Loans

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



(Dollars in thousands)	December 31, 2015			December 31, 2014
Balance:
Commercial	$	4,713,909		$	3,924,394
Commercial real estate	5,529,289			4,505,753
Home equity	784,675			716,293
Residential real estate	607,451			483,542
Premium finance receivables—commercial	2,374,921			2,350,833
Premium finance receivables—life insurance	2,961,496			2,277,571
Consumer and other	146,376			151,012
Total loans, net of unearned income, excluding covered loans	$	17,118,117		$	14,409,398
Covered loans	148,673			226,709
Total loans, net of unearned income	$	17,266,790		$	14,636,107
Mix:
Commercial	27		%	26		%
Commercial real estate	32			31
Home equity	5			5
Residential real estate	3			3
Premium finance receivables—commercial	14			16
Premium finance receivables—life insurance	17			16
Consumer and other	1			1
Total loans, net of unearned income, excluding covered loans	99		%	98		%
Covered loans	1			2
Total loans, net of unearned income	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 $56.7 million and $46.9 million at December 31, 2015 and 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 $(9.2) million and $330,000 at December 31, 2015 and 2014, respectively. The net credit balance at December 31, 2015 is primarily the result of purchase accounting adjustments related to the various acquisitions during 2015.

Certain real estate loans, including mortgage loans held-for-sale, and home equity loans with balances totaling approximately $3.8 billion and $3.6 billion at December 31, 2015 and 2014, respectively, were pledged as collateral to secure the availability of borrowings from certain federal agency banks. At December 31, 2015, approximately $3.2 billion of these pledged loans are included in a blanket pledge of qualifying loans to the FHLB. The remaining $579.2 million of pledged loans was used to secure potential borrowings at the Federal Reserve Bank discount window. At December 31, 2015 and 2014, the banks borrowed $859.9 million and $733.1 million, respectively, from the FHLB in connection with these collateral arrangements. See Note 11 – Federal Home Loan Bank Advances for a summary of these borrowings.

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 assure 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:



	December 31, 2015				December 31, 2014
(Dollars in thousands)	Unpaid Principal Balance		Carrying Value		Unpaid Principal Balance		Carrying Value
Bank acquisitions	$	326,470	$	271,260	$	285,809	$	227,229
Life insurance premium finance loans acquisition	372,738		368,292		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)	North Bank		CBWGE		Suburban		Delavan
Contractually required payments including interest	$	8,563	$	38,656	$	95,804	$	15,791
Less: Nonaccretable difference	1,027		4,437		13,888		1,442
Cash flows expected to be collected ⁽¹⁾	$	7,536	$	34,219	$	81,916	$	14,349
Less: Accretable yield	866		2,895		5,334		898
Fair value of PCI loans acquired	$	6,670	$	31,324	$	76,582	$	13,451


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

See Note 5 - 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 December 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.



	Years Ended December 31,
(Dollars in thousands)	2015			2014
Accretable yield, beginning balance	$	79,102		$	115,909
Acquisitions	9,993			—
Accretable yield amortized to interest income	(24,115		)	(36,956		)
Accretable yield amortized to indemnification asset ⁽¹⁾	(13,495		)	(30,691		)
Reclassification from non-accretable difference ⁽²⁾	7,390			35,967
Increases (decreases) in interest cash flows due to payments and changes in interest rates	5,027			(5,127		)
Accretable yield, ending balance ⁽³⁾	$	63,902		$	79,102


(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 December 31, 2015, the Company estimates that the remaining accretable yield balance to be amortized to the indemnification asset for the bank acquisitions is $6.6 million. The remainder of the accretable yield related to bank acquisitions is expected to be amortized to interest income.

Accretion to interest income from acquired loans totaled $24.1 million and $37.0 million in 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.