Other Real Estate Owned ("OREO")

6 Months Ended

Jun. 30, 2017

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

Other Real Estate Owned ("OREO")

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,			Years Ended December 31,
(dollars in thousands)		2017	2016	2016
Balance at beginning of year		$                  7,763	$                  9,449	$                  9,449
Additions of underlying property		2,772	2,718	3,120
Disposals of underlying property		(1,068)	(3,445)	(3,860)
Transfers to premises and equipment		-	-	(372)
Valuation allowance		(313)	(262)	(574)
Balance at end of period		$                  9,154	$                  8,460	$                  7,763

During the six months ended June 30, 2017, additions of $2.8 million to OREO were related to the foreclosure of a stalled residential development project.  The Bank is working with a construction manager to stabilize and market the project. The Company disposed of four residential properties and multiple residential lots for proceeds of $1.1 million and a gain of $36,000 for the six months ended June 30, 2017. The Bank provided $200,000 in financing for one residential property and the three residential lots during the first quarter of 2017. The transaction qualified for full accrual sales treatment under ASC Topic 360-20-40 “Property Plant and Equipment – Derecognition”.

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 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 qualified for full accrual sales treatment under ASC Topic 360-20-40 “Property Plant and Equipment – Derecognition”.

The Company had $742,000 and $353,000 of impaired loans secured by residential real estate for which formal foreclosure proceedings were in process as of June 30, 2017 and December 31, 2016, respectively.

Additions to the valuation allowances of $313,000 and $262,000 were taken to adjust properties to current appraised values for the six months ended June 30, 2017 and 2016, 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 included the following.

	Three Months Ended June 30,		Six Months Ended June 30,
(dollars in thousands)	2017	2016	2017	2016
Valuation allowance	$                      117	$                          7	$                      313	$                      262
Operating expenses	28	98	27	144
	$                      145	$                      105	$                      340	$                      406