Other Real Estate Owned ("OREO")

3 Months Ended

Mar. 31, 2019

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

Other Real Estate Owned ("OREO")

NOTE 5 - OTHER REAL ESTATE OWNED (“OREO”)

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

	Three Months Ended March 31,				Years Ended December 31,
(dollars in thousands)	2019		2018		2018
Balance at beginning of year	$	8,111	$	9,341	$	9,341
Additions of underlying property		3,215		101		307
Disposals of underlying property		(316)		—		(1,005)
Valuation allowance		(61)		(90)		(532)
Balance at end of period	$	10,949	$	9,352	$	8,111

During the three months ended March 31, 2019 and 2018, OREO additions were $3.2 million and $101,000, respectively. The first quarter 2018 additions of $3.2 million were for commercial real estate acquired at foreclosure on a $3.8 million classified loan relationship recorded at the estimated fair value at the date of foreclosure less selling costs, establishing a new cost basis. During the three months ended March 31, 2018, additions of $101,000 consisted of capitalized costs to improve a residential development project.

During the three months ended March 31, 2019, the Company disposed of an OREO property with a carrying value of $316,000 for proceeds of $326,000 resulting in a gain of $10,000. In connection with the sale, the Bank provided a loan of $280,000. The transaction qualified for sales treatment under ASC Topic 610‑20 “Other Income – Gains and Losses from the Derecognition of Nonfinancial Assets”. There were no disposals of OREO for the three months ended March 31, 2018.

During the year ended December 31, 2018, additions of $307,000 consisted of $165,000 of capitalized costs to improve a development project and $142,000 for commercial real estate.  The Company disposed of commercial real estate for proceeds of $807,000 and gains of $4,000 along with residential lots for proceeds of $190,000 and a loss of $12,000 for the year ended December 31, 2018.

The Company had no impaired loans secured by residential real estate for which formal foreclosure proceedings were in process as of March 31, 2019 and December 31, 2018.

To adjust properties to current appraised values, additions to the valuation allowance were taken for the three months ended March 31, 2019 and 2018 and the year ended December 31, 2018. 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 March 31,
(dollars in thousands)	2019		2018
Valuation allowance	$	61	$	90
Losses (gains) on dispositions		(10)		—
Operating expenses		5		24
	$	56	$	114