ACCOUNTING FOR CERTAIN LOANS ACQUIRED IN A PURCHASE

The Bank acquired loans in a purchase during the years ended December 31, 2014, 2013 and 2012. The acquired loans detailed in the tables below are included in Note 4. LOANS AND ALLOWANCE, in the Notes to Consolidated Condensed Financial Statements of this Form 10-Q. As described in Note 4, loans purchased after December 31, 2008 are recorded at the acquisition date fair value, which could result in a fair value discount or premium. Purchased loans with evidence of credit deterioration since origination and for which it is probable at the date of acquisition that the acquirer will not collect all contractually required principal and interest payments are accounted for under ASC 310-30, Loans Acquired with Deteriorated Credit Quality. The difference between contractually required payments and the cash flows expected to be collected at acquisition is referred to as the nonaccretable portion of the fair value discount or premium. The accretable portion of the fair value discount or premium is the difference between the expected cash flows and the net present value of expected cash flows, with such difference accreted into earnings over the term of the loans. All other loans not accounted for under ASC 310-30 are accounted for under ASC 310-20.

The following table includes the outstanding balance and carrying amount of loans acquired during the years ended December 31, 2012, 2013 and 2014, which are included in the balance sheet amounts of loans receivable at March 31, 2015 and December 31, 2014.



	March 31, 2015								December 31, 2014
	Community		CFS		SCB		Total		Community		CFS		SCB		Total
Commercial and industrial loans	$	6,828	$	58,252	$	5,673	$	70,753	$	8,168	$	64,897	$	6,059	$	79,124
Agricultural production financing and other loans to farmers	737				877		1,614		1,100				893		1,993
Real estate loans:
Construction	19,969		7,334				27,303		19,063		9,113				28,176
Commercial and farmland	69,421		232,436		14,666		316,523		74,600		251,002		15,593		341,195
Residential	28,048		137,457		6,868		172,373		28,863		144,396		7,384		180,643
Home Equity	9,324		37,439		14,843		61,606		9,881		39,244		15,758		64,883
Individuals' loans for household and other personal expenditures	1,056		779		95		1,930		1,314		922		121		2,357
Other Loans			84				84				86				86
Total	$	135,383	$	473,781	$	43,022	$	652,186	$	142,989	$	509,660	$	45,808	$	698,457

Carrying Amount	$	126,996	$	450,867	$	36,980	$	614,843	$	134,198	$	484,949	$	39,324	$	658,471
Allowance	195		285				480				650				650
Carrying Amount Net of Allowance	$	126,801	$	450,582	$	36,980	$	614,363	$	134,198	$	484,299	$	39,324	$	657,821

The balance of the allowance for loan losses for loans acquired and accounted for under ASC 310-30 was $480,000 and $650,000 at March 31, 2015 and December 31, 2014, respectively.

As customer cash flow expectations improve, nonaccretable yield can be reclassified to accretable yield. The accretable yield, or income expected to be collected, and reclassifications from nonaccretable yield, are identified in the table below. The table reflects only purchased loans accounted for under ASC 310-30 and not the entire portfolio of purchased loans.



	Three Months Ended March 31, 2015												Three Months Ended March 31, 2014
	Community			CFS			SCB			Total			CFS			SCB			Total
Beginning balance	$	2,122		$	2,400		$	868		$	5,390		$	4,164		$	1,388		$	5,552
Additions
Accretion	(179		)	(1,341		)	(185		)	(1,705		)	(301		)	(187		)	(488		)
Reclassification from nonaccretable	47			950			135			1,132			252			55			307
Disposals													(35		)				(35		)
Ending balance	$	1,990		$	2,009		$	818		$	4,817		$	4,080		$	1,256		$	5,336