ACCOUNTING FOR CERTAIN LOANS ACQUIRED IN A PURCHASE

The acquired loans detailed in the tables below are included in NOTE 5. LOANS AND ALLOWANCE of these Notes to Consolidated Financial Statements. As described in NOTE 5, 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 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. All other loans not accounted for under ASC 310-30 are accounted for under ASC 310-20, which allows the fair value adjustment to be accreted into income over the remaining life of the loans.

The Corporation's most recent acquisitions, Arlington Bank and IAB, are detailed in NOTE 2. ACQUISITIONS of these Notes to Consolidated Financial Statements. All of the Corporation's acquisitions since December 31, 2008 are as indicated below.

The following tables include the outstanding balance and carrying amount of all acquired loans which were included in the Corporation's balance sheet at December 31, 2017 and December 31, 2016.



	December 31, 2017
	IAB			Arlington Bank			Ameriana			C Financial			Community			CFS			SCB			Total
Outstanding Balance:
Commercial and industrial loans	$	83,630		$	3,152		$	4,150		$	64		$	235		$	10,539		$	1,760		$	103,530
Agricultural production financing and other loans to farmers	33,537												76			50			1,317			34,980
Real estate loans:
Construction	23,571			14,716			2,451			830			1,499			65						43,132
Commercial and farmland	346,155			76,375			79,739			15,791			27,910			65,578			6,733			618,281
Residential	100,569			69,011			86,098			32,854			6,354			79,674			2,899			377,459
Home equity	36,349			22,581			8,800			5,733			4,392			19,972			9,636			107,463
Individuals' loans for household and other personal expenditures	3,552			174			356						82			22			21			4,207
Other commercial loans	11,189			90			1,745									58						13,082
Total	638,552			186,099			183,339			55,272			40,548			175,958			22,366			1,302,134
Remaining fair value discount	(20,090		)	(5,242		)	(6,689		)	(1,266		)	(2,482		)	(5,859		)	(2,120		)	(43,748		)
Carrying amount	618,462			180,857			176,650			54,006			38,066			170,099			20,246			1,258,386
Allowance	290						411						52			16						769
Carrying amount net of allowance	$	618,172		$	180,857		$	176,239		$	54,006		$	38,014		$	170,083		$	20,246		$	1,257,617



	December 31, 2016
	Ameriana			C Financial			Community			CFS			SCB			Total
Outstanding Balance:
Commercial and industrial loans	$	8,003		$	85		$	2,269		$	23,327		$	3,552		$	37,236
Agricultural production financing and other loans to farmers							1,030			50			1,630			2,710
Real estate loans:
Construction	22,017			2,835			4,026			420						29,298
Commercial and farmland	103,075			22,130			36,947			131,895			9,315			303,362
Residential	103,414			44,101			9,363			96,627			4,135			257,640
Home Equity	11,728			7,947			6,326			26,894			11,924			64,819
Individuals' loans for household and other personal expenditures	762			2			147			201			30			1,142
Other commercial loans	1,825									65						1,890
Total	250,824			77,100			60,108			279,479			30,586			698,097
Remaining fair value discount	(10,771		)	(1,906		)	(4,101		)	(12,634		)	(3,268		)	(32,680		)
Carrying Amount	240,053			75,194			56,007			266,845			27,318			665,417
Allowance	265						23			92						380
Carrying Amount Net of Allowance	$	239,788		$	75,194		$	55,984		$	266,753		$	27,318		$	665,037

The outstanding balance and related carrying amount of loans acquired and accounted for under ASC 310-30 as of December 31, 2017 were $38.9 million and $25.3 million, respectively; with no required allowance for loan losses. Comparatively, the outstanding balance and related carrying amount as of December 31, 2016 were $60.5 million and $43.2 million, respectively; with no required allowance for loan losses. During the twelve months ended December 31, 2017, one loan with a December 31, 2016 outstanding balance of $12.1 million and a carrying amount of $7.6 million, was transferred to other real estate owned.

As customer cash flow expectations improve on loans accounted for under ASC310-30, nonaccretable yield can be reclassified to accretable yield. The accretable portion, or income expected to be collected, and reclassifications from nonaccretable, are identified in the tables below for the years indicated.



	Twelve Months Ended December 31, 2017
	IAB			Arlington Bank			Ameriana			C Financial			Community			CFS			SCB			Total
Beginning balance							$	1,629		$	73		$	1,233		$	736		$	279		$	3,950
Additions	$	941		$	667																	1,608
Accretion	(1,009		)	(314		)	(2,983		)	(260		)	(454		)	(1,172		)	(557		)	(6,749		)
Reclassification from nonaccretable	834			164			1,805			187			212			1,075			471			4,748
Disposals													(122		)	(545		)				(667		)
Ending balance	$	766		$	517		$	451					$	869		$	94		$	193		$	2,890



	Twelve Months Ended December 31, 2016
	Ameriana			C Financial			Community			CFS			SCB			Total
Beginning balance	$	2,160		$	114		$	1,508		$	1,188		$	642		$	5,612
Additions
Accretion	(311		)	(123		)	(1,119		)	(4,268		)	(756		)	(6,577		)
Reclassification from nonaccretable	12			82			858			3,827			393			5,172
Disposals	(232		)				(14		)	(11		)				(257		)
Ending balance	$	1,629		$	73		$	1,233		$	736		$	279		$	3,950



	Twelve Months Ended December 31, 2015
	Ameriana		C Financial			Community			CFS			SCB			Total
Beginning balance						$	2,122		$	2,400		$	868		$	5,390
Additions	$	2,160	$	145											2,305
Accretion			(31		)	(723		)	(4,050		)	(1,046		)	(5,850		)
Reclassification from nonaccretable						249			2,854			822			3,925
Disposals						(140		)	(16		)	(2		)	(158		)
Ending balance	$	2,160	$	114		$	1,508		$	1,188		$	642		$	5,612

The following table presents loans acquired during the period ending December 31, 2017, for which it was probable at acquisition that all contractually required payments would not be collected. There were no loans acquired during the period ending December 31, 2016.



	2017
	IAB		Arlington Bank		Total
Contractually required payments receivable at acquisition date	$	14,131	$	6,183	$	20,314
Nonaccretable difference	8,352		2,891		11,243
Expected cash flows at acquisition date	5,779		3,292		9,071
Accretable difference	941		667		1,608
Basis in loans at acquisition date	$	4,838	$	2,625	$	7,463