Loans

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



(Dollars in thousands)	December 31, 2016			December 31, 2015
Balance:
Commercial	$	6,005,422		$	4,713,909
Commercial real estate	6,196,087			5,529,289
Home equity	725,793			784,675
Residential real estate	705,221			607,451
Premium finance receivables—commercial	2,478,581			2,374,921
Premium finance receivables—life insurance	3,470,027			2,961,496
Consumer and other	122,041			146,376
Total loans, net of unearned income, excluding covered loans	$	19,703,172		$	17,118,117
Covered loans	58,145			148,673
Total loans, net of unearned income	$	19,761,317		$	17,266,790
Mix:
Commercial	30		%	27		%
Commercial real estate	31			32
Home equity	4			5
Residential real estate	4			3
Premium finance receivables—commercial	12			14
Premium finance receivables—life insurance	18			17
Consumer and other	1			1
Total loans, net of unearned income, excluding covered loans	100		%	99		%
Covered loans	—			1
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 $69.6 million and $56.7 million at December 31, 2016 and 2015, 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 - PCI Loans,” below.

Total loans, excluding PCI loans, include net deferred loan fees and costs and fair value purchase accounting adjustments totaling $2.6 million and $(9.2) million at December 31, 2016 and 2015, 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 $6.7 billion and $3.8 billion at December 31, 2016 and 2015, respectively, were pledged as collateral to secure the availability of borrowings from certain federal agency banks. At December 31, 2016, approximately $6.1 billion of these pledged loans are included in a blanket pledge of qualifying loans to the FHLB. The remaining $630.7 million of pledged loans was used to secure potential borrowings at the FRB discount window. At December 31, 2016 and 2015, the banks had outstanding borrowings of $153.8 million and $853.4 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 the Company's previous acquisitions, the Company 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, 2016				December 31, 2015
(Dollars in thousands)	Unpaid Principal Balance		Carrying Value		Unpaid Principal Balance		Carrying Value
PCI loans	$	509,446	$	471,786	$	699,208	$	639,552

The following table provides estimated details as of the date of acquisition on loans acquired in 2016 with evidence of credit quality deterioration since origination:



(Dollars in thousands)	First Community		Foundations Bank
Contractually required payments including interest	$	12,200	$	20,091
Less: Nonaccretable difference	185		4,009
Cash flows expected to be collected ⁽¹⁾	$	12,015	$	16,082
Less: Accretable yield	1,380		1,082
Fair value of PCI loans acquired	$	10,635	$	15,000


(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, 2016.

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)	2016			2015
Accretable yield, beginning balance	$	63,902		$	79,102
Acquisitions	2,462			9,993
Accretable yield amortized to interest income	(23,218		)	(24,115		)
Accretable yield amortized to indemnification asset/liability ⁽¹⁾	(5,746		)	(13,495		)
Reclassification from non-accretable difference ⁽²⁾	13,733			7,390
(Decreases) increases in interest cash flows due to payments and changes in interest rates	(1,725		)	5,027
Accretable yield, ending balance ⁽³⁾	$	49,408		$	63,902


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


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


(3)	As of December 31, 2016, the Company estimates that the remaining accretable yield balance to be amortized to the indemnification asset for the bank acquisitions is $1.1 million. The remainder of the accretable yield related to bank acquisitions is expected to be amortized to interest income.

Accretion to interest income accounted for under ASC 310-30 totaled $23.2 million and $24.1 million in 2016 and 2015, 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.