What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2024-02-29 compared with 2023-03-01 · 18 added, 38 removed, 298 unchanged (16% of the section changed)

6 unchanged sentences

REGULATORY AND LITIGATION RISKS

Our Needs to Improve rating under The Community Reinvestment Act may restrict our operations and limit our ability to pursue certain strategic opportunities.

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, the 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.

The 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 the 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 the 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.

United is subject to extensive government regulation and supervision.

71 unchanged sentences

The FASB’s Accounting Standards Update 2016-13, effective for United as of January 1, 2020, substantially changes the accounting for credit losses on loans, leases and other financial assets held by banks, financial institutions and other organizations.

The new standard requires the recognition of credit losses on loans, leases and other financial assets based on an entity’s current estimate of expected losses over the lifetime of each loan, lease or other financial asset, referred to as the Current Expected Credit Loss (“CECL”) model as opposed to the previous “incurred loss” model, which required recognition of losses on loans, leases and other financial assets only when those losses had incurred.

referred to as the Current Expected Credit Loss (“CECL”) model as opposed to the previous “incurred loss” model, which required recognition of losses on loans, leases and other financial assets only when those losses had incurred.

Under the CECL model, United is required to present these certain financial assets, carried at amortized cost, at the net amount expected to be collected over the life of the financial asset.

71 unchanged sentences

Potential problems with vendors such as those discussed above could have a significant adverse effect on United’s business, lead to higher costs and damage its reputation with its customers and, in turn, have a material adverse effect on its financial condition and results of operations.

MARKET AND INTEREST RATE RISKS

MARKET, LIQUIDITY AND INTEREST RATE RISKS

Changes in economic and political conditions could adversely affect our earnings, as our borrowers’ ability to repay loans and the value of the collateral securing our loans decline .

4 unchanged sentences

Consequently, declines in the economy in our market area could have a material adverse effect on our financial condition and results of operations.

While recent economic conditions have seen improving trends since the onset of the COVID-19 pandemic, there can be no assurance that this improvement will continue.

Evolving responses from federal and state governments and other regulators, and our customers or our third-party partners or vendors, to new challenges such as climate change have impacted and could continue to impact the economic and political conditions under which we operate.

Economic and inflationary pressure on consumers and uncertainty regarding continuing economic improvement 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.

In addition, economic and 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 also have a material adverse effect on the credit quality of our loans and our business, financial condition and results of operations.

The value of certain investment securities is volatile and future declines in value could have a materially adverse effect on future earnings and regulatory capital.

Continued volatility in the fair value for certain investment securities, whether caused by changes in market conditions, interest rates, credit risk of the issuer, the expected yield of the security, or actual defaults in the portfolio could result in significant fluctuations in the value of the securities as well as any regulatory rulemaking such as the Volcker Rule which could exclude or limit the holdings of certain investment securities.

Continued volatility in the fair value for certain investment securities, whether caused by changes in market conditions, interest rates, credit risk of the issuer, the expected yield of the security, or actual defaults in the portfolio could result in significant fluctuations in the value of the securities as well as any regulatory rulemaking could exclude or limit the holdings of certain investment securities.

This could have a material adverse impact on United’s accumulated other comprehensive income and shareholders’ equity depending on the direction of the fluctuations.

8 unchanged sentences

United serves the Ohio counties of Lawrence, Belmont, Jefferson and Washington and Fayette county in Pennsylvania primarily because of their close proximity to the Ohio and Pennsylvania borders and United banking offices located in those counties or in nearby West Virginia.

United’s Virginia markets include the Maryland, northern Virginia and Washington, D.C.

United’s Virginia markets

include the Maryland, northern Virginia and Washington, D.C.

MSA, the Winchester MSA, the Harrisonburg MSA, and the Charlottesville MSA.

4 unchanged sentences

A decline in market share could lead to a decline in net income which would have a negative impact on shareholder value.

United is subject to liquidity risk.

We require liquidity to meet our deposit and debt obligations as they come due.

Our access to funding sources in amounts adequate to finance our activities or on terms that are acceptable to us could be impaired by factors that affect us specifically or the financial services industry or economy generally.

A substantial majority of our liabilities are demand, savings, interest checking and money market deposits, which are payable on demand or upon several days’ notice, while by comparison, a substantial portion of our assets are loans, which cannot be called or sold in the same time frame.

We may not be able to replace maturing deposits and advances as necessary in the future, especially if a large number of our depositors sought to withdraw their accounts, regardless of the reason.

Our access to deposits may be negatively impacted by, among other factors, periods of low interest rates or higher interest rates, which could promote increased competition for deposits or provide customers with alternative investment options.

Additionally, negative news about us or the banking industry in general could negatively impact market and/or customer perceptions of our company, which could lead to a loss of depositor confidence and an increase in deposit withdrawals, particularly among those with uninsured deposits.

Furthermore, as we and other regional banking organizations experienced in 2023, the failure of other financial institutions may cause deposit outflows as customers spread deposits among several different banks so as to maximize their amount of FDIC insurance, move deposits to banks deemed “too big to fail” or remove deposits from the banking system entirely.

A failure to maintain adequate liquidity could have a material adverse effect on our business, financial condition and results of operations.

United may be adversely affected by the soundness of other financial institutions.

8 unchanged sentences

For more information concerning United’s interest rate risk model and policy, see the discussion in Quantitative and Qualitative Disclosures About Market Risk included in Part II, under Item 7A of this Form 10-K.

Uncertainty relating to the LIBOR determination process and LIBOR discontinuance may adversely affect our results of operations.

The London Interbank Offered Rate (“LIBOR”) and certain other “benchmarks” are the subject of recent national, international, and other regulatory guidance and proposals for reform.

These reforms may cause such benchmarks to perform differently than in the past or have other consequences, which cannot be predicted.

The United Kingdom’s Financial Conduct Authority and the administrator of LIBOR have announced that the publication of the most commonly used U.S.

dollar LIBOR settings will cease to be published or cease to be representative after June 30, 2023.

The publication of all other LIBOR settings ceased to be published as of December 31, 2021.

The bank regulatory agencies indicated that entering into new contracts that use LIBOR as a reference rate after December 31, 2021, would create safety and soundness risks and that they would examine bank practices accordingly.

The Adjustable Interest Rate (LIBOR) Act, enacted in March 2022, provides a statutory framework to replace U.S.

dollar LIBOR with a benchmark rate based on the Secured Overnight Financing Rate (“SOFR”) for contracts governed by U.S.

law that have no or ineffective fallback, and in December 2022, the Federal Reserve Board adopted related implementing rules.

United has taken steps to ensure that no new contracts using LIBOR were originated after December 31, 2021.

At this time, United intends to prioritize SOFR and Prime as the preferred alternatives to LIBOR;

however, these preferred alternatives could change over time based on market developments.

There can be no assurances on which benchmark rate(s) may replace LIBOR or how LIBOR will be determined for purposes of financial instruments that are currently referencing LIBOR when it ceases to exist.

The discontinuance of LIBOR may result in uncertainty or differences in the calculation of the applicable interest rate or payment amount depending on the terms of the governing documents, may adversely affect the value of our floating rate obligations, loans, deposits, derivatives, and other financial instruments tied to LIBOR rates and may also increase operational and other risks to the Company and the industry.

In addition, the implementation of LIBOR reform proposals may result in increased compliance costs and operational costs, including costs related to continued participation in LIBOR and the transition to a replacement reference rate or rates.

We cannot reasonably estimate the expected cost.

RISKS RELATED TO ACQUISITION ACTIVITY

94 unchanged sentences

Similar and even more expansive initiatives are expected under the current administration, including potentially increasing supervisory expectations with respect to banks’ risk management practices, accounting for the effects of climate change in stress testing scenarios and systemic risk assessments, revising expectations for credit portfolio concentrations based on climate-related factors and encouraging investment by banks in climate-related initiatives and lending to communities disproportionately impacted by the effects of climate change.

The lack of empirical data surrounding the credit and other financial risks posed

by climate change render it impossible to predict how specifically climate change may impact our financial condition and results of operations;

The lack of empirical data surrounding the credit and other financial risks posed by climate change render it impossible to predict how specifically climate change may impact our financial condition and results of operations;

however, the physical effects of climate change may also directly impact us.

14 unchanged sentences

Ongoing legislative or regulatory uncertainties and changes regarding climate risk management and practices may result in higher regulatory, compliance, credit and reputational risks and costs.

UNRESOLVED STAFF COMMENTS

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 1A. Risk Factors