Acquired Credit Impaired Loans

Loans acquired through mergers are recorded at fair value with no carryover of the acquired entity's previously established allowance for loan losses. The excess of expected cash flows over the estimated fair value of acquired loans is recognized as interest income over the remaining contractual lives of the loans using the level yield method. Subsequent decreases in expected cash flows will require additions to the allowance for loan losses. Subsequent improvements in expected cash flows result in the recognition of additional interest income over the then-remaining contractual lives of the loans.

Impaired loans acquired are accounted for under ASC 310-30. Factors considered in evaluating whether an acquired loan was impaired include delinquency status and history, updated borrower credit status, collateral information, and updated loan-to-value information. The difference between contractually required payments at the time of acquisition and the cash flows expected to be collected is referred to as the nonaccretable difference. The interest component of the cash flows expected to be collected is referred to as the accretable yield and is recognized as interest income over the remaining contractual life of the loan using the level yield method. Subsequent decreases in expected cash flows will require additions to the allowance for loan losses. Subsequent improvements in expected cash flows will result in a reclassification from the nonaccretable difference to the accretable yield.

The following table provides at September 30, 2019 and December 31, 2018 the major classifications of acquired credit impaired loans that are accounted for in accordance with ASC 310-30 (in thousands):



	September 30, 2019		December 31, 2018
Acquired from First Capital Bancshares, Inc.
Commercial & industrial	$	7	13
Commercial, secured by real estate	800		818
Residential real estate	676		911
Other loans, including deposit overdrafts	—		—
Loans, gross	1,483		1,742
Less allowance for loan losses	—		—
Loans, net	$	1,483	1,742

Acquired from Eaton National Bank & Trust Co.
Commercial & industrial	$	501	503
Commercial, secured by real estate	841		1,547
Residential real estate	721		784
Other loans, including deposit overdrafts	308		336
Loans, gross	2,371		3,170
Less allowance for loan losses	—		—
Loans, net	$	2,371	3,170

Acquired from BNB Bancorp, Inc.
Commercial & industrial	$	—	—
Commercial, secured by real estate	1,241		1,396
Residential real estate	105		158
Other loans, including deposit overdrafts	—		—
Loans, gross	1,346		1,554
Less allowance for loan losses	—		—
Loans, net	$	1,346	1,554

Acquired from Columbus First Bancorp, Inc.
Commercial & industrial	$	309	406
Commercial, secured by real estate	2,150		2,554
Residential real estate	1,379		1,376
Other loans, including deposit overdrafts	—		—
Loans, gross	3,838		4,336
Less allowance for loan losses	—		—
Loans, net	$	3,838	4,336

Total
Commercial & industrial	$	817	922
Commercial, secured by real estate	5,032		6,315
Residential real estate	2,881		3,229
Other loans, including deposit overdrafts	308		336
Loans, gross	9,038		10,802
Less allowance for loan losses	—		—
Loans, net	$	9,038	10,802

The following table provides the outstanding balance and related carrying amount for acquired credit impaired loans at the dates indicated (in thousands):

Activity during the three and nine months ended September 30, 2019 and 2018 for the accretable discount related to acquired credit impaired loans is as follows (in thousands):



	Three Months Ended September 30,					Nine Months Ended September 30,
	2019			2018		2019		2018
Accretable discount at beginning of period	$	626		633		743		669
Accretable discount acquired during period	—			151		—		151
Reclassification from nonaccretable discount to accretable discount	136			—		195		—
Disposals	—			—		1		—
Accretion	(131		)	(11	)	(308	)	(47	)
Accretable discount at end of period	$	631		773		631		773

September 30, 2019

December 31, 2018

Outstanding balance

Carrying amount