OREO

6 Months Ended

Jun. 30, 2018

OREO

OREO

Note 6:  OREO

OREO represents properties acquired through foreclosure or other proceedings in settlement of loans and is included in other assets in the accompanying Consolidated Balance Sheets.  OREO is held for sale and is recorded at the date of foreclosure at the fair value of the properties less estimated costs of disposal, which establishes a new cost basis.  Any adjustment to fair value at the time of transfer to OREO is charged to the allowance for loan losses.  Properties are evaluated regularly to ensure each recorded amount is supported by its current fair value, and valuation allowances to reduce the carrying amount due to subsequent declines in fair value less estimated costs to dispose are recorded as necessary.  Revenue, expense, gains and losses from the operations of foreclosed assets are included in operations.  At June 30, 2018, the Company held $3.3 million in commercial OREO, $0.4 million in residential OREO and an insignificant amount of other repossessed assets.  At December 31, 2017, the Company held $1.2 million in commercial OREO, $0.1 million in residential OREO and an insignificant amount of other repossessed assets.  At June 30, 2018 the Company had $1.7 million of residential real estate in the process of foreclosure.

The following table summarizes activity related to OREO (dollars in thousands):

	Six Months Ended June 30, 2018			Year Ended December 31, 2017
Beginning balance	$	1,283		$	2,518
Additions, transfers from loans	3,125			1,417
Additions, fair value from First Community acquisition	—			722
Additions, fair value from Mid Illinois acquisition	—			60
Proceeds from sales of OREO	(722		)	(5,024		)
Gain on sales of OREO	26			1,632
Valuation allowance for OREO	(18		)	(42		)
Ending balance	$	3,694		$	1,283