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Loans
 6 Months Ended
Jun. 30, 2015
Loans and Leases Receivable Disclosure [Abstract]  
Loans
Loans
The following table shows the Company’s loan portfolio by category as of the dates shown:
 
June 30,
 
December 31,
 
June 30,
(Dollars in thousands)
2015
 
2014
 
2014
Balance:
 
 
 
 
 
Commercial
$
4,330,344

 
$
3,924,394

 
$
3,640,430

Commercial real estate
4,850,590

 
4,505,753

 
4,353,472

Home equity
712,350

 
716,293

 
713,642

Residential real estate
503,015

 
483,542

 
451,905

Premium finance receivables—commercial
2,460,408

 
2,350,833

 
2,378,529

Premium finance receivables—life insurance
2,537,475

 
2,277,571

 
2,051,645

Consumer and other
119,468

 
151,012

 
160,373

Total loans, net of unearned income, excluding covered loans
$
15,513,650

 
$
14,409,398

 
$
13,749,996

Covered loans
193,410

 
226,709

 
275,154

Total loans
$
15,707,060

 
$
14,636,107

 
$
14,025,150

Mix:
 
 
 
 
 
Commercial
27
%
 
26
%
 
26
%
Commercial real estate
31

 
31

 
31

Home equity
5

 
5

 
5

Residential real estate
3

 
3

 
3

Premium finance receivables—commercial
16

 
16

 
17

Premium finance receivables—life insurance
16

 
16

 
15

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 $53.7 million at June 30, 2015, $46.9 million at December 31, 2014 and $44.8 million at June 30, 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 $1.7 million at June 30, 2015, $330,000 at December 31, 2014 and $(1.3) million at June 30, 2014. The net credit balance at June 30, 2014 is primarily the result of purchase accounting adjustments related to acquisitions in 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:
 
June 30, 2015
 
December 31, 2014
 
Unpaid
Principal
 
Carrying
 
Unpaid
Principal
 
Carrying
(Dollars in thousands)
Balance
 
Value
 
Balance
 
Value
Bank acquisitions
$
251,529

 
$
204,898

 
$
285,809

 
$
227,229

Life insurance premium finance loans acquisition
388,773

 
384,320

 
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 June 30, 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
June 30, 2015
 
Three Months Ended
June 30, 2014
(Dollars in thousands)
Bank Acquisitions

Life Insurance
Premium Finance Loans

Bank
Acquisitions

Life Insurance
Premium
Finance Loans
Accretable yield, beginning balance
$
69,182


$
1,016


$
97,674


$
6,561

Acquisitions
—


—


—


—

Accretable yield amortized to interest income
(5,184
)

(1,131
)

(9,617
)

(1,433
)
Accretable yield amortized to indemnification asset (1)
(4,089
)

—


(11,161
)

—

Reclassification from non-accretable difference (2)
1,638


115


17,928


—

Increases (decreases) in interest cash flows due to payments and changes in interest rates
2,096


—


(2,722
)

51

Accretable yield, ending balance (3)
$
63,643


$
—


$
92,102


$
5,179


 
Six Months Ended
June 30, 2015
 
Six Months Ended
June 30, 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
(10,688
)
 
(1,732
)
 
(17,387
)
 
(3,204
)
Accretable yield amortized to indemnification asset (1)
(7,665
)
 
—

 
(16,809
)
 
—

Reclassification from non-accretable difference (2)
2,741

 
115

 
26,508

 
—

Increases (decreases) in interest cash flows due to payments and changes in interest rates
872

 
—

 
(7,865
)
 
129

Accretable yield, ending balance (3)
$
63,643

 
$
—

 
$
92,102

 
$
5,179



(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 June 30, 2015, the Company estimates that the remaining accretable yield balance to be amortized to the indemnification asset for the bank acquisitions is $12.3 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 $5.2 million and $9.6 million in the second quarter of 2015 and 2014, respectively. For the six months ended June 30, 2015 and 2014, the Company recorded accretion to interest income of $10.7 million and $17.4 million, 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.