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 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 June 30, 2015, United had TDRs of $21,992 as compared to $22,234 as of December 31, 2014. Of the $21,992 aggregate balance of TDRs at June 30, 2015, $9,837 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 June 30, 2015, there were no commitments to lend additional funds to debtors owing receivables whose terms have been modified in TDRs. At June 30, 2015, United had restructured loans in the amount of $3,913 that were modified by a reduction in the interest rate, $8,017 that were modified by a combination of a reduction in the interest rate and the principal and $10,062 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.

The following table sets forth United’s troubled debt restructurings that have been restructured during the three months ended June 30, 2015 and 2014, segregated by class of loans:


	Troubled Debt Restructurings
	For the Three Months Ended
	June 30, 2015						June 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		669		0		0		0
Other commercial		0		0		0		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		1	$	669	$	669		2	$	5,630	$	5,630

The following table sets forth United’s troubled debt restructurings that have been restructured during the six months ended June 30, 2015 and 2014, segregated by class of loans:


	Troubled Debt Restructurings
	For the Six Months Ended
	June 30, 2015						June 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		669		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	$	909		2	$	5,630	$	5,630

During the second quarter and first six months of 2015, $669 and $909, respectively, of restructured loans were modified by a combination of a reduction in the interest rate and an extension of the maturity date. During the second quarter and first six months of 2014, $5,630 of restructured loans 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 periods ended June 30, 2015 and 2014 subsequently defaulted, resulting in a principal charge-off during the first six months of 2015 and 2014, respectively.

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, 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	$	6,907	$	13,228	$	20,135	$	942,480	$	962,615	$	585
Nonowner-occupied		33,582		22,233		55,815		2,664,095		2,719,910		3,414
Other commercial		22,238		25,266		47,504		1,560,215		1,607,719		3,453
Residential real estate		35,357		30,279		65,636		2,182,401		2,248,037		2,648
Construction & land development		6,449		15,858		22,307		1,140,435		1,162,742		425
Consumer:
Bankcard		214		166		380		10,048		10,428		166
Other consumer		6,878		1,285		8,163		377,687		385,850		944

Total	$	111,625	$	108,315	$	219,940	$	8,877,361	$	9,097,301	$	11,635

(1)	Other includes loans with a recorded investment of $162,073 acquired and accounted for under ASC topic 310-30 “Loans and Debt Securities Acquired with Deteriorated Credit Quality”.

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


	June 30, 2015		December 31, 2014
Commercial real estate:
Owner-occupied	$	12,643	$	12,543
Nonowner-occupied		18,819		14,814
Other commercial		21,813		14,941
Residential real estate		27,631		20,127
Construction & land development		15,433		16,471
Consumer:
Bankcard		0		0
Other consumer		341		349

Total	$	96,680	$	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 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 June 30, 2015
	Commercial Real Estate				Other Commercial		Construction & Land Development
	Owner- occupied		Nonowner- occupied		Other Commercial		Construction & Land Development
Grade:
Pass	$	871,955	$	2,547,470	$	1,453,495	$	993,568
Special mention		19,006		37,040		25,093		61,078
Substandard		71,654		135,400		123,302		108,096
Doubtful		0		0		5,829		0

Total	$	962,615	$	2,719,910	$	1,607,719	$	1,162,742


As of December 31, 2014
	Commercial Real Estate				Other Commercial		Construction & Land Development
	Owner- occupied		Nonowner- occupied		Other Commercial		Construction & Land Development
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

Credit Quality Indicators

Consumer Credit Exposure


As of June 30, 2015
	Residential Real Estate		Bankcard		Other Consumer
Grade:
Pass	$	2,165,134	$	10,047	$	377,467
Special mention		16,609		215		6,988
Substandard		64,800		166		1,395
Doubtful		1,494		0		0

Total	$	2,248,037	$	10,428	$	385,850


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
	June 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	$	43,920	$	44,133	$	0	$	37,811	$	37,811	$	0
Nonowner-occupied		71,073		71,538		0		48,126		48,462		0
Other commercial		35,676		37,389		0		38,521		40,329		0
Residential real estate		31,368		32,133		0		31,262		31,930		0
Construction & land development		33,500		37,481		0		64,945		68,799		0
Consumer:
Bankcard		0		0		0		0		0		0
Other consumer		30		30		0		41		41		0
With an allowance recorded:
Commercial real estate:
Owner-occupied	$	4,616	$	4,616	$	1,099	$	5,014	$	5,014	$	776
Nonowner-occupied		6,727		6,727		1,347		6,994		6,994		797
Other commercial		19,692		23,193		11,887		17,554		20,554		7,168
Residential real estate		7,548		8,869		3,577		6,028		7,349		2,578
Construction & land development		11,686		15,415		3,859		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	$	48,536	$	48,749	$	1,099	$	42,825	$	42,825	$	776
Nonowner-occupied		77,800		78,265		1,347		55,120		55,456		797
Other commercial		55,368		60,582		11,887		56,075		60,883		7,168
Residential real estate		38,916		41,002		3,577		37,290		39,279		2,578
Construction & land development		45,186		52,896		3,859		75,724		82,988		3,627
Consumer:
Bankcard		0		0		0		0		0		0
Other consumer		30		30		0		41		41		0


	Impaired Loans
	For the Three Months Ended
	June 30, 2015				June 30, 2014
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial real estate:
Owner-occupied	$	43,898	$	117	$	37,654	$	425
Nonowner-occupied		66,936		354		63,135		154
Other commercial		35,659		140		31,403		147
Residential real estate		30,867		97		30,535		96
Construction & land development		36,722		80		47,169		68
Consumer:
Bankcard		0		0		0		0
Other consumer		35		0		42		0
With an allowance recorded:
Commercial real estate:
Owner-occupied	$	4,789	$	20	$	3,695	$	34
Nonowner-occupied		6,847		7		7,794		46
Other commercial		19,764		154		12,234		82
Residential real estate		7,119		18		7,880		29
Construction & land development		10,740		58		10,328		12
Consumer:
Bankcard		0		0		0		0
Other consumer		0		0		152		0
Total:
Commercial real estate:
Owner-occupied	$	48,687	$	137	$	41,349	$	459
Nonowner-occupied		73,783		361		70,929		200
Other commercial		55,423		294		43,637		229
Residential real estate		37,986		115		38,415		125
Construction & land development		47,462		138		57,497		80
Consumer:
Bankcard		0		0		0		0
Other consumer		35		0		194		0


	Impaired Loans
	For the Six Months Ended
	June 30, 2015				June 30, 2014
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial real estate:
Owner-occupied	$	40,294	$	179	$	26,752	$	488
Nonowner-occupied		61,290		517		44,110		210
Other commercial		32,580		240		24,368		158
Residential real estate		31,912		146		24,369		149
Construction & land development		45,541		159		36,118		137
Consumer:
Bankcard		0		0		0		0
Other consumer		40		0		28		0
With an allowance recorded:
Commercial real estate:
Owner-occupied	$	4,936	$	58	$	3,916	$	75
Nonowner-occupied		7,112		46		8,313		92
Other commercial		19,083		218		12,680		88
Residential real estate		6,692		29		7,810		93
Construction & land development		10,833		92		10,569		16
Consumer:
Bankcard		0		0		0		0
Other consumer		0		0		152		0
Total:
Commercial real estate:
Owner-occupied	$	45,230	$	237	$	30,668	$	563
Nonowner-occupied		68,402		563		52,423		302
Other commercial		51,663		458		37,048		246
Residential real estate		38,604		175		32,179		242
Construction & land development		56,374		251		46,687		153
Consumer:
Bankcard		0		0		0		0
Other consumer		40		0		180		0

At June 30, 2015 and December 31, 2014, other real estate owned (OREO) included in other assets in the Consolidated Balance Sheets was $34,964 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 June 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 $655 and $311, respectively.