Note 5 – Accounting for Certain Loans Acquired in a Transfer

The Company acquired loans in acquisitions and the transferred loans had evidence of deterioration of credit quality since origination and it was probable, at acquisition, that all contractually required payments would not be collected.

Loans purchased with evidence of credit deterioration since origination and for which it is probable that all contractually required payments will not be collected are considered to be credit impaired. Evidence of credit quality deterioration as of the purchase date may include information such as past-due and non-accrual status, borrower credit scores and recent loan-to-value percentages. Purchased credit-impaired loans are accounted for under the accounting guidance for loans and debt securities acquired with deteriorated credit quality (ASC 310-30) and initially measured at fair value, which includes estimated future credit losses expected to be incurred over the life of the loan. Accordingly, an allowance for credit losses related to these loans is not carried over and recorded at the acquisition date. Management estimated the cash flows expected to be collected at acquisition using our internal risk models, which incorporate the estimate of current key assumptions, such as default rates, severity and prepayment speeds.

The carrying amounts of those loans included in the balance sheet amounts of loans receivable are as follows:


	March 31		March 31		March 31
	2015		2015		2015
	Heartland		Summit		Total
Commercial		15,378		59,398	$	74,776
Real estate		8,460		22,379		30,839
Consumer		6,954		7,749		14,703

Outstanding balance	$	30,792	$	89,526	$	120,318

Carrying amount, net of allowance of $254					$	120,064


	December 31 2014 Heartland		December 31 2014 Summit		December 31 2014 Total
Commercial	$	18,307	$	66,371	$	84,678
Real estate		9,734		24,653		34,387
Consumer		8,447		8,975		17,422

Outstanding balance	$	36,488	$	99,999	$	136,487

Carrying amount, net of allowance of $359					$	136,128

Accretable yield, or income expected to be collected for the three months ended March 31, is as follows:


	Three Months Ended March 31, 2015
	Heartland			Summit			Total
Balance at January 1	$	2,400		$	1,268		$	3,668
Additions		—			—			—
Accretion		(107	)		(99	)		(206	)
Reclassification from nonaccretable difference		—			—			—
Disposals		(88	)		(49	)		(137	)

Balance at December 31	$	2,205		$	1,120		$	3,325


	Three Months Ended March 31, 2014
	Heartland			Summit			Total
Balance at January 1	$	3,185		$	—		$	3,185
Additions		—			—			—
Accretion		(138	)		—			(138	)
Reclassification from nonaccretable difference		—			—			—
Disposals		(18	)		—			(18	)

Balance at December 31	$	3,029		$	—		$	3,029

During the three months ended March 31, 2015 and 2014, the Company decreased the allowance for loan losses by a recovery to the income statement of $105,000 and $0, respectively.