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		March 31
	2016		2016		2016		2016
	Heartland		Summit		Peoples		Total
Commercial	$	1,282	$	5,494	$	962	$	7,738
Real estate		676		1,199		289		2,164
Consumer		1		9		—		10

Outstanding balance	$	1,959	$	6,702	$	1,251	$	9,912

Carrying amount, net of allowance of $0							$	9,912


	December 31 2015 Heartland		December 31 2015 Summit		December 31 2015 Peoples		December 31 2015 Total
Commercial	$	1,633	$	5,567	$	1,061	$	8,261
Real estate		693		1,216		179		2,088
Consumer		6		35		—		41

Outstanding balance	$	2,332	$	6,818	$	1,240	$	10,390

Carrying amount, net of allowance of $63							$	10,327

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


	Three Months Ended March 31, 2016
	Heartland			Summit			Peoples			Total
Balance at January 1	$	795		$	708		$	555		$	2,058
Additions		—			—			—			—
Accretion		(36	)		(55	)		(42	)		(133	)
Reclassification from nonaccretable difference		—			—			—			—
Disposals		(10	)		(4	)		(30	)		(44	)

Balance at March 31	$	749		$	649		$	483		$	1,881


	Three Months Ended March 31, 2015
	Heartland			Summit			Peoples			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 March 31	$	2,205		$	1,120		$	—		$	3,325

During the three months ended March 31, 2016 and 2015, the Company decreased the allowance for loan losses on purchased loans by a recovery to the income statement of $63,000 and $105,000, respectively.