LOANS AND LEASES

Loans and leases as of June 30, 2016, and December 31, 2015, were as follows, in thousands:



	June 30, 2016			December 31, 2015
Loans and leases receivable held to maturity:
Commercial	$	1,287,301		$	1,279,214
Commercial real estate	2,643,578			2,326,360
Agricultural and agricultural real estate	480,883			471,870
Residential real estate	644,267			539,555
Consumer	428,730			386,867
Gross loans and leases receivable held to maturity	5,484,759			5,003,866
Unearned discount	(686		)	(488		)
Deferred loan fees	(1,815		)	(1,892		)
Total net loans and leases receivable held to maturity	5,482,258			5,001,486
Allowance for loan and lease losses	(51,756		)	(48,685		)
Loans and leases receivable, net	$	5,430,502		$	4,952,801

Heartland has certain lending policies and procedures in place that are designed to provide for an acceptable level of credit risk. The board of directors reviews and approves these policies and procedures on a regular basis. A reporting system supplements the review process by providing management and the board with frequent reports related to loan production, loan quality, concentrations of credit, loan delinquencies, nonperforming loans and potential problem loans. Diversification in the loan portfolio is also a means of managing risk associated with fluctuations in economic conditions.

The commercial and commercial real estate loan portfolio includes a wide range of business loans, including lines of credit for working capital and operational purposes and term loans for the acquisition of equipment and real estate. Although most loans are made on a secured basis, loans may be made on an unsecured basis where warranted by the overall financial condition of the borrower. Terms of commercial business loans generally range from one to five years. Commercial loans and leases are primarily made based on the identified cash flow of the borrower and secondarily on the underlying collateral provided by the borrower. The collateral that Heartland requires for most of these loans and leases is based upon the discounted market value of the collateral. The primary repayment risks of commercial loans and leases are that the cash flow of the borrowers may be unpredictable, and the collateral securing these loans may fluctuate in value. Heartland seeks to minimize these risks in a variety of ways. The underwriting analysis includes credit verification, analysis of global cash flows, appraisals and a review of the financial condition of the borrower. Personal guarantees are frequently required as a tertiary form of repayment. In addition, when underwriting loans for commercial real estate, careful consideration is given to the property's operating history, future operating projections, current and projected occupancy, location and physical condition. Heartland also utilizes government guaranteed lending through the U.S. Small Business Administration and the U.S. Department of Agriculture's Rural Development Business and Industry Program to assist customers with longer-term funding and to reduce risk.

Agricultural loans, many of which are secured by crops, machinery and real estate, are provided to finance capital improvements and farm operations as well as acquisitions of livestock and machinery. Agricultural loans present unique credit risks relating to adverse weather conditions, loss of livestock due to disease or other factors, declines in market prices for agricultural products and the impact of government regulations. The ultimate repayment of agricultural loans is dependent upon the profitable operation or management of the agricultural entity. In underwriting agricultural loans, lending personnel work closely with their customers to review budgets and cash flow projections for the ensuing crop year. These budgets and cash flow projections are monitored closely during the year and reviewed with the customers at least annually. Lending personnel also work closely with governmental agencies, including the Farm Service Agency, to help agricultural customers obtain credit enhancement products such as loan guarantees or interest assistance.

Heartland originates first-lien, adjustable-rate and fixed-rate, one-to-four-family residential real estate loans for the construction, purchase or refinancing of a single family residential property. These loans are principally collateralized by owner-occupied properties and are amortized over 10 to 30 years. Heartland typically sells longer-term, low-rate, residential mortgage loans in the secondary market with servicing rights retained. This practice allows Heartland to better manage interest rate risk and liquidity risk. The Heartland bank subsidiaries participate in lending programs sponsored by U.S. government agencies such as Veterans Administration and Federal Home Administration when justified by market conditions. As of June 30, 2016, Heartland had $2.4 million of loans secured by residential real estate property that were in the process of foreclosure.

Consumer lending includes motor vehicle, home improvement, home equity and small personal credit lines. Consumer loans typically have shorter terms, lower balances, higher yields and higher risks of default than one-to-four-family residential mortgage loans. Consumer loan collections are dependent on the borrower's continuing financial stability, and are therefore more likely to be affected by adverse personal circumstances. Risk is reduced through underwriting criteria, which include credit verification, appraisals, a review of the borrower's financial condition, and personal cash flows. A security interest, with title insurance when necessary, is taken in the underlying real estate. Heartland's consumer finance subsidiaries, Citizens Finance Co. and Citizens Finance of Illinois Co., typically lend to borrowers with past credit problems or limited credit histories, and these loans comprise approximately 19% of Heartland's total consumer loan portfolio.

Loans are considered past due if the required principal and interest payments have not been received as of the date such payments were due. Heartland’s policy is to discontinue the accrual of interest income on any loan or lease when, in the opinion of management, there is a reasonable doubt as to the timely collection of the interest and principal, normally when a loan or lease is 90 days past due. When interest accruals are deemed uncollectible, interest credited to income in the current year is reversed and interest accrued in prior years is charged to the allowance for loan and lease losses. Nonaccrual loans and leases are returned to an accrual status when, in the opinion of management, the financial position of the borrower indicates that there is no longer any reasonable doubt as to the timely payment of interest and principal.

Under Heartland’s credit practices, a loan is impaired when, based on current information and events, it is probable that Heartland will be unable to collect all amounts due according to the contractual terms of the loan agreement. Loan impairment is measured based on the present value of expected future cash flows discounted at the loan’s effective interest rate, except where more practical, impairment is measured at the observable market price of the loan or the fair value of the collateral if the loan is collateral dependent.

The following table shows the balance in the allowance for loan and lease losses at June 30, 2016, and December 31, 2015, and the related loan balances, disaggregated on the basis of impairment methodology, in thousands. Loans evaluated under ASC 310-10-35 include loans on nonaccrual status and troubled debt restructurings, which are individually evaluated for impairment, and other impaired loans deemed to have similar risk characteristics. All other loans are collectively evaluated for impairment under ASC 450-20. Heartland has made no significant changes to the accounting for the allowance for loan and lease losses policy during 2016.



	Allowance For Loan and Lease Losses						Gross Loans and Leases Receivable Held to Maturity
	Ending Balance Under ASC 310-10-35		Ending Balance Under ASC 450-20		Total		Ending Balance Evaluated for Impairment Under ASC 310-10-35		Ending Balance Evaluated for Impairment Under ASC 450-20		Total
June 30, 2016
Commercial	$	1,342	$	14,183	$	15,525	$	7,985	$	1,279,316	$	1,287,301
Commercial real estate	2,780		20,188		22,968		53,481		2,590,097		2,643,578
Agricultural and agricultural real estate	6		4,094		4,100		14,359		466,524		480,883
Residential real estate	446		1,619		2,065		21,710		622,557		644,267
Consumer	1,351		5,747		7,098		5,708		423,022		428,730
Total	$	5,925	$	45,831	$	51,756	$	103,243	$	5,381,516	$	5,484,759
December 31, 2015
Commercial	$	471	$	15,624	$	16,095	$	6,919	$	1,272,295	$	1,279,214
Commercial real estate	698		18,834		19,532		45,442		2,280,918		2,326,360
Agricultural and agricultural real estate	—		3,887		3,887		4,612		467,258		471,870
Residential real estate	393		1,541		1,934		17,790		521,765		539,555
Consumer	1,206		6,031		7,237		5,458		381,409		386,867
Total	$	2,768	$	45,917	$	48,685	$	80,221	$	4,923,645	$	5,003,866

The following table presents nonaccrual loans, accruing loans past due 90 days or more and troubled debt restructured loans at June 30, 2016, and December 31, 2015, in thousands. There were no nonaccrual leases, accruing leases past due 90 days or more or restructured leases at June 30, 2016, and December 31, 2015.



	June 30, 2016		December 31, 2015
Nonaccrual loans	$	55,732	$	37,874
Nonaccrual troubled debt restructured loans	1,321		1,781
Total nonaccrual loans	$	57,053	$	39,655
Accruing loans past due 90 days or more	$	—	$	—
Performing troubled debt restructured loans	$	9,923	$	11,075

The following table provides information on troubled debt restructured loans that were modified during the three- and six-month periods ended June 30, 2016, and June 30, 2015, dollars in thousands:



	Three Months Ended June 30,
	2016					2015
	Number of Loans	Pre- Modification Recorded Investment		Post- Modification Recorded Investment		Number of Loans	Pre- Modification Recorded Investment		Post- Modification Recorded Investment
Commercial	1	$	100	$	100	1	$	830	$	830
Commercial real estate	1	179		179		—	—		—
Total commercial and commercial real estate	2	279		279		1	830		830
Agricultural and agricultural real estate	—	—		—		1	311		311
Residential real estate	—	—		—		—	—		—
Consumer	—	—		—		—	—		—
Total	2	$	279	$	279	2	$	1,141	$	1,141



	Six Months Ended June 30,
	2016					2015
	Number of Loans	Pre- Modification Recorded Investment		Post- Modification Recorded Investment		Number of Loans	Pre- Modification Recorded Investment		Post- Modification Recorded Investment
Commercial	1	$	100	$	100	1	$	830	$	830
Commercial real estate	1	179		179		1	3,992		3,992
Total commercial and commercial real estate	2	279		279		2	4,822		4,822
Agricultural and agricultural real estate	—	—		—		1	311		311
Residential real estate	—	—		—		—	—		—
Consumer	—	—		—		—	—		—
Total	2	$	279	$	279	3	$	5,133	$	5,133

The pre-modification and post-modification recorded investment represents amounts as of the date of loan modification. Since the modifications on these loans have been only interest rate concessions and term extensions, not principal reductions, the pre-modification and post-modification recorded investment amounts are the same. At June 30, 2016, there were no commitments to extend credit to any of the borrowers with an existing troubled debt restructuring.

The following tables presents troubled debt restructured loans for which there was a payment default during the three and six months ended June 30, 2016, and June 30, 2015, that had been modified during the twelve-month period prior to default.



	With Payment Defaults During the Following Periods
	Three Months Ended June 30,
	2016			2015
	Number of Loans	Recorded Investment		Number of Loans	Recorded Investment
Commercial	1	$	100	—	$	—
Commercial real estate	—	—		—	—
Total commercial and commercial real estate	1	100		—	—
Agricultural and agricultural real estate	—	—		—	—
Residential real estate	—	—		—	—
Consumer	—	—		—	—
Total	1	$	100	—	$	—



	With Payment Defaults During the Following Periods
	Six Months Ended June 30,
	2016			2015
	Number of Loans	Recorded Investment		Number of Loans	Recorded Investment
Commercial	1	$	100	—	$	—
Commercial real estate	—	—		—	—
Total commercial and commercial real estate	1	100		—	—
Agricultural and agricultural real estate	—	—		—	—
Residential real estate	—	—		—	—
Consumer	—	—		—	—
Total	1	$	100	—	$	—

Heartland's internal rating system is a series of grades reflecting management's risk assessment, based on its analysis of the borrower's financial condition. The "pass" category consists of all loans that are not in the "nonpass" category, categorized into a range of loan grades that reflect increasing, though still acceptable, risk. Movement of risk through the various grade levels in the pass category is monitored for early identification of credit deterioration. The "nonpass" category consists of special mention, substandard, doubtful and loss loans. The "special mention" rating is attached to loans where the borrower exhibits negative financial trends due to borrower specific or systemic conditions that, if left uncorrected, threaten the borrower's capacity to meet its debt obligations. The borrower is believed to have sufficient financial flexibility to react to and resolve its negative financial situation. These credits are closely monitored for improvement or deterioration. The "substandard" rating is assigned to loans that are inadequately protected by the current sound net worth and paying capacity of the borrower and may be further at risk due to deterioration in the value of collateral pledged. Well-defined weaknesses jeopardize liquidation of the debt. These loans are still considered collectible; however, a distinct possibility exists that Heartland will sustain some loss if deficiencies are not corrected. Substandard loans may exhibit some or all of the following weaknesses: deteriorating trends, lack of earnings, inadequate debt service capacity, excessive debt and/or lack of liquidity. The "doubtful" rating is assigned to loans where identified weaknesses make collection or liquidation in full, on the basis of existing facts, conditions and values, highly questionable and improbable. These borrowers are usually in default, lack liquidity and capital, as well as resources necessary to remain an operating entity. Specific pending events, such as capital injections, liquidations or perfection of liens on additional collateral, may strengthen the credit, thus deferring classification of the loan as loss until the exact status can be determined. The "loss" rating is assigned to loans considered uncollectible. As of June 30, 2016, Heartland had no loans classified as doubtful and no loans classified as loss. Loans are placed on "nonaccrual" when management does not expect to collect payments of principal and interest in full or when principal or interest has been in default for a period of 90 days or more, unless the loan is both well secured and in the process of collection.

The following table presents loans and leases by credit quality indicator at June 30, 2016, and December 31, 2015, in thousands:



	Pass		Nonpass		Total
June 30, 2016
Commercial	$	1,154,318	$	132,983	$	1,287,301
Commercial real estate	2,438,572		205,006		2,643,578
Total commercial and commercial real estate	3,592,890		337,989		3,930,879
Agricultural and agricultural real estate	431,671		49,212		480,883
Residential real estate	615,626		28,641		644,267
Consumer	418,251		10,479		428,730
Total gross loans and leases receivable held to maturity	$	5,058,438	$	426,321	$	5,484,759
December 31, 2015
Commercial	$	1,106,276	$	172,938	$	1,279,214
Commercial real estate	2,107,474		218,886		2,326,360
Total commercial and commercial real estate	3,213,750		391,824		3,605,574
Agricultural and agricultural real estate	435,745		36,125		471,870
Residential real estate	515,195		24,360		539,555
Consumer	377,173		9,694		386,867
Total gross loans and leases receivable held to maturity	$	4,541,863	$	462,003	$	5,003,866

The nonpass category in the table above is comprised of approximately 57% special mention loans and 43% substandard loans as of June 30, 2016. The percent of nonpass loans on nonaccrual status as of June 30, 2016, was 13%. As of December 31, 2015, the nonpass category in the table above was comprised of approximately 68% special mention loans and 32% substandard loans. The percent of nonpass loans on nonaccrual status as of December 31, 2015, was 8%. Loans delinquent 30 to 89 days as a percent of total loans were 0.73% at June 30, 2016, compared to 0.31% at December 31, 2015. Changes in credit risk are monitored on a continuous basis and changes in risk ratings are made when identified. All impaired loans are reviewed at least annually.

The following table sets forth information regarding Heartland's accruing and nonaccrual loans and leases at June 30, 2016, and December 31, 2015, in thousands:



	Accruing Loans and Leases
	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Nonaccrual		Total Loans and Leases
June 30, 2016
Commercial	$	1,714	$	823	$	—	$	2,537	$	1,279,293	$	5,471	$	1,287,301
Commercial real estate	17,469		12,058		—		29,527		2,595,224		18,827		2,643,578
Total commercial and commercial real estate	19,183		12,881		—		32,064		3,874,517		24,298		3,930,879
Agricultural and agricultural real estate	1,108		133		—		1,241		468,819		10,823		480,883
Residential real estate	1,554		17		—		1,571		624,327		18,369		644,267
Consumer	4,058		949		—		5,007		420,160		3,563		428,730
Total gross loans and leases receivable held to maturity	$	25,903	$	13,980	$	—	$	39,883	$	5,387,823	$	57,053	$	5,484,759
December 31, 2015
Commercial	$	2,005	$	608	$	—	$	2,613	$	1,273,678	$	2,923	$	1,279,214
Commercial real estate	3,549		2,077		—		5,626		2,302,052		18,682		2,326,360
Total commercial and commercial real estate	5,554		2,685		—		8,239		3,575,730		21,605		3,605,574
Agricultural and agricultural real estate	143		54		—		197		470,455		1,218		471,870
Residential real estate	1,900		115		—		2,015		523,915		13,625		539,555
Consumer	3,964		933		—		4,897		378,763		3,207		386,867
Total gross loans and leases receivable held to maturity	$	11,561	$	3,787	$	—	$	15,348	$	4,948,863	$	39,655	$	5,003,866

The majority of Heartland's impaired loans are those that are nonaccrual or have had their terms restructured in a troubled debt restructuring. The following tables present, by category of loan, impaired loans, the unpaid contractual loan balances at June 30, 2016, and December 31, 2015; the outstanding loan balances recorded on the consolidated balance sheets at June 30, 2016, and December 31, 2015; any related allowance recorded for those loans as of June 30, 2016, and December 31, 2015; the average outstanding loan balances recorded on the consolidated balance sheets during the three and six months ended June 30, 2016, and year ended December 31, 2015; and the interest income recognized on the impaired loans during the three and six months ended June 30, 2016, and year ended December 31, 2015, in thousands:



	Unpaid Contractual Balance		Loan Balance		Related Allowance Recorded		Quarter- to- Date Avg. Loan Balance		Quarter- to- Date Interest Income Recognized		Year- to- Date Avg. Loan Balance		Year- to- Date Interest Income Recognized
June 30, 2016
Impaired loans with a related allowance:
Commercial	$	2,664	$	2,664	$	1,342	$	3,598	$	8	$	2,857	$	14
Commercial real estate	16,106		16,106		2,780		7,823		208		6,037		213
Total commercial and commercial real estate	18,770		18,770		4,122		11,421		216		8,894		227
Agricultural and agricultural real estate	111		111		6		36		—		18		—
Residential real estate	3,792		3,706		446		3,351		3		3,127		7
Consumer	3,185		3,185		1,351		3,359		6		3,277		15
Total impaired loans with a related allowance	$	25,858	$	25,772	$	5,925	$	18,167	$	225	$	15,316	$	249
Impaired loans without a related allowance:
Commercial	$	5,332	$	5,321	$	—	$	4,709	$	91	$	7,281	$	261
Commercial real estate	38,783		37,375		—		38,928		380		42,830		785
Total commercial and commercial real estate	44,115		42,696		—		43,637		471		50,111		1,046
Agricultural and agricultural real estate	14,248		14,248		—		14,031		—		10,700		94
Residential real estate	18,137		18,004		—		17,050		49		17,082		81
Consumer	2,538		2,523		—		2,337		11		2,651		20
Total impaired loans without a related allowance	$	79,038	$	77,471	$	—	$	77,055	$	531	$	80,544	$	1,241
Total impaired loans held to maturity:
Commercial	$	7,996	$	7,985	$	1,342	$	8,307	$	99	$	10,138	$	275
Commercial real estate	54,889		53,481		2,780		46,751		588		48,867		998
Total commercial and commercial real estate	62,885		61,466		4,122		55,058		687		59,005		1,273
Agricultural and agricultural real estate	14,359		14,359		6		14,067		—		10,718		94
Residential real estate	21,929		21,710		446		20,401		52		20,209		88
Consumer	5,723		5,708		1,351		5,696		17		5,928		35
Total impaired loans held to maturity	$	104,896	$	103,243	$	5,925	$	95,222	$	756	$	95,860	$	1,490



	Unpaid Contractual Balance		Loan Balance		Related Allowance Recorded		Year-to- Date Avg. Loan Balance		Year-to- Date Interest Income Recognized
December 31, 2015
Impaired loans with a related allowance:
Commercial	$	1,192	$	1,160	$	471	$	524	$	12
Commercial real estate	2,697		2,697		698		2,539		19
Total commercial and commercial real estate	3,889		3,857		1,169		3,063		31
Agricultural and agricultural real estate	—		—		—		2,823		—
Residential real estate	2,210		2,125		393		2,524		16
Consumer	3,111		3,111		1,206		2,877		33
Total impaired loans with a related allowance	$	9,210	$	9,093	$	2,768	$	11,287	$	80
Impaired loans without a related allowance:
Commercial	$	5,784	$	5,759	$	—	$	7,511	$	515
Commercial real estate	46,099		42,745		—		38,444		1,395
Total commercial and commercial real estate	51,883		48,504		—		45,955		1,910
Agricultural and agricultural real estate	4,612		4,612		—		2,287		175
Residential real estate	15,802		15,665		—		10,186		145
Consumer	2,347		2,347		—		2,403		38
Total impaired loans without a related allowance	$	74,644	$	71,128	$	—	$	60,831	$	2,268
Total impaired loans held to maturity:
Commercial	$	6,976	$	6,919	$	471	$	8,035	$	527
Commercial real estate	48,796		45,442		698		40,983		1,414
Total commercial and commercial real estate	55,772		52,361		1,169		49,018		1,941
Agricultural and agricultural real estate	4,612		4,612		—		5,110		175
Residential real estate	18,012		17,790		393		12,710		161
Consumer	5,458		5,458		1,206		5,280		71
Total impaired loans held to maturity	$	83,854	$	80,221	$	2,768	$	72,118	$	2,348

On February 5, 2016, Heartland acquired CIC Bancshares, Inc., parent company of Centennial Bank, in Denver, Colorado. As of February 5, 2016, Centennial Bank had loans of $594.9 million, and the estimated fair value of the loans acquired was $581.5 million.

On November 30, 2015, Heartland acquired Premier Valley Bank in Fresno, California. As of November 30, 2015, Premier Valley Bank had loans of $400.5 million, and the estimated fair value of the loans acquired was $389.8 million.

On September 11, 2015, Heartland acquired First Scottsdale Bank, N.A. in Scottsdale, Arizona. As of September 11, 2015, First Scottsdale Bank, N.A. had loans of $56.5 million, and the estimated fair value of the loans acquired was $54.7 million.

On August 21, 2015, Heartland acquired Community Bancorporation of New Mexico, Inc., parent company of Community Bank of Santa Fe, New Mexico. As of August 21, 2015, Community Bank had loans of $103.7 million, and the estimated fair value of the loans acquired was $99.5 million.

On January 16, 2015, Heartland acquired Community Banc-Corp of Sheboygan, Inc., parent company of Community Bank & Trust in Sheboygan, Wisconsin. As of January 16, 2015, Community Bank & Trust had loans of $413.4 million, and the estimated fair value of the loans acquired was $395.0 million.

The acquisitions of Community Banc-Corp of Sheboygan, Inc., Community Bancorporation of New Mexico, Inc., First Scottsdale Bank, N.A., Premier Valley Bank and CIC Bancshares, Inc. were accounted for under the acquisition method of accounting in accordance with ASC 805, “Business Combinations.” Purchased loans acquired in a business combination are recorded at estimated fair value on their purchase date, but the purchaser cannot carry over the related allowance for loan and lease losses. Purchased loans are accounted for under ASC 310-30, “Loans and Debt Securities with Deteriorated Credit Quality,” when the loans have evidence of credit deterioration since origination, and when at the date of the acquisition, it is probable that Heartland will not collect all contractually required principal and interest payments. Evidence of credit quality deterioration at the purchase date includes statistics such as past due and nonaccrual status. Generally, acquired loans that meet Heartland’s definition for nonaccrual status fall within the scope of ASC 310-30. The difference between contractually required payments at acquisition and the cash flows expected to be collected at acquisition is referred to as the nonaccretable difference which is included in the carrying value of the loans. Subsequent decreases to the expected cash flows will generally result in a provision for loan and lease losses. Subsequent increases in cash flows result in a reversal of the provision for loan and lease losses to the extent of prior charges, or a reclassification of the difference from nonaccretable to accretable with a positive impact on future interest income. Further, any excess of cash flows expected at acquisition over the estimated fair value is referred to as the accretable yield and is recognized into interest income over the remaining life of the loan when there is a reasonable expectation about the amount and timing of such cash flows.

The carrying amount of the acquired loans at June 30, 2016 and December 31, 2015, consisted of purchased impaired and nonimpaired loans as summarized in the following table, in thousands:



	June 30, 2016						December 31, 2015
	Impaired Purchased Loans		Non Impaired Purchased Loans		Total Purchased Loans		Impaired Purchased Loans		Non Impaired Purchased Loans		Total Purchased Loans
Commercial	$	3,261	$	154,959	$	158,220	$	—	$	159,393	$	159,393
Commercial real estate	4,071		762,523		766,594		7,716		494,010		501,726
Agricultural and agricultural real estate	—		771		771		—		2,985		2,985
Residential real estate	236		187,274		187,510		—		85,549		85,549
Consumer loans	—		57,073		57,073		—		33,644		33,644
Total Loans	$	7,568	$	1,162,600	$	1,170,168	$	7,716	$	775,581	$	783,297

Changes in accretable yield on acquired loans with evidence of credit deterioration at the date of acquisition for the three and six months ended June 30, 2016, and June 30, 2015, were as follows, in thousands:



Balance at March 31, 2016	$	305
Original yield discount, net, at date of acquisition	—
Accretion	193
Reclassification from nonaccretable difference⁽¹⁾	(56		)
Balance at June 30, 2016	$	168

Balance at December 31, 2015	$	557
Original yield discount, net, at date of acquisitions	19
Accretion	466
Reclassification from nonaccretable difference⁽¹⁾	(58		)
Balance at June 30, 2016	$	168

(1) Represents increases in estimated cash flows expected to be received, primarily due to lower estimated credit losses.



Balance at March 31, 2015	$	352
Original yield discount, net, at date of acquisitions	—
Accretion	116
Reclassification from nonaccretable difference⁽¹⁾	(162		)
Balance at June 30, 2015	$	398

Balance at December 31, 2014	$	—
Original yield discount, net, at date of acquisitions	352
Accretion	116
Reclassification from nonaccretable difference⁽¹⁾	(162		)
Balance at June 30, 2015	$	398

(1) Represents increases in estimated cash flows expected to be received, primarily due to lower estimated credit losses.

On the acquisition dates, the preliminary estimate of the contractually required payments receivable for all loans with evidence of credit deterioration since origination was $21.0 million, and the estimated fair value of the loans was $13.1 million. At June 30, 2016, a majority of these loans were valued based upon the liquidation value of the underlying collateral, because the expected cash flows are primarily based on the liquidation of underlying collateral, and the timing and amount of the cash flows could not be reasonably estimated. At June 30, 2016, there was an allowance for loan and lease losses of $472,000 related to these ASC 310-30 loans.

On the acquisition dates, the preliminary estimate of the contractually required payments receivable for all nonimpaired loans acquired in the acquisitions was $1.55 billion, and the estimated fair value of the loans was $1.51 billion.