FORM 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2020

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission File Number:    002-86947

United Bankshares, Inc.

(Exact name of registrant as specified in its charter)

West Virginia	55-0641179
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
300 United Center 500 Virginia Street, East
Charleston, West Virginia	25301
(Address of principal executive offices)	Zip Code

Registrant’s telephone number, including area code: (304) 424-8716

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $2.50 per share	UBSI	NASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes  ☐    No  ☒

As of April 30, 2020, the registrant had 101,723,600 shares of common stock, $2.50 par value per share, outstanding.

UNITED BANKSHARES, INC. AND SUBSIDIARIES

FORM 10-Q

TABLE OF CONTENTS

		Page
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements		3
Consolidated Balance Sheets (Unaudited) March 31, 2020 and December 31, 2019			4
Consolidated Statements of Income (Unaudited) for the Three Months Ended March 31, 2020 and 2019			5
Consolidated Statements of Comprehensive Income (Unaudited) for the Three Months Ended March 31, 2020 and 2019			6
Consolidated Statement of Changes in Shareholders’ Equity (Unaudited) for the Three Months Ended March 31, 2020 and 2019			7
Condensed Consolidated Statements of Cash Flows (Unaudited) for the Three Months Ended March 31, 2020 and 2019			8
Notes to Consolidated Financial Statements			9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		52
Item 3.	Quantitative and Qualitative Disclosures about Market Risk		74
Item 4.	Controls and Procedures		77
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings		78
Item 1A.	Risk Factors		78
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		79
Item 3.	Defaults Upon Senior Securities		80
Item 4.	Mine Safety Disclosures		80
Item 5.	Other Information		80
Item 6.	Exhibits		80
Signatures			81

2

PART I - FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS (UNAUDITED)

The March 31, 2020 and December 31, 2019, consolidated balance sheets of United Bankshares, Inc. and Subsidiaries (“United” or the “Company”), consolidated statements of income and comprehensive income for the three months ended March 31, 2020 and 2019, the related consolidated statement of changes in shareholders’ equity for the three months ended March 31, 2020 and 2019, the related condensed consolidated statements of cash flows for the three months ended March 31, 2020 and 2019, and the notes to consolidated financial statements appear on the following pages.

3

CONSOLIDATED BALANCE SHEETS

UNITED BANKSHARES, INC. AND SUBSIDIARIES

(Dollars in thousands, except par value)

	March 31			December 31
	2020			2019
	(Unaudited)			(Note 1)
Assets
Cash and due from banks	$	248,238		$	185,238
Interest-bearing deposits with other banks		1,087,772			651,435
Federal funds sold		823			820
Total cash and cash equivalents		1,336,833			837,493
Securities available for sale at estimated fair value (amortized cost-$2,384,221 at March 31, 2020 and $2,426,924 at December 31, 2019, allowance for credit losses of $0 at March 31, 2020)		2,417,521			2,437,296
Securities held to maturity, net of allowance for credit losses of $10 at March 31, 2020 (estimated fair value-$1,223 at March 31, 2020 and $1,447 at December 31, 2019)		1,226			1,446
Equity securities at estimated fair value		9,013			8,894
Other investment securities		245,655			222,161
Loans held for sale (at fair value-$495,932 at March 31, 2020 and $384,375 at December 31, 2019)		503,514			387,514
Loans		13,856,283			13,713,548
Less: Unearned income		(725	)		(1,419	)
Loans net of unearned income		13,855,558			13,712,129
Less: Allowance for loan losses		(154,923	)		(77,057	)
Net loans		13,700,635			13,635,072
Bank premises and equipment		96,169			96,644
Operating lease right-of-use assets		57,280			57,783
Goodwill		1,478,014			1,478,014
Accrued interest receivable		49,076			58,085
Other assets		475,717			441,922
TOTAL ASSETS	$	20,370,653		$	19,662,324
Liabilities
Deposits:
Noninterest-bearing	$	4,837,538		$	4,621,362
Interest-bearing		9,176,630			9,231,059
Total deposits		14,014,168			13,852,421
Borrowings:
Securities sold under agreements to repurchase		124,561			124,654
Federal Home Loan Bank borrowings		2,326,282			1,851,865
Other long-term borrowings		236,479			236,164
Reserve for lending-related commitments		7,742			1,733
Operating lease liabilities		60,887			61,342
Accrued expenses and other liabilities		256,832			170,312
TOTAL LIABILITIES		17,026,951			16,298,491
Shareholders’ Equity
Preferred stock, $1.00 par value; Authorized-50,000,000 shares, none issued		0			0
Common stock, $2.50 par value; Authorized-200,000,000 shares; issued-105,684,479 and 105,494,290 at March 31, 2020 and December 31, 2019, respectively, including 3,960,879 and 3,940,619 shares in treasury at March 31, 2020 and December 31, 2019, respectively		264,211			263,736
Surplus		2,141,266			2,140,175
Retained earnings		1,092,827			1,132,579
Accumulated other comprehensive loss		(16,171	)		(34,869	)
Treasury stock, at cost		(138,431	)		(137,788	)
TOTAL SHAREHOLDERS’ EQUITY		3,343,702			3,363,833
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	20,370,653		$	19,662,324

See notes to consolidated unaudited financial statements.

4

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

UNITED BANKSHARES, INC. AND SUBSIDIARIES

(Dollars in thousands, except per share data)

	Three Months Ended
	March 31
	2020		2019
Interest income
Interest and fees on loans	$	158,854	$	164,871
Interest on federal funds sold and other short-term investments		3,965		5,837
Interest and dividends on securities:
Taxable		16,969		17,363
Tax-exempt		694		1,026
Total interest income		180,482		189,097
Interest expense
Interest on deposits		27,477		32,638
Interest on short-term borrowings		458		691
Interest on long-term borrowings		11,029		11,600
Total interest expense		38,964		44,929
Net interest income		141,518		144,168
Provision for credit losses		27,119		4,996
Net interest income after provision for credit losses		114,399		139,172
Other income
Fees from trust services		3,483		3,264
Fees from brokerage services		2,916		2,524
Fees from deposit services		7,957		8,053
Bankcard fees and merchant discounts		993		1,156
Other service charges, commissions, and fees		518		521
Income from bank-owned life insurance		2,388		1,827
Income from mortgage banking activities		17,631		13,681
Net investment securities gains (losses)		196		(159	)
Other income		724		356
Total other income		36,806		31,223
Other expense
Employee compensation		44,541		38,949
Employee benefits		10,786		9,431
Net occupancy expense		9,062		8,751
Other real estate owned (OREO) expense		906		1,416
Equipment expense		3,845		3,315
Data processing expense		5,506		5,162
Bankcard processing expense		477		480
FDIC insurance expense		2,400		3,300
Other expense		23,610		18,621
Total other expense		101,133		89,425
Income before income taxes		50,072		80,970
Income taxes		9,889		17,328
Net income	$	40,183	$	63,642
Earnings per common share:
Basic	$	0.40	$	0.62
Diluted	$	0.40	$	0.62
Average outstanding shares:
Basic		101,295,073		101,894,786
Diluted		101,399,181		102,162,704

See notes to consolidated unaudited financial statements

5

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

UNITED BANKSHARES, INC. AND SUBSIDIARIES

(Dollars in thousands)

	Three Months Ended
	March 31
	2020		2019
Net income	$	40,183	$	63,642
Change in net unrealized gain (loss) on available for sale (AFS) securities, net of tax		17,586		16,789
Change in defined benefit pension plan, net of tax		1,112		910
Comprehensive income, net of tax	$	58,881	$	81,341

6

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)

UNITED BANKSHARES, INC. AND SUBSIDIARIES

(Dollars in thousands, except per share data)

	Three Months Ended March 31, 2020
											Accumulated
	Common Stock										Other						Total
			Par					Retained			Comprehensive			Treasury			Shareholders’
	Shares		Value		Surplus			Earnings			Income (Loss)			Stock			Equity
Balance at January 1, 2020		105,494,290	$	263,736	$	2,140,175		$	1,132,579		$	(34,869	)	$	(137,788	)	$	3,363,833
Cumulative effect of adopting Accounting Standard Update 2016-13		0		0		0			(44,331	)		0			0			(44,331	)
Comprehensive income:
Net income		0		0		0			40,183			0			0			40,183
Other comprehensive income, net of tax		0		0		0			0			18,698			0			18,698
Total comprehensive income, net of tax																		58,881
Stock based compensation expense		0		0		1,253			0			0			0			1,253
Purchase of treasury stock (19,314 shares)		0		0		0			0			0			(608	)		(608	)
Cash dividends ($0.35 per share)		0		0		0			(35,604	)		0			0			(35,604	)
Grant of restricted stock (175,495 shares)		175,495		439		(439	)		0			0			0			0
Forfeiture of restricted stock (946 shares)		0		0		35			0			0			(35	)		0
Common stock options exercised (14,694 shares)		14,694		36		242			0			0			0			278
Balance at March 31, 2020		105,684,479	$	264,211	$	2,141,266		$	1,092,827		$	(16,171	)	$	(138,431	)	$	3,343,702

	Three Months Ended March 31, 2019
											Accumulated
	Common Stock										Other						Total
			Par					Retained			Comprehensive			Treasury			Shareholders’
	Shares		Value		Surplus			Earnings			Income (Loss)			Stock			Equity
Balance at January 1, 2019		105,239,121	$	263,098	$	2,134,462		$	1,013,037		$	(57,019	)	$	(101,954	)	$	3,251,624
Cumulative effect of adopting Accounting Standard Update 2016-02		0		0		0			(1,049	)		0			0			(1,049	)
Reclass due to adopting Accounting Standard Update 2017-12		0		0		0			0			50			0			50
Comprehensive income:
Net income		0		0		0			63,642			0			0			63,642
Other comprehensive income, net of tax		0		0		0			0			17,699			0			17,699
Total comprehensive income, net of tax																		81,341
Stock based compensation expense		0		0		1,113			0			0			0			1,113
Purchase of treasury stock (365,702 shares)		0		0		0			0			0			(12,072	)		(12,072	)
Cash dividends ($0.34 per share)		0							(34,759	)		0			0			(34,759	)
Grant of restricted stock (126,427 shares)		126,427		316		(316	)		0			0			0			0
Common stock options exercised (33,816 shares)		33,816		84		559			0			0			0			643
Balance at March 31, 2019		105,399,364	$	263,498	$	2,135,818		$	1,040,871		$	(39,270	)	$	(114,026	)	$	3,286,891

See notes to consolidated unaudited financial statements

7

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

UNITED BANKSHARES, INC. AND SUBSIDIARIES

(Dollars in thousands)

	Three Months Ended
	March 31
	2020			2019
NET CASH PROVIDED BY OPERATING ACTIVITIES	$	21,476		$	93,247
INVESTING ACTIVITIES
Proceeds from maturities and calls of securities held to maturity		210			0
Proceeds from sales of securities available for sale		3,665			133,783
Proceeds from maturities and calls of securities available for sale		129,261			62,548
Purchases of securities available for sale		(91,118	)		(211,217	)
Proceeds from sales of equity securities		195			439
Purchases of equity securities		(293	)		(437	)
Proceeds from sales and redemptions of other investment securities		17,000			27,766
Purchases of other investment securities		(42,499	)		(40,934	)
Redemption of bank-owned life insurance policies		1,186			2,147
Purchases of bank premises and equipment		(2,008	)		(1,754	)
Proceeds from sales of bank premises and equipment		0			251
Proceeds from the sales of OREO properties		2,573			1,057
Net change in loans		(140,529	)		(149,572	)
NET CASH USED IN INVESTING ACTIVITIES		(122,357	)		(175,923	)
FINANCING ACTIVITIES
Cash dividends paid		(36,247	)		(34,974	)
Acquisition of treasury stock		(608	)		(12,072	)
Proceeds from exercise of stock options		281			643
Repayment of long-term Federal Home Loan Bank borrowings		(150,000	)		(960,000	)
Proceeds from issuance of long-term Federal Home Loan Bank borrowings		400,000			1,300,000
Changes in:
Deposits		161,888			164,846
Federal funds purchased, securities sold under agreements to repurchase and other short-term borrowings		224,907			(223,506	)
NET CASH PROVIDED BY FINANCING ACTIVITIES		600,221			234,937
Increase in cash and cash equivalents		499,340			152,261
Cash and cash equivalents at beginning of year		837,493			1,020,396
Cash and cash equivalents at end of period	$	1,336,833		$	1,172,657
Supplemental information
Noncash investing activities:
Transfers of loans to OREO	$	3,560		$	2,822
Transfer of held to maturity debt securities to available for sale debt securities		0			11,544

See notes to consolidated unaudited financial statements.

8

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

UNITED BANKSHARES, INC. AND SUBSIDIARIES

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited consolidated interim financial statements of United Bankshares, Inc. and Subsidiaries (“United” or “the Company”) have been prepared in accordance with accounting principles for interim financial information generally accepted in the United States (GAAP) and with the instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, the financial statements do not contain all of the information and footnotes required by accounting principles generally accepted in the United States. In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. The financial statements presented as of March 31, 2020 and 2019 and for the three-month periods then ended have not been audited. The consolidated balance sheet as of December 31, 2019 has been extracted from the audited financial statements included in United’s 2019 Annual Report to Shareholders. The Notes to Consolidated Financial Statements appearing in United’s 2019 Annual Report on Form 10-K, which includes descriptions of significant accounting policies, should be read in conjunction with these interim financial statements. Please refer to Notes 3, 5 and 6 in these Notes to Consolidated Financial Statements for updated accounting policies for investment securities, troubled debt restructurings (TDRs), acquired loans and the allowance for credit losses. In the opinion of management, any adjustments necessary for a fair presentation of financial position and results of operations for the interim periods have been made. Such adjustments are of a normal and recurring nature.

The accompanying consolidated interim financial statements include the accounts of United and its wholly owned subsidiaries. United operates in two business segments: community banking and mortgage banking. All significant intercompany accounts and transactions have been eliminated in the consolidated financial statements. Information is presented in these notes to the unaudited consolidated interim financial statements with dollars expressed in thousands, except per share or unless otherwise noted.

New Accounting Standards

In March 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The ASU provides “optional expedients and exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued.” ASU No. 2020-04 is effective for public business entities on March 12, 2020 through December 31, 2022. United is implementing a transition plan to identify and modify its loans and other financial instruments with attributes that are either directly or indirectly influenced by LIBOR. The Company is assessing ASU No. 2020-04 and its impact on the Company’s transition away from LIBOR for its loan and other financial instruments.

In February 2020, FASB issued ASU No. 2020-03, Codification Improvements to Financial Instruments. This update makes narrow-scope changes that are intended to improve the board’s standards for financial instruments accounting, including the credit losses standard issued in 2016, as part of FASB’s ongoing project to improve and clarify its Accounting Standards Codification and avoid unintended application. ASU No. 2020-03 was effective for public business entities upon issuance of this final update in March 2020. ASU No. 2020-03 is not expected to have a material impact on the Company’s financial condition or results of operations.

9

In January 2020, the FASB issued ASU No. 2020-01, Investments—Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815)—Clarifying the Interactions between Topic 321, Topic 323, and Topic 815. The new guidance addresses accounting for the transition into and out of the equity method and measuring certain purchased options and forward contracts to acquire investments. ASU No. 2020-01 is effective for public companies for fiscal years, and interim fiscal periods within those fiscal years, beginning after December 15, 2020; early adoption is permitted. ASU No. 2020-01 is not expected to have a material impact on the Company’s financial condition or results of operations.

In November 2019, the FASB issued ASU No. 2019-08, Compensation – Stock Compensation (Topic 718) and Revenue from Contracts with Customers (Topic 606): Codification Improvements—Share-Based Consideration Payable to a Customer. ASU No. 2019-08 requires companies to measure and classify (on the balance sheet) share-based payments to customers by applying the guidance in Topic 718, Compensation—Stock Compensation. As a result, the amount recorded as a reduction in revenue would be measured based on the grant-date fair value of the share-based payment. The amendments in this update become effective for annual periods and interim periods within those annual periods beginning after December 15, 2019. ASU No. 2019-08 was adopted by United on January 1, 2020. The adoption did not have a material impact on the Company’s financial condition or results of operations.

In 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 issues 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. ASU No. 2019-04 was adopted by United on January 1, 2020. The adoption did not have a material impact on the Company’s financial condition or results of operations.

In August 2018, the FASB issued ASU No. 2018-14 “Compensation – Retirement Benefits—Defined Benefits – General (Topic 715-20): Disclosure Framework – Changes to the Disclosure Requirements for Defined Benefit Plans.” This update amends ASC Topic 715 to add, remove, and clarify disclosure requirements related to defined benefit pension and other post retirement plans. The ASU’s changes related to disclosures are part of the FASB’s disclosure framework project, which the FASB launched in 2014 to improve effectiveness of disclosures in notes to financial statements. ASU No. 2018-14 is effective for public companies for fiscal years, and interim fiscal periods within those fiscal years, beginning after December 15, 2020; early adoption is permitted. ASU No. 2018-14 is not expected to have a material impact on the Company’s financial condition or results of operations.

In August 2018, the FASB issued ASU No. 2018-13 “Fair Value Measurement (Topic 820), Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement.” This amendment changes the fair value measurement disclosure requirements of ASC Topic 820 and is the result of a broader disclosure project called FASB Concepts Statement, Conceptual Framework for Financial Reporting – Chapter 8: Notes to Financial Statements, which was finalized in August 2018. ASU No. 2018-13 is effective for all entities for fiscal years, and interim fiscal periods within those fiscal years, beginning after December 15, 2019; early adoption is permitted for any eliminated or modified disclosure upon issuance of this ASU. ASU No. 2018-13 was adopted by United on January 1, 2020 and did not have a material impact on the Company’s financial condition or results of operations.

In August 2017, the FASB issued ASU No. 2017-12, “Targeting Improvement to Accounting for Hedging Activities.” This ASU amends ASC 815 and its objectives are to improve the transparency and understandability of information conveyed to financial statement users about an entity’s risk management activities by better aligning the entity’s financial reporting for hedging relationships with those risk management activities and reduce the complexity and simplify the application of hedge accounting by preparers. This ASU makes certain targeted improvements to simplify the application of the hedge accounting, including to derivative instruments as well as allow a one-time election to reclassify fixed-rate, prepayable debt securities from a held to maturity classification to an available for sale

10

classification. ASU No. 2017-12 is effective for interim and annual reporting periods beginning after December 15, 2018; early adoption is permitted. United adopted the standard on January 1, 2019 using the modified retrospective approach. As part of this adoption, the Company made a one-time election to transfer eligible HTM securities to the AFS category in order to optimize the investment portfolio management for capital and risk management considerations. The Company transferred HTM securities with a carrying amount of $11,544, which resulted in a decrease of $1,098 to AOCI.

In January 2017, the FASB issued ASU No. 2017-04, “Intangibles – Goodwill and Other (Topic 350).” ASU 2017-04 eliminates the requirement to calculate the implied fair value of goodwill to measure a goodwill impairment charge. Instead, entities will record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value. ASU 2017-04 was adopted by United on January 1, 2020. The adoption of ASU 2017-04 did not have a material impact on the Company’s financial condition or results of operations.

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments – Credit Losses.” ASU No. 2016-13 changes the impairment model for most financial assets and certain other instruments that aren’t measured at fair value through net income. The standard replaces the “incurred loss” approach with an “expected loss” model for instruments measured at amortized cost and requires entities to record allowances for available for sale debt securities rather than reduce the carrying amount under the current other-than-temporary impairment (OTTI) model. ASU No. 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. United engaged a third-party service provider to assist with the implementation of the new accounting standard. ASU No. 2016-13 was adopted by United on January 1, 2020 using a modified retrospective approach. At the January 1, 2020 date of adoption, based on forecasts of macroeconomic conditions and exposures at that time, the aggregate impact to United was a net increase to the allowance for credit losses of $57,442 and a decrease to retained earnings of $44,331, with the difference being an adjustment to deferred tax assets. United has elected to phase-in the impact to retained earnings using a five-year transition provision, allowed by the Federal Reserve Board and other federal banking agencies in response to the coronavirus (COVID-19) pandemic, to delay for two years the full impact of ASU No. 2016-13 on regulatory capital, followed by a three-year transition period. The adoption of ASU No. 2016-13 had an insignificant impact on the Company’s held to maturity and available for sale securities portfolios.

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)”. ASU No. 2016-02 includes a lessee accounting model that recognizes two types of leases, finance leases and operating leases, while lessor accounting will remain largely unchanged from the current GAAP. ASU No. 2016-02 requires, amongst other things, that a lessee recognize on the balance sheet a right-of-use asset and a lease liability for leases 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 ASU No. 2018-11 “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

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the standard using the modified retrospective transition method on January 1, 2019. The Company evaluated and elected the package of practical expedients, which allows for existing leases to be accounted for consistent with current guidance, with the exception of the balance sheet recognition for lessees. The Company has also elected the practical expedient on not separating lease and nonlease components and instead treating them as a single lease component. Adoption of the standard resulted in the recognition of additional net lease assets and lease liabilities of $67,040 and $70,692, respectively, as of January 1, 2019. Of the difference between these two amounts, $1,049 was recorded as an adjustment to retained earnings.

2. MERGERS AND ACQUISITIONS

On May 1, 2020 (Acquisition Date), United completed its acquisition of Carolina Financial Corporation (Carolina Financial), a Delaware corporation headquartered in Charleston, South Carolina. Carolina Financial was merged with and into United (the Merger), pursuant to the terms of the Agreement and Plan of Merger, dated November 17, 2019, by and between United and Carolina Financial (the Merger Agreement). Upon completion of the Merger, Carolina Financial ceased to exist and United survived and continues to exist as a West Virginia corporation.

Under the terms of the Merger Agreement, each outstanding share of common stock of Carolina Financial, par value $1.00 per share (other than shares held by United or its subsidiaries, in each case except for shares held by them in a fiduciary capacity or in satisfaction of a debt previously contracted) were converted into the right to receive 1.13 shares of United common stock, par value $2.50 per share (United Common Stock). Also under the terms of the Merger Agreement, as of the effective time of the Merger, each outstanding Carolina Financial stock option, whether vested or unvested as of the date of the Merger Agreement, at such option holder’s election, (i) vested and converted into an option to acquire United common stock adjusted based on the 1.13 exchange ratio, or (ii) was entitled to receive cash consideration equal to the difference between (a) the option’s exercise price and (b) $28.99, the volume weighted average trading price of the Carolina Financial common stock on NASDAQ for the twenty full trading days ending on the second trading day immediately preceding the closing date (the CFC Closing Price) multiplied by the number of shares of Carolina Financial common stock subject to such stock option. Also, at the effective time of the Merger, each restricted stock grant, restricted stock unit grant or any other award of a share of Carolina Financial common stock subject to vesting, repurchase or other lapse restriction under a Carolina Financial stock plan (other than a stock option) (each, a Stock Award) that was outstanding immediately prior to the effective time of the Merger, fully vested in accordance with the terms of the Carolina Financial stock plan and at the election of the holder (i) converted into the right to receive shares of United common stock based on the 1.13 exchange ratio or (ii) converted into cash in an amount equal to the CFC Closing Price multiplied by the shares of Carolina Financial common stock subject to the Stock Award.

Immediately following the Merger, CresCom Bank, a wholly-owned subsidiary of Carolina Financial, merged with and into United Bank, a wholly-owned subsidiary of United (the Bank Merger). United Bank survived the Bank Merger and continues to exist as a Virginia banking corporation. The merger was accounted for under the acquisition method of accounting. The results of operations of Carolina Financial were not reflected in United’s results of operations for the first quarter of 2020, but will be included in the consolidated results of operations from the Acquisition Date.

The acquisition of Carolina Financial affords United the opportunity to expand its existing footprint in North Carolina and South Carolina. The Merger resulted in a combined company with more than 200 locations in some of the best banking markets in the United States. As of March 31, 2020, Carolina Financial had $4,801,787 in total assets, $3,188,962 in gross loans and $3,570,446 in deposits. Carolina Financial has banking locations in North Carolina and South Carolina. CresCom Bank owns and operates Crescent Mortgage Company, which is based in Atlanta, Georgia.

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3. INVESTMENT SECURITIES

Securities Available for Sale

Securities held for indefinite periods of time are classified as available for sale and carried at estimated fair value. The amortized cost, estimated fair values, and allowance for credit losses of securities available for sale are summarized as follows.

	March 31, 2020
			Gross		Gross		Allowance		Estimated
	Amortized		Unrealized		Unrealized		For Credit		Fair
	Cost		Gains		Losses		Losses		Value
U.S. Treasury securities and obligations of U.S. Government corporations and agencies	$	52,844	$	1,169	$	0	$	0	$	54,013
State and political subdivisions		313,164		6,786		2,145		0		317,805
Residential mortgage-backed securities
Agency		781,617		32,051		69		0		813,599
Non-agency		0		0		0		0		0
Commercial mortgage-backed securities
Agency		589,288		26,052		245		0		615,095
Asset-backed securities		283,501		0		21,565		0		261,936
Trust preferred collateralized debt obligations		6,047		0		1,863		0		4,184
Single issue trust preferred securities		18,203		167		2,686		0		15,684
Other corporate securities		339,557		1,781		6,133		0		335,205
Total	$	2,384,221	$	68,006	$	34,706	$	0	$	2,417,521

	December 31, 2019
			Gross		Gross		Estimated		Cumulative
	Amortized		Unrealized		Unrealized		Fair		OTTI in
	Cost		Gains		Losses		Value		AOCI (1)
U.S. Treasury securities and obligations of U.S. Government corporations and agencies	$	58,127	$	555	$	6	$	58,676	$	0
State and political subdivisions		272,014		3,644		3,296		272,362		0
Residential mortgage-backed securities
Agency		826,857		10,923		1,246		836,534		0
Non-agency		3,429		404		0		3,833		86
Commercial mortgage-backed securities
Agency		609,461		8,319		2,807		614,973		0
Asset-backed securities		284,390		0		8,251		276,139		0
Trust preferred collateralized debt obligations		6,045		0		1,342		4,703		842
Single issue trust preferred securities		18,196		170		1,592		16,774		0
Other corporate securities		348,405		4,897		0		353,302		0
Total	$	2,426,924	$	28,912	$	18,540	$	2,437,296	$	928

(1) Non-credit related other-than-temporary impairment in accumulated other comprehensive income. Amounts are before-tax.

United has made a policy election to exclude accrued interest from the amortized cost basis of available-for-sale debt securities and report accrued interest separately in “Accrued interest receivable” in the consolidated balance sheets. Available-for-sale debt securities are placed on non-accrual status when we no longer expect to receive all contractual amounts due, which is generally at 90 days past due. Accrued interest receivable is reversed against interest income

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when a security is placed on non-accrual status. Accordingly, we do not recognize an allowance for credit loss against accrued interest receivable. The table above excludes accrued interest receivable of $9,550 and $9,890 at March 31, 2020 and December 31, 2019, respectively, that is recorded in “Accrued interest receivable.”

The following is a summary of securities available for sale which were in an unrealized loss position at March 31, 2020 and December 31, 2019.

	Less than 12 months				12 months or longer				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses
March 31, 2020
U.S. Treasury securities and obligations of U.S. Government corporations and agencies	$	0	$	0	$	0	$	0	$	0	$	0
State and political subdivisions		72,140		2,141		384		4		72,524		2,145
Residential mortgage-backed securities
Agency		4,350		69		0		0		4,350		69
Non-agency		0		0		0		0		0		0
Commercial mortgage-backed securities
Agency		33,183		233		9,602		12		42,785		245
Asset-backed securities		16,708		1,112		245,228		20,453		261,936		21,565
Trust preferred collateralized debt obligations		2,434		1,113		1,750		750		4,184		1,863
Single issue trust preferred securities		0		0		12,471		2,686		12,471		2,686
Other corporate securities		204,878		6,133		0		0		204,878		6,133
Total	$	333,693	$	10,801	$	269,435	$	23,905	$	603,128	$	34,706

	Less than 12 months				12 months or longer				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses
December 31, 2019
U.S. Treasury securities and obligations of U.S. Government corporations and agencies	$	1,415	$	6	$	0	$	0	$	1,415	$	6
State and political subdivisions		144,307		3,291		885		5		145,192		3,296
Residential mortgage-backed securities
Agency		108,072		502		71,736		744		179,808		1,246
Non-agency		0		0		0		0		0		0
Commercial mortgage-backed securities
Agency		173,039		2,676		45,251		131		218,290		2,807
Asset-backed securities		135,174		3,252		140,965		4,999		276,139		8,251
Trust preferred collateralized debt obligations		2,703		842		2,000		500		4,703		1,342
Single issue trust preferred securities		0		0		13,562		1,592		13,562		1,592
Other corporate securities		0		0		0		0		0		0
Total	$	564,710	$	10,569	$	274,399	$	7,971	$	839,109	$	18,540

The following table shows the proceeds from maturities, sales and calls of available for sale securities and the gross realized gains and losses on sales and calls of those securities that have been included in earnings as a result of any sales and calls. Gains or losses on sales and calls of available for sale securities were recognized by the specific identification method. 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 and its subsidiaries.

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	Three Months Ended March 31
	2020		2019
Proceeds from sales and calls	$	132,926	$	196,331
Gross realized gains		253		15
Gross realized losses		79		364

At March 31, 2020, gross unrealized losses on available for sale securities were $34,706 on 133 securities of a total portfolio of 637 available for sale securities. Securities with the most significant gross unrealized losses at March 31, 2020 consisted primarily of asset-backed securities, corporate securities, and single issue trust preferred securities. The asset-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 subordination in excess of the government guaranteed portion. The corporate securities mainly consist of debt issuances of corporations representing a variety of industries, including financial institutions. The single issue trust preferred securities relate to securities of financial institutions.

In determining whether or not a security is impaired, management considered the severity of the loss in conjunction with United’s positive intent and the more likely than not ability to hold these securities to recovery of their cost basis or maturity.

State and political subdivisions

United’s state and political subdivisions portfolio relates to securities issued by various municipalities located throughout the United States. The total amortized cost of available for sale state and political subdivision securities was $313,164 at March 31, 2020. As of March 31, 2020, approximately 66% of the portfolio was supported by the general obligation of the issuing municipality, which allows for the securities to be repaid by any means available to the municipality. The majority of the portfolio was rated AA or higher, and no securities within the portfolio were rated below investment grade as of March 31, 2020. 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 impaired at March 31, 2020.

Agency mortgage-backed securities

United’s agency mortgage-backed securities portfolio relates to securities issued by Fannie Mae, Freddie Mac, and Ginnie Mae. The total amortized cost of available for sale agency mortgage-backed securities was $1,370,905 at March 31, 2020. Of the $1,370,905 amount, $589,288 was related to agency commercial mortgage-backed securities and $781,617 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 impaired at March 31, 2020.

Single issue trust preferred securities

The majority of United’s single issue trust preferred portfolio consists of obligations from large cap banks (i.e. banks with market capitalization in excess of $10 billion). All single issue trust preferred securities are currently receiving interest payments. The amortized cost of available for sale single issue trust preferred securities as of March 31, 2020 consisted of $11,489 in investment grade bonds, $977 in split rated bonds, and $5,737 in unrated bonds. Management reviews each issuer’s current and projected earnings trends, asset quality, capitalization levels, and other key factors. Upon completing the review for the first quarter of 2020, it was determined that none of the single issue trust preferred securities were impaired.

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Trust preferred collateralized debt obligations (Trup Cdos)

The total amortized cost balance of United’s Trup Cdo portfolio was $6,047 as of March 31, 2020. 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 March 31, 2020, 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.

To determine a net realizable value and assess whether impairment existed, management performed detailed cash flow analysis to determine whether, in management’s judgment, it was more likely that United would not recover the entire amortized cost basis of the security. Based on this review, management does not believe any individual security with an unrealized loss as of March 31, 2020 is impaired.

Corporate securities

As of March 31, 2020, United’s Corporate securities portfolio had a total amortized cost balance of $339,557. The majority of the portfolio consisted of debt issuances of corporations representing a variety of industries, including financial institutions. Of the $339,557, 90% was investment grade rated and 10% was unrated. For corporate securities, management has evaluated the near-term prospects of the investment in relation to the severity of any unrealized loss. Based upon management’s analysis and judgment, it was determined that none of the other corporate securities were impaired at March 31, 2020.

The amortized cost and estimated fair value of securities available for sale at March 31, 2020 and December 31, 2019 by contractual maturity are shown as follows. Expected maturities may differ from contractual maturities because the issuers may have the right to call or prepay obligations without penalties.

	March 31, 2020				December 31, 2019
			Estimated				Estimated
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value
Due in one year or less	$	122,497	$	123,365	$	92,422	$	92,473
Due after one year through five years		504,918		510,917		583,715		592,850
Due after five years through ten years		563,239		583,625		564,922		568,241
Due after ten years		1,193,567		1,199,614		1,185,865		1,183,732
Total	$	2,384,221	$	2,417,521	$	2,426,924	$	2,437,296

Equity securities at fair value

Equity securities consist mainly of equity securities of financial institutions and mutual funds within a rabbi trust for the payment of benefits under a deferred compensation plan for certain key officers of United and its subsidiaries. The fair value of United’s equity securities was $9,013 at March 31, 2020 and $8,894 at December 31, 2019.

	Three Months Ended March 31, 2020			Three Months Ended March 31, 2019
Net gains (losses) recognized during the period	$	22		$	189
Net gains (losses) recognized during the period on equity securities sold		6			132
Unrealized gains recognized during the period on equity securities still held at period end		71			58
Unrealized losses recognized during the period on equity securities still held at period end		(55	)		(1	)

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Other investment securities

During the first quarter of 2020, United evaluated all of its cost method investments to determine if certain events or changes in circumstances during the first quarter of 2020 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 first quarter. There were no other events or changes in circumstances during the first quarter which would have an adverse effect on the fair value of its cost method securities.

The carrying value of securities pledged to secure public deposits, securities sold under agreements to repurchase, and for other purposes as required or permitted by law, approximated $2,098,167 and $1,540,717 at March 31, 2020 and December 31, 2019, respectively.

4. LOANS

Major classes of loans are as follows:

	March 31, 2020		December 31, 2019
Commercial, financial and agricultural:
Owner-occupied commercial real estate	$	1,182,994	$	1,201,652
Nonowner-occupied commercial real estate		4,070,729		3,965,960
Other commercial loans		2,505,552		2,285,037
Total commercial, financial & agricultural		7,759,275		7,452,649
Residential real estate		3,668,356		3,686,401
Construction & land development		1,236,169		1,408,205
Consumer:
Bankcard		9,083		10,074
Other consumer		1,183,400		1,156,219
Total gross loans	$	13,856,283	$	13,713,548

The table above does not include loans held for sale of $503,514 and $387,514 at March 31, 2020 and December 31, 2019, respectively. Loans held for sale consist of single-family residential real estate loans originated for sale in the secondary market.

United’s subsidiary bank has made loans to the directors and officers of United and its subsidiaries, and to their affiliates. The aggregate dollar amount of these loans was $39,404 and $38,558 at March 31, 2020 and December 31, 2019, respectively.

5. CREDIT QUALITY

Management monitors the credit quality of its loans on an ongoing basis. Measurement of delinquency and past due status are based on the contractual terms of each loan. United considers a loan to be past due when it is 30 days or more past its contractual payment due date. 

For all loan classes, past due loans are reviewed on a monthly basis to identify loans for nonaccrual status. Generally, when collection in full of the principal and interest is jeopardized, the loan is placed on nonaccrual status. The accrual of interest income on commercial and most consumer loans generally is discontinued when a loan becomes 90 to 120 days past due as to principal or interest. However, regardless of delinquency status, if a loan is fully secured and in the process of collection and resolution of collection is expected in the near term (generally less than 90 days), then the loan will not be placed on nonaccrual status. When interest accruals are discontinued, unpaid interest recognized in income in the current year is reversed, and unpaid interest accrued in prior years is charged to the allowance for credit losses. United’s method of income recognition for loans that are classified as nonaccrual is to recognize interest income on a cash basis or apply the cash receipt to principal when the ultimate collectibility of principal is in doubt. Nonaccrual loans will not normally be returned to accrual status unless all past due principal and interest has been paid and the borrower has evidenced their ability to meet the contractual provisions of the note.

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A loan is categorized as a troubled debt restructuring (TDR) if a concession is granted and there is deterioration in the financial condition of the borrower. TDRs can take the form of a reduction of the stated interest rate, splitting a loan into separate loans with market terms on one loan and concessionary terms on the other loan, receipts of assets from a debtor in partial or full satisfaction of a loan, the extension of the maturity date or dates at a stated interest rate lower than the current market rate for new debt with similar risk, the reduction of the face amount or maturity amount of the debt as stated in the instrument or other agreement, the reduction of accrued interest or any other concessionary type of renegotiated debt. Under United’s current loan policy, a loan is not recognized as a TDR until it becomes probable that the loan will be a TDR. In response to the coronavirus (COVID-19) pandemic and its economic impact on our customers, United has implemented a short-term modification program that complies with the Coronavirus Aid, Relief, and Economic Security (CARES) Act to provide temporary payment relief to those borrowers directly impacted by COVID-19 who were not more than 30 days past due as of December 31, 2019. This program allows for a deferral of payments for 90 days, which we may extend for an additional 90 days, for a maximum of 180 days. As provided for under the CARES Act, these loan modifications are exempt by law from classification as a TDR as defined by GAAP, from the period beginning March 1, 2020 until the earlier of December 31, 2020 or the date that is 60 days after the date on which the national emergency concerning the COVID-19 outbreak declared by President Trump terminates.

As of March 31, 2020, United had TDRs of $61,470 as compared to $58,369 as of December 31, 2019. Of the $61,470 aggregate balance of TDRs at March 31, 2020, $51,775 was on nonaccrual and $1,143 was 30-89 days past due. Of the $58,369 aggregate balance of TDRs at December 31, 2019, $48,387 was on nonaccrual and $902 was 30-89 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 March 31, 2020, there were commitments to lend additional funds of $162 to a debtor owing receivables whose terms have been modified in TDRs. During the first three months of 2020, $73 was advanced to this debtor under a loan that had been previously modified. At March 31, 2020, United had restructured loans in the amount of $9,054 that were modified by a reduction in the interest rate, $1,727 that were modified by a combination of a reduction in the interest rate and the principal and $50,689 that were modified by a change in terms.

The following table sets forth United’s troubled debt restructurings that were restructured during the three months ended March 31, 2020 and 2019, segregated by class of loans.

	Troubled Debt Restructurings
	For the Three Months Ended
	March 31, 2020						March 31, 2019
	Number of Contracts		Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment		Number of Contracts		Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment
Commercial real estate:
Owner-occupied		3	$	7,951	$	7,827		0	$	0	$	0
Nonowner-occupied		0		0		0		0		0		0
Other commercial		4		498		392		1		265		265
Residential real estate		0		0		0		1		413		409
Construction & land development		3		2,045		2,032		0		0		0
Consumer:
Bankcard		0		0		0		0		0		0
Other consumer		0		0		0		0		0		0
Total		10	$	10,494	$	10,251		2	$	678	$	674

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During the first quarter of 2020, $7,409 of restructured loans were modified by a reduction in the interest rate and $2,842 of restructured loans were modified by a change in terms. During the first quarter of 2019, $265 of restructured loans were modified by a reduction in the interest rate and $409 of restructured loans were modified by a change in terms. In some instances, the post-modification balance on the restructured loans is larger than the pre-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.

No loans restructured during the twelve-month periods ended March 31, 2020 and 2019 subsequently defaulted, resulting in a principal charge-off during the first quarters of 2020 and 2019.

The following table sets forth United’s age analysis of its past due loans, segregated by class of loans: 

Age Analysis of Past Due Loans

As of March 31, 2020

	30-89 Days Past Due		90 Days or more Past Due		Total Past Due		Current & Other		Total Financing Receivables		90 Days or More Past Due & Accruing
Commercial real estate:
Owner-occupied	$	20,258	$	21,284	$	41,542	$	1,141,452	$	1,182,994	$	957
Nonowner-occupied		5,209		16,249		21,458		4,049,271		4,070,729		592
Other commercial		8,433		43,515		51,948		2,453,604		2,505,552		175
Residential real estate		32,769		22,130		54,899		3,613,457		3,668,356		3,883
Construction & land development		4,297		17,924		22,221		1,213,948		1,236,169		0
Consumer:
Bankcard		415		157		572		8,511		9,083		158
Other consumer		12,327		1,603		13,930		1,169,470		1,183,400		1,286
Total	$	83,708	$	122,862	$	206,570	$	13,649,713	$	13,856,283	$	7,051

Age Analysis of Past Due Loans As of December 31, 2019
	30-89 Days Past Due		90 Days or more Past Due		Total Past Due		Current & Other (1)		Total Financing Receivables		90 Days or More Past Due & Accruing
Commercial real estate:
Owner-occupied	$	8,878	$	11,209	$	20,087	$	1,181,565	$	1,201,652	$	544
Nonowner-occupied		6,318		16,129		22,447		3,943,513		3,965,960		471
Other commercial		5,238		51,541		56,779		2,228,258		2,285,037		668
Residential real estate		31,727		24,343		56,070		3,630,331		3,686,401		6,256
Construction & land development		2,219		16,043		18,262		1,389,943		1,408,205		0
Consumer:
Bankcard		445		218		663		9,411		10,074		218
Other consumer		10,991		1,607		12,598		1,143,621		1,156,219		1,337
Total	$	65,816	$	121,090	$	186,906	$	13,526,642	$	13,713,548	$	9,494

(1) Other includes loans with a recorded investment of $96,004 acquired and accounted for under ASC Topic 310-30 “Loans and Debt Securities Acquired with Deteriorated Credit Quality”.

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The following table sets forth United’s nonaccrual loans, segregated by class of loans:

	At March 31, 2020						At December 31, 2019		Interest Income Recognized
	Nonaccruals		With No Related Allowance for Credit Losses		90 Days or More Past Due & Accruing		Nonaccruals		For The Three Months Ended March 31, 2020
Commercial Real Estate:
Owner-occupied	$	20,327	$	16,318	$	957	$	10,665	$	0
Nonowner-occupied		15,657		5,815		592		15,658		0
Other Commercial		43,341		22,992		175		50,873		0
Residential Real Estate		18,246		13,326		3,883		18,087		0
Construction		17,924		17,924		0		16,043		0
Consumer:
Bankcard		0		0		158		0		0
Other consumer		316		316		1,286		270		0
Total	$	115,811	$	76,691	$	7,051	$	111,596	$	0

For the adoption of ASU 2016-13, United elected the practical expedient to measure expected credit losses on collateral dependent loans based on the difference between the loan’s amortized cost and the collateral’s fair value, adjusted for selling costs. The following table presents the amortized cost basis of collateral-dependent loans in which repayment is expected to be derived substantially through the operation or sale of the collateral and where the borrower is experiencing financial difficulty, by class of loans as of March 31, 2020:

	Collateral Dependent Loans
	At March 31, 2020
	Residential Property		Business Assets		Land		Commercial Property		Other		Total
Commercial real estate:
Owner-occupied	$	1,589	$	84	$	0	$	18,195	$	27,622	$	47,490
Nonowner-occupied		11,542		0		3,013		9,461		12,619		36,635
Other commercial		5,569		42,928		0		0		2,250		50,747
Residential real estate		24,376		278		256		0		819		25,729
Construction & land development		10,193		0		21,145		0		740		32,078
Consumer:
Bankcard		0		0		0		0		0		0
Other consumer		0		0		0		0		0		0
Total	$	53,269	$	47,886	$	24,414	$	27,656	$	44,529	$	192,679

United categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt: current financial information, historical payment experience, credit documentation, underlying collateral (if any), public information and current economic trends, among other factors.

United uses the following definitions for risk ratings:

• Pass

• Special Mention

• Substandard

• Doubtful

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For United’s loans with a corporate credit exposure, United analyzes loans individually to classify the loans as to credit risk. Review and analysis of criticized (special mention-rated loans in the amount of $1,000 or greater) and classified (substandard-rated and worse in the amount of $500 and greater) loans is completed once per quarter. Review of notes with committed exposure of $2,000 or greater is completed at least annually. For loans with a consumer credit exposure, United internally assigns a grade based upon an individual loan’s delinquency status. United reviews and updates, as necessary, these grades on a quarterly basis.

Special mention loans, with a corporate credit exposure, have potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loans or in the Company’s credit position at some future date. Borrowers may be experiencing adverse operating trends (declining revenues or margins) or an ill proportioned balance sheet (e.g., increasing inventory without an increase in sales, high leverage, tight liquidity). Adverse economic or market conditions, such as interest rate increases or the entry of a new competitor, may also support a special mention rating. Nonfinancial reasons for rating a credit exposure special mention include management problems, pending litigation, an ineffective loan agreement or other material structural weakness, and any other significant deviation from prudent lending practices. For loans with a consumer credit exposure, loans that are past due 30-89 days are generally considered special mention.

A substandard loan with a corporate credit exposure is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness, or weaknesses, that jeopardize the liquidation of the debt by the borrower. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. They require more intensive supervision by management. Substandard loans are generally characterized by current or expected unprofitable operations, inadequate debt service coverage, inadequate liquidity, or marginal capitalization. Repayment may depend on collateral or other credit risk mitigants. For some substandard loans, the likelihood of full collection of interest and principal may be in doubt and thus, placed on nonaccrual. For loans with a consumer credit exposure, loans that are 90 days or more past due or that have been placed on nonaccrual are considered substandard.

A loan with corporate credit exposure is classified as doubtful if it has all the weaknesses inherent in one classified as substandard with the added characteristic that the weaknesses make collection in full, on the basis of currently existing facts, conditions, and values, highly questionable. A doubtful loan has a high probability of total or substantial loss, but because of specific pending events that may strengthen the loan, its classification as loss is deferred. Doubtful borrowers are usually in default, lack adequate liquidity or capital, and lack the resources necessary to remain an operating entity. Pending events can include mergers, acquisitions, liquidations, capital injections, the perfection of liens on additional collateral, the valuation of collateral, and refinancing. Generally, there are not any loans with a consumer credit exposure that are classified as doubtful. Usually, they are charged-off prior to such a classification.

Based on the most recent analysis performed, the risk category of loans by class of loans is as follows:

Commercial Real Estate – Owner-occupied																Revolving loans converted to term loans
	Term Loans													Revolving loans amortized cost basis				Total
	Origination Year
As of March 31, 2020	2020		2019		2018		2017		2016		Prior
Internal Risk Grade:
Pass	$	24,114	$	107,630	$	92,116	$	160,376	$	248,977	$	457,412		$	20,634	$	0	$	1,111,259
Special Mention		0		0		1,630		0		0		13,301			0		541		15,472
Substandard		0		0		0		1,937		4,411		48,403			1,013		147		55,911
Doubtful		0		0		0		0		0		352			0		0		352
Total	$	24,114	$	107,630	$	93,746	$	162,313	$	253,388	$	519,468		$	21,647	$	688	$	1,182,994
Current-period charge-offs		0		0		0		0		0		(179	)		0		0		(179	)
Current-period recoveries		0		0		0		0		0		66			0		0		66
Current-period net charge-offs	$	0	$	0	$	0	$	0	$	0	$	(113	)	$	0	$	0	$	(113	)

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Commercial Real Estate – Nonowner-occupied															Revolving loans converted to term loans
	Term Loans												Revolving loans amortized cost basis				Total
	Origination Year
As of March 31, 2020	2020		2019		2018		2017		2016		Prior
Internal Risk Grade:
Pass	$	175,412	$	526,289	$	504,087	$	474,727	$	454,319	$	1,718,979	$	119,023	$	2,125	$	3,974,961
Special Mention		0		354		0		593		7,873		30,104		0		195		39,119
Substandard		73		287		2,318		2,233		3,724		48,014		0		0		56,649
Doubtful		0		0		0		0		0		0		0		0		0
Total	$	175,485	$	526,930	$	506,405	$	477,553	$	465,916	$	1,797,097	$	119,023	$	2,320	$	4,070,729
Current-period charge-offs		0		0		0		0		0		0		0		0		0
Current-period recoveries		0		0		0		0		0		585		0		0		585
Current-period net charge-offs	$	0	$	0	$	0	$	0	$	0	$	585	$	0	$	0	$	585

Other commercial																		Revolving loans converted to term loans
	Term Loans															Revolving loans amortized cost basis				Total
	Origination Year
As of March 31, 2020	2020		2019		2018			2017		2016			Prior
Internal Risk Grade:
Pass	$	80,015	$	426,277	$	153,721		$	115,704	$	141,051		$	315,257		$	1,120,009	$	3,155	$	2,355,189
Special Mention		0		207		178			562		223			20,268			45,814		447		67,699
Substandard		0		883		238			473		12,359			51,763			16,324		398		82,438
Doubtful		0		0		0			0		0			226			0		0		226
Total	$	80,015	$	427,367	$	154,137		$	116,739	$	153,633		$	387,514		$	1,182,147	$	4,000	$	2,505,552
Current-period charge-offs		0		0		(783	)		0		(6	)		(4,899	)		0		0		(5,688	)
Current-period recoveries		0		42		2			2		21			248			0		0		315
Current-period net charge-offs	$	0	$	42	$	(781	)	$	2	$	15		$	(4,651	)	$	0	$	0	$	(5,373	)

Residential Real Estate																	Revolving loans converted to term loans
	Term Loans														Revolving loans amortized cost basis				Total
	Origination Year
As of March 31, 2020	2020		2019		2018		2017		2016			Prior
Internal Risk Grade:
Pass	$	139,674	$	651,932	$	844,180	$	306,882	$	285,593		$	984,456		$	410,625	$	4,334	$	3,627,676
Special Mention		0		0		0		950		2,364			6,255			316		0		9,885
Substandard		0		226		444		1,350		5,676			22,159			568		239		30,662
Doubtful		0		0		0		0		0			133			0		0		133
Total	$	139,674	$	652,158	$	844,624	$	309,182	$	293,633		$	1,013,003		$	411,509	$	4,573	$	3,668,356
Current-period charge-offs		0		0		0		0		(1	)		(366	)		0		0		(367	)
Current-period recoveries		0		0		0		100		0			42			0		0		142
Current-period net charge-offs	$	0	$	0	$	0	$	100	$	(1	)	$	(324	)	$	0	$	0	$	(225	)

Construction and Land Development																Revolving loans converted to term loans
	Term Loans													Revolving loans amortized cost basis				Total
	Origination Year
As of March 31, 2020	2020		2019		2018		2017		2016		Prior
Internal Risk Grade:
Pass	$	31,492	$	427,055	$	322,610	$	152,800	$	114,928	$	48,210		$	77,474	$	145	$	1,174,714
Special Mention		0		0		0		0		0		2,057			985		0		3,042
Substandard		0		1,010		980		0		0		32,001			24,422		0		58,413
Doubtful		0		0		0		0		0		0			0		0		0
Total	$	31,492	$	428,065	$	323,590	$	152,800	$	114,982	$	82,268		$	102,881	$	145	$	1,236,169
Current-period charge-offs		0		0		0		0		0		(1,744	)		0		0		(1,744	)
Current-period recoveries		0		0		0		0		0		844			0		0		844
Current-period net charge-offs	$	0	$	0	$	0	$	0	$	0	$	(900	)	$	0	$	0	$	(900	)

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Bankcard																Revolving loans converted to term loans
	Term Loans												Revolving loans amortized cost basis					Total
	Origination Year
As of March 31, 2020	2020		2019		2018		2017		2016		Prior
Internal Risk Grade:
Pass	$	0	$	0	$	0	$	0	$	0	$	0	$	8,511		$	0	$	8,511
Special Mention		0		0		0		0		0		0		414			0		414
Substandard		0		0		0		0		0		0		158			0		158
Doubtful		0		0		0		0		0		0		0			0		0
Total	$	0	$	0	$	0	$	0	$	0	$	0	$	9,083		$	0	$	9,083
Current-period charge-offs		0		0		0		0		0		0		(46	)		0		(46	)
Current-period recoveries		0		0		0		0		0		0		6			0		6
Current-period net charge-offs	$	0	$	0	$	0	$	0	$	0	$	0	$	(40	)	$	0	$	(40	)

Other Consumer																				Revolving loans converted to term loans
	Term Loans																	Revolving loans amortized cost basis				Total
	Origination Year
As of March 31, 2020	2020		2019			2018			2017			2016			Prior
Internal Risk Grade:
Pass	$	116,421	$	532,691		$	325,071		$	120,377		$	65,888		$	18,452		$	4,488	$	0	$	1,183,388
Special Mention		0		0			0			0			0			0			4		0		4
Substandard		0		0			0			0			0			0			8		0		8
Doubtful		0		0			0			0			0			0			0		0		0
Total	$	116,421	$	532,691		$	325,071		$	120,377		$	65,888		$	18,452		$	4,500	$	0	$	1,183,400
Current-period charge-offs		0		(175	)		(278	)		(141	)		(93	)		(50	)		0		0		(737	)
Current-period recoveries		0		9			23			7			10			66			0		0		115
Current-period net charge-offs	$	0	$	(166	)	$	(255	)	$	(134	)	$	(83	)	$	16		$	0	$	0	$	(622	)

The following tables set forth United’s credit quality indicators information, by class of loans, as of December 31, 2019:

Credit Quality Indicators

Corporate Credit Exposure

As of December 31, 2019
	Commercial Real Estate				Other Commercial		Construction & Land Development
	Owner- occupied		Nonowner- occupied
Grade:
Pass	$	1,136,589	$	3,850,886	$	2,136,266	$	1,334,950
Special mention		14,449		44,134		75,511		4,614
Substandard		50,346		70,940		72,451		68,641
Doubtful		268		0		809		0
Total	$	1,201,652	$	3,965,960	$	2,285,037	$	1,408,205

Credit Quality Indicators

Consumer Credit Exposure

As of December 31, 2019
	Residential Real Estate		Bankcard		Other Consumer
Grade:
Pass	$	3,645,654	$	9,411	$	1,143,608
Special mention		12,038		445		10,993
Substandard		28,572		218		1,618
Doubtful		137		0		0
Total	$	3,686,401	$	10,074	$	1,156,219

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At March 31, 2020 and December 31, 2019, other real estate owned (OREO) included in other assets in the Consolidated Balance Sheets was $15,849 and $15,515, 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 March 31, 2020 and December 31, 2019, the recorded investment of consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings are in process was $1,164 and $890, respectively.

6. ALLOWANCE FOR CREDIT LOSSES

United adopted the CECL methodology for measuring credit losses as of January 1, 2020. All disclosures as of and for the three months ended March 31, 2020 are presented in accordance with ASC 326. The Company did not recast comparative financial periods and has presented those disclosures under previously applicable GAAP.

The allowance for loan losses is an estimate of the expected credit losses on financial assets measured at amortized cost to present the net amount expected to be collected as of the balance sheet date. Such allowance is based on the credit losses expected to arise over the life of the asset (contractual term). Assets are charged off when United determines that such financial assets are deemed uncollectible or based on regulatory requirements, whichever is earlier. Charge-offs are recognized as a deduction from the allowance for credit losses. Expected recoveries of amounts previously charged-off, not to exceed the aggregate of the amount previously charged-off, are included in determining the necessary reserve at the balance sheet date.

United made a policy election to present the accrued interest receivable balance separately in its consolidated balance sheets from the amortized cost of a loan. Accrued interest receivable was $39,202 and $48,130 at March 31, 2020 and December 31, 2019, respectively, related to loans are included separately in “Accrued interest receivable” in the consolidated balance sheets. United also elected not to measure an allowance for loan losses for accrued interest receivables. For all classes of loans receivable, the accrual of interest is discontinued when the contractual payment of principal or interest has become 90 days past due, unless the loan is well secured and in the process of collection. Interest received on nonaccrual loans, generally is either applied against principal or reported as interest income, according to management’s judgment as to the collectability of principal.

The following table represents the accrued interest receivable as of March 31, 2020 and the accrued interest receivables written off by reversing interest income as of March 31, 2020:

	Accrued Interest Receivable		Accrued Interest Receivables Written Off by Reversing Interest Income
	At March 31, 2020		For the Three Months Ended March 31, 2020
Commercial Real Estate:
Owner-occupied	$	2,899	$	17
Nonowner-occupied		10,890		7
Other Commercial		6,027		12
Residential Real Estate		11,400		70
Construction		5,654		0
Consumer:
Bankcard		0		0
Other consumer		2,332		40
Total	$	39,202	$	146

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United estimates the allowance balance using relevant available information, from internal and external sources, relating to past events, current conditions and reasonable and supportable forecasts. Historical credit loss experience provides the basis for the estimation of expected credit losses. Adjustments to historical loss information are made for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, delinquency level or term as well as for changes in environmental conditions, such as changes in unemployment rates, property values or other relevant factors. A reversion to historical loss data occurs via a straight-line method during the year following the one-year reasonable and supportable forecast period.

United pools its loans based on similar risk characteristics in estimating expected credit losses. United has identified the following portfolio segments and measures the allowance for credit losses using the following methods:

• Method: Probability of Default/Loss Given Default

• Commercial Real Estate Owner-Occupied

• Commercial Real Estate Nonowner-Occupied

• Commercial Other

• Method: Cohort

• Residential Real Estate

• Construction & Land Development

• Consumer

• Bankcard

Risk characteristics of commercial real estate owner-occupied loans and commercial other loans are similar in that they are normally dependent upon the borrower’s internal cash flow from operations to service debt. Commercial real estate nonowner-occupied loans differ in that cash flow to service debt is normally dependent on external income from third parties for use of the real estate such as rents, leases and room rates. Residential real estate loans are dependent upon individual borrowers who are affected by changes in general economic conditions, demand for housing and resulting residential real estate valuation. Construction and land development loans are impacted mainly by demand whether for new residential housing or for retail, industrial, office and other types of commercial construction within a given area. Consumer loan pool risk characteristics are influenced by general, regional and local economic conditions.

Loans that do not share risk characteristics are evaluated on an individual basis. Loans evaluated individually are not also included in the collective evaluation. When management determines that foreclosure is probable or when the borrower is experiencing financial difficulty at the reporting date and repayment is expected to be provided substantially through the operation or sale of the collateral, expected credit losses are based on the fair value of the collateral at the reporting date, adjusted for selling costs as appropriate.

Expected credit losses are estimated over the contractual term of the loans, adjusted for expected prepayments when appropriate. The contractual term excludes expected extensions, renewals and modifications unless either of the following applies: management has a reasonable expectation at the reporting date that a troubled debt restructuring will be executed with an individual borrower or the extension or renewal options are included in the original or modified contract at the reporting date and are not unconditionally cancelable by United.

For past loans acquired through the completion of a transfer, including loans acquired in a business combination, that had evidence of deterioration of credit quality since origination (PCI) and accounted for under ASC Topic 310, an entity did not have to reassess whether any loans previously accounted for as PCI meet the definition of purchased credit deteriorated (PCD) loans upon adoption of ASC Topic 326. Any changes in the allowance for credit losses for these loans were accounted for as an adjustment to the loan’s amortized cost basis and not as a cumulative-effect adjustment to United’s beginning retained earnings. Non-PCI loans will now be classified as non-PCD loans with the

25

adoption of ASC Topic 326. In accordance with ASC Topic 326 guidance, United calculated a PCD rate adjustment for all PCD loans at adoption. Such adjustment created a deferred fee balance for any excess amount not deemed to be credit-related between the PCD recorded balance at the adoption date and the contractual principal and interest balances outstanding.

For allowance for credit losses under ASC Topic 326 calculation purposes, all acquired loans will be included in their relevant pool and subject to legacy loss rates for that applicable pool unless they meet the criteria for specific review.

For loans acquired after the adoption of ASC Topic 326, United will likely take several factors into consideration when determining if loans meet the definition of PCD. ASC Topic 326 lists some, but not all, factors for consideration in the bifurcation of PCD versus non-PCD assets:

• Financial assets that are delinquent as of the acquisition date

• Financial assets that have been downgraded since origination

• Financial assets that have been placed on nonaccrual status

• Financial assets for which, after origination, credit spreads have widened beyond the threshold specified in its policy

United maintains an allowance for loan losses and a reserve for lending-related commitments such as unfunded loan commitments and letters of credit. United estimates expected credit losses over the contractual period in which United is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by United. The reserve for lending-related commitments on off-balance sheet credit exposures is adjusted as a provision for credit loss expense. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life. Methodology is based on a loss rate approach that starts with the probability of funding based on historical experience. Similar to methodology discussed above related to the loans receivable portfolio, adjustments are made to the historical losses for current conditions and reasonable and supportable forecast. The reserve for lending-related commitments of $7,742 and $1,733 at March 31, 2020 and December 31, 2019, respectively, is separately classified on the balance sheet and is included in other liabilities. The combined allowance for loan losses and reserve for lending-related commitments is considered the allowance for credit losses.

For the three months ended March 31, 2020 the allowance for credit losses increased significantly from the year ended December 31, 2019 primarily due to the adoption of the current expected credit loss (CECL) model under ASC 326 on January 1, 2020 and the macroeconomic factors surrounding the COVID-19 pandemic considered in the determination of the allowance for loan losses at March 31, 2020.

The first quarter of 2020 qualitative adjustments include analyses of the following:

• Past events – This includes portfolio trends related to business conditions; past due, nonaccrual, and graded loans; and concentrations.

• Current conditions – United considered the impact of COVID-19 (negative) as well as the CARES Act (positive) when making determinations related to factor adjustments, such as collateral values and past due loans, and the reasonable and supportable forecast. This is in contrast with the CECL adoption date (January 1, 2020) estimate as neither of these items were relevant for United’s footprint at the beginning of the year.

• Reasonable and supportable forecasts – The forecast is determined on a portfolio-by-portfolio basis by relating the correlation of real GDP and the unemployment rate to loss rates to forecasts of those variables. Assumptions for the economic variables were the following:

• 10-15% decline in GDP in the second quarter of 2020 followed by a recovery in the third quarter of 2020 with GDP stabilizing in 2021.

• 10-15% unemployment rate in the second quarter of 2020 with sharp recovery as businesses begin to reopen and again stabilizing in 2021.

26

• Forecasts account for United’s best estimate of economic impact from government stimulus.

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

A progression of the allowance for loan losses, by portfolio segment, for the periods indicated is summarized as follows:

Allowance for Loan Losses and Carrying Amount of Loans

For the Three Months Ended March 31, 2020

	Commercial Real Estate												Construction									Allowance for
	Owner- occupied			Nonowner- occupied			Other Commercial			Residential Real Estate			& Land Development			Bankcard			Other Consumer			Estimated Imprecision			Total
Allowance for Loan Losses:
Beginning balance	$	5,554		$	8,524		$	47,325		$	8,997		$	3,353		$	74		$	2,933		$	297		$	77,057
Impact of the adoption of ASU 2016-13 on January 1, 2020		9,737			9,023			(4,829	)		13,097			14,817			28			10,745			(297	)		52,321
Impact of the adoption of ASU 2016-13 for PCD loans on January 1, 2020		1,843			121			938			174			2,045			0			0			0			5,121
Charge-offs		(179	)		0			(5,688	)		(367	)		(1,744	)		(46	)		(737	)		0			(8,761	)
Recoveries		66			585			315			142			844			6			115			0			2,073
Provision		2,474			(684	)		15,766			8,581			(523	)		164			1,334			0			27,112
Ending balance	$	19,495		$	17,569		$	53,827		$	30,624		$	18,792		$	226		$	14,390		$	0		$	154,923

Allowance for Loan Losses and Carrying Amount of Loans
For the Year Ended December 31, 2019
	Commercial Real Estate												Construction						Allowance for
	Owner- occupied			Nonowner- occupied			Other Commercial			Residential Real Estate			& Land Development			Consumer			Estimated Imprecision		Total
Allowance for Loan Losses:
Beginning balance	$	5,063		$	6,919		$	41,341		$	12,448		$	7,992		$	2,695		$	245	$	76,703
Charge-offs		(7,905	)		(1,093	)		(12,975	)		(2,967	)		(1,303	)		(2,867	)		0		(29,110	)
Recoveries		3,733			80			2,599			858			175			706			0		8,151
Provision		4,663			2,618			16,360			(1,342	)		(3,511	)		2,473			52		21,313
Ending balance	$	5,554		$	8,524		$	47,325		$	8,997		$	3,353		$	3,007		$	297	$	77,057
Ending Balance: individually evaluated for impairment	$	973		$	2,979		$	11,931		$	354		$	262		$	0		$	0	$	16,499
Ending Balance: collectively evaluated for impairment	$	4,581		$	5,545		$	35,394		$	8,643		$	3,091		$	3,007		$	297	$	60,558
Ending Balance: loans acquired with deteriorated credit quality	$	0		$	0		$	0		$	0		$	0		$	0		$	0	$	0
Financing receivables:
Ending balance	$	1,201,652		$	3,965,960		$	2,285,037		$	3,686,401		$	1,408,205		$	1,166,293		$	0	$	13,713,548

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Allowance for Loan Losses and Carrying Amount of Loans
For the Year Ended December 31, 2019
	Commercial Real Estate				Other Commercial		Residential Real Estate		Construction		Consumer		Allowance for		Total
	Owner- occupied		Nonowner- occupied						& Land Development				Estimated Imprecision
Ending Balance: individually evaluated for impairment	$	16,703	$	27,121	$	54,108	$	11,526	$	14,047	$	0	$	0	$	123,505
Ending Balance: collectively evaluated for impairment	$	1,160,556	$	3,925,249	$	2,194,432	$	3,665,140	$	1,382,369	$	1,166,293	$	0	$	13,494,039
Ending Balance: loans acquired with deteriorated credit quality	$	24,393	$	13,590	$	36,497	$	9,735	$	11,789	$	0	$	0	$	96,004

7. INTANGIBLE ASSETS

The following is a summary of intangible assets subject to amortization and those not subject to amortization:

	March 31, 2020
	Community Banking					Mortgage Banking				Total
	Gross Carrying Amount		Accumulated Amortization			Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Amortized intangible assets:
Core deposit intangible assets	$	98,359	$	(71,085	)	$	0	$	0	$	98,359	$	(71,085	)
Non-amortized intangible assets:
George Mason trade name	$	0				$	1,080			$	1,080
Goodwill not subject to amortization	$	1,472,699				$	5,315			$	1,478,014

	December 31, 2019
	Community Banking					Mortgage Banking				Total
	Gross Carrying Amount		Accumulated Amortization			Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Amortized intangible assets:
Core deposit intangible assets	$	98,359	$	(69,508	)	$	0	$	0	$	98,359	$	(69,508	)
Non-amortized intangible assets:
George Mason trade name	$	0				$	1,080			$	1,080
Goodwill not subject to amortization	$	1,472,699				$	5,315			$	1,478,014

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United incurred amortization expense of $1,577 and $1,754 for the quarters ended March 31, 2020 and 2019, respectively.

The following table sets forth the anticipated amortization expense for intangible assets for the years subsequent to 2019:

Year	Amount
2020	$	6,309
2021		5,369
2022		4,582
2023		4,322
2024 and thereafter		8,269

8. LEASES

United determines if an arrangement is a lease at inception. United and certain subsidiaries have entered into various noncancelable-operating leases for branch and loan production offices as well as operating facilities. Operating leases are included in operating lease right-of-use (“ROU”) assets and operating lease liabilities on the Consolidated Balance Sheets. Operating leases with an initial term of 12 months or less are not recorded on the Consolidated Balance Sheets. Presently, United does not have any finance leases.

United’s operating leases are subject to renewal options under various terms. United’s operating leases have remaining terms of 1 to 13 years, some of which include options to extend leases generally for periods of 5 years. United rents or subleases certain real estate to third parties. Our sublease portfolio consists of operating leases to other organizations for former branch offices.

ROU assets represent United’s right to use an underlying asset for the lease term and lease liabilities represent United’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of United’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. Lease terms may include options to extend the lease when it is reasonably certain that United will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

The components of lease expense were as follows:

			Three Months Ended
	Classification		March 31, 2020			March 31, 2019
Operating lease cost		Net occupancy expense	$	5,066		$	4,821
Sublease income		Net occupancy expense		(205	)		(276	)
Net lease cost			$	4,861		$	4,545

Supplemental balance sheet information related to leases was as follows:

	Classification		March 31, 2020		December 31, 2019
Operating lease right-of-use assets		Operating lease right-of-use assets	$	57,280	$	57,783
Operating lease liabilities		Operating lease liabilities	$	60,887	$	61,342

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Other information related to leases was as follows:

	March 31, 2020
Weighted-average remaining lease term:
Operating leases		5.1 years
Weighted-average discount rate:
Operating leases		3.13	%

Supplemental cash flow information related to leases was as follows:

	Three Months Ended
	March 31, 2020		March 31, 2019
Cash paid for amounts in the measurement of lease liabilities:
Operating cash flows from operating leases	$	5,017	$	4,718
ROU assets obtained in the exchange for lease liabilties		3,783		202

Maturities of lease liabilities by year and in the aggregate, under operating leases with initial or remaining terms of one year or more, for years subsequent to December 31, 2019, consists of the following as of March 31, 2020 and December 31, 2019:

	Amount
Year	As of March 31, 2020			As of December 31, 2019
2020	$	13,359		$	17,725
2021		15,596			15,180
2022		11,892			11,522
2023		9,130			8,751
2024		5,516			5,127
Thereafter		10,476			8,190
Total lease payments		65,969			66,495
Less: imputed interest		(5,082	)		(5,153	)
Total	$	60,887		$	61,342

9. SHORT-TERM BORROWINGS

Federal funds purchased and securities sold under agreements to repurchase are a significant source of funds for the Company. United has various unused lines of credit available from certain of its correspondent banks in the aggregate amount of $230,000. These lines of credit, which bear interest at prevailing market rates, permit United to borrow funds in the overnight market, and are renewable annually subject to certain conditions. At March 31, 2020, United did not have any federal funds purchased while total securities sold under agreements to repurchase (REPOs) were $124,561. The securities sold under agreements to repurchase were accounted for as collateralized financial transactions. They were recorded at the amounts at which the securities were acquired or sold plus accrued interest.

United has a $20,000 line of credit with an unrelated financial institution to provide for general liquidity needs. The line is an unsecured, revolving line of credit. The line will be renewable on a 360-day basis and will carry an indexed, floating-rate of interest. The line requires compliance with various financial and nonfinancial covenants. At March 31, 2020, United had no outstanding balance under this line of credit.

10. LONG-TERM BORROWINGS    

United’s subsidiary bank is a member of the Federal Home Loan Bank (“FHLB”). Membership in the FHLB makes available short-term and long-term borrowings from collateralized advances. All FHLB borrowings are collateralized by a mix of single-family residential mortgage loans, commercial loans and investment securities. At March 31, 2020, United had an unused borrowing amount of approximately $3,117,489 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.

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At March 31, 2020, $2,326,282 of FHLB advances with a weighted-average interest rate of 1.48% are scheduled to mature within the next six years. Overnight funds of $475,000 were included in the $2,326,282 above at March 31, 2020.

The scheduled maturities of these FHLB borrowings are as follows:

Year	Amount
2020	$	1,466,797
2021		827,543
2022		20,898
2023		0
2024 and thereafter		11,044
Total	$	2,326,282

At March 31, 2020, 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 March 31, 2020 and December 31, 2019, the outstanding balance of the Debentures was $236,479 and $236,164, respectively, and was included in the category of long-term debt on the Consolidated Balance Sheets entitled “Other long-term borrowings.” The Capital Securities are not included as a component of shareholders’ equity in the Consolidated Balance Sheets. United fully and unconditionally guarantees each individual trust’s obligations under the Capital Securities.

Under the provisions of the subordinated debt, United has the right to defer payment of interest on the subordinated debt at any time, or from time to time, for periods not exceeding five years. If interest payments on the subordinated debt are deferred, the dividends on the Capital Securities are also deferred. Interest on the subordinated debt is cumulative.

In accordance with the fully-phased in “Basel III Capital Rules” as published by United’s primary federal regulator, the Federal Reserve, United is unable to consider the Capital Securities as Tier 1 capital, but rather the Capital Securities are 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.

11. COMMITMENTS AND CONTINGENT LIABILITIES

Lending-related Commitments

United is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers and to alter its own exposure to fluctuations in interest rates. These financial instruments include loan commitments, standby letters of credit, and interest rate swap agreements. The instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the financial statements.

United’s maximum exposure to credit loss in the event of nonperformance by the counterparty to the financial instrument for the loan commitments and standby letters of credit is the contractual or notional amount of those instruments. United uses the same policies in making commitments and conditional obligations as it does for on-balance sheet instruments. Collateral may be obtained, if deemed necessary, based on management’s credit evaluation of the counterparty.

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Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the commitment contract. Commitments generally have fixed expiration dates or other termination clauses and may require the payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily, and historically do not, represent future cash requirements. The amount of collateral obtained, if deemed necessary upon the extension of credit, is based on management’s credit evaluation of the counterparty. United had approximately $4,297,661 and $3,610,777 of loan commitments outstanding as of March 31, 2020 and December 31, 2019, respectively, approximately half of which contractually expire within one year. Included in the March 31, 2020 amount are commitments to extend credit of $496,911 related to George Mason’s mortgage loan funding commitments and are of a short-term nature.

Commercial and standby letters of credit are agreements used by United’s customers as a means of improving their credit standing in their dealings with others. Under these agreements, United guarantees certain financial commitments of its customers. A commercial letter of credit is issued specifically to facilitate trade or commerce. Typically, under the terms of a commercial letter of credit, a commitment is drawn upon when the underlying transaction is consummated as intended between the customer and a third party. As of March 31, 2020 and December 31, 2019, United had $5,092 of commercial letters of credit outstanding. A standby letter of credit is generally contingent upon the failure of a customer to perform according to the terms of an underlying contract with a third party. United has issued standby letters of credit of $142,203 and $145,105 as of March 31, 2020 and December 31, 2019, respectively. In accordance with the Contingencies Topic of the FASB Accounting Standards Codification, United has determined that substantially all of its letters of credit are renewed on an annual basis and the fees associated with these letters of credit are immaterial.

Mortgage Repurchase Reserve

George Mason provides for its estimated exposure to repurchase loans previously sold to investors for which borrowers failed to provide full and accurate information on their loan application or for which appraisals have not been acceptable or where the loan was not underwritten in accordance with the loan program specified by the loan investor, and for other exposure to its investors related to loan sales activities. United evaluates the merits of each claim and estimates its reserve based on actual and expected claims received and considers the historical amounts paid to settle such claims. George Mason has a reserve of $790 as of March 31, 2020.

United has derivative counter-party risk that may arise from the possible inability of George Mason’s third party investors to meet the terms of their forward sales contracts. George Mason works with third-party investors that are generally well-capitalized, are investment grade and exhibit strong financial performance to mitigate this risk. United does not expect any third-party investor to fail to meet its obligation.

Legal Proceedings

United and its subsidiaries are currently involved in various legal proceedings in the normal course of business. Management is vigorously pursuing all its legal and factual defenses and, after consultation with legal counsel, believes that all such litigation will be resolved with no material effect on United’s financial position.

Regulatory Matters

A variety of consumer products, including mortgage and deposit products, and certain fees and charges related to such products, have come under increased regulatory scrutiny. It is possible that regulatory authorities could bring enforcement actions, including civil money penalties, or take other actions against United in regard to these consumer products. United could also determine of its own accord, or be required by regulators, to refund or otherwise make remediation payments to customers in connection with these products. It is not possible at this time for management to assess the probability of a material adverse outcome or reasonably estimate the amount of any potential loss related to such matters.

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12. DERIVATIVE FINANCIAL INSTRUMENTS

United uses derivative instruments to help aid against adverse price changes or interest rate movements on the value of certain assets or liabilities and on future cash flows. These derivatives may consist of interest rate swaps, caps, floors, collars, futures, forward contracts, written and purchased options. United also executes derivative instruments with its commercial banking customers to facilitate its risk management strategies.

United accounts for its derivative financial instruments in accordance with ASC Topic 815 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.

Derivative instruments designated in a hedge relationship to mitigate exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivative instruments designated in a hedge relationship to mitigate exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges.

For a fair value hedge, the fair value of the interest rate swap is recognized on the balance sheet as either a freestanding asset or liability with a corresponding adjustment to the hedged financial instrument. Subsequent adjustments due to changes in the fair value of a derivative that qualifies as a fair value hedge are offset in current period earnings. 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 to other comprehensive income, net of tax. The portion of a hedge that is ineffective is recognized immediately in earnings.

At inception of a hedge relationship, United formally documents the hedged item, the particular risk management objective, the nature of the risk being hedged, the derivative being used, how effectiveness of the hedge will be assessed and how the ineffectiveness of the hedge will be measured. United also assesses hedge effectiveness at inception and on an ongoing basis using regression analysis. Hedge ineffectiveness is measured by using the change in fair value method. The change in fair value method compares the change in the fair value of the hedging derivative to the change in the fair value of the hedged exposure, attributable to changes in the benchmark rate. The portion of a hedge that is ineffective is recognized immediately in earnings.

United through George Mason enters into interest rate lock commitments to finance residential mortgage loans with its customers. These commitments, which contain fixed expiration dates, offer the borrower an interest rate guarantee provided the loan meets underwriting guidelines and closes within the timeframe established by United. Interest rate risk arises on these commitments and subsequently closed loans if interest rates change between the time of the interest rate lock and the delivery of the loan to the investor. Market risk on interest rate lock commitments and mortgage loans held for sale is managed using corresponding forward mortgage loan sales contracts. United is a party to these forward mortgage loan sales contracts to sell loans servicing released and short sales of mortgage-backed securities. When the interest rate is locked with the borrower, the rate lock commitment, forward sale agreement, and mortgage-backed security position are undesignated derivatives and marked to fair value through earnings. The fair value of the rate lock derivative includes the servicing premium and the interest spread for the difference between retail and wholesale mortgage rates. Income from mortgage banking activities includes the gain recognized for the period presented and associated elements of fair value.

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United sells mortgage loans on either a best efforts or mandatory delivery basis. For loans sold on a mandatory delivery basis, United enters into forward mortgage-backed securities (the “residual hedge”) to mitigate the effect of interest rate risk. Both the rate lock commitment under mandatory delivery and the residual hedge are recorded at fair value through earnings and are not designated as accounting hedges. At the closing of the loan, the loan commitment derivative expires and United records a loan held for sale at fair value and continues to mark these assets to market under the election of fair value option. United closes out of the trading mortgage-backed securities assigned within the residual hedge and replaces the securities with a forward sales contract once a price has been accepted by an investor and recorded at fair value. For those loans selected to be sold under best efforts delivery, at the closing of the loan, the rate lock commitment derivative expires and the Company records a loan held for sale at fair value under the election of fair value option and continues to be obligated under the same forward loan sales contract entered into at inception of the rate lock commitment.

The derivative portfolio also includes derivative financial instruments not included in hedge relationships. These derivatives consist of interest rate swaps used for interest rate management purposes and derivatives executed with commercial banking customers to facilitate their interest rate management strategies. For derivatives that are not designated in a hedge relationship, changes in the fair value of the derivatives are recognized in earnings in the same period as the change in fair value. Gains and losses on other derivative financial instruments are included in noninterest income and noninterest expense, respectively.

The following tables disclose the derivative instruments’ location on the Company’s Consolidated Balance Sheets and the notional amount and fair value of those instruments at March 31, 2020 and December 31, 2019.

	Asset Derivatives
	March 31, 2020						December 31, 2019
	Balance Sheet Location		Notional Amount		Fair Value		Balance Sheet Location		Notional Amount		Fair Value
Derivatives designated as hedging instruments Fair Value Hedges:
Interest rate swap contracts (hedging commercial loans)		Other assets	$	0	$	0		Other assets	$	0	$	0
Total derivatives designated as hedging instruments			$	0	$	0			$	0	$	0
Derivatives not designated as hedging instruments
Interest rate swap contracts		Other assets	$	0	$	0		Other assets	$	0	$	0
Forward loan sales commitments		Other assets		37,443		760		Other assets		27,260		9
Interest rate lock commitments		Other assets		663,127		18,331		Other assets		117,252		4,518
Total derivatives not designated as hedging instruments			$	700,570	$	19,091			$	144,512	$	4,527
Total asset derivatives			$	700,570	$	19,091			$	144,512	$	4,527

	Liability Derivatives
	March 31, 2020						December 31, 2019
	Balance Sheet Location		Notional Amount		Fair Value		Balance Sheet Location		Notional Amount		Fair Value
Derivatives designated as hedging instruments Fair Value Hedges:
Interest rate swap contracts (hedging commercial loans)		Other liabilities	$	81,148	$	8,148		Other liabilities	$	82,243	$	2,394
Total derivatives designated as hedging instruments			$	81,148	$	8,148			$	82,243	$	2,394

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	Liability Derivatives
	March 31, 2020						December 31, 2019
	Balance Sheet Location		Notional Amount		Fair Value		Balance Sheet Location		Notional Amount		Fair Value
Derivatives not designated as hedging instruments
Interest rate swap contracts		Other liabilities	$	0	$	0		Other liabilities	$	0	$	0
TBA mortgage-backed securities		Other liabilities		862,000		19,647		Other liabilities		274,000		671
Interest rate lock commitments		Other liabilities		0		0		Other liabilities		0		0
Total derivatives not designated as hedging instruments			$	862,000	$	19,647			$	274,000	$	671
Total liability derivatives			$	943,148	$	27,795			$	356,243	$	3,065

The following table represents the carrying amount of the hedged assets/(liabilities) and the cumulative amount of fair value hedging adjustment included in the carrying amount of the hedged assets/(liabilities) that are designated as a fair value accounting relationship as of March 31, 2020 and December 31, 2019.

			March 31, 2020
Derivatives in Fair Value Hedging Relationships	Location in the Statement of Condition		Carrying Amount of the Hedged Assets/(Liabilities)		Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Assets/(Liabilities)			Cumulative Amount of Fair Value Hedging Adjustment Remaining for any Hedged Assets/ (Liabilities) for which Hedge Accounting has been Discontinued
Interest rate swaps		Loans, net of unearned income	$	80,313	$	(8,148	)	$	0

			December 31, 2019
Derivatives in Fair Value Hedging Relationships	Location in the Statement of Condition		Carrying Amount of the Hedged Assets/(Liabilities)		Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Assets/(Liabilities)			Cumulative Amount of Fair Value Hedging Adjustment Remaining for any Hedged Assets/ (Liabilities) for which Hedge Accounting has been Discontinued
Interest rate swaps		Loans, net of unearned income	$	81,397	$	(2,394	)	$	0

Derivative contracts involve the risk of dealing with both bank customers and institutional derivative counterparties and their ability to meet contractual terms. Credit risk arises from the possible inability of counterparties to meet the terms of their contracts. United’s exposure is limited to the replacement value of the contracts rather than the notional amount of the contract. The Company’s agreements generally contain provisions that limit the unsecured exposure up to an agreed upon threshold. Additionally, the Company attempts to minimize credit risk through certain approval processes established by management.

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The effect of United’s derivative financial instruments on its unaudited Consolidated Statements of Income for the three months ended March 31, 2020 and 2019 are presented as follows:

			Three Months Ended
	Income Statement Location		March 31, 2020			March 31, 2019
Derivatives in hedging relationships Fair Value Hedges:
Interest rate swap contracts		Interest and fees on loans	$	(443	)	$	(30	)
Total derivatives in hedging relationships			$	(443	)	$	(30	)
Derivatives not designated as hedging instruments
Forward loan sales commitments		Income from Mortgage Banking Activities	$	760		$	380
TBA mortgage-backed securities		Income from Mortgage Banking Activities		(18,975	)		488
Interest rate lock commitments		Income from Mortgage Banking Activities		13,696			2,138
Total derivatives not designated as hedging instruments			$	(4,519	)	$	3,006
Total derivatives			$	(4,962	)	$	2,976

13. FAIR VALUE MEASUREMENTS

United determines the fair values of its financial instruments based on the fair value hierarchy established by ASC Topic 820, which also clarifies that fair value of certain assets and liabilities is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants.

The Fair Value Measurements and Disclosures Topic specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect United’s market assumptions.

The three levels of the fair value hierarchy, based on these two types of inputs, are as follows:

Level 1	-	Valuation is based on quoted prices in active markets for identical assets and liabilities.
Level 2	-	Valuation is based on observable inputs including quoted prices in active markets for similar assets and liabilities, quoted prices for identical or similar assets and liabilities in less active markets, and model-based valuation techniques for which significant assumptions can be derived primarily from or corroborated by observable data in the market.
Level 3	-	Valuation is based on prices, inputs and model-based techniques that use one or more significant inputs or assumptions that are unobservable in the market.

When determining the fair value measurements for assets and liabilities, United looks to active and observable markets to price identical assets or liabilities whenever possible and classifies such items in Level 1. When identical assets and liabilities are not traded in active markets, United looks to market observable data for similar assets and liabilities and classifies such items as Level 2. Nevertheless, certain assets and liabilities are not actively traded in observable markets and United must use alternative valuation techniques using unobservable inputs to determine a fair value and classifies such items as Level 3. For assets and liabilities that are not actively traded, the fair value measurement is based primarily upon estimates that require significant judgment. Therefore, the results may not be realized in an actual sale or immediate settlement of the asset or liability. Additionally, there are inherent weaknesses in any calculation technique, and changes in the underlying assumptions used, including discount rates and estimates of future cash flows, could significantly affect the results of current or future values. The level within the fair value hierarchy is based on the lowest level of input that is significant in the fair value measurement.

In accordance with ASC Topic 820, the following describes the valuation techniques used by United to measure certain financial assets and liabilities recorded at fair value on a recurring basis in the financial statements.

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Securities available for sale and equity securities: Securities available for sale and equity securities are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted market prices, when available (Level 1). If quoted market prices are not available, fair values are measured utilizing independent valuation techniques of identical or similar securities for which significant assumptions are derived primarily from or corroborated by observable market data. Using a market approach valuation methodology, third party vendors compile prices based on observable market inputs, which include benchmark yields, reported trades, issuer spreads, benchmark securities, and “To Be Announced” prices (Level 2). Management internally reviews the fair values provided by third party vendors on a monthly basis. Management also performs a quarterly price testing analysis at the individual security level which compares the pricing provided by the third party vendors to an independent pricing source’s valuation of the same securities. Variances that are deemed to be material are reviewed by management. Additionally, to further assess the reliability of the information received from third party vendors, management obtains documentation from third party vendors related to the sources, methodologies, and inputs utilized in valuing securities classified as Level 2. Management analyzes this information to ensure the underlying assumptions appear reasonable. Management also obtains an independent service auditor’s report from third party vendors to provide reasonable assurance that appropriate controls are in place over the valuation process. Upon completing its review of the pricing from third party vendors at March 31, 2020, 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 March 31, 2020. Management utilizes a number of factors to determine if a market is inactive, all of which may require a significant level of judgment. Factors that management considers include: a significant widening of the bid-ask spread, a considerable decline in the volume and level of trading activity in the instrument, a significant variance in prices among market participants, and a significant reduction in the level of observable inputs. Any securities available for sale not valued based upon quoted market prices or third party pricing models that consider observable market data are considered Level 3. Currently, United considers its valuation of available-for-sale Trup Cdos as Level 3. Based upon management’s review of the market conditions for Trup Cdos, it was determined that an income approach valuation technique (present value technique) that maximizes the use of relevant observable inputs and minimizes the use of unobservable inputs is the most representative measurement technique for these securities. The present value technique discounts expected future cash flows of a security to arrive at a present value. Management considers the following items when calculating the appropriate discount rate: the implied rate of return when the market was last active, changes in the implied rate of return as markets moved from very active to inactive, recent changes in credit ratings, and recent activity showing that the market has built in increased liquidity and credit premiums. Management’s internal credit review of each security was also factored in to determine the appropriate discount rate. The credit review considered each security’s collateral, subordination, excess spread, priority of claims, principal and interest.

Loans held for sale: For residential mortgage loans sold in the mortgage banking segment, the loans closed are recorded at fair value using the fair value option which is measured using valuations from investors for loans with similar characteristics 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 0.11% to 0.81% with a weighted average increase of 0.34%.

Derivatives: United utilizes interest rate swaps to hedge exposure to interest rate risk and variability of cash flows associated to changes in the underlying interest rate of the hedged item. These hedging interest rate swaps are classified as either a fair value hedge or a cash flow hedge. United’s derivative portfolio also includes derivative financial instruments not included in hedge relationships. These derivatives consist of interest rate swaps used for interest rate management purposes and derivatives executed with commercial banking customers to facilitate their interest rate management strategies. United utilizes third-party vendors for derivative valuation purposes. These

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vendors determine the appropriate fair value based on a net present value calculation of the cash flows related to the interest rate swaps using primarily observable market inputs such as interest rate yield curves (Level 2). Valuation adjustments to derivative fair values for liquidity and credit risk are also taken into consideration, as well as the likelihood of default by United and derivative counterparties, the net counterparty exposure and the remaining maturities of the positions. Values obtained from third party vendors are typically not adjusted by management. Management internally reviews the derivative values provided by third party vendors on a quarterly basis. All derivative values are tested for reasonableness by management utilizing a net present value calculation.

For a fair value hedge, the fair value of the interest rate swap is recognized on the balance sheet as either a freestanding asset or liability with a corresponding adjustment to the hedged financial instrument. Subsequent adjustments due to changes in the fair value of a derivative that qualifies as a fair value hedge are offset in current period earnings either in interest income or interest expense depending on the nature of the hedged financial instrument. For a cash flow hedge, the fair value of the interest rate swap is recognized on the balance sheet as either a freestanding asset or liability with a corresponding adjustment to other comprehensive income within shareholders’ equity, net of tax. Subsequent adjustments due to changes in the fair value of a derivative that qualifies as a cash flow hedge are offset to other comprehensive income, net of tax. The portion of a hedge that is ineffective is recognized immediately in earnings.

The Company records its interest rate lock commitments and forward loan sales commitments at fair value determined as the amount that would be required to settle each of these derivative financial instruments at the balance sheet date. In the normal course of business, George Mason enters into contractual interest rate lock commitments to extend credit to borrowers with fixed expiration dates. The commitments become effective when the borrowers “lock-in” a specified interest rate within the timeframes established by the mortgage companies. All borrowers are evaluated for credit worthiness prior to the extension of the commitment. Market risk arises if interest rates move adversely between the time of the interest rate lock by the borrower and the sale date of the loan to the investor. To mitigate the effect of the interest rate risk inherent in providing rate lock commitments to borrowers, George Mason enters into either a forward sales contract to sell loans to investors when using best efforts or a TBA mortgage-backed security under mandatory delivery. As TBA mortgage-backed securities are actively traded in an open market, TBA mortgage-backed securities fall into a Level 1 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 0.11 % to 0.81 % with a weighted average increase of 0.34 %.

For interest rate swap derivatives that are not designated in a hedge relationship, changes in the fair value of the derivatives are recognized in earnings in the same period as the change in the fair value. Unrealized gains and losses due to changes in the fair value of other derivative financial instruments not in hedge relationship are included in noninterest income and noninterest expense, respectively. 

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The following tables present the balances of financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2020 and December 31, 2019, segregated by the level of the valuation inputs within the fair value hierarchy.

			Fair Value at March 31, 2020 Using
Description	Balance as of March 31, 2020		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets
Available for sale debt securities:
U.S. Treasury securities and obligations of U.S. Government corporations and agencies	$	54,013	$	0	$	54,013	$	0
State and political subdivisions		317,805		0		317,805		0
Residential mortgage-backed securities
Agency		813,599		0		813,599		0
Non-agency		0		0		0		0
Commercial mortgage-backed securities
Agency		615,095		0		615,095		0
Asset-backed securities		261,936		0		261,936		0
Trust preferred collateralized debt obligations		4,184		0		0		4,184
Single issue trust preferred securities		15,684		0		15,684		0
Other corporate securities		335,205		6,543		328,662		0
Total available for sale securities		2,417,521		6,543		2,406,794		4,184
Equity securities:
Financial services industry		103		103		0		0
Equity mutual funds (1)		4,074		4,074		0		0
Other equity securities		4,836		4,836		0		0
Total equity securities		9,013		9,013		0		0
Loans held for sale		495,932		0		0		495,932
Derivative financial assets:
Interest rate swap contracts		0		0		0		0
Forward sales commitments		760		0		760		0
Interest rate lock commitments		18,331		0		0		18,331
Total derivative financial assets		19,091		0		760		18,331
Liabilities
Derivative financial liabilities:
Interest rate swap contracts		8,148		0		8,148		0
TBA mortgage-backed securities		19,647		0		19,647		0
Total derivative financial liabilities		27,795		0		27,795		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.

Description			Fair Value at December 31, 2019 Using
	Balance as of December 31, 2019		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets
Available for sale debt securities:
U.S. Treasury securities and obligations of U.S. Government corporations and agencies	$	58,676	$	0	$	58,676	$	0
State and political subdivisions		272,362		0		272,362		0
Residential mortgage-backed securities

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			Fair Value at December 31, 2019 Using
Description	Balance as of December 31, 2019		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Agency		836,534		0		836,534		0
Non-agency		3,833		0		3,833		0
Commercial mortgage-backed securities
Agency		614,973		0		614,973		0
Asset-backed securities		276,139		0		276,139		0
Trust preferred collateralized debt obligations		4,703		0		0		4,703
Single issue trust preferred securities		16,774		0		16,774		0
Other corporate securities		353,302		6,586		346,716		0
Total available for sale securities		2,437,296		6,586		2,426,007		4,703
Equity securities:
Financial services industry		154		154		0		0
Equity mutual funds (1)		3,971		3,971		0		0
Other equity securities		4,769		4,769		0		0
Total equity securities		8,894		8,894		0		0
Loans held for sale		384,375		0		0		384,375
Derivative financial assets:
Interest rate swap contracts		9		0		9		0
Forward sales commitments		4,518		0		0		4,518
Interest rate lock commitments		0		0		0		0
Total derivative financial assets		4,527		0		9		4,518
Liabilities
Derivative financial liabilities:		2,394		0		2,394		0
TBA mortgage-backed securities		671		0		671		0
Total derivative financial liabilities		3,065		0		3,065		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.

There were no transfers between Level 1 and Level 2 for financial assets and liabilities measured at fair value on a recurring basis during the three months ended March 31, 2020 and the year ended December 31, 2019.

The following table presents additional information about financial assets and liabilities measured at fair value at March 31, 2020 and December 31, 2019 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
	March 31, 2020			December 31, 2019
Balance, beginning of period	$	4,703		$	5,917
Total gains or losses (realized/unrealized):
Included in earnings (or changes in net assets)		0			(155	)
Included in other comprehensive income		(519	)		(1,059	)
Purchases, issuances, and settlements		0			0
Sales		0			0

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	Available for sale Securities
	Trust preferred collateralized debt obligations
	March 31, 2020			December 31, 2019
Transfers in and/or out of Level 3		0			0
Balance, end of period	$	4,184		$	4,703
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
	Loans held for sale
	March 31, 2020			December 31, 2019
Balance, beginning of period	$	384,375		$	247,104
Originations		904,949			2,941,722
Sales		(814,543	)		(2,888,257	)
Total gains or losses during the period recognized in earnings		21,151			83,806
Transfers in and/or out of Level 3		0			0
Balance, end of period	$	495,932		$	384,375
The amount of total gains or losses for the period included in earnings (or changes in net assets) attributable to the change in unrealized gains or losses relating to assets still held at reporting date	$	0		$	0

	Derivative Financial Assets Interest Rate Lock Commitments
	March 31, 2020		December 31,   2019
Balance, beginning of period	$	4,518	$	4,103
Transfers other		13,813		415
Balance, end of period	$	18,331	$	4,518
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

Certain financial assets are measured at fair value on a nonrecurring basis in accordance with GAAP. Adjustments to the fair value of these assets usually result from the application of lower-of-cost-or-market accounting or write-downs of individual assets.

Fair Value Option

United elected the fair value option for the loans held for sale in its mortgage banking segment to mitigate a divergence between accounting losses and economic exposure.

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The following table reflects the change in fair value included in earnings of financial instruments for which the fair value option has been elected:

Description	Three Months Ended March 31, 2020		Three Months Ended March 31, 2019
Assets
Loans held for sale
Income from mortgage banking activities	$	1,625	$	(617	)

The following table reflects the difference between the aggregate fair value and the remaining contractual principal outstanding for financial instruments for which the fair value option has been elected:

	March 31, 2020						December 31, 2019
Description	Unpaid Principal Balance		Fair Value		Fair Value Over/ (Under) Unpaid Principal Balance		Unpaid Principal Balance		Fair Value		Fair Value Over/ (Under) Unpaid Principal Balance
Assets
Loans held for sale	$	485,206	$	495,932	$	10,726	$	375,274	$	384,375	$	9,101

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

The following describes the valuation techniques used by United to measure certain financial assets recorded at fair value on a nonrecurring basis in the financial statements.

Loans held for sale: Loans held for sale within the community banking segment that are delivered on a best efforts basis are carried at the lower of cost or fair value. The fair value is based on the price secondary markets are currently offering for similar loans using observable market data which is not materially different than cost due to the short duration between origination and sale (Level 2). As such, United records any fair value adjustments for these loans held for sale on a nonrecurring basis. No nonrecurring fair value adjustments were recorded on loans held for sale during the three months ended March 31, 2020. Gains and losses on sale of loans are recorded within income from mortgage banking activities on the Consolidated Statements of Income.

Individually assessed loans: In the determination of the allowance for loan losses, loans that do not share risk characteristics are evaluated on an individual basis. Loans evaluated individually are not also included in the collective evaluation. When management determines that foreclosure is probable or when the borrower is experiencing financial difficulty at the reporting date and repayment is expected to be provided substantially through the operation or sale of the collateral, expected credit losses are based on the fair value of the collateral at the reporting date, adjusted for selling costs as appropriate. Fair value is measured using a market approach based on the value of the collateral securing the loans. Collateral may be in the form of real estate or business assets including equipment, inventory, and accounts receivable. The vast majority of the collateral is real estate. The value of real estate collateral is determined utilizing an appraisal conducted by an independent, licensed appraiser outside of the Company using comparable property sales (Level 2). However, if the collateral is a house or building in the process of construction or if an appraisal of the real estate property is over two years old, then the fair value is considered Level 3. The value of business equipment is based upon an outside appraisal if deemed significant, or the net book value on the applicable business’ financial statements if not considered significant using observable market data. Likewise, values for inventory and accounts receivables collateral are based on financial statement balances or aging reports (Level 3). For individually assessed loans, a specific reserve is established through the allowance for loan losses, if necessary, by estimating the fair value of the underlying collateral on a nonrecurring basis. Any fair value adjustments are recorded in the period incurred as provision for credit losses expense on the Consolidated Statements of Income.

OREO: OREO consists of real estate acquired in foreclosure or other settlement of loans. Such assets are carried on the balance sheet at the lower of the investment in the assets or the fair value of the assets less estimated selling costs. Fair value is determined by one of two market approach methods depending on whether the property has been vacated and an appraisal can be conducted. If the property has yet to be vacated and thus an appraisal cannot be performed, a Brokers Price Opinion (i.e. BPO), is obtained. A BPO represents a best estimate valuation performed by a realtor

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based on knowledge of current property values and a visual examination of the exterior condition of the property. Once the property is subsequently vacated, a formal appraisal is obtained and the recorded asset value appropriately adjusted. On the other hand, if the OREO property has been vacated and an appraisal can be conducted, the fair value of the property is determined based upon the appraisal using a market approach. An authorized independent appraiser conducts appraisals for United. Appraisals for property other than ongoing construction are based on consideration of comparable property sales (Level 2). In contrast, valuation of ongoing construction assets requires some degree of professional judgment. In conducting an appraisal for ongoing construction property, the appraiser develops two appraised amounts: an “as is” appraised value and a “completed” value. Based on professional judgment and their knowledge of the particular situation, management determines the appropriate fair value to be utilized for such property (Level 3). As a matter of policy, valuations are reviewed at least annually and appraisals are generally updated on a bi-annual basis with values lowered as necessary.

Intangible Assets: For United, intangible assets consist of goodwill and core deposit intangibles. Goodwill is tested for impairment at least annually or sooner if indicators of impairment exist. Goodwill impairment would be defined as the difference between the recorded value of goodwill (i.e. book value) and the implied fair value of goodwill. In determining the implied fair value of goodwill for purposes of evaluating goodwill impairment, United determines the fair value of the reporting unit and compares the fair value to its carrying value. United may elect to perform a qualitative analysis to determine whether or not it is more-likely-than not that the fair value of a reporting unit is less than its carrying amount. If United elects to bypass this qualitative analysis, or concludes via qualitative analysis that it is more-likely-than-not that the fair value of a reporting unit is less than its carrying value, United may use either a market or income quantitative approach, whichever is more practical, to determine the fair value of the reporting unit to compare to its carrying value as step one. If the fair value is greater than the carrying value, then the reporting unit’s goodwill is deemed not to be impaired. If the fair value is less than the carrying value, then a second step is performed which measures the amount of impairment by comparing the carrying amount of the goodwill to its implied fair value. If the implied fair value of the goodwill exceeds the carrying amount, there is no impairment. If the carrying amount exceeds the implied fair value of goodwill, an impairment charge is recorded for the excess. At each reporting date, the Company considers potential indicators of impairment. Given the current economic uncertainty and volatility surrounding COVID-19 and the performance of the Company’s stock, United performed a qualitative assessment to determine if any indicators of impairment would imply that it was more likely than not that goodwill was impaired as of March 31, 2020. After assessing several impairment indicators, United determined that it was not more-likely-than-not that goodwill was impaired as of March 31, 2020. In subsequent periods, COVID-19 could cause a further and sustained decline in our stock price and other impairment indicators which would cause us to perform a goodwill impairment test and could result in an impairment charge being recorded for that period if the carrying value of goodwill was found to exceed fair value. Core deposit intangibles relate to the estimated value of the deposit base of acquired institutions. Management reviews core deposit intangible assets on an annual basis, or sooner if indicators of impairment exist, and evaluates changes in facts and circumstances that may indicate impairment in the carrying value. No other fair value measurement of intangible assets was made during the first three months of 2020 and 2019.

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The following table summarizes United’s financial assets that were measured at fair value on a nonrecurring basis during the period:

			Carrying value at March 31, 2020
Description	Balance as of March 31, 2020		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		YTD Gains (Losses)
Assets
Loans held for sale	$	7,582	$	0	$	7,582	$	0	$	(2	)
Individually assessed loans		62,315		0		59,005		3,310		349
OREO		15,849		0		15,849		0		(180	)

			Carrying value at December 31, 2019
Description	Balance as of December 31, 2019		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		YTD Gains (Losses)
Assets
Loans held for sale	$	3,139	$	0	$	3,139	$	0	$	(4	)
Impaired Loans		68,213		0		55,792		12,421		1,831
OREO		15,515		0		15,495		20		(785	)

Fair Value of Other Financial Instruments

The following methods and assumptions were used by United in estimating its fair value disclosures for other financial instruments:

Cash and Cash Equivalents: The carrying amounts reported in the balance sheet for cash and cash equivalents approximate those assets’ fair values.

Securities held to maturity and other securities: The estimated fair values of securities held to maturity are based on quoted market prices, where available. If quoted market prices are not available, fair values are measured utilizing independent valuation techniques of identical or similar securities for which significant assumptions are derived primarily from or corroborated by observable market data. Third party vendors compile prices from various sources and may determine the fair value of identical or similar securities by using pricing models that considers observable market data. Any securities held to maturity, not valued based upon the methods above, are valued based on a discounted cash flow methodology using appropriately adjusted discount rates reflecting nonperformance and liquidity risks. Other securities consist mainly of shares of Federal Home Loan Bank and Federal Reserve Bank stock that do not have readily determinable fair values and are carried at cost.

Loans: The fair values of certain mortgage loans (e.g., one-to-four family residential), credit card loans, and other consumer loans are based on quoted market prices of similar loans sold in conjunction with securitization transactions, adjusted for differences in loan characteristics. The fair values of other loans (e.g., commercial real estate and rental property mortgage loans, commercial and industrial loans, financial institution loans and agricultural loans) are estimated using discounted cash flow analyses, using market interest rates currently being offered for loans with similar terms to borrowers of similar creditworthiness, which include adjustments for liquidity concerns. For acquired impaired loans, fair value is assumed to equal United’s carrying value, which represents the present value of expected future principal and interest cash flows, as adjusted for any Allowance for Credit Losses recorded for these loans.

Deposits: The fair values of demand deposits (e.g., interest and noninterest checking, regular savings and certain types of money market accounts) are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amounts). The carrying amounts of variable-rate, fixed-term money market accounts and certificates of deposit approximate their fair values at the reporting date. Fair values of fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits.

Short-term Borrowings: The carrying amounts of federal funds purchased, borrowings under repurchase agreements and any other short-term borrowings approximate their fair values.

Long-term Borrowings: The fair values of United’s Federal Home Loan Bank borrowings and trust preferred securities are estimated using discounted cash flow analyses, based on United’s current incremental borrowing rates for similar types of borrowing arrangements.

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Summary of Fair Values for All Financial Instruments

The estimated fair values of United’s financial instruments are summarized below:

					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)
March 31, 2020
Cash and cash equivalents	$	1,336,833	$	1,336,833	$	0	$	1,336,833	$	0
Securities available for sale		2,417,521		2,417,521		6,543		2,406,794		4,184
Securities held to maturity		1,226		1,223		0		203		1,020
Equity securities		9,013		9,013		9,013		0		0
Other securities		245,655		233,372		0		0		233,372
Loans held for sale		503,514		503,514		0		7,582		495,932
Net loans		13,700,635		13,373,811		0		0		13,373,811
Derivative financial assets		19,091		19,091		0		760		18,331
Deposits		14,014,168		14,016,870		0		14,016,870		0
Short-term borrowings		599,561		599,561		0		599,561		0
Long-term borrowings		2,087,761		2,080,022		0		2,080,022		0
Derivative financial liabilities		27,795		27,795		0		27,795		0
December 31, 2019
Cash and cash equivalents	$	837,493	$	837,493	$	0	$	837,493	$	0
Securities available for sale		2,437,296		2,437,296		6,586		2,426,007		4,703
Securities held to maturity		1,446		1,447		0		427		1,020
Equity securities		8,894		8,894		8,894		0		0
Other securities		222,161		211,053		0		0		211,053
Loans held for sale		387,514		387,514		0		3,139		384,375
Net loans		13,635,072		13,185,955		0		0		13,185,955
Derivative financial assets		4,527		4,527		0		9		4,518
Deposits		13,852,421		13,843,077		0		13,843,077		0
Short-term borrowings		374,654		374,654		0		374,654		0
Long-term borrowings		1,838,029		1,820,297		0		1,820,297		0
Derivative financial liabilities		3,065		3,065		0		3,065		0

14. STOCK BASED COMPENSATION

On May 18, 2016, United’s shareholders approved the 2016 Long-Term Incentive Plan (2016 LTI Plan). The 2016 LTI Plan became effective as of May 18, 2016. An award granted under the 2016 LTI Plan may consist of any non-qualified stock options or incentive stock options, stock appreciation rights (SARs), restricted stock, restricted stock units, performance units or other-stock-based award. These awards all relate to the common stock of United. The maximum number of shares of United common stock which may be issued under the 2016 LTI Plan is 1,700,000. The 2016 LTI Plan will be administered by a board committee appointed by United’s Board of Directors (the Board). Unless otherwise determined by the Board, the Compensation Committee of the Board (the Committee) shall administer the 2016 LTI Plan. Any and all shares may be issued in respect of any of the types of Awards, provided that (1) the aggregate number of shares that may be issued in respect of restricted stock awards, and restricted stock unit awards which are settled in shares is 500,000, and (2) the aggregate number of shares that may be issued pursuant

45

to stock options is 1,200,000. The shares to be offered under the 2016 LTI Plan may be authorized and unissued shares or treasury shares. The maximum number of options and SARs, in the aggregate, which may be awarded to any individual key employee during any calendar year is 100,000. The maximum number of stock options and SARs, in the aggregate, which may be awarded to any non-employee director during any calendar year is 10,000. The maximum number of shares of restricted stock or shares subject to a restricted stock units award that may be granted during any calendar year is 50,000 shares to any individual key employee and 5,000 shares to any individual non-employee director. Subject to certain change in control provisions, the 2016 LTI Plan provides that awards of restricted stock and restricted stock units will vest as the Committee determines in the award agreement, provided that no awards will vest sooner than 1/3 per year over the first three anniversaries of the award. Awards granted to executive officers of United typically will have performance based vesting conditions. A Form S-8 was filed on July 29, 2016 with the Securities and Exchange Commission to register all the shares which were available for the 2016 LTI Plan. 

Compensation expense of $1,253 and $1,113 related to the nonvested awards under United’s Long-Term Incentive Plans was incurred for the first quarter of 2020 and 2019, respectively. Compensation expense was included in employee compensation in the unaudited Consolidated Statements of Income. 

Stock Options

United currently has options outstanding from various option plans other than the 2016 LTI Plan (the Prior Plans); however, no common shares of United stock are available for grants under the Prior Plans as these plans have expired. Awards outstanding under the Prior Plans will remain in effect in accordance with their respective terms. The maximum term for options granted under the plans is ten (10) years.

A summary of activity under United’s stock option plans as of March 31, 2020, and the changes during the first three months of 2020 are presented below:

	Three Months Ended March 31, 2020
						Weighted Average
				Aggregate		Remaining
				Intrinsic		Contractual		Exercise
	Shares			Value		Term (Yrs.)		Price
Outstanding at January 1, 2020		1,715,316						$	34.49
Granted		183,551							32.51
Exercised		(14,694	)						20.31
Forfeited or expired		(6,088	)						27.31
Outstanding at March 31, 2020		1,878,085		$	174,324		5.8	$	34.43
Exercisable at March 31, 2020		1,332,280		$	174,324		4.6	$	33.37

The following table summarizes the status of United’s nonvested stock option awards during the first three months of 2020:

	Shares			Weighted-Average Grant Date Fair Value Per Share
Nonvested at January 1, 2020		589,737		$	7.62
Granted		183,551			5.65
Vested		(225,132	)		7.68
Forfeited or expired		(2,351	)		7.32
Nonvested at March 31, 2020		545,805		$	6.94

During the three months ended March 31, 2020 and 2019, 14,694 and 33,816 shares, respectively, were issued in connection with stock option exercises. All shares issued in connection with stock option exercises for the three months ended March 31, 2020 and 2019 were issued from authorized and unissued stock. The total intrinsic value of options exercised under the Plans during the three months ended March 31, 2020 and 2019 was $248 and $554 respectively.

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Restricted Stock

Under the 2016 LTI Plan, United may award restricted common shares to key employees and non-employee directors. Restricted shares granted to participants have a four-year time-based vesting period. Recipients of restricted shares do not pay any consideration to United for the shares, have the right to vote all shares subject to such grant and receive all dividends with respect to such shares, whether or not the shares have vested. Presently, these nonvested participating securities have an immaterial impact on diluted earnings per share.

The following summarizes the changes to United’s restricted common shares for the period ended March 31, 2020:

	Number of Shares			Weighted-Average Grant Date Fair Value Per Share
Outstanding at January 1, 2020		247,896		$	39.20
Granted		175,495			32.51
Vested		(88,545	)		39.32
Forfeited		(946	)		36.58
Outstanding at March 31, 2020		333,900		$	35.66

15. EMPLOYEE BENEFIT PLANS

United has a defined benefit retirement plan covering qualified 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. No discretionary contributions were made during the first quarter of 2020 and 2019.

In September of 2007, after a recommendation by United’s Pension Committee and approval by United’s Board of Directors, the United Bankshares, Inc. Pension Plan (the Plan) was amended to change the participation rules. The decision to change the participation rules for the Plan followed current industry trends, as many large and medium size companies had taken similar steps. The amendment provides that employees hired on or after October 1, 2007, will not be eligible to participate in the Plan. However, new employees will be eligible to participate in United’s Savings and Stock Investment 401(k) plan. This change had no impact on current employees hired prior to October 1, 2007 as they will continue to participate in the Plan, with no change in benefit provisions, and will continue to be eligible to participate in United’s Savings and Stock Investment 401(k) plan.

Included in accumulated other comprehensive income at December 31, 2019 are unrecognized actuarial losses of $60,894 ($46,706 net of tax) that have not yet been recognized in net periodic pension cost. The amortization of this item expected to be recognized in net periodic pension cost during the fiscal year ended December 31, 2020 is $5,802 ($4,450 net of tax).

Net periodic pension cost for the three months ended March 31, 2020 and 2019 included the following components:

	Three Months Ended March 31
	2020			2019
Service cost	$	715		$	555
Interest cost		1,287			1,442
Expected return on plan assets		(2,629	)		(2,330	)
Amortization of transition asset		0			0
Recognized net actuarial loss		1,442			1,171

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	Three Months Ended March 31
	2020			2019
Amortization of prior service cost		0			0
Net periodic pension (benefit) cost	$	815		$	838
Weighted-Average Assumptions:
Discount Rate		3.42	%		4.52	%
Expected return on assets		6.75	%		7.00	%
Rate of Compensation Increase (prior to age 40)		5.00	%		n/a
Rate of Compensation Increase (ages 40-54)		4.00	%		n/a
Rate of Compensation Increase (prior to age 45)		n/a			3.50	%
Rate of Compensation Increase		3.50	%		3.00	%

16. INCOME TAXES

United records a liability for uncertain income tax positions based on a recognition threshold of more-likely-than-not, and a measurement attribute for all tax positions taken on a tax return, in order for those tax positions to be recognized in the financial statements.

As of March 31, 2020 and 2019, the total amount of accrued interest related to uncertain tax positions was $693 and $700, respectively. United accounts for interest and penalties related to uncertain tax positions as part of its provision for federal and state income taxes.

United is currently open to audit under the statute of limitations by the Internal Revenue Service for the years ended December 31, 2016, 2017 and 2018 and certain State Taxing authorities for the years ended December 31, 2016 through 2018.

United’s effective tax rate was 19.75% for the first quarter of 2020 and 21.40% for the first quarter of 2019.

17. COMPREHENSIVE INCOME

The components of total comprehensive income for the three months ended March 31, 2020 and 2019 are as follows:

	Three Months Ended
	March 31
	2020			2019
Net Income	$	40,183		$	63,642
Available for sale (“AFS”) securities:
Change in net unrealized gain on AFS securities arising during the period		23,103			22,238
Related income tax effect		(5,383	)		(5,182	)
Net reclassification adjustment for losses (gains) included in net income		(175	)		(348	)
Related income tax (benefit) expense		41			81
		17,586			16,789
Net effect of AFS securities on other comprehensive income		17,586			16,789
Pension plan:
Recognized net actuarial loss		1,442			1,171
Related income tax benefit		(330	)		(261	)
Net effect of change in pension plan asset on other comprehensive income		1,112			910
Total change in other comprehensive income		18,698			17,699
Total Comprehensive Income	$	58,881		$	81,341

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The components of accumulated other comprehensive income for the three months ended March 31, 2020 are as follows:

Changes in Accumulated Other Comprehensive Income (AOCI) by Component (a)

For the Three Months Ended March 31, 2020

	Unrealized Gains/Losses on AFS Securities			Defined Benefit Pension Items			Total
Balance at January 1, 2020	$	7,956		$	(42,825	)	$	(34,869	)
Other comprehensive income before reclassification		17,720			0			17,720
Amounts reclassified from accumulated other comprehensive income		(134	)		1,112			978
Net current-period other comprehensive income, net of tax		17,586			1,112			18,698
Balance at March 31, 2020	$	25,542		$	(41,713	)	$	(16,171	)

Reclassifications out of Accumulated Other Comprehensive Income (AOCI)

For the Three Months Ended March 31, 2020

Details about AOCI Components	Amount Reclassified from AOCI			Affected Line Item in the Statement Where Net Income is Presented
Available for sale (“AFS”) securities:
Net reclassification adjustment for losses (gains) included in net income	$	(175	)	Net investment securities (losses) gains
		(175	)	Total before tax
Related income tax effect		41		Tax expense
		(134	)	Net of tax
Pension plan:
Recognized net actuarial loss		1,442	(a)
		1,442		Total before tax
Related income tax effect		(330	)	Tax expense
		1,112		Net of tax
Total reclassifications for the period	$	978

(a) This AOCI component is included in the computation of net periodic pension cost (see Note 15, Employee Benefit Plans)

18. EARNINGS PER SHARE

The reconciliation of the numerator and denominator of basic earnings per share with that of diluted earnings per share is presented as follows:    

	Three Months Ended
	March 31
	2020		2019
Distributed earnings allocated to common stock	$	35,487	$	34,672
Undistributed earnings allocated to common stock		4,578		28,830
Net earnings allocated to common shareholders	$	40,065	$	63,502
Average common shares outstanding		101,295,073		101,894,786
Common stock equivalents		104,108		267,918
Average diluted shares outstanding		101,399,181		102,162,704
Earnings per basic common share	$	0.40	$	0.62
Earnings per diluted common share	$	0.40	$	0.62

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19. VARIABLE INTEREST ENTITIES

Variable interest entities (VIEs) are entities that either have a total equity investment that is insufficient to permit the entity to finance its activities without additional subordinated financial support or whose equity investors lack the characteristics of a controlling financial interest (i.e., ability to make significant decisions, through voting rights, right to receive the expected residual returns of the entity, and obligation to absorb the expected losses of the entity). VIEs can be structured as corporations, trusts, partnerships, or other legal entities. United’s business practices include relationships with certain VIEs. For United, the business purpose of these relationships primarily consists of funding activities in the form of issuing trust preferred securities.

United currently sponsors fourteen statutory business trusts that were created for the purpose of raising funds that originally qualified for Tier I regulatory capital. As previously discussed, these trusts now are considered Tier II regulatory capital. These trusts, of which several were acquired through bank acquisitions, issued or participated in pools of trust preferred capital securities to third-party investors with the proceeds invested in junior subordinated debt securities of United. The Company, through a small capital contribution, owns 100% of the voting equity shares of each trust. The assets, liabilities, operations, and cash flows of each trust are solely related to the issuance, administration, and repayment of the preferred equity securities held by third-party investors. United fully and unconditionally guarantees the obligations of each trust and is obligated to redeem the junior subordinated debentures upon maturity.

United does not consolidate these trusts as it is not the primary beneficiary of these entities because United’s wholly owned and indirect wholly owned statutory trust subsidiaries do not have a controlling financial interest in the VIEs. A controlling financial interest is present when an enterprise has both the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and an obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. The enterprise with a controlling financial interest, known as the primary beneficiary, consolidates the VIE.

Information related to United’s statutory trusts is presented in the table below:

Description	Issuance Date	Amount of Capital Securities Issued		Interest Rate	Maturity Date
United Statutory Trust III	December 17, 2003	$	20,000	3-month LIBOR + 2.85%	December 17, 2033
United Statutory Trust IV	December 19, 2003	$	25,000	3-month LIBOR + 2.85%	January 23, 2034
United Statutory Trust V	July 12, 2007	$	50,000	3-month LIBOR + 1.55%	October 1, 2037
United Statutory Trust VI	September 20, 2007	$	30,000	3-month LIBOR + 1.30%	December 15, 2037
Premier Statutory Trust II	September 25, 2003	$	6,000	3-month LIBOR + 3.10%	October 8, 2033
Premier Statutory Trust III	May 16, 2005	$	8,000	3-month LIBOR + 1.74%	June 15, 2035
Premier Statutory Trust IV	June 20, 2006	$	14,000	3-month LIBOR + 1.55%	September 23, 2036
Premier Statutory Trust V	December 14, 2006	$	10,000	3-month LIBOR + 1.61%	March 1, 2037
Centra Statutory Trust I	September 20, 2004	$	10,000	3-month LIBOR + 2.29%	September 20, 2034
Centra Statutory Trust II	June 15, 2006	$	10,000	3-month LIBOR + 1.65%	July 7, 2036
Virginia Commerce Trust II	December 19, 2002	$	15,000	6-month LIBOR + 3.30%	December 19, 2032
Virginia Commerce Trust III	December 20, 2005	$	25,000	3-month LIBOR + 1.42%	February 23, 2036
Cardinal Statutory Trust I	July 27, 2004	$	20,000	3-month LIBOR + 2.40%	September 15, 2034
UFBC Capital Trust I	December 30, 2004	$	5,000	3-month LIBOR + 2.10%	March 15, 2035

United, through its banking subsidiary, also makes limited partner equity investments in various low income housing and community development partnerships sponsored by independent third-parties. United invests in these partnerships to either realize tax credits on its consolidated federal income tax return or for purposes of earning a return on its investment. These partnerships are considered VIEs as the limited partners lack a controlling financial interest in the entities through their inability to make decisions that have a significant effect on the operations and success of the partnerships. United’s limited partner interests in these entities is immaterial, however; these partnerships are not consolidated as United is not deemed to be the primary beneficiary.

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The following table summarizes quantitative information about United’s significant involvement in unconsolidated VIEs:

	As of March 31, 2020						As of December 31, 2019
	Aggregate Assets		Aggregate Liabilities		Risk Of Loss (1)		Aggregate Assets		Aggregate Liabilities		Risk Of Loss (1)
Trust preferred securities	$	257,793	$	248,477	$	9,316	$	257,941	$	248,680	$	9,261

(1) Represents investment in VIEs.

20. SEGMENT INFORMATION

United operates in two business segments: community banking and mortgage banking. Through its community banking segment, United offers a full range of products and services through various delivery channels. In particular, the community banking segment includes both commercial and consumer lending and provides customers with such products as commercial loans, real estate loans, business financing and consumer loans. In addition, this segment provides customers with several choices of deposit products including demand deposit accounts, savings accounts and certificates of deposit as well as investment and financial advisory services to businesses and individuals, including financial planning, retirement/estate planning, and investment management. The mortgage banking segment engages primarily in the origination and acquisition of residential mortgages for sale into the secondary market though George Mason.

The community banking segment provides the mortgage banking segment (George Mason) with short-term funds to originate mortgage loans through a warehouse line of credit and charges the mortgage banking segment interest based on the 30-day LIBOR rate. These transactions are eliminated in the consolidation process.

The Company does not have any operating segments other than those reported. The “Other” category consists of financial information not directly attributable to a specific segment, including interest income from investments and net securities gains or losses of parent companies and their non-banking subsidiaries, interest expense related to subordinated notes of unconsolidated subsidiaries as well as the elimination of non-segment related intercompany transactions such as management fees. The “Other” represents an overhead function rather than an operating segment.

Information about the reportable segments and reconciliation of this information to the consolidated financial statements at and for the three months ended March 31, 2020 and 2019 is as follows:

	At and For the Three Months Ended March 31, 2020
	Community Banking		Mortgage Banking		Other			Intersegment Eliminations			Consolidated
Net interest income	$	140,420	$	949	$	(2,689	)	$	2,838		$	141,518
Provision for loans losses		27,119		0		0			0			27,119
Other income		19,567		21,190		9			(3,960	)		36,806
Other expense		80,464		20,757		1,034			(1,122	)		101,133
Income taxes		10,350		273		(734	)		0			9,889
Net income (loss)	$	42,054	$	1,109	$	(2,980	)	$	0		$	40,183
Total assets (liabilities)	$	20,159,252	$	610,768	$	18,174		$	(417,541	)	$	20,370,653
Average assets (liabilities)		19,503,515		366,379		6,189			(276,830	)		19,599,253

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	At and For the Three Months Ended March 31, 2019
	Community Banking		Mortgage Banking		Other			Intersegment Eliminations			Consolidated
Net interest income	$	145,890	$	55	$	(3,323	)	$	1,546		$	144,168
Provision for loans losses		4,996		0		0			0			4,996
Other income		17,653		16,106		201			(2,737	)		31,223
Other expense		75,994		14,842		(220	)		(1,191	)		89,425
Income taxes		17,666		282		(620	)		0			17,328
Net income (loss)	$	64,887	$	1,037	$	(2,282	)	$	0		$	63,642
Total assets (liabilities)	$	19,561,745	$	316,106	$	6,170		$	(238,888	)	$	19,645,133
Average assets (liabilities)		19,200,980		265,151		(1,848	)		(214,663	)		19,249,620

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD-LOOKING STATEMENTS

Congress passed the Private Securities Litigation Act of 1995 to encourage corporations to provide investors with information about the company’s anticipated future financial performance, goals, and strategies. The act provides a safe harbor for such disclosure, in other words, protection from unwarranted litigation if actual results are not the same as management expectations.

United desires to provide its shareholders with sound information about past performance and future trends. Consequently, any forward-looking statements contained in this report, in a report incorporated by reference to this report, or made by management of United in this report, in any other reports and filings, in press releases and in oral statements, involve numerous assumptions, risks and uncertainties. Forward-looking statements can be identified by the use of the words “expect,” “may,” “could,” “intend,” “project,” “estimate,” “believe,” “anticipate,” and other words of similar meaning. Such forward-looking statements are based on assumptions and estimates, which although believed to be reasonable, may turn out to be incorrect, such as statements about the potential impacts of the COVID-19 pandemic. Therefore, undue reliance should not be placed upon these estimates and statements. United cannot assure that any of these statements, estimates, or beliefs will be realized and actual results may differ from those contemplated in these “forward-looking statements.” United undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future events, or otherwise.

CORONAVIRUS (COVID-19) PANDEMIC

As of December 31, 2019, there were reported cases of a “pneumonia of unknown cause” that were limited to one region of the world. By January 7, 2020, the exact strain, a new type of coronavirus, was identified, and initially named 2019-nCoV. On January 21, 2020 the first case of the new cornonavirus was reported in the U.S. On January 30, 2020, the World Health Organization (WHO) declared the outbreak a “Public Health Emergency of International Concern.” In February of 2020, the WHO officially began calling the disease COVID-19. On March 11, 2020, the WHO characterized the COVID-19 outbreak as a pandemic. In the U.S., President Trump declared the COVID-19 pandemic a national emergency on March 13, 2020.

The COVID-19 pandemic has had a severe disruptive impact on the U.S. and global economy with businesses closing in response to the pandemic. The economic disruption caused by the virus outbreak has caused downturns and increased uncertainty and volatility in financial markets. Individual state governmental responses to the pandemic have included orders closing “non-essential” businesses temporarily and directing individuals to restrict their movements, observe social distancing and “shelter- in-place.” These actions, together with responses to the pandemic by businesses and individuals, have resulted in rapid decreases in commercial and consumer activity, temporary

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closures of many businesses that have led to a loss of revenues and a rapid increase in unemployment, material decreases in oil and gas prices, disrupted global supply chains, changes in consumer behavior because of the potential exposure to the virus, related emergency response legislation and an expectation that Federal Reserve policy will maintain a low interest rate environment for the foreseeable future.

On March 29, 2020, President Trump signed into law the Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act, which authorized approximately $2 trillion in relief to businesses and workers that have been affected by events related to COVID-19. The CARES Act includes the Paycheck Protection Program (PPP), a nearly $350 billion program designed to aid small- and medium-sized businesses through federally guaranteed loans distributed through banks. These loans are intended to guarantee eight weeks of payroll and other costs to help those businesses remain viable and allow their workers to pay their bills. The CARES Act marked the third federal legislative response to the ongoing coronavirus outbreak, following the enactment on March 6, 2020 of supplemental appropriations in the “Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020” and the enactment on March 18, 2020 of provisions relating to, among other things, paid sick leave and COVID-19 testing in the “Families First Coronavirus Response Act.”

On April 16, 2020, the Small Business Administration (SBA) announced that all available funds under the PPP had been exhausted and applications were no longer being accepted. In response, President Trump signed into law the “Paycheck Protection Program and Health Care Enhancement Act” on April 24, 2020. This legislation provides additional fiscal year (FY) 2020 emergency supplemental funding to increase by $310 billion, the amount authorized and appropriated for commitments for the PPP authorized under section 7(a) of the Small Business Act, economic injury disaster loans and emergency grants under the CARES Act, to fund hospital and provider recovery and testing, and for other purposes. The SBA resumed accepting PPP loan applications on April 27, 2020 from approved lenders on behalf of any eligible borrower. 

As of mid-April, United had processed over 3,000 loans totaling over $900 million under the PPP prior to all of the available “first round” funds for the program being exhausted. The SBA resumed accepting PPP loan applications on April 27, 2020 for the “second round” of funds from approved lenders on behalf of any eligible borrower. United has started processing loans under this “second round” of government funding.

Impact on our Operations. In the states where United operates, many jurisdictions have declared health emergencies. The resulting closures of non-essential businesses and related economic disruption has impacted our operations as well as the operations of our customers. Financial services have been identified as a Critical Infrastructure Sector by the Department of Homeland Security. Accordingly, our business remains open. To address the issues arising as a result of COVID-19, and in order to facilitate the continued delivery of essential services while maintaining a high level of safety for our customers as well as our employees, United has implemented the following policies:

• Restricted all non-essential travel and large external gatherings and have instituted a mandatory quarantine period for anyone that has traveled to an impacted area.

• Temporarily closed all of our financial center lobbies and other corporate facilities to non-employees, except for certain limited cases by appointment only. United continues to serve our consumer and business customers through our drive-through facilities, ATMs, internet banking, mobile app and telephone customer service capabilities.

• Expanded remote-access availability so that our work-force has the capability to work from home or other remote locations. All activities are performed in accordance with our compliance and information security policies designed to ensure customer data and other information is properly safeguarded.

• Instituted mandatory social distancing policies for those employees not working remotely. Members of certain operations teams have been split into separate buildings or locations to create redundancy for key functions across the organization.

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

Impact on our Financial Position and Results of Operations. Significant uncertainties as to future economic conditions exist. While some industries have been impacted more severely than others, all businesses have been impacted to some degree. For the first quarter of 2020, the economic pressures, existing and forecasted, as of end of the quarter, coupled with the implementation of an expected loss methodology for determining United’s provision for credit losses as required by CECL contributed to an increased provision for credit losses for the quarter. Also, in United’s mortgage banking segment, a market disruption caused by the COVID-19 pandemic resulted in significant losses on mortgage banking derivatives towards the end of the first quarter of 2020.

In addition, the economic pressures and uncertainties arising from the COVID-19 pandemic may result in specific changes in consumer and business spending and borrowing and saving habits, affecting the demand for loans and other products and services United offers. Consumers affected by COVID-19 may continue to demonstrate changed behavior even after the crisis is over. For example, consumers may decrease discretionary spending on a permanent or long-term basis, certain industries may take longer to recover (particularly those that rely on travel or large gatherings) as consumers may be hesitant to return to full social interaction, United lends to customers operating in such industries including energy, restaurants, hotels/lodging, aviation, entertainment, retail and commercial real estate, among others, that have been significantly impacted by COVID-19 and we are continuing to monitor these customers closely. In response to the COVID-19 pandemic, United has taken deliberate actions to increase on-balance sheet liquidity and increase capital ratio levels. In keeping with guidance from regulators, United is also actively working with COVID-19 affected customers to waive fees from a variety of sources (overdraft fees, ATM fees, account maintenance fees, etc.) as well as affected borrowers to defer their payments, interest, and fees. These measures are thought, at this time, to be temporary in conjunction with the length of the expected COVID-19 pandemic related economic crisis. The Company continues to monitor the impact of the COVID-19 pandemic closely, as well as any effects that may result from the CARES Act and any subsequent legislation; however, the extent to which the COVID-19 pandemic will impact United’s operations and financial results during the remainder of 2020 is highly uncertain.

ADOPTION OF THE CURRENT EXPECTED CREDIT LOSSES STANDARD

The Company has adopted Accounting Standards Update (ASU) 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” as amended, on January 1, 2020, as required by the Financial Accounting Standards Board (FASB). ASU No. 2016-13 was adopted by United using a modified retrospective approach. At the January 1, 2020 date of adoption, based on forecasts of macroeconomic conditions and exposures at that time, the aggregate impact to United was a net increase to the allowance for credit losses of $57.44 million and a decrease to retained earnings of $44.33 million, with the difference being an adjustment to deferred tax assets. United has elected to phase-in the impact to retained earnings using a five-year transition provision, allowed by the Federal Reserve Board and other federal banking agencies in response to the COVID-19 pandemic, to delay for two years the full impact of ASU No. 2016-13 on regulatory capital, followed by a three-year transition period. The adoption of ASU No. 2016-13 had an insignificant impact on the Company’s held to maturity and available for sale securities portfolios.

ASU 2016-13 requires entities to report “expected” credit losses on financial instruments measured at amortized cost and other commitments to extend credit rather than the prior “incurred loss” model. These expected credit losses for financial assets held at the reporting date are to be based on historical experience, current conditions, and reasonable and supportable forecasts. Based on poor economic conditions at March 31, 2020, management recorded $27.12 million in provision for credit losses related to United’s loan portfolio, which will be discussed under the caption of “Provision for Credit Losses” in this Management’s Discussion and Analysis of Financial Condition and results of Operations.”

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ACQUISITION

On May 1, 2020, United completed its acquisition of Carolina Financial Corporation (Carolina Financial). Carolina Financial was merged with and into United pursuant to the terms of the Agreement and Plan of Merger, dated November 17, 2019, by and between United and Carolina Financial (the Merger Agreement). The merger was accounted for under the acquisition method of accounting. The results of operations of Carolina Financial were not reflected in United’s results of operations for the first quarter of 2020, but will be included in the consolidated results of operations from the acquisition date.

Immediately following the Merger, CresCom Bank, a wholly-owned subsidiary of Carolina Financial, merged with and into United Bank, a wholly-owned subsidiary of United (the Bank Merger). United Bank survived the Bank Merger and continues to exist as a Virginia banking corporation.

The acquisition of Carolina Financial affords United the opportunity to expand its existing footprint in North Carolina and South Carolina. The merger resulted in a combined company with more than 200 locations in some of the best banking markets in the United States. As of March 31, 2020, Carolina Financial had $4.80 billion in assets with banking locations in North Carolina and South Carolina. CresCom Bank owns and operates Crescent Mortgage Company, which is based in Atlanta. Crescent Mortgage Company is approved to originate loans in 48 states partnering with community banks, credit unions and mortgage brokers.

TRANSITION FROM THE LONDON INTERBANK OFFERED RATE (LIBOR)

In 2017, the United Kingdom’s Financial Conduct Authority, which regulates LIBOR, publicly announced that it intends to stop persuading or compelling banks to submit the rates used to calculate LIBOR after 2021. Currently, it is unclear whether these banks, as a group or individually, will continue to submit the rates used to calculate LIBOR after 2021. It is also unclear whether LIBOR will continue to be viewed as an acceptable market benchmark, what rate or rates may become accepted alternatives to LIBOR, or what the effect of any such changes may be on the markets for LIBOR-indexed financial instruments.

Working groups comprised of various regulators and other industry groups have been formed in the United States and other countries in order to provide guidance on this topic. In particular, the Alternative Reference Rates Committee (ARRC) has been formed in the United States by the Federal Reserve Board and the Federal Reserve Bank of New York. The ARRC has identified the Secured Overnight Financing Rate (SOFR) as its preferred alternative reference rate for U.S. Dollar LIBOR. The ARRC has also published recommended fall-back language for LIBOR-linked financial instruments, among numerous other areas of guidance. At this time, however, it is unclear whether these recommendations will be broadly accepted by industry participants, whether they will continue to evolve, and what impact they will ultimately have on the broader markets that utilize LIBOR as a reference rate.

United has loans, derivative contracts, borrowings, and other financial instruments that are directly or indirectly dependent on LIBOR. The transition from LIBOR will cause changes to payment calculations for existing contracts that use LIBOR as the reference rate. These changes will create various risks surrounding the financial, operational, compliance and legal aspects associated with changing certain elements of existing contracts. United will also be subject to risks surrounding changes to models and systems that currently use LIBOR reference rates, as well as market and strategic risks that could arise from the use of alternative reference rates. Additionally, United could face reputational risks if this transition is not managed appropriately with its customers. While the full impact of the transition is not yet known, failure to adequately manage the transition could have a material adverse effect on our business, financial condition and results of operations.

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INTRODUCTION

The following discussion and analysis presents the significant changes in financial condition and the results of operations of United and its subsidiaries for the periods indicated below. This discussion and the unaudited consolidated financial statements and the notes to unaudited Consolidated Financial Statements include the accounts of United Bankshares, Inc. and its wholly-owned subsidiaries, unless otherwise indicated. Management has evaluated all significant events and transactions that occurred after March 31, 2020, but prior to the date these financial statements were issued, for potential recognition or disclosure required in these financial statements.

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

USE OF NON-GAAP FINANCIAL MEASURES

This discussion and analysis contains certain financial measures that are not recognized under GAAP. Under SEC Regulation G, public companies making disclosures containing financial measures that are not in accordance with GAAP must also disclose, along with each “non-GAAP” financial measure, certain additional information, including a reconciliation of the non-GAAP financial measure to the closest comparable GAAP financial measure, as well as a statement of the company’s reasons for utilizing the non-GAAP financial measure.

Generally, United has presented a non-GAAP financial measure because it believes that this measure provides meaningful additional information to assist in the evaluation of United’s results of operations or financial position. Presentation of a non-GAAP financial measure is consistent with how United’s management evaluates its performance internally and this non-GAAP financial measure is frequently used by securities analysts, investors and other interested parties in the evaluation of companies in the banking industry. Specifically, this discussion contains certain references to financial measures identified as tax-equivalent (FTE) net interest income and return on average tangible equity. Management believes these non-GAAP financial measures to be helpful in understanding United’s results of operations or financial position.

Net interest income is presented in this discussion on a tax-equivalent basis. The tax-equivalent basis adjusts for the tax-favored status of income from certain loans and investments. Although this is a non-GAAP measure, United’s management believes this measure is more widely used within the financial services industry and provides better comparability of net interest income arising from taxable and tax-exempt sources. United uses this measure to monitor net interest income performance and to manage its balance sheet composition.

Average tangible equity is calculated as GAAP total shareholders’ equity minus total intangible assets. Tangible equity can thus be considered the most conservative valuation of the company. When considering net income, a return on average tangible equity can be calculated. Management provides a return on average equity to facilitate the understanding of as well as to assess the quality and composition of United’s capital structure. By removing the effect of intangible assets that result from merger and acquisition activity, the “permanent” items of shareholders’ equity are presented. This measure, along with others, is used by management to analyze capital adequacy and performance.

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

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APPLICATION OF CRITICAL ACCOUNTING POLICIES

The accounting and reporting policies of United conform with U.S. generally accepted accounting principles. In preparing the consolidated financial statements, management is required to make estimates, assumptions and judgments that affect the amounts reported in the financial statements and accompanying notes. These estimates, assumptions and judgments, which are reviewed with the Audit Committee of the Board of Directors, are based on information available as of the date of the financial statements. Actual results could differ from these estimates. These policies, along with the disclosures presented in the financial statement notes and in this financial review, provide information on how significant assets and liabilities are valued in the financial statements and how those values are determined. Based on the valuation techniques used and the sensitivity of financial statement amounts to the methods, assumptions, and estimates underlying those amounts, management has identified the determination of the allowance for loan losses 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 Loan Losses

The allowance for loan losses is an estimate of the expected credit losses on financial assets measured at amortized cost to present the net amount expected to be collected as of the balance sheet date. Such allowance is based on the credit losses expected to arise over the life of the asset (contractual term). Determining the allowance for loan losses requires management to make estimates of expected credit losses that are highly uncertain and require a high degree of judgment. At March 31, 2020, the allowance for loan losses was $154.92 million and is subject to periodic adjustment based on management’s assessment of expected credit losses in the loan portfolio. Such adjustment from period to period can have a significant impact on United’s consolidated financial statements. To illustrate the potential effect on the financial statements of our estimates of the allowance for loan losses, a 10% increase in the allowance for loan losses would have required $15.5 million in additional allowance (funded by additional provision for loan losses), which would have negatively impacted the first quarter of 2020 net income by approximately $12.2 million, after-tax or $0.12 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 qualitative factors such as 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, qualitative factors which include charge-off and delinquency trends, current business conditions and reasonable and supportable economic forecasts, lending policies and procedures, the size and risk characteristics of the loan portfolio, concentrations of credit, and other various factors. The methodology used to determine the allowance for loan losses is described in Note 6, Notes to Consolidated Financial Statements. A discussion of the factors leading to changes in the amount of the allowance for loan losses is included in the Provision for Credit Losses section of this Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A).

Income Taxes

United’s calculation of income tax provision is inherently complex due to the various different tax laws and jurisdictions in which we operate and requires management’s use of estimates and judgments in its determination. The current income tax liability also includes income tax expense related to our uncertain tax positions as required in ASC Topic 740, “Income Taxes.” Changes to the estimated accrued taxes can occur due to changes in tax rates, implementation of new business strategies, resolution of issues with taxing authorities and recently enacted statutory, judicial and regulatory guidance. These changes can be material to the Company’s operating results for any particular reporting period. The analysis of the income tax provision requires the assessments of the relative risks and merits of the appropriate tax treatment of transactions, filing positions, filing methods and taxable income calculations after considering statutes, regulations, judicial precedent and other information. United strives to keep abreast of changes in the tax laws and the issuance of regulations which may impact tax reporting and provisions for income tax expense.

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United is also subject to audit by federal and state authorities. Because the application of tax laws is subject to varying interpretations, results of these audits may produce indicated liabilities which differ from United’s estimates and provisions. United continually evaluates its exposure to possible tax assessments arising from audits and records its estimate of probable exposure based on current facts and circumstances. The potential impact to United’s operating results for any of the changes cannot be reasonably estimated. See Note 16, Notes to Consolidated Financial Statements for information regarding United’s ASC Topic 740 disclosures.

Use of Fair Value Measurements

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

At March 31, 2020, approximately 14.86% of total assets, or $3.03 billion, consisted of financial instruments recorded at fair value. Of this total, approximately 82.77% or $2.51 billion of these financial instruments used valuation methodologies involving observable market data, collectively Level 1 and Level 2 measurements, to determine fair value. Approximately 17.23% or $521.76 million of these financial instruments were valued using unobservable market information or Level 3 measurements. Most of these financial instruments valued using unobservable market information were loans held for sale at our mortgage banking segment. At March 31, 2020, only $27.80 million or less than 1% of total liabilities were recorded at fair value. This entire amount was valued using methodologies involving observable market data. United does not believe that any changes in the unobservable inputs used to value the financial instruments mentioned above would have a material impact on United’s results of operations, liquidity, or capital resources. See Note 13 for additional information regarding ASC Topic 820 and its impact on United’s financial statements.

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

FINANCIAL CONDITION

United’s total assets as of March 31, 2020 were $20.37 billion, which was an increase of $708.33 million or 3.60% from December 31, 2019. The increase was mainly due to an increase of $499.34 million or 59.62% in cash and cash equivalents, an increase of $143.43 million or 1.05% in portfolio loans, an increase of $116.00 million or 29.93% in loans held for sale, and a $33.80 million increase in other assets. Investment securities remained flat, increasing $3.62 million or less than 1%. Total liabilities increased $728.46 million or 4.47% from year-end 2019. Borrowings increased $474.64 million or 21.45%, deposits increased $161.75 million or 1.17%, and accrued expenses and other liabilities increased $86.52 million or 50.80%. Shareholders’ equity decreased $20.13 million or less than 1%.

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

Cash and Cash Equivalents

Cash and cash equivalents at March 31, 2020 increased $499.34 million or 59.62% from year-end 2019. In particular, interest-bearing deposits with other banks increased $436.34 million or 66.98% as United placed more cash in an interest-bearing account with the Federal Reserve. In addition, cash and due from banks increased $63.00 million or 34.01% due to an increase of $73.80 million in cash. Federal funds sold increased $3 thousand or less than 1%. During the first three months of 2020, net cash of $21.48 million and $600.22 million were provided by operating and financing activities, respectively, while net cash of $122.36 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 three months of 2020 and 2019.

Securities

Total investment securities at March 31, 2020 were flat from year-end 2019, increasing $3.62 million or less than 1%. Securities available for sale were flat, decreasing $19.78 million or less than 1%. This change in securities available for sale reflects $132.75 million in sales, maturities and calls of securities, $91.12 million in purchases, and an increase of $22.93 million in market value. The majority of the purchase activity was related to U.S. Treasury securities and obligations of U.S. Government corporations and agencies. Securities held to maturity declined $220 thousand or 15.21% from year-end 2019. Equity securities were $9.01 million at March 31, 2020, an increase of $119 thousand or 1.34% due mainly to a change in value. Other investment securities increased $23.49 million or 10.58% from year-end 2019 due mainly to purchases of Federal Home Loan Bank (FHLB) stock and investment tax credits.

The following table summarizes the changes in the available for sale securities since year-end 2019:

(Dollars in thousands)	March 31 2020		December 31 2019		$ Change			% Change
U.S. Treasury securities and obligations of U.S. Government corporations and agencies	$	54,013	$	58,676	$	(4,663	)		(7.95	%)
State and political subdivisions		317,805		272,362		45,443			16.68	%
Mortgage-backed securities		1,428,694		1,455,340		(26,646	)		(1.83	%)
Asset-backed securities		261,936		276,139		(14,203	)		(5.14	%)
Trust preferred collateralized debt obligations		4,184		4,703		(519	)		(11.04	%)
Single issue trust preferred securities		15,684		16,774		(1,090	)		(6.50	%)
Corporate securities		335,205		353,302		(18,097	)		(5.12	%)
Total available for sale securities, at fair value	$	2,417,521	$	2,437,296	$	(19,775	)		(0.81	%)

The following table summarizes the changes in the held to maturity securities since year-end 2019:

(Dollars in thousands)	March 31 2020			December 31 2019		$ Change			% Change
U.S. Treasury securities and obligations of U.S. Government corporations and agencies	$	0		$	0	$	0			0.00	%
State and political subdivisions		1,206	(1)		1,426		(220	)		(15.43	%)
Mortgage-backed securities		0			0		0			0.00	%
Single issue trust preferred securities		0			0		0			0.00	%
Other corporate securities		20			20		0			0.00	%
Total held to maturity securities, at amortized cost	$	1,226		$	1,446	$	(220	)		(15.21	%)

Note: (1) net of allowance for credit losses of $10 thousand.

At March 31, 2020, gross unrealized losses on available for sale securities were $34.71 million. Securities with the most significant gross unrealized losses at March 31, 2020 consisted primarily of asset-backed securities, corporate securities, and single issue trust preferred securities. The asset-backed securities are backed by Federal Family

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Education Loan Program (FFELP) student loan collateral which includes a minimum of a 97% government repayment guaranty, as well as additional credit support and subordination in excess of the government guaranteed portion. The corporate securities mainly consist of debt issuances of corporations representing a variety of industries, including financial institutions. The single issue trust preferred securities relate to securities of financial institutions.

As of March 31, 2020, United’s mortgage-backed securities had an amortized cost of $1.37 billion, with an estimated fair value of $1.43 billion. The portfolio consisted primarily of $781.62 million in agency residential mortgage-backed securities with a fair value of $813.60 million and $589.29 million in commercial agency mortgage-backed securities with an estimated fair value of $615.10 million.

As of March 31, 2020, United’s corporate securities had an amortized cost of $647.31 million, with an estimated fair value of $617.01 million. The portfolio consisted of $6.05 million in Trup Cdos with a fair value of $4.18 million and $18.20 million in single issue trust preferred securities with an estimated fair value of $15.68 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 $283.50 million and a fair value of $261.94 million and other corporate securities, with an amortized cost of $339.56 million and a fair value of $335.21 million.

The Trup Cdos consisted of pools of trust preferred securities issued by trusts related to financial institutions. United’s Trup Cdos had a fair value of $4.18 million as of March 31, 2020. As of March 31, 2020, all of the Trup Cdos were rated below investment grade. United’s single issue trust preferred securities had a fair value of $15.68 million as of March 31, 2020. Of the $15.68 million, $10.18 million or 64.91% were investment grade; $0.76 million or 4.87% were split rated; and $4.74 million or 30.22% were unrated. The two largest exposures accounted for 70.39% of the $15.68 million. These included Truist Bank at $6.30 million and Emigrant Bank at $4.74 million. All single-issue trust preferred securities are currently receiving full scheduled principal and interest payments.

The following is a summary of available for sale single-issue trust preferred securities as of March 31, 2020:

Security	Moodys		S&P		Fitch		Amortized Cost		Fair Value		Unrealized Loss/(Gain)
							(Dollars in thousands)
Emigrant Bank		NR		NR		WD	$	5,737	$	4,740	$	997
Truist Bank		Baa1		NR		BBB		4,962		4,250		712
M&T Bank		NR		BBB-		BBB-		3,046		3,212		(166	)
Truist Bank		NR		BBB-		BBB		2,481		2,050		431
HSBC		Baa2		BBB+		NR		1,000		668		332
Royal Bank of Scotland		Baa3		BB+		BBB		977		764		213
							$	18,203	$	15,684	$	2,519

During the first quarter of 2020, United did not recognize any impairment on investment securities. Management does not believe that any individual security with an unrealized loss as of March 31, 2020 is 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.

Further information regarding the amortized cost and estimated fair value of investment securities, including remaining maturities as well as a more detailed discussion of management’s impairment analysis, is presented in Note 3 to the unaudited Notes to Consolidated Financial Statements.

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Loans held for sale

Loans held for sale increased $116.00 million or 29.93% from year-end 2019. Loan originations in the secondary market exceeded sales during the first three months of 2020. Loan originations for the first three months of 2020 were $733.61 million while loans sales were $617.61 million. Loans held for sale were $503.51 million at March 31, 2020 as compared to $387.51 million at year-end 2019.

Portfolio Loans

Loans, net of unearned income, increased $143.43 million or 1.05%. Since year-end 2019, commercial, financial and agricultural loans increased $306.63 million or 4.11% as commercial loans (not secured by real estate) increased $220.52 million or 9.65% while commercial real estate loans increased $86.11 million or 1.67%. Consumer loans increased $26.19 million or 2.25% due to an increase in indirect automobile financing. Partially offsetting these increases in loans, net of unearned income, was a $172.04 million or 12.22% decrease in construction and land development loans while residential real estate loans remained flat from prior year, decreasing $18.05 million or less than 1%.

The following table summarizes the changes in the major loan classes since year-end 2019:

(Dollars in thousands)	March 31 2020			December 31 2019			$ Change			% Change
Loans held for sale	$	503,514		$	387,514		$	116,000			29.93	%
Commercial, financial, and agricultural:
Owner-occupied commercial real estate	$	1,182,994		$	1,201,652		$	(18,658	)		(1.55	%)
Nonowner-occupied commercial real estate		4,070,729			3,965,960			104,769			2.64	%
Other commercial loans		2,505,552			2,285,037			220,515			9.65	%
Total commercial, financial, and agricultural	$	7,759,275		$	7,452,649		$	306,626			4.11	%
Residential real estate		3,668,356			3,686,401			(18,045	)		(0.49	%)
Construction & land development		1,236,169			1,408,205			(172,036	)		(12.22	%)
Consumer:
Bankcard		9,083			10,074			(991	)		(9.84	%)
Other consumer		1,183,400			1,156,219			27,181			2.35	%
Total gross loans	$	13,856,283		$	13,713,548		$	142,735			1.04	%
Less: Unearned income		(725	)		(1,419	)		694			48.91	%
Total Loans, net of unearned income	$	13,855,558		$	13,712,129		$	143,429			1.05	%

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

Other Assets

Other assets increased $33.80 million or 7.65% from year-end 2019, mainly due to a $16.16 million increase in accounts receivables and a $7.39 million increase in deferred tax assets due to timing differences. In addition, derivative assets increased $13.81 million. Partially offsetting these increases were decreases of $2.06 million in income tax receivable and $1.58 million in core deposit intangibles.

Deposits

Deposits represent United’s primary source of funding. Total deposits at March 31, 2020 increased $161.75 million or 1.17%. In terms of composition, noninterest-bearing deposits increased $216.18 million or 4.68% while interest-bearing deposits decreased $54.43 million or less than 1% from December 31, 2019.

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Noninterest-bearing deposits consist of demand deposit and noninterest bearing money market (MMDA) account balances. The $216.18 million increase in noninterest-bearing deposits was due mainly to increases in commercial noninterest-bearing deposits of $107.95 million or 4.50% and personal noninterest-bearing deposits of $42.71 million or 5.74%. In addition, sweep activity to noninterest bearing MMDAs increased $88.30 million or 7.12%.

Interest-bearing deposits consist of interest-bearing checking (NOW), regular savings, interest-bearing MMDA, and time deposit account balances. Interest-bearing MMDAs decreased $122.67 million or 2.17% while NOW accounts increased $19.61 million or 5.27% since year-end 2019. In particular, interest-bearing MMDAs decreased $122.67 million as commercial MMDAs decreased $110.02 million, brokered MMDAs decreased $3.25 million, and personal MMDAs decreased $75.16 million. Partially offsetting these decreases in interest-bearing MMDAs is an increase of $65.76 million in public MMDAs. Excluding sweep activity from NOW accounts to interest-bearing MMDAs to reduce United’s reserve requirement at its Federal Reserve Bank, NOW accounts increased $48.66 million or 2.67% mainly due to an $88.32 million increase in public funds NOW accounts. Partially offsetting this increase was a decrease of $32.19 million in commercial NOW accounts and a decrease of $7.48 million in personal NOW accounts.

Regular savings increased $8.83 million or 1.00% from year-end 2019 mainly due to an $11.32 million increase in personal savings accounts while commercial savings accounts decreased $2.08 million.

Time deposits under $100,000 remained flat, decreasing $4.34 million or less than 1% from year-end 2019. This decrease in time deposits under $100,000 was the result of a $3.90 million decrease in Certificate of Deposit Account Registry Service (CDARS) balances and a $2.04 million decrease in fixed CDs under $100,000.

Since year-end 2019, time deposits over $100,000 increased $44.15 million or 2.76% as fixed rate CDs increased $46.66 million and public funds CDs over $100,000 increased $50.01 million. These increases in time deposits over $100,000 were partly offset by a $47.54 million decrease in CDARS and a $4.99 million decrease in brokered certificates of deposits.

The table below summarizes the changes by deposit category since year-end 2019:

(Dollars in thousands)	March 31 2020		December 31 2019		$ Change			% Change
Demand deposits	$	3,509,741	$	3,381,866	$	127,875			3.78	%
Interest-bearing checking		391,787		372,175		19,612			5.27	%
Regular savings		891,715		882,889		8,826			1.00	%
Money market accounts		6,857,322		6,891,696		(34,374	)		(0.50	%)
Time deposits under $100,000		719,601		723,941		(4,340	)		(0.60	%)
Time deposits over $100,000(1)		1,644,002		1,599,854		44,148			2.76	%
Total deposits	$	14,014,168	$	13,852,421	$	161,747			1.17	%

(1) Includes time deposits of $250,000 or more of $ 879,063 and $803,414 at March 31, 2020 and December 31, 2019, respectively.

Borrowings

Total borrowings at March 31, 2020 increased $474.64 million or 21.45% since year-end 2019. During the first three months of 2020, short-term borrowings increased $224.91 million or 60.03% due to a $225.00 million increase in short term FHLB advances. Short-term securities sold under agreements to repurchase remained flat, decreasing $93 thousand or less than 1%. Long-term borrowings increased $249.73 million or 13.59% from year-end 2019 due to a $249.42 million increase in long-term FHLB advances as new borrowings exceeded repayments.

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The table below summarizes the change in the borrowing categories since year-end 2019:

(Dollars in thousands)	March 31 2020		December 31 2019		$ Change			% Change
Federal funds purchased	$	0	$	0	$	0			0.00	%
Short-term securities sold under agreements to repurchase		124,561		124,654		(93	)		(0.07	%)
Short-term FHLB advances		475,000		250,000		225,000			90.00	%
Long-term FHLB advances		1,851,282		1,601,865		249,417			15.57	%
Issuances of trust preferred capital securities		236,479		236,164		315			0.13	%
Total borrowings	$	2,687,322	$	2,212,683	$	474,639			21.45	%

For a further discussion of borrowings see Notes 9 and 10 to the unaudited Notes to Consolidated Financial Statements.

Accrued Expenses and Other Liabilities

Accrued expenses and other liabilities at March 31, 2020 increased $86.52 million or 50.80% from year-end 2019. In particular, accounts payable associated with George Mason increased $62.25 million due to timing differences and derivative liabilities increased $24.73 million. In addition, accrued mortgage escrow liabilities increased $4.87 million and business franchise taxes increased $2.24 million. Partially offsetting these increases was a decrease of $6.01 million in incentives payables due to payments and a $1.34 million decrease in income taxes payable due to timing differences.

Shareholders’ Equity

Shareholders’ equity at March 31, 2020 was $3.34 billion, which was a decrease of $20.13 million or less than 1% from year-end 2019.

Retained earnings decreased $39.75 million or 3.51% from year-end 2019. Earnings net of dividends for the first three months of 2020 were $4.58 million. Amount recognized in retained earnings for the adoption of ASU No. 2016-13 was $44.33 million.

Accumulated other comprehensive income increased $18.70 million or 53.62% from year-end 2019 due mainly to an increase of $17.59 million in United’s available for sale investment portfolio, net of deferred income taxes. The after-tax accretion of pension costs was $1.11 million for the first quarter of 2020.

RESULTS OF OPERATIONS

Overview

Net income for the first quarter of 2020 were $40.18 million as compared to earnings of $63.64 million for the first quarter of 2019. The lower amount of net income was driven primarily by a higher provision for loan losses resulting from an adverse future macroeconomic forecast as a result of the COVID-19 pandemic. Diluted earnings per share were $0.40 for the first quarter of 2020 and $0.62 for the first quarter of 2019.

United’s annualized return on average assets for the first three months of 2020 was 0.82% and return on average shareholders’ equity was 4.82% as compared to 1.34% and 7.88% for the first three months of 2019. For the first three months of 2020, United’s annualized return on average tangible equity was 8.77%, as compared to 14.64% for the first three months of 2019.

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	Three Months Ended
(Dollars in thousands)	March 31, 2020			March 31, 2019
Return on Average Tangible Equity:
(a) Net Income (GAAP)	$	40,183		$	63,642
(b) Number of days		91			90
Average Total Shareholders’ Equity (GAAP)	$	3,350,652		$	3,276,822
Less: Average Total Intangibles		(1,507,272	)		(1,514,168	)
(b) Average Tangible Equity (non-GAAP)	$	1,843,380		$	1,762,654
Return on Tangible Equity (non-GAAP) [(a) / (b)] x 366 or 365/ (c)		8.77	%		14.64	%

Net interest income for the first three months of 2020 was $141.52 million, a decrease of $2.65 million or 1.84% from net interest income of $144.17 million for the first three months of 2019. The decrease of $2.65 million in net interest income occurred because total interest income decreased $8.62 million while total interest expense only decreased $5.97 million from the first quarter of 2019.

The provision for credit losses was $27.12 million for the first three months of 2020 as compared to $5.00 million for the first three months of 2019. This increase was due to mainly the adoption of the Current Expected Credit Loss (CECL) accounting standard by United on January 1, 2020 and the reasonable and supportable forecasts for future macroeconomic scenarios used in the estimation of expected credit losses adversely impacted by the COVID-19 pandemic. Noninterest income was $36.81 million for the first three months of 2020, an increase of $5.58 million or 17.88% from the first three months of 2019. Noninterest expense for the first three months of 2020 increased $11.71 million or 13.09% from the first three months of 2019. Income taxes decreased $7.44 million or 42.93% for the first three months of 2020 as compared to the first three months of 2019. The effective tax rate was 19.75% and 21.40% for the first quarter of 2020 and 2019, respectively.

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

Business Segments

United operates in two business segments: community banking and mortgage banking.

Community Banking

Net income attributable to the community banking segment for the first quarter of 2020 was $42.05 million compared to net income of $64.89 million for the first quarter of 2019. As previously mentioned, the lower amount of net income was driven primarily by a higher provision for loan losses resulting from an adverse future macroeconomic forecast as a result of the COVID-19 pandemic.

Net interest income of $140.42 million for the first quarter of 2020 was a decrease of $5.47 million or 3.75% from $145.89 million for the same period of 2019. Generally, net interest income for the first quarter of 2020 decreased from the first quarter of 2019 due to a decline in the average yield on earning assets due to a decline in market interest rates. Provision for loan losses was $27.12 million for the three months ended March 31, 2020, an increase of $22.12 million or 442.81% from a provision of $5.00 million for the same period of 2019. As previously mentioned, this increase was due to mainly the adoption of the CECL accounting standard by United on January 1, 2020 and the reasonable and supportable forecasts for future macroeconomic scenarios used in the estimation of expected credit losses adversely impacted by the COVID-19 pandemic. Noninterest income increased $1.91 million for the first quarter of 2020 to $19.57 million as compared to $17.65 million for the first quarter of 2019. The increase of $1.91 million was due mainly to an increase of $561 thousand from income from bank-owned life insurance policies (BOLI) due to the recognition of death benefits of $1.19 million in the first quarter of 2020 as compared to death benefits of

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$600 thousand for the first quarter of 2019. In addition, fees from trust services and fees from brokerage services increased. Noninterest expense was $80.46 million for the first quarter of 2020, compared to $75.99 million for the same period of 2019. The increase of $4.47 million in noninterest expense was primarily attributable to increases in employee compensation, employee benefits, equipment expense, data processing and other expense, which includes merger-related expenses from the announced acquisition of Carolina Financial.

Mortgage Banking

The mortgage banking segment reported net income of $1.11 million for the first quarter of 2020, compared to net income of $1.04 million for the first quarter of 2019. Noninterest income, which consists mainly of realized and unrealized gains associated with the fair value of commitments and loans held for sale, was $21.19 million for the first quarter of 2020, compared to $16.11 million for the first quarter of 2019. Noninterest expense increased $5.92 million for the first quarter of 2020 to $20.76 million as compared to $14.84 million for the first quarter of 2019. Noninterest expense consists mainly of salaries, commissions and benefits of mortgage segment employees.

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

Net Interest Income

Net interest income represents the primary component of United’s earnings. It is the difference between interest income from earning assets and interest expense incurred to fund these assets. Net interest income is impacted by changes in the volume and mix of interest-earning assets and interest-bearing liabilities, as well as changes in market interest rates. Such changes, and their impact on net interest income in 2020 and 2019, are presented below.

Net interest income for the first quarter of 2020 was $141.52 million, a decrease of $2.65 million or 1.84% from the first quarter of 2019. The $2.65 million decrease in net interest income occurred because total interest income decreased $8.62 million while total interest expense decreased $5.97 million from the first quarter of 2019. On a linked-quarter basis, net interest income for the first quarter of 2020 was relatively flat from the fourth quarter of 2019, increasing $235 thousand or less than 1%. The $235 thousand increase in net interest income occurred because total interest income decreased $3.39 million while total interest expense decreased $3.62 million from the fourth quarter of 2019.

Generally, net interest income for the first quarter of 2020 decreased from the first quarter of 2019 due to a larger decline in the yield on average earning assets in comparison to the cost of average interest-bearing liabilities. Both of these declines were due to a decrease in market interest rates for the first quarter of 2020 from the first quarter of 2019. For the purpose of this remaining discussion, net interest income is presented on a tax-equivalent basis to provide a comparison among all types of interest earning assets. The tax-equivalent basis adjusts for the tax-favored status of income from certain loans and investments. Although this is a non-GAAP measure, United’s management believes this measure is more widely used within the financial services industry and provides better comparability of net interest income arising from taxable and tax-exempt sources. United uses this measure to monitor net interest income performance and to manage its balance sheet composition.

Tax-equivalent net interest income for the first quarter of 2020 was $142.30 million, a decrease of $2.86 million or 1.97% from the first quarter of 2019. This decrease was due mainly to a decrease of 33 basis points in the average yield on earning assets due primarily to a decline in interest rates as compared to the first quarter of 2019 partially offset by an increase of $1.00 million in loan accretion on acquired loans. Loan accretion on acquired loans was $9.55 million and $8.54 million for the first quarter of 2020 and 2019, respectively. Partially offsetting the decrease to tax-equivalent net interest income for the first quarter of 2020 was an increase in average earning assets as compared to the first quarter of 2019. Average earning assets for the first quarter of 2020 increased $372.45 million or 2.20% from the first quarter of 2019 due mainly to an increase of $302.42 million or 2.22% in average net loans. In addition,

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average investment securities for the first quarter of 2020 increased $94.45 million or 3.71% from the first quarter of 2019. Partially offsetting these increases was a decrease in average short-term investments of $24.42 million or 3.31%. In addition, the average cost of funds for the first quarter of 2020 decreased 21 basis points from the first quarter of 2019. The net interest margin of 3.30% for the first quarter of 2020 was a decrease of 16 basis points from the net interest margin of 3.46% for the first quarter of 2019.

On a linked-quarter basis, net interest income for the first quarter of 2020 was relatively flat from the fourth quarter of 2019, increasing $235 thousand or less than 1%. United’s tax-equivalent net interest income for the first quarter of 2020 was also relatively flat from the fourth quarter of 2019, increasing $166 thousand or less than 1% due mainly to a decrease of 13 basis points in the average cost of funds and a change in the mix of average earning assts and interest-bearing liabilities. Average earning assets were flat, increasing $130.68 million or less than 1%. Specifically, average short-term investments increased $118.59 million or 19.90% while average investment securities decreased $41.09 million or 1.53%. Average net loans were relatively flat for the quarter, increasing $53.18 million or less than 1%. Virtually offsetting the increases was a decline of 7 basis points in the average yield on earning assets. Loan accretion on acquired loans increased $905 thousand. Loan accretion on acquired loans was $9.55 million and $8.64 million for the first quarter of 2020 and fourth quarter of 2019, respectively. The net interest margin of 3.30% for the first quarter of 2020 was relatively stable from the fourth quarter of 2019, increasing one basis point from the net interest margin of 3.29% for the fourth quarter of 2019.

United’s tax-equivalent net interest income also includes the impact of acquisition accounting fair value adjustments.

The following table provides the discount/premium and net accretion impact to tax-equivalent net interest income for the three months ended March 31, 2020, March 31, 2019 and December 31, 2019:

	Three Months Ended
(Dollars in thousands)	March 31 2020		March 31 2019		December 31 2019
Loan accretion	$	9,546	$	8,544	$	8,641
Certificates of deposit		141		198		198
Long-term borrowings		268		268		268
Total	$	9,955	$	9,010	$	9,107

The following tables reconcile the difference between net interest income and tax-equivalent net interest income for the three months ended March 31, 2020, March 31, 2019 and December 31, 2019.

	Three Months Ended
(Dollars in thousands)	March 31 2020		March 31 2019		December 31 2019
Net interest income, GAAP basis	$	141,518	$	144,168	$	141,283
Tax-equivalent adjustment (1)		782		993		851
Tax-equivalent net interest income	$	142,300	$	145,161	$	142,134

(1) The tax-equivalent adjustment combines amounts of interest income on federally nontaxable loans and investment securities using the statutory federal income tax rate of 21% for the three months ended March 31, 2020 and 2019 and December 31, 2019. All interest income on loans and investment securities was subject to state income taxes.

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The following tables show the unaudited consolidated daily average balance of major categories of assets and liabilities for the three-month periods ended March 31, 2020 and 2019, respectively, with the interest and rate earned or paid on such amount. The interest income and yields on federally nontaxable loans and investment securities are presented on a tax-equivalent basis using the statutory federal income tax rate of 21% for the three-month period ended March 31, 2020 and 2019. Interest income on all loans and investment securities was subject to state income taxes.

	Three Months Ended March 31, 2020								Three Months Ended March 31, 2019
(Dollars in thousands)	Average Balance			Interest (1)		Avg. Rate (1)			Average Balance			Interest (1)		Avg. Rate (1)
ASSETS
Earning Assets:
Federal funds sold and securities purchased under agreements to resell and other short-term investments	$	714,507		$	3,965		2.23	%	$	738,930		$	5,837		3.20	%
Investment Securities:
Taxable		2,537,229			16,969		2.68	%		2,382,450			17,363		2.92	%
Tax-exempt		106,081			879		3.31	%		166,410			1,298		3.12	%
Total Securities		2,643,310			17,848		2.70	%		2,548,860			18,661		2.93	%
Loans, net of unearned income (2)		14,072,021			159,451		4.55	%		13,712,278			165,592		4.89	%
Allowance for loan losses		(134,084	)							(76,762	)
Net loans		13,937,937					4.60	%		13,635,516					4.91	%
Total earning assets		17,295,754		$	181,264		4.21	%		16,923,306		$	190,090		4.54	%
Other assets		2,303,499								2,326,314
TOTAL ASSETS	$	19,599,253							$	19,249,620
LIABILITIES
Interest-Bearing Funds:
Interest-bearing deposits	$	9,278,782		$	27,477		1.19	%	$	9,694,708		$	32,638		1.37	%
Short-term borrowings		137,427			458		1.34	%		173,597			691		1.61	%
Long-term borrowings		2,002,763			11,029		2.21	%		1,697,423			11,600		2.77	%
Total Interest-Bearing Funds		11,418,972			38,964		1.37	%		11,565,728			44,929		1.58	%
Noninterest-bearing deposits		4,627,044								4,221,040
Accrued expenses and other liabilities		202,585								186,030
TOTAL LIABILITIES		16,248,601								15,972,798
SHAREHOLDERS’ EQUITY		3,350,652								3,276,822
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	19,599,253							$	19,249,620
NET INTEREST INCOME				$	142,300							$	145,161
INTEREST SPREAD							2.84	%							2.96	%
NET INTEREST MARGIN							3.30	%							3.46	%

(1) The interest income and the yields on federally nontaxable loans and investment securities are presented on a tax-equivalent basis using the statutory federal income tax rate of 21%.

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

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Provision for Credit Losses

For the quarters ended March 31, 2020 and 2019, the provision for loan losses was $27.12 million and $5.00 million, respectively. Net charge-offs were $6.69 million for the first quarter of 2020 as compared to net charge-offs of $4.81 million for the same quarter in 2019. The higher amount of provision expense for the first quarter of 2020 compared to the first quarter of 2019 was mainly due to the adoption of ASU 2016-13 standard, known as CECL, by United on January 1, 2020 and the reasonable and supportable forecasts for future macroeconomic scenarios used in the estimation of expected credit losses adversely impacted by the COVID-19 pandemic. The higher amount of net charge-offs was due to a large charge-off on a commercial credit in the first quarter of 2020 as compared to the first quarter of 2019. On a linked-quarter basis, the provision for loan losses increased $21.25 million due mainly to the adverse impact of the COVID-19 pandemic under CECL while net charge-offs increased $780 thousand from the fourth quarter of 2019. Annualized net charge-offs as a percentage of average loans were 0.20% for the first quarter of 2020.

At March 31, 2020, nonperforming loans were $132.56 million or 0.96% of loans, net of unearned income which was very comparable to nonperforming loans of $131.07 million or 0.96% of loans, net of unearned income at December 31, 2019. 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.

Loans past due 90 days or more were $7.05 million at March 31, 2020, a decrease of $2.44 million or 25.74% from $9.49 million at year-end 2019. This decrease was primarily due to several larger consumer loans that were repaid in the quarter ended March 31, 2020. At March 31, 2020, nonaccrual loans were $64.04 million, which was a slight increase of $827 thousand or 1.31% from $63.21 million at year-end 2019. Restructured loans were $61.47 million at March 31, 2020, an increase of $3.10 million or 5.31% from $58.37 million at year-end 2019. The increase was mainly due to ten loans totaling $10.25 million being considered restructured under CECL partially offset by repayments and charge-offs of previously recognized impairments. The loss potential on these loans has been properly evaluated and allocated within the Company’s allowance for loan losses.

Nonperforming assets include nonperforming loans and real estate acquired in foreclosure or other settlement of loans (OREO). Total nonperforming assets of $148.41 million, including OREO of $15.85 million at March 31, 2020, represented 0.73% of total assets.

United maintains an allowance for loan losses and a reserve for lending-related commitments. The combined allowance for loan losses and reserve for lending-related commitments is considered the allowance for credit losses. At March 31, 2020, the allowance for credit losses was $162.67 million as compared to $78.79 million at December 31, 2019.

At March 31, 2020, the allowance for loan losses was $154.92 million as compared to $77.06 million at December 31, 2019. As a percentage of loans, net of unearned income, the allowance for loan losses was 1.12% at March 31, 2020 and 0.56% at December 31, 2019. The ratio of the allowance for loan losses to nonperforming loans or coverage ratio was 116.87% and 58.79% at March 31, 2020 and December 31, 2019, respectively. The increase in these ratios was due mainly to the adoption of CECL which caused a change in the Company’s methodology for determining the allowance for loan losses as well as the adverse impact of the COVID-19 pandemic on reasonable and supportable forecasts for future macroeconomic scenarios used in the estimation of expected credit losses.

United continues to evaluate risks which may impact its loan portfolios. As a result of the COVID-19 pandemic and resulting economic uncertainty given the rapidly changing economic impact, the Company reviewed its loan portfolio segments, assessing the likely impact of COVID-19 on each segment and established relevant qualitative adjustment factors. Qualitative adjustments account for the Company’s view of the future. If current conditions underlying any qualitative adjustment factor were deemed to be materially different than historical conditions, then an adjustment was made for that factor.

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The first quarter of 2020 qualitative adjustments include analyses of the following:

• Past events – This includes portfolio trends related to business conditions; past due, nonaccrual, and graded loans; and concentrations.

• Current conditions – United considered the impact of COVID-19 (negative) as well as the CARES Act (positive) when making determinations related to factor adjustments, such as collateral values and past due loans, and the reasonable and supportable forecast. This is in contrast with the CECL adoption date (January 1, 2020) estimate as neither of these items were relevant for United’s footprint at the beginning of the year.

• Reasonable and supportable forecasts – The forecast is determined on a portfolio-by-portfolio basis by relating the correlation of real GDP and the unemployment rate to loss rates to forecasts of those variables. Assumptions for the economic variables were the following:

• 10-15% decline in GDP in the second quarter of 2020 followed by a recovery in the third quarter of 2020 with GDP stabilizing in 2021.

• 10-15% unemployment rate in the second quarter of 2020 with sharp recovery as businesses begin to reopen and again stabilizing in 2021.

• Forecasts account for United’s best estimate of economic impact from government stimulus.

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

Allocations are made for specific commercial loans based upon management’s estimate of the borrowers’ ability to repay and other factors impacting collectibility. Other commercial loans not specifically reviewed on an individual basis are evaluated based on historical loss percentages applied to loan pools that have been segregated by risk. Allocations for loans other than commercial loans are made based upon historical loss experience adjusted for current environmental conditions. The allowance for credit losses includes estimated lifetime losses within the portfolio due to uncertainties in economic conditions, delays in obtaining information, including unfavorable information about a borrower’s financial condition, the difficulty in identifying triggering events that correlate perfectly to subsequent loss rates, and risk factors that have not yet fully manifested themselves in loss allocation factors.

United’s review of the allowance for loan losses at March 31, 2020 produced increased allocations in each of the four loan categories, primarily due to implementation of CECL and the adverse impact of the COVID-19 pandemic on reasonable and supportable forecasts for future macroeconomic scenarios used in the estimation of expected credit losses. The allocation related to the commercial, financial & agricultural loan pool increased $29.49 million. The residential real estate allocation increased $21.63 million. The real estate construction and development loan pool allocation increased $15.44 million. The consumer loan pool experienced an increase of $11.61 million.

An allowance is established for estimated lifetime losses for loans that are individually assessed. Nonperforming commercial loans and leases are regularly reviewed to identify probable credit losses. A loan is individually assessed for expected credit losses when, based on current information and events, it is probable that the Company will not be able to collect all amounts contractually due. Measuring expected credit losses of a loan requires judgment and estimates, and the eventual outcomes may differ from those estimates. Expected credit losses are measured based upon the present value of expected future cash flows from the loan discounted at the loan’s effective rate, the loan’s observable market price or the fair value of collateral if the loan is collateral dependent. When the selected measure is less than the recorded investment in the loan, an expected credit loss has occurred. The allowance for loans that were individually assessed was $12.20 million at March 31, 2020 and $16.50 million at December 31, 2019. In comparison to the prior year-end, this element of the allowance decreased by $4.30 million primarily due to charge-off of previously recognized allocations for probable credit losses on individually assessed loans.

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Management believes that the allowance for credit losses of $162.67 million at March 31, 2020 is adequate to provide for probable losses on existing loans and lending-related commitments based on information currently available. United’s loan administration policies are focused on the risk characteristics of the loan portfolio in terms of loan approval and credit quality. The commercial loan portfolio is monitored for possible concentrations of credit in one or more industries. Management has lending limits as a percentage of capital per type of credit concentration in an effort to ensure adequate diversification within the portfolio. Most of United’s commercial loans are secured by real estate located in West Virginia, southeastern Ohio, Pennsylvania, Virginia, Maryland and the District of Columbia. It is the opinion of management that these commercial loans do not pose any unusual risks and that adequate consideration has been given to these loans in establishing the allowance for credit losses.

The provision for credit losses related to held to maturity and available for sale investment securities for the first three months of 2020 was immaterial. There was no provision for credit losses related to held to maturity and available for sale investment securities for the first three months of 2019.

Management is not aware of any potential problem loans, trends or uncertainties, which it reasonably expects, will materially impact future operating results, liquidity, or capital resources which have not been disclosed. Additionally, management has disclosed all known material credits, which cause management to have serious doubts as to the ability of such borrowers to comply with the loan repayment schedules.

Other Income

Other income consists of all revenues, which are not included in interest and fee income related to earning assets. Noninterest income has been and will continue to be an important factor for improving United’s profitability. Recognizing the importance, management continues to evaluate areas where noninterest income can be enhanced.

Noninterest income for the first quarter of 2020 was $36.81 million, an increase of $5.58 million or 17.88% from the first quarter of 2019. The increase was due mainly to an increase in income from mortgage banking activities. Income from mortgage banking activities totaled $17.63 million for the first quarter of 2020 compared to $13.68 million for the first quarter of 2019. The increase of $3.95 million or 28.87% for the first quarter of 2020 was mainly due to increased loan sales. Mortgage loan sales were $617.61 million in the first quarter of 2020 as compared to $349.49 million in the first quarter of 2019. Mortgage loans originated for sale were $733.61 million for the first quarter of 2020 as compared to $345.40 million for the first quarter of 2019.

Income from bank-owned life insurance (BOLI) for the first quarter of 2020 was $2.39 million, an increase of $561 thousand from the first quarter of 2019 due to an increase in death benefits. For the first quarter of 2020, United recognized death benefits from BOLI of $1.19 million as compared to death benefits of $600 thousand for the first quarter of 2019.

Fees from brokerage services for the first quarter of 2020 increased $392 thousand or 15.53% from the first quarter of 2019. This increase was due to increased volume of transactions.

On a linked-quarter basis, noninterest income for the first quarter of 2020 decreased $436 thousand or 1.17% from the fourth quarter of 2019 due mainly to decreases in fees from deposit services and income from BOLI. Fees from deposit services declined $592 thousand from seasonality while income from BOLI decreased $518 thousand due to a decline in death benefits. Mostly offsetting these decreases were increases of $448 thousand in fees from brokerage services due to increased volume and $388 thousand in other income. Income from mortgage banking activities was flat from the fourth quarter of 2019, increasing $84 thousand or less than 1%. On a linked quarter-basis, an increase in net gains on the sale of mortgage loans in the secondary market by George Mason were virtually offset by losses on mortgage loan derivatives due to a market disruption as a result of the COVID-19 pandemic.

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Other Expenses

Just as management continues to evaluate areas where noninterest income can be enhanced, it strives to improve the efficiency of its operations to reduce costs. Other expenses include all items of expense other than interest expense, the provision for credit losses, and income taxes. Noninterest expense for the first quarter of 2020 was $101.13 million, which was an increase of $11.71 million or 13.09% from the first quarter of 2019.

Employee compensation for the first quarter of 2020 increased $5.59 million or 14.36% when compared to the first quarter of 2019. This increase was primarily due to an increase in commissions expense related to the increase in production and sales of mortgage loans at George Mason.

Employee benefits expense for the first quarter of 2020 increased $1.36 million or 14.37% from the first quarter of 2019. This increase was primarily due to higher levels of Federal Insurance Contributions Act (FICA) and penion expense.

Equipment expense increased $530 thousand or 15.99% for the first quarter of 2020, as compared to the same period in the prior year. The increase was due mainly to higher maintenance costs.

Other expense for the first quarter of 2020 increased $4.99 million or 26.79% from the first quarter of 2019. Within other expense, merger-related expenses associated with the announced Carolina Financial acquisition were $1.56 million, expense associated with income tax credits increased $1.33 million which reduces the effective tax rate, and the expense for the reserve for unfunded commitments increased $897 thousand.

Partially offsetting these increases for the first quarter of 2020 from the first quarter of 2019 were decreases in Federal Deposit Insurance Corporation (FDIC) insurance expense of $900 thousand due to lower premiums and other real estate owned (OREO) expense of $510 thousand due to fewer declines in fair value of OREO properties.

On a linked-quarter basis, noninterest expense for the first quarter of 2020 increased $4.23 million or 4.37% from the fourth quarter of 2019. The increase was due to increases of $1.67 million in employee benefits expense due in large part to higher pension costs, FDIC expense increased $1.40 million due to a Small Bank Assessment Credit in 2019 and $1.14 million in other expense. Within other expense, expense for the reserve for unfunded commitments increased $1.01 million, merger-related expenses from the announced merger with Carolina Financial increased $971 thousand and expense associated with income tax credits increased $720 thousand was partially offset by a decline in donations of $1.20 million. One million dollars was donated by United to West Virginia University Children’s Medicine in the fourth quarter of 2019. Partially offsetting these increases in noninterest expense was a decrease in OREO expense of $544 thousand due to fewer declines in fair value of OREO properties.

Income Taxes

For the first quarter of 2020, income tax expense was $9.89 million, a decrease of $7.44 million from the first quarter of 2019 mainly due to a decrease in earnings and the effective tax rate. On a linked-quarter basis, income tax expense for the first quarter of 2020 decreased $2.58 million from the fourth quarter of 2019 due to a decline in earnings partially offset by a higher effective tax rate. United’s effective tax rate was 19.75% for the first quarter of 2020 and 21.40% and 16.46% for the first and fourth quarters of 2019, respectively. For further details related to income taxes, see Note 16 of the unaudited Notes to Consolidated Financial Statements contained within this document.

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Contractual Obligations, Commitments, Contingent Liabilities and Off-Balance Sheet Arrangements

United has various financial obligations, including contractual obligations and commitments, that may require future cash payments. Please refer to United’s Annual Report on Form 10-K for the year ended December 31, 2019 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 year-end 2019 in the specified contractual obligations disclosed in United’s Annual Report on Form 10-K.

United also enters into derivative contracts, mainly to protect against adverse interest rate movements on the value of certain assets or liabilities, under which it is required to either pay cash to or receive cash from counterparties depending on changes in interest rates. Derivative contracts are carried at fair value and not notional value on the consolidated balance sheet. Because the derivative contracts recorded on the balance sheet at March 31, 2020 do not present the amounts that may ultimately be paid under these contracts, they are excluded from the contractual obligations table in the 2019 Form 10-K report. Further discussion of derivative instruments is presented in Note 12 to the unaudited Notes to Consolidated Financial Statements.

United is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include loan commitments and standby letters of credit. United’s maximum exposure to credit loss in the event of nonperformance by the counterparty to the financial instrument for the loan commitments and standby letters of credit is the contractual or notional amount of those instruments. United uses the same policies in making commitments and conditional obligations as it does for on-balance sheet instruments. Since many of the commitments are expected to expire without being drawn upon, the total commitment amount does not necessarily represent future cash requirements. Further discussion of off-balance sheet commitments is included in Note 11 to the unaudited Notes to Consolidated Financial Statements.

Liquidity

In the opinion of management, United maintains liquidity that is sufficient to satisfy its depositors’ requirements and the credit needs of its customers. Like all banks, United depends upon its ability to renew maturing deposits and other liabilities on a daily basis and to acquire new funds in a variety of markets. A significant source of funds available to United is “core deposits”. Core deposits include certain demand deposits, statement and special savings and NOW accounts. These deposits are relatively stable, and they are the lowest cost source of funds available to United. Short-term borrowings have also been a significant source of funds. These include federal funds purchased and securities sold under agreements to repurchase as well as advances from the FHLB. Repurchase agreements represent funds which are obtained as the result of a competitive bidding process.

Liquid assets are cash and those items readily convertible to cash. All banks must maintain sufficient balances of cash and near-cash items to meet the day-to-day demands of customers and United’s cash needs. Other than cash and due from banks, the available for sale securities portfolio and maturing loans are the primary sources of liquidity.

The goal of liquidity management is to ensure the ability to access funding which enables United to efficiently satisfy the cash flow requirements of depositors and borrowers and meet United’s cash needs. Liquidity is managed by monitoring funds’ availability from a number of primary sources. Substantial funding is available from cash and cash equivalents, unused short-term borrowing and a geographically dispersed network of branches providing access to a diversified and substantial retail deposit market.

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

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Other sources of liquidity available to United to provide long-term as well as short-term funding alternatives, in addition to FHLB advances, are long-term certificates of deposit, lines of credit, borrowings that are secured by bank premises or stock of United’s subsidiaries and issuances of trust preferred securities. In the normal course of business, United through its Asset Liability Committee evaluates these as well as other alternative funding strategies that may be utilized to meet short-term and long-term funding needs.

For the three months ended March 31, 2020, cash of $21.48 million was provided by operating activities due mainly to net income of $40.18 million for the quarter. In addition, increases of $88.12 million in accrued expenses and $27.12 million in the provision for credit losses added cash to the net income amount. Partially offsetting these increases to cash was a decrease of $116.00 million in cash from mortgage banking activities as originations exceeded proceeds from the sales of mortgage loans in the secondary market. Net cash of $122.36 million was used in investing activities which was primarily due to net loan growth of $140.53 million partially offset by $16.42 million of proceeds from sales of investment securities over purchases. During the first three months of 2020, net cash of $600.22 million was provided by financing activities due primarily to net growth of $161.89 million in deposits, net advances of $225.00 million in overnight FHLB advances and net advances of $250.00 million in long-term FHLB advances. These funding activities were partially offset by cash dividends paid of $36.25 million for the quarter. The net effect of the cash flow activities was an increase in cash and cash equivalents of $499.34 million for the first three months of 2020.

United anticipates it can meet its obligations over the next 12 months and has no material commitments for capital expenditures. United also has lines of credit available. See Notes 9 and 10 to the accompanying unaudited Notes to Consolidated Financial Statements for more details regarding the amounts available to United under lines of credit.

The Asset Liability Committee monitors liquidity to ascertain that a liquidity position within certain prescribed parameters is maintained. No changes are anticipated in the policies of United’s Asset Liability Committee.

Capital Resources

United’s capital position is financially sound. United seeks to maintain a proper relationship between capital and total assets to support growth and sustain earnings. United has historically generated attractive returns on shareholders’ equity. United is well-capitalized based upon regulatory guidelines. United’s risk-based capital ratio is 14.47% at March 31, 2020 while its Common Equity Tier 1 capital, Tier 1 capital and leverage ratios are 12.26%, 12.26% and 10.44%, respectively. The March 31, 2020 ratios reflects United’s election of a five-year transition provision, allowed by the Federal Reserve Board and other federal banking agencies in response to the COVID-19 pandemic, to delay for two years the full impact of CECL on regulatory capital, followed by a three-year transition period. The regulatory requirements for a well-capitalized financial institution are a risk-based capital ratio of 10.0%, a Common Equity Tier 1 capital ratio of 6.5%, a Tier 1 capital ratio of 8.0% and a leverage ratio of 5.0%.

Total shareholders’ equity was $3.34 billion at March 31, 2020, which was relatively flat from December 31, 2019, a decrease of $20.13 million or less than 1%. This decrease was primarily due to a cumulative effective adjustment of $44.33 million to retained earnings for the adoption of ASU 2016-13 by United on January 1, 2020 partially offset by the retention of $4.58 million in net earnings. Partially offsetting this net decrease to retained earnings was an increase of $18.70 million in accumulated other comprehensive income due mainly to an after-tax increase in the fair value of available for sale securities.

United’s equity to assets ratio was 16.41% at March 31, 2020 as compared to 17.11% at December 31, 2019. The primary capital ratio, capital and reserves to total assets and reserves, was 17.08% at March 31, 2020 as compared to 17.44% at December 31, 2019. United’s average equity to average asset ratio was 17.10% for the first quarter of 2020 as compared to 17.02% the first quarter of 2019. All of these financial measurements reflect a financially sound position.

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During the first quarter of 2020, United’s Board of Directors declared a cash dividend of $0.35 per share. Total cash dividends declared were $35.60 million for the first quarter of 2020 which was an increase of $845 thousand or 2.43% from dividends declared of $34.76 million for the first quarter of 2019.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The objective of United’s Asset Liability Management function is to maintain consistent growth in net interest income within United’s policy guidelines. This objective is accomplished through the management of balance sheet liquidity and interest rate risk exposures due to changes in economic conditions, interest rate levels and customer preferences.

Interest Rate Risk

Management considers interest rate risk to be United’s most significant market risk. Interest rate risk is the exposure to adverse changes in United’s net interest income as a result of changes in interest rates. United’s earnings are largely dependent on the effective management of interest rate risk.

Management of interest rate risk focuses on maintaining consistent growth in net interest income within Board-approved policy limits. United’s Asset/Liability Management Committee (ALCO), which includes senior management representatives and reports to the Board of Directors, monitors and manages interest rate risk to maintain an acceptable level of change to net interest income as a result of changes in interest rates. Policy established for interest rate risk is stated in terms of the change in net interest income over a one-year and two-year horizon given an immediate and sustained increase or decrease in interest rates. The current limits approved by the Board of Directors are structured on a staged basis with each stage requiring specific actions.

United employs a variety of measurement techniques to identify and manage its exposure to changing interest rates. One such technique utilizes an earnings simulation model to analyze the sensitivity of net interest income to movements in interest rates. The model is based on actual cash flows and repricing characteristics for on and off-balance sheet instruments and incorporates market-based assumptions regarding the impact of changing interest rates on the prepayment rate of certain assets and liabilities. The model also includes executive management projections for activity levels in product lines offered by United. Assumptions based on the historical behavior of deposit rates and balances in relation to changes in interest rates are also incorporated into the model. Rate scenarios could involve parallel or nonparallel shifts in the yield curve, depending on historical, current, and expected conditions, as well as the need to capture any material effects of explicit or embedded options. These assumptions are inherently uncertain and, as a result, the model cannot precisely measure net interest income or precisely predict the impact of fluctuations in interest rates on net interest income. Actual results will differ from simulated results due to timing, magnitude and frequency of interest rate changes as well as changes in market conditions and management’s strategies.

Interest sensitive assets and liabilities are defined as those assets or liabilities that mature or are repriced within a designated time frame. The principal function of managing interest rate risk is to maintain an appropriate relationship between those assets and liabilities that are sensitive to changing market interest rates. The difference between rate sensitive assets and rate sensitive liabilities for specified periods of time is known as the “GAP.” Earnings-simulation analysis captures not only the potential of these interest sensitive assets and liabilities to mature or reprice, but also the probability that they will do so. Moreover, earnings-simulation analysis considers the relative sensitivities of these balance sheet items and projects their behavior over an extended period of time. United closely monitors the sensitivity of its assets and liabilities on an on-going basis and projects the effect of various interest rate changes on its net interest margin.

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The following table shows United’s estimated earnings sensitivity profile as of March 31, 2020 and December 31, 2019:

Change in Interest Rates (basis points)	Percentage Change in Net Interest Income
	March 31, 2020			December 31, 2019
+200		(0.62	%)		(2.37	%)
+100		0.49	%		(1.09	%)
-100		(0.87	%)		0.86	%
-200		(1.22	%)		(1.34	%)

At March 31, 2020, given an immediate, sustained 100 basis point upward shock to the yield curve used in the simulation model, net interest income for United is estimated to increase by 0.49% over one year as compared to a decrease of 1.09% at December 31, 2019. A 200 basis point immediate, sustained upward shock in the yield curve would decrease net interest income by an estimated 0.62% over one year as of March 31, 2020, as compared to a decrease of 2.37% as of December 31, 2019. A 100 basis point immediate, sustained downward shock in the yield curve would decrease net interest income by an estimated 0.87% over one year as of March 31, 2020 as compared to an increase of 0.86%, over one year as of December 31, 2019. A 200 basis point immediate, sustained downward shock in the yield curve would decrease net interest income by an estimated 1.22% over one year as of March 31, 2020 as compared to a decrease of 1.34% over one year as of December 31, 2019.

In addition to the one year earnings sensitivity analysis, a two-year analysis is also performed. Compared to the one year analysis, United is projected to show improved performance in year two within the upward rate shock scenarios. Given an immediate, sustained 100 basis point upward shock to the yield curve used in the simulation model, net interest income for United is estimated to increase by 3.33% in year two as of March 31, 2020. A 200 basis point immediate, sustained upward shock in the yield curve would increase net interest income by an estimated 3.61% in year two as of March 31, 2020. A 100 basis point immediate, sustained downward shock in the yield curve would decrease net interest income by an estimated 3.59% in year two as of March 31, 2020. A 200 basis point immediate, sustained downward shock in the yield curve would decrease net interest income by an estimated 3.95% in year two as of March 31, 2020.

This analysis does not include the potential increased refinancing activities, which should lessen the negative impact on net income from falling rates. While it is unlikely market rates would immediately move 100 or 200 basis points upward or downward on a sustained basis, this is another tool used by management and the Board of Directors to gauge interest rate risk. All of these estimated changes in net interest income are and were within the policy guidelines established by the Board of Directors.

To further aid in interest rate management, United’s subsidiary bank is a member of the Federal Home Loan Bank (FHLB). The use of FHLB advances provides United with a low risk means of matching maturities of earning assets and interest-bearing funds to achieve a desired interest rate spread over the life of the earning assets. In addition, United uses credit with large regional banks and trust preferred securities to provide funding.

As part of its interest rate risk management strategy, United may use derivative instruments to protect against adverse price or interest rate movements on the value of certain assets or liabilities and on future cash flows. These derivatives commonly consist of interest rate swaps, caps, floors, collars, futures, forward contracts, written and purchased options. Interest rate swaps obligate two parties to exchange one or more payments generally calculated with reference to a fixed or variable rate of interest applied to the notional amount. United accounts for its derivative activities in accordance with the provisions of ASC Topic 815, “Derivatives and Hedging.”

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Extension Risk

A key feature of most mortgage loans is the ability of the borrower to repay principal earlier than scheduled. This is called a prepayment. Prepayments arise primarily due to sale of the underlying property, refinancing, or foreclosure. In general, declining interest rates tend to increase prepayments, and rising interest rates tend to slow prepayments. Like other fixed-income securities, when interest rates rise, the value of mortgage- related securities generally declines. The rate of prepayments on underlying mortgages will affect the price and volatility of mortgage-related securities and may shorten or extend the effective maturity of the security beyond what was anticipated at the time of purchase. If interest rates rise, United’s holdings of mortgage-related securities may experience reduced returns if the borrowers of the underlying mortgages pay off their mortgages later than anticipated. This is generally referred to as extension risk.

At March 31, 2020, United’s mortgage related securities portfolio had an amortized cost of $1.4 billion, of which approximately $1.1 billion or 77% were fixed rate collateralized mortgage obligations (CMOs). These fixed rate CMOs consisted primarily of planned amortization class (PACs), sequential-pay and accretion directed (VADMs) bonds having an average life of approximately 3.4 years and a weighted average yield of 2.50%, 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 4.4 years. The projected price decline of the fixed rate CMO portfolio in rates up 300 basis points would be 9.2%, or less than the price decline of a 4- year treasury note. By comparison, the price decline of a 30-year current coupon mortgage backed security (MBS) in rates higher by 300 basis points would be approximately 15.1%.

United had approximately $139 million in balloon and other securities with a projected yield of 2.44% and a projected average life of 3.9 years on March 31, 2020. This portfolio consisted primarily of Fannie Mae Delegated Underwriting and Servicing (DUS) mortgage backed securities (MBS) with a weighted average loan age (WALA) of 5.4 years and a weighted average maturity (WAM) of 4.3 years.

United had approximately $18 million in 15-year mortgage backed securities with a projected yield of 3.05% and a projected average life of 3 years as of March 31, 2020. This portfolio consisted of seasoned 15-year mortgage paper with a weighted average loan age (WALA) of 7.4 years and a weighted average maturity (WAM) of 10.1 years.

United had approximately $40 million in 20-year mortgage backed securities with a projected yield of 2.51% and a projected average life of 3.7 years on March 31, 2020. This portfolio consisted of seasoned 20-year mortgage paper with a weighted average loan age (WALA) of 4.6 years and a weighted average maturity (WAM) of 15.1 years.

United had approximately $44 million in 30-year mortgage backed securities with a projected yield of 2.67% and a projected average life of 3.8 years on March 31, 2020. This portfolio consisted of seasoned 30-year mortgage paper and Home Equity Conversion Mortgages with a weighted average loan age (WALA) of 2.9 years and a weighted average maturity (WAM) of 26.8 years.

The remaining 6% of the mortgage related securities portfolio at March 31, 2020, included adjustable rate securities (ARMs), 10-year mortgage backed pass-through securities and other fixed rate mortgage backed securities.

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Item 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As of March 31, 2020, 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 March 31, 2020 were effective in ensuring that information required to be disclosed in the Quarterly Report on Form 10-Q was recorded, processed, summarized and reported within the time period required by the Securities and Exchange Commission’s rules and forms.

Limitations on the Effectiveness of Controls

United’s management, including the CEO and CFO, does not expect that United’s disclosure controls and internal controls will prevent all errors and fraud. While United’s disclosure controls and procedures are designed to provide reasonable assurance of achieving their objective, a control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls.

Changes in Internal Controls

There have been no changes in United’s internal control over financial reporting (as defined in Rules 13a-15(e) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended March 31, 2020, or in other factors that have materially affected or are reasonably likely to materially affect United’s internal control over financial reporting.

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PART II - OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

United and its subsidiaries are currently involved in various legal proceedings in the normal course of business. Management is vigorously pursuing all its legal and factual defenses and, after consultation with legal counsel, believes that all such litigation will be resolved with no material effect on United’s financial position.

Item 1A. RISK FACTORS

In addition to the other information set forth in this report, please refer to United’s Annual Report on Form 10-K for the year ended December 31, 2019 for disclosures with respect to United’s risk factors which could materially affect United’s business, financial condition or future results. The risks described in the Annual Report on Form 10-K are not the only risks facing United. Additional risks and uncertainties not currently known to United or that United currently deems to be immaterial also may materially adversely affect United’s business, financial condition and/or operating results.

The following risk factor supplements the “Risk Factors” section in Item 1A of United’s Annual Report on Form 10-K for the year ended December 31, 2019:

United’s business, financial condition, liquidity and results of operations have been, and will likely continue to be, adversely affected by the COVID-19 pandemic. The COVID-19 pandemic has created economic and financial disruptions that have adversely affected, and are likely to continue to adversely affect, United’s business, financial condition, liquidity and results of operations. The extent to which the COVID-19 pandemic will continue to negatively affect United’s business, financial condition, liquidity and results of operations will depend on future developments, which are highly uncertain and cannot be predicted, including the scope and duration of the pandemic, the continued effectiveness of United’s business continuity plan, the direct and indirect impact of the pandemic on United’s employees, customers, clients, counterparties and service providers, as well as other market participants, and actions taken by governmental authorities and other third parties in response to the pandemic.

The COVID-19 pandemic has contributed to:

• Increased unemployment and decreased consumer confidence and business generally, leading to an increased risk of delinquencies, defaults and foreclosures.

• Ratings downgrades, credit deterioration and defaults in many industries, including natural resources, hospitality, transportation and commercial real estate.

• A sudden and significant reduction in the valuation of the equity, fixed-income and commodity markets and the significant increase in the volatility of those markets.

• A decrease in the rates and yields on U.S. Treasury securities, which may lead to decreased net interest income.

• Increased demands on capital and liquidity.

• A reduction in the value of the assets that the Company manages or otherwise administers or services for others, affecting related fee income and demand for the Company’s services.

• Heightened cybersecurity, information security and operational risks as a result of work-from-home arrangements.

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Governmental authorities have taken unprecedented measures to provide economic assistance to individual households and businesses, stabilize the markets and support economic growth. The success of these measures is unknown and they may not be sufficient to fully mitigate the negative impact of the COVID-19 pandemic. Additionally, some measures, such as a suspension of mortgage and other loan payments and foreclosures, may have a negative impact on United’s business, financial condition, liquidity and results of operations. United also faces an increased risk of litigation and governmental and regulatory scrutiny as a result of the effects of COVID-19 on market and economic conditions and actions governmental authorities take in response to those conditions.

The length of the pandemic and the efficacy of the extraordinary measures being put in place to address it are unknown. Until the pandemic subsides, the Company expects continued draws on lines of credit, reduced revenues in our trust operations and other businesses and increased customer and client defaults, including defaults in unsecured loans.

Even after the pandemic subsides, the U.S. economy may experience a recession, and United anticipates the Company’s businesses would be materially and adversely affected by a prolonged recession. To the extent the pandemic adversely affects United’s business, financial condition, liquidity or results of operations, it may also have the effect of heightening many of the other risks described in the section entitled “Risk Factors” in United’s Annual Report on Form 10-K for the year ended December 31, 2019 and any subsequent Quarterly Reports on Form 10-Q.

Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

There have been no United equity securities sales during the quarter ended March 31, 2020 that were not registered. The table below includes certain information regarding United’s purchase of its common shares during the quarter ended March 31, 2020:

Period	Total Number of Shares Purchased (1) (2)		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans (3)		Maximum Number of Shares that May Yet be Purchased Under the Plans (3)
1/01 – 1/31/2020		0	$	0.00		0		4,000,000
2/01 – 2/29/2020		19,314	$	31.50		0		4,000,000
3/01 – 3/31/2020		0	$	0.00		0		4,000,000
Total		19,314	$	31.50		0

(1) Includes shares exchanged in connection with the exercise of stock options or the vesting of restricted stock under United’s long-term incentive plans. Shares are purchased pursuant to the terms of the applicable plan and not pursuant to a publicly announced stock repurchase plan. For the quarter ended March 31, 2020 – 19,310 shares at an average price of $31.50 were exchanged by participants in United’s long-term incentive plans.

(2) Includes shares purchased in open market transactions by United for a rabbi trust to provide payment of benefits under a deferred compensation plan for certain key officers of United and its subsidiaries. For the quarter ended March 31, 2020, the following shares were purchased for the deferred compensation plan: February 2020 – 4 shares at an average price of $38.24.

(3) In October 2019, United’s Board of Directors approved a repurchase plan to repurchase up to 4,000,000 shares of United’s common stock on the open market (the 2019 Plan). The timing, price and quantity of purchases under the plans are at the discretion of management and the plan may be discontinued, suspended or restarted at any time depending on the facts and circumstances.

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Item 3. DEFAULTS UPON SENIOR SECURITIES

None.

Item 4. MINE SAFETY DISCLOSURES

None.

Item 5. OTHER INFORMATION

(a) None.

(b) No changes were made to the procedures by which security holders may recommend nominees to United’s Board of Directors.

Item 6. EXHIBITS

Index to exhibits required by Item 601 of Regulation S-K

Exhibit No.		Description
	2.1	Agreement and Plan of Merger, dated November 17, 2019, by and between United Bankshares, Inc. and Carolina Financial Corporation (incorporated into this filing by reference to Exhibit 2.1 to the Form 8-K dated November 17, 2019 and filed November 18, 2019 for United Bankshares, Inc., File No. 002-86947)
	3.1	Articles of Incorporation (incorporated into this filing by reference to a Quarterly Report on Form 10-Q dated March 31, 2017 and filed May 9, 2017 for United Bankshares, Inc., File No.002-86947)
	3.2	Bylaws (incorporated into this filing by reference to a Current Report on Form 8-K dated and filed on March 20, 2020 for United Bankshares, Inc., File No.002-86947)
	4.1	Description of Registrant’s Securities (incorporated into this filing by reference to a Annual Report on Form 10-K dated December 31, 2019 and filed March 2, 2020 for United Bankshares, Inc., File No.002-86947)
	31.1	Certification as Adopted Pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002 by Chief Executive Officer (filed herewith)
	31.2	Certification as Adopted Pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002 by Chief Financial Officer (filed herewith)
	32.1	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by Chief Executive Officer (furnished herewith)
	32.2	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by Chief Financial Officer (furnished herewith)
	101	Interactive data file (iXBRL) (filed herewith)
	104	Cover Page (imbedded in iXBRL)

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		UNITED BANKSHARES, INC.
		(Registrant)
Date:	May 11, 2020	/s/ Richard M. Adams
		Richard M. Adams, Chairman of the Board and Chief Executive Officer
Date:	May 11, 2020	/s/ W. Mark Tatterson
		W. Mark Tatterson, Executive Vice President and Chief Financial Officer

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