Loans and Leases and Allowance for Credit Losses

12 Months Ended

Dec. 31, 2022

Loans and Leases and Allowance for Credit Losses

Major classifications of the loan and lease portfolio (collectively referred to as the “loan portfolio” or “loans”) are summarized as of the dates indicated as follows (in thousands):


	December 31,
	2022		2021
Owner occupied commercial real estate	$	2,734,666	$	2,321,685
Income producing commercial real estate	3,261,626		2,600,858
Commercial & industrial	2,252,322		1,910,162
Commercial construction	1,597,848		1,014,830
Equipment financing	1,374,251		1,083,021
Total commercial	11,220,713		8,930,556
Residential mortgage	2,355,061		1,637,885
HELOC	850,269		694,034
Residential construction	442,553		359,815
Manufactured housing	316,741		—
Consumer	149,290		138,056
Total loans	15,334,627		11,760,346
Less ACL - loans	(159,357)		(102,532)
Loans, net	$	15,175,270	$	11,657,814

At December 31, 2022 and 2021, $2.04 million and $1.01 million, respectively, in overdrawn deposit accounts were reclassified as consumer loans.

Accrued interest receivable related to loans totaled $52.0 million and $28.5 million at December 31, 2022 and 2021, respectively, and was reported in accrued interest receivable on the consolidated balance sheets.

At December 31, 2022, the loan portfolio was subject to blanket pledges on certain qualifying loan types with the FHLB to secure advances outstanding and contingent funding sources.

The following table presents loans held for investment that were sold in the periods presented (in thousands). The gains and losses on these loan sales were included in noninterest income on the consolidated statements of income.


	Loans Sold
	2022		2021		2020
Guaranteed portion of SBA/USDA loans	$	104,813	$	90,903	$	48,385
Equipment financing receivables	89,850		59,097		27,018
Total	$	194,663	$	150,000	$	75,403

At December 31, 2022 and 2021, equipment financing assets included leases of $46.0 million and $37.7 million, respectively. The components of the net investment in leases, which included both sales-type and direct financing, are presented below (in thousands).


	December 31,
	2022		2021
Minimum future lease payments receivable	$	49,723	$	39,962
Estimated residual value of leased equipment	2,804		3,216
Initial direct costs	767		669
Security deposits	(429)		(687)

Unearned income	(6,877)		(5,432)
Net investment in leases	$	45,988	$	37,728

Minimum future lease payments expected to be received from equipment financing lease contracts as of December 31, 2022 were as follows (in thousands):


Year
2023	$	17,531
2024	13,356
2025	9,882
2026	6,184
2027	2,636
Thereafter	134
Total	$	49,723

Nonaccrual and Past Due Loans

The following table presents the amortized cost basis in loans by aging category and accrual status as of December 31, 2022 and 2021 (in thousands).


	Accruing
			Loans Past Due
	Current Loans		30 - 59 Days		60 - 89 Days		> 90 Days		Nonaccrual Loans		Total Loans
As of December 31, 2022
Owner occupied commercial real estate	$	2,731,574	$	1,522	$	1,047	$	—	$	523	$	2,734,666
Income producing commercial real estate	3,257,232		468		41		—		3,885		3,261,626
Commercial & industrial	2,234,284		3,288		274		6		14,470		2,252,322
Commercial construction	1,597,268		447		—		—		133		1,597,848
Equipment financing	1,362,622		4,285		1,906		—		5,438		1,374,251
Total commercial	11,182,980		10,010		3,268		6		24,449		11,220,713
Residential mortgage	2,342,196		1,939		7		—		10,919		2,355,061
HELOC	844,888		2,709		784		—		1,888		850,269
Residential construction	441,673		20		455		—		405		442,553
Manufactured housing	302,386		6,913		924		—		6,518		316,741
Consumer	148,943		237		48		9		53		149,290
Total loans	$	15,263,066	$	21,828	$	5,486	$	15	$	44,232	$	15,334,627

As of December 31, 2021
Owner occupied commercial real estate	$	2,318,944	$	27	$	—	$	—	$	2,714	$	2,321,685
Income producing commercial real estate	2,593,124		146		—		—		7,588		2,600,858
Commercial & industrial	1,903,730		584		419		—		5,429		1,910,162
Commercial construction	1,014,211		—		276		—		343		1,014,830
Equipment financing	1,079,180		1,415		685		—		1,741		1,083,021
Total commercial	8,909,189		2,172		1,380		—		17,815		8,930,556
Residential mortgage	1,622,754		1,583		235		—		13,313		1,637,885
HELOC	691,814		920		88		—		1,212		694,034
Residential construction	358,741		654		—		—		420		359,815
Consumer	137,564		421		19		—		52		138,056
Total loans	$	11,720,062	$	5,750	$	1,722	$	—	$	32,812	$	11,760,346

The following table presents nonaccrual loans by loan class for the periods indicated (in thousands).


	Nonaccrual loans
	December 31, 2022						December 31, 2021
	With no allowance		With an allowance		Total		With no allowance		With an allowance		Total
Owner occupied commercial real estate	$	276	$	247	$	523	$	2,141	$	573	$	2,714
Income producing commercial real estate	3,798		87		3,885		6,873		715		7,588
Commercial & industrial	13,917		553		14,470		3,715		1,714		5,429
Commercial construction	69		64		133		—		343		343
Equipment financing	85		5,353		5,438		—		1,741		1,741
Total commercial	18,145		6,304		24,449		12,729		5,086		17,815
Residential mortgage	2,159		8,760		10,919		3,126		10,187		13,313
HELOC	430		1,458		1,888		219		993		1,212
Residential construction	311		94		405		280		140		420
Manufactured housing	—		6,518		6,518		—		—		—
Consumer	3		50		53		6		46		52
Total	$	21,048	$	23,184	$	44,232	$	16,360	$	16,452	$	32,812

Risk Ratings

United categorizes commercial loans, with the exception of equipment financing receivables, into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current industry and economic trends, among other factors. United analyzes loans individually by classifying the loans as to credit risk. This analysis is performed on a continual basis. United uses the following definitions for its risk ratings:

Pass. Loans in this category are considered to have a low probability of default and do not meet the criteria of the risk categories below.

Special Mention. Loans in this category are presently protected from apparent loss, however weaknesses exist that could cause future impairment, including the deterioration of financial ratios, past due status and questionable management capabilities. These loans require more than the ordinary amount of supervision. Collateral values generally afford adequate coverage, but may not be immediately marketable.

Substandard. These loans are inadequately protected by the current net worth and paying capacity of the obligor or by the collateral pledged. Specific and well-defined weaknesses exist that may include poor liquidity and deterioration of financial ratios. The loan may be past due and related deposit accounts experiencing overdrafts. There is the distinct possibility that United will sustain some loss if deficiencies are not corrected. If possible, immediate corrective action is taken.

Doubtful. Specific weaknesses characterized as Substandard that are severe enough to make collection in full highly questionable and improbable. There is no reliable secondary source of full repayment.

Loss. Loans categorized as Loss have the same characteristics as Doubtful; however probability of loss is certain. Loans classified as Loss are charged off.

Equipment Financing Receivables and Consumer Purpose Loans. United applies a pass / fail grading system to all equipment financing receivables and consumer purpose loans. Under this system, loans that are on nonaccrual status, become past due 90 days or are in bankruptcy are classified as “fail” and all other loans are classified as “pass”. For reporting purposes, loans classified as “fail” are reported as “substandard” and all other loans are reported as “pass”.

The following tables present the risk category of term loans by vintage year, which is the year of origination or most recent renewal, as of the date indicated (in thousands).


	Term Loans												Revolvers		Revolvers converted to term loans		Total
As of December 31, 2022	2022		2021		2020		2019		2018		Prior
Pass
Owner occupied commercial real estate	$	669,451	$	671,395	$	611,900	$	204,990	$	127,738	$	253,890	$	114,975	$	5,779	$	2,660,118
Income producing commercial real estate	812,804		753,936		733,946		248,259		171,108		255,485		50,026		9,953		3,035,517
Commercial & industrial	535,594		388,851		186,292		134,789		119,547		71,503		670,161		15,880		2,122,617
Commercial construction	732,147		391,963		256,087		78,778		11,977		19,973		70,819		1,433		1,563,177
Equipment financing	714,044		374,030		162,463		93,690		22,753		1,214		—		—		1,368,194
Total commercial	3,464,040		2,580,175		1,950,688		760,506		453,123		602,065		905,981		33,045		10,749,623
Residential mortgage	894,960		742,821		329,762		91,300		55,785		223,846		8		3,133		2,341,615
HELOC	—		—		—		—		—		—		824,153		23,948		848,101
Residential construction	344,443		82,289		4,478		1,742		1,545		7,549		—		31		442,077
Manufactured housing	78,097		54,976		48,908		34,836		31,060		61,148		—		—		309,025
Consumer	71,899		29,322		15,406		3,987		1,837		588		25,963		126		149,128
	4,853,439		3,489,583		2,349,242		892,371		543,350		895,196		1,756,105		60,283		14,839,569
Special Mention
Owner occupied commercial real estate	4,236		8,036		4,641		10,299		1,232		11,596		3,875		279		44,194
Income producing commercial real estate	41,423		1,137		44,802		32,821		21,647		50		805		—		142,685
Commercial & industrial	1,695		21,745		2,686		1,047		1,244		167		10,449		309		39,342
Commercial construction	850		33		1,640		13,237		4,891		28		—		—		20,679
Equipment financing	—		—		—		—		—		—		—		—		—
Total commercial	48,204		30,951		53,769		57,404		29,014		11,841		15,129		588		246,900
Residential mortgage	—		—		—		—		—		—		—		—		—
HELOC	—		—		—		—		—		—		—		—		—
Residential construction	—		—		—		—		—		—		—		—		—
Manufactured housing	—		—		—		—		—		—		—		—		—
Consumer	—		—		—		—		—		—		—		—		—
	48,204		30,951		53,769		57,404		29,014		11,841		15,129		588		246,900
Substandard
Owner occupied commercial real estate	9,835		77		2,873		4,490		1,204		8,055		209		3,611		30,354
Income producing commercial real estate	52,384		1,357		1,867		4,180		13,209		10,365		—		62		83,424
Commercial & industrial	10,431		19,477		3,880		4,557		11,019		1,189		39,333		477		90,363
Commercial construction	133		—		45		2		3,876		9,693		—		243		13,992
Equipment financing	1,625		2,160		1,303		705		236		28		—		—		6,057
Total commercial	74,408		23,071		9,968		13,934		29,544		29,330		39,542		4,393		224,190
Residential mortgage	1,195		964		1,364		1,836		2,589		5,296		—		202		13,446
HELOC	—		—		—		—		—		—		93		2,075		2,168
Residential construction	32		268		—		20		3		153		—		—		476
Manufactured housing	1,130		1,267		1,427		990		1,188		1,714		—		—		7,716
Consumer	20		77		34		1		25		4		1		—		162
	76,785		25,647		12,793		16,781		33,349		36,497		39,636		6,670		248,158

Total	$	4,978,428	$	3,546,181	$	2,415,804	$	966,556	$	605,713	$	943,534	$	1,810,870	$	67,541	$	15,334,627


	Term Loans												Revolvers		Revolvers converted to term loans		Total
As of December 31, 2021	2021		2020		2019		2018		2017		Prior
Pass
Owner occupied commercial real estate	$	643,151	$	674,124	$	278,702	$	153,233	$	139,584	$	267,460	$	68,354	$	17,150	$	2,241,758
Income producing commercial real estate	668,322		678,487		333,911		221,218		165,563		219,459		41,157		11,830		2,339,947
Commercial & industrial	638,567		270,150		178,944		136,281		50,567		72,904		514,750		4,361		1,866,524
Commercial construction	378,695		303,154		149,740		40,625		22,983		13,206		12,628		1,673		922,704
Equipment financing	563,618		271,913		167,904		63,254		13,145		903		—		—		1,080,737
Total commercial	2,892,353		2,197,828		1,109,201		614,611		391,842		573,932		636,889		35,014		8,451,670
Residential mortgage	781,007		370,092		108,091		64,346		71,552		221,131		9		3,915		1,620,143
HELOC	—		—		—		—		—		—		676,545		14,994		691,539
Residential construction	325,111		16,301		2,802		2,278		3,144		9,352		—		33		359,021
Consumer	57,530		29,218		10,757		5,137		1,439		1,355		32,312		111		137,859
	4,056,001		2,613,439		1,230,851		686,372		467,977		805,770		1,345,755		54,067		11,260,232
Special Mention
Owner occupied commercial real estate	7,772		2,979		16,639		4,374		6,007		2,641		248		286		40,946
Income producing commercial real estate	64,139		27,875		21,875		22,292		18,415		21,880		—		—		176,476
Commercial & industrial	1,037		1,831		2,740		597		273		303		2,242		—		9,023
Commercial construction	14,283		16,237		13,149		22,479		11,766		52		—		—		77,966
Equipment financing	—		—		—		—		—		—		—		—		—
Total commercial	87,231		48,922		54,403		49,742		36,461		24,876		2,490		286		304,411
Residential mortgage	—		—		—		—		—		—		—		—		—
HELOC	—		—		—		—		—		—		—		—		—
Residential construction	—		—		—		—		—		—		—		—		—
Consumer	—		—		—		—		—		—		—		—		—
	87,231		48,922		54,403		49,742		36,461		24,876		2,490		286		304,411
Substandard
Owner occupied commercial real estate	11,987		1,049		4,216		3,712		5,829		11,088		—		1,100		38,981
Income producing commercial real estate	15,485		12,618		3,779		29,212		6,726		16,531		—		84		84,435
Commercial & industrial	2,741		1,615		5,284		12,685		1,232		5,863		4,326		869		34,615
Commercial construction	3,464		157		272		11		9,750		255		—		251		14,160
Equipment financing	428		590		676		503		84		3		—		—		2,284
Total commercial	34,105		16,029		14,227		46,123		23,621		33,740		4,326		2,304		174,475
Residential mortgage	3,339		1,585		2,813		3,229		1,205		4,744		—		827		17,742
HELOC	—		—		—		—		—		—		329		2,166		2,495
Residential construction	407		—		30		51		—		306		—		—		794
Consumer	37		16		22		26		22		50		3		21		197
	37,888		17,630		17,092		49,429		24,848		38,840		4,658		5,318		195,703

Total	$	4,181,120	$	2,679,991	$	1,302,346	$	785,543	$	529,286	$	869,486	$	1,352,903	$	59,671	$	11,760,346

Troubled Debt Restructurings and Other Modifications

As of December 31, 2022 and 2021, United had TDRs totaling $41.2 million and $52.4 million, respectively. Loans modified under the terms of a TDR during the years ended December 31 are presented in the table below. In addition, the following table presents loans modified under the terms of a TDR that defaulted (became 90 days or more delinquent) during the years ended December 31 that were initially restructured within one year prior to default (dollars in thousands):


	New TDRs
	Number of Contracts		Post-Modification Outstanding Recorded Investment by Type of Modification												TDRs Modified Within the Year That Have Subsequently Defaulted
Year Ended December 31, 2022		Rate Reduction			Structure			Other			Total			Number of Contracts		Recorded Investment
Owner occupied commercial real estate	1		$	—		$	112		$	—		$	112		—		$	—
Income producing commercial real estate	—		—			—			—			—			—		—
Commercial & industrial	6		—			1,118			9,400			10,518			1		394
Commercial construction	—		—			—			—			—			—		—
Equipment financing	60		—			8,165			—			8,165			13		735
Total commercial	67		—			9,395			9,400			18,795			14		1,129
Residential mortgage	9		—			982			—			982			4		509
HELOC	7		—			1,242			6			1,248			—		—
Residential construction	—		—			—			—			—			—		—
Manufactured housing	—		—			—			—			—			—		—
Consumer	—		—			—			—			—			—		—
Total	83		$	—		$	11,619		$	9,406		$	21,025		18		$	1,638
Year Ended December 31, 2021
Owner occupied commercial real estate	2		$	—		$	731		$	—		$	731		1		$	99
Income producing commercial real estate	3		—			—			1,697			1,697			—		—
Commercial & industrial	8		—			597			103			700			2		76
Commercial construction	1		—			309			—			309			—		—
Equipment financing	62		—			4,689			—			4,689			15		375
Total commercial	76		—			6,326			1,800			8,126			18		550
Residential mortgage	16		—			1,528			57			1,585			4		593
HELOC	—		—			—			—			—			2		92
Residential construction	—		—			—			—			—			—		—
Consumer	—		—			—			—			—			—		—

Total	92		$	—		$	7,854		$	1,857		$	9,711		24		$	1,235
Year Ended December 31, 2020
Owner occupied commercial real estate	8		$	—		$	833		$	1,536		$	2,369		—		$	—
Income producing commercial real estate	7		—			4,856			6,699			11,555			1		5,998
Commercial & industrial	4		—			586			15			601			3		819
Commercial construction	7		—			832			70			902			—		—
Equipment financing	172		—			5,821			—			5,821			22		944
Total commercial	198		—			12,928			8,320			21,248			26		7,761
Residential mortgage	40		—			4,359			3			4,362			2		145
HELOC	4		—			164			—			164			1		60
Residential construction	3		—			123			—			123			—		—
Consumer	7		—			11			24			35			1		3

Total	252		$	—		$	17,585		$	8,347		$	25,932		30		$	7,969

Allowance for Credit Losses

The following table presents the balance and activity in the ACL by portfolio segment for the periods indicated (in thousands):


Year Ended December 31, 2022	Beginning Balance		Initial ACL- PCD loans(1)		Charge-Offs		Recoveries		Provision		Ending Balance
Owner occupied commercial real estate	$	14,282	$	266	$	(6)	$	1,767	$	3,525	$	19,834
Income producing commercial real estate	24,156		4,366		(606)		949		3,217		32,082
Commercial & industrial	16,592		2,337		(10,284)		3,824		11,035		23,504
Commercial construction	9,956		2,857		(41)		625		6,723		20,120
Equipment financing	16,290		—		(6,980)		3,027		11,058		23,395
Residential mortgage	12,390		385		(55)		302		7,787		20,809
HELOC	6,568		60		(69)		687		1,461		8,707
Residential construction	1,847		1		—		231		(30)		2,049
Manufactured housing	—		2,438		(794)		29		6,425		8,098
Consumer	451		27		(3,460)		1,200		2,541		759
ACL - loans	102,532		12,737		(22,295)		12,641		53,742		159,357
ACL - unfunded commitments	10,992		—		—		—		10,171		21,163
Total ACL	$	113,524	$	12,737	$	(22,295)	$	12,641	$	63,913	$	180,520

(1) Represents the initial ACL related to PCD loans acquired in the Reliant transaction.


Year Ended December 31, 2021	Beginning Balance		Initial ACL- PCD loans(1)		Charge-Offs		Recoveries		Provision		Ending Balance
Owner occupied commercial real estate	$	20,673	$	280	$	(1,640)	$	1,324	$	(6,355)	$	14,282
Income producing commercial real estate	41,737		982		(267)		496		(18,792)		24,156
Commercial & industrial	22,019		312		(4,776)		7,275		(8,238)		16,592
Commercial construction	10,952		1,969		(334)		1,081		(3,712)		9,956
Equipment financing	16,820		—		(5,724)		2,619		2,575		16,290
Residential mortgage	15,341		—		(344)		564		(3,171)		12,390
HELOC	8,417		1		(112)		517		(2,255)		6,568
Residential construction	764		—		(10)		157		936		1,847
Consumer	287		—		(2,066)		1,202		1,028		451

ACL - loans	137,010		3,544		(15,273)		15,235		(37,984)		102,532
ACL - unfunded commitments	10,558		—		—		—		434		10,992
Total ACL	$	147,568	$	3,544	$	(15,273)	$	15,235	$	(37,550)	$	113,524

(1) Represents the initial ACL related to PCD loans acquired in the Aquesta transaction.



Year Ended December 31, 2020	Dec. 31, 2019		Adoption of CECL		Jan. 1, 2020		Initial ACL- PCD loans(1)		Charge-Offs		Recoveries		Provision		Ending Balance
Owner occupied commercial real estate	$	11,404	$	(1,616)	$	9,788	$	1,779	$	(70)	$	2,565	$	6,611	$	20,673
Income producing commercial real estate	12,306		(30)		12,276		1,208		(8,430)		3,546		33,137		41,737
Commercial & industrial	5,266		4,012		9,278		7,680		(10,707)		1,371		14,397		22,019
Commercial construction	9,668		(2,583)		7,085		74		(726)		1,045		3,474		10,952
Equipment financing	7,384		5,871		13,255		—		(8,764)		2,004		10,325		16,820
Residential mortgage	8,081		1,569		9,650		195		(398)		455		5,439		15,341
HELOC	4,575		1,919		6,494		209		(221)		677		1,258		8,417
Residential construction	2,504		(1,771)		733		—		(93)		156		(32)		764
Consumer	901		(491)		410		7		(2,985)		2,259		596		287

ACL - loans	62,089		6,880		68,969		11,152		(32,394)		14,078		75,205		137,010
ACL - unfunded commitments	3,458		1,871		5,329		—		—		—		5,229		10,558
Total ACL	$	65,547	$	8,751	$	74,298	$	11,152	$	(32,394)	$	14,078	$	80,434	$	147,568

(1) Represents the initial ACL related to PCD loans acquired in the Three Shores transaction.

At December 31, 2022, 2021 and 2020, United used a one-year reasonable and supportable forecast period. Expected credit losses were estimated using a regression model for each segment based on historical data from peer banks combined with a third party vendor’s economic forecast to predict the change in credit losses. These estimates were then combined with a starting value that was based on United’s recent default experience to produce an expected default rate, with the results subject to a floor. In the case of residential construction, at December 31, 2022, the expected default rate was adjusted by a model overlay based on expectations of future performance. At December 31, 2022, the third party vendor’s forecast, which was representative of a baseline scenario, worsened compared to December 31, 2021, including the unemployment rate which has a significant impact on our models and contributed to increased provision expense in 2022. At December 31, 2022, United applied qualitative factors to

the model output for commercial construction, HELOC, residential mortgage and equipment finance portfolios to reflect management’s approximation of long-term losses.For periods beyond the reasonable and supportable forecast period of one year, United reverted to historical credit loss information on a straight line basis over two years. For most collateral types, United reverted to through-the-cycle average default rates using peer data from 2000 to 2017. For loans secured by residential mortgages and manufactured housing, the peer data was adjusted for changes in lending practices designed to mitigate the magnitude of losses observed during the mortgage crisis.