Loans

The following table shows the Company’s loan portfolio by category as of the dates shown:



	March 31,			December 31,			March 31,
(Dollars in thousands)	2015			2014			2014
Balance:
Commercial	$	4,211,932		$	3,924,394		$	3,439,197
Commercial real-estate	4,710,486			4,505,753			4,262,255
Home equity	709,283			716,293			707,748
Residential real-estate	495,925			483,542			426,769
Premium finance receivables—commercial	2,319,623			2,350,833			2,208,361
Premium finance receivables—life insurance	2,375,654			2,277,571			1,929,334
Consumer and other	130,156			151,012			159,496
Total loans, net of unearned income, excluding covered loans	$	14,953,059		$	14,409,398		$	13,133,160
Covered loans	209,694			226,709			312,478
Total loans	$	15,162,753		$	14,636,107		$	13,445,638
Mix:
Commercial	28		%	26		%	26		%
Commercial real-estate	31			31			32
Home equity	5			5			5
Residential real-estate	3			3			3
Premium finance receivables—commercial	15			16			17
Premium finance receivables—life insurance	16			16			14
Consumer and other	1			1			1
Total loans, net of unearned income, excluding covered loans	99		%	98		%	98		%
Covered loans	1			2			2
Total loans	100		%	100		%	100		%

The Company’s loan portfolio is generally comprised of loans to consumers and small to medium-sized businesses located within the geographic market areas that the banks serve. The premium finance receivables portfolios are made to customers throughout the United States and Canada. The Company strives to maintain a loan portfolio that is diverse in terms of loan type, industry, borrower and geographic concentrations. Such diversification reduces the exposure to economic downturns that may occur in different segments of the economy or in different industries.

Certain premium finance receivables are recorded net of unearned income. The unearned income portions of such premium finance receivables were $48.1 million at March 31, 2015, $46.9 million at December 31, 2014 and $40.3 million at March 31, 2014, respectively. Certain life insurance premium finance receivables attributable to the life insurance premium finance loan acquisition in 2009 as well as PCI loans are recorded net of credit discounts. See “Acquired Loan Information at Acquisition” below.

Total loans, excluding PCI loans, include net deferred loan fees and costs and fair value purchase accounting adjustments totaling $(3.7) million at March 31, 2015, $330,000 at December 31, 2014 and $(6.2) million at March 31, 2014. The net credit balances at March 31, 2015 and March 31, 2014 are primarily the result of purchase accounting adjustments related to acquisitions in 2015 and 2014.

It is the policy of the Company to review each prospective credit in order to determine the appropriateness and, when required, the adequacy of security or collateral necessary to obtain when making a loan. The type of collateral, when required, will vary from liquid assets to real estate. The Company seeks to ensure access to collateral, in the event of default, through adherence to state lending laws and the Company’s credit monitoring procedures.

Acquired Loan Information at Acquisition—PCI Loans

As part of our previous acquisitions, we acquired loans for which there was evidence of credit quality deterioration since origination (PCI loans) and we determined that it was probable that the Company would be unable to collect all contractually required principal and interest payments. The following table presents the unpaid principal balance and carrying value for these acquired loans:



	March 31, 2015				December 31, 2014
	Unpaid Principal		Carrying		Unpaid Principal		Carrying
(Dollars in thousands)	Balance		Value		Balance		Value
Bank acquisitions	$	277,163	$	222,837	$	285,809	$	227,229
Life insurance premium finance loans acquisition	394,632		389,048		399,665		393,479

The following table provides estimated details as of the date of acquisition on loans acquired in 2015 with evidence of credit quality deterioration since origination:



(Dollars in thousands)	Delavan
Contractually required payments including interest	$	15,791
Less: Nonaccretable difference	1,442
Cash flows expected to be collected ⁽¹⁾	14,349
Less: Accretable yield	898
Fair value of PCI loans acquired	13,451

(1) Represents undiscounted expected principal and interest cash at acquisition.

See Note 7—Allowance for Loan Losses, Allowance for Losses on Lending-Related Commitments and Impaired Loans for further discussion regarding the allowance for loan losses associated with PCI loans at March 31, 2015.

Accretable Yield Activity - PCI Loans

Changes in expected cash flows may vary from period to period as the Company periodically updates its cash flow model assumptions for PCI loans. The factors that most significantly affect the estimates of gross cash flows expected to be collected, and accordingly the accretable yield, include changes in the benchmark interest rate indices for variable-rate products and changes in prepayment assumptions and loss estimates. The following table provides activity for the accretable yield of PCI loans:



	Three Months Ended March 31, 2015						Three Months Ended March 31, 2014
(Dollars in thousands)	Bank Acquisitions			Life Insurance Premium Finance Loans			Bank Acquisitions			Life Insurance Premium Finance Loans
Accretable yield, beginning balance	$	77,485		$	1,617		$	107,655		$	8,254
Acquisitions	898			—			—			—
Accretable yield amortized to interest income	(5,504		)	(601		)	(7,770		)	(1,771		)
Accretable yield amortized to indemnification asset ⁽¹⁾	(3,576		)	—			(5,648		)	—
Reclassification from non-accretable difference ⁽²⁾	1,103			—			8,580			—
Increases (decreases) in interest cash flows due to payments and changes in interest rates	(1,224		)	—			(5,143		)	78
Accretable yield, ending balance ⁽³⁾	$	69,182		$	1,016		$	97,674		$	6,561


(1)	Represents the portion of the current period accreted yield, resulting from lower expected losses, applied to reduce the loss share indemnification asset.


(2)	Reclassification is the result of subsequent increases in expected principal cash flows.


(3)	As of March 31, 2015, the Company estimates that the remaining accretable yield balance to be amortized to the indemnification asset for the bank acquisitions is $15.8 million. The remainder of the accretable yield related to bank acquisitions is expected to be amortized to interest income.

Accretion to interest income from loans acquired in bank acquisitions totaled $5.5 million and $7.8 million in the first quarter of 2015 and 2014, respectively. These amounts include accretion from both covered and non-covered loans, and are included together within interest and fees on loans in the Consolidated Statements of Income.