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)	2018			2017			2017
Balance:
Commercial	$	7,289,060		$	6,787,677		$	6,406,289
Commercial real estate	6,575,084			6,580,618			6,402,494
Home equity	593,500			663,045			689,483
Residential real estate	895,470			832,120			762,810
Premium finance receivables—commercial	2,833,452			2,634,565			2,648,386
Premium finance receivables—life insurance	4,302,288			4,035,059			3,719,043
Consumer and other	121,706			107,713			114,827
Total loans, net of unearned income, excluding covered loans	$	22,610,560		$	21,640,797		$	20,743,332
Covered loans	—			—			50,119
Total loans	$	22,610,560		$	21,640,797		$	20,793,451
Mix:
Commercial	32		%	31		%	31		%
Commercial real estate	29			30			31
Home equity	3			3			3
Residential real estate	4			4			3
Premium finance receivables—commercial	12			12			13
Premium finance receivables—life insurance	19			19			18
Consumer and other	1			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 $96.2 million at June 30, 2018, $87.0 million at December 31, 2017 and $81.0 million at June 30, 2017.

Total loans, excluding PCI loans, include net deferred loan fees and costs and fair value purchase accounting adjustments totaling $11.5 million at June 30, 2018, $9.3 million at December 31, 2017 and $6.5 million at June 30, 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:

June 30, 2018

December 31, 2017

(Dollars in thousands)

Unpaid

Principal

Balance

Carrying

Value

Unpaid
Principal
Balance

Carrying
Value

PCI loans

331,517

311,317

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 June 30, 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						Six Months Ended
(Dollars in thousands)	June 30, 2018			June 30, 2017			June 30, 2018			June 30, 2017
Accretable yield, beginning balance	$	35,692		$	45,762		$	36,565		$	49,408
Acquisitions	—			(105		)	—			426
Accretable yield amortized to interest income	(4,152		)	(5,477		)	(8,771		)	(11,076		)
Accretable yield amortized to indemnification asset/liability ⁽¹⁾	—			(361		)	—			(715		)
Reclassification from non-accretable difference ⁽²⁾	1,306			3,554			2,862			6,089
Increases in interest cash flows due to payments and changes in interest rates	1,501			2,137			3,691			1,378
Accretable yield, ending balance	$	34,347		$	45,510		$	34,347		$	45,510


(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 $4.2 million and $5.5 million in the second quarter of 2018 and 2017, respectively. For the six months ended June 30, 2018 and 2017, the Company recorded accretion to interest income of $8.8 million and $11.1 million, respectively. These amounts are included within interest and fees on loans in the Consolidated Statements of Income.