Accounting for Certain Loans Acquired in a Transfer

3 Months Ended

Mar. 31, 2018

Transfers and Servicing [Abstract]

Accounting for Certain Loans Acquired in a Transfer

Note 5 – 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:

	March 31, 2018
	Commercial		Real Estate		Consumer		Outstanding Balance		Allowance for Loan Losses		Carrying Amount
Heartland	$	265	$	205	$	—	$	470	$	—	$	470
Summit		3,289		827		—		4,116		—		4,116
Peoples		308		118		—		426		—		426
Kosciusko		823		215		—		1,038		—		1,038
LaPorte		900		991		32		1,923		—		1,923
Lafayette		3,655		—		—		3,655		—		3,655
Wolverine		15,481		—		—		15,481		—		15,481
Total	$	24,721	$	2,356	$	32	$	27,109	$	—	$	27,109
	December 31, 2017
	Commercial		Real Estate		Consumer		Outstanding Balance		Allowance for Loan Losses		Carrying Amount
Heartland	$	390	$	229	$	—	$	619	$	—	$	619
Summit		3,653		870		—		4,523		—		4,523
Peoples		315		126		—		441		—		441
Kosciusko		838		403		—		1,241		—		1,241
LaPorte		1,034		1,004		33		2,071		—		2,071
Lafayette		4,271		—		—		4,271		—		4,271
Wolverine		16,697		—		—		16,697		—		16,697
Total	$	27,198	$	2,632	$	33	$	29,863	$	—	$	29,863

Accretable yield, or income expected to be collected for the three months ended March 31, is as follows:

	Three Months Ended March 31, 2018
	Beginning balance		Additions		Accretion			Reclassification from nonaccretable difference		Disposals			Ending balance
Heartland	$	452	$	—	$	(59	)	$	—	$	—		$	393
Summit		147		—		(18	)		—		(2	)		127
Peoples		—		—		—			—		—			—
Kosciusko		386		—		(20	)		—		—			366
LaPorte		980		—		(40	)		—		(7	)		933
Lafayette		933		—		(118	)		—		(2	)		813
Wolverine		2,267		—		(387	)		—		(42	)		1,838
Total	$	5,165	$	—	$	(642	)	$	—	$	(53	)	$	4,470
	Three Months Ended March 31, 2017
	Beginning balance		Additions		Accretion			Reclassification from nonaccretable difference		Disposals			Ending balance
Heartland	$	557	$	—	$	(34	)	$	—	$	(6	)	$	517
Summit		502		—		(93	)		—		(2	)		407
Peoples		389		—		(194	)		—		(1	)		194
Kosciusko		530		—		(31	)		—		—			499
LaPorte		1,479		—		(81	)		—		(110	)		1,288
Total	$	3,457	$	—	$	(433	)	$	—	$	(119	)	$	2,905

During the three months ended March 31, 2018 the Company increased the allowance for loan losses on purchased loans by a charge to the income statement of $0. During the three months ended March 31, 2017, the Company increased the allowance for loan losses on purchased loans by a charge to the income statement of $71,000.