (5,819 ) 67,356 $ 143,875 $ (322 ) $ (10,947 ) $ 132,606 $ 18,780,395 $ 350,483 $ (900 ) $ 19,129,978 17,020,928 187,118 (20,402 ) 17,187,644 At and For the Nine Months Ended September 30, 2016 Community
Banking Other Consolidated $ 317,835 $ (5,757 ) $ 312,078 18,690 0 18,690 55,323 (1,943 ) 53,380 186,322 (634 ) 185,688 55,580 (2,477 ) 53,103 $ 112,566 $ (4,589 ) $ 107,977 $ 14,364,797 $ (20,101 ) $ 14,344,696 13,125,973 (21,575 ) 13,104,398 Item 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSharborhaven for such disclosure,disclosure; in other words, protection from unwarranted litigation if actual results are not the same as management expectations.ActualForward-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 couldmay differ materially from those containedcontemplated in or implied by United’sthese “forward-looking statements.” United undertakes no obligation to publicly update any forward-looking statements, for a variety of factors including, but not limited to: changes in economic conditions; business conditions in the banking industry; movements in interest rates; competitive pressures on product pricing and services; success and timing of business strategies; the nature and extent of governmental actions and reforms; and rapidly changing technology and evolving banking industry standards.ACQUISITIONSOn April 21, 2017, United acquired 100% of the outstanding common stock of Cardinal Financial Corporation (“Cardinal”), headquartered in Tysons Corner, Virginia. The acquisition of Cardinal expands United’s existing footprint in the Washington, D.C. Metropolitan Statistical Area (“MSA”). Cardinal also operated George Mason Mortgage, LLC (“George Mason”), a residential mortgage lending company based in Fairfax, Virginia with offices located in Virginia, Maryland, North Carolina, South Carolina and the District of Columbia. Aswhether as a result of new information, future events, or otherwise.merger,first quarter of 2024, United consolidated its mortgage delivery channels by consolidating George Mason’s and Crescent’s mortgage origination and sales business with United Bank. United had previously exited the third-party origination (“TPO”) business during the fourth quarter of 2023 as part of this consolidation. United continues to offer mortgage products through its bank mortgage channel with previous George Mason became an indirectly-owned subsidiary of United. The Cardinal merger was accounted foroffices re-branded under the acquisition methodUnited umbrella. The consolidation streamlined operations and will enhance the customer experience.accounting. At consummation, Cardinal had assets of $4.14 billion, portfolio loans of $3.31 billionits mortgage delivery channels and deposits of $3.34 billion.an analysis performed at March 31, 2024 in accordance with ASC 280, “Segment Reporting,” United has concluded that it operates only in one reportable segment – community banking. In addition, after the close of business on June 3, 2016, United acquired 100% of the outstanding common stock of Bank of Georgetown, a privately held community bank headquartered in Washington, D.C. The acquisition of Bank of Georgetown enhances United’s existing footprint in the Washington, D.C. MSA. The merger was accounted for under the acquisition method of accounting. At consummation, Bank of Georgetown had assets of approximately $1.28 billion, loans of $999.77 million, and deposits of $971.37 million.Both the results of operations of Cardinal and Bank of Georgetown are included in the consolidated results of operations from their respective dates of acquisition. As a result of the Cardinal acquisition, the third quarter and first nine months of 2017 were impacted by increased levels of average balances, income, and expense as compared to the third quarter and first nine months of 2016 which were impacted by increased levels of average balances, income, and expense due to the Bank of Georgetown acquisition. In addition, the third quarter and first nine months of 2017 included $532 thousand and $24.99 million, respectively, of merger-related expenses from the Cardinal acquisition and the third quarter and first nine months of 2016 included $924 thousand and $5.61 million, respectively, of merger-related expenses to the Bank of Georgetown acquisition.September 30, 2017,March 31, 2024, but prior to the date these financial statements were issued, for potential recognition or disclosure required in these financial statements.a certain financial measuremeasures that isare 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 thenon-GAAP financial measure to the closest comparable GAAP financial measure, as well as a statement of the company’s reasons for utilizing thenon-GAAP financial measure.thisa 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 thisa non-GAAP financial measure is consistent with how United’s management evaluates its performance internally and thisnon-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 a financial measuremeasures identified astax-equivalent (“FTE”) net interest income.income and return on average tangible equity. Management believes thisthese non-GAAP financial measure, if significant,measures to be helpful in understanding United’s results of operations or financial position. 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 creditloan and lease losses, the valuation of investment securities and the related other-than-temporary impairment analysis, the accounting for acquired loans and 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.Allowance for Credit LossesAs explainedUnited’s critical accounting policies involving the significant judgments and assumptions used in Note 6, Allowance for Credit Losses to the unauditedpreparation of the Consolidated Financial Statements as of March 31, 2024 were unchanged from theallowance policies disclosed in United’s Annual Report on Form 10-K for loan losses represents management’s estimate of the probable credit losses inherent inyear ended December 31, 2023 within the lending portfolio.Determining the allowance for loan losses requires management to make estimates of losses that are highly uncertain and require a high degree of judgment. At September 30, 2017, the allowance for loan losses was $74.9 million and is subject to periodic adjustment based on management’s assessment of current probable losses in the loan portfolio. Such adjustment from period to period can have a significant impact on United’s consolidated financial statements. To illustrate the potential effect on the financial statements of our estimates of the allowance for loan losses, a 10% increase in the allowance for loan losses would have required $7.5 million in additional allowance (funded by additional provision for credit losses), which would have negatively impacted the third quarter of 2017 net income by approximately $4.9 million,after-tax or $0.05 diluted per common share. Management’s evaluation of the adequacy of the allowance for loan losses and the appropriate provision for loan losses is based upon a quarterly evaluation of the loan portfolio. 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 based on historical loss experience, and consideration of current economic trends, all of which are susceptible to constant and 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 losses, management considers the risk arising in part from, but not limited to,charge-off and delinquency trends, current economic and business conditions, lending policies and procedures, the size and risk characteristics of the loan portfolio, concentrations of credit, and other various factors. The methodology used to determine the allowance for loan losses is described in Note 6. A discussion of the factors leading to changes in the amount of the allowance for credit losses is included in the Provision for Credit Losses section of this Management’s“Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A). Additional information relating to United’s loans is included in Note 4, Loans to the unaudited Consolidated Financial Statements.Operations.”Investment SecuritiesAccounting estimates are used in the presentation of the investment portfolio and these estimates impact the presentation of United’s financial condition and results of operations. United classifies its investments in debt as either held to maturity or available for sale and its equity securities as available for sale. Securities held to maturity are accounted for using historical costs, adjusted for amortization of premiums and accretion of discounts. Securities available for sale are accounted for at fair value, with the net unrealized gains and losses, net of income tax effects, presented as a separate component of shareholders’ equity. When available, fair values of securities are based on quoted prices or prices obtained from third party vendors. Third party vendors compile prices from various sources and may determine the fair value of identical or similar securities by using pricing models that consider observable market data. Prices obtained from third party vendors that do not reflect forced liquidation or distressed sales are not adjusted by management. Where prices reflect forced liquidation or distressed sales, as is the case with United’s portfolio of trust preferred securities (Trup Cdos), management estimates fair value based on a discounted cash flow methodology using appropriately adjusted discount rates reflecting nonperformance and liquidity risks. Due to the subjective nature of this valuation process, it is possible that the actual fair values of these securities could differ from the estimated amounts, thereby affecting United’s financial position, results of operations and cash flows. The potential impact to United’s financial position, results of operations or cash flows for changes in the valuation process cannot be reasonably estimated.57If the estimated value of investments is less than the cost or amortized cost, the investment is considered impaired and management evaluates whether an event or change in circumstances has occurred that may have a significant adverse effect on the fair value of the investment. If such an event or change has occurred, management must exercise judgment to determine the nature of the potential impairment (i.e., temporary or other-than-temporary) in order to apply the appropriate accounting treatment. If United intends to sell, or is more likely than not they will be required to sell an impaired debt security before recovery of its amortized cost basis less any current period credit loss, other-than-temporary impairment is recognized in earnings. The amount recognized in earnings is equal to the entire difference
between the security’s amortized cost basis and its fair value at the balance sheet date. If United does not intend to sell, and is not more likely than not they will be required to sell the impaired debt security prior to recovery of its amortized cost basis less any current-period credit loss, the other-than-temporary impairment is separated into the following: 1) the amount representing the credit loss, which is recognized in earnings, and 2) the amount related to all other factors, which is recognized in other comprehensive income. For additional information on management’s consideration of investment valuation and other-than-temporary impairment, see Note 3, Investment Securities, and Note 12, Fair Value Measurements, to the unaudited consolidated financial statements.
Accounting for Acquired Loans
Loans acquired are initially recorded at their acquisition date fair values. The fair value of the acquired loans is based on the present value of the expected cash flows, including principal, interest and prepayments. Periodic principal and interest cash flows are adjusted for expected losses and prepayments, then discounted to determine the present value and summed to arrive at the estimated fair value. Fair value estimates involve assumptions and judgments as to credit risk, interest rate risk, prepayment risk, liquidity risk, default rates, loss severity, payment speeds, collateral values and discount rate.
Acquired loans are divided into loans with evidence of credit quality deterioration, which are accounted for under ASC topic310-30 (acquired impaired) and loans that do not meet this criteria, which are accounted for under ASC topic310-20 (acquired performing). Acquired impaired loans have experienced a deterioration of credit quality from origination to acquisition for which it is probable that United will be unable to collect all contractually required payments receivable, including both principal and interest. In the assessment of credit quality, numerous assumptions, interpretations and judgments must be made, based on internal and third-party credit quality information and ultimately the determination as to the probability that all contractual cash flows will not be able to be collected. This is a point in time assessment and inherently subjective due to the nature of the available information and judgment involved.
Subsequent to the acquisition date, United continues to estimate the amount and timing of cash flows expected to be collected on acquired impaired loans. Increases in expected cash flows will generally result in a recovery of any previously recorded allowance for loan losses, to the extent applicable, and/or a reclassification from the nonaccretable difference to accretable yield, which will be recognized prospectively. The present value of any decreases in expected cash flows after the acquisition date will generally result in an impairment charge recorded as a provision for loan losses, resulting in an increase to the allowance for loan losses.
For acquired performing loans, the difference between the acquisition date fair value and the contractual amounts due at the acquisition date represents the fair value adjustment. Fair value adjustments may be discounts (or premiums) to a loan’s cost basis and are accreted (or amortized) to interest income over the loan’s remaining life using the level yield method. Subsequent to the acquisition date, the methods utilized to estimate the required allowance for loan losses for these loans is similar to originated loans.
See Note 2, Merger and Acquisitions, and Note 4, Loans, to the unaudited Consolidated Financial Statements for information regarding United’s acquired loans disclosures.
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 15, Income Taxes, to the unaudited 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 September 30, 2017, approximately 10.98% of total assets, or $2.10 billion, consisted of financial instruments recorded at fair value. Of this total, approximately 81.87% or $1.72 billion of these financial instruments used valuation methodologies involving observable market data, collectively Level 1 and Level 2 measurements, to determine fair value. Approximately $381.00 million or 18.13% 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 pooled trust preferred investment securities classified asavailable-for-sale. At September 30, 2017, only $1.03 million 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 12, Fair Value Measurements, to the unaudited Consolidated Financial Statements for additional information regarding ASC topic 820 and its impact on United’s financial statements.
Any material effect on the financial statements related to these critical accounting areas are further discussed in this MD&A.
FINANCIAL CONDITION
United’s total assets as of September 30, 2017March 31, 2024 were $19.13$30.03 billion, which was an increase of $4.62 billion$102.32 million or 31.85%less than 1% from December 31, 2016, primarily the result2023. This increase was mainly due to an increase of the acquisition of Cardinal on April 21, 2017. Portfolio loans increased $2.80 billion$133.70 million or 27.07%,8.36% in cash and cash equivalents increased $312.51and an increase of $160.99 million or 21.78%,less than 1% in portfolio loans. These increases in assets were partly offset by a $171.24 million or 4.15% decrease in investment securities, increased $433.09an $11.84 million or 30.85%, goodwill increased $623.8421.04% decrease in loans held for sale, and a $10.98 million or 72.22%,3.97% decrease in other assets increased $107.28 million or 25.86%, bank premises and equipment increased $28.40 million or 37.42% and interest receivable increased $12.21 million or 30.98% due primarily to the Cardinal merger.assets. Total liabilities increased $3.59 billion or
29.28% fromyear-end 2016. This increase in total liabilities was due mainly to an increase of $3.08 billion or 28.51% and $474.71$66.12 million or 34.36%less than 1% from year-end 2023. Deposits increased $100.43 million or less than 1% and accrued expenses and other liabilities increased $6.14 million or 2.88%, which were partially offset by a $38.04 million or 1.92% decrease in deposits and borrowings, respectively, mainly due to the Cardinal acquisition.borrowings. Shareholders’ equity increased $1.03 billion$36.20 million or 45.98% fromyear-end 2016 due primarily to the acquisition of Cardinal.less than 1%.
The following discussion explains in more detail the changes in financial condition by major category.
Cash and Cash Equivalents
Cash and cash equivalents at September 30, 2017March 31, 2024 increased $312.51$133.70 million or 21.78%8.36% fromyear-end 2016. Of this total increase, 2023. In particular, interest-bearing deposits with other banks increased $275.22$152.69 million or 21.87%11.39% as United placed more cash in an interest-bearing account with the Federal Reserve while cash and due from banks increased $37.22decreased $19.01 million or 21.21% and fed7.39%. Federal funds sold increased $62$16 thousand or 8.55%1.37%. During the first ninethree months of 2017,2024, net cash of $125.15$124.37 million and $384.45$11.77 million waswere provided by operating activities and investingfinancing activities, respectively, while $197.09net cash of $2.43 million was used in financinginvesting activities. See the unaudited Consolidated Statements of Cash Flows for data on cash and cash equivalents provided and used in operating, investing and financing activities for the first ninethree months of 20172024 and 2016.2023.
Securities
Total investment securities at September 30, 2017 increased $433.09March 31, 2024 decreased $171.24 million or 30.85% fromyear-end 2016. Cardinal added $395.83million in investment securities, including purchase accounting amounts, upon consummation of the acquisition.4.15%. Securities available for sale increased $390.42decreased $172.40 million or 31.01%4.55%. This change in securities available for sale reflects $378.05$248.05 million acquired from Cardinal, $630.12in purchases, $416.41 million in sales, maturities and calls of securities, $630.06 million in purchases, and an increasea decrease of $13.40$3.12 million in market value. Securities heldThe majority of the purchase activity was related to maturity decreased $12.92obligations of U.S. Government corporations and agencies. Equity securities were $8.76 million at March 31, 2024, a decrease of $183 thousand or 38.86% fromyear-end 20162.05% due mainly to calls and maturities of securities.a net decrease in fair value. Other investment securities increased $55.59were relatively flat from year-end 2023, increasing $1.35 million or 50.01% fromyear-end 2016. Cardinal added $14.27 million in otherless than 1% due to net purchases of investment securities. Otherwise, Federal Reserve Bank (FRB) stock increased $33.28 million and FHLB stock increased $7.30 million.tax credits.
The following table summarizes the changes in the available for sale securities sinceyear-end 2016: 2023:
September 30 | December 31 | |||||||||||||||||||||||||||||||
(Dollars in thousands) | 2017 | 2016 | $ Change | % Change | March 31 2024 | December 31 2023 | $ Change | % Change | ||||||||||||||||||||||||
U.S. Treasury securities and obligations of U.S. | $ | 115,866 | $ | 95,786 | $ | 20,080 | 20.96 | % | $ | 434,111 | $ | 484,950 | $ | (50,839 | ) | (10.48 | %) | |||||||||||||||
State and political subdivisions | 305,141 | 192,812 | 112,329 | 58.26 | % | 528,301 | 533,831 | (5,530 | ) | (1.04 | %) | |||||||||||||||||||||
Mortgage-backed securities | 1,141,338 | 896,480 | 244,858 | 27.31 | % | 1,535,876 | 1,599,850 | (63,974 | ) | (4.00 | %) | |||||||||||||||||||||
Asset-backed securities | 13,429 | 217 | 13,212 | 6,088.48 | % | 830,930 | 860,638 | (29,708 | ) | (3.45 | %) | |||||||||||||||||||||
Marketable equity securities | 10,480 | 13,828 | (3,348 | ) | (24.21 | %) | ||||||||||||||||||||||||||
Trust preferred collateralized debt obligations | 31,659 | 33,552 | (1,893 | ) | (5.64 | %) | ||||||||||||||||||||||||||
Single issue trust preferred securities | 12,467 | 11,477 | 990 | 8.63 | % | 15,333 | 15,141 | 192 | 1.27 | % | ||||||||||||||||||||||
Corporate securities | 19,254 | 15,062 | 4,192 | 27.83 | % | |||||||||||||||||||||||||||
Other corporate securities | 269,424 | 291,967 | (22,543 | ) | (7.72 | %) | ||||||||||||||||||||||||||
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Total available for sale securities, at fair value | $ | 1,649,634 | $ | 1,259,214 | $ | 390,420 | 31.01 | % | $ | 3,613,975 | $ | 3,786,377 | $ | (172,402 | ) | (4.55 | %) | |||||||||||||||
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The following table summarizes the changes in the held to maturity securities sinceyear-end 2016: 2023:
(Dollars in thousands) | September 30 2017 | December 31 2016 | $ Change | % Change | March 31 2024 | December 31 2023 | $ Change | % Change | ||||||||||||||||||||||||
U.S. Treasury securities and obligations of U.S. | $ | 5,215 | $ | 5,295 | $ | (80 | ) | (1.51 | %) | |||||||||||||||||||||||
State and political subdivisions | 5,674 | 8,598 | (2,924 | ) | (34.01 | %) | $ | 981 | (1) | $ | 983 | (2) | $ | (2 | ) | (0.20 | %) | |||||||||||||||
Mortgage-backed securities | 26 | 30 | (4 | ) | (13.33 | %) | ||||||||||||||||||||||||||
Single issue trust preferred securities | 9,400 | 19,315 | (9,915 | ) | (51.33 | %) | ||||||||||||||||||||||||||
Other corporate securities | 20 | 20 | 0 | 0.00 | % | 20 | 20 | 0 | 0.00 | % | ||||||||||||||||||||||
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Total held to maturity securities, at amortized cost | $ | 20,335 | $ | 33,258 | $ | (12,923 | ) | (38.86 | %) | $ | 1,001 | $ | 1,003 | $ | (2 | ) | (0.20 | %) | ||||||||||||||
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(1) | net of allowance for credit losses of $19 thousand. |
(2) | net of allowance for credit losses of $17 thousand. |
At September 30, 2017,March 31, 2024, gross unrealized losses on available for sale securities were $16.47$366.79 million. Securities in anwith the most significant gross unrealized loss positionlosses at September 30, 2017March 31, 2024 consisted primarily of Trup Cdos, single issue trust preferred securities and agency residential mortgage-backed securities. The Trup Cdos and the single issue trust preferred securities relate mainly to securities of financial institutions. The agency residential mortgage-backed securities, relate to residential propertiesstate and provide a guaranty of fullpolitical subdivision securities, agency commercial mortgage-backed securities and timely payments of principal and interest by the issuing agency.corporate securities.
As of September 30, 2017,March 31, 2024, United’s available for sale mortgage-backed securities had an amortized cost of $1.14$1.78 billion, with an estimated fair value of $1.14$1.54 billion. The portfolio consisted primarily of $715.03 million$1.18 billion in agency residential mortgage-backed securities with a fair value of $714.73$1.01 billion, $83.70 million $5.26 million innon-agency residential mortgage-backed securities with an estimated fair value of $5.85$75.30 million, and $420.12$507.89 million in commercial agency mortgage-backed securities with an estimated fair value of $420.79$453.71 million.
As of September 30, 2017,March 31, 2024, United’s available for sale state and political subdivisions securities had an amortized cost of $611.24 million, with an estimated fair value of $528.30 million. The portfolio relates to securities issued by various municipalities located throughout the United States, and no securities within the portfolio were rated below investment grade as of March 31, 2024.
As of March 31, 2024, United’s available for sale corporate securities had an amortized cost of $103.38 million,$1.15 billion, with an estimated fair value of $95.87 million.$1.12 billion. The portfolio consisted primarily of $38.19 million in Trup Cdos with a fair value of $31.66 million and $22.80$16.39 million in single issue trust preferred securities with an estimated fair value of $21.03$15.33 million. In addition to the single issue trust preferred securities, the Company held positions in various other corporate securities, including asset-backed securities with an amortized cost of $13.42$837.06 million and a fair value of $13.43$830.93 million and marketable equityother corporate securities, with an amortized cost of $9.95$301.20 million and a fair value of $10.48 million, only one of which was individually significant.$269.42 million.
The Trup Cdos consisted of pools of trust preferred securities issued by trusts related primarily to financial institutions and to a lesser extent, insurance companies. The Company has no exposure to Real Estate Investment Trusts (REITs) in its investment portfolio. The Company owns both senior and mezzanine tranches in the Trup Cdos; however, the Company does not own any income notes. The senior and mezzanine tranches of Trup Cdos generally have some protection from defaults in the form of over-collateralization and excess spread revenues, along with waterfall structures that redirect cash flows in the event certain coverage test requirements have failed. Generally, senior tranches have the greatest protection, with mezzanine tranches subordinated to the senior tranches, and income notes subordinated to the mezzanine tranches. The fair value of senior tranches represents $5.29 million of the Company’s pooled securities, while mezzanine tranches represent $26.37 million. Of the $26.37 million in mezzanine tranches, $5.52 million are now in the Senior position as the Senior notes have been paid to a zero balance. As of September 30, 2017, Trup Cdos with a fair value of $3.17 million were investment grade, and the remaining $28.49 million were below investment grade. In terms of capital adequacy, the Company allocates additional risk-based capital to the below investment grade securities. As of September 30, 2017, United’s available for sale single issue trust preferred securities had a fair value of $21.00 million.$15.33 million as of March 31, 2024. Of the $21.03$15.33 million, $4.12$7.11 million or 19.60%46.36% were investment grade; $9.42$3.04 million or 44.85%19.82% were split rated; $3.10and $5.18 million or 14.77% were below investment grade; and $4.36 million or 20.78%33.82% were unrated. The two largest exposures accounted for 53.50%80.19% of the $21.03$15.33 million. These included SunTrustTruist Bank at $6.87$7.11 million and Emigrant Bank at $4.36$5.18 million. All single-issuesingle issue trust preferred securities are currently receiving full scheduled principal and interest payments.
The following two tables provide a summary of Trup Cdos as of September 30, 2017:
Description (1) | Tranche | Class | Moodys | S&P | Fitch | Amortized Cost Basis | Fair Value | Unrealized Loss (Gain) | Cumulative Credit- Related OTTI | |||||||||||||||||||||||||||
Dollars in thousands | ||||||||||||||||||||||||||||||||||||
SECURITY 1 | Senior | Sr | Ca | NR | WD | $1,798 | $2,115 | $ | (317 | ) | $ | 1,219 | ||||||||||||||||||||||||
SECURITY 2 | Senior (org Mezz) | B | Ca | NR | WD | 6,429 | 5,519 | 910 | 7,398 | |||||||||||||||||||||||||||
SECURITY 5 | Mezzanine | C-2 | Caa1 | NR | C | 1,978 | 1,300 | 678 | 184 | |||||||||||||||||||||||||||
SECURITY 6 | Mezzanine | C-1 | Ca | NR | C | 1,916 | 1,636 | 280 | 1,316 | |||||||||||||||||||||||||||
SECURITY 7 | Mezzanine | B-1 | Caa1 | NR | C | 4,493 | 3,601 | 892 | 41 | |||||||||||||||||||||||||||
SECURITY 8 | Mezzanine | B-1 | Ca | NR | C | 3,676 | 3,122 | 554 | 1,651 | |||||||||||||||||||||||||||
SECURITY 14 | Mezzanine | B-1 | Ba2 | NR | CCC | 3,300 | 2,625 | 675 | 422 | |||||||||||||||||||||||||||
SECURITY 15 | Mezzanine | B | Caa3 | NR | C | 6,436 | 5,000 | 1,436 | 3,531 | |||||||||||||||||||||||||||
SECURITY 17 | Mezzanine | B-1 | Caa1 | NR | C | 2,250 | 1,920 | 330 | 750 | |||||||||||||||||||||||||||
SECURITY 18 | Senior | A-3 | Aaa | NR | AA | 3,410 | 3,171 | 239 | 0 | |||||||||||||||||||||||||||
SECURITY 22 | Mezzanine | B-1 | B1 | NR | CCC | 2,500 | 1,650 | 850 | 0 | |||||||||||||||||||||||||||
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$ | 38,186 | $ | 31,659 | $ | 6,527 | $ | 16,512 | |||||||||||||||||||||||||||||
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Desc. | # of Issuers Currently Performing (1) | Deferrals as % of Original Collateral | Defaults as a % of Original Collateral | Expected Deferrals and Defaults as a % of Remaining Performing Collateral (2) | Projected Recovery/ Cure Rates on Deferring Collateral | Excess Subordination as % of Performing Collateral | Amortized Cost as a % of Par Value | Discount as a % of Par Value (3) | ||||||||||||||||||
1 | 5 | 6.3% | 13.3 | % | 7.9 | % | 25 - 90% | (73.5 | )% | 57.0% | 43.0 | % | ||||||||||||||
2 | 7 | 0.0% | 11.1 | % | 5.0 | % | N/A | (104.7 | )% | 45.4% | 54.6 | % | ||||||||||||||
5 | 39 | 0.0% | 9.8 | % | 5.7 | % | N/A | 0.2 | % | 91.3% | 8.7 | % | ||||||||||||||
6 | 39 | 0.0% | 15.9 | % | 5.6 | % | N/A | (21.9 | )% | 58.5% | 41.5 | % | ||||||||||||||
7 | 18 | 0.0% | 12.0 | % | 5.4 | % | N/A | (7.8 | )% | 84.8% | 15.2 | % | ||||||||||||||
8 | 22 | 0.0% | 22.4 | % | 5.2 | % | N/A | (28.5 | )% | 68.3% | 31.7 | % | ||||||||||||||
14 | 37 | 3.1% | 7.1 | % | 6.0 | % | 0 - 90% | 10.5 | % | 88.0% | 12.0 | % | ||||||||||||||
15 | 18 | 0.8% | 13.2 | % | 6.7 | % | 90% | (33.1 | )% | 64.4% | 35.6 | % | ||||||||||||||
17 | 26 | 0.0% | 7.4 | % | 6.1 | % | N/A | (1.6 | )% | 75.0% | 25.0 | % | ||||||||||||||
18 | 28 | 1.0% | 15.2 | % | 5.4 | % | 15% | 76.2 | % | 100.0% | 0.0 | % | ||||||||||||||
22 | 28 | 1.5% | 4.8 | % | 5.5 | % | 50% | 6.6 | % | 100.0% | 0.0 | % |
The Company defines “Excess Subordination” as all outstanding collateral less the sum of (i) 100% of the defaulted collateral, (ii) the sum of the projected net loss amounts for each piece of the deferring but not defaulted collateral and (iii) the amount of each Trup Cdo’s debt that is either senior to or pari passu with our security’s priority level.
The calculation of excess subordination in the above table does not consider the OTTI the Company has recognized on these securities. While the ratio of excess subordination provides some insight on overall collateralization levels, the Company completes an expected cash flow analysis each quarter to determine whether an adverse change in future cash flows has occurred under ASC 320. The standard specifies that a cash flow projection can be present-valued at the security specific effective interest rate and the resulting present value compared to the amortized cost in order to quantify the credit component of impairment. The Company utilizes the cash flow models to determine the net realizable value and assess whether additional OTTI has occurred.
While the ratio of excess subordination provides some insight on overall collateralization levels, the Company does not utilize this ratio to calculate OTTI. The ratio of excess subordination represents only one component of the projected cash flow. The Company believes the excess subordination is limited as it does not consider the following:
Waterfall structure and redirection of cash flows
Excess interest spread
Cash reserves
The collateral backing of a particular tranche can be increased by decreasing the more senior liabilities of the Trup Cdo tranche. This occurs when collateral deterioration due to defaults and deferrals triggers alternative waterfall provisions of the cash flow. The waterfall structure of the bond requires the excess spread to be rerouted away from the most junior classes of debt (which includes the income notes) in order to pay down the principal of the most senior liabilities. As these senior liabilities are paid down, the senior and mezzanine tranches become better secured (due to the rerouting away from the income notes). Therefore, variances will exist between the calculated excess subordination measure and the amount of OTTI recognized due to the impact of the specific structural features of each bond as it relates to the cash flow models.
The following is a summary of available for sale single-issue trust preferred securities as of September 30, 2017:
Security | Moodys | S&P | Fitch | Amortized Cost | Fair Value | Unrealized Loss/ (Gain) | ||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
Emigrant Bank | NR | NR | WD | $ | 5,707 | $ | 4,366 | $ | 1,341 | |||||||||||||||
Bank of America | Ba1 | NR | BBB- | 4,680 | 4,819 | (139 | ) | |||||||||||||||||
M&T Bank | NR | BBB- | BBB- | 3,017 | 3,282 | (265 | ) | |||||||||||||||||
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$ | 13,404 | $ | 12,467 | $ | 937 | |||||||||||||||||||
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Additionally, the Company owns two single-issue trust preferred securities that are classified asheld-to-maturity and include at least one rating below investment grade. These securities include SunTrust Bank ($7.42 million) and Royal Bank of Scotland ($976 thousand).
During the thirdfirst quarter of 2017,2024, United did not recognize any other-than-temporary impairment charges.credit losses on its available for sale investment securities. Management does not believe that any individual security with an unrealized loss as of September 30, 2017March 31, 2024 is other-than-temporarily impaired. United believes the decline in value resulted from changes in market interest rates, credit spreads and liquidity, not an adverse change in the expected contractual cash flows.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 not probablemore-likely-than-not that it would be unableable 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 March 31, 2024, there was no allowance for credit losses related to the Company’s available for sale securities. However, United acknowledges that any impaired 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 other-than-temporary impairment analysis, is presented in Note 32 to the unaudited Notes to Consolidated Financial Statements.
59
Loans heldHeld for saleSale
Loans held for sale increased $306.59were $44.43 million at March 31, 2024, a decrease of $11.84 million or 3,630.38% due mainly to the acquisition of Cardinal and its mortgage banking subsidiary, George Mason.21.04% from year-end 2023. Loan originations exceeded loan sales in the secondary market exceeded originations during the first ninethree months of 2017.2024. Loan originations for the first ninethree months of 20172024 were $1.72 billion$176.91 million while loans sales were $1.67 billion. Loans held for sale were $315.03 million at September 30, 2017 as compared to $8.45 million atyear-end 2016.$188.74 million.
Portfolio Loans
Loans, net of unearned income, increased $2.80 billion$160.99 million or 27.07% fromless than 1%. Since year-end 2016 mainly as a result of the Cardinal acquisition which added $3.17 billion, including purchase accounting amounts, in portfolio loans. Sinceyear-end 2016, 2023, commercial, financial and agricultural loans increased $1.72 billion$285.82 million or 28.25%2.40% as a result of a $318.44 million or 3.83% increase in commercial real estate loans, increased $1.58 billionwhich was partially offset by a $32.61 million or 35.21% andless than 1% decrease in commercial loans (not secured by real estate) increased $144.30. Construction and land development loans decreased $150.57 million or 8.94%. In addition,4.78%, residential real estate loans increased $95.15 million or 1.81%, and other consumer loans increased $647.43decreased $71.02 million or 26.94% and $88.90 million or 14.60%, respectively, while construction and land development loans increased $343.89 million or 27.39%. These increases were6.67% due primarily to the Cardinal acquisition. Otherwise, portfolio loans, net of unearned income, declined $369.23 million fromyear-end 2016.a decrease in indirect automobile financing.
The following table summarizes the changes in the major loan classes sinceyear-end 2016: 2023:
September 30 | December 31 | |||||||||||||||
(Dollars in thousands) | 2017 | 2016 | $ Change | % Change | ||||||||||||
Loans held for sale | $ | 315,031 | $ | 8,445 | $ | 306,586 | 3,630.38 | % | ||||||||
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Commercial, financial, and agricultural: | ||||||||||||||||
Owner-occupied commercial real estate | $ | 1,364,757 | $ | 1,049,885 | $ | 314,872 | 29.99 | % | ||||||||
Nonowner-occupied commercial real estate | 4,686,183 | 3,425,453 | 1,260,730 | 36.80 | % | |||||||||||
Other commercial loans | 1,757,741 | 1,613,437 | 144,304 | 8.94 | % | |||||||||||
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Total commercial, financial, and agricultural | $ | 7,808,681 | $ | 6,088,775 | $ | 1,719,906 | 28.25 | % | ||||||||
Residential real estate | 3,050,868 | 2,403,437 | 647,431 | 26.94 | % | |||||||||||
Construction & land development | 1,599,632 | 1,255,738 | 343,894 | 27.39 | % | |||||||||||
Consumer: | ||||||||||||||||
Bankcard | 13,775 | 14,187 | (412 | ) | (2.90 | %) | ||||||||||
Other consumer | 683,898 | 594,582 | 89,316 | 15.02 | % | |||||||||||
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Total gross loans | $ | 13,156,854 | $ | 10,356,719 | $ | 2,800,135 | 27.04 | % | ||||||||
Less: Unearned income | (16,386 | ) | (15,582 | ) | (804 | ) | 5.16 | % | ||||||||
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Total Loans, net of unearned income | $ | 13,140,468 | $ | 10,341,137 | $ | 2,799,331 | 27.07 | % | ||||||||
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The following table summarizes the outstanding balances of portfolio loans originated and acquired, by type, as of September 30, 2017 and December 31, 2016:
September 30, 2017 | ||||||||||||||||||||
(In thousands) | Commercial, financial and agricultural | Residential real estate | Construction & land development | Consumer | Total | |||||||||||||||
Originated | $ | 4,459,221 | $ | 1,973,839 | $ | 1,056,959 | $ | 690,711 | $ | 8,180,730 | ||||||||||
Acquired | 3,349,460 | 1,077,029 | 542,673 | 6,962 | 4,976,124 | |||||||||||||||
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Total gross loans | $ | 7,808,681 | $ | 3,050,868 | $ | 1,599,632 | $ | 697,673 | $ | 13,156,854 | ||||||||||
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December 31, 2016 | ||||||||||||||||||||
(In thousands) | Commercial, financial and agricultural | Residential real estate | Construction & land development | Consumer | Total | |||||||||||||||
Originated | $ | 4,457,470 | $ | 1,914,273 | $ | 1,095,972 | $ | 603,781 | $ | 8,071,496 | ||||||||||
Acquired | 1,631,305 | 489,164 | 159,766 | 4,988 | 2,285,223 | |||||||||||||||
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Total gross loans | $ | 6,088,775 | $ | 2,403,437 | $ | 1,255,738 | $ | 608,769 | $ | 10,356,719 | ||||||||||
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(Dollars in thousands) | March 31 2024 | December 31 2023 | $ Change | % Change | ||||||||||||
Loans held for sale | $ | 44,426 | $ | 56,261 | $ | (11,835 | ) | (21.04 | %) | |||||||
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Commercial, financial, and agricultural: | ||||||||||||||||
Owner-occupied commercial real estate | $ | 1,624,746 | $ | 1,598,231 | $ | 26,515 | 1.66 | % | ||||||||
Nonowner-occupied commercial real estate | 7,010,266 | 6,718,343 | 291,923 | 4.35 | % | |||||||||||
Other commercial loans | 3,539,826 | 3,572,440 | (32,614 | ) | (0.91 | %) | ||||||||||
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Total commercial, financial, and agricultural | $ | 12,174,838 | $ | 11,889,014 | $ | 285,824 | 2.40 | % | ||||||||
Residential real estate | 5,366,385 | 5,271,236 | 95,149 | 1.81 | % | |||||||||||
Construction & land development | 2,997,678 | 3,148,245 | (150,567 | ) | (4.78 | %) | ||||||||||
Consumer: | ||||||||||||||||
Bankcard | 9,431 | 9,962 | (531 | ) | (5.33 | %) | ||||||||||
Other consumer | 984,236 | 1,054,728 | (70,492 | ) | (6.68 | %) | ||||||||||
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Total gross loans | $ | 21,532,568 | $ | 21,373,185 | $ | 159,383 | 0.75 | % | ||||||||
Less: Unearned income | (12,492 | ) | (14,101 | ) | 1,609 | (11.41 | %) | |||||||||
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Total Loans, net of unearned income | $ | 21,520,076 | $ | 21,359,084 | $ | 160,992 | 0.75 | % | ||||||||
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For a further discussion of loans see Note 4 to the unaudited Notes to Consolidated Financial Statements.
Other Assets
Other assets increased $107.28decreased $10.98 million or 25.86%3.97% fromyear-end 2016. The Cardinal acquisition added $135.38 2023. Income tax receivable decreased $9.42 million due to timing differences, accounts receivable decreased $1.54 million, and dealer reserve decreased $2.09 million due to a decrease in indirect automobile financing. In addition, core deposit intangibles decreased $910 thousand due to amortization. Partially offsetting these decreases was an increase of $1.68 million in other prepaid assets, plus an additional $28.72 milliona $986 thousand increase in core deposit intangiblesdeferred tax assets, and $1.23 million for the George Mason trade name intangible. The cash surrender value of bank-owned life insurance policies increased $37.66 million, of which $33.50 million was acquired from Cardinal while the remaininga $208 thousand increase wasin derivative assets due to an increase in the cash surrenderfair value. Deferred tax assets increased $30.77 million due mainly to the deferred taxes recorded on the purchase accounting adjustments in the Cardinal acquisition. The remainder of the increase in other assets is the result of an increase of $5.28 million in derivative assets from George Mason, an increase of $4.26 million in income taxes receivable due to a timing difference in payments and an increase of $4.94 million in accounts receivable. Partially offsetting these increases was a decrease of $4.68 million in OREO due to sales and declines in the fair values of properties.
Deposits
60
Deposits
Deposits represent United’s primary source of funding. Total deposits at September 30, 2017March 31, 2024 increased $3.08 billion$100.43 million or 28.51% fromyear-end 2016 as a result of the Cardinal acquisition. Cardinal added $3.35 billion in deposits, including purchase accounting amounts.less than 1%. In terms of composition, noninterest-bearing deposits increased $962.18decreased $131.73 million or 30.34%2.14% while interest-bearing deposits increased $2.12 billion$232.16 million or 27.75%1.39% from December 31, 2016. Organically,2023.
Noninterest-bearing deposits declined $269.74consist of demand deposit and noninterest bearing money market (“MMDA”) account balances. The $131.73 million fromyear-end 2016.
The increasedecrease in noninterest-bearing deposits was due mainly to increasesa $99.65 million or 2.22% decrease in commercial noninterest-bearing deposits of $793.09and a $32.30 million or 32.65%54.40% decrease in official checks. In addition, items in-process decreased $34.53 million. Partially offsetting these decreases in noninterest-bearing deposits was an increase in public noninterest-bearing deposits of $25.59 million or 16.24% and an increase in personal noninterest-bearing deposits of $92.09$7.96 million or 16.03%less than 1%.
Interest-bearing deposits consist of interest-bearing transaction, regular savings, interest-bearing MMDA, and time deposit account balances. Interest-bearing transaction accounts decreased $145.62 million or 2.58% since year-end 2023 as the result of decreases of $57.60 million in personal interest-bearing transaction accounts, $81.28 million in commercial interest-bearing transaction accounts, and $6.74 million in public funds interest-bearing transaction accounts. Regular savings accounts decreased $22.71 million or 1.69% mainly as a result of the Cardinal acquisition. Public funds noninterest-bearing deposits increased $37.42a $14.63 million or 37.07%.
All major categories of interest-bearing deposits increased fromyear-end 2016 as the result of the Cardinal acquisition. Interest-bearing checking accounts increased $418.90 million or 23.56% mainly due to a $110.68 million increasedecrease in commercial interest-bearing checkingpersonal savings accounts and a $252.31$9.86 million increasedecrease in personal interest-bearing checkingcommercial savings accounts. Regular savings increased $342.61 million or 47.50% due to the Cardinal acquisition. Interest-bearing MMDAs increased $617.08$265.66 million or 19.58% as commercial MMDAs increased $526.03 million or 28.59% and4.18%. In particular, personal MMDAs increased $81.74$69.61 million or 7.03%. while commercial MMDAs and public funds MMDAs increased $175.05 million and $21.00 million, respectively.
Time deposits under $100,000 increased $128.41$41.49 million or 18.53% due mainly to an3.89% from year-end 2023. This increase in time deposits under $100,000 was the result of a $45.06 million increase in fixed rate certificatesCertificates of Deposits (“CDs”) under $100,000. Partially offsetting this increase in deposits (CDs)under $100,000 was a $3.36 million decrease in CDs under $100,000 obtained through the use of $89.24 million due to the Cardinal acquisition. Timedeposit listing services.
Since year-end 2023, time deposits over $100,000 increased $609.25$93.34 million or 47.57% due to increases in brokered deposits of $163.45 million,4.13% as fixed rate CDs increased $109.62 million. Partially offsetting this increase in time deposits over $100,000, were decreases of $255.88$5.49 million Certificate of Deposit Account Registry Service (CDARS) balances of $88.09in CDARS over $100,000, $4.36 million in brokered CDs, and $5.71 million in public funds CDs of $95.64 million, all as a result of the Cardinal acquisition.
The following table below summarizes the changes in theby deposit categoriescategory sinceyear-end 2016: 2023:
(Dollars in thousands) | September 30 2017 | December 31 2016 | $ Change | % Change | March 31 2024 | December 31 2023 | $ Change | % Change | ||||||||||||||||||||||||
Demand deposits | $ | 4,134,019 | $ | 3,171,841 | $ | 962,178 | 30.33 | % | $ | 6,017,349 | $ | 6,149,080 | $ | (131,731 | ) | (2.14 | %) | |||||||||||||||
Interest-bearing checking | 2,197,058 | 1,778,156 | 418,902 | 23.56 | % | 5,502,513 | 5,648,135 | (145,622 | ) | (2.58 | %) | |||||||||||||||||||||
Regular savings | 1,063,830 | 721,224 | 342,606 | 47.50 | % | 1,322,553 | 1,345,258 | (22,705 | ) | (1.69 | %) | |||||||||||||||||||||
Money market accounts | 3,768,979 | 3,151,896 | 617,083 | 19.58 | % | 6,615,111 | 6,349,453 | 265,658 | 4.18 | % | ||||||||||||||||||||||
Time deposits under $100,000 | 821,417 | 693,005 | 128,412 | 18.53 | % | 1,107,580 | 1,066,092 | 41,488 | 3.89 | % | ||||||||||||||||||||||
Time deposits over $100,000(1) | 1,889,994 | 1,280,745 | 609,249 | 47.57 | % | 2,354,640 | 2,261,301 | 93,339 | 4.13 | % | ||||||||||||||||||||||
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Total deposits | $ | 13,875,297 | $ | 10,796,867 | $ | 3,078,430 | 28.51 | % | $ | 22,919,746 | $ | 22,819,319 | $ | 100,427 | 0.44 | % | ||||||||||||||||
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(1) | Includes time deposits of $250,000 or more of |
Borrowings
Total borrowings at September 30, 2017 increased $474.71March 31, 2024 decreased $38.04 million or 34.36% during1.92% since year-end 2023. During the first ninethree months of 2017. Cardinal added $316.33 million, including purchase accounting amounts, upon consummation of the acquisition. Sinceyear-end 2016,2024, short-term borrowings increased $282.49$11.63 million or 134.80%5.93% due to increases of $200.00 million and $78.92 millionan increase in short-term FHLB advances and short-term securities sold under agreements to repurchase, respectively. In addition, federal funds purchased increased $3.57 million. Cardinal added $96.21 million in short-term borrowings, all of which was repaid prior toquarter-end.repurchase. Long-term borrowings increased $192.22decreased $49.67 million or 16.40% since2.78% from year-end 2016 as long-term 2023 due to maturities of advances obtained from the FHLB advances increased $174.41 million and issuancesduring the first quarter of trust preferred capital securities increased $17.81 million. Cardinal added $220.12 million in long-term borrowings, $20 million of which was repaid prior toquarter-end.2024.
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The table below summarizes the change in the borrowing categories sinceyear-end 2016: 2023:
(Dollars in thousands) | September 30 2017 | December 31 2016 | $ Change | % Change | March 31 2024 | December 31 2023 | $ Change | % Change | ||||||||||||||||||||||||
Federal funds purchased | $ | 25,800 | $ | 22,235 | $ | 3,565 | 16.03 | % | ||||||||||||||||||||||||
Short-term securities sold under agreements to repurchase | 266,236 | 187,316 | 78,920 | 42.13 | % | $ | 207,727 | $ | 196,095 | $ | 11,632 | 5.93 | % | |||||||||||||||||||
Long-term securities sold under agreements to repurchase | 50,000 | 50,000 | 0 | 0.00 | % | |||||||||||||||||||||||||||
Short-term FHLB advances | 200,000 | 0 | 200,000 | 100.00 | % | |||||||||||||||||||||||||||
Long-term FHLB advances | 1,072,115 | 897,707 | 174,408 | 19.43 | % | 1,460,415 | 1,510,487 | (50,072 | ) | (3.31 | )% | |||||||||||||||||||||
Issuances of trust preferred capital securities | 242,131 | 224,319 | 17,812 | 7.94 | % | 279,019 | 278,616 | 403 | 0.14 | % | ||||||||||||||||||||||
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Total borrowings | $ | 1,856,282 | $ | 1,381,577 | $ | 474,705 | 34.36 | % | $ | 1,947,161 | $ | 1,985,198 | $ | (38,037 | ) | (1.92 | )% | |||||||||||||||
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For a further discussion of borrowings see Notes 89 and 910 to the unaudited Notes to Consolidated Financial Statements.
Accrued Expenses and Other Liabilities
Accrued expenses and other liabilities at September 30, 2017March 31, 2024 increased $40.10$6.14 million or 42.81%2.88% fromyear-end 2016. Cardinal added $50.93 million including an unfavorable lease liability of $2.28 million. 2023. In particular, deferred compensation increased $14.33 million, dividends payable increased $9.33 million, accrued mortgage escrow liabilities increased $6.05 million, other accrued expenses increased $8.12 million and income taxes payable increased $6.75$12.44 million due to timing differences, business franchise taxes increased $2.60 million, and accrued loan expenses increased $7.44 million. In addition, interest payable increased $534 thousand due to an increase in CDs. Partially offsetting these increases in accrued expenses and other liabilities was a decrease of $10.72$11.52 million in the pension liabilityincentives payable due to a $10 million payment in the third quarter of 2017 and a decline of $1.58 million in derivative liabilities due to a change in fair value.
Shareholders’ Equity
Shareholders’ equity at September 30, 2017March 31, 2024 was $4.81 billion, which was an increase of $36.20 million or less than 1% from year-end 2023.
Retained earnings increased $1.03 billion$36.60 million or 45.98%2.10% from December 31, 2016 mainly as a result of the Cardinal acquisition. The Cardinal transaction added approximately $975.25 million in shareholders’ equity as 23,690,589 shares were issued from United’s authorized but unissued shares for the merger at a cost of approximately $972.50 million.year-end 2023. Earnings net of dividends for the first ninethree months of 20172024 were $36.57$36.60 million.
Accumulated other comprehensive income increased $10.55decreased $1.31 million or less than 1% from year-end 2023 due mainly to an increasea decrease of $8.44$2.39 million in the fair value of United’s available for sale investment portfolio, net of deferred income taxes. Partially offsetting this decrease was a $657 thousand increase in the fair value of cash flow hedges, net of deferred income taxes. The after taxnon-credit portionafter-tax accretion of pension costs was $2.11 million$424 thousand for the first nine monthsquarter of 2017.2024.
RESULTS OF OPERATIONS
Overview
NetThe following table sets forth certain consolidated income for the third quarterstatement information of 2017 was $56.74 million or $0.54 per diluted share, as compared to $41.48 million or $0.54 per diluted share for the prior year third quarter. United:
Three Months Ended | ||||||||||||
(Dollars in thousands) | March 2024 | March 2023 | December 2023 | |||||||||
Income Statement Summary: | ||||||||||||
Interest income | $ | 369,180 | $ | 329,303 | $ | 369,175 | ||||||
Interest expense | 146,691 | 94,983 | 139,485 | |||||||||
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Net interest income | 222,489 | 234,320 | 229,690 | |||||||||
Provision for credit losses | 5,740 | 6,890 | 6,875 | |||||||||
Other income | 32,212 | 32,744 | 33,675 | |||||||||
Other expense | 140,742 | 137,419 | 152,287 | |||||||||
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Income before income taxes | 108,219 | 122,755 | 104,203 | |||||||||
Income taxes | 21,405 | 24,448 | 24,813 | |||||||||
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Net income | $ | 86,814 | $ | 98,307 | $ | 79,390 | ||||||
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Net income for the first nine monthsquarter of 20172024 was $132.61$86.81 million or $1.39 per diluted shareas compared to $107.98earnings of $98.31 million or $1.48 per share for the first nine monthsquarter of 2016.
As previously mentioned, United completed its acquisition of Cardinal on April 21, 2017. The financial results of Cardinal are included in United’s results from the acquisition date. As a result of the acquisition,2023. Earnings for the first nine months and third quarter of 2017 were impacted for increased levels of average balances, income, and expense2024, as compared to the first nine months and third quarter of 2016 and two full months in2023, decreased primarily due to lower net interest income as a result of the secondimpact of higher market interest rates on interest-bearing liabilities. Diluted earnings per share were $0.64 for the first quarter of 2017.
In addition, as previously mentioned, United completed its acquisition of Bank of Georgetown on June 3, 2016. The financial results of Bank of Georgetown were included in United’s results from the acquisition date. As a result,2024 and $0.73 for the first nine months and third quarter of 2016 were impacted by increased levels of average balances,2023. On a linked-quarter basis, net income and expense. The third quarter and first nine months of 2017 included $532 thousand and $24.99 million, respectively, of merger-related expenses fromfor the Cardinal acquisition and the third quarter and first nine months of 2016 included $924 thousand and $5.61 million, respectively, of merger-related expenses from the Bank of Georgetown acquisition.
For the thirdfourth quarter of 2017, 2023 was $79.39 million or $0.59 per diluted share. The fourth quarter of 2023 included $11.99 million of noninterest expense for the FDIC special assessment levied on banking organizations as compared to an additional $1.81 million of noninterest expense for the first quarter of 2024 related to the FDIC’s revised loss estimates to the Deposit Insurance Fund.
United’s annualized return on average assets for the first three months of 2024 was 1.19% and return on average shareholders’ equity was 6.89%7.25% as compared to 1.17%1.35% and 8.10%8.72%, respectively, for the third quarterfirst three months of 2016.2023. On a linked-quarter basis, United’s annualized return on average assets for the first nine monthsfourth quarter of 20172024 was 1.03%1.08% and return on average shareholders’ equity was 6.22%6.70%. For the first three months of 2024, United’s annualized return on average tangible equity, a non-GAAP measure, was 11.98%, as compared to 1.10% and 7.73%14.97% for the first ninethree months of 2016.2023. On a linked-quarter basis, United’s Federal Reserve peer group’s (bank holding companies with total assets over $10 billion) most recently reported averageannualized return on assets and average return ontangible equity were 0.96% and 8.28%, respectively,was 11.27% for the first six monthsfourth quarter of 2017.2023.
Three Months Ended | ||||||||||||
March 31, 2024 | March 31, 2023 | December 31, 2023 | ||||||||||
Return on Average Tangible Equity: | ||||||||||||
(a) Net Income (GAAP) | $ | 86,814 | $ | 98,307 | $ | 79,390 | ||||||
(b) Number of Days | 91 | 90 | 92 | |||||||||
Average Total Shareholders’ Equity (GAAP) | $ | 4,816,476 | $ | 4,570,288 | $ | 4,697,680 | ||||||
Less: Average Total Intangibles | (1,901,074 | ) | (1,907,331 | ) | (1,903,458 | ) | ||||||
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(c) Average Tangible Equity (non-GAAP) | $ | 2,915,402 | $ | 2,662,957 | $ | 2,794,222 | ||||||
Return on Average Tangible Equity (non-GAAP)\ [(a) / (b)] x 366 or 365 / (c)] | 11.98 | % | 14.97 | % | 11.27 | % |
Net interest income for the thirdfirst quarter of 2017 was $394.14 million, an increase of $39.212024 decreased $11.83 million, or 35.30%5.05%, to $222.49 million from net interest income of $234.32 million for the third quarterfirst three months of 2016.2023. The increasedecrease of $11.83 million in net interest income occurred because total interest income increased $48.45$39.88 million while total interest expense only increased $9.24$51.71 million from the thirdfirst quarter of 2016.2023. Net interest income for the first nine monthsquarter of 2017 was $394.14 million, an increase of $82.062024 decreased $7.20 million, or 26.30%3.14%, from the prior year’s first nine months.fourth quarter of 2023. The increasedecrease of $7.20 million in net interest income occurred because total interest income increased $102.57 million$5 thousand while total interest expense only increased $20.51$7.21 million from the first nine monthsfourth quarter of 2016.2023.
The provision for credit losses was $7.28 million and $21.43$5.74 million for the thirdfirst quarter and first nine months of 2017, respectively,2024 as compared to $6.99 million and $18.69a provision for credit losses of $6.89 million for the thirdfirst quarter of 2023. The decrease in the provision for credit losses was mainly due to a change in qualitative factors and the impact of reasonable and supportable forecasts of future macroeconomic conditions. On a linked-quarter basis, the provision for credit losses for the first ninequarter of 2024 declined $1.14 million from $6.88 million for the fourth quarter of 2023 due mainly to less portfolio loan growth as well as a change in the impact of reasonable and supportable forecasts of future macroeconomic conditions in the first quarter of 2024 as compared to the fourth quarter of 2023.
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Noninterest income was $32.21 million for the first three months of 2016, respectively. For the third quarter2024, a decrease of 2017, noninterest income was $38.23 million, which was an increase of $19.21 million$532 thousand or 100.98%1.62% from the third quarterfirst three months of 2016. Noninterest2023 due mainly to a decrease in mortgage loan servicing income of $1.49 million partially offset by increased fees of $1.07 million from brokerage services. On a linked-quarter basis, noninterest income for the first nine monthsquarter of 20172024 decreased $1.46 million, or 4.34%, from the fourth quarter of 2023. The fourth quarter of 2023 included a $2.66 million gain from the payoff of a fixed rate commercial loan that had an associated interest rate swap derivative. Partially offsetting the decrease in noninterest income was $98.88a $907 thousand increase in fees from brokerage services.
Noninterest expense for the first quarter of 2024 was $140.74 million, which was an increase of $45.50$3.32 million or 85.24%2.42% from the first ninequarter of 2023 primarily due to increases in employee compensation and FDIC insurance expense partially offset by a decrease in other noninterest expense. On a linked-quarter basis, noninterest expense for the first quarter of 2024 decreased $11.55 million or 7.58% from the fourth quarter of 2023. This decrease in noninterest expense was driven by decreases in FDIC insurance expense and other noninterest expense partially offset by an increase in employee benefits.
Income taxes decreased $3.04 million or 12.45% for the first three months of 2016. These
increases from 2016 were mainly2024 as compared to the first three months of 2023 primarily due to additionaldecreased earnings and a slightly lower effective tax rate. On a linked-quarter basis, income from mortgage banking activities as a result oftaxes decreased $3.41 million or 13.73% for the Cardinal acquisition. For the thirdfirst quarter of 2017, noninterest expense increased $33.88 million or 53.96% from2024 as compared to the thirdfourth quarter of 2016. For the first nine months of 2017, noninterest expense increased $85.94 million or 46.28% from the first nine months of 2016. These increases from 2016 were2023 due mainly to the Cardinal acquisition.
Income taxes for the third quarter of 2017 were $27.84 million as compared to $18.85 million for the third quarter of 2016. For the first nine months of 2017 and 2016, income tax expense was $67.36 million and $53.10 million, respectively. These increases for 2017 were due to higher earnings and a higherlower effective tax rate. For the quarters ended September 30, 2017 and 2016, United’srate partially offset by higher earnings. The effective tax rate was 32.91%19.78% and 31.24%,19.92% and for the first quarter of 2024 and 2023, respectively. The effective tax rate was 23.81% for the first nine months of 2017 and 2016 was 33.68% and 32.97%, respectively.
Business Segments
As a result of the Cardinal acquisition, United now operates in two business segments: community banking and mortgage banking. Prior to the Cardinal acquisition, United’s business activities were confined to just one reportable segment of community banking.
Community Banking
Net income attributable to the community banking segment for the thirdfourth quarter of 2017 was $59.94 million compared to net income of $42.97 million for the third quarter of 2016.
Net interest income increased $39.85 million to $152.89 million for the third quarter of 2017, compared to $113.03 million for the same period of 2016. Generally, net interest income for the third quarter of 2017 increased from the third quarter of 2016 because of the earning assets added from the Cardinal acquisition. Provision for loan losses was $7.28 million for the three months ended September 30, 2017 compared to a provision of $6.99 million for the same period of 2016. Noninterest income decreased $1.29 million for the third quarter of 2017 to $18.37 million as compared to $19.67 million for the third quarter of 2016. The decrease was mainly due to a decline of $1.14 million in income from bank-owned life insurance policies due to death benefits recorded in the third quarter of 2016. Noninterest expense was $74.55 million for the third quarter of 2017, compared to $63.01 million for the same period of 2016. The increase of $11.54 million in noninterest expense was primarily attributable to increases in branches, staffing and merger-related expenses from the Cardinal acquisition.
Net income attributable to the community banking segment for the first nine months of 2017 was $143.88 million compared to net income of $112.57 million for the first nine months of 2016.
Net interest income increased $83.21 million to $401.04 million for the first nine months of 2017, compared to $317.84 million for the same period of 2016. Generally, net interest income for the first nine months of 2017 increased from the first nine months of 2016 because of the earning assets added from the Cardinal acquisition. Provision for loan losses was $21.43 million for the nine months ended September 30, 2017 compared to a provision of $18.69 million for the same period of 2016. Noninterest income decreased by $1.91 million to $53.41 million for the first nine months of 2017 as compared to $55.32 million for the first nine months of 2016. The decrease was mainly due to a decline of $1.04 million in income from bank-owned life insurance policies due to death benefits recorded in the third quarter of 2016. Noninterest expense was $215.94 million for the nine months ended September 30, 2017, compared to $186.32 million for the same period of 2016. The increase of $29.61 million in noninterest expense was primarily attributable to increases in branches, staffing and merger-related expenses from the Cardinal acquisition.
Mortgage Banking
The mortgage banking segment reported a net loss of $2.80 million and $322 thousand for the third quarter and first nine months of 2017, respectively. Noninterest income, which consists mainly of realized and unrealized gains associated with the fair value of commitments and loans held for sale, was $19.94 million and $42.33 million for the third quarter and first nine months of 2017, respectively. Noninterest expense was $24.04 million and $42.74 million for the third quarter and first nine months of 2017, respectively. Noninterest expense consists mainly of salaries, commissions and benefits of mortgage segment employees. There is no comparison to results for 2016 because United did not have a mortgage banking segment in 2016.2023.
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 20172024 and 2016,2023, are presented below.
Net interest income for the thirdfirst quarter of 20172024 was $150.28$222.49 million, which was an increasea decrease of $39.21$11.83 million or 35.30%5.05% from the thirdfirst quarter of 2016.2023. The $39.21$11.83 million increasedecrease in net interest income occurred because total interest income increased $48.45$39.88 million while total interest expense only increased $9.24$51.71 million from the thirdfirst quarter of 2016. Net2023. On a linked-quarter basis, net interest income for the first nine monthsquarter of 2017 was $394.14 million, which was an increase of $82.062024 decreased $7.20 million, or 26.30%3.14%, from the first nine monthsfourth quarter of 2016.2023. The $82.06$7.20 million increasedecrease in net interest income occurred because total interest income increased $102.57 million$5 thousand while total interest expense only increased $20.51$7.21 million from the first nine months of 2016. On a linked-quarter basis, net interest income for the thirdfourth quarter of 2017 increased $14.03 million or 10.30% from the second quarter of 2017. The $14.03 million increase in net interest income occurred because total interest income increased $16.64 million while total interest expense only increased $2.61 million from the second quarter of 2017. Generally, interest income for the third quarter and first nine months of 2017 increased from the third quarter and first nine months of 2016 because of the earning assets added from the Cardinal acquisition. In addition, loan accretion on acquired loans for the third quarter and first nine months of 2017 increased from the same time periods last year and the second quarter of 2017. 2023.
For the purpose of this remaining discussion, net interest income is presented on atax-equivalent basis to provide a comparison among all types of interest earning assets. Thetax-equivalent basis adjusts for thetax-favored status of income from certain loans and investments. Although this is anon-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 andtax-exempt sources. United uses this measure to monitor net interest income performance and to manage its balance sheet composition.
Tax-equivalent net interest income for the thirdfirst quarter of 20172024 was $152.37$223.36 million, an increasewhich was a decrease of $39.74$12.09 million or 35.29%5.14% from the thirdfirst quarter of 20162023. The decrease in net interest income and tax-equivalent net interest income was primarily due mainly to higher interest expense driven by deposit rate repricing, an increase in average earning assets frominterest-bearing deposits and a decrease in loan fees partially offset by the Cardinal acquisition. Average earning assets for the third quarterimpact of 2017 increased $3.97 billion or 31.53% from the third quarter of 2016 due mainly to a $3.18 billion or 30.66% increase in average net loans. Average short-term investments increased $436.66 million or 53.90% while average investment securities increased $360.25 million or 25.15%. The third quarter of 2017 average yieldrising market interest rates on earning assets, organic loan growth and a decrease in average long-term borrowings. The average cost of funds increased 22104 basis points from the thirdfirst quarter of 2016 due2023 to additional3.21% driven by an increase in the yield on average interest-bearing deposits of 127 basis points. Average interest-bearing deposits increased $1.48 billion or 9.73% from the first quarter of 2023.
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Acquired loan accretion of $7.68 million on acquired loans and higher market interest rates. Partially offsetting the increases totax-equivalent net interest income for the thirdfirst quarter of 2017 was2024 decreased $613 thousand from the first quarter of 2023. Loan fees for the first quarter of 2024 decreased $351 thousand from the first quarter of 2023. The yield on average earning assets increased 60 basis points from the first quarter of 2023 to 5.70% driven by an increase of 19 basis points in the yield on average costnet loans of funds as compared to53 basis points. Average net loans increased $800.47 million, or 3.91%, from the thirdfirst quarter of 2016 due to the higher market interest rates.2023. The net interest margin of 3.65%3.44% for the thirdfirst quarter of 20172024 was an increasea decrease of 919 basis points from the net interest margin of 3.56%3.63% for the thirdfirst quarter of 2016.
Tax-equivalentOn a linked-quarter basis, tax-equivalent net interest income for the first nine monthsquarter of 2017 was $400.31 million, an increase of $83.672024 decreased $7.20 million, or 26.42%3.12%, from the first nine monthsfourth quarter of 2016. This increase2023. The decrease in net interest income and tax-equivalent net interest income was primarily attributabledue to an increasehigher interest expense driven by the impact of deposit rate repricing and a decrease in loan fees. The yield on average earning assets from the Cardinal acquisition. Average earning assetsinterest-bearing deposits increased $3.53 billion or 30.25% from the first nine months of 2016 as average net loans increased $2.51 billion or 25.66%15 basis points to 3.10% for the first nine monthsquarter of 2017. Average investment securities increased $340.92 million or 26.26%. Partially offsetting the increases totax-equivalent net interest income for the first nine months of 2017 was an increase of 15 basis points in2024. Overall, the average cost of funds as compared tofor the first nine monthsquarter of 2016 due to higher market interest rates.2024 increased 14 basis points from the fourth quarter of 2023. In addition,comparison, the yield on average earning assets for the first nine monthsquarter of 2017 average yield on2024 increased 2 basis points from the fourth quarter of 2023. Loan fees for the first quarter of 2024 decreased $677 thousand from the fourth quarter of 2023. Acquired loan accretion income for the first quarter of 2024 decreased $521 thousand from the fourth quarter of 2023. Average earning assets decreased a basis pointfor the first quarter of 2024 were relatively flat from the first nine monthsfourth quarter of 2016 due to the replacement of maturing higher-yielding investment securities with those at a lower current interest rate despite an increase of $11.642023, increasing $211.65 million from accretion on acquired loans.or less than 1%. Average net loans increased $224.86 million or 1.07% and average short-term investments increased $63.23 million or 7.72% while average investments decreased $76.44 million or 1.90%. The net interest margin of 3.52%3.44% for the first nine monthsquarter of 20172024 was a decrease of 1011 basis points from the net interest margin of 3.62%3.55% for the first nine months of 2016.
On a linked-quarter basis, United’stax-equivalent net interest income for the thirdfourth quarter of 2017 increased $13.61 million or 9.81% due mainly to increases in the average yield on and the average balance of earning assets. The third quarter of 2017 average yield on earning assets increased 25 basis points from the second quarter of 2017 due to additional loan accretion of $5.45 million on acquired loans. Average earning assets increased $426.47 million or 2.64% for the linked-quarter due to the Cardinal acquisition. Average net loans increased $492.64 million or 3.78% while average investment securities increased $40.60 million or 2.32%. Average short-term investments decreased $106.77 million or 7.89%. Partially offsetting the increases totax-equivalent net interest income for the third quarter of 2017 was an increase of 7 basis points in the average cost of funds as compared to the second quarter of 2017 due to higher market interest rates. The net interest margin of 3.65% for the third quarter of 2017 was an increase of 21 basis points from the net interest margin of 3.44% for the second quarter of 2017.2023.
United’stax-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 totax-equivalent net interest income for the three months ended September 30, 2017, September 30, 2016March 31, 2024, March 31, 2023 and June 30, 2017 and the nine months ended September 30, 2017 and September 30, 2016:December 31, 2023:
Three Months Ended | ||||||||||||||||||||||||
September 30 | September 30 | June 30 | Three Months Ended | |||||||||||||||||||||
(Dollars in thousands) | 2017 | 2016 | 2017 | March 31 2024 | March 31 2023 | December 31 2023 | ||||||||||||||||||
Loan accretion | $ | 12,805 | $ | 5,121 | $ | 7,355 | $ | 2,506 | $ | 3,119 | $ | 3,027 | ||||||||||||
Certificates of deposit | 817 | 63 | 776 | 171 | 356 | 201 | ||||||||||||||||||
Long-term borrowings | 268 | 22 | 197 | (331 | ) | (353 | ) | (333 | ) | |||||||||||||||
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Total | $ | 13,890 | $ | 5,206 | $ | 8,328 | $ | 2,346 | $ | 3,122 | $ | 2,895 | ||||||||||||
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September 30 | September 30 | |||||||
(Dollars in thousands) | 2017 | 2016 | ||||||
Loan accretion | $ | 24,395 | $ | 12,750 | ||||
Certificates of deposit | 1,640 | 63 | ||||||
Long-term borrowings | 348 | 328 | ||||||
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Tax-equivalent net interest income | $ | 26,383 | $ | 13,141 | ||||
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The following tables reconcile the difference between net interest income andtax-equivalent net interest income for the three months ended September 30, 2017, September 30, 2016March 31, 2024, March 31, 2023 and June 30, 2017 and the nine months ended September 30, 2017 and September 30, 2016.December 31, 2023.
Three Months Ended | ||||||||||||
September 30 | September 30 | June 30 | ||||||||||
(Dollars in thousands) | 2017 | 2016 | 2017 | |||||||||
Net interest income, GAAP basis | $ | 150,276 | $ | 111,069 | $ | 136,245 | ||||||
Tax-equivalent adjustment (1) | 2,092 | 1,556 | 2,512 | |||||||||
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Tax-equivalent net interest income | $ | 152,368 | $ | 112,625 | $ | 138,757 | ||||||
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September 30 | September 30 | Three Months Ended | ||||||||||||||||||
(Dollars in thousands) | 2017 | 2016 | March 31 2024 | March 31 2023 | December 31 2023 | |||||||||||||||
Net interest income, GAAP basis | $ | 394,141 | $ | 312,078 | $ | 222,489 | $ | 234,320 | $ | 229,690 | ||||||||||
Tax-equivalent adjustment (1) | 6,168 | 4,562 | 872 | 1,135 | 866 | |||||||||||||||
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Tax-equivalent net interest income | $ | 400,309 | $ | 316,640 | $ | 223,361 | $ | 235,455 | $ | 230,556 | ||||||||||
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(1) | Thetax-equivalent adjustment combines amounts of interest income on federally nontaxable loans and investment securities using the statutory federal income tax rate of |
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The following tables showtable shows the unaudited consolidated daily average balance of major categories of assets and liabilities for the three-month andsix-monthperiods ended September 30, 2017March 31, 2024 and 2016,2023, respectively, with the interest and rate earned or paid on such amount. The interest income and yields on federally nontaxable loans and investment securities are presented on atax-equivalent basis using the statutory federal income tax rate of 35%.21% for the three-month period ended March 31, 2024 and 2023. Interest income on all loans and investment securities was subject to state income taxes.
Three Months Ended | Three Months Ended | Three Months Ended | Three Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
September 30, 2017 | September 30, 2016 | March 31, 2024 | March 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||
(Dollars in thousands) | Average Balance | Interest (1) | Avg. Rate (1) | Average Balance | Interest (1) | Avg. Rate (1) | Average Balance | Interest (1) | Avg. Rate (1) | Average Balance | Interest (1) | Avg. Rate (1) | ||||||||||||||||||||||||||||||||||||
ASSETS | ||||||||||||||||||||||||||||||||||||||||||||||||
Earning Assets: | ||||||||||||||||||||||||||||||||||||||||||||||||
Federal funds sold and securities purchased under agreements to resell and other short-term investments | $ | 1,246,742 | $ | 4,874 | 1.55 | % | $ | 810,081 | $ | 1,107 | 0.54 | % | $ | 882,656 | $ | 12,303 | 5.61 | % | $ | 936,394 | $ | 10,983 | 4.76 | % | ||||||||||||||||||||||||
Investment Securities: | ||||||||||||||||||||||||||||||||||||||||||||||||
Taxable | 1,533,444 | 9,406 | 2.45 | % | 1,270,734 | 8,764 | 2.76 | % | 3,743,157 | 34,722 | 3.71 | % | 4,404,864 | 36,259 | 3.29 | % | ||||||||||||||||||||||||||||||||
Tax-exempt | 259,189 | 2,284 | 3.52 | % | 161,651 | 1,527 | 3.78 | % | 212,375 | 1,474 | 2.78 | % | 387,671 | 2,740 | 2.83 | % | ||||||||||||||||||||||||||||||||
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Total Securities | 1,792,633 | 11,690 | 2.61 | % | 1,432,385 | 10,291 | 2.87 | % | 3,955,532 | 36,196 | 3.66 | % | 4,792,535 | 38,999 | 3.26 | % | ||||||||||||||||||||||||||||||||
Loans, net of unearned income (2) | 13,607,933 | 157,111 | 4.59 | % | 10430,449 | 113,295 | 4.32 | % | ||||||||||||||||||||||||||||||||||||||||
Loans, net of unearned income (2)(3) | 21,508,611 | 321,553 | 6.01 | % | 20,683,610 | 280,456 | 5.49 | % | ||||||||||||||||||||||||||||||||||||||||
Allowance for loan losses | (73,031 | ) | (71,493 | ) | ||||||||||||||||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||||||||||||||||||||||||
Net loans | 13,534,902 | 4.61 | % | 10,358,956 | 4.35 | % | ||||||||||||||||||||||||||||||||||||||||||
Net loans (2)(3) | 21,249,270 | 6.08 | % | 20,448,801 | 5.55 | % | ||||||||||||||||||||||||||||||||||||||||||
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Total earning assets | 16,574,277 | $ | 173,675 | 4.16 | % | 12,601,422 | $ | 124,693 | 3.94 | % | 26,087,458 | $ | 370,052 | 5.70 | % | 26,177,730 | $ | 330,438 | 5.10 | % | ||||||||||||||||||||||||||||
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Other assets | 2,353,508 | 1,558,147 | ||||||||||||||||||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||||||||||||||||||||||||
TOTAL ASSETS | $ | 18,927,785 | $ | 14,159,569 | ||||||||||||||||||||||||||||||||||||||||||||
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LIABILITIES | ||||||||||||||||||||||||||||||||||||||||||||||||
Interest-Bearing Funds: | ||||||||||||||||||||||||||||||||||||||||||||||||
Interest-bearing deposits | $ | 9,837,967 | $ | 14,227 | 0.57 | % | $ | 7,255,184 | $ | 7,723 | 0.42 | % | $ | 16,663,765 | $ | 128,377 | 3.10 | % | $ | 15,186,632 | $ | 68,592 | 1.83 | % | ||||||||||||||||||||||||
Short-term borrowings | 325,631 | 430 | 0.52 | % | 519,807 | 553 | 0.42 | % | 203,570 | 2,082 | 4.11 | % | 166,614 | 1,157 | 2.82 | % | ||||||||||||||||||||||||||||||||
Long-term borrowings | 1,364,417 | 6,650 | 1.93 | % | 1,171,599 | 3,792 | 1.29 | % | 1,500,237 | 16,232 | 4.35 | % | 2,417,999 | 25,234 | 4.23 | % | ||||||||||||||||||||||||||||||||
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Total Interest-Bearing Funds | 11,528,015 | 21,307 | 0.73 | % | 8,946,590 | 10,068 | 0.54 | % | 18,367,572 | 146,691 | 3.21 | % | 17,771,245 | 94,983 | 2.17 | % | ||||||||||||||||||||||||||||||||
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Noninterest-bearing deposits | 4,036,653 | 3,105,273 | ||||||||||||||||||||||||||||||||||||||||||||||
Accrued expenses and other liabilities | 97,575 | 71,670 | ||||||||||||||||||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||||||||||||||||||||||||
TOTAL LIABILITIES | 15,662,243 | 12,123,533 | ||||||||||||||||||||||||||||||||||||||||||||||
SHAREHOLDERS’ EQUITY | 3,265,542 | 2,036,036 | ||||||||||||||||||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||||||||||||||||||||||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 18,927,785 | $ | 14,159,569 | ||||||||||||||||||||||||||||||||||||||||||||
TOTAL LIABILITIES AND | ||||||||||||||||||||||||||||||||||||||||||||||||
SHAREHOLDERS’ EQUITY | ||||||||||||||||||||||||||||||||||||||||||||||||
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NET INTEREST INCOME | $ | 152,368 | $ | 112,625 | ||||||||||||||||||||||||||||||||||||||||||||
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INTEREST SPREAD | 3.43 | % | 3.40 | % | 2.49 | % | 2.93 | % | ||||||||||||||||||||||||||||||||||||||||
NET INTEREST MARGIN | 3.65 | % | 3.56 | % | 3.44 | % | 3.63 | % |
(1) | The interest income and the yields on federally nontaxable loans and investment securities are presented on atax-equivalent basis using the statutory federal income tax rate of |
(2) | Nonaccruing loans are included in the daily average loan amounts outstanding. |
(3) | Loans held for sale and leases are included in the daily average loan amounts outstanding. |
ASSETS Earning Assets: Federal funds sold and securities repurchased under agreements to resell and other short-term investments Investment Securities: Taxable Tax-exempt Total Securities Loans, net of unearned income (2) Allowance for loan losses Net loans Total earning assets Other assets TOTAL ASSETS LIABILITIES Interest-Bearing Funds: Interest-bearing deposits Short-term borrowings Long-term borrowings Total Interest-Bearing Funds Non-interest bearing deposits Accrued expenses and other liabilities TOTAL LIABILITIES SHAREHOLDERS’ EQUITY TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY NET INTEREST INCOME INTEREST SPREAD NET INTEREST MARGIN66 Nine Months Ended Nine Months Ended September 30, 2017 September 30, 2016 (Dollars in thousands) Average
Balance Interest
(1) Avg. Rate
(1) Average
Balance Interest
(1) Avg. Rate
(1) $ 1,282,589 $ 11,345 1.18 % $ 599,695 $ 2,371 0.53 % 1,412,221 26,226 2.48 % 1,162,082 24,728 2.84 % 227,171 6,242 3.66 % 136,386 4,130 4.04 % 1,639,392 32,468 2.64 % 1,298,468 28,858 2.96 % 12,360,252 409,643 4.43 % 9,852,670 318,053 4.31 % (72,904 ) (74,198 ) 12,287,348 4.46 % 9,778,472 4.34 % 15,209,329 $ 453,456 3.99 % 11,676,635 $ 349,282 4.00 % 1,978,315 1,427,763 $ 17,187,644 $ 13,104,398 $ 9,024,232 $ 35,281 0.52 % $ 6,815,863 $ 21,278 0.42 % 298,213 1,149 0.52 % 396,769 1,132 0.38 % 1,286,583 16,717 1.74 % 1,100,741 10,232 1.24 % 10,609,028 53,147 0.67 % 8,313,373 32,642 0.52 % 3,639,507 2,856,807 90,112 67,820 14,338,647 11,238,000 2,848,997 1,866,398 $ 17,187,644 $ 13,104,398 $ 400,309 $ 316,640 3.32 % 3.48 % 3.52 % 3.62 %
The following table shows the unaudited consolidated daily average balance of major categories of assets and liabilities for the three-month periods ended March 31, 2024 and December 31, 2023, respectively, with the interest and rate earned or paid on such amount. The interest income and yields on federally nontaxable loans and investment securities are presented on a tax-equivalent basis using the statutory federal income tax rate of 21% for the three-month period ended March 31, 2024 and December 31, 2023. Interest income on all loans and investment securities was subject to state income taxes.
Three Months Ended March 31, 2024 | Three Months Ended December 31, 2023 | |||||||||||||||||||||||
(Dollars in thousands) | Average Balance | Interest (1) | Avg. Rate (1) | Average Balance | Interest (1) | Avg. Rate (1) | ||||||||||||||||||
ASSETS | ||||||||||||||||||||||||
Earning Assets: | ||||||||||||||||||||||||
Federal funds sold and securities purchased under agreements to resell and other short-term investments | $ | 882,656 | $ | 12,303 | 5.61 | % | $ | 819,431 | $ | 11,570 | 5.60 | % | ||||||||||||
Investment Securities: | ||||||||||||||||||||||||
Taxable | 3,743,157 | 34,722 | 3.71 | % | 3,836,498 | 35,710 | 3.72 | % | ||||||||||||||||
Tax-exempt | 212,375 | 1,474 | 2.78 | % | 195,471 | 1,471 | 3.01 | % | ||||||||||||||||
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Total Securities | 3,955,532 | 36,196 | 3.66 | % | 4,031,969 | 37,181 | 3.69 | % | ||||||||||||||||
Loans, net of unearned income (2)(3) | 21,508,611 | 321,553 | 6.01 | % | 21,279,444 | 321,290 | 6.00 | % | ||||||||||||||||
Allowance for loan losses | (259,341 | ) | (255,032 | ) | ||||||||||||||||||||
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Net loans (2)(3) | 21,249,270 | 6.08 | % | 21,024,412 | 6.07 | % | ||||||||||||||||||
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Total earning assets | 26,087,458 | $ | 370,052 | 5.70 | % | 25,875,812 | $ | 370,041 | 5.68 | % | ||||||||||||||
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Other assets | 3,344,925 | 3,288,334 | ||||||||||||||||||||||
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TOTAL ASSETS | $ | 29,432,383 | $ | 29,164,146 | ||||||||||||||||||||
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LIABILITIES | ||||||||||||||||||||||||
Interest-Bearing Funds: | ||||||||||||||||||||||||
Interest-bearing deposits | $ | 16,663,765 | $ | 128,377 | 3.10 | % | $ | 16,414,152 | $ | 122,132 | 2.95 | % | ||||||||||||
Short-term borrowings | 203,570 | 2,082 | 4.11 | % | 198,453 | 1,998 | 3.99 | % | ||||||||||||||||
Long-term borrowings | 1,500,237 | 16,232 | 4.35 | % | 1,394,361 | 15,355 | 4.37 | % | ||||||||||||||||
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| |||||||||||||
Total Interest-Bearing Funds | 18,367,572 | 146,691 | 3.21 | % | 18,006,966 | 139,485 | 3.07 | % | ||||||||||||||||
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Noninterest-bearing deposits | 5,941,866 | 6,175,309 | ||||||||||||||||||||||
Accrued expenses and other liabilities | 306,469 | 284,191 | ||||||||||||||||||||||
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TOTAL LIABILITIES | 24,615,907 | 24,466,466 | ||||||||||||||||||||||
SHAREHOLDERS’ EQUITY | 4,816,476 | 4,697,680 | ||||||||||||||||||||||
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TOTAL LIABILITIES AND | ||||||||||||||||||||||||
SHAREHOLDERS’ EQUITY | $ | 29,432,383 | $ | 29,164,146 | ||||||||||||||||||||
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NET INTEREST INCOME | $ | 223,361 | $ | 230,556 | ||||||||||||||||||||
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INTEREST SPREAD | 2.49 | % | 2.61 | % | ||||||||||||||||||||
NET INTEREST MARGIN | 3.44 | % | 3.55 | % |
(1) | The interest income and the yields on federally nontaxable loans and investment securities are presented on atax-equivalent basis using the statutory federal income tax rate of |
(2) | Nonaccruing loans are included in the daily average loan amounts outstanding. |
(3) | Loans held for sale and leases are included in the daily average loan amounts outstanding. |
67
Provision for LoanCredit Losses
The provision for credit losses was $5.74 million for the first quarter of 2024 as compared to a provision for credit losses of $6.89 million for the first quarter of 2023. On a linked-quarter basis, the provision for credit losses for the fourth quarter of 2023 was $6.88 million. United’s provision for credit losses relates to its portfolio of loans and leases, held-to-maturity securities and interest receivable on loans which are discussed in more detail in the following paragraphs.
For the quartersquarter ended September 30, 2017 and 2016,March 31, 2024, the provision for loan and lease losses was $7.28 million and $6.99 million, respectively. The provision for loan losses for the first nine months of 2017 and 2016 was $21.43 million and $18.69 million, respectively. Net charge-offs were $5.34 million for the third quarter of 2017 as compared to net charge-offs of $6.78 million for the same quarter in 2016. Net charge-offs for the first nine months of 2017 were $19.27a $5.74 million as compared to $21.76a provision for loan and lease losses of $6.89 million for the first nine months of 2016.quarter ended March 31, 2023. The higher amountslower amount of provision expense for the periods in 2017first quarter of 2024 compared to the same periods in 2016 werefirst quarter of 2023 was mainly due to an increase in impaired loans necessitating specific allowance allocation.less credit deterioration expected within the portfolios for 2024 as compared to 2023. Net charge-offs were $2.07 million for the first quarter of 2024 compared to net charge-offs were $1.14 million for the first quarter of 2023. The lower amountshigher amount of net charge-offs for the periods in 20172024 as compared to
the same periods in 2016 were 2023 was primarily due to thecharge-off in 2016 of a large loan relationship which had deteriorated toincreased charge-offs within the point ofnon-collectability.consumer portfolio. On a linked-quarter basis, the provision for loan and lease losses and net charge-offs decreased $972 thousand and $2.81for the fourth quarter of 2023 was $6.88 million. The decline of $1.14 million respectively,for the first quarter of 2024 from the secondfourth quarter of 20172023 was due mainly to providing for additional allowance allocation needs withina greater amount of recoveries in the existingfirst quarter of 2024 compared to fourth quarter of 2023, primarily in the commercial real estate owner-occupied portfolio and recognitionother commercial portfolio. Net charge-offs were $2.53 million for the fourth quarter of charge-offs on previously impaired loans.2023. Annualized net charge-offs as a percentage of average loans were 0.16% and 0.21% for the third quarter and first nine months of 2017, respectively.
At September 30, 2017, nonperforming loans were $168.40 million or 1.28% of loans,leases, net of unearned income for the first quarter of 2024 were 0.04% as compared to nonperforming loansannualized net charge-offs of $113.26 million or 1.10% of loans, net of unearned income at December 31, 2016. The components of nonperforming loans include: 1) nonaccrual loans, 2) loans which are contractually past due 90 days or more as to interest or principal, but have not been put on a nonaccrual basis and 3) loans whose terms have been restructured0.02% for economic or legal reasons due to financial difficulties of the borrowers.
Loans past due 90 days or more and still on accrual were $22.25 million at September 30, 2017 which was an increase of $13.66 million or 159.13% from $8.59 million atyear-end 2016. The increase was due to the delinquency of a $14.83 million credit atquarter-end. At September 30, 2017, nonaccrual loans were $100.02 million, an increase of $16.49 million or 19.74% from $83.53 million atyear-end 2016. This increase was due to the downgrade and transfer to nonaccrual of several oil, gas and coal industry relationships within the Company’s loan portfolio. Restructured loans were $46.13 million at September 30, 2017, an increase of $24.98 million or 118.10% from $21.15 million atyear-end 2016. Ten loans totaling $30.89 million were restructured during the first nine monthsquarter of 2017. Two2023 and annualized net charge-offs of 0.05% for the restructured loans totaling $20.99 million were associated with an oil, gas and coal industry-related relationship. The remaining difference was mainly due to repayments and acharge-off. The loss potential on these loans has been properly evaluated and allocated within the Company’s allowance for loan losses.
Nonperforming assets include nonperforming loans and real estate acquired in foreclosure or other settlementfourth quarter of loans (OREO). Total nonperforming assets of $195.22 million, including OREO of $26.83 million at September 30, 2017, represented 1.02% of total assets.2023.
The following table summarizesshows a summary of United’s nonperforming assets for the indicated periods. including nonperforming loans and other real estate owned (“OREO”) at March 31, 2024 and December 31, 2023:
September 30, | December 31, | |||||||||||||||||||||||
(In thousands) | 2017 | 2016 | 2015 | 2014 | 2013 | 2012 | ||||||||||||||||||
Nonaccrual Loans | ||||||||||||||||||||||||
Originated | $ | 93,731 | $ | 77,111 | $ | 83,146 | $ | 64,312 | $ | 58,121 | $ | 66,711 | ||||||||||||
Acquired | 6,285 | 6,414 | 8,043 | 10,739 | 3,807 | 4,848 | ||||||||||||||||||
Loans which are contractually past due 90 days or more as to interest or principal, and are still accruing interest | ||||||||||||||||||||||||
Originated | 21,464 | 7,763 | 11,462 | 10,868 | 10,015 | 13,819 | ||||||||||||||||||
Acquired | 785 | 823 | 166 | 807 | 1,029 | 4,249 | ||||||||||||||||||
Restructured loans | ||||||||||||||||||||||||
Originated | 44,695 | 21,115 | 23,890 | 22,234 | 8,157 | 3,175 | ||||||||||||||||||
Acquired | 1,437 | 37 | 0 | 0 | 0 | 0 | ||||||||||||||||||
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Total nonperforming loans | $ | 168,397 | $ | 113,263 | $ | 126,707 | $ | 108,960 | $ | 81,129 | $ | 92,802 | ||||||||||||
Other real estate owned | 26,826 | 31,510 | 32,228 | 38,778 | 38,182 | 49,484 | ||||||||||||||||||
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TOTAL NONPERFORMING ASSETS | $ | 195,223 | $ | 144,773 | $ | 158,935 | $ | 147,738 | $ | 119,311 | $ | 142,286 | ||||||||||||
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(In thousands) | March 31 2024 | December 31 2023 | ||||||
Nonaccrual loans | $ | 63,053 | $ | 30,919 | ||||
Loans past due 90 days of more | 11,329 | 14,579 | ||||||
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Total nonperforming loans | $ | 74,382 | $ | 45,498 | ||||
Other real estate owned | 2,670 | 2,615 | ||||||
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| |||||
Total nonperforming assets | $ | 77,052 | $ | 48,113 | ||||
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Loans are designated as impaired when, in the opinion of management, the collection of principal and interest in accordance with the loan contract is doubtful. At September 30, 2017, impaired loans were $420.46 million, which was anThe increase of $112.02$32.13 million or 36.32%in nonaccrual loans from $308.44 million at December 31, 2016. This increase2023 to March 31, 2024 was due mainly to the acquired impaired loans from Cardinal and the Company’s exposuretransfer to the oil, gas and coal industry. Acquired impaired loans are accounted for under ASC Subtopic310-30. The recorded investment balance and the contractual principal balancenonaccrual of the acquired impaired loans were $227.75 million and $310.61 million, respectively, at September 30, 2017 as compared to $171.60 million and $231.10 million, respectively, at December 31, 2016. For the acquired impaired loans accounted for under ASC310-30, the difference between the contractually required payments due and the cash flows expected to be collected, considering the impact of prepayments, is referred to as the non-accretable difference (the credit mark). The credit mark is not recognized in income. The remaining credit mark was $70.75 million and $58.88 million at September 30, 2017 and December 31, 2016, respectively. For further details regarding impaired loans, see Note 5 to the unaudited Consolidated Financial Statements.one significant commercial lending relationship.
United maintains an allowance for loan and lease losses and a reserve for lending-related commitments. The combined allowance for loan losses and reserve for lending-related commitments are referred to asis considered the allowance for credit losses. At September 30, 2017 and DecemberMarch 31, 2016,2024, the allowance for credit losses was $75.73$305.82 million and $73.82as compared to $303.94 million respectively.at December 31, 2023.
At September 30, 2017,March 31, 2024, the allowance for loan and lease losses was $74.93$262.91 million as compared to $72.78$259.24 million at December 31, 2016.2023. The slight increase in the allowance for loan and lease losses was primarily driven by increases in the reserves for the commercial real estate, both owner and non-owner occupied, the residential real estate and the other commercial loans segments due to increased outstanding loan balances and increased adjustments resulting from the reasonable and supportable forecast. As a percentage of loans and leases, net of unearned income, the allowance for loan losses was 0.57%1.22% at September 30, 2017March 31, 2024 and 0.70%1.21% at December 31, 2016, respectively.2023. The ratio of the allowance for loan and lease losses to nonperforming loans and leases or coverage ratio was 44.49%353.45% and 64.25%569.78% at September 30, 2017March 31, 2024 and December 31, 2016,2023, respectively. The Company’s detailed methodology and analysis indicated a minimal increase in this ratio was due mainly to an increase in nonperforming loans.
68
United continues to evaluate risks which may impact its loan and lease portfolios. Reserves are initially determined based on losses identified from the allowancePD/LGD and Cohort models which utilize the Company’s historical information. Then, any qualitative adjustments are applied to account for loan losses primarily becausethe Company’s view of current conditions, the future and other factors.
The first quarter of 2024 qualitative adjustments include analyses of the offsetting factorsfollowing:
• | Current conditions – United considered the impact of inflation, interest rates, the banking regulatory environment and geopolitical conflict when making determinations related to factor adjustments for the external environment. United also considered portfolio trends related to economic and business conditions, collateral values for dependent loans; past due, nonaccrual and graded loans and leases; and concentrations of credit. |
• | Reasonable and supportable forecasts – The forecast is determined on a portfolio-by-portfolio basis by relating the correlation of real GDP and the unemployment rate to loss rates to forecasts of those variables. The reasonable and supportable forecast selection is subjective in nature and requires more judgment compared to the other components of the allowance. Assumptions for the economic variables were the following: |
The forecast for real GDP in 2024 increased in the first quarter, from a projection of changes within historical1.40% for 2024 at the end of 2023 to 2.10% for 2024 with a slightly smaller increase for 2025, from a projection of 1.80% for 2025 at the end of 2023 to 2.00% for 2025. The unemployment rate remained fairly consistent to the end of 2023 with a steady trend expected throughout 2024 and 2025.
Greater risk of loss rates and reduced loss allocations on impaired loans.
Allocations are made for specific commercial loans based upon management’s estimate ofis probable in the borrowers’ ability to repay and other factors impacting collectibility. Other commercial loans not specifically reviewed on an individual basis are evaluated based on historical loss percentages applied to loan pools that have been segregated by risk. Allocations for loans other than commercial loans are made based upon historical loss experience adjusted for current environmental conditions. The allowance for credit losses includes estimated probable inherent but unidentified losses within theoffice portfolio due to uncertainties incontinued hybrid and remote work that may be exacerbated by future economic conditions delays in obtaining information, including unfavorable information about a borrower’s financial condition, the difficulty in identifying triggering events that correlate perfectly to subsequent lossas well as higher interest rates and risk factors that have not yet fully manifested themselves in loss allocation factors. In addition, a portion of the allowance accounts for the inherent imprecision in the allowance for credit losses analysis.cap rates.
• | Reversion to historical loss data occurs via a straight-line method during the year following the one-year reasonable and supportable forecast period. |
United’s company-wide review of the allowance for loan and lease losses at September 30, 2017March 31, 2024 produced increased allocationsreserves in onetwo of the four loan categories.categories as compared to December 31, 2023. The allowance related to the commercial, financial & agricultural loan pool, allocationconsisting of the owner and non-owner occupied commercial real estate and other commercial loan segments, increased $8.16$3.99 million primarily due to an increase in other commercial loans deemed impaired necessitating specific allowance allocation. Offsetting these increases was a decrease in the allocation relatedincreased outstanding balances and increased reasonable and supportable forecast adjustments particularly as it pertains to theoffice loans. The residential real estate segment reserve increased $4.79 million due primarily to increased outstanding balances. The real estate construction and development loan pool of $2.60segment reserve decreased $4.39 million due to recognition of losses previously allocated. The residential real estate loan pool allocation decreased $2.92 million due to improvement in the Bank’s collateral position for a significant relationship and reduction of impairment allocation required.outstanding balances. The consumer loan pool also experiencedsegment reserve decreased $728 thousand primarily due to a decrease of $290 thousand due to an improvement in historical loss rates. In summary, the overall level of the allowance for loan losses was relatively stable in comparison toyear-end 2016 as a result of offsetting factors within the portfolio as described above.outstanding balances.
An allowance is established for probable creditestimated lifetime losses on impairedfor loans via specific allocations.that are individually assessed. Nonperforming commercial loans and leases are regularly reviewed to identify impairment.expected credit losses. A loan or lease is impairedindividually assessed for expected credit losses when based on current information and events, it is probable that the Company willloan does not be able to collect all amounts contractually due.share similar characteristics with other loans in the portfolio. Measuring impairmentexpected credit losses of a loan requires judgment and estimates, and the eventual outcomes may differ from
those estimates. Impairment isExpected credit losses are measured based upon the present value of expected future cash flows from the loan discounted at the loan’s effective rate the loan’s observable market price or the fair value of collateral if the loan is collateral dependent. When the selected measure is less than the recorded investment in the loan, an impairmentexpected credit loss has occurred. The allowance for impaired loans and leases that were individually assessed was $26.75$18.02 million at September 30, 2017March 31, 2024 and $23.42$13.15 million at December 31, 2016.2023. In comparison to the prioryear-end, this element of the allowance increased by $3.33$4.87 million primarily due to increased specific allocations forthe downgrade of a commercial financial & agricultural loans.real estate non-owner occupied loan.
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Management believes that the allowance for credit losses of $75.73$305.82 million at September 30, 2017March 31, 2024 is adequate to provide for probableexpected losses on existing loans and lending-related commitments based on information currently available. Note 6 to the accompanying unaudited Notes to Consolidated Financial Statements provides a progression of the allowance for loan losses by portfolio segment.
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 first quarter of 2024 and 2023 was immaterial. The allowance for credit losses related to held to maturity securities was $19 thousand and $17 thousand as of March 31, 2024 and December 31, 2023, respectively. There was no provision for credit losses recorded on available for sale investment securities for the first quarter of 2024 and 2023 and no allowance for credit losses on available for sale investment securities as of March 31, 2024 and December 31, 2023.
Management is not aware of any potential problem loans or leases, trends or uncertainties, which it reasonably expects, will materially impact future operating results, liquidity, or capital resources which have not been disclosed. Additionally, management has disclosed all known material credits, which cause management to have serious doubts as to the ability of such borrowers to comply with the loan repayment schedules.
Other Income
Other income consists of all revenues, which are not included in interest and fee income related to earning assets. Noninterest income has been and will continue to be an important factor for improving United’s profitability. Recognizing the importance, management continues to evaluate areas where noninterest income can be enhanced.
Noninterest income for the thirdfirst quarter of 20172024 was $38.23$32.21 million, a decrease of $532 thousand or 1.62% from the first quarter of 2023 driven by decreases in mortgage loan servicing income and mortgage banking income partially offset by an increase of $19.21 million or 100.98%in fees from the third quarter of 2016. Noninterestbrokerage services and lower net losses on investment securities transactions.
Mortgage loan servicing income for the first nine monthsquarter of 2017 was $98.88 million, which was an increase of $45.502024 decreased $1.49 million or 85.24%65.33% from the first nine monthsquarter of 2016.2023. The decrease in mortgage loan servicing income was due to lower mortgage servicing rights (“MSRs”) balances after the sale of MSRs during the second quarter of 2023.
Income from mortgage banking activities totaled $20.39$5.30 million for the thirdfirst quarter of 20172024 compared to $982 thousand$6.38 million for the same periodfirst quarter of 2016. For2023. The decrease of $1.09 million or 17.01% for the first nine monthsquarter of 2017 and 2016, income from mortgage banking activities2024 was $43.60 million and $2.50 million, respectively. The increasesmainly due to a decrease in the fair value of loans held for 2017 are the result of the acquisition of Cardinal and, in particular, the acquisition of its mortgage banking subsidiary, George Mason. For the three months ended September 30, 2017 and 2016, mortgagesale. Mortgage loan sales were $908.60$188.74 million and $43.32 million, respectively. Forin the nine months ended September 30, 2017 and 2016, mortgage loan sales were $1.67 billion and $112.70 million, respectively.
For the thirdfirst quarter of 2017, fees from deposit services were $8.742024 as compared to $166.51 million an increase of $438 thousand or 5.27% fromin the thirdfirst quarter of 2016. In particular, overdraft fees and ATM income increased $167 thousand and $160 thousand, respectively. 2023. Mortgage loans originated for sale were $176.91 million for the first quarter of 2024 as compared to $177.81 million for the first quarter of 2023.
Fees from depositbrokerage services for the first nine monthsquarter of 2017 were $24.982024 increased $1.07 million an increase of $309 thousand or 1.25%25.40% from the first nine monthsquarter of 2016. In particular, debit card income increased $2362023. The increase was primarily due to higher volume.
United recorded a net loss on investment securities of $99 thousand duringfor the first nine monthsquarter of 2017.
Partially offsetting these increases2024 as compared to noninterest income was a decline in income from bank-owned life insurance policies. Income from bank-owned life insurancenet loss on investment securities of $405 thousand for the third quarter and first nine months of 2017 decreased $1.14 million or 44.79% and $1.04 million or 21.07%, respectively, from the third quarter and first nine months of 2016. These decreases were due to death benefits recorded in the third quarter of 2016.2023 driven primarily by a net loss of $420 thousand on the sale of AFS securities in last year’s first quarter.
On a linked-quarter basis, noninterest income for the thirdfirst quarter of 20172024 decreased $2.28$1.46 million, or 5.62%4.34%, from the secondfourth quarter of 2017 due mainly to2023 driven by a declinedecrease of $2.15$3.00 million in income from mortgage banking activities despite increased production and sales of mortgage loans in the secondary market.other noninterest income. The decline was due mainly to the impact of Accounting Standards Codification (ASC) 815 “Derivatives and Hedging” (ASC815-10-S99-1), formerly Staff Accounting Bulletin (SAB) 109, accounting requirement to record unrealized gains associated with George Mason’s locked mortgage loan pipeline which creates a timing difference in the recognition of income as the loans are sold. The impact of ASC815-10-S99-1 resulted in a decline of $4.48 million in income for the thirdfourth quarter of 2017 versus2023 included a $2.66 million gain from the payoff of a fixed rate commercial loan that had an associated interest rate swap derivative. Partially offsetting the decrease in noninterest income was a $907 thousand increase of $1.02 million in income for the second quarter of 2017.fees from brokerage services primarily due to higher volume.
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Other Expenses
Just as management continues to evaluate areas where noninterest income can be enhanced, it strives to improve the efficiency of its operations to reduce costs. Other expenses include all items of expense other than interest expense, the provision for loancredit losses, and income taxes. Noninterest expense increased $33.88for the first quarter of 2024 was $140.74 million, which was an increase of $3.32 million or 53.96% for the third quarter of 2017 compared to the same period in 2016. For the first nine months of 2017, noninterest expense increased $85.94 million or 46.28%2.42% from the first nine monthsquarter of 2016. Generally, these increases in 2017 from 2016 were the result of additional general operating expenses and increased merger-related charges from the Cardinal acquisition.2023.
Employee compensation for the thirdfirst quarter of 20172024 increased $20.10$3.88 million or 82.99% from the third quarter of 2016. Employee compensation increased $54.12 million or 78.29% for the first nine months of 20177.00% when compared to the first nine monthsquarter of 2016. Merger severance charges of $12.78 million from the Cardinal acquisition were included in first nine months of 2017 as compared to $670 thousand in the first nine of 2016 from the Bank of Georgetown acquisition. Otherwise, base salaries for the third quarter and first nine months of 2017 increased $9.37 million or 44.67% and $19.49 million or 32.41%, respectively, from the same time periods in 2016 due mainly to additional employees from the Cardinal acquisition.2023. The remainder of the increase in employee compensation for the third quarter and first nine months of 2017 was due mainly todriven by higher employee incentives, commissions, base salaries and commissions expense mainly related to the mortgage banking production of George Mason.employee severance.
Employee benefits expense for the thirdfirst quarter of 20172024 increased $2.10$1.24 million or 28.00%9.20% from the thirdfirst quarter of 2016. Employee benefits expense for the first nine months of 2017 increased $5.99 million or 28.03% as compared to the first nine months of 2016. The increases for third quarter and first nine months of 2017 were due in large part to additional health insurance expense of $1.11 million and $2.68 million, respectively, from the same time periods last year2023. This increase was primarily due to higher premiumsamounts of expense for postretirement benefits.
Mortgage servicing and additional employeesimpairment expense decreased $869 thousand or 46.13% due to a lower amount of loans serviced.
FDIC expense increased $1.87 million or 40.72% from the Cardinal acquisition. In addition, Federal Insurance Contributions Act (FICA) expense for thirdfirst quarter and first nine months of 2017 increased $784 thousand and $2.692023 due to an additional special assessment accrual of $1.81 million respectively,resulting from the third quarter and first nine months of 2016 due mainlyFDIC’s revised loss estimates to the additional employees from the Cardinal acquisition
Net occupancy expense increased $2.45 million or 35.34% and $9.12 million or 43.52% for the third quarter and first nine months of 2017, respectively, as compared to the same periods in the prior year. The increases were due mainly to additional building rental expense from the offices added in the Cardinal acquisition. Included in net occupancy expense for the first nine months of 2017 were charges of $5.93 million for the termination of leases and the reduction in the value of leasehold improvements for closed offices in the Cardinal acquisition as compared to charges of $1.58 million in the third quarter and first nine months of 2016 for the termination of leases for closed offices in the Bank of Georgetown acquisition.
Other real estate owned (OREO) expense for the third quarter of 2017 increased $1.37 million or 102.16% from the third quarter of 2016 due to declines in the fair value on OREO properties.
Data processing expense increased $1.74 million or 45.11% and $3.97 million or 36.05% for the third quarter and first nine months of 2017, respectively, as compared to the same periods in prior year due to additional processing as a result of the Cardinal acquisition. In addition, the results for first nine months of 2017 included a penalty of $525 thousand for the termination of Cardinal’s data processing contract.
Federal Deposit Insurance Corporation (FDIC) insurance expense for the third quarter and first nine months of 2017 decreased $546 thousand or 26.17% and $1.28 million or 20.17%, respectively, from the third quarter and first nine months of 2016 due to lower premiums.Fund.
Other expense for the thirdfirst quarter of 2017 increased $5.752024 decreased $2.69 million or 40.18%7.77% from the thirdfirst quarter of 2016. Other2023. Within other expenses, the most significant decrease was the expense for the first nine monthsreserve for unfunded commitments of 2017 increased $12.63$4.39 million or 28.19% from the first nine months of 2016. Included in other expense for the third quarter and first nine months of 2017 were merger-related expenses of $434 thousand and $5.83 million, respectively, as compared to merger-related expenses of $620 thousand and $2.78 million, respectively for the third quarter and first nine months of 2016. Amortization of core deposit intangibles increased $1.12 million and $2.60 million for the third quarter and first nine months of 2017, respectively, as compared to the same periods in 2016 due to the additional core deposit intangibles addedlower amount of outstanding loan commitments. Partially offsetting this decrease was an increase in the Cardinal acquisition. Business and occupation (B&O) taxes increased $1.32 million and $2.47 million for the third quarter and first nine monthsamortization of 2017, respectively, as compared to the same periods in 2016.investment tax credits of $950 thousand.
On a linked-quarter basis, noninterest expense for the thirdfirst quarter of 20172024 decreased $15.49$11.55 million, or 13.81%7.58%, from the secondfourth quarter of 2017 generally due to a decline2023. This decrease in noninterest expense was driven by decreases in FDIC insurance expense of $22.62$10.17 million in merger-related expenses. Partially offsetting this decrease wasand other noninterest expense of $8.02 million partially offset by an increase in OREOemployee benefits of $4.90 million and employee compensation of $1.46 million. The fourth quarter of 2023 included $11.99 million of expense for the FDIC special assessment. The first quarter of 2024 included an additional expense of $2.19$1.81 million duerelated to declinesthe FDIC special assessment stemming from the FDIC’s revised loss estimates. The decrease of $8.02 million in other noninterest expense was driven primarily by decreases of $2.73 million in the fair valueexpense for the reserve for unfunded commitments, $1.23 million of OREO properties.expense related to community development lending programs and $1.22 million of amortization for investment tax credits. Additionally, other noninterest expense for the fourth quarter of 2023 included $1.28 million related to trade name intangible impairments. The decrease in the expense for the reserve for unfunded loan commitments was driven by a decrease in the outstanding balance of loan commitments. The increase in employee benefits was primarily driven by higher postretirement benefit costs and higher Federal Insurance Contributions Act (“FICA”) costs. Employee compensation for the first quarter of 2024 increased due mainly to higher amount of base salaries and approximately $240 thousand of severance expense associated with the mortgage delivery channel consolidation.
Income Taxes
For the thirdfirst quarter of 2017,2024, income tax expense was $27.84$21.41 million as compared to $18.85 million for the third quarter of 2016. This increase was mainly due to higher earnings and a higher effective tax rate as the result of a reduction in the income tax expense for the third quarter of 2016 due to an increase in United’s deferred tax rate. For the first nine months of 2017, income tax expense was $67.36 million as compared to $53.10$24.45 million for the first nine monthsquarter of 20162023. The decrease of $3.04 million was primarily due to higherdecreased earnings and a higherlower effective tax rate. On a linked-quarter basis, income tax expense increased $8.53decreased $3.41 million primarily due to higher earningsa lower effective tax rate partially offset by a decline in the effective tax rate due to the Cardinal acquisition.higher earnings. United’s effective tax rate was 32.91%19.78% for the thirdfirst quarter of 2017, 34.25%2024, 19.92% for the secondfirst quarter of 20172023 and 31.24%23.81% for the thirdfourth quarter of 2016. For the first nine months of 20172023.
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Liquidity and 2016, United’s effective tax rate was 33.68% and 32.97%, respectively. For further details related to income taxes, see Note 15 of the unaudited Notes to Consolidated Financial Statements contained within this document.
Contractual Obligations, Commitments, Contingent Liabilities andOff-Balance Sheet Arrangements
United has various financial obligations, including contractual obligations and commitments, that may require future cash payments. Please refer to United’s Annual Report on Form10-K for the year ended December 31, 2016 for disclosures with respect to United’s fixed and determinable contractual obligations. As previously mentioned, United completed its acquisition of Cardinal during the second quarter of 2017. As such, United assumed the financial obligations of Cardinal, including contractual obligations and commitments, which also may require future payments. Otherwise, there have been no material changes outside the ordinary course of business sinceyear-end 2016 in the specified contractual obligations disclosed in United’s Annual Report on Form10-K.
As of September 30, 2017, United recorded a liability for uncertain tax positions, including interest and penalties, of $2.41 million in accordance with ASC topic 740. This liability represents an estimate of tax positions that United has
taken in its tax returns which may ultimately not be sustained upon examination by tax authorities. Since the ultimate amount and timing of any future cash settlements cannot be predicted with reasonable certainty, this estimated liability is excluded from the contractual obligations table in the 2016 Form10-K report.
United also 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. Because the derivative contracts recorded on the balance sheet at September 30, 2017 do not present the amounts that may ultimately be paid under these contracts, they are excluded from the contractual obligations table in the 2016 Form10-K report. Further discussion of derivative instruments is presented in Note 11 to the unaudited Notes to Consolidated Financial Statements.
United is a party to financial instruments withoff-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 foron-balance sheet instruments. Since many of the commitments are expected to expire without being drawn upon, the total commitment amount does not necessarily represent future cash requirements. Further discussion ofoff-balance sheet commitments is included in Note 10 to the unaudited Notes to Consolidated Financial Statements.
LiquidityCapital 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 theday-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.
During the first quarter of 2024, United increased its interest-bearing deposit balance at the FRB by $135.62 million to $1.38 billion. The change in the balance at the FRB was mostly the result of a $100.43 million increase in total deposits and $168.36 million of net sales, maturities, and paydowns in the available for sale debt securities portfolio partially offset by a $50.07 million decrease in FHLB advances.
For the ninethree months ended September 30, 2017,March 31, 2024, cash of $125.15$124.37 million was provided by operating activities due mainly to net income of $132.61 million for$86.81 million. In addition, proceeds from the first nine monthssale of 2017.mortgage loans in the secondary market exceeded originations by $17.14 million. Net cash of $384.45$2.43 million was provided byused in investing activities which was primarily due to net repayments on loansloan growth of $369.23$160.68 million and net cashpurchases of $44.53$4.71 million provided in the acquisitionbank premises and equipment over sales proceeds mostly offset by $162.81 million of Cardinal.net proceeds from sales of investment securities over purchases. During the first ninethree months of 2017,2024, net cash of $197.09$11.77 million was used inprovided by financing activities due primarily to a declinegrowth of $100.60 million in deposits partially offset by cash dividends paid of $269.74$50.14 million and the net repayment of long-term borrowings of $30.21 million and the payment of cash dividends in the amount of $86.71 million. Partially offsetting these decreases to cash were net proceeds of $200.00$50.00 million in short-term FHLB borrowings.borrowings during the quarter. The net effect of the cash flow activities was an increase in cash and cash equivalents of $312.51$133.70 million for the first ninethree months of 2017.2024.
At March 31, 2024, United had an unused borrowing amount at the FHLB of approximately $7.00 billion subject to delivery of collateral after certain trigger points, $2.86 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 $280 million, all of which was available at March 31, 2024. United also has a $20 million unsecured, revolving line of credit with an unrelated financial institution to provide for general liquidity needs, all of which was available at March 31, 2024. At March 31, 2024, United’s borrowing capacity for the FRB Discount Window was $2.53 billion. United did not have any borrowings from the FRB’s Discount Window, or its new Bank Term Funding Program, during the first quarter of 2024.
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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 89 and 910 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.
Capital Resources
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 14.26%15.55% at September 30, 2017March 31, 2024 while its Common Equity Tier 1 capital, Tier 1 capital and leverage ratios are 11.99%13.22%, 11.99%13.22% and 10.09%11.41%, respectively. The March 31, 2024 ratios reflects United’s election of a five-year transition provision, allowed by the Federal Reserve Board and other federal banking agencies in response to the COVID-19 pandemic, to delay for two years the full impact of CECL on regulatory capital, followed by a three-year transition period. The regulatory requirements for a well-capitalized financial institution are a risk-based capital ratio of 10.0%, a Common Equity Tier 1 capital ratio of 6.5%, a Tier 1 capital ratio of 8.0% and a leverage ratio of 5.0%.
Total shareholders’ equity was $3.26$4.81 billion at September 30, 2017, increasing $1.03 billion or 45.98%March 31, 2024, which was relatively flat from December 31, 20162023, increasing $36.20 million or less than 1%. This increase is primarily due to the Cardinal acquisition. increases of $36.60 million in retained earnings (net income less dividends declared).
United’s equity to assets ratio was 17.06%16.01% at September 30, 2017March 31, 2024 as compared to 15.41%15.94% at December 31, 2016.2023. The primary capital ratio, capital and reserves to total assets and reserves, was 17.39%16.86% at September 30, 2017March 31, 2024 as compared to 15.84%16.79% at December 31, 2016.2023. United’s average equity to average asset ratio was 17.25%16.36% for the thirdfirst quarter of 20172024 as compared to 14.38%15.49% the thirdfirst quarter of 2016. United’s average equity to average asset ratio was 16.58% for the first nine months of 2017 as compared to 14.24% for the first half of 2016.2023. All of these financial measurements reflect a financially sound position.
During the thirdfirst quarter of 2017,2024, United’s Board of Directors declared a cash dividend of $0.33$0.37 per share. Cash dividends were $0.99 per common share for the first nine months of 2017. Total cash dividends declared were $34.64 million for the third quarter of 2017 and $96.04$50.21 million for the first nine monthsquarter of 2017 as compared to $25.222024 which was an increase of $1.49 million and $73.38or 3.07% from dividends declared of $48.72 million respectively, for the thirdfirst quarter and first nine months of 2016.2023.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The objective of United’s Asset Liability Management function is to maintain consistent growth in net interest income within United’s policy guidelines. This objective is accomplished through the management of balance sheet liquidity and interest rate risk exposures due to changes in economic conditions, interest rate levels and customer preferences.
Interest Rate Risk
Management considers interest rate risk to be United’s most significant market risk. Interest rate risk is the exposure to adverse changes in United’s net interest income as a result of changes in interest rates. United’s earnings are largely dependent on the effective management of interest rate risk.
Management of interest rate risk focuses on maintaining consistent growth in net interest income within Board-approved policy limits. United’s Asset/Liability Management Committee (ALCO)(“ALCO”), which includes senior management representatives and reports to the Board, of Directors, monitors and manages interest rate risk to maintain an acceptable level of change to net interest income as a result of changes in interest rates. Policy established for interest rate risk is stated in terms of the change in net interest income over aone-year andtwo-year horizon given an immediate and sustained increase or decrease in interest rates. The current limits approved by the Board of Directors are structured on a staged basis with each stage requiring specific actions.
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United employs a variety of measurement techniques to identify and manage its exposure to changing interest rates. One such technique utilizes an earnings simulation model to analyze the sensitivity of net interest income to movements in interest rates. The model is based on actual cash flows and repricing characteristics for on andoff-balance sheet instruments and incorporates market-based assumptions regarding the impact of changing interest rates on the prepayment rate of certain assets and liabilities. The model also includes executive management projections for activity levels in product lines offered by United. Assumptions based on the historical behavior of deposit rates and balances in relation to changes in interest rates are also incorporated into the model. Rate scenarios could involve parallel or nonparallel shifts in the yield curve, depending on historical, current, and expected conditions, as well as the need to capture any material effects of explicit or embedded options. These assumptions are inherently uncertain and, as a result, the model cannot precisely measure net interest income or precisely predict the impact of fluctuations in interest rates on net interest income. Actual results will differ from simulated results due to timing, magnitude and frequency of interest rate changes as well as changes in market conditions and management’s strategies.
Interest sensitive assets and liabilities are defined as those assets or liabilities that mature or are repriced within a designated time frame. The principal function of managing interest rate risk is to maintain an appropriate relationship between those assets and liabilities that are sensitive to changing market interest rates. The difference between rate sensitive assets and rate sensitive liabilities for specified periods of time is known as the “GAP.” Earnings-simulation analysis captures not only the potential of these interest sensitive assets and liabilities to mature or reprice, but also the probability that they will do so. Moreover, earnings-simulation analysis considers the relative sensitivities of these balance sheet items and projects their behavior over an extended period of time. United closely monitors the sensitivity of its assets and liabilities on anon-going basis and projects the effect of various interest rate changes on its net interest margin.
The following table shows United’s estimated earnings sensitivity profile as of September 30, 2017March 31, 2024 and December 31, 2016:2023:
Change in Interest Rates (basis points) | Percentage Change in Net Interest Income | Percentage Change in Net Interest Income | ||||||
September 30, 2017 | December 31, 2016 | March 31, 2024 | December 31, 2023 | |||||
+200 | (0.22%) | (2.05%) | (0.62%) | (0.28%) | ||||
+100 | (0.02%) | (1.05%) | 0.07% | 0.24% | ||||
-100 | 0.22% | 1.87% | 2.82% | 2.66% | ||||
-200 | — | — | 4.31% | 4.35% |
At September 30, 2017,March 31, 2024, given an immediate, sustained 100 basis point upward shock to the yield curve used in the simulation model, net interest income for United is estimated to decreaseincrease by 0.02%0.07% over one year as compared to a decrease of 1.05%an increase by 0.24% at December 31, 2016.2023. A 200 basis point immediate, sustained upward shock in the yield curve would decrease net interest income by an estimated 0.22%0.62% over one year as of September 30, 2017,March 31, 2024, as compared to a decrease of 2.05%0.28% as of December 31, 2016.2023. A 100 basis point immediate, sustained downward shock in the yield curve would increase net interest income by an estimated 0.22%2.82% over one year as of September 30, 2017March 31, 2024 as compared to an increase of 1.87%2.66%, over one year as of December 31, 2016. With the federal funds rate at 1.25% at September 30, 2017 and 0.75% at December 31, 2016, management believed a2023. A 200 basis point immediate, sustained declinedownward shock in rates was highly unlikely.
In addition to the one year earnings sensitivity analysis, atwo-year analysis is also performed. Compared to the one year analysis, United is projected to show improved performance in year two within the upward rate shock scenarios. Given an immediate, sustained 100 basis point upward shock to the yield curve used in the simulation model, net interest income for United is estimated to increase by 2.58%1.94% in year two as of September 30, 2017.March 31, 2024. A 200 basis point immediate, sustained upward shock in the yield curve would increase net interest income by an estimated 4.80%2.80% in year two as of September 30, 2017.March 31, 2024. A 100 basis point immediate, sustained downward shock in the yield curve would increase net interest income by an estimated 0.46% in year two as of March 31, 2024. A 200 basis point immediate, sustained downward shock in the yield curve would decrease net interest income by an estimated 1.95%0.76% in year two as of September 30, 2017.March 31, 2024.
This analysis does not include the potential increased refinancing activities, which should lessen the negative impact on net income from falling rates.
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While it is unlikely market rates would immediately move 100 or 200 basis points upward or downward on a sustained basis, this is another tool used by management and the Board of Directors to gauge interest rate risk. All of these estimated changes in net interest income are and were within the policy guidelines established by the Board of Directors.Board.
To further aid in interest rate management, United’s subsidiary banks are membersbank is a member of the Federal Home Loan Bank (FHLB)(“FHLB”). The use of FHLB advances provides United with a low risk means of matching maturities of earning assets and interest-bearing funds to achieve a desired interest rate spread over the life of the earning assets. In addition, United uses credit with large regional banks and trust preferred securities to provide funding.
As part of its interest rate risk management strategy, United may use derivative instruments to protect against adverse price or interest rate movements on the value of certain assets or liabilities and on future cash flows. These derivatives commonly consist of interest rate swaps, caps, floors, collars, futures, forward contracts, written and purchased options. Interest rate swaps obligate two parties to exchange one or more payments generally calculated with reference to a fixed or variable rate of interest applied to the notional amount. United accounts for its derivative activities in accordance with the provisions of ASC topicTopic 815, “Derivatives and Hedging.”
Extension Risk
A key feature of most mortgage loans is the ability of the borrower to repay principal earlier than scheduled. This is called a prepayment. Prepayments arise primarily due to sale of the underlying property, refinancing, or foreclosure. In general, declining interest rates tend to increase prepayments, and rising interest rates tend to slow prepayments. Like other fixed-income securities, when interest rates rise, the value of mortgage- related securities generally declines. The rate of prepayments on underlying mortgages will affect the price and volatility of mortgage-related securities and may shorten or extend the effective maturity of the security beyond what was anticipated at the time of purchase. If interest rates rise, United’s holdings of mortgage-related securities may experience reduced returns if the borrowers of the underlying mortgages pay off their mortgages later than anticipated. This is generally referred to as extension risk.
At September 30, 2017,March 31, 2024, United’s mortgage related securities portfolio had an amortized cost of $1.1$1.8 billion, of which approximately $664$745.1 million or 58%42% were fixed rate collateralized mortgage obligations (CMOs)(“CMOs”). These fixed rate CMOs consisted primarily of planned amortization class (PACs)(“PACs”),sequential-pay and accretion directed (VADMs)(“VADMs”) bonds having an average life of approximately 3.95.7 years and a weighted average yield of 2.51%2.09%, under current projected prepayment assumptions. These securities are expected to have very littlemoderate extension risk in a rising rate environment. Current models show that an immediate, sustained upward shock of 300 basis points, the average life of these securities would only extend to 4.66.7 years. The projected price decline of the fixed rate CMO portfolio in rates up 300 basis points would be 11.3%15.9%, or less than the price decline of a5-7- year treasury note. By comparison, the price decline of a30-year 5.5% current coupon mortgage backed security (MBS) given an immediate, sustained upward shock of(“MBS”) in rates higher by 300 basis points would be approximately 16.9%12.2%.
United had approximately $257$487.9 million in balloon and otherfixed rate commercial mortgage backed securities (“CMBS”) with a projected yield of 2.12%1.94% and a projected average life of 4.14.5 years on September 30, 2017.March 31, 2024. This portfolio consisted primarily of Freddie Mac Multifamily K securities and Fannie Mae Delegated Underwriting and Servicing (DUS) mortgage backed(“DUS”) securities (MBS) with a weighted average loan age (WALA)maturity (“WAM”) of 3.8 years and a weighted average maturity (WAM) of 4.48.3 years.
United had approximately $63$22.9 million in15-year mortgage backed securities with a projected yield of 2.20%1.98% and a projected average life of 3.74.6 years as of September 30, 2017.March 31, 2024. This portfolio consisted of seasoned15-year mortgage paper with a weighted average loan age (WALA)(“WALA”) of 4.74.2 years and a weighted average maturity (WAM)WAM of 9.911.1 years.
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United had approximately $69$318.9 million in20-year mortgage backed securities with a projected yield of 2.68%1.82% and a projected average life of 56.7 years on September 30, 2017.March 31, 2024. This portfolio consisted of seasoned20-year mortgage paper with a weighted average loan age (WALA)WALA of 5.13 years and a weighted average maturity (WAM)WAM of 14.516.8 years.
United had approximately $65$151.3 million in30-year mortgage backed securities with a projected yield of 2.60%2.65% and a projected average life of 5.57.8 years on September 30, 2017.March 31, 2024. This portfolio consisted of seasoned30-year mortgage paper and Home Equity Conversion Mortgages with a weighted average loan age (WALA)WALA of 2.34.6 years and a weighted average maturity (WAM)WAM of 26.323.7 years.
The remaining 2%3% of the mortgage related securities portfolio at September 30, 2017,on March 31, 2024, included adjustablefloating rate securities (ARMs),10-yearCMO, CMBS, and mortgage backed pass-through securitiessecurities.
Item 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and other fixed rate mortgage backed securities.Procedures
As of September 30, 2017,March 31, 2024, an evaluation was performed under the supervision of and with the participation of United’s management, including the Chief Executive Officer (CEO)(“CEO”) and Chief Financial Officer (CFO)(“CFO”), of the effectiveness of the design and operation of United’s disclosure controls and procedures. Based on that evaluation, United’s management, including the CEO and CFO, concluded that United’s disclosure controls and procedures as of September 30, 2017March 31, 2024 were effective in ensuring that information required to be disclosed in the Quarterly Report on Form10-Q was recorded, processed, summarized and reported within the time period required by the Securities and Exchange Commission’s rules and forms.
Limitations on the Effectiveness of Controls
United’s management, including the CEO and CFO, does not expect that United’s disclosure controls and internal controls will prevent all errors and fraud. While United’s disclosure controls and procedures are designed to provide reasonable assurance of achieving their objective, a control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls.
Changes in Internal Controls
There have been no changes in United’s internal control over financial reporting (as defined in Rules 13a-15(e) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended September 30, 2017,March 31, 2024, or in other factors that have materially affected or are reasonably likely to materially affect United’s internal control over financial reporting.
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PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
United and its subsidiaries are currently involved in various legal proceedings in the normal course of business. Management is vigorously pursuing all its legal and factual defenses and, after consultation with legal counsel, believes that all such litigation will be resolved with no material effect on United’s financial position.
Item 1A. RISK FACTORS
In addition to the other information set forth in this report, please refer to United’s Annual Report on Form10-K for the year ended December 31, 20162023 for disclosures with respect to United’s risk factors which could materially affect United’s business, financial condition or future results. The risks described in the Annual Report on Form10-K are not the only risks facing United. Additional risks and uncertainties not currently known to United or that United currently deems to be immaterial also may materially adversely affect United’s business, financial condition and/or operating results. There are no material changes from the risk factors disclosed in United’s Annual Report on Form10-K for the year ended December 31, 2016.
Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
There have been no United equity securities sales during the quarter ended September 30, 2017March 31, 2024 that were not registered. The table below includes certain information regarding United’s purchase of its common shares during the quarter ended September 30, 2017:March 31, 2024:
Period | Total Number of Shares Purchased (1)(2) | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans (3) | Maximum Number of Shares that May Yet be Purchased Under the Plans (3) | ||||||||||||
7/01 – 7/31/2017 | 0 | $ | 00.00 | 0 | 2,000,000 | |||||||||||
8/01 – 8/31/2017 | 4 | $ | 41.58 | 0 | 2,000,000 | |||||||||||
9/01 – 9/30/2017 | 0 | $ | 00.00 | 0 | 2,000,000 | |||||||||||
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Total | 4 | $ | 41.58 | 0 | ||||||||||||
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Period | Total Number of Shares Purchased (1) (2) | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans (3) | Maximum Number of Shares that May Yet be Purchased Under the Plans (3) | ||||||||||||
1/01 – 1/31/2024 | 0 | $ | 0.00 | 0 | 4,371,239 | |||||||||||
2/01 – 2/29/2024 | 29,896 | $ | 34.43 | 0 | 4,371,239 | |||||||||||
3/01 – 3/31/2024 | 0 | $ | 0.00 | 0 | 4,371,239 | |||||||||||
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Total | 29,896 | $ | 34.43 | 0 | ||||||||||||
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(1) | Includes shares exchanged in connection with the exercise of stock options or the vesting of restricted stock under United’s |
(2) | Includes shares purchased in open market transactions by United for a rabbi trust to provide payment of benefits under a deferred compensation plan for certain key officers of United and its subsidiaries. For the quarter ended |
(3) | In |
None.
None.
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(a) | None. |
(b) | No changes were made to the procedures by which security holders may recommend nominees to United’s Board of Directors. |
Item 6. EXHIBITS
Index to exhibits required by Item 601 of RegulationS-K
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
UNITED BANKSHARES, INC. (Registrant) | ||||||||||
Date: May 10, 2024 | ||||||||||
| /s/ Richard M. Adams, Jr. | |||||||||
Name: | Richard M. Adams, | |||||||||
Title: | ||||||||||
Date: May 10, 2024 | /s/ W. Mark Tatterson | |||||||||
Name: | W. Mark Tatterson | |||||||||
Title: | Chief Financial Officer |
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