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Loans and Leases and Allowance for Credit Losses
 3 Months Ended
Mar. 31, 2024
Receivables [Abstract]  
Loans and Leases and Allowance for Credit Losses 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)March 31, 2024December 31, 2023
Owner occupied CRE$3,310,231 $3,264,051 
Income producing CRE4,206,322 4,263,952 
Commercial & industrial2,404,505 2,411,045 
Commercial construction1,936,074 1,859,538 
Equipment financing1,543,905 1,541,120 
Total commercial13,401,037 13,339,706 
Residential mortgage3,239,687 3,198,928 
Home equity969,020 958,987 
Residential construction257,279 301,650 
Manufactured housing328,121 336,474 
Consumer180,102 181,117 
Total loans excluding fair value hedge basis adjustment18,375,246 18,316,862 
Fair value hedge basis adjustment(402)1,893 
     Total loans18,374,844 18,318,755 
Less ACL - loans(210,934)(208,071)
Loans, net$18,163,910 $18,110,684 

Accrued interest receivable related to loans totaled $67.0 million at both March 31, 2024 and December 31, 2023, and was reported in other assets on the consolidated balance sheets. Accrued interest receivable was excluded from the estimate of credit losses.

At March 31, 2024 and December 31, 2023, the loan portfolio included certain loans specifically pledged to the Federal Reserve as well as loans covered by a blanket lien on qualifying loan types with the FHLB to secure contingent funding sources.

The following table presents the amortized cost of certain loans held for investment that were sold in the periods indicated. The gains on these loan sales were included in noninterest income on the consolidated statements of income.
Three Months Ended March 31,
(in thousands)20242023
Guaranteed portion of SBA/USDA loans$9,388 $21,770 
Equipment financing receivables28,323 18,703 
Total$37,711 $40,473 
  
At March 31, 2024 and December 31, 2023, equipment financing receivables included leases of $74.8 million and $68.9 million, respectively. The components of the net investment in leases, which included both sales-type and direct financing, are presented below.
(in thousands)March 31, 2024December 31, 2023
Minimum future lease payments receivable$81,882 $75,198 
Estimated residual value of leased equipment4,737 4,445 
Initial direct costs1,566 1,402 
Security deposits(437)(413)
Unearned income(12,978)(11,711)
Net investment in leases$74,770 $68,921 
Minimum future lease payments expected to be received from equipment financing lease contracts as of March 31, 2024 were as follows: 
(in thousands)
Year 
Remainder of 2024$20,668 
202523,996 
202618,243 
202712,703 
20285,675 
Thereafter597 
Total$81,882 

Nonaccrual and Past Due Loans
The following table presents the aging of the amortized cost basis in loans by aging category and accrual status as of the dates indicated. Past due status is based on contractual terms of the loan. The accrual of interest is generally discontinued when a loan becomes 90 days past due.
 Accruing
Current LoansLoans Past Due
(in thousands)30 - 59 Days60 - 89 Days> 90 DaysNonaccrual LoansTotal Loans
As of March 31, 2024
Owner occupied CRE$3,300,380 $7,136 $405 $— $2,310 $3,310,231 
Income producing CRE4,176,324 812 — — 29,186 4,206,322 
Commercial & industrial2,371,045 10,707 2,619 — 20,134 2,404,505 
Commercial construction1,932,826 1,311 75 — 1,862 1,936,074 
Equipment financing1,525,225 7,746 2,105 — 8,829 1,543,905 
Total commercial13,305,800 27,712 5,204 — 62,321 13,401,037 
Residential mortgage3,217,293 5,182 643 — 16,569 3,239,687 
Home equity960,734 2,638 664 — 4,984 969,020 
Residential construction255,899 51 85 — 1,244 257,279 
Manufactured housing298,850 7,869 1,605 — 19,797 328,121 
Consumer179,582 428 38 — 54 180,102 
Total loans$18,218,158 $43,880 $8,239 $— $104,969 $18,375,246 
As of December 31, 2023
Owner occupied CRE
$3,258,015 $2,942 $— $— $3,094 $3,264,051 
Income producing CRE
4,230,140 3,684 — — 30,128 4,263,952 
Commercial & industrial2,388,076 8,129 1,373 — 13,467 2,411,045 
Commercial construction1,857,660 — — — 1,878 1,859,538 
Equipment financing1,522,962 5,895 3,758 — 8,505 1,541,120 
Total commercial13,256,853 20,650 5,131 — 57,072 13,339,706 
Residential mortgage3,179,329 4,622 1,033 — 13,944 3,198,928 
Home equity950,841 4,106 268 — 3,772 958,987 
Residential construction299,230 1,255 221 — 944 301,650 
Manufactured housing304,794 12,622 3,197 — 15,861 336,474 
Consumer180,245 686 92 — 94 181,117 
Total loans$18,171,292 $43,941 $9,942 $— $91,687 $18,316,862 
At March 31, 2024 and December 31, 2023, United had $55.5 million and $48.5 million, respectively, in loans for which repayment is expected to be provided substantially through the operation or sale of the collateral. Estimated credit losses for these loans are based on the net realizable value of the collateral relative to the amortized cost of the loan. The majority of these loans are income producing CRE and commercial and industrial loans.

The following table presents nonaccrual loans held for investment by loan class for the periods indicated. 

Nonaccrual Loans
 March 31, 2024December 31, 2023
(in thousands)With no allowanceWith an allowanceTotalWith no allowanceWith an allowanceTotal
Owner occupied CRE
$1,072 $1,238 $2,310 $2,451 $643 $3,094 
Income producing CRE
29,153 33 29,186 11,003 19,125 30,128 
Commercial & industrial14,038 6,096 20,134 11,940 1,527 13,467 
Commercial construction1,778 84 1,862 1,784 94 1,878 
Equipment financing92 8,737 8,829 57 8,448 8,505 
Total commercial46,133 16,188 62,321 27,235 29,837 57,072 
Residential mortgage3,368 13,201 16,569 1,836 12,108 13,944 
Home equity1,426 3,558 4,984 1,276 2,496 3,772 
Residential construction781 463 1,244 398 546 944 
Manufactured housing— 19,797 19,797 — 15,861 15,861 
Consumer— 54 54 2 92 94 
Total$51,708 $53,261 $104,969 $30,747 $60,940 $91,687 

Risk Ratings 
United categorizes commercial loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, 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.
 
Consumer Purpose Loans. United applies a pass / fail grading system to all consumer purpose loans. Under this system, loans that are on nonaccrual status, become past due 90 days, or are in bankruptcy and 30 or more days past due are classified as “fail” and all other loans are classified as “pass”. For reporting purposes, loans in these categories that are 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 and gross charge-offs by vintage year, which is the year of origination or most recent renewal, as of the date indicated (in thousands).
(in thousands)Term Loans by Origination YearRevolversRevolvers converted to term loansTotal
As of March 31, 202420242023202220212020Prior
Owner occupied CRE
Pass$121,015 $643,801 $665,648 $594,768 $546,727 $501,390 $113,065 $17,263 $3,203,677 
Special Mention831 1,837 14,475 13,905 9,131 11,771 — 2,774 54,724 
Substandard1,398 7,750 9,010 15,079 4,137 13,025 1,431 — 51,830 
Total owner occupied CRE$123,244 $653,388 $689,133 $623,752 $559,995 $526,186 $114,496 $20,037 $3,310,231 
Current period gross charge-offs$— $192 $17 $— $— $219 $— $— $428 
Income producing CRE
Pass$157,636 $570,861 $929,507 $835,019 $681,583 $668,180 $51,731 $12,087 $3,906,604 
Special Mention27,581 51,055 26,868 21,336 28,963 12,362 49 — 168,214 
Substandard38,515 48,474 9,076 2,460 5,439 27,487 — 53 131,504 
Total income producing CRE$223,732 $670,390 $965,451 $858,815 $715,985 $708,029 $51,780 $12,140 $4,206,322 
Current period gross charge-offs$— $— $— $— $— $229 $— $— $229 
Commercial & industrial
Pass$97,538 $559,393 $398,107 $275,540 $122,578 $197,346 $578,784 $11,182 $2,240,468 
Special Mention10,752 2,434 3,821 6,862 8,432 8,090 34,656 313 75,360 
Substandard685 25,705 3,818 15,705 4,935 4,715 31,806 1,308 88,677 
Total commercial & industrial$108,975 $587,532 $405,746 $298,107 $135,945 $210,151 $645,246 $12,803 $2,404,505 
Current period gross charge-offs$— $3,105 $409 $107 $111 $532 $— $522 $4,786 
Commercial construction
Pass$160,727 $627,053 $667,547 $263,091 $62,508 $74,320 $65,090 $936 $1,921,272 
Special Mention4,849 204 118 4 — — — — 5,175 
Substandard1,578 6,030 1,064 30 720 205 — — 9,627 
Total commercial construction$167,154 $633,287 $668,729 $263,125 $63,228 $74,525 $65,090 $936 $1,936,074 
Current period gross charge-offs$— $— $53 $— $— $— $— $— $53 
Equipment financing
Pass$192,828 $578,878 $452,224 $201,010 $68,999 $34,265 $— $— $1,528,204 
Special Mention— — 815 2,311 900 674 — — 4,700 
Substandard— 1,954 4,439 3,189 592 827 — — 11,001 
Total equipment financing$192,828 $580,832 $457,478 $206,510 $70,491 $35,766 $— $— $1,543,905 
Current period gross charge-offs$— $1,219 $3,457 $2,199 $383 $31 $— $— $7,289 
Residential mortgage
Pass$102,601 $823,173 $941,593 $721,699 $311,808 $315,388 $6 $3,262 $3,219,530 
Substandard1,311 2,772 3,431 2,104 1,982 8,276 — 281 20,157 
Total residential mortgage$103,912 $825,945 $945,024 $723,803 $313,790 $323,664 $6 $3,543 $3,239,687 
Current period gross charge-offs$— $— $13 $— $— $3 $— $— $16 
Home equity
Pass$— $— $— $— $— $— $935,162 $28,461 $963,623 
Substandard— — — — — — — 5,397 5,397 
Total home equity$— $— $— $— $— $— $935,162 $33,858 $969,020 
Current period gross charge-offs$— $— $— $— $— $— $— $7 $7 
Residential construction
Pass$15,109 $176,092 $44,524 $9,044 $4,941 $6,127 $— $92 $255,929 
Substandard215 963 30 — 7 135 — — 1,350 
Total residential construction$15,324 $177,055 $44,554 $9,044 $4,948 $6,262 $— $92 $257,279 
Current period gross charge-offs$— $85 $— $48 $— $— $— $— $133 
Manufactured housing
Pass$— $43,191 $67,155 $47,387 $42,030 $106,805 $— $— $306,568 
Substandard128 2,018 5,055 3,903 3,816 6,633 — — 21,553 
Total consumer$128 $45,209 $72,210 $51,290 $45,846 $113,438 $— $— $328,121 
Current period gross charge-offs$— $234 $615 $304 $149 $305 $— $— $1,607 
Consumer
Pass$27,459 $71,656 $33,669 $13,687 $9,517 $1,309 $22,067 $462 $179,826 
Substandard127 25 54 48 13 9 — — 276 
Total consumer$27,586 $71,681 $33,723 $13,735 $9,530 $1,318 $22,067 $462 $180,102 
Current period gross charge-offs$648 $55 $86 $18 $5 $— $— $49 $861 
(in thousands)Term LoansRevolversRevolvers converted to term loansTotal
As of December 31, 202320232022202120202019Prior
Owner occupied CRE
Pass$643,752 $681,834 $615,571 $553,047 $202,068 $337,495 $117,212 $18,671 $3,169,650 
Special Mention2,409 7,877 7,070 4,815 9,221 2,245 100 254 33,991 
Substandard11,128 8,929 15,405 7,104 5,395 8,340 1,421 2,688 60,410 
Total owner occupied CRE$657,289 $698,640 $638,046 $564,966 $216,684 $348,080 $118,733 $21,613 $3,264,051 
Current period gross charge-offs$207 $48 $— $819 $— $— $— $— $1,074 
Income producing CRE
Pass$661,093 $931,559 $851,529 $750,415 $302,845 $419,111 $50,659 $13,247 $3,980,458 
Special Mention48,358 26,751 18,989 25,964 6,387 6,173 — — 132,622 
Substandard68,032 9,998 2,523 21,037 28,877 20,351 — 54 150,872 
Total income producing CRE$777,483 $968,308 $873,041 $797,416 $338,109 $445,635 $50,659 $13,301 $4,263,952 
Current period gross charge-offs$3,033 $2,534 $— $— $— $2,291 $— $— $7,858 
Commercial & industrial
Pass$610,288 $425,626 $299,170 $130,586 $82,710 $130,190 $581,871 $13,332 $2,273,773 
Special Mention6,459 2,068 472 5,430 5,473 718 14,861 274 35,755 
Substandard10,906 5,713 22,635 8,557 4,499 1,610 46,282 1,315 101,517 
Total commercial & industrial$627,653 $433,407 $322,277 $144,573 $92,682 $132,518 $643,014 $14,921 $2,411,045 
Current period gross charge-offs$5,999 $1,627 $13,153 $2,377 $400 $157 $— $1,825 $25,538 
Commercial construction
Pass$665,792 $638,761 $293,276 $95,046 $59,471 $24,698 $62,370 $966 $1,840,380 
Special Mention28 124 6 — — — — — 158 
Substandard16,253 1,784 31 723 127 82 — — 19,000 
Total commercial construction$682,073 $640,669 $293,313 $95,769 $59,598 $24,780 $62,370 $966 $1,859,538 
Current period gross charge-offs$— $60 $— $— $— $— $— $— $60 
Equipment financing
Pass$673,201 $496,336 $233,422 $83,507 $41,053 $3,722 $— $— $1,531,241 
Substandard1,471 4,141 2,487 960 817 3 — — 9,879 
Total equipment financing$674,672 $500,477 $235,909 $84,467 $41,870 $3,725 $— $— $1,541,120 
Current period gross charge-offs$474 $10,902 $9,764 $1,960 $786 $320 $— $— $24,206 
Residential mortgage
Pass$839,825 $955,592 $734,078 $318,886 $84,736 $245,648 $6 $3,415 $3,182,186 
Substandard2,001 3,078 2,715 1,074 1,331 6,295 — 248 16,742 
Total residential mortgage$841,826 $958,670 $736,793 $319,960 $86,067 $251,943 $6 $3,663 $3,198,928 
Current period gross charge-offs$— $51 $— $— $— $38 $— $— $89 
Home equity
Pass$— $— $— $— $— $— $926,596 $28,412 $955,008 
Substandard— — — — — — — 3,979 3,979 
Total home equity$— $— $— $— $— $— $926,596 $32,391 $958,987 
Current period gross charge-offs$— $— $— $— $— $— $— $167 $167 
Residential construction
Pass$208,798 $70,011 $9,827 $5,201 $1,046 $5,614 $— $93 $300,590 
Substandard878 31 — 6 38 107 — — 1,060 
Total residential construction$209,676 $70,042 $9,827 $5,207 $1,084 $5,721 $— $93 $301,650 
Current period gross charge-offs$— $1,111 $— $— $— $— $— $— $1,111 
Manufactured housing
Pass$45,065 $69,424 $48,814 $43,735 $31,321 $80,284 $— $— $318,643 
Substandard1,078 4,665 3,601 3,020 1,291 4,176 — — 17,831 
Total consumer$46,143 $74,089 $52,415 $46,755 $32,612 $84,460 $— $— $336,474 
Current period gross charge-offs$38 $1,503 $985 $419 $279 $690 $— $— $3,914 
Consumer
Pass$86,142 $39,593 $16,191 $10,350 $1,212 $623 $26,239 $534 $180,884 
Substandard50 55 53 25 5 13 32 — 233 
Total consumer$86,192 $39,648 $16,244 $10,375 $1,217 $636 $26,271 $534 $181,117 
Current period gross charge-offs$3,245 $241 $233 $38 $15 $1 $5 $204 $3,982 
Modifications to Borrowers Experiencing Financial Difficulty
The period-end amortized cost and additional information regarding the modified terms of loans modified under the terms of a FDM during the three months ended March 31, 2024 and 2023 are presented in the following tables.

Three Months Ended March 31, 2024
New FDMs
Defaults within 12 months of modification
(in thousands)
Amortized Cost
% of Total Class of Receivable
Owner occupied CRE$1,950 0.1 %$— 
Income producing CRE28,540 0.7 — 
Commercial & industrial6,575 0.3 — 
Equipment financing1,393 0.1 228 
Residential mortgage1,228 — — 
Residential construction100 — — 
Manufactured housing128 — — 
Consumer125 0.1 — 
Total
$40,039 0.2 $228 

Three Months Ended March 31, 2024
New FDMs
(dollars in thousands)
Weighted Average Modification
Extension
Owner occupied CRE$243 1 year
Commercial & industrial
6,117 7 months
Residential mortgage27 1 year
Consumer125 5 months
Total
6,512 
Payment Delay
Owner occupied CRE (1)
266 N/A
Income producing CRE28,540 1 year
Commercial & industrial (1)
179 6 months
Residential construction100 6 months
Total29,085 
Payment Delay and Extension
Commercial & industrial
279 
Payment delay: 4 months; Extension: 3 years
Equipment financing1,393 
Extension and payment delay: 7 months
Total1,672 
Rate Reduction and Extension
Residential mortgage1,201 
Rate reduction: 444 basis points; Extension: 2 years
Manufactured housing128 
Rate reduction: 624 basis points; Extension: 6 years
Total1,329 
Rate Reduction and Payment Delay
Owner occupied CRE1,441 
Rate reduction: 75 basis points; Payment delay: 6 months
Total
$40,039 
(1) Payment delay FDMs in bankruptcy status are excluded from the weighted average payment delay calculation.
Three Months Ended March 31, 2023
New FDMs
Defaults within 12 months of modification
 Amortized Cost by Type of Modification
(in thousands)ExtensionPayment DelayRate Reduction & ExtensionTotal% of Total Class of Receivable
Commercial & industrial$— $6,170 $— $6,170 0.3 %$— 
Equipment financing5,211 — — 5,211 0.4 — 
Residential mortgage— — 57 57 — — 
Manufactured housing— — 152 152 — — 
Total
$5,211 $6,170 $209 $11,590 0.1 $— 

During the three months ended March 31, 2023, equipment financing FDMs typically consist of one or more three-month extensions beyond the original maturity date.

For the three months ended March 31, 2023, commercial and industrial payment delay modifications consisted of one or more three-month periods during which principal payments were deferred but interest payments continued to be paid.

During the three months ended March 31, 2023, FDMs categorized as rate reduction and extensions in the residential mortgage and manufactured housing categories resulted in a decrease in the weighted average interest rate on these FDMs of 621 bps and extended the weighted average maturity by 6.5 years.

Allowance for Credit Losses
The ACL for loans represents management’s estimate of life of loan credit losses in the portfolio as of the end of the period. The ACL related to unfunded commitments is included in other liabilities in the consolidated balance sheet.

At both March 31, 2024 and December 31, 2023, 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 baseline 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 charge-off experience to produce an expected default rate, with the results subject to a floor.

In the case of commercial construction, income producing CRE, owner occupied CRE, multifamily loans (included in income producing CRE) and commercial & industrial loans, at March 31, 2024, the expected default rate was adjusted by a model overlay based on expectations of future performance.

At March 31, 2024, the third party vendor’s baseline forecast was similar to the forecast at December 31, 2023. At March 31, 2024 United applied qualitative adjustments to the model output for the residential mortgage portfolio to account for the ongoing performance stability of the portfolio. United also applied qualitative adjustments to the equipment finance portfolio due to an elevated default rate that resulted from a higher level of recent charge-offs that was mostly coming from the long-haul trucking equipment segment, a small portion of the portfolio deemed not representative of the entire equipment financing portfolio.

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 2008 mortgage crisis.
The following table presents the balance and activity in the ACL by portfolio segment for the periods indicated.
Three Months Ended March 31, 2024
(in thousands)Beginning BalanceCharge-OffsRecoveriesProvisionEnding Balance
Owner occupied CRE$23,542 $(428)$226 $(3,682)$19,658 
Income producing CRE47,755 (229)24 (752)46,798 
Commercial & industrial30,890 (4,786)880 4,874 31,858 
Commercial construction21,741 (53)33 (1,698)20,023 
Equipment financing33,383 (7,289)927 12,961 39,982 
Residential mortgage28,219 (16)32 401 28,636 
Home equity9,647 (7)61 14 9,715 
Residential construction1,833 (133)14 (185)1,529 
Manufactured housing10,339 (1,607)38 3,274 12,044 
Consumer722 (861)266 564 691 
ACL - loans208,071 (15,409)2,501 15,771 210,934 
ACL - unfunded commitments16,057 — — (2,872)13,185 
Total ACL$224,128 $(15,409)$2,501 $12,899 $224,119 

Three Months Ended March 31, 2023
(in thousands)Beginning
Balance
Initial ACL - PCD loans (1)
Charge-OffsRecoveriesProvisionEnding
Balance
Owner occupied CRE
$19,834 $181 $(207)$117 $906 $20,831 
Income producing CRE
32,082 307 (2,781)475 3,524 33,607 
Commercial & industrial23,504 1,358 (898)673 3,675 28,312 
Commercial construction20,120 39 — 37 1,877 22,073 
Equipment financing23,395 — (4,027)652 6,175 26,195 
Residential mortgage20,809 157 (19)106 3,029 24,082 
Home equity8,707 534 (121)88 1,129 10,337 
Residential construction2,049 124 — 15 (145)2,043 
Manufactured housing8,098 — (654)26 954 8,424 
Consumer759 4 (817)251 433 630 
ACL - loans159,357 2,704 (9,524)2,440 21,557 176,534 
ACL - unfunded commitments21,163 — — — 226 21,389 
Total ACL$180,520 $2,704 $(9,524)$2,440 $21,783 $197,923 
(1) Represents the initial ACL related to PCD loans acquired in the Progress transaction.