Loans

9 Months Ended

Sep. 30, 2019

Loans and Leases Receivable Disclosure [Abstract]

Loans

Loans

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

	September 30,			December 31,			September 30,
(Dollars in thousands)	2019			2018			2018
Balance:
Commercial	$	8,195,602		$	7,828,538		$	7,473,958
Commercial real estate	7,448,667			6,933,252			6,746,774
Home equity	512,303			552,343			578,844
Residential real estate	1,218,666			1,002,464			924,250
Premium finance receivables—commercial	3,449,950			2,841,659			2,885,327
Premium finance receivables—life insurance	4,795,496			4,541,794			4,398,971
Consumer and other	89,487			120,641			115,827
Total loans, net of unearned income	$	25,710,171		$	23,820,691		$	23,123,951
Mix:
Commercial	32		%	33		%	32		%
Commercial real estate	29			29			29
Home equity	2			2			3
Residential real estate	5			4			4
Premium finance receivables—commercial	13			12			12
Premium finance receivables—life insurance	19			19			19
Consumer and other	0			1			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. 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 $117.5 million at September 30, 2019, $112.9 million at December 31, 2018 and $98.1 million at September 30, 2018.

Total loans, excluding PCI loans, include net deferred loan fees and costs and fair value purchase accounting adjustments totaling $8.9 million at September 30, 2019, $4.5 million at December 31, 2018 and $6.5 million at September 30, 2018. 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:

	September 30, 2019				December 31, 2018
(In thousands)	Unpaid Principal Balance		Carrying Value		Unpaid Principal Balance		Carrying Value
PCI loans	$	311,258	$	286,009	$	341,555	$	318,394

The following table provides estimated details as of the date of acquisition on loans acquired during the first nine months of 2019 with evidence of credit quality deterioration since origination:

(In thousands)	ROC
Contractually required payments including interest	$	27,510
Less: Nonaccretable difference	2,162
Cash flows expected to be collected (1)	25,348
Less: Accretable yield	1,874
Fair value of PCI loans acquired	$	23,474

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

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 September 30, 2019.

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						Nine Months Ended
(In thousands)	September 30, 2019			September 30, 2018			September 30, 2019			September 30, 2018
Accretable yield, beginning balance	$	34,289		$	34,347		$	34,876		$	36,565
Acquisitions	—			2,321			1,874			2,321
Accretable yield amortized to interest income	(4,266		)	(4,144		)	(12,179		)	(12,915		)
Reclassification from non-accretable difference (1)	184			1,734			2,190			4,596
Increases in interest cash flows due to payments and changes in interest rates	1,164			(1,093		)	4,610			2,598
Accretable yield, ending balance	$	31,371		$	33,165		$	31,371		$	33,165

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

Accretion to interest income accounted for under ASC 310-30 totaled $4.3 million and $4.1 million in the third quarter of 2019 and 2018, respectively. For the first nine months ended September 30, 2019 and 2018, the Company recorded accretion to interest income of $12.2 million and $12.9 million, respectively. These amounts are included within interest and fees on loans in the Consolidated Statements of Income.