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:


	September 30		September 30		September 30		September 30		September 30		September 30
	2017		2017		2017		2017		2017		2017
	Heartland		Summit		Peoples		Kosciusko		LaPorte		Total
Commercial	$	521	$	4,657	$	398	$	962	$	1,086	$	7,624
Real estate		241		895		139		411		1,017		2,703
Consumer		—		—		—		—		35		35

Outstanding balance	$	762	$	5,552	$	537	$	1,373	$	2,138	$	10,362

Carrying amount, net of allowance of $71											$	10,291


	December 31		December 31		December 31		December 31		December 31		December 31
	2016		2016		2016		2016		2016		2016
	Heartland		Summit		Peoples		Kosciusko		LaPorte		Total
Commercial	$	774	$	5,245	$	692	$	1,652	$	3,200	$	11,563
Real estate		534		967		165		457		1,114		3,237
Consumer		2		—		—		—		41		43

Outstanding balance	$	1,310	$	6,213	$	856	$	2,109	$	4,355	$	14,843

Carrying amount, net of allowance of $0											$	14,843

Accretable yield, or income expected to be collected for the nine months ended September 30, is as follows:


	Nine Months Ended September 30, 2017
	Heartland			Summit			Peoples			Kosciusko			LaPorte			Total
Balance at January 1	$	557		$	502		$	389		$	530		$	1,479		$	3,457
Additions		—			—			—			—			—			—
Accretion		(99	)		(268	)		(388	)		(80	)		(194	)		(1,029	)
Reclassification from nonaccretable difference		—			—			—			—			—			—
Disposals		(6	)		(2	)		(1	)		(42	)		(264	)		(315	)

Balance at September 30	$	452		$	232		$	—		$	408		$	1,021		$	2,113


	Nine Months Ended September 30, 2016
	Heartland			Summit			Peoples			Kosciusko			LaPorte			Total
Balance at January 1	$	795		$	708		$	555		$	—		$	—		$	2,058
Additions		—			—			—			634			1,736			2,370
Accretion		(127	)		(139	)		(92	)		(38	)		—			(396	)
Reclassification from nonaccretable difference		—			—			—			—			—			—
Disposals		(74	)		(35	)		(59	)		(23	)		—			(191	)

Balance at September 30	$	594		$	534		$	404		$	573		$	—		$	3,841

During the nine months ended September 30, 2017 and 2016, the Company increased the allowance for loan losses on purchased loans by a charge to the income statement of $71,000 and $0, respectively.