10-Q 1 d10640d10q.htm FORM 10-Q Form 10-Q
Table of Contents

 

 

FORM 10-Q

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

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

For the quarterly period ended September 30, 2015

OR

 

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

For the transition period from              to             

Commission File Number: 0-13322

United Bankshares, Inc.

(Exact name of registrant as specified in its charter)

 

West Virginia   55-0641179

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

300 United Center

500 Virginia Street, East

Charleston, West Virginia

  25301
(Address of principal executive offices)   Zip Code

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

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

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

 

Large accelerated filer   x    Accelerated filer   ¨
Non-accelerated filer   ¨  (Do not check if a smaller reporting company)    Smaller reporting company   ¨

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class - Common Stock, $2.50 Par Value; 69,573,186 shares outstanding as of October 31, 2015.

 

 

 


Table of Contents

UNITED BANKSHARES, INC. AND SUBSIDIARIES

FORM 10-Q

TABLE OF CONTENTS

 

          Page  

PART I. FINANCIAL INFORMATION

  

Item 1.

  

Financial Statements

  

Consolidated Balance Sheets (Unaudited) September 30, 2015 and December 31, 2014

     4   

Consolidated Statements of Income (Unaudited) for the Three and Nine Months Ended September 30, 2015 and 2014

     5   

Consolidated Statements of Comprehensive Income (Unaudited) for the Three and Nine Months Ended September 30, 2015 and 2014

     7   

Consolidated Statement of Changes in Shareholders’ Equity (Unaudited) for the Nine Months Ended September 30, 2015

     8   

Condensed Consolidated Statements of Cash Flows (Unaudited) for the Nine Months Ended September 30, 2015 and 2014

     9   

Notes to Consolidated Financial Statements

     10   

Item 2.

  

Management’s Discussion and Analysis of Financial Condition and Results of Operations

     52   

Item 3.

  

Quantitative and Qualitative Disclosures about Market Risk

     76   

Item 4.

  

Controls and Procedures

     79   

PART II. OTHER INFORMATION

  

Item 1.

  

Legal Proceedings

     80   

Item 1A.

  

Risk Factors

     80   

Item 2.

  

Unregistered Sales of Equity Securities and Use of Proceeds

     80   

Item 3.

  

Defaults Upon Senior Securities

     81   

Item 4.

  

Mine Safety Disclosures

     81   

Item 5.

  

Other Information

     81   

Item 6.

  

Exhibits

     81   

Signatures

     82   

Exhibits Index

     83   

 

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PART I - FINANCIAL INFORMATION

 

Item 1. FINANCIAL STATEMENTS (UNAUDITED)

The September 30, 2015 and December 31, 2014, consolidated balance sheets of United Bankshares, Inc. and Subsidiaries (“United” or the “Company”), consolidated statements of income and comprehensive income for the three and nine months ended September 30, 2015 and 2014, the related consolidated statement of changes in shareholders’ equity for the nine months ended September 30, 2015, the related condensed consolidated statements of cash flows for the nine months ended September 30, 2015 and 2014, and the notes to consolidated financial statements appear on the following pages.

 

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CONSOLIDATED BALANCE SHEETS

UNITED BANKSHARES, INC. AND SUBSIDIARIES

(Dollars in thousands, except par value)

 

     September 30     December 31  
     2015     2014  
     (Unaudited)     (Note 1)  

Assets

    

Cash and due from banks

   $ 143,276      $ 175,713   

Interest-bearing deposits with other banks

     864,460        576,630   

Federal funds sold

     722        721   
  

 

 

   

 

 

 

Total cash and cash equivalents

     1,008,458        753,064   

Securities available for sale at estimated fair value (amortized cost- $1,099,646 at September 30, 2015 and $1,180,016 at December 31, 2014)

     1,107,410        1,180,386   

Securities held to maturity (estimated fair value-$36,232 at September 30, 2015 and $36,784 at December 31, 2014)

     38,795        39,310   

Other investment securities

     90,387        96,344   

Loans held for sale

     11,602        8,680   

Loans

     9,187,949        9,119,492   

Less: Unearned income

     (14,292     (14,840
  

 

 

   

 

 

 

Loans net of unearned income

     9,173,657        9,104,652   

Less: Allowance for loan losses

     (75,480     (75,529
  

 

 

   

 

 

 

Net loans

     9,098,177        9,029,123   

Bank premises and equipment

     73,915        77,520   

Goodwill

     710,252        709,794   

Accrued interest receivable

     35,424        32,334   

Other assets

     382,509        402,256   
  

 

 

   

 

 

 

TOTAL ASSETS

   $ 12,556,929      $ 12,328,811   
  

 

 

   

 

 

 

Liabilities

    

Deposits:

    

Noninterest-bearing

   $ 2,703,433      $ 2,591,619   

Interest-bearing

     6,801,463        6,453,866   
  

 

 

   

 

 

 

Total deposits

     9,504,896        9,045,485   

Borrowings:

    

Federal funds purchased

     32,250        53,840   

Securities sold under agreements to repurchase

     341,694        434,155   

Federal Home Loan Bank borrowings

     664,880        830,335   

Other long-term borrowings

     223,288        222,636   

Reserve for lending-related commitments

     1,178        1,518   

Accrued expenses and other liabilities

     78,902        84,682   
  

 

 

   

 

 

 

TOTAL LIABILITIES

     10,847,088        10,672,651   

Shareholders’ Equity

    

Preferred stock, $1.00 par value; Authorized-50,000,000 shares, none issued

     —          —     

Common stock, $2.50 par value; Authorized-100,000,000 shares; issued-69,583,445 and 69,314,407 at September 30, 2015 and December 31, 2014, respectively, including 21,397 and 18,548 shares in treasury at September 30, 2015 and December 31, 2014, respectively

     173,959        173,286   

Surplus

     751,261        742,960   

Retained earnings

     814,094        776,311   

Accumulated other comprehensive loss

     (28,740     (35,764

Treasury stock, at cost

     (733     (633
  

 

 

   

 

 

 

TOTAL SHAREHOLDERS’ EQUITY

     1,709,841        1,656,160   
  

 

 

   

 

 

 

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

   $ 12,556,929      $ 12,328,811   
  

 

 

   

 

 

 

See notes to consolidated unaudited financial statements.

 

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CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

UNITED BANKSHARES, INC. AND SUBSIDIARIES

(Dollars in thousands, except per share data)

 

     Three Months Ended     Nine Months Ended  
     September 30     September 30  
     2015      2014     2015     2014  

Interest income

         

Interest and fees on loans

   $ 97,331       $ 97,874      $ 289,184      $ 281,663   

Interest on federal funds sold and other short-term investments

     461         241        1,142        656   

Interest and dividends on securities:

         

Taxable

     7,619         7,873        23,390        21,869   

Tax-exempt

     898         869        2,674        2,632   
  

 

 

    

 

 

   

 

 

   

 

 

 

Total interest income

     106,309         106,857        316,390        306,820   

Interest expense

         

Interest on deposits

     7,145         7,077        20,826        20,493   

Interest on short-term borrowings

     213         234        653        911   

Interest on long-term borrowings

     2,633         3,628        7,942        10,264   
  

 

 

    

 

 

   

 

 

   

 

 

 

Total interest expense

     9,991         10,939        29,421        31,668   
  

 

 

    

 

 

   

 

 

   

 

 

 

Net interest income

     96,318         95,918        286,969        275,152   

Provision for loan losses

     5,182         4,748        16,252        15,628   
  

 

 

    

 

 

   

 

 

   

 

 

 

Net interest income after provision for loan losses

     91,136         91,170        270,717        259,524   

Other income

         

Fees from trust and brokerage services

     4,737         4,474        14,560        13,708   

Fees from deposit services

     9,059         11,134        29,266        31,595   

Bankcard fees and merchant discounts

     1,243         1,101        3,288        2,974   

Other service charges, commissions, and fees

     527         512        1,644        1,541   

Income from bank-owned life insurance

     1,234         1,325        3,765        4,021   

Income from mortgage banking

     665         774        1,873        1,471   

Net gain on the sale of bank premises

     0         0        0        8,976   

Other income

     236         251        979        901   

Total other-than-temporary impairment losses

     0         (561     (100     485   

Portion of loss recognized in other comprehensive income

     0         (4,153     66        (6,259
  

 

 

    

 

 

   

 

 

   

 

 

 

Net other-than-temporary impairment losses

     0         (4,714     (34     (5,774

Net gains on sales/calls of investment securities

     111         1,309        160        2,134   
  

 

 

    

 

 

   

 

 

   

 

 

 

Net investment securities gains (losses)

     111         (3,405     126        (3,640
  

 

 

    

 

 

   

 

 

   

 

 

 

Total other income

     17,812         16,166        55,501        61,547   

Other expense

         

Employee compensation

     22,700         22,173        63,692        68,726   

Employee benefits

     6,690         4,753        20,081        15,567   

Net occupancy expense

     5,654         6,400        18,725        19,349   

Other real estate owned (OREO) expense

     769         1,818        3,003        4,968   

Equipment expense

     2,601         2,376        6,745        6,518   

Data processing expense

     3,582         3,785        11,192        10,611   

Bankcard processing expense

     390         350        1,092        1,022   

FDIC insurance expense

     2,098         1,981        6,253        5,559   

Other expense

     13,200         14,058        42,286        43,503   
  

 

 

    

 

 

   

 

 

   

 

 

 

Total other expense

     57,684         57,694        173,069        175,823   
  

 

 

    

 

 

   

 

 

   

 

 

 

Income before income taxes

     51,264         49,642        153,149        145,248   

Income taxes

     16,217         16,382        48,666        48,617   
  

 

 

    

 

 

   

 

 

   

 

 

 

Net income

   $ 35,047       $ 33,260      $ 104,483      $ 96,631   
  

 

 

    

 

 

   

 

 

   

 

 

 

 

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CONSOLIDATED STATEMENTS OF INCOME (Unaudited) - continued

UNITED BANKSHARES, INC. AND SUBSIDIARIES

(Dollars in thousands, except per share data)

 

     Three Months Ended      Nine Months Ended  
     September 30      September 30  
     2015      2014      2015      2014  

Earnings per common share:

           

Basic

   $ 0.50       $ 0.48       $ 1.51       $ 1.45   
  

 

 

    

 

 

    

 

 

    

 

 

 

Diluted

   $ 0.50       $ 0.48       $ 1.50       $ 1.44   
  

 

 

    

 

 

    

 

 

    

 

 

 

Dividends per common share

   $ 0.32       $ 0.32       $ 0.96       $ 0.96   
  

 

 

    

 

 

    

 

 

    

 

 

 

Average outstanding shares:

           

Basic

     69,391,401         69,044,876         69,302,180         66,836,396   

Diluted

     69,689,723         69,269,309         69,586,287         67,069,352   

See notes to consolidated unaudited financial statements

 

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

UNITED BANKSHARES, INC. AND SUBSIDIARIES

(Dollars in thousands)

 

     Three Months Ended      Nine Months Ended  
     September 30      September 30  
     2015      2014      2015      2014  

Net income

   $ 35,047       $ 33,260       $ 104,483       $ 96,631   

Change in net unrealized gain (loss) on available-for-sale (AFS) securities, net of tax

     5,482         1,635         4,716         18,445   

Accretion of the net unrealized loss on the transfer of AFS securities to held-to-maturity (HTM) securities, net of tax

     1         2         4         4   

Change in pension plan assets, net of tax

     768         309         2,304         928   
  

 

 

    

 

 

    

 

 

    

 

 

 

Comprehensive income, net of tax

   $ 41,298       $ 35,206       $ 111,507       $ 116,008   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)

UNITED BANKSHARES, INC. AND SUBSIDIARIES

(Dollars in thousands, except per share data)

 

     Nine Months Ended September 30, 2015  
                               Accumulated              
     Common Stock                  Other           Total  
            Par            Retained     Comprehensive     Treasury     Shareholders’  
     Shares      Value      Surplus     Earnings     Income (Loss)     Stock     Equity  

Balance at January 1, 2015

     69,314,407       $ 173,286       $ 742,960      $ 776,311      ($ 35,764   ($ 633   $ 1,656,160   

Comprehensive income:

                

Net income

     0         0         0        104,483        0        0        104,483   

Other comprehensive income, net of tax:

     0         0         0        0        7,024        0        7,024   
                

 

 

 

Total comprehensive income, net of tax

                   111,507   

Stock based compensation expense

     0         0         2,144        0        0        0        2,144   

Distribution of treasury stock for deferred compensation plan (24 shares)

     0         0         0        0        0        1        1   

Purchase of treasury stock (12 shares)

     0         0         0        0        0        (1     (1

Cash dividends ($0.96 per share)

     0         0         0        (66,700     0        0        (66,700

Grant of restricted stock (53,071 shares)

     53,071         132         (132     0        0        0        0   

Forfeiture of restricted stock (2,861 shares)

     0         0         100        0        0        (100     0   

Common stock options exercised (215,967 shares)

     215,967         541         6,189        0        0        0        6,730   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at September 30, 2015

     69,583,445       $ 173,959       $ 751,261      $ 814,094      ($ 28,740   ($ 733   $ 1,709,841   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

See notes to consolidated unaudited financial statements.

 

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

UNITED BANKSHARES, INC. AND SUBSIDIARIES

(Dollars in thousands)

 

     Nine Months Ended  
     September 30  
     2015     2014  

NET CASH PROVIDED BY OPERATING ACTIVITIES

   $ 127,687      $ 99,495   

INVESTING ACTIVITIES

    

Proceeds from maturities and calls of securities held to maturity

     400        897   

Proceeds from sales of securities available for sale

     6,233        92,413   

Proceeds from maturities and calls of securities available for sale

     123,793        408,079   

Purchases of securities available for sale

     (50,955     (403,277

Purchases of bank premises and equipment

     (3,940     (6,300

Proceeds from sales of bank premises and equipment

     998        11,428   

Redemption of bank-owned life insurance policies

     0        8,930   

Purchases of other investment securities

     (11,979     (59,123

Proceeds from sales and redemptions of other investment securities

     18,005        42,282   

Acquisition of Virginia Commerce Bancorp, Inc., net of cash paid

     0        97,298   

Net change in loans

     (78,266     (308,225
  

 

 

   

 

 

 

NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES

     4,289        (115,598
  

 

 

   

 

 

 

FINANCING ACTIVITIES

    

Cash dividends paid

     (66,607     (60,354

Excess tax benefits from stock-based compensation arrangements

     853        482   

Acquisition of treasury stock

     (1     (2

Proceeds from exercise of stock options

     6,590        7,172   

Repayment of long-term Federal Home Loan Bank borrowings

     (790,455     (421,390

Proceeds from issuance of long-term Federal Home Loan Bank borrowings

     625,000        775,000   

Distribution of treasury stock for deferred compensation plan

     1        81   

Changes in:

    

Deposits

     460,978        110,112   

Federal funds purchased, securities sold under agreements to repurchase and other short-term borrowings

     (112,941     (220,345
  

 

 

   

 

 

 

NET CASH PROVIDED BY FINANCING ACTIVITIES

     123,418        190,756   
  

 

 

   

 

 

 

Increase in cash and cash equivalents

     255,394        174,653   

Cash and cash equivalents at beginning of year

     753,064        416,617   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 1,008,458      $ 591,270   
  

 

 

   

 

 

 

See notes to consolidated unaudited financial statements.

 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

UNITED BANKSHARES, INC. AND SUBSIDIARIES

1. GENERAL

The accompanying unaudited consolidated interim financial statements of United Bankshares, Inc. and Subsidiaries (“United” or “the Company”) have been prepared in accordance with accounting principles for interim financial information generally accepted in the United States and with the instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, the financial statements do not contain all of the information and footnotes required by accounting principles generally accepted in the United States. In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. The financial statements presented as of September 30, 2015 and 2014 and for the three-month and nine-month periods then ended have not been audited. The consolidated balance sheet as of December 31, 2014 has been extracted from the audited financial statements included in United’s 2014 Annual Report to Shareholders. The accounting and reporting policies followed in the presentation of these financial statements are consistent with those applied in the preparation of the 2014 Annual Report of United on Form 10-K. To conform to the 2015 presentation, certain reclassifications have been made to prior period amounts, which had no impact on net income, comprehensive income or stockholders’ equity. In the opinion of management, all adjustments necessary for a fair presentation of financial position and results of operations for the interim periods have been made. Such adjustments are of a normal and recurring nature.

The accompanying consolidated interim financial statements include the accounts of United and its wholly owned subsidiaries. United considers all of its principal business activities to be bank related. All significant intercompany accounts and transactions have been eliminated in the consolidated financial statements. Dollars are in thousands, except per share or unless otherwise noted.

New Accounting Standards

In September 2015, the FASB issued ASU 2015-16, “Simplifying the Accounting for Measurement-Period Adjustments”, as part of its simplification initiative. ASU 2015-16 requires an acquirer to “recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined.” In addition, the acquirer must record, in the financial statements for the same period, “the effect on earnings of changes in depreciation, amortization, or other income effect, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date.” Entities must also “present separately on the face of the income statement or disclose in the notes the portion of the amount recorded in the current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amount had been recognized as of the acquisition date.” ASU 2015-16 is effective for United on January 1, 2016 and is not expected to have a significant impact on the Company’s financial condition or results of operation.

In May 2015, the FASB issued ASU 2015-07, “Disclosures for Investment in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent), a consensus of the FASB Emerging Issues Task Force.” ASU 2015-07 modifies certain provision of FASB Accounting Standards Codification Topic 820, Fair Value Measurement (ASC 820). ASU 2015-07 eliminates the requirement to categorize investments in the fair value hierarchy if an investment’s fair value is measured based on net asset value (NAV) per share (or its equivalent) using the practical expedient. The reporting entities will no longer be required to provide the related fair value disclosures for these securities but instead, will be required to disclose information to help users understand the nature of the investments as well as risks, including whether it is probable that the amount realized on the sale of the investments would differ from net asset value. ASU 2015-07 is effective for United on January 1, 2016 and is not expected to have a significant impact on the Company’s financial condition or results of operation.

 

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In April 2015, the FASB issued ASU 2015-04, “Compensation – Retirement Benefits: Practical Expedient for the Measurement Date of an Employer’s Defined Benefit Obligation and Plan Assets.” ASU 2015-04 gives an employer whose fiscal year-end does not coincide with a calendar month-end the ability, as a practical expedient, to measure defined benefit retirement obligations and related plan assets as of the month-end that is closest to its fiscal year-end. ASU 2015-04 also provides guidance on accounting for contributions to the plan and significant events that require a remeasurement that occur during the period between a month-end measurement and the employer’s fiscal year-end. ASU 2015-04 is effective for United on January 1, 2016 and is not expected to have a significant impact on the Company’s financial condition or results of operation.

In April 2015, the FASB issued ASU 2015-03, “Simplifying the Presentation of Debt Issuance Costs.” Under ASU 2015-03, debt issuance costs are required to be presented as a direct deduction of debt balances on the statement of financial condition, similar to the presentation of debt discounts. ASU 2015-03 is limited to simplifying the presentation of debt issuance costs and does not change the recognition and measurement guidance for debt issuance costs. ASU 2015-03 is effective for United on January 1, 2016 and is not expected to have a significant impact on the Company’s financial condition or results of operation.

In February 2015, the FASB issued ASU 2015-02, “Amendments to the Consolidation Analysis.” ASU 2015-02 improves targeted areas of the consolidation guidance and reduces the number of consolidation models. The new consolidation standard eliminates the deferral of FAS 167 and makes changes to both the variable interest model and the voting model in ASC 810. ASU 2015-02 affects all entities, could change consolidation conclusions and may trigger additional disclosures. ASU 2015-02 is effective for United on January 1, 2016 and is not expected to have a significant impact on the Company’s financial condition or results of operation.

In January 2015, the FASB issued ASU 2015-01, “Income Statement, Extraordinary and Unusual Items (Subtopic 225-20).” ASU 2015-01 eliminates the separate presentation of extraordinary items but does not change the requirement to disclose material items that are unusual or infrequent in nature. Eliminating the concept of extraordinary items will allow entities to no longer have to assess whether a particular event or transaction is both unusual in nature and infrequent in occurrence. ASU 2015-01 is effective for United on January 1, 2016 and is not expected to have a significant impact on the Company’s financial condition or results of operation.

In June 2014, the FASB issued ASU 2014-12, “Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period.” ASU 2014-12 amends the guidance in FASB ASC 718, “Compensation-Stock Compensation”, to bring consistency to the accounting for share-based payment awards that require a specific performance target to be achieved in order for employees to become eligible to vest in the awards. The amendments affect all entities that grant their employees share-based payments in which the terms of the award provide that a performance target that affects vesting could be achieved after the requisite service period. ASU 2014-12 is effective for United on January 1, 2016, and is not expected to have a significant impact on the Company’s financial condition or results of operation.

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606).” ASU 2014-09 supersedes the revenue recognition requirements in Accounting Standards Codification Topic 605, “Revenue Recognition”, and most industry-specific guidance throughout the Accounting Standards Codification. The amendments require an entity to recognize revenue upon the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. The new revenue recognition standard sets forth a five step principle-based approach for determining revenue recognition. In April 2015, the FASB voted to defer the effective date of ASU 2014-09 by one-year for both public and private companies, and gave both public and private companies the option to “early” adopt using the original effective

 

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dates. ASU 2014-09 now will be effective for United on January 1, 2018 with early adoption permitted on January 1, 2017. Management is currently evaluating this guidance to determine the impact on the Company’s financial condition or results of operation.

2. MERGERS AND ACQUISITIONS

At the close of business on January 31, 2014 (Acquisition Date), United acquired 100% of the outstanding common stock of Virginia Commerce Bancorp, Inc. (Virginia Commerce), a Virginia corporation headquartered in Arlington, Virginia. The acquisition of Virginia Commerce significantly enhances United’s existing footprint in the Washington, D.C. Metropolitan Statistical Area. The results of operations of Virginia Commerce are included in the consolidated results of operations from the date of acquisition.

At consummation, Virginia Commerce had assets of $2,769,716, loans of $2,065,490 and deposits of $2,018,962. The transaction was accounted for under the purchase acquisition method of accounting and accordingly, assets acquired, liabilities assumed and consideration exchanged were recorded at estimated fair value on the Acquisition Date.

The aggregate purchase price was $585,533 including common stock issued valued at $547,894, stock options exchanged valued at $4,368, cash paid of $33,263 to redeem the warrant held by the U.S. Department of the Treasury (the Treasury) issued by Virginia Commerce in connection with the TARP Capital Purchase Program and $8 paid in cash to holders of Virginia Commerce common stock and restricted stock in lieu of fractional shares of United common stock. The cash portion of the purchase price was funded by cash on hand. The purchase price of the warrant was based on its fair market as agreed upon by United and the Treasury. As a result of the purchase by United, the warrant has been canceled. The number of shares issued in the transaction was 18,330,347, which were valued based on the closing market price of $29.89 for United’s common shares on January 31, 2014. The purchase price has been allocated to the identifiable tangible and intangible assets resulting in additions to goodwill and core deposit intangibles of $336,102 and $17,143, respectively. The core deposit intangibles are being amortized over ten years. Because the consideration paid was greater than the net fair value of the acquired assets and liabilities, the Company recorded goodwill as part of the acquisition. None of the goodwill from the Virginia Commerce acquisition is deductible for tax purposes. As a result of the merger, United recorded a downward fair value adjustment of $88,129 on the loans acquired from Virginia Commerce, a downward fair value adjustment of $1,708 on certain other real estate owned properties, a premium on interest-bearing deposits of $6,007, a premium on term securities sold under agreements to repurchase of $3,700 and a discount of $16,384 on junior subordinated debt securities. The discount and premium amounts are being amortized or accreted on an accelerated basis over each asset’s or liability’s estimated remaining life at the time of acquisition. At September 30, 2015, the premium on the interest-bearing deposits and the securities sold under agreements to repurchase has an estimated remaining life of three months and 0.83 years, respectively, while the discount on the junior subordinated debt securities has an estimated remaining life of 18.83 years. United assumed $109 of liabilities to provide severance benefits to terminated employees of Virginia Commerce which has no remaining balance as of September 30, 2015.

In many cases, determining the estimated fair value of the acquired assets and assumed liabilities required United to estimate cash flows expected to result from those assets and liabilities and to discount those cash flows at appropriate rates of interest. The most significant of those determinations related to the fair valuation of acquired loans. The fair value of the acquired loans was based on the present value of the expected cash flows. Periodic principal and interest cash flows were adjusted for expected losses and prepayments, then discounted to determine the present value and summed to arrive at the estimated fair value. For such loans, the excess of cash flows expected at acquisition over the estimated fair value is recognized as interest income over the remaining lives of the loans. The difference between contractually required payments at acquisition and the cash flows expected to be collected at acquisition reflects the impact of estimated credit losses and other factors, such as prepayments. In accordance with GAAP, there was no carry-over of Virginia Commerce’s previously established allowance for loan losses. As a result, standard industry coverage ratios with regard to the allowance for credit losses are less meaningful after the acquisition of Virginia Commerce.

 

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The acquired loans were divided into loans with evidence of credit quality deterioration, which are accounted for under ASC topic 310-30 (acquired impaired) and loans that do not meet this criteria, which are accounted for under ASC topic 310-20 (acquired performing). Acquired impaired loans have experienced a deterioration of credit quality from origination to acquisition for which it is probable that United will be unable to collect all contractually required payments receivable, including both principal and interest. Subsequent decreases in the expected cash flows require United to evaluate the need for additions to the Company’s allowance for credit losses. Subsequent improvements in expected cash flows generally result in the recognition of additional interest income over the then remaining lives of the loans.

In conjunction with the Virginia Commerce merger, the acquired loan portfolio was accounted for at fair value as follows:

 

     January 31, 2014  

Contractually required principal and interest at acquisition

   $ 2,685,339   

Contractual cash flows not expected to be collected

     (396,024
  

 

 

 

Expected cash flows at acquisition

     2,289,315   

Interest component of expected cash flows

     (274,539
  

 

 

 

Basis in acquired loans at acquisition – estimated fair value

   $ 2,014,776   
  

 

 

 

Included in the above table is information related to acquired impaired loans. Specifically, contractually required principal and interest, cash flows expected to be collected and estimated fair value of acquired impaired loans were $427,858, $189,277, and $179,199, respectively.

The following table shows the consideration paid for Virginia Commerce’s common equity and the amounts of acquired identifiable assets and liabilities assumed as of the Acquisition Date.

 

Purchase price:

  

Value of common shares issued (18,330,347 shares)

   $ 547,894   

Fair value of stock options assumed

     4,368   

Cash to redeem the Treasury warrant

     33,263   

Cash for fractional shares

     8   
  

 

 

 

Total purchase price

     585,533   
  

 

 

 

Identifiable assets:

  

Cash and cash equivalents

     130,569   

Investment securities

     476,541   

Loans

     2,014,776   

Premises and equipment

     10,786   

Core deposit intangibles

     17,143   

Other assets

     104,131   
  

 

 

 

Total identifiable assets

   $ 2,753,946   

Identifiable liabilities:

  

Deposits

   $ 2,024,969   

Short-term borrowings

     263,816   

Long-term borrowings

     204,335   

Other liabilities

     11,395   
  

 

 

 

Total identifiable liabilities

     2,504,515   
  

 

 

 

Net assets acquired including identifiable intangible assets

     249,431   
  

 

 

 

Resulting goodwill

   $ 336,102   
  

 

 

 

 

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The following table provides a reconciliation of goodwill:

 

Goodwill at December 31, 2014

   $ 709,794   

Addition to goodwill from Virginia Commerce acquisition

     458   
  

 

 

 

Goodwill at September 30, 2015

   $ 710,252   
  

 

 

 

3. INVESTMENT SECURITIES

Securities held for indefinite periods of time and all marketable equity securities are classified as available for sale and carried at estimated fair value. The amortized cost and estimated fair values of securities available for sale are summarized as follows.

 

     September 30, 2015  
            Gross      Gross      Estimated      Cumulative  
     Amortized      Unrealized      Unrealized      Fair      OTTI in  
     Cost      Gains      Losses      Value      AOCI (1)  

U.S. Treasury securities and obligations of U.S. Government corporations and agencies

   $ 78,864       $ 2,914       $ 0       $ 81,778       $ 0   

State and political subdivisions

     137,660         2,489         194         139,955         0   

Residential mortgage-backed securities

              

Agency

     487,995         11,738         63         499,670         0   

Non-agency

     9,638         476         3         10,111         458   

Commercial mortgage-backed securities

              

Agency

     308,596         5,680         98         314,178         0   

Asset-backed securities

     4,273         0         8         4,265         0   

Trust preferred collateralized debt obligations

     49,894         680         14,863         35,711         25,952   

Single issue trust preferred securities

     13,798         210         1,780         12,228         0   

Other corporate securities

     4,999         73         0         5,072         0   

Marketable equity securities

     3,929         535         22         4,442         0   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 1,099,646       $ 24,795       $ 17,031       $ 1,107,410       $ 26,410   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

     December 31, 2014  
            Gross      Gross      Estimated      Cumulative  
     Amortized      Unrealized      Unrealized      Fair      OTTI in  
     Cost      Gains      Losses      Value      AOCI (1)  

U.S. Treasury securities and obligations of U.S. Government corporations and agencies

   $ 88,559       $ 1,425       $ 3       $ 89,981       $ 0   

State and political subdivisions

     133,730         3,165         32         136,863         0   

Residential mortgage-backed securities

              

Agency

     547,825         8,407         547         555,685         0   

Non-agency

     11,474         544         0         12,018         458   

Commercial mortgage-backed securities

              

Agency

     316,707         2,393         2,001         317,099         0   

Asset-backed securities

     8,004         23         0         8,027         0   

Trust preferred collateralized debt obligations

     51,328         922         12,692         39,558         25,886   

Single issue trust preferred securities

     13,760         173         2,189         11,744         0   

Other corporate securities

     4,998         137         0         5,135         0   

Marketable equity securities

     3,631         648         3         4,276         0   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 1,180,016       $ 17,837       $ 17,467       $ 1,180,386       $ 26,344   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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

 

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The following is a summary of securities available-for-sale which were in an unrealized loss position at September 30, 2015 and December 31, 2014.

 

     Less than 12 months      12 months or longer  
     Fair      Unrealized      Fair      Unrealized  
     Value      Losses      Value      Losses  

September 30, 2015

           

U.S. Treasury securities and obligations of U.S. Government corporations and agencies

   $ 0       $ 0       $ 0       $ 0   

State and political subdivisions

     17,546         194         0         0   

Residential mortgage-backed securities

           

Agency

     20,780         63         0         0   

Non-agency

     378         3         0         0   

Commercial mortgage-backed securities

           

Agency

     7,934         67         9,527         31   

Asset-backed securities

     4,265         8         0         0   

Trust preferred collateralized debt obligations

     1,199         94         29,578         14,769   

Single issue trust preferred securities

     0         0         3,900         1,780   

Marketable equity securities

     973         22         0         0   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 53,075       $ 451       $ 43,005       $ 16,580   
  

 

 

    

 

 

    

 

 

    

 

 

 

December 31, 2014

        

U.S. Treasury securities and obligations of U.S. Government corporations and agencies

   $ 7,142       $ 3       $ 0       $ 0   

State and political subdivisions

     11,637         32         0         0   

Residential mortgage-backed securities

           

Agency

     96,550         547         0         0   

Commercial mortgage-backed securities

           

Agency

     21,674         56         146,897         1,945   

Asset-backed securities

     0         0         0         0   

Trust preferred collateralized debt obligations

     0         0         32,241         12,692   

Single issue trust preferred securities

     0         0         8,080         2,189   

Marketable equity securities

     23         3         0         0   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 137,026       $ 641       $ 187,218       $ 16,826   
  

 

 

    

 

 

    

 

 

    

 

 

 

Marketable equity securities consist mainly of equity securities of financial institutions and mutual funds within a rabbi trust for the payment of benefits under a deferred compensation plan for certain key officers of United and its subsidiaries. The following table shows the proceeds from maturities, sales and calls of available for sale securities and the gross realized gains and losses on sales and calls of those securities that have been included in earnings as a result of those sales and calls. Gains or losses on sales and calls of available for sale securities were recognized by the specific identification method. The realized losses relate to sales of securities within a rabbi trust for the payment of benefits under a deferred compensation plan for certain key officers of United and its subsidiaries.

 

     Three Months Ended
September 30
     Nine Months Ended
September 30
 
     2015      2014      2015      2014  

Proceeds from sales and calls

   $ 42,559       $ 64,610       $ 130,027       $ 500,493   

Gross realized gains

     43         1,314         97         2,366   

Gross realized losses

     2         5         7         232   

 

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At September 30, 2015, gross unrealized losses on available for sale securities were $17,031 on 56 securities of a total portfolio of 449 available for sale securities. Securities in an unrealized loss position at September 30, 2015 consisted primarily of pooled trust preferred collateralized debt obligations (Trup Cdos) and single issue trust preferred securities. The Trup Cdos and the single issue trust preferred securities relate mainly to securities of financial institutions. In determining whether or not a security is other-than-temporarily impaired (OTTI), management considered the severity and the duration of the loss in conjunction with United’s positive intent and the more likely than not ability to hold these securities to recovery of their cost basis or maturity.

Agency mortgage-backed securities

United’s agency mortgage-backed securities portfolio relates to securities issued by Fannie Mae, Freddie Mac, and Ginnie Mae. The total amortized cost of available for sale agency mortgage securities was $796,591 at September 30, 2015. Of the $796,591, $308,596 was related to agency commercial mortgage securities and $487,995 was related to agency residential mortgage securities. Each of the agency mortgage securities provides a guarantee of full and timely payments of principal and interest by the issuing agency. Based upon management’s analysis and judgment, it was determined that none of the agency mortgage-backed securities were other-than-temporarily impaired at September 30, 2015.

Non-agency residential mortgage-backed securities

United’s non-agency residential mortgage-backed securities portfolio relates to securities of various private label issuers. The Company has no exposure to real estate investment trusts (REITS) in its investment portfolio. The total amortized cost of available for sale non-agency residential mortgage securities was $9,638 at September 30, 2015. Of the $9,638, $2,141 was rated above investment grade and $7,496 was rated below investment grade. Approximately 30% of the portfolio includes collateral that was originated during the year of 2005 or before. The remaining 70% includes collateral that was originated in the years of 2006 and 2007. The entire portfolio of the non-agency residential mortgage securities are either the senior or super-senior tranches of their respective structure. In determining whether or not the non-agency mortgage-backed securities are other-than-temporarily impaired, management performs an in-depth analysis on each non-agency residential mortgage-backed security on a quarterly basis. The analysis includes a review of the following factors: weighted average loan to value, weighted average maturity, average FICO scores, historical collateral performance, geographic concentration, credit subordination, cross-collateralization, coverage ratios, origination year, full documentation percentage, event risk (repricing), and collateral type. Management completes a quarterly stress test to determine the level of loss protection remaining in each individual security and compares the protection remaining to the future expected performance of the underlying collateral. Additionally, management utilizes a third-party cash flow model to perform a cash flow test for each bond below investment grade. The model produces a bond specific set of cash flows based upon assumptions input by management. The input assumptions that are incorporated include the projected constant default rate (CDR) of the underlying mortgages, the loss severity upon default, and the prepayment rate on the underlying mortgage collateral. CDR and loss severities are forecasted by management after full evaluation of the underlying collateral including recent performance statistics. Therefore, based upon management’s analysis and judgment, there was no additional credit-related or noncredit-related other-than-temporary impairment recognized on the non-agency residential mortgage-backed securities at September 30, 2015.

Single issue trust preferred securities

The majority of United’s single-issue trust preferred portfolio consists of obligations from large cap banks (i.e. banks with market capitalization in excess of $10 billion). Management reviews each issuer’s current and projected earnings trends, asset quality, capitalization levels, TARP participation status, and other key factors. Upon completing the review for the third quarter of 2015, it was determined that none of the single issue securities were other-than-temporarily

 

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impaired. All single-issue trust preferred securities are currently receiving interest payments. The available for sale single issue trust preferred securities’ ratings ranged from a low of B+ to a high of BBB-. The amortized cost of available for sale single issue trust preferred securities as of September 30, 2015 consisted of $2,997 in investment grade bonds, $5,121 in split-rated bonds and $5,680 in below investment grade bonds. The amortized cost of available for sale single issue trust preferred securities included $5,680 that was in an unrealized loss position for twelve months or longer as of September 30, 2015.

Trust preferred collateralized debt obligations (Trup Cdos)

In order to determine how and when the Company recognizes OTTI, the Company first assesses its intentions regarding any sale of securities as well as the likelihood that it would be required to sell prior to recovery of the amortized cost. As of September 30, 2015, the Company has determined that it does not intend to sell any pooled trust preferred security and that it is not more likely than not that the Company will be required to sell such securities before recovery of their amortized cost.

To determine a net realizable value and assess whether other-than-temporary impairment existed, management performed detailed cash flow analysis to determine whether, in management’s judgment, it was more likely that United would not recover the entire amortized cost basis of the security. The Company discounts the security-specific cash flow projection at the security-specific interest rate and compares the present value to the amortized cost. Management’s cash flow analysis was performed for each security and considered the current deferrals and defaults within the underlying collateral, the likelihood that current deferrals would cure or ultimately default, potential future deferrals and defaults, potential prepayments, cash reserves, excess interest spread, credit analysis of the underlying collateral and the priority of payments in the cash flow structure. The underlying collateral analysis for each issuer took into consideration multiple factors including TARP participation, capital adequacy, earnings trends and asset quality. After completing its analysis of estimated cash flows, management determined that none of the Trup Cdos experienced an adverse change in cash flow during the third quarter of 2015, as the expected discounted cash flows from these securities were greater than or equal to the discounted cash flow originally expected at purchase or from the previous date of other-than-temporary impairment (cash flows are discounted at the contractual coupon rate for purposes of assessing OTTI).

There was no credit-related other-than-temporary impairment recognized in earnings for the third quarter of 2015 related to these securities. At September 30, 2015, the balance of the noncredit-related other-than-temporary impairment recognized on United’s Trup Cdo portfolio was $25,952 as compared to $25,886 at December 31, 2014.

The amortized cost of available for sale Trup Cdos in an unrealized loss position for twelve months or longer as of September 30, 2015 consisted of $4,617 in investment grade bonds and $39,731 in below investment grade bonds.

The following is a summary of the available for sale Trup Cdos as of September 30, 2015:

 

                          Amortized Cost  

Class

   Amortized
Cost
     Fair
Value
     Unrealized
Loss
     Investment
Grade
     Split
Rated
     Below
Investment
Grade
 

Senior – Bank

   $ 6,758       $ 5,981       $ 777       $ 4,617       $ 0       $ 2,141   

Mezzanine – Bank (now in senior position)

     11,859         9,097         2,762         0         0         11,859   

Mezzanine – Bank

     26,090         16,966         9,124         0         0         26,090   

Mezzanine – Bank & Insurance (combination)

     5,187         3,667         1,520         0         0         5,187   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Totals

   $ 49,894       $ 35,711       $ 14,183       $ 4,617       $ 0       $ 45,277   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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While a large difference remains between the fair value and amortized cost, the Company believes the remaining unrealized losses are related to the illiquid market for Trup Cdos rather than an adverse change in expected cash flows. The expected future cash flow substantiates the return of the remaining amortized cost of the security. The Company believes the following evidence supports the position that the remaining unrealized loss is related to the illiquid market for Trup Cdos:

 

   

The market for new issuance of Trup Cdos was robust from 2000 to 2007 with an estimated $60 billion in new issuance. The new market issuances came to an abrupt halt in 2007.

 

   

The secondary market for Trup Cdos ultimately became illiquid and although the market has improved, trading activity remains limited on these securities. In making this determination, the Company holds discussions with institutional traders to identify trends in the number and type of transactions related to the Trup Cdos.

 

   

The presence of a below-investment grade rating severely limits the pool of available buyers and contributes to the illiquidity of the market.

 

   

Trup Cdos have a more complex structure than most debt instruments, making projections of tranche returns difficult for non-specialists in the product. Deferral features available to the underlying issuers within each pool are unique to these securities. Additionally, it can be difficult for market participants to predict whether deferrals will ultimately cure or ultimately default. Due to the lack of transparency, market participants will require a higher risk premium, thus resulting in higher required discount rates.

 

   

The variability of cash flows at the time the securities were originated was expected to be very limited. Due to the financial crisis, Trup Cdos have experienced more substantive variability of cash flows compared to expectations, resulting in a higher risk premium when evaluating discount rates.

 

   

The limited, yet relevant, observable inputs indicate that market yield requirements for Trup Cdos, on a credit-adjusted basis, remained very high relative to discount rates at purchase and compared to other similarly rated debt securities.

Overall, the Company believes the lack of new issuances, illiquid secondary market, limited pool of buyers, below investment grade ratings, complex structures and high market discount rates are the key drivers of the remaining unrealized losses in the Company’s Trup Cdos and the robust expected cash flow analysis substantiates the return of the remaining amortized cost under ASC 320.

Management also considered the ratings of the Company’s bonds in its portfolio and the extent of downgrades in United’s impairment analysis. However, management considered it imperative to independently perform its own credit analysis based on cash flows as described. The ratings of the investment grade Trup Cdos in the table above range from a low of BBB- to a high of Aaa. The below investment grade Trup Cdos range from a low of Ca to a high of Ba1.

On the Trup Cdos that have not been deemed to be other-than-temporarily impaired, the collateralization ratios range from a low of 98.0% to a high of 308.4%, with a median of 147.8%, and a weighted average of 206.9%. The collateralization ratio is defined as the current performing collateral in a security, divided by the current balance of the specific tranche the Company owns, plus any debt which is senior or pari passu with the Company’s security’s priority level. Performing collateral excludes the balance of any issuer that has either defaulted or has deferred its interest payment. It is not uncommon for the collateralization of a security that is not other-than-temporarily impaired to be less than 100% due to the excess spread built into the securitization structure.

Management does not believe any individual security with an unrealized loss as of September 30, 2015 is other-than-temporarily impaired. For these securities, United believes the decline in value resulted from changes in market interest rates, credit spreads and liquidity, not a change in the expected contractual cash flows. Based on a review of each of the securities in the investment portfolio, management concluded that it expected to recover the amortized cost basis of the investment in such securities.

 

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Equity securities

The amortized cost of United’s equity securities was $3,929 at September 30, 2015. For equity securities, management has evaluated the near-term prospects of the investment in relation to the severity and duration of any impairment and based on that evaluation, management determined that no equity securities were other-than-temporarily impaired at September 30, 2015. These securities had gross unrealized losses of $22 at September 30, 2015.

Other investment securities (cost method)

During the third quarter of 2015, United also evaluated all of its cost method investments to determine if certain events or changes in circumstances during the third quarter of 2015 had a significant adverse effect on the fair value of any of its cost method securities. United determined that there were no events or changes in circumstances during the third quarter which would have an adverse effect on the fair value of any of its cost method securities. Therefore, no impairment was recorded.

Below is a progression of the credit losses on securities which United has recorded other-than-temporary charges. These charges were recorded through earnings and other comprehensive income.

 

     Three Months Ended
September 30
     Nine Months Ended
September 30
 
     2015      2014      2015      2014  

Balance of cumulative credit losses at beginning of period

   $ 23,773       $ 34,082       $ 23,739       $ 40,663   

Addition for credit losses recognized in earnings during the period:

           

Additional credit losses on securities for which OTTI was previously recognized

     0         4,714         34         5,738   

Reductions for securities sold or paid off during the period

     0         0         0         (7,605
  

 

 

    

 

 

    

 

 

    

 

 

 

Balance of cumulative credit losses at end of period

   $ 23,773       $ 38,796       $ 23,773       $ 38,796   
  

 

 

    

 

 

    

 

 

    

 

 

 

The amortized cost and estimated fair value of securities available for sale at September 30, 2015 and December 31, 2014 by contractual maturity are shown as follows. Expected maturities may differ from contractual maturities because the issuers may have the right to call or prepay obligations without penalties.

 

     September 30, 2015      December 31, 2014  
            Estimated             Estimated  
     Amortized      Fair      Amortized      Fair  
     Cost      Value      Cost      Value  

Due in one year or less

   $ 22,311       $ 22,451       $ 38,358       $ 38,727   

Due after one year through five years

     276,823         281,147         180,821         181,930   

Due after five years through ten years

     199,455         206,182         313,863         317,663   

Due after ten years

     597,128         593,188         643,343         637,790   

Marketable equity securities

     3,929         4,442         3,631         4,276   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 1,099,646       $ 1,107,410       $ 1,180,016       $ 1,180,386   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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The amortized cost and estimated fair values of securities held to maturity are summarized as follows:

 

     September 30, 2015  
            Gross      Gross      Estimated  
     Amortized      Unrealized      Unrealized      Fair  
     Cost      Gains      Losses      Value  

U.S. Treasury securities and obligations of U.S. Government corporations and agencies

   $ 10,470       $ 1,066       $ 0       $ 11,536   

State and political subdivisions

     8,975         24         304         8,695   

Residential mortgage-backed securities

           

Agency

     36         7         0         43   

Single issue trust preferred securities

     19,294         0         3,356         15,938   

Other corporate securities

     20         0         0         20   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 38,795       $ 1,097       $ 3,660       $ 36,232   
  

 

 

    

 

 

    

 

 

    

 

 

 
     December 31, 2014  
            Gross      Gross      Estimated  
     Amortized      Unrealized      Unrealized      Fair  
     Cost      Gains      Losses      Value  

U.S. Treasury securities and obligations of U.S. Government corporations and agencies

   $ 10,599       $ 1,329       $ 0       $ 11,928   

State and political subdivisions

     9,369         32         294         9,107   

Residential mortgage-backed securities

           

Agency

     41         7         0         48   

Single issue trust preferred securities

     19,281         0         3,600         15,681   

Other corporate securities

     20         0         0         20   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 39,310       $ 1,368       $ 3,894       $ 36,784   
  

 

 

    

 

 

    

 

 

    

 

 

 

Even though the market value of the held-to-maturity investment portfolio is less than its cost, the unrealized loss has no impact on the net worth or regulatory capital requirements of United. As of September 30, 2015, the Company’s two largest held-to-maturity single-issue trust preferred exposures were to Wells Fargo ($9,913) and SunTrust Bank ($7,407). The two held-to-maturity single-issue trust preferred exposures with at least one rating below investment grade included SunTrust Bank ($7,407) and Royal Bank of Scotland ($973). Other corporate securities consist mainly of bonds of corporations.

The amortized cost and estimated fair value of debt securities held to maturity at September 30, 2015 and December 31, 2014 by contractual maturity are shown below. Expected maturities may differ from contractual maturities because the issuers may have the right to call or prepay obligations without penalties.

 

     September 30, 2015      December 31, 2014  
     Amortized
Cost
     Estimated
Fair
Value
     Amortized
Cost
     Estimated
Fair
Value
 

Due in one year or less

   $ 5,049       $ 5,215       $ 360       $ 361   

Due after one year through five years

     9,287         10,200         14,499         15,848   

Due after five years through ten years

     4,294         3,998         4,293         4,007   

Due after ten years

     20,165         16,819         20,158         16,568   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 38,795       $ 36,232       $ 39,310       $ 36,784   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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The carrying value of securities pledged to secure public deposits, securities sold under agreements to repurchase, and for other purposes as required or permitted by law, approximated $1,034,982 and $1,081,299 at September 30, 2015 and December 31, 2014, respectively.

4. LOANS

Major classes of loans are as follows:

 

     September 30,
2015
     December 31,
2014
 

Commercial, financial and agricultural:

     

Owner-occupied commercial real estate

   $ 942,302       $ 1,016,364   

Nonowner-occupied commercial real estate

     2,842,158         2,760,189   

Other commercial loans

     1,609,331         1,577,438   
  

 

 

    

 

 

 

Total commercial, financial & agricultural

     5,393,791         5,353,991   

Residential real estate

     2,252,530         2,263,354   

Construction & land development

     1,125,908         1,133,251   

Consumer:

     

Bankcard

     10,171         10,437   

Other consumer

     405,549         358,459   
  

 

 

    

 

 

 

Total gross loans

   $ 9,187,949       $ 9,119,492   
  

 

 

    

 

 

 

The table above does not include loans held for sale of $11,602 and $8,680 at September 30, 2015 and December 31, 2014, respectively. Loans held for sale consist of single-family residential real estate loans originated for sale in the secondary market.

The outstanding balances in the table above include acquired impaired loans with a recorded investment of $154,180 or 1.68% of total gross loans at September 30, 2015 and $176,339 or 1.93% of total gross loans at December 31, 2014. The contractual principal in these acquired impaired loans was $217,684 and $252,759 at September 30, 2015 and December 31, 2014, respectively. The balances above do not include future accretable net interest (i.e. the difference between the undiscounted expected cash flows and the recorded investment in the loan) on the acquired impaired loans.

Activity for the accretable yield for the first nine months of 2015 follows:

 

Accretable yield at the beginning of the period

   $  11,339   

Accretion (including cash recoveries)

     (8,590

Net reclassifications to accretable from non-accretable

     10,393   

Disposals (including maturities, foreclosures, and charge-offs)

     (510
  

 

 

 

Accretable yield at the end of the period

   $ 12,632   
  

 

 

 

United’s subsidiary banks have made loans to the directors and officers of United and its subsidiaries, and to their affiliates. The aggregate dollar amount of these loans was $196,403 and $188,516 at September 30, 2015 and December 31, 2014, respectively.

5. CREDIT QUALITY

Management monitors the credit quality of its loans on an ongoing basis. Measurement of delinquency and past due status are based on the contractual terms of each loan.

For all loan classes, past due loans are reviewed on a monthly basis to identify loans for nonaccrual status. Generally, when collection in full of the principal and interest is jeopardized, the loan is placed on nonaccrual status. The accrual of interest income on commercial and most consumer loans generally is discontinued when a loan becomes 90 to 120

 

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

A loan is categorized as a troubled debt restructuring (TDR) if a concession is granted and there is deterioration in the financial condition of the borrower. TDRs can take the form of a reduction of the stated interest rate, splitting a loan into separate loans with market terms on one loan and concessionary terms on the other loan, receipts of assets from a debtor in partial or full satisfaction of a loan, the extension of the maturity date or dates at a stated interest rate lower than the current market rate for new debt with similar risk, the reduction of the face amount or maturity amount of the debt as stated in the instrument or other agreement, the reduction of accrued interest or any other concessionary type of renegotiated debt. As of September 30, 2015, United had TDRs of $21,509 as compared to $22,234 as of December 31, 2014. Of the $21,509 aggregate balance of TDRs at September 30, 2015, $9,679 was on nonaccrual status and included in the “Loans on Nonaccrual Status” on the following page. Of the $22,234 aggregate balance of TDRs at December 31, 2014, $4,194 was on nonaccrual status and included in the “Loans on Nonaccrual Status” on the following page. As of September 30, 2015, there were no commitments to lend additional funds to debtors owing receivables whose terms have been modified in TDRs. At September 30, 2015, United had restructured loans in the amount of $3,882 that were modified by a reduction in the interest rate, $7,919 that were modified by a combination of a reduction in the interest rate and the principal and $9,708 that was modified by a change in terms.

A loan acquired and accounted for under ASC topic 310-30 “Loans and Debt Securities Acquired with Deteriorated Credit Quality” is reported as an accruing loan and a performing asset.

No loans were restructured during the three months ended September 30, 2015 and 2014. The following table sets forth United’s troubled debt restructurings that have been restructured during the nine months ended September 30, 2015 and 2014, segregated by class of loans:

 

     Troubled Debt Restructurings  
     For the Nine Months Ended  
     September 30, 2015      September 30, 2014  
     Number of
Contracts
     Pre-Modification
Outstanding
Recorded
Investment
     Post-
Modification
Outstanding
Recorded
Investment
     Number of
Contracts
     Pre-Modification
Outstanding
Recorded
Investment
     Post-
Modification
Outstanding
Recorded
Investment
 

Commercial real estate:

                 

Owner-occupied

     0       $ 0       $ 0         0       $ 0       $ 0   

Nonowner-occupied

     1         669         647         0         0         0   

Other commercial

     1         240         240         2         5,630         5,630   

Residential real estate

     0         0         0         0         0         0   

Construction & land

development

     0         0         0         0         0         0   

Consumer:

                 

Bankcard

     0         0         0         0         0         0   

Other consumer

     0         0         0         0         0         0   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     2       $ 909       $ 887         2       $ 5,630       $ 5,630   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

During the first nine months of 2015, restructured loans of $887 were modified by a combination of a reduction in the interest rate and an extension of the maturity date. During the first nine months of 2014, restructured loans of $5,630

 

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were modified by a combination of a reduction in the interest rate and an extension of the maturity date. In some instances, the post-modification balance on the restructured loans is larger than the pre-modification balance due to the advancement of monies for items such as delinquent taxes on real estate property. The loans were evaluated individually for allocation within United’s allowance for loan losses. The modifications had an immaterial impact on the financial condition and results of operations for United.

No loans restructured during the twelve-month period ended September 30, 2015 subsequently defaulted, resulting in a principal charge-off during the three months and first nine months ended September 30, 2015. The following table presents troubled debt restructurings, by class of loan, that had charge-offs during the three months and nine months ended September 30, 2014. During the time periods indicated, the loan’s principal was reduced through a charge-off to the value of the underlying collateral.

 

     Three Months Ended
September 30, 2014
     Nine Months Ended
September 30, 2014
 

(In thousands)

   Number of
Contracts
     Recorded
Investment
     Number of
Contracts
     Recorded
Investment
 

Troubled Debt Restructurings

           

Commercial real estate:

           

Owner-occupied

     0       $ 0         0       $ 0   

Nonowner-occupied

     1         478         1         478   

Other commercial

     0         0         0         0   

Residential real estate

     0         0         0         0   

Construction & land development

     0         0         0         0   

Consumer:

           

Bankcard

     0         0         0         0   

Other consumer

     0         0         0         0   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     1       $ 478         1       $ 478   
  

 

 

    

 

 

    

 

 

    

 

 

 

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

Age Analysis of Past Due Loans

As of September 30, 2015

 

 

     30-89
Days
Past Due
     90 Days
or more
Past Due
     Total Past
Due
     Current &
Other (1)
     Total
Financing
Receivables
     Recorded
Investment
>90 Days
& Accruing
 

Commercial real estate:

                 

Owner-occupied

   $ 5,729       $ 14,178       $ 19,907       $ 922,395       $ 942,302       $ 1,394   

Nonowner-occupied

     12,154         20,978         33,132         2,809,026         2,842,158         1,341   

Other commercial

     8,751         29,998         38,749         1,570,582         1,609,331         6,375   

Residential real estate

     34,672         30,605         65,277         2,187,253         2,252,530         4,093   

Construction & land

development

     4,327         15,931         20,258         1,105,650         1,125,908         1,643   

Consumer:

                 

Bankcard

     448         216         664         9,507         10,171         216   

Other consumer

     7,645         1,308         8,953         396,596         405,549         1,086   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 73,726       $ 113,214       $ 186,940       $ 9,001,009       $ 9,187,949       $ 16,148   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) Other includes loans with a recorded investment of $154,180 acquired and accounted for under ASC topic 310-30 “Loans and Debt Securities Acquired with Deteriorated Credit Quality”.

 

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Table of Contents

Age Analysis of Past Due Loans

As of December 31, 2014

 

 

     30-89
Days
Past Due
     90 Days
or more
Past Due
     Total Past
Due
     Current &
Other (1)
     Total
Financing
Receivables
     Recorded
Investment
>90 Days
& Accruing
 

Commercial real estate:

                 

Owner-occupied

   $ 4,158       $ 13,582       $ 17,740       $ 998,624       $ 1,016,364       $ 1,039  

Nonowner-occupied

     10,627         14,859         25,486         2,734,703         2,760,189         45  

Other commercial

     17,348         17,975         35,323         1,542,115         1,577,438         3,034  

Residential real estate

     40,793         25,544         66,337         2,197,017         2,263,354         5,417  

Construction & land

development

     5,329         17,119         22,448         1,110,803         1,133,251         648  

Consumer:

                 

Bankcard

     471         114         585         9,852         10,437         114  

Other consumer

     8,992         1,727         10,719         347,740         358,459         1,378  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 87,718       $ 90,920       $ 178,638       $ 8,940,854       $ 9,119,492       $ 11,675  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) Other includes loans with a recorded investment of $176,339 acquired and accounted for under ASC topic 310-30 “Loans and Debt Securities Acquired with Deteriorated Credit Quality”.

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

Loans on Nonaccrual Status

 

      September 30,
2015
     December 31,
2014
 

Commercial real estate:

     

Owner-occupied

   $ 12,784       $ 12,543   

Nonowner-occupied

     19,637         14,814   

Other commercial

     23,623         14,941   

Residential real estate

     26,512         20,127   

Construction & land development

     14,288         16,471   

Consumer:

     

Bankcard

     0         0   

Other consumer

     222         349   
  

 

 

    

 

 

 

Total

   $ 97,066       $ 79,245   
  

 

 

    

 

 

 

United assigns credit quality indicators of pass, special mention, substandard and doubtful to its loans. For United’s loans with a corporate credit exposure, United internally assigns a grade based on the creditworthiness of the borrower. For loans with a consumer credit exposure, United internally assigns a grade based upon an individual loan’s delinquency status. United reviews and updates, as necessary, these grades on a quarterly basis.

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

A substandard loan with a corporate credit exposure is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness, or

 

24


Table of Contents

weaknesses, that jeopardize the liquidation of the debt by the borrower. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. They require more intensive supervision by management. Substandard loans are generally characterized by current or expected unprofitable operations, inadequate debt service coverage, inadequate liquidity, or marginal capitalization. Repayment may depend on collateral or other credit risk mitigants. For some substandard loans, the likelihood of full collection of interest and principal may be in doubt and thus, placed on nonaccrual. For loans with a consumer credit exposure, loans that are 90 days or more past due or that have been placed on nonaccrual are considered substandard.

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

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

Credit Quality Indicators

Corporate Credit Exposure

 

As of September 30, 2015

 
     Commercial Real Estate      Other
Commercial
     Construction
& Land
Development
 
     Owner-
occupied
     Nonowner-
occupied
       

Grade:

           

Pass

   $ 857,365       $ 2,691,563       $ 1,454,916       $ 971,431   

Special mention

     26,129         27,057         46,861         61,767   

Substandard

     58,808         123,538         100,512         92,710   

Doubtful

     0         0         7,042         0   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 942,302       $ 2,842,158       $ 1,609,331       $ 1,125,908   
  

 

 

    

 

 

    

 

 

    

 

 

 

As of December 31, 2014

 
     Commercial Real Estate      Other
Commercial
     Construction
& Land
Development
 
     Owner-
occupied
     Nonowner-
occupied
       

Grade:

           

Pass

   $ 920,981       $ 2,592,783       $ 1,407,853       $ 966,335   

Special mention

     26,181         48,382         20,776         64,597   

Substandard

     69,202         119,024         147,494         102,319   

Doubtful

     0         0         1,315         0   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 1,016,364       $ 2,760,189       $ 1,577,438       $ 1,133,251   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

25


Table of Contents

Credit Quality Indicators

Consumer Credit Exposure

 

As of September 30, 2015

 
     Residential
Real Estate
     Bankcard      Other
Consumer
 

Grade:

        

Pass

   $ 2,182,354       $ 9,507       $ 396,446   

Special mention

     14,027         448         7,751   

Substandard

     54,958         216         1,352   

Doubtful

     1,191         0         0   
  

 

 

    

 

 

    

 

 

 

Total

   $ 2,252,530       $ 10,171       $ 405,549   
  

 

 

    

 

 

    

 

 

 

 

As of December 31, 2014

 
     Residential
Real Estate
     Bankcard      Other
Consumer
 

Grade:

        

Pass

   $ 2,176,655       $ 9,852       $ 347,442   

Special mention

     18,254         471         9,113   

Substandard

     66,973         114         1,904   

Doubtful

     1,472         0         0   
  

 

 

    

 

 

    

 

 

 

Total

   $ 2,263,354       $ 10,437       $ 358,459   
  

 

 

    

 

 

    

 

 

 

Loans are designated as impaired when, in the opinion of management, based on current information and events, the collection of principal and interest in accordance with the loan contract is doubtful. Typically, United does not consider loans for impairment unless a sustained period of delinquency (i.e. 90 days or more) is noted or there are subsequent events that impact repayment probability (i.e. negative financial trends, bankruptcy filings, eminent foreclosure proceedings, etc.). Impairment is evaluated in total for smaller-balance loans of a similar nature and on an individual loan basis for other loans. Consistent with United’s existing method of income recognition for loans, interest on impaired loans, except those classified as nonaccrual, is recognized as income using the accrual method. Impaired loans, or portions thereof, are charged off when deemed uncollectible.

The following table sets forth United’s impaired loans information, by class of loans:

 

     Impaired Loans  
     September 30, 2015      December 31, 2014  
     Recorded
Investment
     Unpaid
Principal
Balance
     Related
Allowance
     Recorded
Investment
     Unpaid
Principal
Balance
     Related
Allowance
 

With no related allowance recorded:

                 

Commercial real estate:

                 

Owner-occupied

   $ 41,438      $ 41,651      $ 0       $ 37,811      $ 37,811      $ 0   

Nonowner-occupied

     76,314        76,778        0         48,126        48,462        0   

Other commercial

     30,002        31,868        0         38,521        40,329        0   

Residential real estate

     25,776        26,541        0         31,262        31,930        0   

Construction & land development

     30,131        31,838        0         64,945        68,799        0   

Consumer:

                 

Bankcard

     0        0        0         0        0        0   

Other consumer

     39         39         0         41        41        0   

With an allowance recorded:

                 

Commercial real estate:

                 

Owner-occupied

   $ 4,590      $ 4,590      $ 1,194       $ 5,014      $ 5,014      $ 776  

Nonowner-occupied

     7,056        7,056        1,339         6,994        6,994        797  

Other commercial

     18,287        21,788        12,394         17,554        20,554        7,168  

Residential real estate

     10,054        11,374        3,292         6,028        7,349        2,578  

 

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Table of Contents
     Impaired Loans  
     September 30, 2015      December 31, 2014  
     Recorded
Investment
     Unpaid
Principal
Balance
     Related
Allowance
     Recorded
Investment
     Unpaid
Principal
Balance
     Related
Allowance
 

Construction & land

development

     13,635        19,639        4,467         10,779        14,189        3,627  

Consumer:

                 

Bankcard

     0        0        0        0        0        0  

Other consumer

     0        0        0        0         0         0  

Total:

                 

Commercial real estate:

                 

Owner-occupied

   $ 46,028      $ 46,241      $ 1,194       $ 42,825      $ 42,825      $ 776  

Nonowner-occupied

     83,370        83,834        1,339         55,120        55,456        797  

Other commercial

     48,289        53,656        12,394         56,075        60,883        7,168  

Residential real estate

     35,830        37,915        3,292         37,290        39,279        2,578  

Construction & land

development

     43,766        51,477        4,467         75,724        82,988        3,627  

Consumer:

                 

Bankcard

     0        0        0        0        0        0  

Other consumer

     39        39        0        41        41        0  

 

     Impaired Loans  
     For the Three Months Ended  
     September 30, 2015      September 30, 2014  
     Average
Recorded
Investment
     Interest
Income
Recognized
     Average
Recorded
Investment
     Interest
Income
Recognized
 

With no related allowance recorded:

           

Commercial real estate:

           

Owner-occupied

   $ 42,679      $ 75      $ 37,208      $ 129  

Nonowner-occupied

     73,694         566        63,035        230  

Other commercial

     32,839        133        20,679        59  

Residential real estate

     28,572        31        32,864        46  

Construction & land development

     31,815        6        44,191        97  

Consumer:

           

Bankcard

     0        0        0        0  

Other consumer

     35        0        55        0  

With an allowance recorded:

           

Commercial real estate:

           

Owner-occupied

   $ 4,603      $ 28      $ 4,352      $ 114  

Nonowner-occupied

     6,891        44        7,332        67  

Other commercial

     18,990        56         12,537        97  

Residential real estate

     8,801        6         7,716        8   

Construction & land development

     12,661        114         11,491        31  

Consumer:

           

Bankcard

     0        0        0        0  

Other consumer

     0        0        76        0  

Total:

           

Commercial real estate:

           

Owner-occupied

   $ 47,282      $ 103      $ 41,560      $ 243  

Nonowner-occupied

     80,585        610        70,367        297  

Other commercial

     51,829        189        33,216        156  

Residential real estate

     37,373        37        40,580        54  

Construction & land development

     44,476        120        55,682        128  

Consumer:

           

Bankcard

     0        0        0        0  

Other consumer

     35        0        131        0  

 

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Table of Contents
     Impaired Loans  
     For the Nine Months Ended  
     September 30, 2015      September 30, 2014  
     Average
Recorded
Investment
     Interest
Income
Recognized
     Average
Recorded
Investment
     Interest
Income
Recognized
 

With no related allowance recorded:

           

Commercial real estate:

           

Owner-occupied

   $ 42,908      $ 254      $ 35,959      $ 617  

Nonowner-occupied

     68,919         1,083        62,205        440  

Other commercial

     34,472        373        27,454        217  

Residential real estate

     29,127        177        30,484        195  

Construction & land development

     34,703        165        46,747        234   

Consumer:

           

Bankcard

     0        0        0        0  

Other consumer

     36        0        45        0  

With an allowance recorded:

           

Commercial real estate:

           

Owner-occupied

   $ 4,664      $ 86      $ 4,236      $ 189  

Nonowner-occupied

     6,747        90        7,606        159  

Other commercial

     18,740        274         12,751        185  

Residential real estate

     7,879        35         8,548        101   

Construction & land development

     11,606        206         10,694        47  

Consumer:

           

Bankcard

     0        0        0        0  

Other consumer

     0        0        102        0  

Total:

           

Commercial real estate:

           

Owner-occupied

   $ 47,572      $ 340      $ 40,195      $ 806  

Nonowner-occupied

     75,666        1,173        69,811        599  

Other commercial

     53,212        647        40,205        402  

Residential real estate

     37,006        212        39,032        296  

Construction & land development

     46,309        371        57,441        281  

Consumer:

           

Bankcard

     0        0        0        0  

Other consumer

     36        0        147        0  

At September 30, 2015 and December 31, 2014, other real estate owned (OREO) included in other assets in the Consolidated Balance Sheets was $34,119 and $38,778, respectively. OREO consists of real estate acquired in foreclosure or other settlement of loans. Such assets are carried at the lower of the investment in the assets or the fair value of the assets less estimated selling costs. Any adjustment to the fair value at the date of transfer is charged against the allowance for loan losses. Any subsequent valuation adjustments as well as any costs relating to operating, holding or disposing of the property are recorded in other expense in the period incurred. At September 30, 2015 and December 31, 2014, the recorded investment of consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings are in process was $473 and $311, respectively.

6. ALLOWANCE FOR CREDIT LOSSES

The allowance for loan losses is management’s estimate of the probable credit losses inherent in the loan portfolio. Management’s evaluation of the adequacy of the allowance for loan losses and the appropriate provision for credit losses is based upon a quarterly evaluation of the portfolio. This evaluation is inherently subjective and requires significant estimates, including the amounts and timing of estimated future cash flows, estimated losses on pools of loans based on historical loss experience, and consideration of current economic trends, all of which are susceptible to constant and significant change. Allocations are made for specific commercial loans based upon management’s estimate of the borrowers’ ability to repay and other factors impacting collectibility. Other commercial loans not specifically reviewed on an individual basis are evaluated based on historical loss percentages applied to loan pools that have been segregated by the type of risk. Allocations for loans other than commercial loans are made based upon historical loss

 

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Table of Contents

experience adjusted for current environmental conditions. The allowance for credit losses includes estimated probable inherent but undetected losses within the portfolio due to uncertainties in economic conditions, delays in obtaining information, including unfavorable information about a borrower’s financial condition, the difficulty in identifying triggering events that correlate perfectly to subsequent loss rates, and risk factors that have not yet fully manifested themselves in loss allocation factors. In addition, a portion of the allowance accounts for the inherent imprecision in the allowance for credit losses analysis.

For purposes of determining the general allowance, the loan portfolio is segregated by loan product type to recognize differing risk profiles among loan categories. It is further segregated by credit grade for risk-rated loan pools and delinquency for homogeneous loan pools. The outstanding principal balance within each pool is multiplied by historical loss data and certain qualitative factors to derive the general loss allocation per pool. Specific loss allocations are calculated for loans in excess of $500 thousand in accordance with ASC topic 310. Risk characteristics of owner-occupied commercial real estate loans and other commercial loans are similar in that they are normally dependent upon the borrower’s internal cash flow from operations to service debt. Nonowner-occupied commercial real estate loans differ in that cash flow to service debt is normally dependent on external income from third parties for use of the real estate such as rents, leases and room rates. Residential real estate loans are dependent upon individual borrowers who are affected by changes in general economic conditions, demand for housing and resulting residential real estate valuation. Construction and land development loans are impacted mainly by demand whether for new residential housing or for retail, industrial, office and other types of commercial construction within a given area. Consumer loan pool risk characteristics are influenced by general, regional and local economic conditions. During the first nine months of 2015, there were no material changes to the accounting policy or methodology related to the allowance for loan losses.

Loans deemed to be uncollectible are charged against the allowance for loan losses, while recoveries of previously charged-off amounts are credited to the allowance for loan losses. For commercial loans, when a loan or a portion of a loan is identified to contain a loss, a charge-off recommendation is directed to management to charge-off all or a portion of that loan. Generally, any unsecured commercial loan more than six months delinquent in payment of interest must be charged-off in full. If secured, the charge-off is generally made to reduce the loan balance to a level equal to the liquidation value of the collateral when payment of principal and interest is six months delinquent. Any commercial loan, secured or unsecured, on which a principal or interest payment has not been made within 90 days, is reviewed monthly for appropriate action.

For consumer loans, closed-end retail loans that are 120 cumulative days delinquent from the contractual due date and open-end loans 180 cumulative days delinquent from the contractual due date are charged-off. Any consumer loan on which a principal or interest payment has not been made within 90 days is reviewed monthly for appropriate action. For a one-to-four family open-end or closed-end residential real estate loan, home equity loan, or high-loan-to-value loan that has reached 180 or more days past due, management evaluates the collateral position and charge-offs any amount that exceeds the value of the collateral. On retail credits for which the borrower is in bankruptcy, all amounts deemed unrecoverable are charged off within 60 days of the receipt of the notification. On retail credits effected by fraud, a loan is charged-off within 90 days of the discovery of the fraud. In the event of the borrower’s death and if repayment within the required timeframe is uncertain, the loan is generally charged-off as soon as the amount of the loss is determined.

For loans acquired through the completion of a transfer, including loans acquired in a business combination, that have evidence of deterioration of credit quality since origination and for which it is probable, at acquisition, that United will be unable to collect all contractually required payment receivable are initially recorded at fair value (as determined by the present value of expected future cash flows) with no valuation allowance. The difference between the undiscounted cash flows expected at acquisition and the investment in the loan, or the “accretable yield,” is recognized as interest income on a level-yield method over the life of the loan. Contractually required payments for interest and principal that exceed the undiscounted cash flows expected at acquisition, or the “nonaccretable difference,” are not recognized as a yield adjustment or as a loss accrual or a valuation allowance. Increases in expected cash flows subsequent to the initial

 

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Table of Contents

investment are recognized prospectively through adjustment of the yield on the loan over its remaining life. Decreases in expected cash flows are recognized as impairment. Valuation allowances on these impaired loans reflect only losses incurred after the acquisition (meaning the present value of all cash flows expected at acquisition that ultimately are not to be received). The amount of provision for loan losses related to loans acquired that have evidence of deterioration of credit quality was $267 and $381 for the third quarter of 2015 and 2014, respectively, and $4,299 and $727 for the nine months ended September 30, 2015 and 2014, respectively.

United maintains an allowance for loan losses and a reserve for lending-related commitments such as unfunded loan commitments and letters of credit. The reserve for lending-related commitments of $1,178 and $1,518 at September 30, 2015 and December 31, 2014, respectively, is separately classified on the balance sheet and is included in other liabilities. The combined allowance for loan losses and reserve for lending-related commitments are referred to as the allowance for credit losses.

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

Allowance for Loan Losses

For the Three Months Ended September 30, 2015

 

      Commercial Real Estate     Other
Commercial
     Residential
Real
Estate
    Construction
& Land
Development
    Consumer      Allowance
for
Estimated
Imprecision
    Total  
   Owner-
occupied
     Nonowner-
occupied
               

Allowance for Loan Losses:

                   

Beginning balance

   $ 4,247      $ 7,296     $ 28,476      $ 14,920     $ 16,975     $ 3,169      $ 132     $ 75,215  

Charge-offs

     175        28       3,889        756       54       505        0       5,407  

Recoveries

     129        15       101        76       64       105        0       490  

Provision

     158        (255 )     6,736        (1,041 )     (1,190 )     817        (43 )     5,182  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Ending balance

   $ 4,359      $ 7,028     $ 31,424      $ 13,199     $ 15,795     $ 3,586      $ 89     $ 75,480  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Allowance for Loan Losses and Carrying Amount of Loans

For the Nine Months Ended September 30, 2015

 

      Commercial Real Estate     Other
Commercial
     Residential
Real
Estate
     Construction
& Land
Development
    Consumer      Allowance
for
Estimated
Imprecision
     Total  
   Owner-
occupied
     Nonowner-
occupied
                 

Allowance for Loan Losses:

                     

Beginning balance

   $ 4,041      $ 8,167     $ 26,931      $ 13,835      $ 19,402     $ 3,083      $ 70      $ 75,529  

Charge-offs

     4,303        355       7,941        2,888        825       1,830        0        18,142  

Recoveries

     249        53       297        347        451       444        0        1,841  

Provision

     4,372        (837 )     12,137        1,905        (3,233 )     1,889        19        16,252  
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Ending balance

   $ 4,359      $ 7,028     $ 31,424      $ 13,199      $ 15,795     $ 3,586      $ 89      $ 75,480  
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Ending Balance: individually evaluated for impairment

   $ 1,194      $ 1,339     $ 12,394      $ 3,291       $ 4,468     $ 0      $ 0       $ 22,686  

Ending Balance: collectively evaluated for impairment

   $ 3,165      $ 5,689     $ 19,030      $ 9,908       $ 11,327     $ 3,586      $ 89       $ 52,794  

Ending Balance: loans acquired with deteriorated credit quality

   $ 0      $ 0     $ 0      $ 0      $ 0     $ 0      $ 0       $ 0  

 

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Table of Contents

Allowance for Loan Losses and Carrying Amount of Loans

For the Nine Months Ended September 30, 2015

 

      Commercial Real Estate      Other
Commercial
     Residential
Real Estate
     Construction
& Land
Development
     Consumer      Allowance
for
Estimated
Imprecision
     Total  
   Owner-
occupied
     Nonowner-
occupied
                   

Financing receivables:

                       

Ending balance

   $ 942,302       $ 2,842,158       $ 1,609,331       $ 2,252,530       $ 1,125,908       $ 415,720       $ 0      $ 9,187,949   

Ending Balance: individually evaluated for impairment

   $ 12,753       $ 28,385       $ 25,136       $ 14,741       $ 17,010      $ 0      $ 0      $ 98,025   

Ending Balance: collectively evaluated for impairment

   $ 902,958       $ 2,760,084       $ 1,564,569       $ 2,220,777       $ 1,071,684       $ 415,672       $ 0      $ 8,935,744   

Ending Balance: loans acquired with deteriorated credit quality

   $ 26,591       $ 53,689      $ 19,626       $ 17,012       $ 37,214       $ 48      $ 0      $ 154,180   

Allowance for Loan Losses and Carrying Amount of Loans

For the Year Ended December 31, 2014

 

      Commercial Real Estate      Other
Commercial
     Residential
Real
Estate
     Construction
& Land
Development
     Consumer      Allowance
for
Estimated
Imprecision
     Total  
   Owner-
occupied
    Nonowner-
occupied
                   

Allowance for Loan Losses:

                      

Beginning balance

   $ 5,653     $ 8,992      $ 20,917      $ 16,694      $ 18,953      $ 2,945      $ 44      $ 74,198  

Charge-offs

     3,073       2,097        4,947        5,027        7,476        2,621        0        25,241  

Recoveries

     2,372       268        294        573        685        443        0        4,635  

Provision

     (911 )     1,004        10,667        1,595        7,240        2,316        26        21,937  
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Ending balance

   $ 4,041     $ 8,167      $ 26,931      $ 13,835      $ 19,402      $ 3,083      $ 70      $ 75,529  
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Ending Balance: individually evaluated for impairment

   $ 776      $ 797       $ 7,168       $ 2,578       $ 3,627       $ 0       $ 0       $ 14,946   

Ending Balance: collectively evaluated for impairment

   $ 3,265     $ 7,370      $ 19,763      $ 11,257      $ 15,775      $ 3,083      $ 70      $ 60,583  

Ending Balance: loans acquired with deteriorated credit quality

   $ 0     $ 0      $ 0      $ 0      $ 0      $ 0      $ 0      $ 0  

 

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Table of Contents

Allowance for Loan Losses and Carrying Amount of Loans

For the Year Ended December 31, 2014

 

      Commercial Real Estate      Other
Commercial
     Residential
Real Estate
     Construction
& Land
Development
     Consumer      Allowance
for
Estimated
Imprecision
     Total  
   Owner-
occupied
     Nonowner-
occupied
                   

Financing receivables:

                       

Ending balance

   $ 1,016,364      $ 2,760,189      $ 1,577,438      $ 2,263,354      $ 1,133,251      $ 368,896      $ 0      $ 9,119,492  

Ending Balance: individually evaluated for impairment

   $ 12,869      $ 13,733      $ 27,491      $ 16,189      $ 17,168      $ 0       $ 0      $ 87,450  

Ending Balance: collectively evaluated for impairment

   $ 971,408      $ 2,692,374      $ 1,523,504      $ 2,227,605      $ 1,071,966      $ 368,846      $ 0      $ 8,855,703  

Ending Balance: loans acquired with deteriorated credit quality

   $ 32,087      $ 54,082      $ 26,443      $ 19,560      $ 44,117      $ 50      $ 0      $ 176,339  

7. INTANGIBLE ASSETS

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

 

     As of September 30, 2015  
     Gross Carrying
Amount
     Accumulated
Amortization
     Net Carrying
Amount
 

Amortized intangible assets:

        

Core deposit intangible assets

   $ 60,577       ($ 41,882    $ 18,695   
  

 

 

    

 

 

    

 

 

 

Goodwill not subject to amortization

         $ 710,252   
        

 

 

 
     As of December 31, 2014  
     Gross Carrying
Amount
     Accumulated
Amortization
     Net Carrying
Amount
 

Amortized intangible assets:

        

Core deposit intangible assets

   $ 60,577       ($ 39,317    $ 21,260   
  

 

 

    

 

 

    

 

 

 

Goodwill not subject to amortization

         $ 709,794   
        

 

 

 

United incurred amortization expense of $855 and $2,565 for the quarter and nine months ended September 30, 2015, respectively, and $1,054 and $2,967 for the quarter and nine months ended September 30, 2014, respectively.

The following table sets forth the anticipated amortization expense for intangible assets for the years subsequent to 2014:

 

Year

   Amount  

2015

   $ 3,420   

2016

     2,981   

2017

     2,767   

2018

     2,574   

2019 and thereafter

     9,518   

 

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Table of Contents

8. SHORT-TERM BORROWINGS

Federal funds purchased and securities sold under agreements to repurchase are a significant source of funds for the Company. United has various unused lines of credit available from certain of its correspondent banks in the aggregate amount of $254,000. These lines of credit, which bear interest at prevailing market rates, permit United to borrow funds in the overnight market, and are renewable annually subject to certain conditions. At September 30, 2015, federal funds purchased were $32,250 while securities sold under agreements to repurchase (REPOs) were $290,461. Excluded from the $290,461 of total REPOs were wholesale REPOs of $51,233, including purchase accounting amounts, assumed in the Virginia Commerce merger. These wholesale REPOs are scheduled to mature in May of 2018. The securities sold under agreements to repurchase were accounted for as collateralized financial transactions. They were recorded at the amounts at which the securities were acquired or sold plus accrued interest.

United has a $20,000 line of credit with an unrelated financial institution to provide for general liquidity needs. The line is an unsecured, revolving line of credit. The line will be renewable on a 360 day basis and will carry an indexed, floating-rate of interest. The line requires compliance with various financial and nonfinancial covenants. At September 30, 2015, United had no outstanding balance under this line of credit.

9. LONG-TERM BORROWINGS

United’s subsidiary banks are members of the Federal Home Loan Bank (FHLB). Membership in the FHLB makes available short-term and long-term borrowings from collateralized advances. All FHLB borrowings are collateralized by a mix of single-family residential mortgage loans, commercial loans and investment securities. At September 30, 2015, United had an unused borrowing amount of approximately $2,559,566 available subject to delivery of collateral after certain trigger points. Advances may be called by the FHLB or redeemed by United based on predefined factors and penalties.

At September 30, 2015, $664,880 of FHLB advances with a weighted-average interest rate of 0.43% are scheduled to mature within the next four years. No overnight funds are included in the $664,880 above at September 30, 2015. The scheduled maturities of these FHLB borrowings are as follows:

 

Year

   Amount  

2015

   $ 628,975   

2016

     618   

2017

     287   

2018

     0   

2019 and thereafter

     35,000   
  

 

 

 

Total

   $ 664,880   
  

 

 

 

At September 30, 2015, United had a total of thirteen statutory business trusts that were formed for the purpose of issuing or participating in pools of trust preferred capital securities (Capital Securities) with the proceeds invested in junior subordinated debt securities (Debentures) of United. The Debentures, which are subordinate and junior in right of payment to all present and future senior indebtedness and certain other financial obligations of United, are the sole assets of the trusts and United’s payment under the Debentures is the sole source of revenue for the trusts. At September 30, 2015 and December 31, 2014, the outstanding balance of the Debentures was $223,288 and $222,636, respectively, and was included in the category of long-term debt on the Consolidated Balance Sheets entitled “Other long-term borrowings.” The Capital Securities are not included as a component of shareholders’ equity in the Consolidated Balance Sheets. United fully and unconditionally guarantees each individual trust’s obligations under the Capital Securities.

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

 

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Table of Contents

During the fourth quarter of 2014, United redeemed the Capital Securities of Sequoia Capital Trust I. As part of the redemption, United retired the $2,000 principal of 10.18% Junior Subordinated Debentures issued by Sequoia Capital Trust I. Also, during the fourth quarter of 2014, United redeemed the Capital Securities of VCBI Capital Trust IV. As part of the redemption, United retired the $25,000 principal amount of 10.20% Junior Subordinated Debentures issued by VCBI Capital Trust IV. The redemptions were funded with excess cash available to United.

In July of 2013, United’s primary federal regulator, the Federal Reserve, published final rules (the “Basel III Capital Rules”) establishing a new comprehensive capital framework for U.S. banking organizations which were effective for United on January 1, 2015. The Basel III Capital Rules permit bank holding companies such as United with less than $15 billion in total consolidated assets as of December 31, 2009 to include in additional Tier 1 Capital trust preferred securities and cumulative perpetual preferred stock issued and included in Tier 1 Capital prior to May 19, 2010 on a permanent basis, without any phase-out. However, United’s Trust Preferred Securities are subject to a limit of 25 percent of Tier 1 capital elements excluding any non-qualifying capital instruments and after all regulatory capital deductions and adjustments applied to Tier 1 capital. Trust Preferred Securities no longer included in United’s Tier 1 capital may be included as a component of Tier 2 capital on a permanent basis without phase-out. As of September 30, 2015, all of United’s Trust Preferred Securities qualify as Tier 1 Capital.

10. COMMITMENTS AND CONTINGENT LIABILITIES

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

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

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the commitment contract. Commitments generally have fixed expiration dates or other termination clauses and may require the payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily, and historically do not, represent future cash requirements. The amount of collateral obtained, if deemed necessary upon the extension of credit, is based on management’s credit evaluation of the counterparty. United had approximately $2,556,542 and $2,763,129 of loan commitments outstanding as of September 30, 2015 and December 31, 2014, respectively, approximately half of which expire within one year.

Commercial and standby letters of credit are agreements used by United’s customers as a means of improving their credit standing in their dealings with others. Under these agreements, United guarantees certain financial commitments of its customers. A commercial letter of credit is issued specifically to facilitate trade or commerce. Typically, under the terms of a commercial letter of credit, a commitment is drawn upon when the underlying transaction is consummated as intended between the customer and a third party. As of September 30, 2015 and December 31, 2014, United had $226 and $216, respectively, of outstanding commercial letters of credit. A standby letter of credit is generally contingent upon the failure of a customer to perform according to the terms of an underlying contract with a third party. United has issued standby letters of credit of $144,698 and $160,230 as of September 30, 2015 and December 31, 2014, respectively. In accordance with the Contingencies Topic of the FASB Accounting Standards Codification, United has determined that substantially all of its letters of credit are renewed on an annual basis and the fees associated with these letters of credit are immaterial.

 

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

11. DERIVATIVE FINANCIAL INSTRUMENTS

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

United accounts for its derivative financial instruments in accordance with the Derivatives and Hedging topic of the FASB Accounting Standards Codification. The Derivatives and Hedging topic require all derivative instruments to be carried at fair value on the balance sheet. United has designated certain derivative instruments used to manage interest rate risk as hedge relationships with certain assets, liabilities or cash flows being hedged. Certain derivatives used for interest rate risk management are not designated in a hedge relationship.

Derivative instruments designated in a hedge relationship to mitigate exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivative instruments designated in a hedge relationship to mitigate exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. As of September 30, 2015, United has only fair value hedges.

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

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

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

 

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The following table sets forth certain information regarding the interest rate derivatives portfolio used for interest-rate risk management purposes and designated as accounting hedges under the Derivatives and Hedging topic at September 30, 2015.

 

Derivative Classifications and Hedging Relationships

September 30, 2015

 

  

  

      Notional
Amount
     Average
Pay Rate
 

Fair Value Hedges:

     

Pay Fixed Swaps (Hedging Commercial Loans)

   $ 36,481         3.44
  

 

 

    

 

 

 

Total Derivatives Used in Fair Value Hedges

   $ 36,481      
  

 

 

    

Total Derivatives Used for Interest Rate Risk Management and Designated as Hedges

   $ 36,481      
  

 

 

    

The following tables summarize the fair value of United’s derivative financial instruments.

 

     Asset Derivatives  
     September 30, 2015      December 31, 2014  
     Balance
Sheet
Location
     Fair
Value
     Balance
Sheet
Location
     Fair
Value
 

Derivatives designated as hedging instruments

           

Interest rate contracts

     Other assets       $ 0         Other assets