Credit Quality

6 Months Ended

Jun. 30, 2020

Text Block [Abstract]

Credit Quality

5. CREDIT QUALITY

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

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

A loan is categorized as a troubled debt restructuring (“TDR”) if a concession is granted and there is deterioration in the financial condition of the borrower. TDRs can take the form of a reduction of the stated interest rate, splitting a loan into separate loans with market terms on one loan and concessionary terms on the other loan, receipts of assets from a debtor in partial or full satisfaction of a loan, the extension of the maturity date or dates at a stated interest rate lower than the current market rate for new debt with similar risk, the reduction of the face amount or maturity amount

of the debt as stated in the instrument or other agreement, the reduction of accrued interest or any other concessionary type of renegotiated debt. Under United’s current loan policy, a loan is not recognized as a TDR until it becomes probable that the loan will be a TDR. In response to the coronavirus (“COVID-19”) pandemic and its economic impact on our customers, United has implemented a short-term modification program that complies with the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act to provide temporary payment relief to those borrowers directly impacted by COVID-19 who were not more than 30 days past due as of December 31, 2019. This program allows for a deferral of payments for 90 days, which we may extend for an additional 90 days, for a maximum of 180 days. As provided for under the CARES Act, these loan modifications are exempt by law from classification as a TDR as defined by GAAP, from the period beginning March 1, 2020 until the earlier of December 31, 2020 or the date that is 60 days after the date on which the national emergency concerning the COVID-19 outbreak declared by President Trump terminates.

As of June 30, 2020, United had TDRs of $77,436 as compared to $58,369 as of December 31, 2019. Of the $77,436 aggregate balance of TDRs at June 30, 2020, $59,916 was on nonaccrual and $544 was 30-89 days past due. Of the $58,369 aggregate balance of TDRs at December 31, 2019, $48,387 was on nonaccrual and $902 was 30-89 days past due. All these amounts are included in the appropriate categories in the “Age Analysis of Past Due Loans” table on a subsequent page. As of June 30, 2020, there were commitments to lend additional funds of $124 to a debtor owing receivables whose terms have been modified in TDRs. During the second quarter and first six months of 2020, $38 and $111, respectively, were advanced to this debtor under a loan that had been previously modified.

The following tables sets for the balances of TDRs at June 30, 2020 and December 31, 2019 and the reasons for modification:

Reason for modification	June 30, 2020		December 31, 2019
Interest rate reduction	$	11,662	$	1,685
Interest rate reduction and change in terms		3,039		1,733
Forgiveness of principal		252		0
Transfer of asset		121		0
Concession of principal and term		24		0
Extended maturity		4,879		0
Change in terms		57,459		54,951
Total	$	77,436	$	58,369

The following table sets forth United’s troubled debt restructurings that have been restructured during the three months ended June 30, 2020 and 2019, segregated by class of loans:

	Troubled Debt Restructurings
	For the Three Months Ended
	June 30, 2020						June 30, 2019
	Number of Contracts		Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment		Number of Contracts		Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment
Commercial real estate:
Owner-occupied		18	$	10,628	$	10,586		1	$	150	$	150
Nonowner-occupied		6		2,259		2,248		0		0		0
Other commercial		14		3,169		3,090		1		559		559
Residential real estate		19		3,889		3,872		2		1,845		1,832
Construction & land development		9		2,562		2,557		3		2,242		2,202
Consumer:
Bankcard		0		0		0		0		0		0
Other consumer		3		69		36		0		0		0
Total		69	$	22,576	$	22,389		7	$	4,796	$	4,743

The following table sets forth United’s troubled debt restructurings that have been restructured during the six months ended June 30, 2020 and 2019, segregated by class of loans:

	Troubled Debt Restructurings
	For the Six Months Ended
	June 30, 2020						June 30, 2019
	Number of Contracts		Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment		Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment
Commercial real estate:
Owner-occupied		21	$	18,579	$	18,345		1	$	150	$	150
Nonowner-occupied		6		2,259		2,248		0		0		0
Other commercial		18		3,667		3,322		2		824		811
Residential real estate		19		3,889		3,872		3		2,258		2,234
Construction & land development		12		4,607		4,570		3		2,242		2,202
Consumer:
Bankcard		0		0		0		0		0		0
Other consumer		3		69		36		0		0		0
Total		79	$	33,070	$	32,393		9	$	5,474	$	5,397

The following table sets forth United’s troubled debt restructurings, based on their post-modification outstanding recorded balance, that have been restructured during the three and six months ended June 30, 2020 and 2019, segregated by the reason for modification:

	Three Months Ended				Six Months Ended
Reason for modification	June 30, 2020		June 30, 2019		June 30, 2020		June 30, 2019
Interest rate reduction	$	2,675	$	0	$	10,028	$	251
Interest rate reduction and change in terms		1,326		0		1,326		0
Forgiveness of principal		252		0		252		0
Transfer of asset		121		0		121		0
Concession of principal and term		24		0		24		0
Extended maturity		4,879		0		4,879		0
Change in terms		13,112		4,743		15,763		5,146
Total	$	22,389	$	4,743	$	32,393	$	5,397

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.

The following table presents troubled debt restructurings, by class of loan, that were restructured during the twelve-month period ended June 30, 2020 and had charge-offs during the three and six months ended June 30, 2020.

	Three Months Ended June 30, 2020				Six Months Ended June 30, 2020
	Number of Contracts		Recorded Investment		Number of Contracts		Recorded Investment
Troubled Debt Restructurings
Commercial real estate:
Owner-occupied		0	$	0		0	$	0
Nonowner-occupied		0		0		0		0
Other commercial		0		0		0		0
Residential real estate		0		0		0		0
Construction & land development		1		690		1		690
Consumer:
Bankcard		0		0		0		0
Other consumer		0		0		0		0
Total		1	$	690		1	$	690

The following table presents troubled debt restructurings, by class of loan, that were restructured during the twelve-month period ended June 30, 2019 and had charge-offs during the six months ended June 30, 2019.

	Six Months Ended June 30, 2019
	Number of Contracts		Recorded Investment
Troubled Debt Restructurings
Commercial real estate:
Owner-occupied		0	$	0
Nonowner-occupied		0		0
Other commercial		1		1,321
Residential real estate		0		0
Construction & land development		0		0
Consumer:
Bankcard		0		0
Other consumer		0		0
Total		1	$	1,321

No loans restructured during the twelve-month periods ended June 30, 2019 subsequently defaulted, resulting in a principal charge-off during the second quarter of 2019.

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

Age Analysis of Past Due Loans

As of June 30, 2020 

	30-89 Days Past Due		90 Days or more Past Due		Total Past Due		Current & Other		Total Financing Receivables		90 Days or More Past Due & Accruing
Commercial real estate:
Owner-occupied	$	4,281	$	33,199	$	37,480	$	1,587,280	$	1,624,760	$	1,419
Nonowner-occupied		3,633		23,365		26,998		4,977,792		5,004,790		859
Other commercial		10,781		43,456		54,237		4,059,268		4,113,505		777
Residential real estate		34,510		29,883		64,393		4,245,763		4,310,156		6,234
Construction & land development		5,427		6,888		12,315		1,763,413		1,775,728		84
Consumer:
Bankcard		173		160		333		8,132		8,465		160
Other consumer		7,814		2,023		9,837		1,185,313		1,195,150		1,617
Total	$	66,619	$	138,974	$	205,593	$	17,826,961	$	18,032,554	$	11,150

Age Analysis of Past Due Loans

As of December 31, 2019  

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

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

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

	At June 30, 2020						At December 31, 2019		Interest Income Recognized
	Nonaccruals		With No Related Allowance for Credit Losses		90 Days or More Past Due & Accruing		Nonaccruals		For The Three Months Ended June 30, 2020		For The Six Months Ended June 30, 2020
Commercial Real Estate:
Owner-occupied	$	31,780	$	26,723	$	1,419	$	10,665	$	17	$	32
Nonowner-occupied		22,506		19,882		859		15,658		1		1
Other Commercial		42,679		18,909		777		50,873		1		1
Residential Real Estate		23,649		22,022		6,234		18,087		3		3
Construction		6,804		6,759		84		16,043		0		0
Consumer:
Bankcard		0		0		160		0		0		0
Other consumer		406		406		1,617		270		0		0
Total	$	127,824	$	94,701	$	11,150	$	111,596	$	22	$	37

For the adoption of ASU 2016-13, United elected the practical expedient to measure expected credit losses on collateral dependent loans based on the difference between the loan’s amortized cost and the collateral’s fair value, adjusted for selling costs. The following table presents the amortized cost basis of collateral-dependent loans in which repayment is expected to be derived substantially through the operation or sale of the collateral and where the borrower is experiencing financial difficulty, by class of loans as of June 30, 2020:

	Collateral Dependent Loans
	At June 30, 2020
	Residential Property		Business Assets		Land		Commercial Property		Other		Total
Commercial real estate:
Owner-occupied	$	2,084	$	84	$	0	$	19,246	$	28,719	$	50,133
Nonowner-occupied		12,806		0		2,981		15,550		17,076		48,413
Other commercial		6,037		47,707		0		0		49		53,793
Residential real estate		25,104		229		255		0		0		25,588
Construction & land development		9,939		0		9,869		0		746		20,554
Consumer:
Bankcard		0		0		0		0		0		0
Other consumer		0		0		0		0		0		0
Total	$	55,970	$	48,020	$	13,105	$	34,796	$	46,590	$	198,481

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

United uses the following definitions for risk ratings:

• Pass

• Special Mention

• Substandard

• Doubtful

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

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

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

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

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

Commercial Real Estate – Owner-occupied
	Term Loans																	Revolving loans amortized cost basis			Revolving loans converted to term loans		Total
	Origination Year
As of June 30, 2020	2020		2019			2018			2017			2016			Prior
Internal Risk Grade:
Pass	$	107,784	$	163,097		$	133,255		$	244,528		$	304,759		$	565,627		$	23,576		$	0	$	1,542,626
Special Mention		0		1,225			6,995			781			2,100			9,634			0			468		21,203
Substandard		1,831		72			0			2,235			4,542			50,394			1,364			149		60,587
Doubtful		0		0			0			0			0			344			0			0		344
Total	$	109,615	$	164,394		$	140,250		$	247,544		$	311,401		$	625,999		$	24,940		$	617	$	1,624,760
YTD charge-offs		0		0			0			0			0			(535	)		0			0		(535	)
YTD recoveries		0		0			0			0			0			310			0			0		310
YTD net  charge-offs	$	0	$	0		$	0		$	0		$	0		$	(225	)	$	0		$	0	$	(225	)
Commercial Real Estate – Nonowner-occupied
	Term Loans																	Revolving loans amortized cost basis			Revolving loans converted to term loans		Total
	Origination Year
As of June 30, 2020	2020		2019			2018			2017			2016			Prior
Internal Risk Grade:
Pass	$	297,474	$	748,897		$	685,228		$	620,528		$	582,809		$	1,844,405		$	115,345		$	2,145	$	4,896,831
Special Mention		0		347			0			977			10,645			27,024			0			0		38,993
Substandard		73		964			8,618			1,702			13,245			44,364			0			0		68,966
Doubtful		0		0			0			0			0			0			0			0		0
Total	$	297,547	$	750,208		$	693,846		$	623,207		$	606,699		$	1,915,793		$	115,345		$	2,145	$	5,004,790
YTD charge-offs		0		0			0			0			(690	)		(1,247	)		0			0		(1,937	)
YTD recoveries		0		0			0			0			0			722			0			0		722
YTD net charge-offs	$	0	$	0		$	0		$	0		$	(690	)	$	(525	)	$	0		$	0	$	(1,215	)
Other commercial
	Term Loans																	Revolving loans amortized cost basis			Revolving loans converted to temr loans		Total
	Origination Year
As of June 30, 2020	2020		2019			2018			2017			2016			Prior
Internal Risk Grade:
Pass	$	1,509,244	$	451,574		$	212,881		$	150,587		$	150,389		$	311,422		$	1,213,494		$	3,071	$	4,002,662
Special Mention		99		313			430			2,044			202			20,072			4,053			423		27,636
Substandard		0		895			2,635			2,535			11,386			48,486			16,794			404		83,135
Doubtful		0		0			0			0			0			72			0			0		72
Total	$	1,509,343	$	452,782		$	215,946		$	155,166		$	161,977		$	380,052		$	1,234,341		$	3,898	$	4,113,505
YTD charge-offs		0		(11	)		(964	)		(365	)		(6	)		(5,682	)		0			0		(7,028	)
YTD recoveries		0		42			16			3			21			332			32			0		446
YTD net charge-offs	$	0	$		31	$	(948	)	$	(362	)	$		15	$	(5,350	)	$		32	$	0	$	(6,582	)
Residential Real Estate																		Revolving loans amortized cost basis			Revolving loans converted to term loans		Total
	Term Loans
	Origination Year
As of June 30, 2020	2020		2019			2018			2017			2016			Prior
Internal Risk Grade:
Pass	$	324,682	$	750,044		$	857,069		$	393,030		$	347,781		$	1,111,476		$	476,577		$	4,332	$	4,264,991
Special Mention		0		271			0			226			2,349			7,014			435			0		10,295
Substandard		0		226			459			3,800			5,333			24,252			437			234		34,741
Doubtful		0		0			0			0			0			129			0			0		129
Total	$	324,682	$	750,541		$	857,528		$	397,056		$	355,463		$	1,142,871		$	477,449		$	4,566	$	4,310,156
YTD charge-offs		0		0			0			0			(1	)		(889	)		0			0		(890	)
YTD recoveries		0		0			0			101			0			201			0			0		302
YTD net charge-offs	$	0	$	0		$	0		$	101		$	(1	)	$	(688	)	$	0		$	0	$	(588	)

Construction and Land Development																Revolving loans converted to term loans
	Term Loans													Revolving loans amortized cost basis				Total
	Origination Year
As of June 30, 2020	2020		2019		2018		2017		2016		Prior
Internal Risk Grade:
Pass	$	163,253	$	706,921	$	375,025	$	173,269	$	133,679	$	70,466		$	102,752	$	143	$	1,725,510
Special Mention		0		0		1,506		0		561		2,681			995		0		5,743
Substandard		0		156		1,553		25		0		20,443			22,298		0		44,475
Doubtful		0		0		0		0		0		0			0		0		0
Total	$	163,253	$	707,077	$	378,084	$	173,294	$	134,240	$	93,590		$	126,045	$	143	$	1,775,728
YTD charge-offs		0		0		0		0		0		(1,969	)		0		0		(1,969	)
YTD recoveries		0		0		0		0		0		1,361			0		0		1,361
YTD net charge-offs	$	0	$	0	$	0	$	0	$	0	$	(608	)	$	0	$	0	$	(608	)

Bankcard																						Revolving loans converted to term loans
	Term Loans																		Revolving loans amortized cost basis						Total
	Origination Year
As of June 30, 2020	2020			2019			2018			2017			2016			Prior
Internal Risk Grade:
Pass	$	0		$	0		$	0		$	0		$	0		$	0		$	0		$	8,133		$	8,133
Special Mention		0			0			0			0			0			0			0			172			172
Substandard		0			0			0			0			0			0			0			160			160
Doubtful		0			0			0			0			0			0			0			0			0
Total	$	0		$	0		$	0		$	0		$	0		$	0		$	0		$	8,465		$	8,465
YTD charge-offs		0			0			0			0			0			0			0			(128	)		(128	)
YTD recoveries		0			0			0			0			0			0			0			12			12
YTD net charge-offs	$	0		$	0		$	0		$	0		$	0		$	0		$	0		$	(116	)	$	(116	)
Other Consumer																						Revolving loans converted to term loans
	Term Loans																		Revolving loans amortized cost basis						Total
	Origination Year
As of June 30, 2020	2020			2019			2018			2017			2016			Prior
Internal Risk Grade:
Pass	$	220,924		$	494,700		$	298,460		$	104,779		$	54,766		$	14,247		$	7,095		$	0		$	1,194,971
Special Mention		0			0			11			0			0			152			4			0			167
Substandard		3			0			0			0			0			9			0			0			12
Doubtful		0			0			0			0			0			0			0			0			0
Total	$	220,927		$	494,700		$	298,471		$	104,779		$	54,766		$	14,408		$	7,099		$	0		$	1,195,150
YTD charge-offs		(16	)		(589	)		(652	)		(272	)		(152	)		(225	)		(2	)		0			(1,908	)
YTD recoveries		0			24			33			11			18			124			0			0			210
YTD net charge-offs	$	(16	)	$	(565	)	$	(619	)	$	(261	)	$	(134	)	$	(101	)	$	(2	)	$	0		$	(1,698	)

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

Credit Quality Indicators

Corporate Credit Exposure

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

Credit Quality Indicators

Consumer Credit Exposure

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

At June 30, 2020 and December 31, 2019, other real estate owned (“OREO”) included in other assets in the Consolidated Balance Sheets was $29,947 and $15,515, respectively. OREO consists of real estate acquired in foreclosure or other settlement of loans. Such assets are carried at the lower of the investment in the assets or the fair value of the assets less estimated selling costs. Any adjustment to the fair value at the date of transfer is charged against the allowance for loan losses. Any subsequent valuation adjustments as well as any costs relating to operating, holding or disposing of the property are recorded in other expense in the period incurred. At June 30, 2020 and December 31, 2019, the recorded investment of consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings are in process was $1,738 and $890, respectively.