PURCHASED CREDIT IMPAIRED LOANS

Purchased Credit Impaired Loans are included in NOTE 4. LOANS AND ALLOWANCE, in the Notes to Consolidated Condensed Financial Statements of this Quarterly Report on Form 10-Q. As described in NOTE 4, purchased loans 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 difference. 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.

The carrying amount of Purchased Credit Impaired Loans as of September 30, 2018 and December 31, 2017 was $20.6 million and $25.3 million, respectively; with no required allowance for loan losses. 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, are identified in the table below.



	Three Months Ended September 30, 2018			Nine Months Ended September 30, 2018
Beginning balance	$	2,423		$	2,890
Additions
Accretion	(1,004		)	(2,441		)
Reclassification from nonaccretable	798			1,768
Disposals	(16		)	(16		)
Ending balance	$	2,201		$	2,201



	Three Months Ended September 30, 2017			Nine Months Ended September 30, 2017
Beginning balance	$	2,607		$	3,951
Additions	941			1,608
Accretion	(686		)	(5,082		)
Reclassification from nonaccretable	449			3,501
Disposals				(667		)
Ending balance	$	3,311		$	3,311

The following table presents loans acquired, as of the respective acquisition date, during the nine months ended September 30, 2017, for which it was probable that all contractually required payments would not be collected. There were no loans acquired during the nine months ended September 30, 2018.



	IAB		Arlington Bank
Contractually required payments receivable at acquisition date	$	14,131	$	6,183
Nonaccretable difference	8,352		2,891
Expected cash flows at acquisition date	5,779		3,292
Accretable difference	941		667
Basis in loans at acquisition date	$	4,838	$	2,625