UNITED BANKSHARES INC/WV (UBSI) FY 2024 MD&A

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD-LOOKING STATEMENTS

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

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

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

DEVELOPMENTS

On January 10, 2025, United consummated its acquisition of Atlanta-based Piedmont Bancorp, Inc. (“Piedmont”). As of January 10, 2025, Piedmont had total assets of approximately $2.4 billion, total loans of approximately $2.1 billion, total liabilities of approximately $2.2 billion, total deposits of approximately $2.1 billion, and total shareholders’ equity of approximately $202 million.

During the first quarter of 2024, United consolidated its mortgage delivery channels by consolidating George Mason’s and Crescent’s mortgage origination and sales business with United Bank. United had previously exited the third-party origination (“TPO”) business during the fourth quarter of 2023 as part of this consolidation. United continues to offer mortgage products through its bank mortgage channel with previous George Mason offices re-branded under the United umbrella. The consolidation streamlined operations and will enhance the customer experience.

INTRODUCTION

The following discussion and analysis presents the more significant changes in financial condition as of December 31, 2024 and 2023 and the results of operations of United and its subsidiaries for each of the years then ended. This discussion and the consolidated financial statements and the notes to Consolidated Financial Statements include the accounts of United Bankshares, Inc. and its wholly-owned subsidiaries, unless otherwise indicated. Management has evaluated all significant events and transactions that occurred after December 31, 2024, but prior to the date these financial statements were issued, for potential recognition or disclosure required in these financial statements. Refer to Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K filed with the SEC on February 29, 2024 (the 2023 Form 10-K) for a discussion and analysis of the more significant factors that affected periods prior to 2024.

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

USE OF NON-GAAP FINANCIAL MEASURES

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

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

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.

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

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

APPLICATION OF CRITICAL ACCOUNTING POLICIES

The accounting and reporting policies of United conform with U.S. generally accepted accounting principles. In preparing the consolidated financial statements, management is required to make estimates, assumptions and judgments that affect the amounts reported in the financial statements and accompanying notes. These estimates, assumptions and judgments, which are reviewed with the Audit Committee of the Board of Directors, are based on information available as of the date of the financial statements. Actual results could differ from these estimates. These policies, along with the disclosures presented in the financial statement notes and in this financial review, provide information on how significant assets and liabilities are valued in the financial statements and how those values are determined. Based on the valuation techniques used and the sensitivity of financial statement amounts to the methods, assumptions, and estimates underlying those amounts, management has identified the determination of the allowance for loan and lease losses, the calculation of the income tax provision, and the use of fair value measurements to account for certain financial instruments to be the accounting areas that require the most subjective or complex judgments, and as such could be most subject to revision as new information becomes available. The most significant accounting policies followed by United are presented in Note A, Notes to Consolidated Financial Statements.

Allowance for Loan and Lease Losses

The allowance for loan and lease losses is an estimate of the expected credit losses on financial assets measured at amortized cost to present the net amount expected to be collected as of the balance sheet date. Such allowance is based on the credit losses expected to arise over the life of the asset (contractual term). Determining the allowance for loan and lease losses requires management to make estimates of expected credit losses that are highly uncertain and require a high degree of judgment. At December 31, 2024, the allowance for loan and lease losses was $271.84 million and is subject to periodic adjustment based on management’s assessment of expected credit losses in the loan portfolio. Such adjustment from period to period can have a significant impact on United’s consolidated financial statements. To illustrate the potential effect on the financial statements of our estimates of the allowance for loan and lease losses, a 10% increase in the allowance for loan and lease losses would have required $27.18 million in additional allowance (funded by additional provision for loan and lease losses), which would have negatively impacted the year of 2024 net income by approximately $21.48 million, after-tax or $0.16 diluted earnings per common share. Management’s evaluation of the adequacy of the allowance for loan and lease losses and the appropriate provision for loan and lease losses is based upon a quarterly evaluation of the loan portfolio. This evaluation is inherently subjective and requires significant estimates, including estimates related to the amounts and timing of future cash flows, value of collateral, losses on pools of homogeneous loans and leases based on historical loss experience, and consideration of qualitative factors such as current economic trends, all of which are susceptible to constant and significant change. The allowance allocated to specific credits and loan pools grouped by similar risk characteristics is reviewed on a quarterly basis and adjusted as necessary based upon subsequent changes in circumstances. In determining the components of the allowance for loan and lease losses, management considers the risk arising in part from, but not limited to, qualitative factors which include charge-off and delinquency trends, current business conditions and reasonable and supportable economic forecasts, lending policies and procedures, the size and risk characteristics of the loan portfolio, concentrations of credit, and other various

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factors. The methodology used to determine the allowance for loan and lease losses is described in Note A, Notes to Consolidated Financial Statements. A discussion of the factors leading to changes in the amount of the allowance for loan and lease losses is included in the Provision for Credit Losses section of this Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”). For a discussion of concentrations of credit risk, see Item 1, under the caption of Loan Concentrations in this Form 10-K.

Income Taxes

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

Use of Fair Value Measurements

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

At December 31, 2024, approximately 10.22% of total assets, or $3.07 billion, consisted of financial instruments recorded at fair value. Of this total, approximately 97.91% or $3.01 billion of these financial instruments used valuation methodologies involving observable market data, collectively Level 1 and Level 2 measurements, to determine fair value. Approximately 2.09% or $64.04 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 December 31, 2024, only $20 thousand or less than 1% of total liabilities were recorded at fair value. This entire amount was valued using methodologies involving unobservable 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 W 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.

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2024 COMPARED TO 2023

United’s total assets as of December 31, 2024 were $30.02 billion, which was an increase of $97.06 million or less than 1% from December 31, 2023. This increase was mainly due to an increase of $693.30 million or 43.36% in cash and cash equivalents, a $314.41 million or 1.47% increase in loans, net of unearned income, and a $10.29 million or 2.11% increase in cash surrender life insurance policies. These increases in assets were mostly offset by a $866.46 million or 21.00% decrease in investment securities, a $11.90 million or 21.15% decrease in loans held for sale, a $9.01 million or 8.08% decrease in interest receivable, and a $6.77 million or 2.45% decrease in other assets. Total liabilities decreased $124.92 million or less than 1% from year-end 2023. Borrowings decreased $1.27 billion or 63.91%, which were partially offset by a $1.14 billion or 5.01% increase in deposits. Shareholders’ equity increased $221.98 million or 4.65%.

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

Cash and Cash Equivalents

Cash and cash equivalents at December 31, 2024 increased $693.30 million or 43.36% from year-end 2023. In particular, interest-bearing deposits with other banks increased $709.70 million or 52.94% as United placed more cash in an interest-bearing account with the Federal Reserve while cash and due from banks decreased $16.50 million or 6.42%. Federal funds sold increased $98 thousand or 8.38%. During the year of 2024, net cash of $445.45 million and $571.49 million were provided by operating and investing activities, respectively, while net cash of $323.64 million was used in financing activities. Further details related to changes in cash and cash equivalents are presented in the Consolidated Statements of Cash Flows.

Securities

Total investment securities at December 31, 2024 decreased $866.46 million or 21.00%. Securities available for sale decreased $826.66 million or 21.83%. This change in securities available for sale reflects $2.06 billion in purchases, $2.93 billion in sales, maturities and calls of securities, and an increase of $40.55 million in market value. The majority of the sales activity was related to asset-backed securities, mortgage-backed securities and state and political subdivision securities. Equity securities were $21.06 million at December 31, 2024, an increase of $12.11 million or 135.42% due mainly to a reclass of an equity security that now has a readily determinable market value. The equity security was previously held in “Other investment securities” on the December 31, 2023 Consolidated Balance Sheets. Other investment securities decreased $51.91 million or 15.76% from year-end 2023, due mainly to a redemption of FHLB stock due to a decline in FHLB borrowings.

The following table summarizes the changes in the available for sale securities since year-end 2023:

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The following table summarizes the changes in the held to maturity securities since year-end 2023:

At December 31, 2024, gross unrealized losses on available for sale securities were $323.94 million. Securities with the most significant gross unrealized losses at December 31, 2024 consisted primarily of agency residential mortgage-backed securities, state and political subdivision securities, agency commercial mortgage-backed securities and other corporate securities.

As of December 31, 2024, United’s available for sale mortgage-backed securities had an amortized cost of $1.69 billion, with an estimated fair value of $1.47 billion. The portfolio consisted primarily of $1.23 billion in agency residential mortgage-backed securities with a fair value of $1.06 billion, $88.39 million in non-agency residential mortgage-backed securities with an estimated fair value of $82.12 million, and $372.65 million in commercial agency mortgage-backed securities with an estimated fair value of $329.99 million.

As of December 31, 2024, United’s available for sale state and political subdivisions securities had an amortized cost of $574.58 million, with an estimated fair value of $495.07 million. The portfolio relates to securities issued by various municipalities located throughout the United States, and no securities within the portfolio were rated below investment grade as of December 31, 2024.

As of December 31, 2024, United’s available for sale corporate securities had an amortized cost of $771.81 million, with an estimated fair value of $746.98 million. The portfolio consisted of $13.30 million in single issue trust preferred securities with an estimated fair value of $11.92 million. In addition to the single issue trust preferred securities, the Company held positions in various other corporate securities, including asset-backed securities with an amortized cost of $476.86 million and a fair value of $474.98 million and other corporate securities, with an amortized cost of $281.65 million and a fair value of $260.08 million.

United’s available for sale single issue trust preferred securities had a fair value of $11.92 million as of December 31, 2024. Of the $11.92 million, $7.32 million, or 61.44%, were investment grade and $4.60 million, or 38.56%, were unrated. The portfolio consists of two exposures, with Truist Bank at $7.32 million and Emigrant Bank at $4.60 million. All single issue trust preferred securities are currently receiving full scheduled principal and interest payments.

During 2024, United did not recognize any credit losses on its available for sale investment securities. Management does not believe that any individual security with an unrealized loss as of December 31, 2024 is impaired. United believes the decline in value resulted from changes in market interest rates, credit spreads and liquidity, not a deterioration of credit. Based on a review of each of the securities in the available for sale investment portfolio, management concluded that it was more-likely-than-not that it would be able to realize the cost basis investment and appropriate interest payments on such securities. United has the intent and the ability to hold these securities until such time as the value recovers or the securities mature. As of December 31, 2024, there was no allowance for credit losses related to the Company’s available for sale securities. However, United acknowledges that any securities in an unrealized loss position may be sold in future periods in response to significant, unanticipated changes in asset/liability management decisions, unanticipated future market movements or business plan changes. During 2024, United sold approximately $470 million of available for sale securities at a loss of $16.30 million.

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 C, Notes to Consolidated Financial Statements.

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Loans Held for Sale

Loans held for sale were $44.36 million at December 31, 2024, a decrease of $11.90 million or 21.15% from year-end 2023. Loan sales in the secondary market exceeded originations during the year of 2024. Loan originations for the year of 2024 were $645.94 million while loans sales were $657.84 million.

Portfolio Loans

Loans, net of unearned income, increased $314.41 million or 1.47%. Since year-end 2023, commercial, financial and agricultural loans decreased $8.01 million or less than 1% as a result of a $213.07 million or 2.56% increase in commercial real estate loans, which was mostly offset by a $221.08 million or 6.19% decrease in commercial loans (not secured by real estate). Residential real estate loans increased $236.15 million or 4.48% and construction and land development loans increased $360.79 million or 11.46%. Consumer loans decreased $281.62 million or 26.45% due to a decrease in indirect automobile financing.

The following table summarizes the changes in the major loan classes since year-end 2023:

The following table shows the amount of loans acquired and outstanding by major loan classes as of December 31, 2024 and 2023:

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The following table shows the maturity of loans and leases, outstanding as of December 31, 2024:

At December 31, 2024, for loans and leases due after one year, interest rate information is as follows:

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

Other Assets

Other assets decreased $6.77 million or 2.45% from year-end 2023. Deferred tax assets decreased $3.43 million due to an increase in the fair value and sales of AFS securities, dealer reserve decreased $7.82 million due to a decrease in indirect automobile financing, accounts receivable decreased $4.56 million due to timing differences, core deposit intangibles decreased $3.64 million due to amortization, and OREO properties decreased $2.29 million due to sales of consumer OREO properties. Partially offsetting these decreases in other assets was a $14.65 million increase in the pension asset.

Deposits

Deposits represent United’s primary source of funding. Total deposits at December 31, 2024 increased $1.14 billion or 5.01%. In terms of composition, noninterest-bearing deposits decreased $13.67 million or less than 1% while interest-bearing deposits increased $1.16 billion or 6.94% from December 31, 2023.

Noninterest-bearing deposits consist of demand deposit and noninterest bearing money market (“MMDA”) account balances. The $13.67 million decrease in noninterest-bearing deposits was due mainly to a $37.19 million decrease in commercial noninterest-bearing deposits and a $57.56 million decrease in in-process items. Partially offsetting these decreases in noninterest-bearing deposits were increases of $26.27 million and $19.92 million in personal and public noninterest-bearing deposits, respectively, and an increase of $30.11 million in official checks.

Interest-bearing deposits consist of interest-bearing transaction, regular savings, interest-bearing MMDA, and time deposit account balances. Interest-bearing transaction accounts increased $288.79 million or 5.11% since year-end 2023. In particular, commercial interest-bearing transaction accounts increased $414.86 million and public interest-bearing transaction accounts increased $6.03 million while personal interest-bearing transaction accounts decreased $132.10 million. Regular savings accounts decreased $94.96 million or 7.06% mainly as a result of a $77.10 million decrease in personal savings accounts and a $19.91 million decrease in commercial savings accounts. Interest-bearing MMDAs increased $707.44 million or 11.14%. In particular, commercial MMDAs increased $511.19 million while personal MMDAs and public funds MMDAs increased $162.06 million and $34.20 million, respectively.

Time deposits under $100,000 increased $106.37 million or 9.98% from year-end 2023. This increase in time deposits under $100,000 was the result of a $119.22 million increase in fixed rate Certificates of Deposits (“CDs”) under $100,000. Partially offsetting this increase in deposits under $100,000 was a $5.69 million decrease in CDs under $100,000 obtained through the use of deposit listing services.

Since year-end 2023, time deposits over $100,000 increased $148.57 million or 6.57% as fixed rate CDs increased $375.07 million and public funds CDs increased $45.68 million. Partially offsetting these increases in time deposits over $100,000, was a decrease of $272.13 million in brokered CDs.

The table below summarizes the changes by deposit category since year-end 2023:

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At December 31, 2024, the scheduled maturities of time deposits are as follows:

Maturities of estimated uninsured time deposits of $100,000 or more outstanding at December 31, 2024 are summarized as follows:

The amounts of uninsured time deposits of $100,000 or more outstanding at December 31, 2024 are based on estimates using the same methodologies and assumptions used for regulatory reporting requirements.

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

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

Borrowings

Total borrowings at December 31, 2024 decreased $1.27 billion or 63.91% since year-end 2023. During the year of 2024, short-term borrowings decreased $20.01 million or 10.20% due to a decrease in securities sold under agreements to repurchase. Long-term borrowings decreased $1.25 billion or 69.79% from year-end 2023 due to maturities of advances obtained from the FHLB during the year of 2024.

The table below summarizes the change in the borrowing categories since year-end 2023:

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

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Accrued Expenses and Other Liabilities

Accrued expenses and other liabilities at December 31, 2024 increased $17.14 million or 8.04% from year-end 2023. In particular, other accrued expenses increased $10.96 million due to the accrual associated with housing tax credits, incentives payable increased $2.93 million due to timing differences, deferred compensation increased $3.20 million, and business franchise taxes increased $1.26 million due to timing differences. Partially offsetting these increases in accrued expenses and other liabilities was a $1.12 million decrease in accrued loan expenses and a $5.24 million decrease in other miscellaneous liabilities.

Shareholders’ Equity

Shareholders’ equity at December 31, 2024 was $4.99 billion, which was an increase of $221.98 million or 4.65% from year-end 2023.

Retained earnings increased $172.11 million or 9.86% from year-end 2023. Earnings net of dividends for the year of 2024 were $172.11 million.

Accumulated other comprehensive income increased $35.78 million or 13.78% from year-end 2023 due to an increase of $30.85 million in the fair value of United’s available for sale investment portfolio, net of deferred income taxes. In addition, the after-tax amortization of the pension net actuarial loss was $9.40 million while the after-tax accretion of pension costs was $1.78 million for the year of 2024. Partially offsetting these increases was a decrease of $6.25 million in the fair value of cash flow hedges, net of deferred income taxes.

RESULTS OF OPERATIONS

Overview

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

Net income for the year 2024 was $373.00 million or $2.75 per diluted share, an increase of $6.68 million or 1.82% from $366.31 million or $2.71 per diluted share for the year of 2023. Higher net income for the year 2024 compared to the year of 2023 was primarily driven by lower noninterest expense, provision for credit losses and income tax expense partially offset by lower net interest income and lower noninterest income.

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As previously mentioned, on January 10, 2025, United announced the consummation of its merger with Piedmont. Expenses of $2.87 million related to the Piedmont acquisition were recorded in the year of 2024. During the year of 2024, United sold approximately $470 million of AFS investment securities at a loss of $16.30 million. Additionally, United recognized a net gain of $7.09 million on the sale of its remaining mortgage rights (“MSRs”) associated with a loan portfolio of $1.12 billion, a gain of $6.85 million on a VISA share exchange and $1.72 million gain on the fair value of an equity security.

United’s return on average assets for the year of 2024 was 1.26% and the return on average shareholders’ equity was 7.61% as compared to 1.25% and 7.87% for the year of 2023. For the year of 2024, United’s return on average tangible equity, a non-GAAP measure, was 12.43%, as compared to 13.33% for the year of 2023.

Net interest income for the year of 2024 was $911.07 million which was relatively flat from the prior year, decreasing $8.86 million or less than 1%. The slight decrease of $8.86 million in net interest income occurred because total interest income increased $100.80 million while total interest expense increased $109.66 million from the year of 2023. Generally, interest income increased in 2024 due to the impact of rising market interest rates on earning assets, loan growth and a change in the asset mix to higher earning assets while interest expense increased mainly due to higher funding costs as a result of the rising market interest rates on higher interest-bearing balances.

The provision for credit losses was $25.15 million for the year 2024 as compared to $31.15 million for the year 2023. Noninterest income was $123.70 million for the year of 2024, which was a decrease of $11.56 million or 8.55% from the year of 2023. Noninterest expense for the year of 2024 was $545.03 million, which was a decrease of $15.19 million from the year of 2023.

Income taxes for the year of 2024 were $91.58 million as compared to $97.49 million for the year of 2023. United’s effective tax rate was approximately 19.7% and 21.0% for years ended December 31, 2024 and 2023, respectively, as compared to 20.2% for 2022.

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 2024 and 2023, are presented below.

Net interest income for the year of 2024 was $911.07 million which was relatively flat from the year of 2023, decreasing $8.86 million or less than 1%. The $8.86 million decrease in net interest income occurred because total interest income increased $100.80 million while total interest expense increased $109.66 million from the year of 2023. 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.

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Tax-equivalent net interest income for the year of 2024 decreased $9.51 million, or 1.04%, from the year of 2023. The decrease in tax-equivalent net interest income was primarily due to higher interest expense driven by deposit rate repricing, an increase in average interest-bearing deposits, and a decrease in acquired loan accretion income. These decreases were partially offset by a higher yield on average net loans, loan growth, and a decrease in average long-term borrowings. The cost on average interest-bearing deposits increased 66 basis points from the year of 2023. Average interest-bearing deposits increased $1.39 billion from the year of 2023. Acquired loan accretion income for year of 2024 of $9.26 million was a decrease of $2.28 million from the year of 2023. The yield on average earning assets increased 33 basis points from the year of 2023 to 5.74% driven by an increase in the yield on average net loans of 28 basis points. Average net loans increased $683.67 million from the year of 2023. Average long-term borrowings decreased $906.10 million from the year of 2023. Additionally, average investment securities decreased $790.73 million, or 17.89%, from the year of 2023 while the yield on average investment securities increased 25 basis points from the year of 2023. The net interest margin for the year of 2024 and 2023 was 3.49% and 3.56%, respectively.

United’s tax-equivalent net interest income also includes the impact of acquisition accounting fair value adjustments. The following table provides the discount/premium and net accretion impact to tax-equivalent net interest income for the year ended December 31, 2024, 2023 and 2022.

The following table reconciles the difference between net interest income and tax-equivalent net interest income for the year ended December 31, 2024, 2023 and 2022.

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The following table shows the consolidated daily average balance of major categories of assets and liabilities for each of the three years ended December 31, 2024, 2023, and 2022 with the consolidated interest and rate earned or paid on such amount. The interest income and yields on federally nontaxable loans and investment securities are presented on a tax-equivalent basis using the statutory federal income tax rate of 21% for the years ended December 31, 2024, 2023, and 2022. Interest income on all loans and investment securities was subject to state taxes.

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

Provision for Credit Losses

United’s provision for credit losses was $25.15 million for the year of 2024 while the provision for credit losses was $31.15 million for the year of 2023. United’s provision for credit losses relates to its portfolio of loans and leases and held to maturity securities which are discussed in more detail in the following paragraphs.

The provision for loan and lease losses for the year of 2024 was $25.15 million as compared to $31.15 million for the year of 2023. The lower amount of provision expense for the year of 2024 compared to the year of 2023 was mainly due to less severe reasonable and supportable forecast assumptions regarding future economic expectations in 2024 as compared to 2023. Net charge-offs for the year of 2024 were $12.55 million as compared to $6.66 million for the year of 2023. The higher amount of net charge-offs for the year of 2024 as compared to the year of 2023 was primarily due to increased charge-offs within the commercial real estate nonowner-occupied and consumer loan portfolios. Net charge-offs as a percentage of average loans and leases were 0.06% and 0.03% for the year of 2024 and 2023, respectively.

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The following table shows a summary of United’s nonperforming assets including nonperforming loans and other real estate owned (“OREO”) at December 31, 2024 and December 31, 2023:

United maintains an allowance for loan and lease losses and a reserve for lending-related commitments. The combined allowance for loan and lease losses and reserve for lending-related commitments is considered the allowance for credit losses. At December 31, 2024, the allowance for credit losses was $306.76 million as compared to $303.94 million at December 31, 2023.

At December 31, 2024, the allowance for loan and lease losses was $271.84 million as compared to $259.24 million at December 31, 2023. The increase in the allowance for loan and lease losses was primarily driven by increased outstanding loan balances for the real estate construction and development and residential real estate portfolios as well as increased reasonable and supportable forecast adjustments for the commercial real estate nonowner-occupied office portfolio. As a percentage of loans and leases, net of unearned income, the allowance for loan losses was 1.25% at December 31, 2024 and 1.21% at December 31, 2023. The ratio of the allowance for loan and lease losses to nonperforming loans and leases or coverage ratio was 370.36% and 569.78% at December 31, 2024 and December 31, 2023, respectively. The decrease in this ratio was due to a larger increase in nonperforming loans than the allowance for loan losses.

The following table summarizes United’s credit loss experience for loan and leases losses, based on loan categories, for the year of 2024 and 2023:

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

The year of 2024 qualitative adjustments include analyses of the following:

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

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

United’s review of the allowance for loan and lease losses at December 31, 2024 produced increased reserves in three of the four loan categories as compared to December 31, 2023. The allowance related to the commercial, financial & agricultural loan pool, consisting of the owner and non-owner occupied commercial real estate and other commercial loan segments, increased $6.64 million due to increased reasonable and supportable forecast adjustments particularly as it pertains to office loans. The balance of office loans at December 31, 2024 totaled approximately $950 million or 13.7% of nonowner-occupied commercial real estate loans or 4.4% of loans and leases, net of unearned income. The top forty

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office loans make up approximately 68% of the balance of nonowner-occupied commercial real estate office loans. The weighted average loan-to-value (“LTV”) based on current loan balances and appraised values at origination date for the top forty office loans was approximately 56% at December 31, 2024. The weighted average LTV at origination date for the top forty office loans was approximately 63%. United has been disciplined in its approach to underwriting office loans with a stringent underwriting process focusing on the underlying tenants, lease terms, sponsor support, location, property class and amenities. The residential real estate segment reserve increased $5.21 million due primarily to increased outstanding balances. The real estate construction and development loan segment reserve increased $3.71 million due to increased outstanding balances. The consumer loan segment reserve decreased $2.95 million primarily due to a decrease in outstanding balances.

An allowance is established for estimated lifetime losses for loans that are individually assessed. Nonperforming commercial loans and leases are regularly reviewed to identify expected credit losses. A loan is individually assessed for expected credit losses when the loan does not share similar characteristics with other loans in the portfolio. Measuring expected credit losses of a loan requires judgment and estimates, and the eventual outcomes may differ from those estimates. Expected credit losses are measured based upon the present value of expected future cash flows from the loan discounted at the loan’s effective rate or the fair value of collateral if the loan is collateral dependent. When the selected measure is less than the recorded investment in the loan, an expected credit loss has occurred. The allowance for loans and leases that were individually assessed was $11.21 million at December 31, 2024 and $13.15 million at December 31, 2023. In comparison to the prior year-end, this element of the allowance decreased $1.94 million due to liquidation of collateral securing a commercial relationship which has reduced the balance outstanding for the relationship as well as the loss potential requiring individually assessed reserves.

Management believes that the allowance for credit losses of $306.75 million at December 31, 2024 is adequate to provide for expected losses on existing loans and lending-related commitments based on information currently available. United’s loan administration policies are focused on the risk characteristics of the loan portfolio in terms of loan approval and credit quality. The commercial loan portfolio is monitored for possible concentrations of credit in one or more industries. Management has lending limits as a percentage of capital per type of credit concentration in an effort to ensure adequate diversification within the portfolio. Most of United’s commercial loans are secured by real estate located in West Virginia, southeastern Ohio, Pennsylvania, Virginia, Maryland, North Carolina, South Carolina, and the District of Columbia. It is the opinion of management that these commercial loans do not pose any unusual risks and that adequate consideration has been given to these loans in establishing the allowance for credit losses.

The provision for credit losses related to held to maturity securities for the year of 2024 and 2023 was immaterial. The allowance for credit losses related to held to maturity securities was $18 thousand as of December 31, 2024 as compared to $17 thousand as of December 31, 2023. There was no provision for credit losses recorded on available for sale investment securities for the year of 2024 and 2023 and no allowance for credit losses on available for sale investment securities as of December 31, 2024 and 2023.

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

Other Income

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

Noninterest income for the year of 2024 was $123.70 million, which was a decrease of $11.56 million or 8.55% from the year of 2023. This decrease was driven by decreases in mortgage loan servicing income and mortgage banking income partially offset by an increase in fees from brokerage services and higher income from bank-owned life insurance.

For the year of 2024, net losses on investment securities were $7.72 million as compared to net losses on investment securities of $7.65 million for the year of 2023. The net losses in 2024 were mainly due a loss of $16.30 million during the year of 2024 as United sold approximately $470 million of AFS investment securities. Additionally,

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during the year of 2024, United recognized a $6.85 million gain on the VISA share exchange and a $1.72 million change in fair value gain on an equity security. In the year of 2023, United sold approximately $187 million of AFS investment securities resulting in a net loss of $7.24 million. United did not recognize any impairment on investment securities for the year of 2024 and 2023.

Income from mortgage banking activities totaled $16.06 million for the year of 2024 compared to $26.59 million for the year of 2023. The decrease of $10.54 million or 39.62% for the year of 2024 was primarily due mainly to lower mortgage loan production. Mortgage loan sales were $657.84 million in the year of 2024 as compared to $861.52 million in the year of 2023. Mortgage loans originated for sale were $645.94 million for the year of 2024 as compared to $860.90 million for the year of 2023.

Mortgage loan servicing income for the year of 2024 decreased $4.79 million or 34.83% from the year of 2023. The year of 2024 included the $7.09 million net gain on the sale of MSRs while the year of 2023 included net gains on the sale of MSRs of $8.31 million. In addition, mortgage loan servicing income declined in the year of 2024 due to lower mortgage balances serviced since the sale of the MSRs in 2023 and 2024.

Fees from brokerage services for the year of 2024 increased $3.37 million or 19.90%, from the year of 2023. The increase was primarily due to higher volume.

Fees from trust services for the year of 2024 were $19.45 million, an increase of $1.13 million or 6.18% from the year of 2023 due to an increase in managed assets.

Income from bank-owned life insurance (“BOLI”) for the year of 2024 increased $2.90 million or 34.75% from the year of 2023. This increase was due mainly to an increase in the cash surrender value of insurance policies as well as death proceeds of $1.39 million recognized in 2024. Death benefits were $571 thousand for the year of 2023.

Other income for the year of 2024 decreased $3.34 million or 30.16% from the year of 2023. Included in the year of 2023 was a gain of $2.66 million from the payoff of a fixed rate commercial loan that had an associated interest rate swap.

Other Expense

Just as management continues to evaluate areas where noninterest income can be enhanced, it strives to improve the efficiency of its operations to reduce costs. Other expense includes all items of expense other than interest expense, the provision for credit losses and income tax expense. Noninterest expense for the year of 2024 was $545.03 million, which was a decrease of $15.19 million or 2.71% from the year of 2023 driven by decreases in FDIC insurance expense, mortgage loan servicing expense and impairment, OREO expense and other noninterest expense. Partially offsetting these decreases were increases in employee benefits expense and employee compensation expense.

OREO expense for the year of 2024 decreased $779 thousand or 57.49% from the year of 2023 due mainly to fewer declines in the fair value of OREO properties.

Mortgage loan servicing expense and impairment for the year of 2024 decreased $2.90 million or 51.86% from the year of 2023. The decrease was due primarily to a lower amount of mortgage loans serviced as a result of the sale of MSRs in 2024 and 2023.

FDIC expense for the year of 2024 decreased $10.64 million or 35.03% from the year of 2023. The decrease in FDIC insurance expense was driven by $11.99 million of expense recognized in 2023 as compared to $1.51 million of expense recognized in 2024 for a FDIC special assessment levied on banking organizations to recover losses to the Deposit Insurance Fund.

Employee compensation for the year of 2024 increased $3.81 million or 1.65% from the year of 2023. The increase in employee compensation was driven by higher employee incentives, base salaries and employee severance related to the consolidation of the mortgage delivery channels. Partially offsetting these increases was a decrease in commissions related to lower mortgage banking production.

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Employee benefits expense for the year of 2024 increased $5.25 million or 10.86% as compared to the year of 2023. For the year of 2024, postretirement expense, which includes expense associated with United’s pension plan, non-qualified deferred compensation plan, supplemental early retirement plans (“SERPs”) and Savings and Stock Investment Plan (“401K plan”), increased $5.58 million from the year of 2023. United uses certain valuation methodologies to measure the fair value of the assets within United’s pension plan which are presented in Note P, Notes to Consolidated Financial Statements. The funded status of United’s pension plan is based upon the fair value of the plan assets compared to the projected benefit obligation. The determination of the projected benefit obligation and the associated periodic benefit expense involves significant judgment and estimation of future employee compensation levels, the discount rate and the expected long-term rate of return on plan assets. If United assumes a 1% increase or decrease in the estimation of future employee compensation levels while keeping all other assumptions constant, the benefit cost associated with the pension plan would increase by approximately $599 thousand and decrease by approximately $578 thousand, respectively. If United assumes a 1% increase or decrease in the discount rate while keeping all other assumptions constant, the benefit cost associated with the pension plan would decrease by approximately $2.13 million and increase by approximately $2.58 million, respectively. If United assumes a 1% increase or decrease in the expected long-term rate of return on plan assets while keeping all other assumptions constant, the benefit cost associated with the pension plan would decrease by and increase by approximately $1.69 million and $1.71 million, respectively.

Other expense for the year of 2024 decreased $10.08 million or 7.41% from the year of 2023. Within other expenses, the most significant decrease was $8.31 million in the expense for the reserve for unfunded loan commitments. In addition, amortization of intangibles declined $1.48 million, consulting and legal expense decreased $1.27 million and advertising expense decreased $994 thousand. Partially offsetting these decreases were increases in the merger expenses of $2.87 million as well as higher amounts of certain other general operating expenses.

Income Taxes

For the year ended December 31, 2024, income taxes were $91.58 million, compared to $97.49 million for 2023, a decrease of $5.91 million or 6.06%. This decrease was primarily due to the impact of discrete tax benefits recognized in the second quarter of 2024. United’s effective tax rate was approximately 19.7% and 21.0% for years ended December 31, 2024 and 2023, respectively. For further details related to income taxes, see Note O, Notes to Consolidated Financial Statements.

Quarterly Results

Net income for the first quarter of 2024 was $86.81 million as compared to earnings of $98.31 million for the first quarter of 2023. Earnings for the first quarter of 2024, as compared to the first quarter of 2023, decreased primarily due to lower net interest income as a result of the impact of higher market interest rates on interest-bearing liabilities. Diluted earnings per share were $0.64 for the first quarter of 2024 and $0.73 for the first quarter of 2023. Net interest income for the first quarter of 2024 decreased $11.83 million, or 5.05%, to $222.49 million from net interest income of $234.32 million for the first three months of 2023. The decrease of $11.83 million in net interest income occurred because total interest income increased $39.88 million while total interest expense increased $51.71 million from the first quarter of 2023. The provision for credit losses was $5.74 million for the first quarter of 2024 as compared to a provision for credit losses of $6.89 million for the first quarter of 2023. The decrease in the provision for credit losses was mainly due to a change in qualitative factors and the impact of reasonable and supportable forecasts of future macroeconomic conditions. Noninterest income was $32.21 million for the first three months of 2024, a decrease of $532 thousand or 1.62% from the first three months of 2023 due mainly to a decrease in mortgage loan servicing income of $1.49 million partially offset by increased fees of $1.07 million from brokerage services. Noninterest expense for the first quarter of 2024 was $140.74 million, an increase of $3.32 million or 2.42% from the first quarter of 2023 primarily due to increases in employee compensation and FDIC insurance expense partially offset by a decrease in other noninterest expense. Income taxes decreased $3.04 million or 12.45% for the first three months of 2024 as compared to the first three months of 2023 primarily due to decreased earnings and a slightly lower effective tax rate. United’s effective tax rate was 19.8% and 19.9% for the first quarter of 2024 and 2023, respectively.

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Net income for the second quarter of 2024 was $96.51 million, as compared to earnings of $92.46 million for the second quarter of 2023. Earnings for the second quarter of 2024 as compared to the second quarter of 2023 increased primarily due to lower provision for credit losses and income tax expense. Diluted earnings per share were $0.71 for the second quarter of 2024 and $0.68 for the second quarter of 2023. As previously mentioned, United announced during the second quarter of 2024 that it entered into a definitive merger agreement with Piedmont. Expenses of $1.27 million related to the announced Piedmont acquisition were recorded in the second quarter of 2024. United also recognized a $6.87 million gain on a VISA share exchange during the second quarter of 2024, of which $4.65 million was realized through the sale of eligible shares and the remainder of which related to shares held at fair value at quarter-end. Additionally, during the second quarter of 2024, United sold $102.72 million of AFS investment securities at a loss of $6.81 million. The first quarter of 2024 included $1.81 million of noninterest expense related to the FDIC’s revised loss estimates to the Deposit Insurance Fund. For the second quarter of 2024, United’s annualized return on average assets was 1.32% and return on average shareholders’ equity was 7.99% as compared to 1.26% and 7.96% for the second quarter of 2023. Net interest income for the second quarter of 2024 was $225.72 million, which was relatively flat from the second quarter of 2023, decreasing $1.75 million or less than 1%. The slight decrease of $1.75 million in net interest income occurred because total interest income increased $28.25 million while total interest expense increased $30.00 million from the second quarter of 2023. The provision for credit losses was $5.78 million for the second quarter of 2024, respectively, while the provision for credit losses was $11.44 million for the second quarter of 2023. The decrease in the provision for credit losses was mainly due to a more substantial increase in reserves for future expected losses in 2023 as compared to 2024. For the second quarter of 2024, noninterest expense was relatively flat from the second quarter of 2023, decreasing $514 thousand or less than 1%. Several categories of noninterest expense decreased which were largely offset by increases in other categories, none of which were significant. Income taxes for the second quarter of 2024 were $18.88 million as compared to $23.45 million for the second quarter of 2023. United’s effective tax rate was 16.4% and 20.2% for the second quarter of 2024 and second quarter of 2023, respectively.

Net income for the third quarter of 2024 was $95.27 million, as compared to earnings of $96.16 million for the third quarter of 2023. Earnings for the third quarter of 2024 as compared to the third quarter of 2023 decreased primarily due to higher provision for credit losses and lower noninterest income partially offset by a higher net interest income and a lower income tax expense. Diluted earnings per share were $0.70 for the third quarter of 2024 and $0.71 for the third quarter of 2023. Net interest income for the third quarter of 2024 was $230.26 million, which was relatively flat from the third quarter of 2023, increasing $1.80 million or less than 1%. The slight increase of $1.80 million in net interest income occurred because total interest income increased $25.81 million while total interest expense increased $24.01 million from the third quarter of 2023. The provision for credit losses was $6.94 million for the third quarter of 2024, while the provision for credit losses was $5.95 million for the third quarter of 2023. For the third quarter of 2024, noninterest income was $31.94 million, which was a decrease of $1.72 million or 5.11% from the third quarter of 2023. This decrease in noninterest income for the third quarter of 2024 was due mainly to decreases of $6.53 million and $3.01 million, respectively, in net losses on investment securities transactions and in income from mortgage banking activities driven by lower mortgage loan sales volume partially offset by the gain on the sale of MSRs. For the third quarter of 2024, noninterest expense was relatively flat from the third quarter of 2023, increasing $109 thousand. This increase was less than 1%. For the third quarter of 2024 compared to the third quarter of 2023, several categories of noninterest expense increased which were largely offset by decreases in other categories. Income taxes for the third quarter of 2024 were $24.65 million as compared to $24.78 million for the third quarter of 2023. For the quarters ended September 30, 2024 and 2023, United’s effective tax rate was 20.6% and 20.5%, respectively.

Net income for the fourth quarter of 2024 was $94.41 million or $0.69 per diluted share as compared to earnings of $79.39 million or $0.59 per diluted share for the fourth quarter of 2023. Net interest income for the fourth quarter of 2024 was $232.61 million, which was an increase of $2.92 million or 1.27% from the fourth quarter of 2023. The $2.92 million increase in net interest income occurred because total interest income increased $6.86 million while total interest expense increased $3.94 million from the fourth quarter of 2023. The provision for credit losses was $6.69 million for the fourth quarter of 2024 as compared to a provision for credit losses of $6.88 million for the fourth quarter of 2023. Noninterest income for the fourth quarter of 2024 was $29.32 million, which was a decrease of $4.36 million, or 12.94% from the fourth quarter of 2023. This decrease in noninterest income was driven by decreases in other noninterest income of $3.26 million and income from mortgage banking activities of $2.43 million due to lower mortgage loan origination and sale volume partially offset by an increase in income from BOLI of $1.37 million due to the impact of higher market values of underlying investments and higher amounts of death benefits recognized in the fourth quarter of 2024. Other

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noninterest income for the fourth quarter of 2023 included a $2.66 million gain from the payoff of a fixed rate commercial loan that had an associated interest rate swap derivative. Noninterest expense for the fourth quarter of 2024 was $134.18 million, a decrease of $18.11 million, or 11.89%, from the fourth quarter of 2023. The decrease in noninterest expense was driven by decreases in FDIC insurance expense of $12.74 million and other noninterest expense of $8.66 million due to a lower expense for the reserve for unfunded loan commitments partially offset by increases in employee benefits of $3.95 million. FDIC insurance expense for the fourth quarter of 2023 included $11.99 million for the FDIC special assessment. The decrease in the expense for the reserve for unfunded loan commitments was mainly due to a decrease in loan commitments. The increase in employee benefits was driven by higher health insurance costs and higher postretirement benefit costs. For the fourth quarter of 2024, income tax expense was $26.65 million as compared to $24.81 million for the fourth quarter of 2023. The increase was driven by higher pre-tax earnings partially offset by a lower effective tax rate. United’s effective tax rate was 22.0% and 23.8% for the fourth quarter of 2024 and fourth quarter of 2023, respectively. The effective tax rates for the fourth quarter of 2024 and 2023 reflect the impact of provision to return adjustments during each period.

Additional quarterly financial data for 2024 and 2023 may be found in Note Z, Notes to Consolidated Financial Statements.

The Effect of Inflation

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

The Effect of Regulatory Policies and Economic Conditions

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

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

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

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Liquidity and Capital Resources

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

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

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

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

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

During the year of 2024, United increased its interest-bearing deposit balance at the FRB by $727.91 million to $1.97 billion. The change in the balance at the FRB was mostly the result of net sales, maturities, and paydowns in the available for sale debt securities portfolio of $867.21 million and an increase in deposits of $1.14 billion partially offset by loan growth of $318.05 million and the net repayment of $1.25 billion in FHLB advances.

Cash flows provided by operations in 2024 were $445.45 million due mainly to net income of $373.00 million for the year of 2024. In 2023, cash flows provided by operations were $435.24 million due mainly to net income of $366.31 million for the year of 2023. In 2024, net cash of $571.49 million was provided by investing activities which was primarily due to proceeds of $882.85 million from sales, calls and maturities of investment securities over purchases partially offset by loan growth of $318.05 million. In 2023, net cash of $38.99 million was provided by investing activities which was primarily due to proceeds of $819.87 million from sales, calls and maturities of investment securities over purchases partially offset by loan growth of $800.97 million. During the year of 2024, net cash of $323.64 million was used in financing activities due primarily to net repayments of $1.25 billion from long-term FHLB borrowings partially offset by an increase of $1.14 billion in deposits. Other uses of cash within funding activities for the year of 2024 were $200.73 million for cash dividends paid. During the year of 2023, net cash of $51.94 million was used in financing activities due primarily to net repayments of $400.00 million from long-term FHLB borrowings partially offset by an increase of $517.27 million in deposits. Other uses of cash within funding activities for the year of 2023 were $194.73 million for cash dividends paid. The net effect of the cash flow activities was an increase in cash and cash equivalents of $693.30 million for the year of 2024 as compared to increase in cash and cash equivalents of $422.29 million for the year of 2023. See the Consolidated Statement of Cash Flows in the Consolidated Financial Statements.

At December 31, 2024, United had an unused borrowing amount at the FHLB of approximately $8.14 billion subject to delivery of collateral after certain trigger points and $4.24 billion without the delivery of additional collateral. United has various unused lines of credit available from certain of its correspondent banks in the aggregate amount of $280 million, all of which was available at December 31, 2024. United also has a $20 million unsecured, revolving line of credit with an unrelated financial institution to provide for general liquidity needs, all of which were available at December 31, 2024. At December 31, 2024, United’s borrowing capacity for the FRB Discount Window was $4.83 billion. United did not have any borrowings from the FRB’s Discount Window, or its Bank Term Funding Program, during the year of 2024.

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

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

The following table details the amounts of significant commitments and letters of credit as of December 31, 2024:

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

United anticipates it can meet its obligations over the next 12 months and has no material commitments for capital expenditures. There are no known trends, demands, commitments, or events that will result in or that are reasonably likely to result in United’s liquidity increasing or decreasing in any material way. United also has lines of credit available. See Notes L and M to the accompanying unaudited Notes to Consolidated Financial Statements for more details regarding the amounts available to United under lines of credit.

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

United’s capital position is financially sound. United seeks to maintain a proper relationship between capital and total assets to support growth and sustain earnings. United has historically generated attractive returns on shareholders’ equity. United is well-capitalized based upon regulatory guidelines. United’s risk-based capital ratio is 16.52% at December 31, 2024 while its Common Equity Tier 1 capital, Tier 1 capital and leverage ratios are 14.14%, 14.14% and 11.74%, respectively. The December 31, 2024 ratios reflects United’s election of a five-year transition provision, allowed by the Federal Reserve Board and other federal banking agencies in response to the COVID-19 pandemic, to delay for two years the full impact of CECL on regulatory capital, followed by a three-year transition period. The regulatory requirements for a well-capitalized financial institution are a risk-based capital ratio of 10.0%, a Common Equity Tier 1 capital ratio of 6.5%, a Tier 1 capital ratio of 8.0% and a leverage ratio of 5.0%.

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Total shareholders’ equity was $4.99 billion at December 31, 2024, which was an increase of $221.98 million or 4.65% from December 31, 2023. This increase is primarily due to increases of $172.11 million in net earnings and $35.78 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 16.63% at December 31, 2024 as compared to 15.94% at December 31, 2023. The primary capital ratio, capital and reserves to total assets and reserves, was 17.47% at December 31, 2024 as compared to 16.79% at December 31, 2023. United’s average equity to average asset ratio was 16.57% at December 31, 2024 as compared to 15.89% at December 31, 2023. All of these financial measurements reflect a financially sound position.

During the fourth quarter of 2024, United’s Board of Directors declared a cash dividend of $0.37 per share. Dividends per share of $1.48 for the year of 2024 represented an increase over the $1.45 per share paid for 2023. Total cash dividends declared to common shareholders were $200.89 million for the year of 2024 as compared to $196.12 million for the year of 2023. The year 2024 was the fifty-first consecutive year of dividend increases to United shareholders.