Loans

6 Months Ended

Jun. 30, 2020

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)	2020			2019			2019
Balance:
Commercial	$	11,859,232		$	8,285,920		$	8,270,774
Commercial real estate	8,200,745			8,020,276			7,276,244
Home equity	466,596			513,066			527,370
Residential real estate	1,427,429			1,354,221			1,118,178
Premium finance receivables
Commercial insurance	3,999,774			3,442,027			3,368,423
Life insurance	5,400,802			5,074,602			4,634,478
Consumer and other	48,325			110,178			109,192
Total loans, net of unearned income	$	31,402,903		$	26,800,290		$	25,304,659
Mix:
Commercial	38		%	31		%	33		%
Commercial real estate	26			30			29
Home equity	1			2			2
Residential real estate	5			5			4
Premium finance receivables
Commercial insurance	13			13			13
Life insurance	17			19			18
Consumer and other	0			0			1
Total loans, net of unearned income	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. Additionally, to provide short-term relief due to macroeconomic deterioration from the COVID-19 pandemic to small businesses within such market areas, the Company originates loans through the Paycheck Protection Program ("PPP"), an expansion of guaranteed lending under Section 7(a) of the Small Business Act within the CARES Act. As of June 30, 2020, the Company's commercial portfolio included approximately $3.3 billion of such PPP loans. 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 $114.8 million at June 30, 2020, $118.4 million at December 31, 2019 and $119.7 million at June 30, 2019.

Total loans, excluding PCD loans, include net deferred loan fees and costs and fair value purchase accounting adjustments totaling $(61.7) million at June 30, 2020, $9.1 million at December 31, 2019 and $5.6 million at June 30, 2019. Prior to January 1, 2020, PCI loans were recorded net of credit discounts. See “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.

PCI Loans

Prior to January 1, 2020, PCI loans were aggregated into pools by common risk characteristics for accounting purposes, including recognition of interest income on a pool basis. Measurement of any allowance for loan losses on these loans were offset by the remaining credit discount related to the pool. Changes in expected cash flows would vary from period to period as the Company periodically updated 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, included changes in the benchmark interest rate indices for variable-rate products and changes in prepayment assumptions and loss estimates. As a result of the implementation

of CECL, beginning in the first quarter of 2020, PCI loans transitioned to a classification of PCD, which no longer maintains the prior pools and related accounting concepts. The following tables present the required disclosures for PCI loans before the adoption of CECL.

Acquired Loan Information at Acquisition—PCI Loans

The following table presents the unpaid principal balance and carrying value for these acquired loans:

	December 31, 2019
(In thousands)	Unpaid Principal Balance		Carrying Value
PCI loans	$	455,784	$	425,372

Accretable Yield Activity - PCI Loans

The following table provides activity for the accretable yield of PCI loans as of June 30, 2019:

	Three Months Ended			Six Months Ended
(In thousands)	June 30, 2019			June 30, 2019
Accretable yield, beginning balance	$	34,092		$	34,876
Acquisitions	1,874			1,874
Accretable yield amortized to interest income	(4,084		)	(7,913		)
Reclassification from non-accretable difference (1)	432			2,006
Increases in interest cash flows due to payments and changes in interest rates	1,975			3,446
Accretable yield, ending balance	$	34,289		$	34,289

(1)

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