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)	2018			2017			2017
Balance:
Commercial	$	7,060,871		$	6,787,677		$	6,081,489
Commercial real estate	6,633,520			6,580,618			6,261,682
Home equity	626,547			663,045			708,258
Residential real estate	869,104			832,120			720,608
Premium finance receivables—commercial	2,576,150			2,634,565			2,446,946
Premium finance receivables—life insurance	4,189,961			4,035,059			3,593,563
Consumer and other	105,981			107,713			118,512
Total loans, net of unearned income, excluding covered loans	$	22,062,134		$	21,640,797		$	19,931,058
Covered loans	—			—			52,359
Total loans	$	22,062,134		$	21,640,797		$	19,983,417
Mix:
Commercial	32		%	31		%	30		%
Commercial real estate	30			30			31
Home equity	3			3			4
Residential real estate	4			4			4
Premium finance receivables—commercial	12			12			12
Premium finance receivables—life insurance	19			19			18
Consumer and other	—			1			1
Total loans, net of unearned income, excluding covered loans	100		%	100		%	100		%
Covered loans	—			—			—
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 $85.4 million at March 31, 2018, $87.0 million at December 31, 2017 and $72.4 million at March 31, 2017.

Total loans, excluding PCI loans, include net deferred loan fees and costs and fair value purchase accounting adjustments totaling $9.4 million at March 31, 2018, $9.3 million at December 31, 2017 and $4.6 million at March 31, 2017. PCI loans are recorded net of credit discounts. See “Acquired Loan Information at Acquisition - PCI Loans” below.

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 the Company's previous acquisitions, the Company acquired loans for which there was evidence of credit quality deterioration since origination (PCI loans) and 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, 2018

December 31, 2017

(Dollars in thousands)

Unpaid

Principal

Balance

Carrying

Value

Unpaid
Principal
Balance

Carrying
Value

PCI loans

348,102

325,745

375,237

350,690

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, 2018.

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
(Dollars in thousands)	March 31, 2018			March 31, 2017
Accretable yield, beginning balance	$	36,565		$	49,408
Acquisitions	—			531
Accretable yield amortized to interest income	(4,619		)	(5,599		)
Accretable yield amortized to indemnification asset/liability ⁽¹⁾	—			(354		)
Reclassification from non-accretable difference ⁽²⁾	1,556			2,535
Increases (decreases) in interest cash flows due to payments and changes in interest rates	2,190			(759		)
Accretable yield, ending balance	$	35,692		$	45,762


(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.

Accretion to interest income accounted for under ASC 310-30 totaled $4.6 million and $5.6 million in the first quarter of 2018 and 2017, respectively. These amounts include accretion from both covered and non-covered loans, and are both included within interest and fees on loans in the Consolidated Statements of Income.