The Company accounts for its acquisitions under ASC Topic 805, Business Combinations, which requires the use of the acquisition method of accounting. All identifiable assets acquired, including loans, are recorded at fair value. No allowance for loan losses related to the loans acquired is recorded on the acquisition date as the fair value of the loans acquired incorporates assumptions regarding credit risk. Loans acquired are recorded at fair value in accordance with the fair value methodology prescribed in ASC Topic 820, Fair Value Measurement. The fair value estimates associated with the loans include estimates related to expected prepayments and the amount and timing of undiscounted expected principal, interest and other cash flows.

The Company evaluates non-impaired loans acquired in accordance with the provisions of ASC Topic 310-20, Nonrefundable Fees and Other Costs. The fair value discount on these loans is accreted into interest income over the weighted average life of the loans using a constant yield method. The Company evaluates purchased impaired loans in accordance with the provisions of ASC Topic 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality. Purchased loans are considered impaired if there is evidence of credit deterioration since origination and if it is probable that not all contractually required payments will be collected.

For impaired loans accounted for under ASC Topic 310-30, the Company continues to estimate cash flows expected to be collected on purchased credit impaired loans. The Company evaluates, at each balance sheet date, whether the present value of the purchased credit impaired loans determined using the effective interest rates has decreased significantly and if so, recognize a provision for loan loss in the consolidated statement of income. For any significant increases in cash flows expected to be collected, the Company adjusts the amount of accretable yield recognized on a prospective basis over the remaining life of the purchased credit impaired loan.

During the second quarter 2019, the Company evaluated $1.097 billion of net loans ($1.127 billion gross loans less $30.6 million discount) purchased in conjunction with the acquisition of Reliance, described in Note 2, Acquisitions, in accordance with the provisions of ASC Topic 310-20. The Company evaluated the remaining $176,000 of net loans ($385,000 gross loans less $209,000 discount) purchased in conjunction with the acquisition of Reliance for impairment in accordance with the provisions of ASC Topic 310-30.



	Loans Acquired
(In thousands)	September 30, 2019		December 31, 2018
Consumer:
Other consumer	$	7,431	$	15,658
Real estate:
Construction	362,000		429,605
Single family residential	504,490		566,188
Other commercial	2,134,973		1,848,679
Total real estate	3,001,463		2,844,472
Commercial:
Commercial	349,821		430,914
Agricultural	872		1,739
Total commercial	350,693		432,653
Total loans acquired ⁽¹⁾	$	3,359,587	$	3,292,783

Nonaccrual loans acquired, excluding purchased credit impaired loans accounted for under ASC Topic 310-30, segregated by class of loans, are as follows (see Note 4, Loans and Allowance for Loan Losses, for discussion of nonaccrual loans):



(In thousands)	September 30, 2019		December 31, 2018

Consumer:
Other consumer	$	71	$	140
Real estate:
Construction	48		114
Single family residential	4,492		6,603
Other commercial	1,029		1,167
Total real estate	5,569		7,884
Commercial:
Commercial	1,636		13,578
Agricultural	23		38
Total commercial	1,659		13,616
Total	$	7,299	$	21,640

An age analysis of past due loans acquired segregated by class of loans, is as follows (see Note 4, Loans and Allowance for Loan Losses, for discussion of past due loans):



(In thousands)	Gross 30-89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Total Loans		90 Days Past Due & Accruing

September 30, 2019
Consumer:
Other consumer	$	131	$	36	$	167	$	7,264	$	7,431	$	4
Real estate:
Construction	30		12		42		361,958		362,000		—
Single family residential	3,664		1,790		5,454		499,036		504,490		17
Other commercial	1,888		943		2,831		2,132,142		2,134,973		—
Total real estate	5,582		2,745		8,327		2,993,136		3,001,463		17
Commercial:
Commercial	607		724		1,331		348,490		349,821		—
Agricultural	—		—		—		872		872		—
Total commercial	607		724		1,331		349,362		350,693		—

Total	$	6,320	$	3,505	$	9,825	$	3,349,762	$	3,359,587	$	21



December 31, 2018
Consumer:
Other consumer	$	337	$	49	$	386	$	15,272	$	15,658	$	2
Real estate:
Construction	8,283		27		8,310		421,295		429,605		—
Single family residential	4,706		3,049		7,755		558,433		566,188		—
Other commercial	168		577		745		1,847,934		1,848,679		—
Total real estate	13,157		3,653		16,810		2,827,662		2,844,472		—
Commercial:
Commercial	1,302		9,542		10,844		420,070		430,914		—
Agricultural	31		5		36		1,703		1,739		—
Total commercial	1,333		9,547		10,880		421,773		432,653		—

Total	$	14,827	$	13,249	$	28,076	$	3,264,707	$	3,292,783	$	2

The following table presents a summary of loans acquired by credit risk rating, segregated by class of loans (see Note 4, Loans and Allowance for Loan Losses, for discussion of loan risk rating). Loans accounted for under ASC Topic 310-30 are all included in Risk Rate 1-4 in this table.



(In thousands)	Risk Rate 1-4		Risk Rate 5		Risk Rate 6		Risk Rate 7		Risk Rate 8		Total

September 30, 2019
Consumer:
Other consumer	$	7,285	$	—	$	146	$	—	$	—	$	7,431
Real estate:
Construction	344,075		17,874		51		—		—		362,000
Single family residential	492,826		1,224		10,312		128		—		504,490
Other commercial	2,085,649		26,207		23,117		—		—		2,134,973
Total real estate	2,922,550		45,305		33,480		128		—		3,001,463
Commercial:
Commercial	341,385		1,491		6,945		—		—		349,821
Agricultural	804		—		68		—		—		872
Total commercial	342,189		1,491		7,013		—		—		350,693

Total	$	3,272,024	$	46,796	$	40,639	$	128	$	—	$	3,359,587



December 31, 2018
Consumer:
Other consumer	$	15,380	$	—	$	278	$	—	$	—	$	15,658
Real estate:
Construction	393,122		27,621		8,862		—		—		429,605
Single family residential	553,460		2,081		10,299		348		—		566,188
Other commercial	1,822,179		9,137		17,363		—		—		1,848,679
Total real estate	2,768,761		38,839		36,524		348		—		2,844,472
Commercial:
Commercial	401,300		12,416		17,198		—		—		430,914
Agricultural	1,642		—		97		—		—		1,739
Total commercial	402,942		12,416		17,295		—		—		432,653

Total	$	3,187,083	$	51,255	$	54,097	$	348	$	—	$	3,292,783

Loans acquired were individually evaluated and recorded at estimated fair value, including estimated credit losses, at the time of acquisition. These loans are systematically reviewed by the Company to determine the risk of losses that may exceed those identified at the time of the acquisition. Techniques used in determining risk of loss are similar to the Company’s legacy loan portfolio, with most focus being placed on those loans which include the larger loan relationships and those loans which exhibit higher risk characteristics.

In addition to the accretable yield on loans acquired not considered to be impaired, the amount of the estimated cash flows expected to be received from the purchased credit impaired loans in excess of the fair values recorded for the purchased credit impaired loans is referred to as the accretable yield. The accretable yield is recognized as interest income over the estimated lives of the loans. Each quarter, the Company estimates the cash flows expected to be collected from the acquired purchased credit impaired loans, and adjustments may or may not be required. This has resulted in an increase in interest income that is spread on a level-yield basis over the remaining expected lives of the loans.

Changes in the carrying amount of the accretable yield for all purchased impaired loans were as follows for the three and nine months ended September 30, 2019 and 2018.



	Three Months Ended September 30, 2019						Nine Months Ended September 30, 2019
(In thousands)	Accretable Yield			Carrying Amount of Loans			Accretable Yield			Carrying Amount of Loans
Beginning balance	$	1,461		$	3,487		$	1,460		$	4,050
Additions	—			—			—			175
Accretable yield adjustments	10			—			38			—
Accretion	(12		)	12			(39		)	39
Payments and other reductions, net	—			(422		)	—			(1,187		)
Balance, ending	$	1,459		$	3,077		$	1,459		$	3,077



	Three Months Ended September 30, 2018						Nine Months Ended September 30, 2018
(In thousands)	Accretable Yield			Carrying Amount of Loans			Accretable Yield			Carrying Amount of Loans
Beginning balance	$	1,382		$	13,995		$	620		$	17,116
Additions	—			—			—			—
Accretable yield adjustments	717			—			1,895			—
Accretion	(635		)	635			(1,051		)	1,051
Payments and other reductions, net	—			(9,664		)	—			(13,201		)
Balance, ending	$	1,464		$	4,966		$	1,464		$	4,966

Purchased impaired loans are evaluated on an individual borrower basis. Because some loans evaluated by the Company were determined to have experienced impairment in the estimated credit quality or cash flows, the Company recorded a provision and established an allowance for loan loss for loans acquired resulting in a total allowance on loans acquired of $597,000 at September 30, 2019 and $95,000 at December 31, 2018. The provision on loans acquired for the three and nine months ended September 30, 2019 was $0 and $2,464,000, respectively. The provision on loans acquired for the three and nine months ended September 30, 2018 was $0 and $1,837,000, respectively.