Note 6 – 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:


	December 31		December 31		December 31		December 31
	2015		2015		2015		2015
	Heartland		Summit		Peoples		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


	December 31		December 31		December 31		December 31
	2014		2014		2014		2014
	Heartland		Summit		Peoples		Total
Commercial	$	5,492	$	7,725	$	—	$	13,217
Real estate		900		1,458		—		2,358
Consumer		8		43		—		51

Outstanding balance	$	6,400	$	9,226	$	—	$	15,626

Carrying amount, net of allowance of $359							$	15,267

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


	Twelve Months Ended December 31, 2015
	Heartland			Summit			Peoples			Total
Balance at January 1	$	2,400		$	1,268		$	—		$	3,668
Additions		—			—			647			647
Accretion		(327	)		(315	)		(83	)		(725	)
Reclassification from nonaccretable difference		—			—			—			—
Disposals		(1,278	)		(245	)		(9	)		(1,532	)

Balance at December 31	$	795		$	708		$	555		$	2,058


	Twelve Months Ended December 31, 2014
	Heartland			Summit			Peoples		Total
Balance at January 1	$	3,185		$	—		$	—	$	3,185
Additions		—			1,688			—		1,688
Accretion		(557	)		(332	)		—		(889	)
Reclassification from nonaccretable difference		—			—			—		—
Disposals		(228	)		(88	)		—		(316	)

Balance at December 31	$	2,400		$	1,268		$	—	$	3,668

During the years ended December 31, 2015 and 2014, the Company increased (decreased) the allowance for loan losses by a charge to the income statement of $(190,000) and $253,000, respectively. $63,000 and $283,000 of allowances for loan losses were reversed for the years ended December 31, 2015 and 2014, respectively.