Accounting for Certain Loans Acquired in a Transfer

12 Months Ended

Dec. 31, 2019

Accounting for Certain Loans Acquired in a Transfer

Note 6 – Accounting for Certain Loans Acquired in a Transfer

The Company acquired loans in acquisitions with 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. Interest marks are accreted to income over the remaining life of the loan. Credit marks are evaluated using the practical expedient method.

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


	December 31, 2019
	Commercial		Real Estate		Consumer		Outstanding Balance		Allowance for Loan Losses		Carrying Amount
Heartland	$	197	$	99	$	—	$	296	$	—	$	296
Summit		88		473		—		561		—		561
Peoples		229		35		—		264		—		264
Kosciusko		244		131		—		375		—		375
LaPorte		353		793		20		1,166		—		1,166
Lafayette		1,867		—		—		1,867		—		1,867
Wolverine		2,289		—		—		2,289		—		2,289
Salin		4,938		1,912		962		7,812		133		7,679

Total	$	10,205	$	3,443	$	982	$	14,630	$	133	$	14,497


	December 31, 2018
	Commercial		Real Estate		Consumer		Outstanding Balance		Allowance for Loan Losses		Carrying Amount
Heartland	$	232	$	175	$	—	$	407	$	—	$	407
Summit		323		555		—		878		—		878
Peoples		270		58		—		328		—		328
Kosciusko		746		155		—		901		—		901
LaPorte		753		947		27		1,727		60		1,667
Lafayette		3,080		—		—		3,080		—		3,080
Wolverine		7,841		—		—		7,841		—		7,841

Total	$	13,245	$	1,890	$	27	$	15,162	$	60	$	15,102

Accretable yield, or income expected to be collected are as follows:


	Twelve Months Ended December 31, 2019
	Beginning balance		Additions		Accretion			Reclassification from nonaccretable difference		Disposals			Ending balance
Heartland	$	174	$	—	$	(32	)	$	—	$	—		$	142
Summit		42		—		(9	)		—		(11	)		22
Kosciusko		300		—		(63	)		—		(2	)		235
LaPorte		829		—		(111	)		—		4			722
Lafayette		609		—		(126	)		—		(193	)		290
Wolverine		698		—		(272	)		—		(306	)		120
Salin		—		2,002		(590	)		—		(37	)		1,375

Total	$	2,652	$	2,002	$	(1,203	)	$	—	$	(545	)	$	2,906


	Twelve Months Ended December 31, 2018
	Beginning balance		Additions		Accretion			Reclassification from nonaccretable difference		Disposals			Ending balance
Heartland	$	452	$	—	$	(85	)	$	—	$	(193	)	$	174
Summit		147		—		(54	)		—		(51	)		42
Kosciusko		386		—		(78	)		—		(8	)		300
LaPorte		980		—		(144	)		—		(7	)		829
Lafayette		933		—		(275	)		—		(49	)		609
Wolverine		2,267		—		(812	)		—		(757	)		698

Total	$	5,165	$	—	$	(1,448	)	$	—	$	(1,065	)	$	2,652

During the years ended December 31, 2019 and 2018, the Company increased the allowance for loan losses by a charge to the income statement of $133,000 and $60,000, respectively. No allowance for loan losses were reversed for the years ended December 31, 2019 and 2018.