QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 2019 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FINANCIAL STATEMENTS (UNAUDITED) 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-$2,103,362 at June 30, 2018 and $1,900,684 at December 31, 2017) Securities held to maturity (estimated fair value-$19,708 at June 30, 2018 and $20,018 at December 31, 2017) Equity securities at estimated fair value Other investment securities Loans held for sale (at fair value-$282,439 at June 30, 2018 and $263,308 at December 31, 2017) 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-105,208,914 and 105,069,821 at June 30, 2018 and December 31, 2017, respectively, including 1,005,372 and 29,173 shares in treasury at June 30, 2018 and December 31, 2017, 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 services Fees from 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 Net investment securities (losses) gains Other income 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) securities, net of tax 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 - continued Balance at January 1, 2018 Cumulative effect of adopting Accounting Standard Update2016-01 Reclass due to adopting Accounting Standard Update2018-02 Comprehensive income: Net income Other comprehensive income, net of tax: Total comprehensive income, net of tax Stock based compensation expense Purchase of treasury stock (973,346 shares) Cash dividends ($0.68 per share) Grant of restricted stock (97,004 shares) Forfeiture of restricted stock (2,853 shares) Common stock options exercised (42,089 shares) Balance at June 30, 2018 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 Proceeds from sales of equity securities Purchases of equity securities Proceeds from sales and redemptions of other investment securities Purchases of other investment securities Purchases of bank premises and equipment Proceeds from sales of bank premises and equipment Proceeds from the sales of OREO properties Acquisition of subsidiaries, net of cash paid Net change in loans NET CASH (USED IN) PROVIDED BY 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 Repayment of trust preferred issuance Changes in: Deposits Federal funds purchased, securities sold under agreements to repurchase and other short-term borrowings NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES Decrease 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 $11,544, which resulted in a decrease of $1,098 to AOCI. January 1, 2019. 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 Fair value of net assets acquired including identifiable intangible assets Resulting goodwill 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 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 Total December 31, 2017 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 2018. Proceeds from sales and calls Gross realized gains Gross realized losses The single issue trust preferred securities relate to securities of financial institutions. 2019. 2019. 2019. The total amount of OTTI recognized in earnings on this security during the second quarter of 2019 was $21. other-than-temporarily impaired. 2019. The total amount of OTTI recognized in earnings on this security during the second quarter of 2019 was $54. 2019. Balance of cumulative credit losses at beginning of period Reductions for securities sold or paid off during the period Balance of cumulative credit losses at end of period 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 2018. 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 Net gains (losses) recognized during the period Net gains (losses) recognized during the period on equity securities sold Unrealized gains recognized during the period on equity securities still held at period end Unrealized losses recognized during the period on equity securities still held at period end 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 fromnon-accretable Disposals (including maturities, foreclosures, and charge-offs) Accretable yield at the end of the period income in the current year is reversed, and unpaid interest accrued in prior years is charged to the allowance for loan 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 2018. Commercial real estate: Owner-occupied Nonowner-occupied Other commercial Residential real estate Construction & land development Consumer: Bankcard Other consumer Total Other includes loans with a recorded investment of 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 As of June 30, 2018 Grade: Pass Special mention Substandard Doubtful Total As of December 31, 2017 Grade: Pass Special mention Substandard Doubtful Total As of June 30, 2018 Grade: Pass Special mention Substandard Doubtful Total As of December 31, 2017 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 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 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 Nonowner-occupied commercial real estate 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. 2018. Allowance for Loan Losses: Beginning balance Charge-offs Recoveries Provision Ending balance 2019 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 2019 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 Non-amortized intangible assets: George Mason trade name Goodwill not subject to amortization Goodwill at December 31, 2017 Addition to goodwill from Cardinal acquisition Goodwill at June 30, 2018 Year 2018 2019 2020 2021 2022 and thereafter 2018: 2018 2019 2020 2021 2022 and thereafter Total 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. basis. 2019, United had $5,092 of commercial letters of credit outstanding. As of December 31, 2019. 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 Forward loan sales commitments 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 (hedging commercial loans) Total derivatives designated as hedging instruments Derivatives not designated as hedging instruments TBA mortgage-backed securities Interest rate lock commitments Total derivatives not designated as hedging instruments Total liability derivatives 2018. 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 M which may require a significant level of judgment. Factors that management considers include: a significant widening Description Assets Available for sale 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 Description Single issue trust preferred securities Other corporate securities Total available for sale securities Equity securities: Financial services industry Equity mutual funds (1) Other equity securities Total equity securities Loans held for sale Derivative financial assets: Interest rate swap contracts Forward sales commitments Interest rate lock commitments Total derivative financial assets Liabilities Derivative financial liabilities: TBA mortgage-backed securities 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 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) Description 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 Total derivative financial assets Liabilities Derivative financial liabilities: Interest rate swap contracts TBA mortgage-backed securities Total derivative financial liabilities 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. 2018. Balance, beginning of period Total gains or losses (realized/unrealized): Included in earnings (or changes in net assets) Included in other comprehensive income Purchases, issuances, and settlements Sales 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 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 Description Assets Loans held for sale Income from mortgage banking activities Description Assets Loans held for sale Income from mortgage banking activities Description Assets Loans held for sale 2018. Description Assets Loans held for sale Impaired Loans OREO Description Assets Loans held for sale Impaired Loans OREO June 30, 2018 Cash and cash equivalents Securities available for sale Securities held to maturity Equity securities Other securities Loans held for sale Loans Derivative financial assets Deposits Short-term borrowings Long-term borrowings Derivative financial liabilities December 31, 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 individual key employee during any calendar year is Outstanding at January 1, 2018 Granted Exercised Forfeited or expired Outstanding at June 30, 2018 Exercisable at June 30, 2018 Nonvested at January 1, 2018 Granted Vested Forfeited or expired Nonvested at June 30, 2018 2019: Outstanding at January 1, 2018 Granted Vested Forfeited Outstanding at June 30, 2018 2019: first half of 2019. 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 2018. 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 comprehensive income Total change in other comprehensive income Total Comprehensive Income Balance at January 1, 2018 Cumulative effect of adopting Accounting Standard Update2016-01 Reclass due to adopting Accounting Standard Update2018-02 Other comprehensive income before reclassification Amounts reclassified from accumulated other comprehensive income Net current-period other comprehensive income, net of tax Balance at June 30, 2018 All amounts arenet-of-tax. 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 This AOCI component is included in the 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 Description Issuance Date Interest Rate Maturity Date 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 Through its community banking segment, United offers a full range of products and services through various delivery channels. In particular, the community banking segment includes both commercial and consumer lending and provides customers with such products as commercial loans, real estate loans, business financing and consumer loans. In addition, this segment provides customers with several choices of deposit products including demand deposit accounts, savings accounts and certificates of deposit as well as investment and financial advisory services to businesses and individuals, including financial planning, retirement/estate planning, and investment management. The mortgage banking segment engages primarily in the origination and acquisition of residential mortgages for sale into the secondary market though George Mason. 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) MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Where the 2018. U.S. Treasury securities and obligations of U.S. Government corporations and agencies State and political subdivisions Mortgage-backed securities Asset-backed securities Market equity securities Trust preferred collateralized debt obligations Single issue trust preferred securities Corporate securities Total available for sale securities, at fair value U.S. Treasury securities and obligations of U.S. State and political subdivisions Mortgage-backed securities Single issue trust preferred securities Other corporate securities Total held to maturity securities, at amortized cost The single issue trust preferred securities relate to securities of financial institutions. Security Emigrant Bank M&T Bank 2019: Loans held for sale Commercial, financial, and agricultural: Owner-occupied commercial real estate Nonowner-occupied commercial real estate Other commercial loans Total commercial, financial, and agricultural Residential real estate Construction & land development Consumer: Bankcard Other consumer Total gross loans Less: Unearned income Total Loans, net of unearned income Originated Acquired Total gross loans Originated Acquired Total gross loans 2018: derivative assets, $1.77 million in prepaid assets and $2.34 million in accounts receivables for the first half of 2019. 2018. deposits decreased $350 thousand or less than 1% and $4.32 million or 3.91%, respectively. $100,000. Demand deposits Interest-bearing checking Regular savings Money market accounts Time deposits under $100,000 Time deposits over $100,000(1) Total deposits Includes time deposits of $250,000 or more of 2019. Federal funds purchased Short-term securities sold under agreements to repurchase Long-term securities sold under agreements to repurchase Short-term FHLB advances Long-term FHLB advances Issuances of trust preferred capital securities Total borrowings decreases of $2.67 million and $2.03 million in deferred compensation and incentives payable, respectively. 2.53% from 2019. $33.91. 2018. 2018. United’s Federal Reserve peer group’s (bank holding companies with total assets over $10 billion) most recently reported average return on assets and average return on equity were 1.21% and 9.96%, respectively, for the first three months of 2019. For the second quarter and first half of 2019, United’s annualized return on average tangible equity was 14.90% and 14.78%, respectively, as compared to 15.14% and 14.72% for the second quarter and first half of 2018, respectively. 2018. second quarter of 2019 on the prepayment of FHLB advances. 2018. FHLB advances. 2018. higher FDIC insurance premiums due to United Bank now being considered a large institution and subject to increased assessment rates. 2019. 2018. 2019. Loan accretion Certificates of deposit Long-term borrowings Total Loan accretion Certificates of deposit Long-term borrowings Tax-equivalent net interest income 2018: Net interest income, GAAP basis Tax-equivalent adjustment (1) Tax-equivalent net interest income Net interest income, GAAP basis Tax-equivalent adjustment (1) Tax-equivalent net interest income The ASSETS Earning Assets: Federal funds sold and securities purchased 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 Noninterest-bearing deposits Accrued expenses and other liabilities TOTAL LIABILITIES SHAREHOLDERS’ EQUITY TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY NET INTEREST INCOME INTEREST SPREAD NET INTEREST MARGIN The interest income and the yields on federally nontaxable loans and investment securities are presented on a Nonaccruing loans 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 MARGIN The interest income and the yields on federally nontaxable loans and investment securities are presented on a Nonaccruing loans are included in the daily average loan amounts outstanding. $421 thousand while net 2019, respectively. Nonaccrual loans(1) Originated Acquired Loans which are contractually past due 90 days or more as to interest or principal, and are still accruing interest Originated Acquired Restructured loans(1) Originated Acquired Total nonperforming loans Other real estate owned TOTAL NONPERFORMING ASSETS Restructured loans that were contractually past due 90 days or moreas to interest or principal and are still accruing interest or on nonaccrual status for the indicated periods are included in “Restructured loans” and not “Loans which are contractually past due 90 days or moreas to interest or principal and are still accruing interest” or “Nonaccrual loans” (see Note 2018. 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 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. 2018. in managed assets. overdraft fees. Partially offsetting the increases was a decrease of $501 thousand in income from bank-owned life insurance resulting due to the recognition of proceeds from death benefits in the first quarter of 2019. 2018. These increases were due mainly to the recognition of $5.11 million in penalties to prepay FHLB advances during the second quarter of 2019. incentives. 2018. new contract. income tax credits. fewer declines in the values of OREO properties. 2019. Change in Interest Rates (basis points) +200 +100 -100 -200 2018: the yield curve would decrease net interest income by an estimated 1.80% over one year as of June 30, 2019 as compared to a decrease of 0.97% over one year as of December 31, 2018. 2019. A 200 basis point immediate, sustained downward shock in the yield curve would decrease net interest income by an estimated 8.15% in year two as of June 30, 2019. CONTROLS AND PROCEDURES Period 4/01 – 4/30/2018 5/01 – 5/31/2018 6/01 – 6/30/2018 Total Includes shares exchanged in connection with the exercise of stock options and the vesting of restricted shares under United’s long-term incentive plans. Shares are purchased or vested pursuant to the terms of the applicable plan and not pursuant to a publicly announced stock repurchase plan. No shares were exchanged by participants in United’s long-term incentive plans for the quarter ended June 30, 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 June 30, In DEFAULTS UPON SENIOR SECURITIES MINE SAFETY DISCLOSURES OTHER INFORMATION None. No changes were made to the procedures by which security holders may recommend nominees to United’s Board of Directors.2018 incorporation or organization) Identification No.) Charleston, West Virginia25301 and 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. Non-accelerated filer ☐ (Do not check if a smaller reporting company) Indicatenumber of registrant had outstanding of each of the issuer’s classes of common stock, as$2.50 par value per share, outstanding. Page Item 1. 4 5 7 8 9 10 Item 2. 11 5957 Item 3. 78 81 Item 4. 84 Item 1. 85 Item 1A. 85 2.1. 82 82 8582 Item 3. 8683 Item 4. 86Item 5. 86 6.4. 8683 8783 83 84 Item 1. 20182019 and December 31, 2017,2018, consolidated balance sheets of United Bankshares, Inc. and Subsidiaries (“United” or the “Company”), consolidated statements of income and comprehensive income for the three and six months ended June 30, 20182019 and 2017,2018, the related consolidated statement of changes in shareholders’ equity for the three and six months ended June 30, 2019 and 2018, the related condensed consolidated statements of cash flows for the six months ended June 30, 20182019 and 2017,2018, and the notes to consolidated financial statements appear on the following pages. June 30
2018 December 31
2017 (Unaudited) (Note 1) $ 230,965 $ 196,742 861,166 1,468,636 795 789 1,092,926 1,666,167 2,060,927 1,888,756 20,378 20,428 9,664 0 175,334 162,461 285,194 265,955 13,529,008 13,027,337 (12,379 ) (15,916 ) 13,516,629 13,011,421 (77,135 ) (76,627 ) 13,439,494 12,934,794 100,260 104,894 1,478,014 1,478,380 57,270 52,815 488,142 484,309 $ 19,207,603 $ 19,058,959 $ 4,331,840 $ 4,294,687 9,498,926 9,535,904 13,830,766 13,830,591 14,000 16,235 185,507 311,352 1,560,365 1,271,531 234,276 242,446 927 679 139,197 145,595 15,965,038 15,818,429 0 0 263,022 262,675 2,131,697 2,129,077 954,953 891,816 (70,001 ) (42,025 ) (37,106 ) (1,013 ) 3,242,565 3,240,530 $ 19,207,603 $ 19,058,959
2018 $ $ ) ) ) ) $ $ $ $ ) ) ) ) $ $ Three Months Ended Six Months Ended June 30 June 30 2018 2017 2018 2017 $ 159,294 $ 140,899 $ 308,222 $ 249,841 3,465 3,785 8,382 6,471 13,810 8,809 25,685 16,820 1,431 1,454 2,896 2,573 178,000 154,947 345,185 275,705 19,076 12,586 34,733 21,054 464 415 885 719 9,338 5,701 16,402 10,067 28,878 18,702 52,020 31,840 149,122 136,245 293,165 243,865 6,204 8,251 11,382 14,150 142,918 127,994 281,783 229,715 3,104 2,863 6,195 5,893 1,953 1,882 4,177 3,738 8,420 8,528 16,650 16,234 1,479 1,216 2,835 2,100 599 521 1,108 998 1,271 1,258 2,525 2,475 18,692 22,537 33,262 23,212 (55 ) 747 (540 ) 4,687 544 954 987 1,315 36,007 40,506 67,199 60,652 43,120 56,030 83,956 80,063 9,298 9,760 18,869 16,663 9,076 13,913 18,503 20,697 556 524 1,502 1,938 3,279 2,471 6,436 4,436 5,817 5,331 11,667 9,374 480 442 946 907 2,842 1,771 4,690 3,522 18,942 21,895 37,293 37,379 93,410 112,137 183,862 174,979 85,515 56,363 165,120 115,388 19,241 19,304 37,140 39,520 $ 66,274 $ 37,059 $ 127,980 $ 75,868 $ $ $ $ ) ) ) $ $ $ $ Three Months Ended Six Months Ended June 30 June 30 2018 2017 2018 2017 $ 0.63 $ 0.37 $ 1.22 $ 0.84 $ 0.63 $ 0.37 $ 1.22 $ 0.84 $ 0.34 $ 0.33 $ 0.68 $ 0.66 104,682,910 99,197,807 104,770,681 90,100,627 104,952,788 99,620,045 105,058,014 90,570,289 $ $ $ $ $ $ $ $ Three Months Ended Six Months Ended June 30 June 30 2018 2017 2018 2017 $ 66,274 $ 37,059 $ 127,980 $ 75,868 (6,501 ) 3,101 (23,274 ) 6,479 1 1 2 2 1,052 695 1,785 1,390 $ 60,826 $ 40,856 $ 106,493 $ 83,739 $ $ $ $ ) ) $ $ $ $ $ $ $ $ ) $ ) $ ) ) ) ) ) ) ) ) ) ) ) ) ) ) $ $ $ $ ) $ ) $ (Unaudited) Six Months Ended June 30, 2018 Accumulated Common Stock Other Total Par Retained Comprehensive Treasury Shareholders’ Shares Value Surplus Earnings Income (Loss) Stock Equity 105,069,821 $ 262,675 $ 2,129,077 $ 891,816 ($ 42,025 ) ($ 1,013 ) $ 3,240,530 136 (136 ) 0 6,353 (6,353 ) 0 0 0 0 127,980 0 0 127,980 0 0 0 0 (21,487 ) 0 (21,487 ) 106,493 0 0 1,992 0 0 0 1,992 0 0 0 0 0 (35,984 ) (35,984 ) 0 (71,332 ) 0 0 (71,332 ) 97,004 243 (243 ) 0 0 0 0 0 0 109 0 0 (109 ) 0 42,089 104 762 0 0 0 866 105,208,914 $ 263,022 $ 2,131,697 $ 954,953 ($ 70,001 ) ($ 37,106 ) $ 3,242,565 $ $ $ ($ ) ($ ) $ ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) $ $ $ $ ) ($ ) $ Six Months Ended June 30 2018 2017 $ 98,498 $ 35,919 2 12,888 53,179 234,816 124,894 332,488 (391,186 ) (524,561 ) 1,826 0 (380 ) 0 15,606 9,272 (33,279 ) (43,337 ) (2,159 ) (2,798 ) 2,123 13 4,658 3,835 0 44,531 (493,787 ) 112,150 (718,503 ) 179,297 (71,461 ) (52,092 ) (35,984 ) (1 ) 851 2,546 (625,000 ) (825,191 ) 1,115,000 845,000 (9,374 ) 0 812 (174,557 ) (328,080 ) (34,444 ) 46,764 (238,739 ) (573,241 ) (23,523 ) 1,666,167 1,434,527 $ 1,092,926 $ 1,411,004 $ 527 $ 1,951 $ $ ) ) ) ) ) ) Redemption of bank-owned life insurance policies Purchases of bank premises and equipment ) ) Proceeds from sales of bank premises and equipment Proceeds from the sales of OREO properties ) ) NET CASH USED IN INVESTING ACTIVITIES ) ) ) ) ) ) ) ) ) ) ) NET CASH PROVIDED BY FINANCING ACTIVITIES Increase (Decrease) in cash and cash equivalents ) $ $ $ $ 20182019 and 20172018 and for the three-month and20172018 has been extracted from the audited financial statements included in United’s 20172018 Annual Report to Shareholders. The accounting and reporting policies followed in the presentation of these financial statements are consistent with those applied in the preparation of the 20172018 Annual Report of United on Form To conform to the 2018 presentation, certain reclassifications have been made to prior period amounts, which had no impact on net income, comprehensive income, or stockholders’ equity. June 2018,April 2019, the Financial Accounting Standards Board (FASB) issued ASU No. 2019-04 “Codification Improvements to Topic 326, Financial Instruments – Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments.” The amendments clarify the scope of the credit losses standard and address issued related to accrued interest receivable balances, recoveries, variable interest rates and prepayments. The amendments also address partial-term fair valued hedges, fair value hedge basis adjustments. The amendments to the credit losses and hedging standards have the same effective dates as those standards, unless an entity has already adopted the standards. The amendments to recognition and measurement guidance are effective for fiscal years beginning after December 15, 2019; early adoption is permitted. Management is currently evaluating the possible impact this standard may have on the Company’s financial condition or results of operations. “Compensation-Stock is not expected to have a material impactthe Company’s financial condition or results of operations.In February 2018, the FASB issued ASU No. 2018-03, “Technical Corrections and Improvements to Financial Instruments – Overall (Subtopic825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.” ASU2018-03 clarifies that entities that use the measurement alternative for equity securities without readily determinable fair values can change its measurement approach to fair value. This election is irrevocable and will apply to all future purchases of identical or similar investments of the same issuer.January 1, 2019. The amended guidance also clarifies that adjustments made under the measurement alternative should reflect the fair value of the security as of the date that an observable transaction took place rather than the current reporting date. Entities will use the prospective transition approach only for securities they elect to measure using the measurement alternative. ASUNo. 2018-03 is effective for interim and annual reporting periods beginning after December 15, 2017; early adoption is permitted. ASUNo. 2018-03 did not have a material impact on the Company’s financial condition or results of operations.In February 2018, the FASB issued ASU No. 2018-02, “Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income,” to help organizations address certain stranded income tax effects in accumulated other comprehensive income (AOCI) resulting from the Tax Cuts and Jobs Act (the “Tax Act”). This ASU provides financial statement preparers with an option to reclassify stranded tax effects within AOCI to retained earnings in each period in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Act (or portion thereof) is recorded. The amendments are effective for all organizations for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted. Organizations should apply the proposed amendments either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Act is recognized. United adopted ASUNo. 2018-02 in the first quarter of 2018 and reclassified $6,353 of stranded income tax effected amounts in AOCI to retained earnings. “TargetingASUNo. 2017-12 is not expectedUnited adopted the standard on January 1, 2019 using the modified retrospective approach. As part of this adoption, the Company made ahavetransfer eligible HTM securities to the AFS category. The Company transferred HTM securities with a material impact on the Company’s financial condition or resultscarrying amount of operations. is not expected to have a material impact was adopted by United on the Company’s financial condition or results of operations.MayMarch 2017, the FASB issued ASUNo. 2017-09, “Stock Compensation, Scope of Modification Accounting.2017-08, “Receivables – Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities.” This ASU clarifies when changesupdate amends the amortization period for certain purchased callable debt securities held at a premium. FASB is shortening the amortization period for the premium to the terms of conditions of a share-based payment award must be accounted for as modifications. Companies will apply the modification accounting guidance if the value, vesting conditions or classification of the award changes.earliest call date. The new guidance should reduce diversityamendments 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. ASUNo. 2017-09 isthis update became effective for interim and annual reporting periods beginning after December 15, 2017; early2018, including interim reporting periods within those annual reporting periods. ASU No. 2017-08 was adopted by United on January 1, 2019. The adoption is permitted. ASUNo. 2017-09 did not have a material impact on the Company’s financial condition or results of operations.In March 2017, the FASB issued ASUNo. 2017-07, “Improving the Presentation “IntangiblesNo. No. In January 2017, the FASB issued ASUNo. 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business.” ASUNo. 2017-01 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. ASUNo. 2017-01 was effective for United on January 1, 2018 and did not have a material impact on the Company’s financial condition or results of operations.In August 2016, the FASB issued ASUNo. 2016-15, “Classification of Certain Cash Receipts and Cash Payments.” ASUNo. 2016-15 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 ASUNo. 2016-15 using a retrospective transition method to each period presented. ASUNo. 2016-15 was effective for United on January 1, 2018 and did not have a material impact on the Company’s financial condition or results of operations.available-for-sale available for sale debt securities rather than reduce the carrying amount under the current other-than-temporary impairment (OTTI) model. ASUNo. 2016-13 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 reporting period in which the guidance is effective. ASUIn May 2019, the FASB issued Accounting Standards Update (ASU) No. 2019-05 “Financial Instruments—Credit Losses (Topic 326): Targeted Transition Relief.” ASU 2019-05 amends ASU 2016-13 to allow companies to irrevocably elect, upon adoption of ASU 2016-13, the fair value option on financial instruments that were previously recorded at amortized cost and are within the scope of ASC 326-20 if the instruments are eligible for the fair value option under ASC 825-10. The fair value option election does not apply to held-to-maturity debt securities. Entities are required to make this election on an instrument-by-instrument basis. ASU No. 2019-05 is effective for United on the same date as ASU No. 2016-13, which is January 1, 2020 for United, with early adoption permitted,permitted. United has completed an initial data gap assessment and managementloan segmentation procedures and is currently evaluating the various forecasting and modeling assumptions that will be used to estimate the initial current expected credit loss allowance. In addition, United is currently working through the implementation plan which includes documentation of methodologies, processes, data sources, internal controls and policies, as well as model development, documentation and validation. United has engaged a third-party service provider to assist with the implementation of the new accounting standard. 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 ASUNo. 2016-09, “Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.” ASUNo. 2016-09 will change certain aspects of accounting for share-based payments to employees. The new guidance will, amongst other things, require 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 $1,048 for the year of 2017. ASUNo. 2016-09 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. ASUNo. 2016-09 also requires that all incometax-related cash flows resulting from share-based payments be reported as operating activitiesin 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. The adoption of ASUNo. 2016-09 did not have a material impact on the Company’s financial condition or results of operations. which has not yet been quantified, 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. In July 2018, the FASB issued ASUNo. 2016-02 is2018-11 “Leases (Topic 842), Targeted Improvements.” This update creates an additional transition method, and a lessor practical expedient to not separate lease and non-lease components if specified criteria are met. The new transition method allows companies to use the effective date of the new leases standard as the date of initial application transition. Companies that elect this transition option will not adjust their comparative period financial information for the effect of ASC Topic 842, nor will they make the new required lease disclosure for periods before the effective date. In addition, these companies will carry forward their ASC Topic 840 disclosures for comparative periods. The practical expedient permits lessors to make an accounting policy election by class of underlying asset to not separate lease and non-lease components if specified criteria are met. In July 2018, the FASB issued ASU No. 2018-10 “Codification Improvements to ASC Topic 842, Leases.” This update includes narrow amendments to clarify how to apply certain aspects of the new leases standard. The amendments address the rate implicit in the lease, impairment of the net investment in the lease, lessee reassessment of lease classification, lessor reassessment of lease term and purchase options, variable payments that depend on an index or rate and certain transition adjustments. ASU 2018-10 does not make any substantive changes to the core provisions or principals of the new leases standard. United adopted the standard using the modified retrospective transition method on January 1, 2019. The Company is currently assessing the impact of the adoption of ASUNo. 2016-02 on the Company’s results of operations, financial position and cash flows. The Company has evaluated and plans to electelected the package of practical expedients, which would allowallows for existing leases to be accounted for consistent with current guidance, with the exception of the balance sheet recognition for lessees. The electionCompany has also elected the practical expedient on not separating lease and nonlease components and instead treating them as a single leasenew standard the Company has evaluated and selected a third-party lease accounting software solution as part of its implementation strategy. The Company is also documenting the new lease accounting process and has drafted internal controls over financial reporting as part of the implementation process.In January 2016, the FASB issued ASUNo. 2016-01, “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, ASUNo. 2016-01 clarifies guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses onavailable-for-sale debt securities. ASUNo. 2016-01 was adopted by United on January 1, 2018 and did not have a significant impact on the Company’s financial condition or results of operations.In May 2014, the FASB issued ASUNo. 2014-09, “Revenue from Contracts with Customers (Topic 606).” ASUNo. 2014-09 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. For United, 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, gains and losses from securities, income from bank-owned life insurance (BOLI) and income from mortgage banking activities are not impacted by the standard. Based on a review and evaluation of a number of revenue contracts, United’s management determined that ASUNo. 2014-09 impacts certain recurring revenue streams related to noninterest income such as fees from trust and brokerage services. However, based on an assessment of these revenue streams under the standard, management concluded that ASUNo. 2014-09 does not have a material impact on the Company’s financial condition or results of operations. In addition, in the Company’s evaluation of the nature of its contracts with customers, United has determined that further disaggregation of revenue from contracts with customers into more granular categories beyond those presented in the Consolidated Statements of Income was not necessary. ASUNo. 2014-09 was adopted by United on January 1, 2018 using the modified-retrospective transition method. No cumulative effect adjustment was made to the opening balance of retained earnings because the amount was considered immaterial. The impact of ASUNo. 2014-09 for the first six months of 2018 was also immaterial to United’s consolidated financial position, results of operations, shareholders’ equity, cash flows and disclosures.Descriptions of our revenue-generating activities that are within the scope of ASC Topic 606, which are presented in our Consolidated Statements of Income as components of Other Income are discussed below. There are no significant judgements relating to the amount and timing of revenue recognition for those revenue streams under the scope of ASC Topic 606.Fees from Trust ServicesRevenue from trust services primarily is comprised of fees earned from the management and administration of trusts and other customer assets. Trust services include custody of assets, investment management, escrow services, and similar fiduciary activities. The Company’s performance obligation is generally satisfied over time and the resulting fees are recognized monthly, based upon themonth-end market value of the assets under management and the applicable fee rate. Payment is generally received a few days after month end through a direct charge to customers’ accounts.Fees from Brokerage ServicesRevenue from brokerage services are recorded as the income is earned at the time the related service is performed. In return for such services, the Company charges a commission for the sales of various securities products primarily consisting of investment company shares, annuity products, and corporate debt and equity securities, for its selling and administrative efforts. For account supervision, advisory and administrative services, revenue is recognized over a period of time as earned based on customer account balances and activity.Fees from Deposit ServicesService charges on deposit accounts consist of account analysis fees (i.e., net fees earned on analyzed business and public checking accounts), monthly service fees, check orders, ATM activity fees, debit card fees, and other deposit account related fees. Revenue is recognized when our performance obligation is completed which is generally monthly for account maintenance services or when a transaction has been completed (ATM or debit card activity).Bankcard Fees and Merchant DiscountsBankcard fees and merchant discounts are primarily comprised of credit card income and merchant services income. Credit card income is primarily comprised of interchange fees earned whenever the Company’s credit cards are processed through card payment networks such as Visa. Merchant services income mainly represents fees charged to merchants to process their credit card transactions. The Company’s performance obligation for bankcard fees and exchange are largely satisfied, and related revenue recognized at the time services are rendered. Payment is typically received immediately or in the following month.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 purchase price has been allocated to the identifiable tangible and intangible assets resulting in additions to goodwill, core deposit intangibles and the George Mason trade name intangible of $612,920, $28,724 and $1,080, respectively. The core deposit intangibles are being 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 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 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 June 30, 2018, the discounts on leases and trust preferred issuances had an average estimated remaining life of 5.25 years and 16.22 years, respectively, and the premiums on the interest-bearing deposits and the FHLB advances each had an average estimated remaining life of 4.25 years and 4.06 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 June 30, 2018. The estimated fair values of the acquired assets and assumed liabilities, including identifiable intangible assets and goodwill are considered final as of June 30, 2018.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 value 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 resultresulted 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 amounts of acquired identifiablenet lease assets and lease liabilities assumedof $Cardinal Acquisition Date weredifference between these two amounts, $follows: $ 972,499 2,741 14 975,254 44,545 395,829 271,301 3,168,599 24,774 28,724 1,080 135,383 $ 4,070,235 $ 3,349,812 96,215 220,119 2,281 39,474 3,707,901 362,334 $ 612,920 The operating results of United for the six months ended June 30, 2018 include operating results of acquired assets and assumed liabilities subsequentan adjustment 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 $431,463 in total revenues, which represents net interest income plus other income, and $212,834 in net income from the period from the Cardinal Acquisition Date to June 30, 2018. These amounts are included in United’s consolidated financial statements as of and for the six months ended June 30, 2018. Cardinal’s results of operations prior to the Cardinal Acquisition Date are not included in United’s consolidated financial statements.3.retained earnings. June 30, 2018 Gross Gross Estimated Cumulative Amortized Unrealized Unrealized Fair OTTI in Cost Gains Losses Value AOCI (1) $ 144,867 $ 8 $ 1,060 $ 143,815 $ 0 276,516 897 5,233 272,180 0 913,926 766 24,562 890,130 0 4,306 487 0 4,793 86 513,212 127 11,936 501,403 0 166,355 342 566 166,131 0 6,177 91 450 5,818 2,586 8,742 234 738 8,238 0 69,261 174 1,016 68,419 0 $ 2,103,362 $ 3,126 $ 45,561 $ 2,060,927 $ 2,672 December 31, 2017 Gross Gross Estimated Cumulative Amortized Unrealized Unrealized Fair OTTI in Cost Gains Losses Value AOCI (1) $ 114,735 $ 385 $ 362 $ 114,758 $ 0 303,101 3,197 2,429 303,869 0 821,857 2,096 9,360 814,593 0 4,969 543 0 5,512 86 457,107 1,059 3,309 454,857 0 109,829 148 7 109,970 0 37,856 542 4,129 34,269 20,770 13,417 368 1,225 12,560 0 28,101 407 18 28,490 0 9,712 179 13 9,878 0 $ 1,900,684 $ 8,924 $ 20,852 $ 1,888,756 $ 20,856 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ (1) available-for-sale available for sale which were in an unrealized loss position at June 30, 20182019 and December 31, 2017. Less than 12 months 12 months or longer Fair Unrealized Fair Unrealized Value Losses Value Losses June 30, 2018 $ 116,482 $ 964 $ 22,771 $ 97 137,435 1,710 57,150 3,524 664,630 16,051 190,576 8,511 0 0 0 0 415,526 10,289 69,225 1,647 75,437 566 0 0 0 0 2,050 450 0 0 4,980 737 51,304 1,015 0 0 $ 1,460,814 $ 30,595 $ 346,752 $ 14,966 Less than 12 months 12 months or longer Fair Unrealized Fair Unrealized Value Losses Value Losses $ 36,678 $ 230 $ 22,920 $ 132 82,896 566 59,432 1,863 460,414 4,621 182,482 4,739 0 0 0 0 282,858 2,386 70,763 923 27,931 7 0 0 0 0 28,629 4,129 0 0 4,485 1,225 6,975 18 0 0 0 0 363 13 $ 897,752 $ 7,828 $ 369,074 $ 13,024 $ $ $ $ $ 327,321 $ 3,537 $ 370,938 $ 4,774 $ $ $ $ $ $ $ $ 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
June 30 Six Months Ended
June 30 2018 2017 2018 2017 $ 75,157 $ 468,506 $ 174,860 $ 567,304 58 845 1,221 1,059 85 82 1,397 82 $ $ $ $ 2018,2019, gross unrealized losses on available for sale securities were $45,561$8,311 on 668245 securities of a total portfolio of 858 791in anwith the most significant gross unrealized loss positionlosses at June 30, 20182019 consisted primarily of state and political subdivisionasset-backed securities, agency residential mortgage-backed securities, and agency commercial and residential mortgage-backedsingle issue trust preferred securities. The stateasset-backed securities are backed by Federal Family Education Loan Program (FFELP) student loan collateral which includes a minimum of a 97% government repayment guaranty, as well as additional credit support and political subdivisions securities relate to securities issued by various municipalities.subordination in excess of the government guaranteed portion. The agency commercial and residential mortgage-backed securities relate to commercial and residential properties and provide a guaranty of full and timely payments of principal and interest by the issuing agency.$276,516$178,833 at June 30, 2018.2019. As of June 30, 2018,2019, approximately 75%77% of the portfolio was supported by the general obligation of the issuing municipality, which allows for the securities to be repaid by any means available to2018.2019. 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 impaired at June 30, 2018.$1,427,138$1,432,963 at June 30, 2018.2019. Of the $1,427,138 $$513,212$566,366 was related to agency commercial mortgage-backed securities and $913,926$866,597 was related to agency residential mortgage-backed securities. Each of the agency mortgage-backed securities provides a guarantee of full and timely payments of principal and interest by the issuing agency. Based upon management’s analysis and judgment, it was determined that none of the agency mortgage-backed securities were other-than-temporarily impaired at June 30, 2018.$4,306$3,598 at June 30, 2018.2019. Of the $4,306$$250$8 was rated above investment grade and $4,056$3,590 was rated below investment grade. The entire portfolio of theareis either the senior or super-senior tranches of their respective structure. Based upon management’s analysis and judgment, it was determined that noneone of thenon-agency mortgage-backed securities werewas other-than-temporarily impaired at June 30, 2018. Management reviews each issuer’s current and projected earnings trends, asset quality, capitalization levels, and other key factors. Upon completing the review for the second quarter of 2018, it was determined that none of the single issue trust preferred securities were other-than-temporarily impaired. All single issue trust preferred securities are currently receiving interest payments. The amortized cost of available for sale single issue trust preferred securities as of June 30, 20182019 consisted of $3,024$4,036 in investment grade bonds, $5,935 in split rated bonds, $2,480 in below investment grade rated bonds, and $5,718$5,729 in unrated bonds. The investment grade bonds were ratedBBB-. AllManagement reviews each issuer’s current and projected earnings trends, asset quality, capitalization levels, and other key factors. Upon completing the review for the second quarter of 2019, it was determined that none of the unrated bondssingle issue trust preferred securities were in an unrealized loss position for twelve months or longer as of June 30, 2018.$6,177$6,136 as of June 30, 2018.2019. For any securities in an unrealized loss position, 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 June 30, 2018,2019, the Company has determined that it does not intend to sell any Trup Cdo 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.Except forBased on this review, management determined that one of the debtTrup Cdo securities that have already been deemed to bewas other-than-temporarily impaired management does not believe any other individual security with an unrealized loss as of June 30, 2018 is other-than-temporarily impaired.2018,2019, United’s Corporate securities portfolio had a total amortized cost balance of $69,261.$338,784. The majority of the portfolio consisted of debt issuances of corporations representing a variety of industries, including financial institutions. Of the $69,261, 70%$338,784, 94% was investment grade rated and 30%6% was unrated. For corporate impairmentimpairment. Based upon management’s analysis and based on that evaluation, managementjudgment, it was determined that nonone of the other corporate securities were other-than-temporarily impaired at June 30, 2018. Three Months Ended
June 30 Six Months Ended
June 30 2018 2017 2018 2017 $ 3,199 $ 22,162 $ 18,060 $ 22,162 0 0 (14,861 ) 0 $ 3,199 $ 22,162 $ 3,199 $ 22,162 $ $ $ $ Additional credit losses on securities for which OTTI was previously recognized 54 0 54 0 ) $ $ $ $ 20182019 and December 31, 20172018 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. June 30, 2018 December 31, 2017 Estimated Estimated Amortized Fair Amortized Fair Cost Value Cost Value $ 68,381 $ 68,272 $ 50,311 $ 50,212 510,595 503,142 386,039 384,585 447,739 435,727 400,129 398,208 1,076,647 1,053,786 1,054,493 1,045,873 0 0 9,712 9,878 $ 2,103,362 $ 2,060,927 $ 1,900,684 $ 1,888,756 $ $ $ $ $ $ $ $ June 30, 2018 Gross Gross Estimated Amortized Unrealized Unrealized Fair Cost Gains Losses Value $ 5,132 $ 181 $ 0 $ 5,313 5,798 9 0 5,807 21 3 0 24 9,407 0 863 8,544 20 0 0 20 $ 20,378 $ 193 $ 863 $ 19,708 December 31, 2017 Gross Gross Estimated Amortized Unrealized Unrealized Fair Cost Gains Losses Value $ 5,187 $ 308 $ 0 $ 5,495 5,797 10 0 5,807 23 3 0 26 9,401 0 731 8,670 20 0 0 20 $ 20,428 $ 321 $ 731 $ 20,018 $ $ $ $ $ $ $ $ U.S. Treasury securities and obligations of U.S. Government corporations and agencies $ 5,074 $ 90 $ 0 $ 5,164 State and political subdivisions 5,473 7 1 5,479 Residential mortgage-backed securities Agency 20 2 0 22 Single issue trust preferred securities 9,412 0 1,442 7,970 Other corporate securities 20 0 0 20 Total $ 19,999 $ 99 $ 1,443 $ 18,655 held-to-maturity held to maturity investment portfolio is less than its cost, the unrealized loss has no impact on the net worth or regulatory capital requirements of United. As of June 30, 2018, the Company’s largestheld-to-maturity single-issue trust preferred exposure was to SunTrust Bank ($7,430). The twoheld-to-maturity single-issue trust preferred exposures with at least one rating below investment grade included SunTrust Bank ($7,430) and Royal Bank of Scotland ($976).20182019 and 2017.20182019 and December 31, 20172018 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. June 30, 2018 December 31, 2017 Estimated Estimated Amortized Fair Amortized Fair Cost Value Cost Value $ 2,000 $ 2,000 $ 0 $ 0 7,290 7,478 9,344 9,660 8,092 7,610 5,663 5,343 2,996 2,620 5,421 5,015 $ 20,378 $ 19,708 $ 20,428 $ 20,018 Due in one year or less $ 5,225 $ 5,246 $ 7,913 $ 8,005 Due after one year through five years 216 217 1,059 1,061 Due after five years through ten years 0 0 8,030 7,134 Due after ten years 1,020 1,020 2,997 2,455 Total $ 6,461 $ 6,483 $ 19,999 $ 18,655 $9,664$9,098 at June 30, 2019 and $9,734 at December 31, 2018. Prior to the adoption of ASU No.2016-01 on January 1, 2018, equity securities were included in available for sale securities. Three Months
Ended
June 30, 2018 Six Months
Ended
June 30, 2018 $ (28 ) $ (64 ) (4 ) (2 ) 11 50 35 112 Net gains (losses) recognized during the period $ 55 $ (28 ) $ 244 $ (64 ) Net gains (losses) recognized during the period on equity securities sold 2 (4 ) 134 (2 ) Unrealized gains recognized during the period on equity securities still held at period end 64 11 122 50 Unrealized losses recognized during the period on equity securities still held at period end 11 35 12 112 2018,2019, United evaluated all of its cost method investments to determine if certain events or changes in circumstances during the second quarter of 20182019 had a significant adverse effect on the fair value of any of its cost method securities. United determined that there was no individual security that experienced an adverse event during the second quarter. There were no other events or changes in circumstances during the second quarter which would have an adverse effect on the fair value of its cost method securities.$1,735,336$1,588,440 and $1,403,565$1,887,176 at June 30, 20182019 and December 31, 2017,2018 respectively.4. June 30,
2018 December 31,
2017 $ 1,366,814 $ 1,361,629 4,435,910 4,451,298 2,209,191 1,998,979 8,011,915 7,811,906 3,300,472 2,996,171 1,396,853 1,504,907 9,717 10,314 810,051 704,039 $ 13,529,008 $ 13,027,337
2018 Commercial, financial and agricultural: Owner-occupied commercial real estate $ 1,239,954 $ 1,291,790 Nonowner-occupied commercial real estate 4,194,064 4,303,613 Other commercial loans 2,021,953 1,957,641 Total commercial, financial & agricultural 7,455,971 7,553,044 Residential real estate 3,674,005 3,501,393 Construction & land development 1,464,064 1,410,468 Consumer: Bankcard 9,380 10,203 Other consumer 1,036,526 954,424 Total gross loans $ 13,639,946 $ 13,429,532 $285,194$370,593 and $265,955$249,846 at June 30, 20182019 and December 31, 2017,2018, respectively. Loans held for sale consist of single-family residential real estate loans originated for sale in the secondary market.$168,497$111,611 or 1.25%0.82% of total gross loans at June 30, 20182019 and $210,521$149,737 or 1.62%1.12% of total gross loans at December 31, 2017.2018. The contractual principal in these acquired impaired loans was $221,983$144,127 and $285,964$195,706 at June 30, 20182019 and December 31, 2017,2018, 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.20182019 follows: $ 39,098 (8,371 ) 0 9,803 (3,323 ) $ 37,207 Accretable yield at the beginning of the period $ 26,289 Accretion (including cash recoveries) (5,850 ) Additions 0 Net reclassifications to accretable from non-accretable 7,051 Disposals (including maturities, foreclosures, and charge-offs) (4,335 ) Accretable yield at the end of the period $ 23,155 $32,506$85,506 and $36,360$93,282 at June 30, 20182019 and December 31, 2017,2018, respectively.5.2018,2019, United had TDRs of $60,384$58,750 as compared to $50,129$59,425 as of December 31, 2017.2018. Of the $60,384$58,750 aggregate balance of TDRs at June 30, 2018, $46,6522019, $48,586 was on nonaccrual $84and $1,278 were 90 days or more past due and $1,148 were 30 to 8930-89 days past due. Of the $50,129$59,425 aggregate balance of TDRs at December 31, 2017, $30,868 was2018, $48,899 were on nonaccrual $95and $690 were 90 days or more past due and $1,254 were 30 to 89 days past due. All these amounts are included in the appropriate categories in the “Age Analysis of Past Due Loans” table on a subsequent page. As of June 30, 2018,2019, there were no commitments to lend additional funds to debtors owing receivables whose terms have been modified in TDRs. At June 30, 2018,2019, United had restructured loans in the amount of $1,715$1,801 that were modified by a reduction in the interest rate, $1,859$1,796 that were modified by a combination of a reduction in the interest rate and the principal and $56,810$55,153 that were modified by a change in terms. “Loans20182019 and 2017,2018, segregated by class of loans: Troubled Debt Restructurings For the Three Months Ended June 30, 2018 June 30, 2017 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 0 $ 0 $ 0 1 $ 5,333 $ 5,333 0 0 0 0 0 0 4 9,571 9,571 4 21,355 21,355 2 6,953 6,953 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 6 $ 16,524 $ 16,524 5 $ 26,688 $ 26,688 $ $ $ $
development $ $ $ $ 20182019 and 2017,2018, segregated by class of loans: Troubled Debt Restructurings For the Six Months Ended June 30, 2018 June 30, 2017 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 0 $ 0 $ 0 1 $ 5,333 $ 5,333 0 0 0 0 0 0 4 9,571 9,571 8 24,107 24,032 2 6,953 6,953 0 0 0 0 0 0 1 1,456 1,437 0 0 0 0 0 0 0 0 0 0 0 0 6 $ 16,524 $ 16,524 10 $ 30,896 $ 30,802 $ $ $ $ $ $ $ $ boththe second quarter of 2019, $4,743 of restructured loans were modified by a change in terms. For the first six months of 2019, $ of restructured loans were modified by a change in loan terms. During the second quarter and first six months of 2017, $26,688 and $30,802, respectively, of restructured loans were modified by a change in loan terms. 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. $ $ periodsperiod ended June 30, 2018 and 2017 subsequently defaulted, resulting in a principalcharge-off during the second quarter and first six months of 2018 and 2017, respectively.20182019 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 $ 13,261 $ 18,602 $ 31,863 $ 1,334,951 $ 1,366,814 $ 1,377 14,118 16,924 31,042 4,404,868 4,435,910 1,301 9,598 54,562 64,160 2,145,031 2,209,191 2,313 37,135 28,705 65,840 3,234,632 3,300,472 9,866 2,910 17,345 20,255 1,376,598 1,396,853 802 427 165 592 9,125 9,717 165 6,618 969 7,587 802,464 810,051 682 $ 84,067 $ 137,272 $ 221,339 $ 13,307,669 $ 13,529,008 $ 16,506 $ $ $ $ $ $ $ $ $ $ $ $ (1) $168,497 $ Commercial real estate: Owner-occupied $ 9,224 $ 17,742 $ 26,966 $ 1,264,824 $ 1,291,790 $ 629 Nonowner-occupied 16,108 18,092 34,200 4,269,413 4,303,613 1,171 Other commercial 13,556 46,040 59,596 1,898,045 1,957,641 2,850 Residential real estate 37,111 30,278 67,389 3,434,004 3,501,393 9,141 8,462 19,412 27,874 1,382,594 1,410,468 680 Consumer: Bankcard 657 177 834 9,369 10,203 177 Other consumer 8,909 1,243 10,152 944,272 954,424 893 Total $ 94,027 $ 132,984 $ 227,011 $ 13,202,521 $ 13,429,532 $ 15,541 (1) Other includes loans with a recorded investment of $149,737 acquired and accounted for under ASC Topic 310-30 “Loans and Debt Securities Acquired with Deteriorated Credit Quality”. Age Analysis of Past Due LoansAs of December 31, 2017(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 $ 7,968 $ 13,663 $ 21,631 $ 1,339,998 $ 1,361,629 $ 458 10,398 20,448 30,846 4,420,452 4,451,298 634 11,533 68,476 80,009 1,918,970 1,998,979 940 35,300 28,637 63,937 2,932,234 2,996,171 6,519 1,615 17,190 18,805 1,486,102 1,504,907 385 449 186 635 9,679 10,314 186 9,288 968 10,256 693,783 704,039 775 $ 76,551 $ 149,568 $ 226,119 $ 12,801,218 $ 13,027,337 $ 9,897 (1)Other includes loans with a recorded investment of $210,521 acquired and accounted for under ASC Topic310-30 “Loans and Debt Securities Acquired with Deteriorated Credit Quality”. June 30,
2018 December 31,
2017 $ 17,225 $ 13,205 15,623 19,814 52,249 67,536 18,839 22,118 16,543 16,805 0 0 287 193 $ 120,766 $ 139,671 Commercial real estate: Owner-occupied $ 16,467 $ 17,113 Nonowner-occupied 16,965 16,921 Other commercial 44,098 43,190 Residential real estate 25,349 21,137 Construction & land development 16,588 18,732 Consumer: Bankcard 0 0 Other consumer 242 350 Total $ 119,709 $ 117,443 information,information, by class of loans: Commercial Real Estate Other
Commercial Construction
& Land
Development Owner-
occupied Nonowner-
occupied $ 1,279,444 $ 4,282,361 $ 2,100,084 $ 1,312,907 31,737 56,404 16,523 4,402 55,633 97,145 89,566 79,544 0 0 3,018 0 $ 1,366,814 $ 4,435,910 $ 2,209,191 $ 1,396,853 Commercial Real Estate Other
Commercial Construction &
Land
Development Owner-
occupied Nonowner-
occupied $ 1,276,088 $ 4,312,985 $ 1,848,868 $ 1,413,706 20,165 57,618 55,564 5,196 65,376 80,695 90,625 86,005 0 0 3,922 0 $ 1,361,629 $ 4,451,298 $ 1,998,979 $ 1,504,907
Commercial
occupied
occupied $ $ $ $ $ $ $ $
Commercial
Development
occupied
occupied $ $ $ $ $ $ $ $ Residential
Real Estate Bankcard Other
Consumer $ 3,239,999 $ 9,125 $ 802,394 25,077 427 6,671 35,396 165 986 0 0 0 $ 3,300,472 $ 9,717 $ 810,051 Residential
Real Estate Bankcard Other
Consumer $ 2,945,266 $ 9,679 $ 693,727 18,025 449 9,334 32,880 186 978 0 0 0 $ 2,996,171 $ 10,314 $ 704,039
Real Estate
Consumer $ $ $ $ $ $
Real Estate
Consumer $ $ $ $ $ $ informationinformation and 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 Impaired Loans June 30, 2018 December 31, 2017 Recorded
Investment Unpaid
Principal
Balance Related
Allowance Recorded
Investment Unpaid
Principal
Balance Related
Allowance $ 72,883 $ 73,343 $ 0 $ 78,117 $ 78,419 $ 0 99,098 99,159 0 134,136 134,195 0 52,375 61,377 0 46,993 49,552 0 24,315 25,078 0 26,751 28,202 0 45,497 50,132 0 52,279 59,691 0 0 0 0 0 0 0 23 23 0 15 15 0 $ 4,766 $ 4,766 $ 978 $ 9,132 $ 9,132 $ 2,251 10,463 10,463 1,693 7,797 7,797 1,592 44,671 50,278 14,676 60,512 70,396 16,721 12,097 13,539 1,460 9,813 10,418 1,552 Impaired Loans June 30, 2018 December 31, 2017 Recorded
Investment Unpaid
Principal
Balance Related
Allowance Recorded
Investment Unpaid
Principal
Balance Related
Allowance 2,001 4,654 277 1,383 1,383 229 0 0 0 0 0 0 0 0 0 0 0 0 $ 77,649 $ 78,109 $ 978 $ 87,249 $ 87,551 $ 2,251 109,561 109,622 1,693 141,933 141,992 1,592 97,046 111,655 14,676 107,505 119,948 16,721 36,412 38,617 1,460 36,564 38,620 1,552 47,498 54,786 277 53,662 61,074 229 0 0 0 0 0 0 23 23 0 15 15 0 Impaired Loans For the Three Months Ended June 30, 2018 June 30, 2017 Average
Recorded
Investment Interest
Income
Recognized Average
Recorded
Investment Interest
Income
Recognized $ 74,330 $ 354 $ 69,670 $ 412 108,343 159 109,003 168 52,384 246 58,597 226 24,220 85 20,713 54 46,909 98 36,182 83 0 0 0 0 32 0 36 0 $ 5,319 $ 6 $ 14,102 $ 159 9,503 60 14,147 12 46,376 10 72,568 157 11,992 11 15,485 34 2,008 20 2,587 21 0 0 0 0 0 0 0 0 $ 79,649 $ 360 $ 83,772 $ 571 117,846 219 123,150 180 98,760 256 131,165 383 36,212 96 36,198 88 48,917 118 38,769 104 0 0 0 0 32 0 36 0 Impaired Loans For the Six Months Ended June 30, 2018 June 30, 2017 Average
Recorded
Investment Interest
Income
Recognized Average
Recorded
Investment Interest
Income
Recognized $ 75,592 $ 739 $ 62,615 $ 837 116,941 328 105,045 347 50,587 470 53,076 496 25,064 180 21,468 103 48,699 197 35,903 164 0 0 0 0 26 0 36 0 $ 6,590 $ 31 $ 9,997 $ 318 8,934 119 15,411 87 51,088 28 63,783 622 11,266 21 14,345 83 1,800 40 3,372 42 0 0 0 0 0 0 0 0 $ 82,182 $ 770 $ 72,612 $ 1,155 125,875 447 120,456 434 101,675 498 116,859 1,118 36,330 201 35,813 186 50,499 237 39,275 206 0 0 0 0 26 0 36 0
Investment
Principal
Balance
Allowance
Investment
Principal
Balance
Allowance $ $ $ $ $ $ $ $ $ $ $ $ Consumer: Bankcard 0 0 0 0 0 0 Other consumer 0 0 0 0 0 0 Commercial real estate: Owner-occupied $ $ 78,209 $ 1,390 $ 73,637 $ 73,802 $ 2,542 Nonowner-occupied 60,665 1,524 114,565 114,624 2,715 Other commercial 105,729 7,805 101,557 113,271 17,581 Residential real estate 48,792 1,390 47,830 51,343 3,265 Construction & land development 59,453 1,954 51,916 59,905 2,254 Consumer: Bankcard 0 0 0 0 0 0 Other consumer 31 31 0 27 27 0
Recorded
Investment
Income
Recognized
Recorded
Investment
Income
Recognized $ $ $ $ $ $ $ $ $ $ $ $
Recorded
Investment
Income
Recognized
Recorded
Investment
Income
Recognized $ $ $ $ $ $ $ $ $ $ $ $ 20182019 and December 31, 2017,2018, other real estate owned (“OREO”) included in other assets in the Consolidated Balance Sheets was $21,926$14,469 and $24,348,$16,865, 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 June 30, 20182019 and December 31, 2017,2018, the recorded investment of consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings are in process was $1,587$288 and $873,$520, respectively.6.paymentspayment receivable are initially recorded at fair value (as determined by the present value of expected future cash flows) with no valuation allowance. The difference between 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 payments 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 six months ended June 30, 2018,2019, there-estimation amount of the expected cash flowsprovision for loan losses related to loans acquired that have evidence of deterioration of credit quality resulted in provision for loan losses expense of $801$1,631 and $2,080,$3,268, respectively, as compared to a reversal of provision for loan losses expense of $738$801 and $371,$2,080, respectively, for the three and six months ended June 30, 2017.$927$1,752 and $679$1,389 at June 30, 20182019 and December 31, 2017,2018, 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 as the allowance for credit losses.2018 Commercial Real Estate Construction Allowance
for Owner-
occupied Nonowner-
occupied Other
Commercial Residential
Real Estate & Land
Development Consumer Estimated
Imprecision Total $ 3,719 $ 6,774 $ 46,917 $ 10,253 $ 6,429 $ 2,391 $ 170 $ 76,653 728 314 5,795 82 72 721 0 7,712 690 17 984 94 9 196 0 1,990 (468 ) (294 ) 6,085 115 226 553 (13 ) 6,204 $ 3,213 $ 6,183 $ 48,191 $ 10,380 $ 6,592 $ 2,419 $ 157 $ 77,135 $ $ $ $ $ $ $ $ ) ) ) ) $ $ $ $ $ $ $ $ 2018 Commercial Real Estate Construction Owner-
occupied Nonowner-
occupied Other
Commercial Residential
Real Estate & Land
Development Consumer Estimated
Imprecision Total $ 5,401 $ 6,369 $ 45,189 $ 9,927 $ 7,187 $ 2,481 $ 73 $ 76,627 1,743 314 8,663 992 532 1,326 0 13,570 745 153 1,090 358 11 339 0 2,696 (1,190 ) (25 ) 10,575 1,087 (74 ) 925 84 11,382 $ 3,213 $ 6,183 $ 48,191 $ 10,380 $ 6,592 $ 2,419 $ 157 $ 77,135 $ 978 $ 1,693 $ 14,676 $ 1,460 $ 277 $ 0 $ 0 $ 19,084 $ 2,235 $ 4,490 $ 33,515 $ 8,920 $ 6,315 $ 2,419 $ 157 $ 58,051 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 1,366,814 $ 4,435,910 $ 2,209,191 $ 3,300,472 $ 1,396,853 $ 819,768 $ 0 $ 13,529,008 $ 30,134 $ 21,653 $ 79,980 $ 15,185 $ 16,892 $ 0 $ 0 $ 163,844 $ 1,305,807 $ 4,337,381 $ 2,103,205 $ 3,272,737 $ 1,357,792 $ 819,745 $ 0 $ 13,196,667 $ 30,873 $ 76,876 $ 26,006 $ 12,550 $ 22,169 $ 23 $ 0 $ 168,497 $ $ $ $ $ $ $ $ ) ) ) ) $ $ $ $ $ $ $ $
occupied
occupied
Commercial
Real Estate
Development
Imprecision $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 2017 Commercial Real Estate Construction Allowance
for 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 2,246 296 21,189 2,973 3,337 2,822 0 32,863 2,599 244 3,395 601 726 748 0 8,313 (225 ) (462 ) 29,896 (1,471 ) (808 ) 1,750 (274 ) 28,406 $ 5,401 $ 6,369 $ 45,189 $ 9,927 $ 7,187 $ 2,481 $ 73 $ 76,627 $ 2,251 $ 1,592 $ 16,721 $ 1,552 $ 229 $ 0 $ 0 $ 22,345 $ 3,150 $ 4,777 $ 28,468 $ 8,375 $ 6,958 $ 2,481 $ 73 $ 54,282 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 1,361,629 $ 4,451,298 $ 1,998,979 $ 2,996,171 $ 1,504,907 $ 714,353 $ 0 $ 13,027,337 $ 36,721 $ 21,851 $ 78,715 $ 14,316 $ 16,921 $ 0 $ 0 $ 168,524 $ 1,291,379 $ 4,320,997 $ 1,892,706 $ 2,967,666 $ 1,461,206 $ 714,338 $ 0 $ 12,648,292 $ 33,529 $ 108,450 $ 27,558 $ 14,189 $ 26,780 $ 15 $ 0 $ 210,521 7.2018 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $
evaluated for impairment $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $
for
occupied
occupied
Commercial
Real Estate
Development
Imprecision $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ June 30, 2018 Community Banking Mortgage Banking Total Gross
Carrying
Amount Accumulated
Amortization Gross
Carrying
Amount Accumulated
Amortization Gross
Carrying
Amount Accumulated
Amortization $ 98,359 ($ 58,473 ) $ 0 ($ 0 ) $ 98,359 ($ 58,473 ) $ 0 $ 1,080 $ 1,080 $ 1,472,699 $ 5,315 $ 1,478,014 December 31, 2017 Community Banking Mortgage Banking Total Gross
Carrying
Amount Accumulated
Amortization Gross
Carrying
Amount Accumulated
Amortization Gross
Carrying
Amount Accumulated
Amortization $ 98,359 ($ 54,453 ) $ 0 $ 0 $ 98,359 ($ 54,453 ) $ 0 $ 1,080 $ 1,080 $ 1,473,265 $ 5,115 $ 1,478,380 ��
Carrying
Amount
Amortization
Carrying
Amount
Amortization
Carrying
Amount
Amortization $ $ ) $ $ $ $ ) $ $ $ $ $ $
Carrying
Amount
Amortization
Carrying
Amount
Amortization
Carrying
Amount
Amortization $ $ ) $ $ $ $ ) $ $ $ $ $ $ Community
Banking Mortgage
Banking Total $ 1,473,265 $ 5,115 $ 1,478,380 (566 ) 200 (366 ) $ 1,472,699 $ 5,315 $ 1,478,014
Banking
Banking $ $ $ $ $ $ respectively, and $2,093 and $3,141 for the quarter and six months ended June 30, 2017, respectively.2017: Amount $ 8,039 7,016 6,309 5,369 17,173 $ $ $ ) ) $ $ $ $ % $ $
liabilities $ $ ) ) $ $ 2018,2019, United did were $14,000 while total securities sold under agreements to repurchase (REPOs) were $185,507.$2018,2019, United had2018,2019, United had an unused borrowing amount of approximately $3,579,159$3,905,439 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.2018, $1,560,3652019, $1,548,032 of FHLB advances with a weighted-average interest rate of 1.97%2.22% are scheduled to mature within the next sevensix years.Year Amount $ 1,246,776 187,370 41,896 52,547 31,776 $ 1,560,365 $ $ 2018,2019, United had a total of fourteen 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 June 30, 20182019 and December 31, 2017,2018, the outstanding balance of the Debentures was $234,276$235,535 and $242,446,$234,905, respectively,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 less than $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.$3,899,439$3,909,612 and $4,224,719$3,826,370 of loan commitments outstanding as of June 30, 20182019 and December 31, 2017,2018, respectively, the majorityapproximately half of which contractually expire within one year. Included in the June 30, 20182019 amount are commitments to extend credit of $324,487$354,996 related to George Mason’s mortgage loan funding commitments and are of a short-term nature.2018 and2017,2018, United had$145,778$133,930 and $147,017$141,032 as of June 30, 20182019 and December 31, 2017,2018, 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.$516$946 as of June 30, 2018.the Derivatives and Hedging topic of the FASB Accounting Standards Codification (ASCASC Topic 815). The Derivatives and Hedging topic require815 which requires 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.offsetrecorded in currentincome in the same period earnings.and in the same income statement line as changes in the fair values of the hedged items that relate to the hedged risk(s). For a cash flow hedge, the fair value of the interest rate swap is recognized on the balance sheet as either a freestanding asset or liability with a corresponding adjustment to other comprehensive income within shareholders’ equity, net of tax. Subsequent adjustments due to changes in the fair value of a derivative that qualifies as a cash flow hedge are offset torecorded as a component of other comprehensive income, net of tax.deferred taxes, and reclassified to earnings when the hedged transaction affects earnings. The portion of a hedge that is ineffective is recognized immediately in earnings.amountamount and fair value of those instruments at June 30, 20182019 and December 31, 2017. Asset Derivatives June 30, 2018 December 31, 2017 Balance
Sheet
Location Notional
Amount Fair
Value Balance
Sheet
Location Notional
Amount Fair
Value Other assets $ 87,672 $ 3,329 Other assets $ 71,831 $ 538 $ 87,672 $ 3,329 $ 71,831 $ 538 Other assets $ 22,107 $ 112 Other assets $ 31,024 $ 2 Other assets 182,030 6,541 Other assets 148,866 4,559 $ 204,137 $ 6,653 $ 179,890 $ 4,561 $ 291,809 $ 9,982 $ 251,721 $ 5,099 Liability Derivatives June 30, 2018 December 31, 2017 Balance
Sheet
Location Notional
Amount Fair
Value Balance
Sheet
Location Notional
Amount Fair
Value Other liabilities $ 0 $ 0 Other liabilities $ 18,795 $ 165 $ 0 $ 0 $ 18,795 $ 165 Other liabilities $ 343,000 $ 1,422 Other liabilities $ 236,500 $ 312 Other liabilities 0 0 Other liabilities 0 0 $ 343,000 $ 1,422 $ 236,500 $ 312 $ 343,000 $ 1,422 $ 255,295 $ 477 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $
of Condition
of the Hedged
Assets/(Liabilities)
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 $ $ ) $ 20182019 and 20172018 are presented as follows: Three Months Ended Income Statement
Location June 30,
2018 June 30,
2017 Interest income/(expense) $ 24 $ (282 ) $ 24 $ (282 ) Income from Mortgage
Banking Activities
112 (170 ) Income from Mortgage
Banking Activities
(660 ) 2,784 Income from Mortgage
Banking Activities
2,888 1,019 $ 2,340 $ 3,633 $ 2,364 $ 3,351 Six Months Ended Income Statement
Location June 30,
2018 June 30,
2017 Interest income/(expense) $ (18 ) $ (440 ) Other income 0 0 $ (18 ) $ (440 ) Income from Mortgage
Banking Activities
185 (170 ) Income from Mortgage
Banking Activities
(1,110 ) 2,784 Income from Mortgage
Banking Activities
1,619 1,019 $ 694 $ 3,633 $ 676 $ 3,193
2019
2018 $ ) $ $ ) $ ) ) $ $ $ $
2019
2018 $ ) $ ) $ ) $ ) ) ) $ $ $ $ MEASUREMENTStopicTopic specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect United’s market assumptions.Level 1 - Level 2 - Level 3 - from various sources and may determine the fair value of identical or similar securities by using pricing models that considersbased on observable market datainputs, 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 June 30, 2018,2019, management determined that the prices provided by its third party pricing source 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 by management at 2018.3.available-for-saleavailable for sale Trup Cdos as Level 3.usingas management has elected the fair value option which is measured using valuations from investors for loans with similar characteristics adjusted for the Company’s actual sales experience versus the investor’s indicated pricing. These valuations fall into the Level 3 category. The unobservable input is the Company’s historical sales prices. The range of historical sales prices increased the investor’s indicated pricing by a range of 0.18%0.16% to 0.65%0.71% with a weighted average increase of 0.34%0.33%.“lock-in” “lock-in” a specified12 category. The forward sales contracts lock in an interest rate and price for the sale of loans similar to the specific rate lock commitments. Under the Company’s best efforts model, the rate lock commitments to borrowers and the forward sales contracts to investors through to the date the loan closes are undesignated derivatives and accordingly, are marked to fair value through earnings. These valuations fall into a Level 2 category. For residential mortgage loans sold in the mortgage banking segment, the interest rate lock commitments are recorded at fair value which is measured using valuations from investors for loans with similar characteristics adjusted for the Company’s actual sales experience versus the investor’s indicated pricing. These valuations fall into the Level 3 category. The unobservable input is the Company’s historical sales prices. The range of historical sales prices increased the investor’s indicated pricing by a range of 0.18%0.16% to 0.65%0.71% with a weighted average increase of 0.34%0.33%.20182019 and December 31, 2017,2018, segregated by the level of the valuation inputs within the fair value hierarchy. Fair Value at June 30, 2018 Using Balance as of
June 30,
2018 Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1) Significant
Other
Observable
Inputs
(Level 2) Significant
Unobservable
Inputs
(Level 3) $ 143,815 $ 0 $ 143,815 $ 0 272,180 0 272,180 0 890,129 0 890,129 0 4,794 0 4,794 0 501,403 0 501,403 0 166,131 0 166,131 0 5,818 0 0 5,818 Fair Value at June 30, 2018 Using Balance as of
June 30,
2018 Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1) Significant
Other
Observable
Inputs
(Level 2) Significant
Unobservable
Inputs
(Level 3) 8,238 0 8,238 0 68,419 6,940 61,479 0 2,060,927 6,940 2,048,169 5,818 175 175 0 0 4,856 4,856 0 0 4,633 4,633 0 0 9,664 9,664 0 0 282,439 0 0 282,439 3,329 0 3,329 0 112 0 112 0 6,541 0 0 6,541 9,982 0 3,441 6,541 1,422 0 1,422 0 1,422 0 1,422 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, 2017 Using Balance as of
December 31,
2017 Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1) Significant
Other
Observable
Inputs
(Level 2) Significant
Unobservable
Inputs
(Level 3) $ 114,758 $ 0 $ 114,758 $ 0 303,869 0 303,869 0 814,593 0 814,593 0 5,512 0 5,512 0 454,857 0 454,857 0 109,970 0 109,970 0 34,269 0 0 34,269 12,560 0 12,560 0 28,490 0 28,490 0 1,878,878 0 1,844,609 34,269 3,545 331 3,214 0 6,332 6,332 0 0 Fair Value at December 31, 2017 Using Balance as of
December 31,
2017 Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1) Significant
Other
Observable
Inputs
(Level 2) Significant
Unobservable
Inputs
(Level 3) 1 1 0 0 9,878 6,664 3,214 0 1,888,756 6,664 1,847,823 34,269 263,308 0 0 263,308 538 0 538 0 4,561 0 2 4,559 5,099 0 540 4,559 165 0 165 0 312 0 312 0 477 0 477 0 (1) Assets Available for sale debt securities: U.S. Treasury securities and obligations of U.S. Government corporations and agencies $ 85,890 $ 0 $ 85,890 $ 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. 20182019 and the year ended December 31, 2017.20182019 and December 31, 20172018 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 June 30,
2018 December 31,
2017 $ 34,269 $ 33,552 28 9 821 8,757 0 0 (29,300 ) (8,049 ) 0 0 $ 5,818 $ 34,269 $ 0 $ 0 Loans held for sale June 30,
2018 December 31,
2017 $ 263,308 $ 0 0 271,301 1,448,225 2,333,927 (1,440,029 ) (2,408,945 ) 38,351 58,132 (27,416 ) 8,893 $ 282,439 $ 263,308 $ 0 $ 0 Derivative Financial Assets
Interest Rate Lock Commitments June 30,
2018 December 31,
2017 $ 4,559 $ 0 0 10,393 1,982 (5,834 ) $ 6,541 $ 4,559 $ 0 $ 0
2018 Balance, beginning of period $ 5,917 $ 34,269 Total gains or losses (realized/unrealized): Included in earnings (or changes in net assets) (53 ) 28 ) ) $ $ $ $
2018 $ $ ) ) ) $ $ The amount of total gains or losses for the period included in earnings (or changes in net assets) attributable to the change in unrealized gains or losses relating to assets still held at reporting date $ 0 $ 0 Balance, beginning of period $ 4,103 $ 4,559 Transfers other 4,024 (456 ) Balance, end of period $ 8,127 $ 4,103 The amount of total gains or losses for the period included in earnings (or changes in net assets) attributable to the change in unrealized gains or losses relating to assets still held at reporting date $ 0 $ 0 Three Months Ended
June 30, 2018 Three Months Ended
June 30, 2017 $ 3,929 $ (2,439 ) Six Months Ended
June 30, 2018 Six Months Ended
June 30, 2017 $ 3,092 $ (2,439 ) Assets Loans held for sale Income from mortgage banking activities $ 4,578 $ 3,929 Assets Loans held for sale Income from mortgage banking activities $ 6,542 $ 3,092 June 30, 2018 December 31, 2017 Unpaid
Principal
Balance Fair Value Fair Value
Over/(Under)
Unpaid
Principal
Balance Unpaid
Principal
Balance Fair Value Fair Value
Over/(Under)
Unpaid
Principal
Balance $ 275,693 $ 282,439 $ 6,746 $ 257,674 $ 263,308 $ 5,634
Principal
Balance
Over/(Under)
Unpaid
Principal
Balance
Principal
Balance
Over/(Under)
Unpaid
Principal
Balance $ $ $ $ $ $ 2018.2019. Gains and losses on sale of loans are recorded within income from mortgage banking activities on the Consolidated Statements of Income.20182019 and 2017. Carrying value at June 30, 2018 Balance as of
June 30,
2018 Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1) Significant
Other
Observable
Inputs
(Level 2) Significant
Unobservable
Inputs
(Level 3) YTD
Losses $ 2,755 $ 0 $ 2,755 $ 0 $ 0 73,997 0 65,174 8,823 1,581 21,926 0 21,747 179 825 Carrying value at December 31, 2017 Balance as of
December 31,
2017 Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1) Significant
Other
Observable
Inputs
(Level 2) Significant
Unobservable
Inputs
(Level 3) YTD
Losses $ 2,647 $ 0 $ 2,647 $ 0 $ 14 88,637 0 70,950 17,687 12,291 24,348 0 24,151 197 4,200 $ $ $ $ $ ) ) $ $ $ $ $ ) ) ) Loans: For June 30, 2018, fair values of loans are estimated on an exit price basis incorporating discounts for credit, liquidity and marketability factors. This is not comparable with the fair values disclosed for December 31, 2017, which were based on an entrance price basis. For that date, thewereare based on quoted market prices of similar loans sold in conjunction with securitization transactions, adjusted for differences in loan characteristics. The fair values of other loans (e.g., commercial real estate and rental property mortgage loans, commercial and industrial loans, financial institution loans and agricultural loans) wereare estimated using discounted cash flow analyses, using market interest rates currently being offered at that time for loans with similar terms to borrowers of similar creditworthiness, which includedinclude adjustments for liquidity concerns. For acquired impaired loans, fair value wasis assumed to equal United’s carrying value, which representedrepresents the present value of expected future principal and interest cash flows, as adjusted for any Allowance for Loan 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) $ 1,092,926 $ 1,092,926 $ 0 $ 1,092,926 $ 0 2,060,927 2,060,927 6,940 2,048,169 5,818 20,378 19,708 0 19,708 0 9,664 9,664 9,664 0 0 175,334 166,568 0 0 166,568 285,194 285,194 0 2,755 282,439 13,439,494 12,582,256 0 0 12,582,256 9,882 9,882 0 3,441 6,541 13,830,766 13,789,447 0 13,789,447 0 199,507 199,507 0 199,507 0 1,794,641 1,767,186 0 1,767,186 0 1,422 1,422 0 1,422 0 $ 1,666,167 $ 1,666,167 $ 0 $ 1,666,167 $ 0 1,888,756 1,888,756 6,664 1,847,823 34,269 20,428 20,018 0 16,998 3,020 162,461 154,338 0 0 154,338 265,955 265,955 0 2,647 263,308 12,934,794 12,437,797 0 0 12,437,797 5,099 5,099 0 540 4,559 13,830,591 14,024,720 0 14,024,720 0 477,587 477,587 0 477,587 0 1,363,977 1,338,754 0 1,338,754 0 477 477 0 477 0
Amount $ $ $ $ $ $ $ $ $ $ 1,200,000. 100,000. 10,000. During the first six months$1,024 $$1,992 $ 2018,$998 $$1,680 $ 2017,(10)(2018,2019, and the changes during the first six months of 20182019 are presented below: Six Months Ended June 30, 2018 Weighted Average Shares Aggregate
Intrinsic
Value Remaining
Contractual
Term (Yrs.) Exercise
Price 1,558,438 $ 31.09 276,192 37.60 (42,089 ) 21.72 (15,389 ) 33.17 1,777,152 $ 9,902,605 6.0 $ 32.30 1,191,092 $ 9,780,319 4.6 $ 28.73
Intrinsic
Value
Contractual
Term (Yrs.)
Price $ ) ) $ $ $ $ 2018: Shares Weighted-Average
Grant Date Fair Value
Per Share 507,871 $ 7.89 276,192 7.56 (187,815 ) 7.53 (10,188 ) 7.61 586,060 $ 7.86
Grant Date Fair Value
Per Share $ ) ) $ 2017, 42,089 and 126,808 shares, respectively, were issued in connection with stock option exercises. All shares issued in connection with stock option exercises for the six months ended June 30, 20182019 and 20172018 were issued from authorized and unissued stock. The total intrinsic value of options exercised under the Plans during the six months ended June 30, 2019 and 2018 was $713 and 2017 was $630 and $2,501 respectively. four-year2018: Number of
Shares Weighted-Average
Grant Date Fair Value
Per Share 170,496 $ 40.05 97,004 37.60 (62,411 ) 37.59 (2,853 ) 37.97 202,236 $ 39.66
Shares
Grant Date Fair Value
Per Share $ ) ) $ a majority of allqualified employees. 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. During the first quarterhalf of 2018, United made a discretionary contributioncontributions of $7,000 to$Plan.20172018 are unrecognized actuarial losses of $56,222 ($35,420 $20182019 is $4,653 ($2,932 $20182019 and 20172018 included the following components: Three Months Ended
June 30 Six Months Ended
June 30 2018 2017 2018 2017 $ 666 $ 569 $ 1,324 $ 1,131 1,308 1,279 2,603 2,544 (2,551 ) (2,049 ) (5,073 ) (4,076 ) 1,162 1,100 2,311 2,187 $ 585 $ 899 $ 1,165 $ 1,786 3.83 % 4.49 % 3.83 % 4.49 % 7.00 % 7.00 % 7.00 % 7.00 % 3.50 % 3.50 % 3.50 % 3.50 % 3.00 % 3.00 % 3.00 % 3.00 % $ $ $ $ ) ) ) ) $ $ $ $ % % % % % % % % 3.50 % % % % 3.00 % % % % 20182019 and 2017,2018, the total amount of accrued interest related to uncertain tax positions was $721 $$609,$2014, 2015, 2016 and 20162017 and certain State Taxing authorities for the years ended December 31, 20142015 through 2016.On December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Act”) was signed into law. The Tax Act lowered the Federal corporate tax rate from 35% to 21% effective January 1, 2018 and made numerous other tax law changes. U.S. generally accepted accounting principles (GAAP) requires companies to recognize the effect of tax law changes in the period of enactment. As a result of the Tax Act, United was required to remeasure deferred tax assets and liabilities at the new tax rate and as a result, recorded deferred tax expense of $37,732 in the fourth quarter of 2017. Reasonable estimates were made based on the Company’s analysis of the Tax Act. This provisional amount may be adjusted in future periods during 2018 when additional information is obtained as provided for under Staff Accounting Bulletin 118 (“SAB 118”). Additional information that may affect our provisional amount would include further clarification and guidance on how the IRS will implement tax reform, further clarification and guidance on how state taxing authorities will implement tax reform and the related effect on the Company’s state income tax returns, completion of United’s 2017 tax return filings, and the potential for additional guidance from the SEC or the FASB related to the Tax Act. Management continues to evaluate other potential impacts of the Tax Act. The Company did not identify items for which the income tax effects of the Tax Act have not been completed and a reasonable estimate could not be determined as of June 30, 2018. 22.50% 22.49%20182019 and 34.25% for both the second quarter first six months of 2017. The lower effective tax rate2018 was due mainly to the Tax Act.20182019 and 20172018 are as follows: Three Months Ended Six Months Ended June 30 June 30 2018 2017 2018 2017 $ 66,274 $ 37,059 $ 127,980 $ 75,868 0 (16 ) 0 (60 ) 0 6 0 22 0 16 0 60 0 (6 ) 0 (22 ) 0 0 0 0 0 (0 ) 0 (0 ) 0 0 0 0 (10,684 ) 5,686 (32,701 ) 11,262 4,162 (2,104 ) 9,292 (4,167 ) 27 (763 ) 176 (977 ) (6 ) 282 (41 ) 361 (6,501 ) 3,101 (23,274 ) 6,479 (6,501 ) 3,101 (23,274 ) 6,479 2 2 4 4 (1 ) (1 ) (2 ) (2 ) 1 1 2 2 1,162 1,100 2,311 2,187 (110 ) (405 ) (526 ) (797 ) 1,052 695 1,785 1,390 (5,448 ) 3,797 (21,487 ) 7,871 $ 60,826 $ 40,856 $ 106,493 $ 83,739 $ $ $ $ Available for sale (“AFS”) securities: AFS securities with OTTI charges during the period (75 ) 0 (75 ) 0 Related income tax effect 17 0 17 0 Less: OTTI charges recognized in net income 75 0 75 0 Related income tax benefit (17 ) 0 (17 ) 0 Reclassification of previous noncredit OTTI to credit OTTI 2,188 0 2,188 0 Related income tax benefit (510 ) 0 (510 ) 0 Net unrealized (losses) gains on AFS securities with OTTI 1,678 0 1,678 0 AFS securities – all other: Change in net unrealized gain on AFS securities arising during the period 21,141 (10,684 ) 43,379 (32,701 ) Related income tax effect (4,925 ) 4,162 (10,107 ) 9,292 Net reclassification adjustment for (gains) losses included in net income 130 27 (218 ) 176 Related income tax expense (benefit) (30 ) (6 ) 51 (41 ) 16,316 (6,501 ) 33,105 (23,274 ) ) ) 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 0 2 0 4 Related income tax expense (0 ) (1 ) (0 ) (2 ) Pension plan: Recognized net actuarial loss 1,184 1,162 2,355 2,311 Related income tax benefit (275 ) (110 ) (536 ) (526 ) ) ) $ $ $ $ 20182019 are as follows:20182019 Unrealized
Gains/Losses
on AFS
Securities Accretion on
the unrealized
loss for
securities
transferred
from AFS to
the HTM Defined
Benefit
Pension
Items Total ($ 6,204 ) ($ 46 ) ($ 35,775 ) ($ 42,025 ) (136 ) 0 0 (136 ) (1,632 ) 0 (4,721 ) (6,353 ) (23,409 ) 2 0 (23,407 ) 135 0 1,785 1,920 (23,274 ) 2 1,785 (21,487 ) ($ 31,246 ) ($ 44 ) ($ 38,711 ) ($ 70,001 )
Gains/Losses
on AFS
Securities
the unrealized
loss for
securities
transferred
from AFS to
the HTM
Benefit
Pension ($ ) ($ ) ($ ) ($ ) $ $ ($ ) ($ ) (a) EndedEnded June 30, 20182019 Amount
Reclassified
from AOCI
to credit OTTI $ 0 Net investment securities (losses) gains
(gains) included in net income 176 Net investment securities (losses) gains 176 Total before tax (41 ) Tax expense 135 Net of tax 2,311 (a) 2,311 Total before tax (526 ) Tax expense 1,785 Net of tax $ 1,920
Reclassified
from AOCI $ ) ) (a) ) $ (a) computation of net periodic pension cost (see Note 14, Employee Benefit Plans) Three Months Ended Six Months Ended June 30 June 30 2018 2017 2018 2017 $ 35,516 $ 34,562 $ 71,195 $ 61,284 30,637 2,440 56,557 14,454 $ 66,153 $ 37,002 $ 127,752 $ 75,738 104,682,910 99,197,807 104,770,681 90,100,627 269,878 422,238 287,333 469,662 104,952,788 99,620,045 105,058,014 90,570,289 $ 0.63 $ 0.37 $ 1.22 $ 0.84 $ 0.63 $ 0.37 $ 1.22 $ 0.84 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 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% Amount of
Capital
Securities Issued 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 $ $ $ $ $ $ $ $ $ $ $ $ $ $ As of June 30, 2018 As of December 31, 2017 Aggregate
Assets Aggregate
Liabilities Risk Of
Loss(1) Aggregate
Assets Aggregate
Liabilities Risk Of
Loss(1) $ 257,518 $ 248,629 $ 8,889 $ 266,669 $ 257,674 $ 8,995 $ $ $ $ $ $ (1) Represents investment in VIEs. As a result of the Cardinal acquisition in April 2017, 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.athe 30-day LIBOR rate. In addition, the mortgage banking segment (George Mason) originates mortgage loans which are sold to the community banking segment for its loan portfolio. These intersegment transactions are eliminated in the consolidation process.20182019 and 20172018 is as follows: At and For the Three Months Ended June 30, 2018 Community
Banking Mortgage
Banking Other Intersegment
Eliminations Consolidated $ 149,448 $ 264 $ (3,032 ) $ 2,442 $ 149,122 6,204 0 0 0 6,204 17,465 23,468 68 (4,994 ) 36,007 76,495 21,225 (1,758 ) (2,552 ) 93,410 18,948 564 (271 ) 0 19,241 $ 65,266 $ 1,943 $ (935 ) $ 0 $ 66,274 $ 19,112,133 $ 388,292 $ 10,895 $ (303,717 ) $ 19,207,603 18,658,168 335,781 6,776 (288,341 ) 18,712,384 At and For the Three Months Ended June 30, 2017 Community
Banking Mortgage
Banking Other Intersegment
Eliminations Consolidated $ 138,498 $ 90 $ (2,343 ) $ 0 $ 136,245 8,251 0 0 0 8,251 18,223 22,393 (110 ) 0 40,506 78,631 18,708 14,798 0 112,137 23,920 1,293 (5,909 ) 0 19,304 $ 45,919 $ 2,482 $ (11,342 ) $ 0 $ 37,059 $ 18,984,921 $ 382,086 $ (4,807 ) $ (326,600 ) $ 19,035,600 18,070,305 236,074 (20,180 ) (103,184 ) 18,183,015 At and For the Six Months Ended June 30, 2018 Community
Banking Mortgage
Banking Other Intersegment
Eliminations Consolidated $ 295,070 $ 640 $ (5,626 ) $ 3,081 $ 293,165 11,382 0 0 0 11,382 35,235 38,351 (754 ) (5,633 ) 67,199 148,986 39,609 (2,181 ) (2,552 ) 183,862 38,224 (139 ) (945 ) 0 37,140 $ 131,713 $ (479 ) $ (3,254 ) $ 0 $ 127,980 $ 19,112,133 $ 388,292 $ 10,895 $ (303,717 ) $ 19,207,603 18,583,975 274,211 9,231 (238,796 ) 18,628,621 At and For the Six Months Ended June 30, 2017 Community
Banking Mortgage
Banking Other Intersegment
Eliminations Consolidated $ 248,158 $ 90 $ (4,383 ) $ 0 $ 243,865 14,150 0 0 0 14,150 35,036 22,393 3,223 0 60,652 141,383 18,708 14,888 0 174,979 43,724 1,293 (5,497 ) 0 39,520 $ 83,937 $ 2,482 $ (10,551 ) $ 0 $ 75,868 $ 18,984,921 $ 382,086 $ (4,807 ) $ (326,600 ) $ 19,035,600 16,415,261 118,689 (24,551 ) (205,235 ) 16,304,164
Banking
Banking $ $ $ ) $ $ ) ) ) $ $ $ ) $ $ $ $ $ $ ) $ )
Banking
Banking $ $ $ ) $ $ ) ) ) ) $ $ $ ) $ $ $ $ $ $ ) $ )
Banking
Banking $ $ $ ) $ $ ) ) ) ) $ $ $ ) $ $ $ 19,735,901 $ 442,188 $ 16,729 $ (312,279 ) $ 19,882,539 )
Banking
Banking $ $ $ ) $ $ ) ) ) ) ) ) $ $ ) $ ) $ $ $ $ $ $ ) $ ) Item 2. 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. As a result of the merger, George Mason became an indirectly-owned subsidiary of United. The Cardinal merger was accounted for under the acquisition method of accounting. At consummation, Cardinal had assets of $4.14 billion, portfolio loans of $3.31 billion and deposits of $3.34 billion.The results of operations of Cardinal are included in the consolidated results of operations from their respective dates of acquisition. As a result of the Cardinal acquisition, the second quarter and first half of 2018 was impacted by increased levels of average balances, income, and expense as compared to the second quarter and first half of 2017. In addition, the second quarter and first half of 2017 included $23.22 million and $24.45 million, respectively, of merger-related expenses from the Cardinal acquisition.2018,2019, but prior to the date these financial statements were issued, for potential recognition or disclosure required in these financial statements.a financial measuremeasures identified asincome.income and return on average tangible equity. Management believes thisthesemeasure, if significant,measures to be helpful in understanding United’s results of operations or financial position.thesethose estimates. TheseUnited’s critical accounting policies along withinvolving the disclosures presentedsignificant judgments and assumptions used 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 determinationpreparation of the allowance for credit 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 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 explained in Note 6, Allowance for Credit Losses to the unaudited Consolidated Financial Statements the allowance for loan losses represents management’s estimateas of the probable credit losses inherent in 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 June 30, 2019 were unchanged from the policies disclosed in United’s Annual Report on Formallowance for loan losses was $77.14 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 $7.71 million in additional allowance (funded by additional provision for credit losses), which would have negatively impacted the second quarter of 2018 net income by approximately $6.09 million,after-tax or $0.06 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.Investment SecuritiesAccounting estimates are used in the presentationOperations.”20182019 were $19.21$19.88 billion, which was relatively flatan increase of $632.04 million or 3.28% from December 31, 2017, increasing $148.64 million or less than 1% from December 31, 2017.2018. The slight increase was mainly due to an increase of $505.21$233.18 million or 3.88%22.85% in cash and cash equivalents, an increase of $213.04 million or 1.59% in portfolio loans.loans, and an increase of $120.75 million or 48.33% in loans held for sale. Investment securities increased $194.66 million or 9.40%. Loans held for sale increased $19.24 million or 7.23%. Cash and cash equivalents decreased $573.24 million or 34.40%. Other assets were relatively flat, increasing $3.83$19.54 million or less than 1%. In addition, United adopted the new accounting standard for leases effective January 1, 2019, as previously mentioned, resulting in a $63.11 million operating leasewere relatively flat, increasing $146.61increased $549.81 million or less than 1%3.44% from 2017.were flat, increasing $175 thousandincreased $409.34 million or less than 1%2.92%. Borrowings increased $152.58$55.30 million or 8.29%2.99% while accrued expenses and other liabilities decreased $6.40increased $17.99 million or 4.39%11.81%. As a result of the adoption of the leases accounting standard, United also recorded a $66.82 million operating lease liability as of June 30, 2019. Shareholders’ equity was relatively flat from December 31, 2017, increasing $2.04increased $82.23 million or less than 1%2.53%.2018 decreased $573.242019 increased $233.18 million or 34.40%22.85% from 2017.decrease,increase, cash and due from banks increased $34.22$10.29 million or 5.47% while interest-bearing deposits with other banks decreased $607.47increased $222.88 million or 41.36%26.80% as United usedplaced excess cash to mainly invest in securities and grow loans.an interest-bearing account with the Federal Reserve. Federal funds sold were flat.increased $10 thousand or 1.25%. During the first six months of 2018,2019, net cash of $98.50$31.79 million and $46.76$378.75 million waswere provided by operating activities and financing activities, respectively, while $718.50net cash of $177.36 million was used in investing activities. See the unaudited Consolidated Statements of Cash Flows for data on cash and cash equivalents provided and used in operating, investing and financing activities for the first six months of 20182019 and 2017.2018 increased $194.662019 were flat, increasing $19.54 million or 9.40%less than 1% from 2017.increased $172.17were flat, increasing $8.75 million or 9.12%less than 1%. This slight change in securities available for sale reflects $177.90$384.98 million in sales, maturities and calls of securities, $391.19$338.98 million in purchases, and a decreasean increase of $30.50$43.16 million in market value. The majority of the purchase activity was related to corporate securities which were all issued by investment grade rated, single-name issuers, and have maturity dates of less than five years. Securities held to maturity were flat, declining $50 thousanddeclined $13.54 million or less than 1%67.69% from 2017calls and maturitiesthe transfer of securities. $11.54 million of investment securities to available for sale securities upon the adoption of ASU No.now carried at fair value, were $9.66$9.10 million at June 30, 2018.2019, a decrease of $636 thousand or 6.53% due mainly to net sales. Other investment securities increased $12.87$24.96 million or 7.92%14.10% from 2017the purchasepurchases of Federal Home Loan Bank (FHLB)an equity security without a readily determinable fair value, investment tax credits, and FHLB stock. 2017: June 30 December 31 (Dollars in thousands) 2018 2017 $ Change % Change $ 143,815 $ 114,758 $ 29,057 25.32 % 272,180 303,869 (31,689 ) (10.43 %) 1,396,326 1,274,962 121,364 9.52 % 166,131 109,970 56,161 51.07 % 0 9,878 (9,878 ) (100.00 %) 5,818 34,269 (28,451 ) (83.02 %) 8,238 12,560 (4,322 ) (34.41 %) 68,419 28,490 39,929 140.15 % $ 2,060,927 $ 1,888,756 $ 172,171 9.12 % The following table summarizes the changes in the held to maturity securities sinceyear-end 2017: June 30 December 31 (Dollars in thousands) 2018 2017 $ Change % Change
Government corporations and agencies $ 5,132 $ 5,187 $ (55 ) (1.06 %) 5,798 5,797 1 0.02 % 21 23 (2 ) (8.70 %) 9,407 9,401 6 0.06 % 20 20 0 0.00 % $ 20,378 $ 20,428 $ (50 ) (0.24 %) $ $ $ ) %) ) %) ) %) ) %) ) %) % % $ $ $ % $ $ $ ) %) ) %) ) %) ) %) % $ $ $ ) %) 2018,2019, gross unrealized losses on available for sale securities were $45.56$8.31 million. Securities in anwith the most significant gross unrealized loss positionlosses at June 30, 20182019 consisted primarily of state and political subdivisionasset-backed securities, agency residential mortgage-backed securities, and agency commercial and residential mortgage-backedsingle issue trust preferred securities. The stateasset-backed securities are backed by FFELP student loan collateral which includes a minimum of a 97% government repayment guaranty, as well as additional credit support and political subdivisions securities relate to securities issued by various municipalities.subordination in excess of the government guaranteed portion. The agency commercial and residential mortgage-backed securities relate to commercial and residential properties and provide a guaranty of full and timely payments of principal and interest by the issuing agency.2018,2019, United’s mortgage-backed securities had an amortized cost of $1.43$1.44 billion, with an estimated fair value of $1.40$1.46 billion. The portfolio consisted primarily of $913.95$866.60 million in agency residential mortgage-backed securities with a fair value of $890.15$877.57 million, $4.31$3.60 million in$4.79$3.98 million, and $513.21$566.37 million in commercial agency mortgage-backed securities with an estimated fair value of $501.40$574.72 million.2018,2019, United’s corporate securities had an amortized cost of $259.96$635.54 million, with an estimated fair value of $257.17$633.80 million. The portfolio consisted primarily of $6.18$6.14 million in Trup Cdos with a fair value of $5.82$5.41 million and $18.15$18.18 million in single issue trust preferred securities with an estimated fair value of $16.78$16.84 million. In addition to the trust preferred securities, the Company held positions in various other corporate securities, including asset-backed securities with an amortized cost of $166.36$272.42 million and a fair value of $166.13$268.85 million and other corporate securities, with an amortized cost of $69.28$338.80 million and a fair value of $68.44$342.69 million.During the first quarter of 2018, sevenUnited’s Trup Cdos were sold and one Trup Cdo was redeemed at par.had a fair value of $5.41 million as of June 30, 2019. As of June 30, 2018,2019, all of the Trup Cdos were rated$16.78$16.84 million as of June 30, 2018.2019. Of the $16.78$16.84 million, $4.03$3.92 million or 24.02%23.28% were investment grade; $5.48$5.40 million or 32.66%32.07% were split rated; $2.29$2.28 million or 13.65%13.54% were below investment grade; and $4.98$5.24 million or 29.67%31.11% were unrated. The two largest exposures accounted for 71.05%71.97% of the $16.78$16.84 million. These included SunTrust Bank at $6.94$6.88 million and Emigrant Bank at $4.98$5.24 million. All single-issue trust preferred securities are currently receiving full scheduled principal and interest payments.2018: Moodys S&P Fitch Amortized Cost Fair Value Unrealized
Loss/
(Gain) (Dollars in thousands) NR NR WD $ 5,718 $ 4,980 $ 738 NR BBB- BBB- 3,024 3,258 (234 ) $ 8,742 $ 8,238 $ 504 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 (amortized cost balance of $7.43 million) and Royal Bank of Scotland (amortized cost balance of $976 thousand). $ $ $ ) $ $ $ 2018,2019, United did not recognize anyrecognized other-than-temporary impairment totaling $75 thousand on any of itstwo investment securities. ManagementWith the exception of these two securities, management does not believe that any other individual security with an unrealized loss as of June 30, 20182019 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. Based on a review of each of the securities in the investment portfolio, management concluded that it was not probable that it would be unable 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. However, United acknowledges that any impaired securities 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.32 to the unaudited Notes to Consolidated Financial Statements.$19.24$120.75 million or 7.23%48.33%. Loan originations exceeded sales in the secondary market exceeded sales during the first six monthshalf of 2018.2019. Loan originations for the first half of 20182019 were $1.10$1.06 billion while loans sales were $1.05 billion.$934.88 million. Loans held for sale were $285.19$370.59 million at June 30, 20182019 as compared to $265.96$249.85 million at 2017.$505.21$213.04 million or 3.88% from1.59%. Since 2017. Sinceyear-end 2017,increased $200.01decreased $97.07 million or 2.56%1.29% as commercial real estate loans decreased $161.39 million or 2.88% which was partially offset by a $64.31 million or 3.29% increase in commercial loans (not secured by real estate) increased $210.21 million while commercial real estate loans were relatively flat, decreasing $10.20 million or less than 1%. In addition, residential real estate loans increased $304.30$172.61 million or 10.16% and4.93%, consumer loans increased $105.42$81.28 million or 14.76%, due mainly to an increase in automobile loans. Partially offsetting these increases was a decrease in8.43% and construction and land development loans of $108.05increased $53.60 million or 7.18%3.80%. 2017: June 30 December 31 (Dollars in thousands) 2018 2017 $ Change % Change $ 285,194 $ 265,955 $ 19,239 7.23 % $ 1,366,814 $ 1,361,629 $ 5,185 0.38 % 4,435,910 4,451,298 (15,388 ) (0.35 %) 2,209,191 1,998,979 210,212 10.52 % $ 8,011,915 $ 7,811,906 $ 200,009 2.56 % 3,300,472 2,996,171 304,301 10.16 % 1,396,853 1,504,907 (108,054 ) 7.18 % 9,717 10,314 (597 ) (5.79 %) 810,051 704,039 106,012 15.06 % $ 13,529,008 $ 13,027,337 $ 501,671 3.85 % (12,379 ) (15,916 ) 3,537 (22.22 %) $ 13,516,629 $ 13,011,421 $ 505,208 3.88 % $ $ $ % $ $ $ ) %) ) %) % $ $ $ ) %) % % ) %) % $ $ $ % ) ) %) $ $ $ % 20182019 and December 31, 2017: June 30, 2018 (In thousands) Commercial,
financial and
agricultural Residential
real estate Construction &
land development Consumer Total $ 5,033,926 $ 2,381,261 $ 1,061,551 $ 813,893 $ 9,290,631 2,977,989 919,211 335,302 5,875 4,238,377 $ 8,011,915 $ 3,300,472 $ 1,396,853 $ 819,768 $ 13,529,008 December 31, 2017 (In thousands) Commercial,
financial and
agricultural Residential
real estate Construction &
land development Consumer Total $ 4,647,745 $ 1,974,804 $ 1,032,629 $ 707,661 $ 8,362,839 3,164,161 1,021,367 472,278 6,692 4,664,498 $ 7,811,906 $ 2,996,171 $ 1,504,907 $ 714,353 $ 13,027,337
financial and
agricultural
real estate
land development $ $ $ $ $ $ $ $ $ $
financial and
agricultural
real estate
land development $ $ $ $ $ $ $ $ $ $ were relatively flat fromyear-end 2017, increasing $3.83decreased $17.52 million or less than 1%3.83% from 2017. Deferred taxes increased $5.82derivative assets and bank owned life insurance policies increased $4.77 million and $2.60 million, respectively, due to a change in fair value and dealer reserve increased $2.45core deposit intangibles decreased $3.51 million due to an increase in automobile loans. Partially offsetting these increases were decreases for the quarter in core deposit intangibles of $4.02 million due to amortization income taxes receivable of $3.72 million and other real estate owned of $2.42(OREO) decreased $2.40 million due to a combination of sales and declineswrite-downs of fair value. Partially offsetting these decreases were increases of $2.17 million in fair value.2018 were flat fromyear-end 2017, increasing $175 thousand2019 increased $409.34 million or less than 1%2.92%. In terms of composition, interest-bearing deposits increased $495.49 million or 5.17% while noninterest-bearing deposits were relatively flat, increasing $37.15decreased $86.15 million or less than 1% and interest-bearing deposits were relatively flat as well, decreasing $36.98 million or less than 1%1.95% from December 31, 2017.slight increase$86.15 million decrease in noninterest-bearing deposits was due mainly to increasesa decrease in commercial andnoninterest-bearing deposits of $51.61 million or 2.29% while personal noninterest-bearing deposits of $41.76 million or 1.25% and $21.06 million or 3.00%, respectively. Partially offsetting these increases was a decrease of $19.22 million or 14.99% in public funds noninterest-bearing deposits.$2.04 billion$101.67 million or 1.71 % while NOW accounts decreased $2.00 billion$7.38 million or 1.97% since 2017 due mainly to of $1.94 billion from NOW accounts to interest-bearing MMDAs to reduce United’s reserve requirement at its Federal Reserve Bank. Otherwise, interest-bearing MMDAs increased $99.99 million or 2.66% as brokered MMDAs and public funds MMDAs were up $158.75 million and $20.03 million, respectively, while commercial and personal MMDAs declined $46.93 million and $31.87 million, respectively. Excluding the sweep activity,Bank, NOW accounts decreased $61.44$155.25 million or 2.85%7.84% mainly due to a decrease of $99.59$141.70 million in personal NOW accounts and a $39.33 million decrease in public funds NOW accounts. Partially offsetting this decrease were increasesthese decreases was an increase of $27.35$25.78 million and $10.80in commercial NOW accounts.NOWsavings accounts, respectively.Regular savings were relatively flat fromyear-end 2017, increasing $6.70 million or less than 1%.decreased $78.82increased $9.07 million or 9.91%.1.27% fromdecreaseincrease in time deposits under $100,000 is the result of decreases of $28.52a $4.26 million and $32.62 millionincrease in fixed rate certificates of deposits (CDs) and Certificate of Deposit Account Registry Service (CDARS) balances respectively.Timeand a $4.14 million increase in fixed CDs under $100,000.flat, decreasing $3.34partially offset by a $68.86 million or less than 1% as CDARS balances decreased $97.24 million, fixed ratedecrease in public funds CDs over $100,000 decreased $23.96 million and variable rate CDs over $100,00 decreased $7.24 million while brokered deposits increased $115.09 million. 2017: June 30 December 31 (Dollars in thousands) 2018 2017 $ Change % Change $ 1,411,647 $ 4,294,687 $ (2,883,040 ) (67.13 %) 156,060 2,156,974 (2,000,914 ) (92.76 %) 1,040,797 1,034,100 6,697 0.65 % 8,715,912 3,756,259 4,959,653 132.04 % 716,313 795,137 (78,824 ) (9.91 %) 1,790,037 1,793,434 (3,397 ) (0.19 %) $ 13,830,766 $ 13,830,591 $ 175 0.00 % $ $ $ ) %) ) %) % % % % $ $ $ % (1) $915,443$1,213,987 and $790,703$979,707 at June 30, 20182019 and December 31, 2017,2018, respectively.30, 201830,2019 increased $152.58$55.30 million or 8.29% from2.99% since 2017.six monthshalf of 2018,2019, short-term borrowings decreased $278.08$229.17 million or 58.23%65.23% due to a $200.00$175.00 million decrease in overnight Federal Home Loan Bank (FHLB) andshort-term FHLB advances, a $75.85$30.77 million decrease in short-term securities sold under agreements to repurchase. Federalrepurchase and a $23.40 million decrease in federal funds purchased decreased $2.24 million or 13.77%.purchased. Long-term borrowings increased $430.66$284.46 million or 31.57%18.98% from 2017net advances ona $283.83 million increase in long-term FHLBpartially offset byas new borrowings exceeded repayments for the redemptionfirst six months of a trust preferred issuance (Century Trust) and the repayment of a wholesale security sold under an agreement to repurchase. 2017: June 30 December 31 (Dollars in thousands) 2018 2017 $ Change % Change $ 14,000 $ 16,235 $ (2,235 ) (13.77 %) 185,507 261,352 (75,845 ) (29.02 %) 0 50,000 (50,000 ) (100.00 %) 0 200,000 (200,000 ) (100.00 %) 1,560,365 1,071,531 488,834 45.62 % 234,276 242,446 (8,170 ) (3.37 %) $ 1,994,148 $ 1,841,564 $ 152,584 8.29 % $ $ $ ) %) ) %) ) %) % % $ $ $ % 2018 decreased $6.402019 increased $17.99 million or 4.39%11.81% from 2017. the pension liability declined $8.15 million due a discretionary contribution of $7.00 million to the Company’s pension plan during the first quarter, business franchise taxes decreased $4.24 million and incentive payables declined $2.75 million due to payments. Partially offsetting these decreases were increases of $6.09 million in the accounts payable associated with George Mason $5.34increased $19.68 million, foraccrued mortgage escrow liabilities increased $4.86 million and $1.39derivative liabilities increased $2.62 million. Partially offsetting these increases was a decrease of $4.43 million in incomebusiness franchise taxes payable and a $3.70 million decrease in accrued employee expenses due to a timing difference.20182019 was relatively flat from December 31, 2017, increasing $2.04$3.33 billion, which was an increase of $82.23 million or less than 1%.$63.14$60.35 million or 7.08%5.96% from 2017.20182019 were $56.65$61.40 million. Amounts reclassed toAmount recognized in retained earnings from AOCI for the adoption of ASU No. 2016-01 and ASU No. 2018-02 totaled $6.492018.Accumulated other comprehensive income decreased $27.98 million or 66.57% due mainly to a decrease of $30.49 million in United’s available for sale investment portfolio, net of deferred income taxes partially offset by the reclass to retained earnings of $6.49 million and the reversal of $7.22 million in noncredit OTTI for securities sold in the first half of 2018. Theafter-tax accretion of pension costs was $1.78 million for the first half of 2018.a plan announcedrepurchase plans approved by the Company in AugustUnited’s Board of 2017 to repurchase up to 2 million shares of its common stock.Directors. United repurchased 962,500520,600 shares duringin the second quarterfirst half of 20182019 at a cost of $35.58$17.65 million or an average price per share of $36.97.20182019 was $66.27$67.21 million or $0.63$0.66 per diluted share, as compared to $37.06$66.27 million or $0.37$0.63 per diluted share for the prior year second quarter. Net income for the first six months of 20182019 was $127.98$130.85 million or $1.22$1.28 per diluted share compared to $75.87$127.98 million or $0.84$1.22 per share for the first six months of 2017.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, the first half and second quarter of 2018 were impacted for increased levels of average balances, income, and expense as compared to the first half and second quarter of 2017. In addition, the second quarter and first half of 2017 included merger-related expenses of $23.22 million and $24.45 million, respectively, due to the Cardinal acquisition.2018,2019, United’s annualized return on average assets was 1.42%1.38% and return on average shareholders’ equity was 8.11%8.12% as compared to 0.82%1.42% and 4.93%8.11% for the second quarter of 2017.2018. United’s annualized return on average assets for the first six months of 20182019 was 1.39%1.36% and return on average shareholders’ equity was 7.88%8.00% as compared to 0.94%1.39% and 5.80%7.88% for the first six months of 2017. $ $ $ $ $ $ $ $ ) ) ) ) $ $ $ $ % % % % 20182019 was $149.12$150.55 million an increase of $12.88 million or 9.45%which was relatively flat from the second quarter of 2017.2018, increasing $1.43 million or less than 1%. The slight increase in net interest income occurred because total interest income increased $23.05$21.25 million while total interest expense only increased $10.18$19.81 million from the second quarter of 2017.2018. Net interest income for the first half of 20182019 was $293.17$294.72 million an increase of $49.30 million or 20.22%which was relatively flat from the prior year’s first six months.months, increasing $1.56 million or less than 1%. The slight increase in net interest income occurred because total interest income increased $69.48$43.16 million while total interest expense only increased $20.18$41.60 million from the first six months of 2017.respectively, as compared to $8.25 million and $14.15 million for the second quarter and first six months of 2017, respectively. For the second quarter of 2018,2019, noninterest income was $36.01$39.80 million, which was a decreasean increase of $4.50$3.79 million or 11.11%10.52% from the second quarter of 2017.2018. Noninterest income for the first six months of 20182019 was $67.20$71.02 million which was an increase of $6.55$3.82 million or 10.79%5.68% from the first six months of 2017.2018. These increases from 20172018 were mainly due to additional income from mortgage banking activities as a result of the Cardinal acquisition.activities. For the second quarter of 2018,2019, noninterest expense decreased $18.73increased $6.79 million or 16.70%7.26% from the second quarter of 2017.2018. For the first six months of 2018,2019, noninterest expense increased $8.88$5.76 million or 5.08%3.13% from the first six months of 2017.2018. These changes from 2017increases were due mainly to penalties incurred during the Cardinal acquisition.20182019 were $19.24$17.53 million as compared to $19.30$19.24 million for the second quarter of 2017.2018. For the first six months of 20182019 and 2017,2018, income tax expense was $37.14$34.86 million and $39.52$37.14 million, respectively. For the quarters ended June 30, 20182019 and 2017,2018, United’s effective tax rate was 22.50%20.69% and 34.25%22.50%, respectively. The effective tax rate for the first six months of 2019 and 2018 was 21.04% and 2017 was 22.49% and 34.25%, respectively.As a result of the Cardinal acquisition, 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.20182019 was $65.27$65.99 million compared to net income of $45.92$65.27 million for the second quarter of 2017.$10.95$3.07 million to $149.45$152.52 million for the second quarter of 2018,2019, compared to $138.50$149.45 million for the same period of 2017. Generally, net2018. Net interest income for the second quarter of 20182019 increased from the second quarter of 2017 because of almost one additional month of2018 due mainly to an increase in average earning assets from the Cardinal acquisition.and additional accretion on acquired loans. Provision for loan losses was $6.20$5.42 million for the three months ended June 30, 20182019 compared to a provision of $8.25$6.20 million for the same period of 2017.2018. Noninterest income decreased $758increased $933 thousand for the second quarter of 20182019 to $17.47$18.40 million as compared to $18.22$17.47 million for the second quarter of 2017.2018. The declineincrease was due mainly due to a decrease in net gainsincreased fees from trust and losses on investment securities’ activity.brokerage services. Noninterest expense was $76.50$82.30 million for the second quarter of 2018,2019, compared to $78.63$76.50 million for the same period of 2017.2018. The decreaseincrease of $2.14$5.81 million in noninterest expense was primarily attributable to merger-related expenses frompenalties on the Cardinal acquisition included in the second quarterprepayment of 2017.20182019 was $131.71$130.87 million compared to net income of $83.94$131.71 million for the first half of 2017.$46.91$3.34 million to $295.07$298.41 million for the first half of 2018,2019, compared to $248.16$295.07 million for the same period of 2017. Generally, net2018. Net interest income for the first six months of 20182019 increased from the first six months of 2017 because2018 due to a higher level of the earning assets added from the Cardinal acquisition.assets. Provision for loan losses was $11.38$10.41 million for the six months ended June 30, 20182019 compared to a provision of $14.15$11.38 million for the same period of 2017.2018. Noninterest income was relatively flat fromfor the first half of 2018, increasing $1992019 increased $815 thousand to $36.05 million for the first half of 2019 as compared to $35.24 million for the first half of 2018 as compared2018. The increase was due mainly to $35.04 million forincreased fees from trust and brokerage services and higher income from bank-owned life insurance due to death benefits received in the first halfquarter of 2017.2019. Noninterest expense was $148.99$158.30 million for the six months ended June 30, 2018,2019, compared to $141.38$148.99 million for the same period of 2017.2018. The increase of $7.60$9.31 million in noninterest expense was primarily attributable to increases in branches, staffingpenalties on the prepayment of FHLB advances and merger-related expenses from the Cardinal acquisition.2018 as compared to net income of $2.48 million for the second quarter and first half of 2017.2018. Noninterest income, which consists mainly of realized and unrealized gains associated with the fair value of commitments and loans held for sale, was $23.50 million and $39.61 million for the second quarter and first half of 2019 as compared to $23.47 million and $38.35 million for the second quarter and first half of 2018 as compared to $22.392018. Noninterest expense was $18.77 million and $33.61 million for the second quarter and first half of 2017. Noninterest expense was2019 as compared $21.23 million and $39.61 million for the second half and first half of 2018 as compared $18.71 million for the second quarter and first half of 2017.2018. Noninterest expense consists mainly of salaries, commissions and benefits of mortgage segment employees.20182019 and 2017,2018, are presented below.20182019 was $149.12$150.55 million, which was an increase of $12.88 million or 9.45%relatively flat from the second quarter of 2017.2018, increasing $1.43 million or less than 1%. The $12.88$1.43 million increase in net interest income occurred because total interest income increased $23.05$21.25 million while total interest expense only increased $10.18$19.81 million from the second quarter of 2017.2018. Net interest income for the first six monthshalf of 20182019 was $293.17$294.72 million, which was an increase of $49.30 million or 20.22%relatively flat from the first six monthshalf of 2017.2018, increasing $1.56 million or less than 1%. The $49.30$1.56 million increase in net interest income occurred because total interest income increased $69.48$43.16 million while total interest expense only increased $20.18$41.60 million from the first six monthshalf of 2017.2018. On a linked-quarter basis, net interest income for the second quarter of 20182019 increased $5.08$6.39 million or 3.53%4.43% from the first quarter of 2018.2019. The $5.08$6.39 million increase in net interest income occurred because total interest income increased $10.82$10.15 million while total interest expense only increased $5.74$3.76 million from the first quarter of 2018.20182019 increased from the first half of 2017 because2018 due to a higher level of the earning assets added from the Cardinal acquisition.assets. The higher amount ofincrease in interest expense for the first half of 20182019 from the first half of 20172018 was due mainly to the interest-bearing liabilities added from the Cardinal acquisition and higher market interest rates. In addition, loan accretion on acquired loans for the first half of 2018 increased from the same time period last year. For the purpose of this remaining discussion, net interest income is presented on a2018 was $150.24 million, an increase of $11.48 million or 8.27% from the second quarter of 2017 due mainly to almost an additional month of average earning assets from the Cardinal acquisition. Average earning assets for the second quarter of 2018 increased $264.43 million or 1.64% from the second quarter of 2017 due mainly to increases of $540.32 million or 30.84% in average investment securities and $428.34 million or 3.28% in average net loans. Partially offsetting these increases was a decrease in average short-term investments of $704.23 million or 52.03%. The second quarter of 2018 average yield on earning assets increased 46 basis points from the second quarter of 2017 due to additional loan accretion of $4.70 million on acquired loans and higher market interest rates. Partially offsetting the increases totax-equivalent net interest income for the second quarter of 20182019 was an increase of 3961 basis points in the average cost of funds as compared to the second quarter of 20172018 due to higher market interest rates. The net interest margin of 3.67%3.53% for the second quarter of 20182019 was an increasea decrease of 2314 basis points from the net interest margin of 3.44%3.67% for the second quarter of 2017.six monthshalf of 20182019 was $295.38$296.69 million, an increase of $47.44 million or 19.14%which was relatively flat from the first six monthshalf of 2017. This increase intax-equivalent net interest income was primarily attributable2018, increasing $1.31 million or less than 1% due mainly to an increase in average earning assets frommostly offset by an increase in the Cardinal acquisition.average cost of funds. Average earning assets for the first half of 2019 increased $1.82 billion$726.82 million or 12.53%4.45% from the first six monthshalf of 2017 as2018 due mainly to increases of $439.39 million or 3.31% in average net loans increased $1.63 billion or 14.00% for the first six months of 2018. Average investment securities increased $674.66and $346.12 million or 43.21%15.48% in average investment securities. Average short-term investments decreased $58.70 million or 7.21%. The first half of 2018In addition, the average yield on earning assets for the first half of 2019 increased 4032 basis points from the first half of 20172018 due to additional loan accretion of $11.23 million on acquired loans and higher market interest rates. PartiallyMostly offsetting thethese increases to20182019 was an increase of 3267 basis points in the average cost of funds as compared to the first half of 20172018 due to higher market interest rates. Loan accretion on acquired loans was $23.00 million and $22.82 million for the first half of 2019 and 2018, respectively, increasing $173 thousand or less than 1%. The net interest margin of 3.50% for the first half of 2019 was a decrease of 14 basis points from the net interest margin of 3.64% for the first half of 2018 was an increase of 202018.points from the net interest margin of 3.44% for the first half of 2017.Tax-equivalent United’s20182019 increased $5.09$6.37 million or 3.51%4.43% from the first quarter of 20182019 due to a combination of a slight increase in the average earning assets and an increase in the yield on average earning assets. AverageThe average yield on earning assets for the second quarter of 2018 were relatively flat, increasing $156.14 million or less than 1% as compared to2019 increased 13 basis points from the first quarter of 2018 as average investment securities increased $113.012019 due to an increase of $5.91 million or 5.19%in loan accretion on acquired loans due mainly to the repayment of two large acquired loans under a single customer relationship. Loan accretion on acquired loans was $14.45 million and average net loans increased $373.52$8.54 million or 2.85% for the linked-quarter. Average short-terminvestments decreased $330.38 million or 33.72%. The yield onsecond quarter and first quarter of 2019, respectively. In addition, average earning assets for the second quarter of 20182019 increased 18 basis points from$274.68 million or 1.62% as compared to the first quarter of 2018 due mainly to a higher yield on2019 as average net loans as a result of an increase of $1.29increased $176.52 million in loan accretion on acquired loansor 1.30%, average investment securities increased $66.47 million or 2.61% and higher market interest rates.average short-term investments increased $31.70 million or 4.29% for the linked quarter. Partially offsetting the increases to20182019 was an increase of 208 basis points in the average cost of funds as compared to the first quarter of 20182019 due to higher market interest rates. The net interest margin of 3.67%3.53% for the second quarter of 20182019 increased 67 basis points from the net interest margin of 3.61%3.46% for the first quarter of 2018.2018,2019, June 30, 20172018 and March 31, 20182019 and the six months ended June 30, 20182019 and June 30, 2017: Three Months Ended June 30 June 30 March 31 (Dollars in thousands) 2018 2017 2018 $ 12,056 $ 7,355 $ 10,766 311 776 326 268 197 269 $ 12,635 $ 8,328 $ 11,361 Six Months Ended June 30 June 30 (Dollars in thousands) 2018 2017 $ 22,822 $ 11,590 637 823 537 80 $ 23,996 $ 12,493 $ $ $ $ $ $ $ $ $ $ 2018,2019, June 30, 20172018 and March 31, 20182019 and the six months ended June 30, 20182019 and June 30, 2017. Three Months Ended June 30 June 30 March 31 (Dollars in thousands) 2018 2017 2018 $ 149,122 $ 136,245 $ 144,043 1,115 2,512 1,104 $ 150,237 $ 138,757 $ 145,147 2018. Six Months Ended June 30 June 30 (Dollars in thousands) 2018 2017 $ 293,165 $ 243,865 2,219 4,076 $ 295,384 $ 247,941 $ $ $ $ $ $ $ $ $ $ (1) 2018 and 35% for the three months and six months ended June 30, 2017.2019. All interest income on loans and investment securities was subject to state income taxes.20182019 and 2017,2018, 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 a20182019 and 35% for the three-month andsix-month period ended June 30, 2017.2018. Interest income on all loans and investment securities was subject to state income taxes. Three Months Ended Three Months Ended June 30, 2018 June 30, 2017 (Dollars in thousands) Average
Balance Interest
(1) Avg. Rate
(1) Average
Balance Interest
(1) Avg. Rate
(1) $ 649,282 $ 3,465 2.14 % $ 1,353,516 $ 3,785 1.12 % 2,049,301 13,810 2.70 % 1,505,704 8,809 2.34 % 243,048 1,811 2.98 % 246,325 2,237 3.63 % 2,292,349 15,621 2.73 % 1,752,029 11,046 2.52 % 13,547,371 160,029 4.74 % 13,115,097 142,628 4.36 % (76,773 ) (72,837 ) 13,470,598 4.76 % 13,042,260 4.38 % 16,412,229 $ 179,115 4.37 % 16,147,805 $ 157,459 3.91 % 2,300,155 2,035,210 $ 18,712,384 $ 18,183,015 $ 9,210,282 $ 19,076 0.83 % $ 9,613,565 $ 12,586 0.53 % 208,058 464 0.89 % 341,201 415 0.49 % 1,659,613 9,338 2.26 % 1,329,013 5,701 1.72 % 11,077,953 28,878 1.05 % 11,283,779 18,702 0.66 % 4,255,840 3,784,465 102,492 97,982 15,436,285 15,166,226 3,276,099 3,016,789 $ 18,712,384 $ 18,183,015 $ 150,237 $ 138,757 3.32 % 3.25 % 3.67 % 3.44 %
(1) $ $ % $ $ % % % % % % % % % ) ) % % $ % $ % $ $ $ $ % $ $ % % % % % % % $ $ $ $ % % % % (1) starting 2018 and 35% in 2017..(2) Six Months Ended Six Months Ended June 30, 2018 June 30, 2017 (Dollars in thousands) Average
Balance Interest
(1) Avg. Rate
(1) Average
Balance Interest
(1) Avg. Rate
(1) $ 813,562 $ 8,382 2.08 % $ 1,300,810 $ 6,471 1.00 % 1,986,668 25,685 2.59 % 1,350,603 16,820 2.49 % 249,488 3,666 2.94 % 210,898 3,959 3.75 % 2,236,156 29,351 2.63 % 1,561,501 20,779 2.66 % 13,361,545 309,671 4.67 % 11,726,073 252,531 4.34 % (76,675 ) (72,840 ) 13,284,870 4.70 % 11,653,233 4.37 % 16,334,588 $ 347,404 4.28 % 14,515,544 $ 279,781 3.88 % 2,294,033 1,788,620 $ 18,628,621 $ 16,304,164 $ 9,281,485 $ 34,733 0.75 % $ 8,610,621 $ 21,054 0.49 % 246,988 885 0.72 % 284,276 719 0.51 % 1,506,795 16,402 2.20 % 1,247,022 10,067 1.63 % 11,035,268 52,020 0.95 % 10,141,919 31,840 0.63 % 4,215,230 3,437,643 103,484 86,319 15,353,982 13,665,881 3,274,639 2,638,283 $ 18,628,621 $ 16,304,164 $ 295,384 $ 247,941 3.33 % 3.25 % 3.64 % 3.44 %
(1) $ $ % $ $ % % % % % % % % % ) ) % % $ % $ % $ $ $ $ % $ $ % % % % % % % �� $ $ $ $ % % % % (1) starting 2018 and 35% in 2017.(2) 20182019 and 2017,2018, the provision for loan losses was $6.20$5.42 million and $8.25$6.20 million, respectively. The provision for loan losses for the first six months of 2019 and 2018 and 2017 was $11.38$10.41 million and $14.15$11.38 million, respectively. Net charge-offs were $5.72$5.90 million for the second quarter of 20182019 as compared to net charge-offs of $8.14$5.72 million for the same quarter in 2017.2018. Net charge-offs for the first six months of 20182019 were $10.87$10.72 million as compared to $13.94$10.87 million for the first six months of 2017.2018. These lower amounts of provision expense and net charge-offs in 2018for the first half of 2019 compared to the same periods in 2017first half of 2018 were due to the recognition of losses on several large commercial relationshipsa reduction in 2017. nonperforming loans requiring$1.03 millionincreased $570 thousanddecreased $1.09 million from the first quarter of 2018. These higher amounts of2019. The increase in the provision expense and net charge-offs for the second quarter of 2018 compared to the first quarter of 2018 wereloan losses was due to the recognition of losses on two large commercial relationships andloan growth requiring the need to provide for additional allocations within the commercial portfolio.reserves. Annualized net charge-offs as a percentage of average loans werewas 0.17% and 0.16% for both the second quarter and first six monthshalf of 2018.2018,2019, nonperforming loans were $150.92$142.60 million or 1.12%1.05% of loans, net of unearned income compared to nonperforming loans of $168.74$142.82 million or 1.30%1.06% of loans, net of unearned income at December 31, 2017.2018. 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 restructured for economic or legal reasons due to financial difficulties of the borrowers.$16.42$12.73 million at June 30, 2018, an increase of $6.62 million or 67.52% from $9.80 million atyear-end 2017. This increase was primarily due to an increase in delinquencies of loans that have matured. At June 30, 2018, nonaccrual loans were $74.11 million,2019, a decrease of $34.69$2.12 million or 31.88%14.29% from $108.80$14.85 million at 2017.restructuretransfer of a large nonperforming relationship to nonaccrual status. At June 30, 2019, nonaccrual loans were $71.12 million, an increase of $2.58 million or 3.76% from $68.54 million atsuch that it is now reported aswhile the borrower awaits settlement of a restructured loan as well as losses recognized on several large commercial nonaccrual relationships.lawsuit. Restructured loans were $60.38$58.75 million at June 30, 2018, an increase2019, a decrease of $10.26$675 thousand or 1.14% from $59.43 million or 20.46% from $50.13 million at 2017. Six loans totaling $16.52 million were restructured during the first half of Four of the restructured loans totaling $9.57 million were associated with an oil, gas and coal industry-related relationship. The remaining differencedecline was mainly due to repayments. The loss potential on these loans has been properly evaluated and allocated within the Company’s allowance for loan losses.$172.85$157.07 million, including OREO of $21.93$14.47 million at June 30, 2018,2019, represented 0.90%0.79% of total assets. June 30, December 31, (In thousands) 2018 2017 2016 2015 2014 2013 $ 65,313 $ 97,971 $ 77,111 $ 83,146 $ 64,312 $ 58,121 8,801 10,832 6,414 8,043 10,739 3,807 8,278 7,288 7,763 11,462 10,868 10,015 8,144 2,515 823 166 807 1,029 58,986 48,709 21,115 23,890 22,234 8,157 1,398 1,420 37 0 0 0 $ 150,920 $ 168,835 $ 113,263 $ 126,707 $ 108,960 $ 81,129 21,926 24,348 31,510 32,228 38,778 38,182 $ 172,846 $ 193,083 $ 144,773 $ 158,935 $ 147,738 $ 119,311 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ (1) 54 to the unaudited Consolidated Financial Statements for further information).2018,2019, impaired loans were $368.19$333.74 million, which was a decrease of $58.74$55.79 million or 13.76%14.32% from the $426.93$389.53 million in impaired loans at December 31, 2017.2018. Thisreduction inlarge acquired impaired loans as well as the Company’s reduced exposure to the oil, gas and coal industry.loan relationship. Acquired impaired loans are accounted for under ASC Subtopic$168.50$111.61 million and $221.98$144.13 million at June 30, 2018,2019, respectively, as compared to $210.52$149.74 million and $285.96$195.71 million, respectively, at December 31, 2017.2018. For the acquired impaired loans accounted for under ASC$46.43$30.60 million and $60.15$38.53 million at June 30, 20182019 and December 31, 2017,2018, respectively. For further details regarding impaired loans, see Note 54 to the unaudited Notes to Consolidated Financial Statements.2018,2019, the allowance for credit losses was $78.06$78.15 million as compared to $77.31$78.09 million at December 31, 2017.2018,2019, the allowance for loan losses was $77.13$76.40 million as compared to $76.63$76.70 million at December 31, 2017.2018. As a percentage of loans, net of unearned income, the allowance for loan losses was 0.57%0.56% at June 30, 20182019 and 0.59%0.57% at December 31, 2017.2018. The ratio of the allowance for loan losses to nonperforming loans or coverage ratio was 51.11%53.58% and 45.41%53.71% at June 30, 20182019 and December 31, 2017,2018, respectively. The Company’s detailed methodology and analysis indicated a minimal increase in the allowance for loan losses primarily because of the offsetting factors of changes within historical loss rates and reduced loss allocations on impaired loans. company-wide review of the allowance for loan losses at June 30, 20182019 produced increased allocations in two of the four loan categories. The allocation related to the commercial, financial &and agricultural loan pool allocation increased $629 thousand primarily$3.02 million due to an increase in historical loss rates for other commercial loans and increased outstanding balances.as a result of a significantresidential real estate allocation increased $452consumer loan pool experienced a minimal increase of $27 thousand primarily due to an increase in outstanding loan balances. Offsetting these increases was a decrease in the residential real estate loan pool allocation relatedof $2.28 million due to thea decrease in historical loss rates as well as reduction in specific allocations associated with improved collateral position on a large relationship. The real estate construction and development loan pool of $595 thousandallocation decreased $1.07 million primarily due to improvement in the historical loss rate applied to the pool. The consumer loan pool also experienced a decrease of $62 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 to 2017$19.08$14.06 million at June 30, 20182019 and $22.35$28.36 million at December 31, 2017.2018. In comparison to the prior$3.27$14.30 million primarily due to decreased specific allocations for commercial, financial & agricultural loans.$78.06$78.15 million at June 30, 20182019 is adequate to provide for probable 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.20182019 was $36.01$39.80 million, a decreasean increase of $4.50$3.79 million or 11.11%10.52% from the second quarter of 2017.2018. Noninterest income for the first half of 20182019 was $67.20$71.02 million, which was an increase of $6.55$3.82 million or 10.79%5.68% from the first half of 2017.$18.69$21.70 million for the second quarter of 20182019 compared to $22.54$18.69 million for the same period of 2017.2018. For the first half of 20182019 and 2017,2018, income from mortgage banking activities was $33.26$35.39 million and $23.21$33.26 million, respectively. The decreaseincrease for the second quarter of 20182019 was due to decreasedincreased production and sales of mortgage loans in the secondary market by United’s mortgage banking subsidiary, George Mason.Mason Mortgage, LLC (George Mason). The increase for the first half of 2019 was due mainly to an increase of $2.12 million in income from mortgage banking activities due mainly to a change in fair value of $4.25 million on George Mason’s interest rate lock commitments due to a higher locked pipeline. For the three months ended June 30, 20182019 and 2017,2018, mortgage loan sales were $585.40 million and $484.79 million, and $733.08 million, respectively. The increase for the first half of 2018 was mainly due to including the production and sales of mortgage loans in the secondary market by George Mason for a full first six months in 2018 as compared to slightly over two months in 2017. For the six months ended June 30, 20182019 and 2017,2018, mortgage loan sales were $934.88 million and $1.05 billion, and $764.24 million, respectively.For the second quarter of 2018, net gains and losses on investment securities’ activity declined $802 thousand from the second quarter of 2017. A net loss on investment securities of $55 thousand was recorded for the second quarter of 2018 as compared to a net gain on investment securities of $747 thousand for the second quarter of 2017. The net loss and gain were mainly due to sales of investment securities. For the first half of 2018, United recorded a net loss of $540 thousand on investment securities’ activity as compared to a net gain of $4.69 million for the first half of 2017. A net gain of $3.77 million on the redemption of an investment security was recorded during the first quarter of 2017.$439volume.20172018 due to increased volume.Fees from deposit services for the first half of 2018 increased $416 thousand from the first half of 2017. Thean increase was mainly due to higher income from debit card and automated teller machine (ATM) fees.2018 increased $7352019 decreased $577 thousand from the first half of 20172018 due to increaseddecreased volume.20182019 increased $4.82$8.57 million or 15.44%27.45% from the first quarter of 20182019 due mainly to an increase of $4.12$8.02 million in income from mortgage banking activities. The increase was due mainly to a changeincreased production and sales of mortgage loans in fair value of $4.16 million onthe secondary market by George Mason’s interest rate lock commitments.Mason. In addition, net gainsfees from deposit services increased $411 thousand due to increased income from debit card and losses on investment securities’ activity increased $430 thousand.decreased $18.73increased $6.79 million or 16.70%7.26% for the second quarter of 20182019 compared to the same period in 2017.2018. For the first six months of 2018,2019, noninterest expense increased $8.88$5.76 million or 5.08%3.13% from the first six months of 2017.2018 decreased $12.912019 increased $1.18 million or 23.04%2.74% from the second quarter of 2017. Employee compensation increased $3.89 million or 4.86% for the first six months of 2018 when compared to the first six months of 2017. Merger severance charges of $12.77 million from the Cardinal acquisition were included in the second quarter and first half of 2017. Otherwise, base salaries for the second quarter and first half of 2018 increased $1.43 million or 5.02% and $10.14 million or 20.58%, respectively, from the same time periods in 2017 due mainly to additional employees from the Cardinal acquisition.2018. The remainder of the increase in employee compensation for the second quarter and first half of 20182019 was due mainly to higher employee incentives and commissions expense mainly related to the mortgage banking production of George Mason. for the first six months of 2018 increased $2.21 million or 13.24% as compared to the first six months of 2017. The increase for the first half of 2018 was due in large part to additional 401K expense of $1.25 million, Federal Insurance Contributions Act (FICA) expense of $978 thousand, and health insurance expense of $803 thousand resulting from the additional employees from the Cardinal acquisition. Pension expense declined $540 thousand.Net occupancy expense decreased $4.84 million or 34.77% and $2.19 million or 10.60% for the second quarter and first six months of 2018,2019 decreased $720 thousand or 7.74% and $860 thousand or 4.56%, respectively, from the same time periods in 2018. The decreases were due primarily to a decline in pension expense.IncludedThe decrease was due mainly to a decline in net occupancybuilding rental expense fordue to fewer offices since the second quarter and first half of 2017 were charges of $5.76 million for the termination of leases and the reduction in the value of leasehold improvements for closed offices in the Cardinal acquisition.increased $2.29 milliondecreased $938 thousand or 24.46%8.04% for the first half of 20182019 as compared to the same period in the prior yearfirst half of 2018 due to additional processing aslower fees from a result of the Cardinal acquisition.20182019 increased $1.07 million$458 thousand and $1.17$1.91 million, respectively, from the same periods in 20172018 as United Bank is now considered a large institution and subject to increased assessment rates.2018 decreased $2.952019 increased $979 thousand or 5.17% and $1.25 million or 13.49%3.35% from the second quarter and first half of 2017. Included in other expense for2018, respectively due mainly to the second quarter 2017 were merger-related expenses of $4.16 million.20182019 increased $2.96$10.77 million or 3.27%12.04% from the first quarter of 20182019 due mainlyin large part to an increasethe previously mentioned prepayment penalties on FHLB advances of $2.28 million in$5.11 million. In addition, employee compensation due mainly toincreased $5.35 million as a result of higher commissions expense related to an increase in production and sales of mortgage loans at George Mason. In addition, FDIC insuranceMason and other expense increased $994$1.30 million due primarily to increased consulting and legal expenses. Partially offsetting these increases were decreases of $853 thousand in employee benefits due mainly to a decline in pension expense and $783 thousand in other real estate owned (OREO) expense due to United Bank now being considered a large institution as previously mentioned.2018,2019, income tax expense was $17.53 million and $34.86 million, respectively, as compared to $19.24 million and $37.14 million, respectively, as compared to $19.30 million and $39.52 million, respectively, in the second quarter and first half of 2017.2018. The decreases in 20182019 were mainly due to a decline in the effective tax rate as a result ofdue in large part to the Tax Cuts and Jobs Act of 2017 (the Tax Act) partially offset by an increase in earnings.previously mentioned income tax credits. On a linked-quarter basis, income tax expense for the second quarter of 20182019 increased $1.34 million$201 thousand from the first quarter of 20182019 mainly due to higher earnings. United’s effective tax rate was 20.69% for the second quarter of 2019, 22.50% for the second quarter of 2018 and 21.40% for the first quarter of 2018 and 34.25% for the second quarter of 2017.2019. For the first half of 20182019 and 2017,2018, United’s effective tax rate was 22.49%21.04% and 34.25%22.49%, respectively. The lower effective tax rate for the time periods in 2018 was due to the impact of the Tax Act. For further details related to income taxes, see Note 15 of the unaudited Notes to Consolidated Financial Statements contained within this document.20172018 for disclosures with respect to United’s fixed and determinable contractual obligations. There have been no material changes outside the ordinary course of business since 201720182019 do not present the amounts that may ultimately be paid under these contracts, they are excluded from the contractual obligations table in the 20172018 FormUnited’sUnited���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.2018,2019, cash of $98.50$31.79 million was provided by operating activities due mainly to net income of $127.98$130.85 million for the first half of 2018.six months. Partially offsetting this amountnet income were net originations exceeding proceeds from the sales of $120.75 million in mortgage loans in the secondary market by $13.39 million.held for sale. Net cash of $718.50$177.36 million was used in investing activities which was primarily due to $493.79 million ofnet loan growth and $229.34of $203.90 million partially offset by $23.70 million of net purchasesproceeds on sales of investments over proceeds from sales.purchases. During the first six months of 2018,2019, net cash of $46.76$378.75 million was provided by financing activities due primarily to net growth of $409.73 million in deposits and net advances of $285.00 million in long-term FHLB advances of $490.00 millionadvances. These funding activities were partially offset by repaymentsa net repayment of $328.08$229.17 million in short-term borrowings and cash dividends paid of $71.46 million and the repurchase of treasury stock for $35.98$69.73 million for the first halfsix months of 2018.2019. The net effect of the cash flow activities was a decreasean increase in cash and cash equivalents of $573.24$233.18 million for the first six months of 2018.14.23%14.32% at June 30, 20182019 while its Common Equity Tier 1 capital, Tier 1 capital and leverage ratios are 12.04%12.17%, 12.04%12.17% and 10.36%10.18%, respectively. 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%.$3.24$3.33 billion at June 30, 2018,2019, which was relatively flatan increase of $82.23 million or 2.53% from December 31, 2017, increasing $2.04 million or less than 1%.2018. This slight increase was primarily due to the retention of earnings.16.88%16.77% at June 30, 20182019 as compared to 17.00%16.89% at December 31, 2017.2018. The primary capital ratio, capital and reserves to total assets and reserves, was 17.21%17.09% at June 30, 20182019 as compared to 17.34%17.23% at December 31, 2017.2018. United’s average equity to average asset ratio was 17.51%17.02% for the second quarter of 20182019 as compared to 16.59%17.51% the second quarter of 2017.2018. United’s average equity to average asset ratio was also 17.02% for the first half of 2019 as compared to 17.58% for the first half of 2018 as compared to 16.18% for the first half of 2017.2018. All of these financial measurements reflect a financially sound position.2018,2019, United’s Board of Directors declared a cash dividend of $0.34 per share. Cash dividends were $0.68 per common share for the first six months of 2018.2019. Total cash dividends declared were $34.69 million for the second quarter of 2019 and $69.45 million for the first six months of 2019 as compared to $35.58 million for the second quarter of 2018 and $71.33 million for the first six months of 2018 as compared to $34.62 million for the second quarter of 2017 and $61.40 million for the first six months of 2017.2018.Item 3. 20182019 and December 31, 2017: Percentage Change in Net Interest Income June 30,
2018 December 31,
2017 (1.01 %) (1.22 %) (0.47 %) (0.48 %) 1.06 % (0.18 %) — — %) %) %) %) % % %) %) 2018,2019, 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 decrease by 0.47%0.70% over one year as compared to a decrease of 0.48%1.29% at December 31, 2017.2018. A 200 basis point immediate, sustained upward shock in the yield curve would decrease net interest income by an estimated 1.01%1.97% over one year as of June 30, 2018,2019, as compared to a decrease of 1.22%2.71% as of December 31, 2017.2018. A 100 basis point immediate, sustained downward shock in the yield curve would increase net interest income by an estimated 1.06%0.44% over one year as of June 30, 2018 as compared to a decreasean increase of 0.18%0.97%, over one year as of December 31, 2017. With the federal funds rate at 2.00% at June 30, 2018 and 1.50% at December 31, 2017, management believed a2018. A 200 basis point immediate, sustained declinedownward shock in rates was highly unlikely.1.31%1.78% in year two as of June 30, 2018.2019. A 200 basis point immediate, sustained upward shock in the yield curve would increase net interest income by an estimated 2.34%2.83% in year two as of June 30, 2018.2019. A 100 basis point immediate, sustained downward shock in the yield curve would decrease net interest income by an estimated 0.46%2.85% in year two as of June 30, 2018.2018,2019, United’s mortgage related securities portfolio had an amortized cost of $1.4 billion, of which approximately $868 million$1 billion or 61%73% were fixed rate collateralized mortgage obligations (CMOs). These fixed rate CMOs consisted primarily of planned amortization class (PACs),4.23.4 years and a weighted average yield of 2.58%2.75%, under current projected prepayment assumptions. These securities are expected to have very little 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 4.74.1 years. The projected price decline of the fixed rate CMO portfolio in rates up 300 basis points would be 11.5%9.8%, or less than the price decline of a5-year19.4%15.1%.$256$182 million in balloon and other securities with a projected yield of 2.27%2.41% and a projected average life of 44.1 years on June 30, 2018.2019. This portfolio consisted primarily of Fannie Mae Delegated Underwriting and Servicing (DUS) mortgage backed securities (MBS) with a weighted average loan age (WALA) of 4.34.6 years and a weighted average maturity (WAM) of 4.34.4 years.$109$23 million in2.47%3.00% and a projected average life of 3.83.2 years as of June 30, 2018.2019. This portfolio consisted of seasoned4.97.1 years and a weighted average maturity (WAM) of 10.310 years.$89$47 million in2.79%2.71% and a projected average life of 5.34.5 years on June 30, 2018.2019. This portfolio consisted of seasoned5.35.8 years and a weighted average maturity (WAM) of 14.313.7 years.$66$57 million in2.93%2.90% and a projected average life of 7.35.4 years on June 30, 2018.2019. This portfolio consisted of seasoned2.52.8 years and a weighted average maturity (WAM) of 27.827.4 years.4%6% of the mortgage related securities portfolio at June 30, 2018,2019, included adjustable rate securities (ARMs),Item 4. 2018,2019, an evaluation was performed under the supervision of and with the participation of United’s management, including the Chief Executive Officer (CEO) and Chief Financial Officer (CFO), of the effectiveness of the design and operation of United’s disclosure controls and procedures. Based on that evaluation, United’s management, including the CEO and CFO, concluded that United’s disclosure controls and procedures as of June 30, 20182019 were effective in ensuring that information required to be disclosed in the Quarterly Report on Form2018,2019, or in other factors that have materially affected or are reasonably likely to materially affect United’s internal control over financial reporting.Item 1. Item 1A. 20172018 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 Form2017.2018.Item 2. 20182019 that were not registered. The table below includes certain information regarding United’s purchase of its common shares during the quarter ended June 30, 2018:2019: 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) 0 $ 00.00 0 2,000,000 270,004 $ 36.65 270,000 1,730,000 692,500 $ 37.09 692,500 1,037,500 962,504 $ 36.97 962,500
of Shares
Purchased
per Share
Shares
Purchased as
Part of Publicly
Announced
Plans (3)
of Shares that May
Yet be Purchased
Under the Plans (3) $ $ $ $ (1) 2018.(2) 2018,2019, the following shares were purchased for the deferred compensation plan: May 20182019 – 4 shares at an average price of $35.65.(3) AugustNovember of 2017,2018, United’s Board of Directors approved a repurchase plan to repurchase up to 2 million3,352,000 shares of United’s common stock on the open market (the 20172018 Plan). The timing, price and quantity of purchases under the planplans are at the discretion of management and the plan may be discontinued, suspended or restarted at any time depending on the facts and circumstances.Item 3. Item 4. Item 5. (a) (b) ExhibitNo. Description
No. 2.1 3.1 3.2 31.1 31.2 32.1 32.2 101 (XBRL)(Inline XBRL) (filed herewith) Date: 8, 20189, 2019 Date: 8, 20189, 2019 87