Other Real Estate Owned ("OREO")

6 Months Ended

Jun. 30, 2016

Other Real Estate Owned ("OREO") [Abstract]

NOTE 9 - OTHER REAL ESTATE OWNED (“OREO”)

OREO assets are presented net of valuation allowances. The Company considers OREO as classified assets for regulatory and financial reporting. An analysis of OREO activity follows.


	Six Months Ended June 30,		Year Ended December 31,
(dollars in thousands)	2016	2015	2015
Balance at beginning of year	$ 9,449	$ 5,883	$ 5,883
Additions of underlying property	2,718	1,556	5,436
Disposals of underlying property	(3,445)	(643)	(1,206)
Valuation allowance	(262)	(374)	(664)
Balance at end of period	$ 8,460	$ 6,422	$ 9,449

During the six months ended June 30, 2016, additions of $2.7 million consisted of $577,000 for a residential property and $2.1 million for a deed in lieu of foreclosure on an improved commercial office building with multiple tenants. The commercial office building was taken into OREO at fair value of the loan during the three months ended March 31, 2016 and had a ratified contract for its sale. That contract was voided during the second quarter of 2016. The Company plans to manage the property until its sale and will recognize miscellaneous rental income during the ownership and management of the property. During the six months ended June 30, 2015, additions of $1.6 million consisted of $784,000 for five residential properties, $378,000 for three residential lots and $400,000 for a commercial building.

The Company recognized net losses on OREO disposals of $443,000 for the six months ended June 30, 2016. Disposals for the six months ended June 30, 2016 consisted of properties with the following carrying values; $106,000 for three residential lots, $166,000 for one residential property, $875,000 for three commercial properties and $2.2 million for an apartment and condominium property. The Bank provided financing for the apartment and condominium purchase which was transferred from OREO to loans during the second quarter of 2015. The transaction qualified for full accrual sales treatment under ASC Topic 360-20-40 “Property Plant and Equipment – Derecognition”. The Company disposed of two residential properties and two finished residential lots at a loss of $18,000 for the six months ended June 30, 2015.

Additions to the valuation allowances of $262,000 and $374,000 were taken to adjust properties to current appraised values for the six months ended June 30, 2016 and 2015, respectively. OREO carrying amounts reflect management’s estimate of the realizable value of these properties incorporating current appraised values, local real estate market conditions and related costs. Expenses applicable to OREO assets include the following.


	Three Months Ended June 30,		Six Months Ended June 30,
(dollars in thousands)	2016	2015	2016	2015
Valuation allowance	$ 7	$ 249	$ 262	$ 374
Operating expenses	98	85	144	179
	$ 105	$ 334	$ 406	$ 553