Loans and Allowance for Loan Losses | Note 6 – Loans and Allowance for Credit Losses Major classifications of loans as of June 30, 2015, December 31, 2014 and June 30, 2014, are summarized as follows (in thousands) June 30, December 31, June 30, Owner occupied commercial real estate $ 1,265,783 $ 1,163,480 $ 1,163,327 Income producing commercial real estate 688,768 598,537 598,318 Commercial & industrial 792,791 710,256 554,089 Commercial construction 237,820 196,030 159,755 Total commercial 2,985,162 2,668,303 2,475,489 Residential mortgage 935,646 865,789 860,525 Home equity lines of credit 490,753 465,872 451,435 Residential construction 298,920 298,627 301,737 Consumer installment 105,931 104,899 105,160 Indirect auto 357,105 268,629 215,939 Total loans 5,173,517 4,672,119 4,410,285 Less allowance for loan losses (70,129 ) (71,619 ) (73,248 ) Loans, net $ 5,103,388 $ 4,600,500 $ 4,337,037 At June 30, 2015, December 31, 2014 and June 30, 2014, loans totaling $2.42 billion, $2.35 billion and $2.09 billion, respectively, were pledged as collateral to secure FHLB advances and other contingent funding sources. At June 30, 2015, the carrying value and unpaid principal balance of purchased credit impaired loans accounted for under ASC 310-30 was $10.1 million and $13.6 million, respectively. The following table presents changes in the value of the accretable yield for acquired loans accounted for under ASC Topic 310-30 for the three and six months ended June 30, 2015 (in thousands) Three Months Ended June 30, 2015 Six Months Ended June 30, 2015 Balance at beginning of period $ - $ - Additions due to acquisitions 1,029 1,029 Accretion (83 ) (83 ) Balance at end of period $ 946 $ 946 In addition to the accretable yield on loans accounted for under ASC Topic 310-30, the fair value adjustments on purchased loans outside the scope of ASC Topic 310-30 are also accreted to interest income over the life of the loans. At June 30, 2015, the remaining accretable fair value mark on loans not accounted for under ASC Topic 310-30 was $2.60 million. The allowance for loan losses represents management’s estimate of probable incurred losses in the loan portfolio as of the end of the period. The allowance for unfunded commitments is included in other liabilities in the consolidated balance sheet. Combined, the allowance for loan losses and allowance for unfunded commitments are referred to as the allowance for credit losses. The following table presents the balance and activity in the allowance for credit losses by portfolio segment for the three and six months ended June 30, 2015 and 2014 (in thousands) 2015 2014 Three Months Ended June 30, Beginning Balance Charge-Offs Recoveries Provision Ending Balance Beginning Balance Charge-Offs Recoveries Allocation of Unallocated Provision Ending Balance Owner occupied commercial real estate $ 14,952 $ (363 ) $ 78 $ 1,672 $ 16,339 $ 20,292 $ (918 ) $ 2,753 $ - $ (4,323 ) $ 17,804 Income producing commercial real estate 9,655 (74 ) 350 (1,731 ) 8,200 10,926 (632 ) 197 - 1,270 11,761 Commercial & industrial 3,442 (162 ) 789 659 4,728 4,247 (1,012 ) 350 - 300 3,885 Commercial construction 5,335 (147 ) 51 (344 ) 4,895 3,977 (131 ) - - 221 4,067 Residential mortgage 20,138 (1,109 ) 322 (299 ) 19,052 15,967 (2,800 ) 292 - 3,304 16,763 Home equity lines of credit 4,321 (348 ) 26 1,480 5,479 6,120 (624 ) 158 - 684 6,338 Residential construction 10,210 (499 ) 392 (766 ) 9,337 12,181 (1,946 ) 275 - 698 11,208 Consumer installment 713 (349 ) 187 137 688 717 (455 ) 391 - (54 ) 599 Indirect auto 1,241 (130 ) 8 292 1,411 796 (89 ) 16 - 100 823 Total allowance for loan losses 70,007 (3,181 ) 2,203 1,100 70,129 75,223 (8,607 ) 4,432 - 2,200 73,248 Allowance for unfunded commitments 2,780 - - (200 ) 2,580 2,165 - - - - 2,165 Total allowance for credit losses $ 72,787 $ (3,181 ) $ 2,203 $ 900 $ 72,709 $ 77,388 $ (8,607 ) $ 4,432 $ - $ 2,200 $ 75,413 Six Months Ended June 30, Beginning Balance Charge-Offs Recoveries Provision Ending Balance Beginning Balance Charge-Offs Recoveries Allocation of Unallocated Provision Ending Balance Owner occupied commercial real estate $ 16,041 $ (731 ) $ 89 $ 940 $ 16,339 $ 17,164 $ (1,284 ) $ 2,843 $ 1,278 $ (2,197 ) $ 17,804 Income producing commercial real estate 10,296 (322 ) 357 (2,131 ) 8,200 7,174 (837 ) 197 688 4,539 11,761 Commercial & industrial 3,255 (631 ) 917 1,187 4,728 6,527 (1,975 ) 891 318 (1,876 ) 3,885 Commercial construction 4,747 (169 ) 51 266 4,895 3,669 (132 ) - 388 142 4,067 Residential mortgage 20,311 (1,687 ) 484 (56 ) 19,052 15,446 (4,381 ) 357 1,452 3,889 16,763 Home equity lines of credit 4,574 (421 ) 40 1,286 5,479 5,528 (1,627 ) 168 391 1,878 6,338 Residential construction 10,603 (1,639 ) 471 (98 ) 9,337 12,532 (2,251 ) 369 1,728 (1,170 ) 11,208 Consumer installment 731 (675 ) 563 69 688 1,353 (1,131 ) 718 - (341 ) 599 Indirect auto 1,061 (258 ) 21 587 1,411 1,126 (166 ) 27 - (164 ) 823 Unallocated - - - - - 6,243 - - (6,243 ) - - Total allowance for loan losses 71,619 (6,533 ) 2,993 2,050 70,129 76,762 (13,784 ) 5,570 - 4,700 73,248 Allowance for unfunded commitments 1,930 - - 650 2,580 2,165 - - - - 2,165 Total allowance for credit losses $ 73,549 $ (6,533 ) $ 2,993 $ 2,700 $ 72,709 $ 78,927 $ (13,784 ) $ 5,570 $ - $ 4,700 $ 75,413 In the first quarter of 2014, United modified its allowance for loan losses methodology to incorporate a loss emergence period. The increase in precision resulting from the use of the loss emergence period led to the full allocation of the portion of the allowance that had previously been unallocated. The following table represents the recorded investment in loans by portfolio segment and the balance of the allowance for loan losses assigned to each segment based on the method of evaluating the loans for impairment as of June 30, 2015, December 31, 2014 and June 30, 2014 (in thousands) June 30, 2015 December 31, 2014 June 30, 2014 Allowance for Loan Losses Individually evaluated for impairment Collectively evaluated for impairment Purchased with deteriorated credit quality Ending Balance Individually evaluated for impairment Collectively evaluated for impairment Ending Balance Individually evaluated for impairment Collectively evaluated for impairment Ending Balance Owner occupied commercial real estate $ 1,592 $ 14,747 $ - $ 16,339 $ 2,737 $ 13,304 $ 16,041 $ 2,483 $ 15,321 $ 17,804 Income producing commercial real estate 782 7,418 - 8,200 1,917 8,379 10,296 1,404 10,357 11,761 Commercial & industrial 137 4,591 - 4,728 15 3,240 3,255 399 3,486 3,885 Commercial construction 530 4,365 - 4,895 729 4,018 4,747 412 3,655 4,067 Residential mortgage 3,107 15,945 - 19,052 3,227 17,084 20,311 3,117 13,646 16,763 Home equity lines of credit 26 5,453 - 5,479 47 4,527 4,574 115 6,223 6,338 Residential construction 506 8,831 - 9,337 1,192 9,411 10,603 1,054 10,154 11,208 Consumer installment 6 682 - 688 18 713 731 33 566 599 Indirect auto - 1,411 - 1,411 - 1,061 1,061 - 823 823 Total allowance for loan losses 6,686 63,443 - 70,129 9,882 61,737 71,619 9,017 64,231 73,248 Allowance for unfunded commitments - 2,580 - 2,580 - 1,930 1,930 - 2,165 2,165 Total allowance for credit losses $ 6,686 $ 66,023 $ - $ 72,709 $ 9,882 $ 63,667 $ 73,549 $ 9,017 $ 66,396 $ 75,413 Loans Outstanding Owner occupied commercial real estate $ 37,547 $ 1,225,779 $ 2,457 $ 1,265,783 $ 34,654 $ 1,128,826 $ 1,163,480 $ 31,952 $ 1,131,375 $ 1,163,327 Income producing commercial real estate 21,926 661,988 4,854 688,768 24,484 574,053 598,537 26,045 572,273 598,318 Commercial & industrial 5,023 787,247 521 792,791 3,977 706,279 710,256 3,641 550,448 554,089 Commercial construction 12,123 223,631 2,066 237,820 12,321 183,709 196,030 11,214 148,541 159,755 Residential mortgage 20,538 914,981 127 935,646 18,775 847,014 865,789 20,455 840,070 860,525 Home equity lines of credit 551 490,132 70 490,753 478 465,394 465,872 540 450,895 451,435 Residential construction 8,631 290,289 - 298,920 11,604 287,023 298,627 13,320 288,417 301,737 Consumer installment 141 105,790 - 105,931 179 104,720 104,899 329 104,831 105,160 Indirect auto - 357,105 - 357,105 - 268,629 268,629 - 215,939 215,939 Total loans $ 106,480 $ 5,056,942 $ 10,095 $ 5,173,517 $ 106,472 $ 4,565,647 $ 4,672,119 $ 107,496 $ 4,302,789 $ 4,410,285 Excluding loans accounted for under ASC Topic 310-30, management considers all loans that are on nonaccrual with a balance of $500,000 or greater and all troubled debt restructurings (“TDRs”) to be impaired. In addition, management reviews all accruing substandard loans greater than $2 million to determine if the loan is impaired. A loan is considered impaired when, based on current events and circumstances, it is probable that all amounts due according to the original contractual terms of the loan will not be collected. All TDRs are considered impaired regardless of accrual status. Impairment is measured based on the present value of expected future cash flows, discounted at the loan’s effective interest rate, the loan’s observable market price, or the fair value of the collateral if the loan is collateral dependent. For TDRs less than $500,000, impairment is estimated based on the average impairment of TDRs greater than $500,000 by loan category. For loan types that do not have TDRs greater than $500,000, the average impairment for all TDR loans is used to quantify the amount of required specific reserve. A specific reserve is established for impaired loans for the amount of calculated impairment. Interest payments received on impaired nonaccrual loans are applied as a reduction of the outstanding principal balance. For impaired loans not on nonaccrual status, interest is accrued according to the terms of the loan agreement. Loans are evaluated for impairment quarterly and specific reserves are established in the allowance for loan losses for any measured impairment. Each quarter, United’s management prepares an analysis of the allowance for credit losses to determine the appropriate balance that measures and quantifies the amount of probable incurred losses in the loan portfolio and unfunded loan commitments. The allowance is comprised of specific reserves on individually impaired loans, which are determined as described above, and general reserves which are determined based on historical loss experience as adjusted for current trends and economic conditions multiplied by a loss emergence period factor. Management uses eight quarters of historical loss experience to determine the loss factors to be used in the reserve calculation for loans evaluated in the aggregate. Eight quarters has been determined to be an appropriate time period as it is recent enough to be relevant to current conditions and covers a length of time sufficient to minimize distortions caused by nonrecurring and unusual activity that might otherwise influence a shorter time period. In previous years, the loss rates were weighted toward more recent quarters by multiplying each quarter’s annualized historical net charge-off rate by 1 through 8, with 8 representing the most recent quarter and 1 representing the oldest quarter. Management adopted this method of weighting quarterly loss rates to capture the rapidly deteriorating credit conditions in its loss factors during the financial crisis. In the first quarter of 2014, in light of stabilizing credit conditions, management concluded that it was appropriate to apply a more level weighting to capture the full range and impacts of credit losses experienced during the most recent economic and credit cycle. For the four quarters of 2014, management applied a weighting factor of 1.75 to the most recent four quarters and a weighting of 1.00 for the four oldest quarters. Beginning with the first quarter of 2015, management began applying equal weight to all eight quarters to capture the full range of the loss cycle. Management believes the current weightings are more appropriate to measure the probable losses incurred within the loan portfolio. Also, beginning in the first quarter of 2014, management updated its method for measuring the loss emergence period in the calculation of the allowance for credit losses. The rapidly deteriorating credit conditions during the peak of the credit cycle shortened the length of time between management’s estimation of the incurrence of a loss and its recognition as a charge-off. In most cases, the loss emergence period was within a twelve month period which made the use of annualized loss factors appropriate for measuring the amount of incurred yet unconfirmed credit losses within the loan portfolio. As United has moved out beyond the peak of the financial crisis, management has observed that the loss emergence period has extended. Management calculates the loss emergence period for each pool of loans based on the average length of time between the date a loan first exceeds 30 days past due and the date the loan is charged off. The updates to the weightings to the eight quarters of loss history and the update to our estimation of the loss emergence period did not have a material effect on the total allowance for loan losses or the provision for loan losses, however, the revised loss emergence period resulted in the full allocation of the previously unallocated portion of the allowance for loan losses. On junior lien home equity loans, management has limited ability to monitor the delinquency status of the first lien unless the first lien is also held by United. As a result, management applies the weighted average historical loss factor for this category and appropriately adjusts it to reflect the increased risk of loss from these credits. Management carefully reviews the resulting loss factors for each category of the loan portfolio and evaluates whether qualitative adjustments are necessary to take into consideration recent credit trends such as increases or decreases in past due, nonaccrual, criticized and classified loans, and other macro environmental factors such as changes in unemployment rates, lease vacancy rates and trends in property values and absorption rates. Management believes that its method of determining the balance of the allowance for credit losses provides a reasonable and reliable basis for measuring and reporting losses that are incurred in the loan portfolio as of the reporting date. When a loan officer determines that a loan is uncollectible, he or she is responsible for recommending that the loan be charged off. Full or partial charge-offs may also be recommended by the Collections Department, the Special Assets Department and the Foreclosure/OREO Department. Nonaccrual real estate loans that are collateral dependent are generally charged down to 80% of the appraised value of the underlying collateral at the time they are placed on nonaccrual status. Commercial and consumer asset quality committees consisting of the Chief Credit Officer, a Senior Risk Officer and the Senior Credit Officers meet monthly to review charge-offs that have occurred during the previous month. Generally, closed-end retail loans (installment and residential mortgage loans) past due 90 cumulative days are written down to their collateral value less estimated selling costs unless the loan is well secured and in process of collection (within the next 90 days). Open-end (revolving) unsecured retail loans which are past due 90 cumulative days from their contractual due date are generally charged-off. The following table presents loans individually evaluated for impairment by class of loans as of June 30, 2015, December 31, 2014 and June 30, 2014 (in thousands) June 30, 2015 December 31, 2014 June 30, 2014 Unpaid Principal Balance Recorded Investment Allowance for Loan Losses Allocated Unpaid Principal Balance Recorded Investment Allowance for Loan Losses Allocated Unpaid Principal Balance Recorded Investment Allowance for Loan Losses Allocated With no related allowance recorded: Owner occupied commercial real estate $ 14,138 $ 12,939 $ - $ 12,025 $ 11,325 $ - $ 14,445 $ 12,985 $ - Income producing commercial real estate 9,696 9,553 - 8,311 8,311 - 12,755 11,808 - Commercial & industrial 2,785 1,977 - 1,679 1,042 - 1,736 1,710 - Commercial construction - - - - - - 195 195 - Total commercial 26,619 24,469 - 22,015 20,678 - 29,131 26,698 - Residential mortgage 2,395 1,930 - 2,569 1,472 - 3,357 2,849 - Home equity lines of credit - - - - - - - - - Residential construction 2,347 2,347 - 4,338 3,338 - 6,168 5,491 - Consumer installment - - - - - - - - - Indirect auto - - - - - - - - - Total with no related allowance recorded 31,361 28,746 - 28,922 25,488 - 38,656 35,038 - With an allowance recorded: Owner occupied commercial real estate 26,301 24,608 1,592 24,728 23,329 2,737 20,287 18,967 2,483 Income producing commercial real estate 12,460 12,373 782 16,352 16,173 1,917 14,706 14,237 1,404 Commercial & industrial 3,055 3,046 137 2,936 2,935 15 1,931 1,931 399 Commercial construction 12,203 12,123 530 12,401 12,321 729 11,194 11,019 412 Total commercial 54,019 52,150 3,041 56,417 54,758 5,398 48,118 46,154 4,698 Residential mortgage 19,045 18,608 3,107 17,732 17,303 3,227 18,077 17,606 3,117 Home equity lines of credit 563 551 26 478 478 47 540 540 115 Residential construction 7,291 6,284 506 8,962 8,266 1,192 9,255 7,829 1,054 Consumer installment 163 141 6 179 179 18 329 329 33 Indirect auto - - - - - - - - - Total with an allowance recorded 81,081 77,734 6,686 83,768 80,984 9,882 76,319 72,458 9,017 Total $ 112,442 $ 106,480 $ 6,686 $ 112,690 $ 106,472 $ 9,882 $ 114,975 $ 107,496 $ 9,017 Excluding loans accounted for under ASC Topic 310-30, there were no loans more than 90 days past due and still accruing interest at June 30, 2015, December 31, 2014 or June 30, 2014. Nonaccrual loans include both homogeneous loans that are collectively evaluated for impairment and individually evaluated impaired loans. United’s policy is to place loans on nonaccrual status when, in the opinion of management, the principal and interest on a loan is not likely to be repaid in accordance with the loan terms or when the loan becomes 90 days past due and is not well secured and in the process of collection. When a loan is classified on nonaccrual status, interest previously accrued but not collected is reversed against current interest revenue. Principal and interest payments received on a nonaccrual loan are applied to reduce outstanding principal. Loans accounted for under ASC Topic 310-30 are considered past due or delinquent when the contractual principal or interest due in accordance with the terms of the loan agreement remains unpaid after the due date of the scheduled payment. However, these loans are considered as performing, even though they may be contractually past due, as any non-payment of contractual principal or interest is considered in the periodic re-estimation of expected cash flows and is included in the resulting recognition of current period covered loan loss provision or future period yield adjustments. Loans accounted for under ASC Topic 310-30 were not classified as nonaccrual at June 30, 2015 as the carrying value of the respective loan or pool of loans cash flows were considered estimable and probable of collection. Therefore, interest income, through accretion of the difference between the carrying value of the loans and the expected cash flows, is being recognized on all acquired loans being accounted for under ASC Topic 310-30. The gross additional interest revenue that would have been earned if the loans classified as nonaccrual had performed in accordance with the original terms was approximately $165,000 and $96,000 for the three months ended June 30, 2015 and 2014, respectively and $424,000 and $556,000 for the six months ended June 30, 2015 and 2014, respectively. The gross additional interest revenue that would have been earned for the three and six months ended June 30, 2015 and 2014 had performing TDRs performed in accordance with the original terms is immaterial. The average balances of impaired loans and income recognized on impaired loans while they were considered impaired are presented below for the three and six months ended June 30, 2015 and 2014 (in thousands) 2015 2014 Three Months Ended June 30, Average Balance Interest Revenue Recognized During Impairment Cash Basis Interest Revenue Received Average Balance Interest Revenue Recognized During Impairment Cash Basis Interest Revenue Received Owner occupied commercial real estate $ 37,985 $ 469 $ 509 $ 31,558 $ 403 $ 391 Income producing commercial real estate 22,055 273 253 26,415 316 317 Commercial & industrial 5,221 45 89 3,683 40 50 Commercial construction 12,164 117 116 11,340 104 107 Total commercial 77,425 904 967 72,996 863 865 Residential mortgage 20,604 200 203 20,598 228 217 Home equity lines of credit 558 5 5 550 5 6 Residential construction 8,748 128 132 13,762 177 175 Consumer installment 161 3 3 335 6 5 Indirect auto - - - - - - Total $ 107,496 $ 1,240 $ 1,310 $ 108,241 $ 1,279 $ 1,268 Six Months Ended June 30, Owner occupied commercial real estate $ 37,487 $ 929 $ 968 $ 30,334 $ 761 $ 771 Income producing commercial real estate 21,740 540 529 26,138 628 650 Commercial & industrial 4,622 83 125 4,122 92 101 Commercial construction 12,219 233 237 12,027 216 242 Total commercial 76,068 1,785 1,859 72,621 1,697 1,764 Residential mortgage 21,345 425 436 20,960 457 455 Home equity lines of credit 518 10 10 528 10 12 Residential construction 9,662 248 258 13,400 322 325 Consumer installment 157 6 6 392 12 14 Indirect auto - - - - - - Total $ 107,750 $ 2,474 $ 2,569 $ 107,901 $ 2,498 $ 2,570 The following table presents the recorded investment in nonaccrual loans by loan class as of June 30, 2015, December 31, 2014 and June 30, 2014 (in thousands) Nonaccrual Loans June 30, 2015 December 31, 2014 June 30, 2014 Owner occupied commercial real estate $ 4,878 $ 4,133 $ 2,975 Income producing commercial real estate 883 717 1,032 Commercial & industrial 1,389 1,571 1,102 Commercial construction 59 83 95 Total commercial 7,209 6,504 5,204 Residential mortgage 8,599 8,196 10,201 Home equity lines of credit 940 695 510 Residential construction 1,358 2,006 4,248 Consumer installment 131 134 171 Indirect auto 568 346 390 Total $ 18,805 $ 17,881 $ 20,724 The following table presents the aging of the recorded investment in past due loans as of June 30, 2015, December 31, 2014 and June 30, 2014 by class of loans (in thousands) Loans Past Due Loans Not As of June 30, 2015 30 - 59 Days 60 - 89 Days >90 Days Total Past Due Total Owner occupied commercial real estate $ 2,789 $ 337 $ 1,646 $ 4,772 $ 1,261,011 $ 1,265,783 Income producing commercial real estate 726 313 440 1,479 687,289 688,768 Commercial & industrial 810 87 1,278 2,175 790,616 792,791 Commercial construction 626 - 44 670 237,150 237,820 Total commercial 4,951 737 3,408 9,096 2,976,066 2,985,162 Residential mortgage 4,888 1,568 1,615 8,071 927,575 935,646 Home equity lines of credit 1,268 528 279 2,075 488,678 490,753 Residential construction 2,110 269 429 2,808 296,112 298,920 Consumer installment 444 188 23 655 105,276 105,931 Indirect auto 276 132 402 810 356,295 357,105 Total loans $ 13,937 $ 3,422 $ 6,156 $ 23,515 $ 5,150,002 $ 5,173,517 As of December 31, 2014 Owner occupied commercial real estate $ 1,444 $ 1,929 $ 1,141 $ 4,514 $ 1,158,966 $ 1,163,480 Income producing commercial real estate 2,322 1,172 - 3,494 595,043 598,537 Commercial & industrial 302 40 1,425 1,767 708,489 710,256 Commercial construction - - 66 66 195,964 196,030 Total commercial 4,068 3,141 2,632 9,841 2,658,462 2,668,303 Residential mortgage 5,234 2,931 3,278 11,443 854,346 865,789 Home equity lines of credit 961 303 167 1,431 464,441 465,872 Residential construction 1,172 268 1,395 2,835 295,792 298,627 Consumer installment 607 136 33 776 104,123 104,899 Indirect auto 200 146 141 487 268,142 268,629 Total loans $ 12,242 $ 6,925 $ 7,646 $ 26,813 $ 4,645,306 $ 4,672,119 As of June 30, 2014 Owner occupied commercial real estate $ 448 $ 1,239 $ 762 $ 2,449 $ 1,160,878 $ 1,163,327 Income producing commercial real estate 2,030 - 242 2,272 596,046 598,318 Commercial & industrial 930 101 405 1,436 552,653 554,089 Commercial construction 116 - 50 166 159,589 159,755 Total commercial 3,524 1,340 1,459 6,323 2,469,166 2,475,489 Residential mortgage 7,372 1,404 3,150 11,926 848,599 860,525 Home equity lines of credit 1,609 193 79 1,881 449,554 451,435 Residential construction 1,246 584 1,331 3,161 298,576 301,737 Consumer installment 677 80 1 758 104,402 105,160 Indirect auto 258 99 193 550 215,389 215,939 Total loans $ 14,686 $ 3,700 $ 6,213 $ 24,599 $ 4,385,686 $ 4,410,285 As of June 30, 2015, December 31, 2014, and June 30, 2014, $6.24 million, $9.72 million and $8.98 million, respectively, of specific reserves were allocated to customers whose loan terms have been modified in TDRs. United committed to lend additional amounts totaling up to $75,000, $51,000 and $44,000 as of June 30, 2015, December 31, 2014 and June 30, 2014, respectively, to customers with outstanding loans that are classified as TDRs. The modification of the terms of the TDRs included one or a combination of the following: a reduction of the stated interest rate of the loan or an extension of the amortization period that would not otherwise be considered in the current market for new debt with similar risk characteristics; a restructuring of the borrower’s debt into an “A/B note structure” where the A note would fall within the borrower’s ability to pay and the remainder would be included in the B note, or a mandated bankruptcy restructuring. The following table presents information on TDRs including the number of loan contracts restructured and the pre- and post-modification recorded investment as of June 30, 2015, December 31, 2014 and June 30, 2014 (dollars in thousands) June 30, 2015 December 31, 2014 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 Number of Contracts Pre- Modification Outstanding Recorded Investment Post- Modification Outstanding Recorded Investment Owner occupied commercial real estate 57 $ 34,845 $ 33,401 54 $ 27,695 $ 26,296 52 $ 28,233 $ 26,670 Income producing commercial real estate 29 15,756 15,681 31 18,094 17,915 33 19,427 18,957 Commercial & industrial 32 3,583 3,583 32 2,848 2,847 31 2,893 2,893 Commercial construction 14 11,174 11,094 14 11,360 11,280 15 11,390 11,213 Total commercial 132 65,358 63,759 131 59,997 58,338 131 61,943 59,733 Residential mortgage 165 19,742 19,141 154 18,630 17,836 154 21,008 20,030 Home equity lines of credit 3 560 551 2 478 478 4 540 540 Residential construction 45 6,925 6,284 48 8,962 8,265 54 12,463 10,361 Consumer installment 16 159 141 17 179 179 23 329 329 Indirect auto - - - - - - - - - Total loans 361 $ 92,744 $ 89,876 352 $ 88,246 $ 85,096 366 $ 96,283 $ 90,993 Loans modified under the terms of a TDR during the three and six months ended June 30, 2015 and 2014 are presented in the table below. In addition, the following table presents loans modified under the terms of a TDR that became 90 days or more delinquent during the three and six months ended June 30, 2015 and 2014, that were initially restructured within one year prior to becoming delinquent (dollars in thousands) New Troubled Debt Restructurings for the Three Months Ended June 30, New Troubled Debt Restructurings for the Six Months Ended June 30, Modified Within the Previous Twelve Months that Have Subsequently Defaulted During the Three Months Ended June 30, 2015 Modified Within the Previous Twelve Months that Have Subsequently Defaulted During the Six Months Ended June 30, 2015 Pre- Post- Pre- Post- Modification Modification Modification Modification Outstanding Outstanding Outstanding Outstanding Number of Recorded Recorded Number of Recorded Number of Recorded Recorded Number of Recorded 2015 Contracts Investment Investment Contracts Investment Contracts Investment Investment Contracts Investment Owner occupied commercial real estate 6 $ 8,040 $ 7,996 - $ - 8 $ 12,537 $ 12,493 - $ - Income producing commercial real estate 1 55 54 - - 3 310 310 - - Commercial & industrial 4 992 992 - - 6 1,180 1,180 - - Commercial construction 1 233 233 - - 1 233 233 - - Total commercial 12 9,320 9,275 - - 18 14,260 14,216 - - Residential mortgage 8 523 523 - - 23 2,121 2,121 - - Home equity lines of credit 1 83 74 - - 1 83 74 - - Residential construction 2 163 139 - - 2 163 139 - - Consumer installment 1 25 25 - - 2 28 28 1 30 Indirect auto - - - - - - - - - - Total loans 24 $ 10,114 $ 10,036 - $ - 46 $ 16,655 $ 16,578 1 $ 30 Modified Within the Previous Twelve Months that Have Subsequently Defaulted During the Three Months Ended June 30, 2014 Modified Within the Previous Twelve Months that Have Subsequently Defaulted During the Six Months Ended June 30, 2014 Pre- Post- Pre- Post- Modification Modification Modification Modification Outstanding Outstanding Outstanding Outstanding Number of Recorded Recorded Number of Recorded Number of Recorded Recorded Number of Recorded 2014 Contracts Investment Investment Contracts Investment Contracts Investment Investment Contracts Investment Owner occupied commercial real estate 5 $ 2,787 $ 2,787 - $ - 7 $ 3,392 $ 3,392 1 $ 104 Income producing commercial real estate 3 1,459 1,459 - - 5 1,992 1,992 - - Commercial & industrial 3 106 106 - - 4 330 330 2 54 Commercial construction 1 240 240 - - 2 471 471 - - Total commercial 12 4,592 4,592 - - 18 6,185 6,185 3 158 Residential mortgage 9 1,014 973 2 280 23 2,146 2,105 6 732 Home equity lines of credit 1 36 36 - - 1 36 36 - - Residential construction 3 1,124 1,124 - - 3 1,124 1,124 - - Consumer installment 3 84 84 - - 5 226 226 - - Indirect auto - - - - - - - - - - Total loans 28 $ 6,850 $ 6,809 2 $ 280 50 $ 9,717 $ 9,676 9 $ 890 Collateral dependent TDRs that subsequently default and are placed on nonaccrual are charged down to the fair value of the collateral consistent with United’s policy for nonaccrual loans. Impairment on TDRs that are not collateral dependent continues to be measured on discounted cash flows regardless of whether the loan has subsequently defaulted. As of June 30, 2015, December 31, 2014 and June 30, 2014, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows (in thousands) Substandard Doubtful / As of June 30, 2015 Pass Watch Performing Nonaccrual Loss Total Owner occupied commercial real estate $ 1,195,986 $ 25,301 $ 39,618 $ 4,878 $ - $ 1,265,783 Income producing commercial real estate 664,137 4,973 18,775 883 - 688,768 Commercial & industrial 781,820 3,188 6,394 1,389 - 792,791 Commercial construction 232,080 2,426 3,255 59 - 237,820 Total commercial 2,874,023 35,888 68,042 7,209 - 2,985,162 Residential mortgage 886,863 9,605 30,579 8,599 - 935,646 Home equity lines of credit 484,222 - 5,591 940 - 490,753 Residential construction 284,395 3,481 9,686 1,358 - 298,920 Consumer installment 104,958 - 842 131 - 105,931 Indirect auto 355,576 - 961 568 - 357,105 Total loans $ 4,990,037 $ 48,974 $ 115,701 $ 18,805 $ - $ 5,173,517 As of December 31, 2014 Owner occupied commercial real estate $ 1,094,057 $ 18,889 $ 46,401 $ 4,133 $ - $ 1,163,480 Income producing commercial real estate 560,559 16,701 20,560 717 - 598,537 Commercial & industrial 696,805 4,017 7,863 1,571 - 710,256 Commercial construction 190,070 2,311 3,566 83 - 196,030 Total commercial 2,541,491 41,918 78,390 6,504 - 2,668,303 Residential mortgage 814,168 11,594 31,831 8,196 - 865,789 Home equity lines of credit 459,881 - 5,296 695 - 465,872 Residential construction 280,166 5,535 10,920 2,006 - 298,627 Consumer installment 103,383 - 1,382 134 - 104,899 Indirect auto 267,709 - 574 346 - 268,629 Total loans $ 4,466,798 $ 59,047 $ 128,393 $ 17,881 $ - $ 4,672,119 As of June 30, 2014 Owner occupied commercial real estate $ 1,079,629 $ 32,501 $ 48,222 $ 2,975 $ - $ 1,163,327 Income producing commercial real estate 556,223 16,430 24,633 1,032 - 598,318 Commercial & industrial 542,836 4,504 5,647 1,102 - 554,089 Commercial construction 152,894 2,360 4,406 95 - 159,755 Total commercial 2,331,582 55,795 82,908 5,204 - 2,475,489 Residential mortgage 797,725 10,743 41,856 10,201 - 860,525 Home equity lines of credit 443,196 167 7,562 510 - 451,435 Residential construction 276,539 8,078 12,872 4,248 - 301,737 Consumer installment 103,203 10 1,776 171 - 105,160 Indirect auto 214,987 - 562 390 - 215,939 Total loans $ 4,167,232 $ 74,793 $ 147,536 $ 20,724 $ - $ 4,410,285 Risk Ratings Uni |