What changed in this filing

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Item 1. Business

2024-02-29 compared with 2023-03-01 · 51 added, 71 removed, 401 unchanged (23% of the section changed)

21 unchanged sentences

It also strategically connected our Mid-Atlantic and Southeast footprints.

See Note B—Notes to Consolidated Financial Statements for a discussion of United’s merger with Community Bankers Trust.

On May 1, 2020, United completed its acquisition of Carolina Financial Corporation (“Carolina Financial”), the parent company of CresCom Bank (“CresCom”) with $5.0 billion in assets, headquartered in Charleston, South Carolina.

15 unchanged sentences

These loans are for single-family, owner-occupied residences with either adjustable or fixed rate terms, with a variety of maturities tailored to effectively serve its markets.

Crescent Mortgage Company (“Crescent”), a wholly-owned subsidiary of United Bank, is primarily a correspondent/wholesale mortgage company approved to originate loans in 48 states partnering with community banks, credit unions and mortgage brokers.

Crescent Mortgage Company (“Crescent”), a wholly-owned subsidiary of United Bank, is a mortgage company approved to originate loans in 48 states partnering with community banks, credit unions and mortgage brokers.

Much like George Mason, Crescent is also engaged in the operation of a general mortgage and agency business, including the origination and acquisition of residential real estate loans for resale and the activities commonly conducted by a mortgage banking company.

1 unchanged sentence

In addition, at certain times, Crescent may purchase or sell rights to service mortgage loans from or to third parties.

During the fourth quarter of 2023, Crescent exited the third-party origination (“TPO”) business.

United Brokerage Services, Inc., a wholly-owned subsidiary of United Bank, is a fully-disclosed broker/dealer and a Registered Investment Advisor with the Financial Industry Regulatory Authority (“FINRA”), the Securities and Exchange Commission, and a member of the Securities Investor Protection Corporation.

13 unchanged sentences

Lending Activities

United’s loan and lease portfolio, net of unearned income, increased $2.5 billion or 14.06% in 2022 due mainly to substantial loan growth in almost all major categories of loans.

United’s loan and lease portfolio, net of unearned income, increased $800.9 million or 3.90% in 2023 due mainly to loan growth in almost all major categories of loans.

The loan and lease portfolio is mainly comprised of commercial, real estate and consumer loans including credit card and home equity loans.

Since year-end 2022, commercial, financial and agricultural loans increased $264.5 million or 2.28%.

In particular, commercial real estate loans increased $321.4 million or 4.18% while commercial loans (not secured by real estate) increased $150.2 million or 4.34%.

In particular, commercial real estate loans increased $304.7 million or 3.80% while commercial loans (not secured by real estate) decreased $40.1 million or 1.11%.

Within commercial loans (not secured by real estate), Payment Protection Program (“PPP”) loans declined $14.8 million.

Construction and land development loans increased $912.8 million or 45.32%, residential real estate loans increased $971.4 million or 26.31%, and consumer loans increased $173.1 million or 14.51% due to an increase in indirect automobile financing.

Construction and land development loans increased $221.3 million or 7.56%, residential real estate loans increased $608.3 million or 13.05%, and consumer loans decreased $301.1 million or 22.05% due mainly to a decrease in indirect automobile financing.

Commercial Loans and Leases

12 unchanged sentences

These loans are traditional one-to-four family residential mortgages.

The loans generally do not exceed an 80% loan to value ratio at the loan origination date and most are at a variable rate of interest.

The loans generally do not exceed an 80% loan to value ratio at the loan origination date and are at either a variable rate or fixed rate of interest.

These loans are considered to be of normal risk.

44 unchanged sentences

Depending on the pricing in the marketplace, servicing rights are either sold or retained.

During 2022, United originated $1.9 billion of real estate loans for sale in the secondary market and sold $2.2 billion of loans designated as held for sale in the secondary market.

During 2023, United originated $860.9 million of real estate loans for sale in the secondary market and sold $861.5 million of loans designated as held for sale in the secondary market.

Net gains on the sales of these loans during 2023 were $25.9 million.

23 unchanged sentences

Interest and dividends on securities for the years of 2023, 2022, and 2021 were $151.1 million, $114.5 million, and $61.9 million, respectively.

For the year of 2022, United realized net gains on sales of securities of $2 thousand.

For the years of 2021 and 2020, United realized net gains on sales of securities of $2.8 million and $3.2 million, respectively.

For the year of 2023, United realized net losses on sales of securities of $7.7 million.

For the years of 2022 and 2021, United realized net gains on sales of securities of $2 thousand and $2.8 million, respectively.

Human Capital

122 unchanged sentences

The Dodd-Frank Act includes, among other things, provisions creating a Financial Services Oversight Council to identify emerging systemic risks and improve interagency cooperation;

centralizing the responsibility for

consumer financial protection by creating a new agency, the Consumer Financial Protection Bureau, which is responsible for implementing, examining and enforcing compliance with federal consumer financial laws;

centralizing the responsibility for consumer financial protection by creating a new agency, the Consumer Financial Protection Bureau, which is responsible for implementing, examining and enforcing compliance with federal consumer financial laws;

permanently raising the current standard maximum deposit insurance amount to $250,000;

37 unchanged sentences

As a result of the new rule, the FDIC insurance costs of insured depository institutions, including United Bank, would generally increase.

On November 16, 2023, the FDIC Board of Directors approved a final rule to implement a special assessment to recover the loss to the DIF associated with protecting uninsured depositors following the closures of Silicon Valley Bank and Signature Bank.

The Federal Deposit Insurance Act (“FDI Act”) requires the FDIC to take this action in connection with the systemic risk determination announced on March 12, 2023.

The special assessment did not apply to any banking organization (defined to include FDIC-insured financial institutions that are not subsidiaries of a holding company and FDIC–insured financial institutions that are subsidiaries of a holding company with one or more FDIC–insured financial institution subsidiaries) with less than $5 billion in total consolidated assets.

The FDIC estimated that of the total cost of the failures of Silicon Valley Bank and Signature Bank of approximately $16.3 billion was attributable to the protection of uninsured depositors.

The assessment base for the special assessment is equal to an insured depository institution’s (“IDI’s”) estimated uninsured deposits reported as of December 31, 2022, adjusted to exclude the first $5 billion, applicable either to the IDI, if an IDI is not a subsidiary of a holding company, or at the banking organization level, to the extent that an IDI is part of a holding company with one or more subsidiary IDIs.

The special assessment will be collected at an annual rate of approximately 13.4 basis points for an anticipated total of eight quarterly assessment periods.

The special assessment will be collected beginning with the first quarterly assessment period of 2024 (i.e., January 1 through March 31, 2024) with an invoice payment date of June 28, 2024.

Because the estimated loss pursuant to the systemic risk determination will be periodically adjusted, the FDIC could:

(1) cease collection early, if it has collected enough to recover actual or estimated losses;

(2) extend the special assessment collection period one or more quarters beyond the initial eight-quarter collection period, if actual or estimated losses exceed the amounts collected;

and (3) impose a final shortfall special assessment on a one-time basis after the receiverships for Silicon Valley Bank and Signature Bank terminate, if actual losses exceed the amounts collected.

As a result of this final rule, United accrued $12.0 million in the fourth quarter of 2023 to pay the special assessment over the next eight assessment periods.

United expects the special assessments will be tax deductible.

United’s FDIC insurance expense totaled $30.4 million, $12.0 million, and $8.3 million in 2023, 2022 and 2021, respectively.

26 unchanged sentences

In November 2019, the federal banking agencies adopted a rule revising the scope of commercial real estate mortgages subject to a 150% risk weight.

In December 2017, the Basel Committee published standards that it described as the finalization of the Basel III post-crisis regulatory reforms (the standards are commonly referred to as “Basel IV”).

In December 2017, the Basel Committee published standards that it described as the finalization of the Basel III post-crisis regulatory reforms.

Among other things, these standards revise the Basel Committee’s standardized approach for credit risk (including by recalibrating risk weights and introducing new capital requirements for certain “unconditionally cancellable commitments,” such as unused credit card lines of credit) and provides a new standardized approach for operational risk capital.

Under the Basel framework, these standards generally became effective on January 1, 2022, with an aggregate output floor phasing in through January 1, 2027.

Under the current U.S.

capital rules, operational risk capital requirements and a capital floor apply only to advanced approaches institutions, and not to United or United Bank.

The impact of Basel IV on us will depend on the manner in which it is implemented by the federal bank regulators.

In July 2023, the federal banking regulators proposed revisions to the Basel III Capital Rules to implement the Basel Committee’s 2017 standards and make other changes to the Basel III Capital Rules.

The proposal introduces revised credit risk, equity risk, operational risk, credit valuation adjustment risk and market risk requirements, among other changes.

However, the revised capital requirements of the proposed rule would not apply to United or United Bank because they have less than $100 billion in total consolidated assets and trading assets and liabilities below the threshold for market risk requirements.

Failure to meet statutorily mandated capital guidelines or more restrictive ratios separately established for a financial institution could subject United to a variety of enforcement remedies, including issuance of a capital directive, the termination of deposit insurance by the FDIC, a prohibition on accepting or renewing brokered deposits, limitations on the rates of interest that the institution may pay on its deposits and other restrictions on its business.

13 unchanged sentences

Banking regulators take into account CRA ratings when considering approval of a proposed transaction.

In the third quarter of 2022, United Bank received a Community Reinvestment Act (“CRA”) Performance Evaluation from the Federal Reserve Bank of Richmond (the “FRB”) with a rating of “Needs to Improve.” Based on its performance on the individual components of the CRA exam, United Bank received a rating of “Satisfactory.” These individual components were a “High Satisfactory” rating for the Lending Test, an “Outstanding” rating for the Investment Test and a “High Satisfactory” rating for the Service Test.

United Bank’s final overall rating, however, was downgraded to “Needs to Improve” as a result of a Fair Housing Act violation cited in the Washington DC Metropolitan Statistical Area following a FRB fair lending examination of United Bank and its wholly-owned subsidiary, George Mason Mortgage, LLC.

This matter was also the subject of an investigation by the Department of Justice.

The Department of Justice, however, has advised United Bank in writing that it has completed its review of this matter and determined that the circumstances of this matter do not require enforcement action by the Department of Justice at this time.

The FRB Performance Evaluation states that “United Bank management has taken action to address the deficiencies and committed to taking further voluntary corrective actions to prevent further violations.”

A “Needs to Improve” rating results in restrictions on certain expansionary activities, including certain mergers and acquisitions and the establishment of bank branches.

These restrictions will remain in place until the FRB issues a higher CRA rating following a subsequent CRA examination.

The next CRA examination commenced in October 2022 and United Bank is awaiting the results.

The precise timing of any results therefrom will not be known until later.

The Office of the Comptroller of the Currency (“OCC”), the Federal Reserve Board and the FDIC issued a joint notice of proposed rulemaking on May 5, 2022, proposing revisions to the CRA regulations.

Comments on the proposed rulemaking were due by August 5, 2022.

In September, 2022, legislation was introduced to significantly revise the CRA to add a number of new substantive and procedural requirements.

This legislation may delay the pending proposed rulemaking by the banking regulators.

We will continue to evaluate the impact of any changes to the regulations implementing the CRA and their impact to our financial condition, results of operations, and/or liquidity, which cannot be predicted at this time.

The Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”)

The CARES Act, which became law on March 27, 2020, provided over $2 trillion to combat the coronavirus (“COVID-19”) and stimulate the economy.

Many of the CARES Act’s programs, including the Paycheck Protection Program (“PPP”), are dependent upon the direct involvement of U.S.

financial institutions and have been implemented through rules and guidance adopted by federal departments and agencies, including the U.S.

Department of Treasury, the Federal Reserve and other federal banking agencies, including those with direct supervisory jurisdiction over United and United Bank.

Furthermore, as the on-going COVID-19 pandemic evolves, federal regulatory authorities continue to issue additional guidance with respect to the implementation, lifecycle, and eligibility requirements for the various CARES Act programs as well as industry-specific recovery procedures for COVID-19.

On December 27, 2020, then President Trump signed into law the 2021 Consolidated Appropriations Act (the “CAA”), an approximately $900 billion bill, which extended several provisions of the CARES Act as well as provided additional COVID-19 relief.

In particular, the CAA extended weekly unemployment benefits, provided another round of economic stimulus payments to individuals and families, lengthened temporary suspensions and modifications of several-bank related provisions and provided more aid to small businesses.

On March 11, 2021, President Joe Biden signed into law the $1.9 trillion American Rescue Plan Act of 2021.

The legislation included additional stimulus checks to eligible individuals and an extension of the $300-per-week supplement to federal unemployment benefits through September 6, 2021.

The legislation also allocates funding to small businesses, state and local governments, and COVID-19 vaccination and testing and tracing efforts.

The legislation also modified the PPP to clarify that the SBA affiliation rules would not apply to certain applicants.

Specifically, 501(c)(3) organizations that employ not more than 500 employees per physical location of the organization would become eligible for the program.

The legislation also provided an additional $7.25 billion for the program.

However, the legislation did not extend the March 31, 2021 application deadline.

On March 27, 2021, the COVID-19 Bankruptcy Relief Extension Act of 2021 was enacted, extending the bankruptcy relief provisions enacted in the CARES Act of 2020 bill until March 27, 2022.

These provisions provide financially distressed small businesses and individuals greater access to bankruptcy relief.

On March 30, 2021, President Biden signed into law the PPP Extension Act of 2021.

This bill extended the PPP through June 30, 2021.

For the final 30 days of the program (i.e., from June 1 until June 30), the SBA may only process applications submitted prior to June 1, and it may not accept any new loan applications.

On June 24, 2021, President Biden announced that the three federal agencies that back mortgages – the Department of Housing and Urban Development (“HUD”), Department of Veterans Affairs (“VA”), and Department of Agriculture (“USDA”) – extended their respective foreclosure moratorium for one, final month, until July 31, 2021.

The Federal Housing Finance Agency (“FHFA”) also announced that it extended the foreclosure moratorium for mortgages backed by Fannie Mae and Freddie Mac until July 31, 2021.

President Biden emphasized that this was the final extension.

On January 30, 2023, President Biden announced that he intends to end both the national emergency and the public health emergency declarations related to COVID-19 on May 11, 2023.

Cybersecurity

In February 2018, the SEC published interpretive guidance to assist public companies in preparing disclosures about cybersecurity risks and incidents.

These SEC guidelines, and any other regulatory guidance, are in addition to notification and disclosure requirements under state and federal banking law and regulations.

The federal banking regulators regularly issue new guidance and standards, and update existing guidance and standards, regarding cybersecurity intended to enhance cyber risk management among financial institutions.

Financial institutions are expected to comply with such guidance and standards and to accordingly develop appropriate security controls and risk management processes.

If we fail to observe such regulatory guidance or standards, we could be subject to various regulatory sanctions, including financial penalties.

In November 2021, the federal banking agencies adopted a final rule, with compliance by May 1, 2022, that requires banking organizations to notify their primary banking regulator within 36 hours of determining that a “computer-security incident” has materially disrupted or degraded, or is reasonably likely to materially disrupt or degrade, the banking organization’s ability to carry out banking operations or deliver banking products and services to a material portion of its customer base, its businesses and operations that would result in material loss, or its operations that would impact the stability of the United States.

In the ordinary course of business, United relies on electronic communications and information systems to conduct its operations and to store sensitive data.

United employs an in-depth, layered, defensive approach that leverages people, processes and technology to manage and maintain cybersecurity controls.

United employs a variety of preventative and detective tools to monitor, block, and provide alerts regarding suspicious activity, as well as to report on any suspected advanced persistent threats.

Notwithstanding the strength of its defensive measures, the threat from cyber-attacks is severe, attacks are sophisticated and increasing in volume, and attackers respond rapidly to changes in defensive measures.

While to date, United and United Bank have not experienced a significant compromise, significant data loss or any material financial losses related to cybersecurity attacks, United’s systems and those of its customers and third-party service providers are under constant threat and it is possible that United could experience a significant event in the future.

Risks and exposures related to cybersecurity attacks, including litigation and enforcement risks, are expected to be elevated for the foreseeable future due to the rapidly evolving nature and sophistication of these threats, as well as due to the expanding use of Internet banking, mobile banking and other technology-based products and services by United and its customers.

Risk Factors for a further discussion of risk related to cybersecurity.

In 2023, United Bank received a CRA Performance Evaluation from the Federal Reserve Bank of Richmond (the “FRB”) with a rating of “Satisfactory.”

On October 24, 2023, the Federal Reserve Board, the FDIC, and the Office of the Comptroller of the Currency (“OCC”) published a final CRA rule that creates a modernized rule for the banking industry.

The final rule updates the CRA regulations to achieve the following key goals:

(1) encourage banks to expand access to credit, investment, and banking services in LMI communities;

(2) adapt to changes in the banking industry, including mobile and online banking;

(3) provide greater clarity and consistency in the application of the CRA regulations;

and (4) tailor CRA evaluations and data collection to bank size and type.

Most of the rule’s requirements will be applicable beginning January 1, 2026.

The remaining requirements, including the data reporting requirements, will be applicable on January 1, 2027.

We will evaluate the impact of these changes to these new CRA rules and their impact to our financial condition, results of operations, and/or liquidity, which is not known at this time.

Deposit Acquisition Limitation

44 unchanged sentences

The final rules implement the “pay versus performance” disclosure requirements mandated by Section 953(a) of the Dodd-Frank Act.

Disclosure related to these final rules will be effective for United’s proxy statement filed in 2023.

Disclosure related to these final rules was effective for United’s proxy statement filed in 2023.

In October 2022, the SEC adopted the final “clawback” rule mandated by Section 954 of the Dodd-Frank Act directing national securities exchanges and associations, including the NASDAQ, to implement listing standards that require listed companies to adopt policies mandating the recovery or “clawback” of excess incentive-based compensation earned by a current or former executive officer during the three fiscal years preceding the date the listed company is required to prepare an accounting restatement, including to correct an error that would result in a material misstatement if the error were corrected in the current period or left uncorrected in the current period.

The final rule requires United to adopt a clawback policy within 60 days after such listing standard becomes effective.

The scope and content of the U.S.

banking regulators’ policies on incentive compensation are continuing to develop.

It cannot be determined at this time whether or when a final rule will be adopted and whether compliance with such a final rule will adversely affect the ability of United and United Bank to hire, retain and motivate their key employees.

The final rule required United to adopt a clawback policy within 60 days after such listing standard became effective.

In June 2023, the New York Stock Exchange and Nasdaq Stock Market adopted these required listing standards mandated by Section 954 of the Dodd-Frank Act, which were effective on October 2, 2023.

Each listed issuer was required to adopt a policy relating to the recovery of erroneously awarded compensation no later than December 1, 2023, which is 60 days following the effective date.

The incentive compensation received by executives on or after October 2, 2023 is subject to the issuer’s recovery policies.

Issuers that do not adopt and comply with the compensation recovery policies or those that do not disclose the policy will be subject to delisting.

United adopted a “clawback” policy on November 17, 2023 and is filed as Exhibit 97 to this Form 10-K.

Cybersecurity

Financial institutions are expected to comply with such guidance and standards and to accordingly develop appropriate security controls and risk management processes.

If we fail to observe such regulatory guidance or standards, we could be subject to various regulatory sanctions, including financial penalties.

In July 2023, the SEC issued a final rule, “Cybersecurity Risk Management, Strategy, Governance, and Incident Disclosure,” which requires registrants to provide investors, through enhanced and standardized disclosures, greater insight into material cybersecurity incidents and the registrants’ cybersecurity risk management, strategy and governance.

Cybersecurity for information on United’s risk management, strategy and governance processes related to cybersecurity.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business