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Other Real Estate Owned ("OREO")
 12 Months Ended
Dec. 31, 2019
Real Estate [Abstract]  
Other Real Estate Owned ("OREO")
OTHER REAL ESTATE OWNED (“OREO”)
OREO assets are presented net of the allowance for losses. 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 the activity follows.
(dollars in thousands)
 
Years Ended December 31,
 
2019
 
2018
Balance at beginning of year
 
$
8,111

 
$
9,341

Additions of underlying property
 
3,567

 
307

Disposals of underlying property
 
(3,004
)
 
(1,005
)
Valuation allowance
 
(901
)
 
(532
)
Balance at end of period
 
$
7,773

 
$
8,111


During the year ended December 31, 2019, additions of $3.6 million consisted of $3.4 million 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 and $146,000 for residential lots. The Company disposed of commercial real estate for proceeds of $3.1 million and recognized a gain of $190,000. Residential lots were sold for $63,000 with a loss of $2,000 along with sales of commercial equipment for $35,000 for the year ended December 31, 2019. The Bank provided $280,000 in financing for the sale of a commercial building during the first quarter of 2019. The transaction qualified for full accrual sales treatment under ASC Topic 610-20 “Other Income – Gains and Losses from the Derecognition of Nonfinancial Assets”.
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 at December 31, 2019 and 2018.
Additions to the valuation allowances of $901,000, $532,000 and $600,000 were recorded to adjust properties to current appraised values for the years ended December 31, 2019, 2018 and 2017, 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.
(dollars in thousands)
 
Years Ended December 31,
 
2019
 
2018
 
2017
Valuation allowance
 
$
901

 
$
532

 
$
600

Losses (gains) on dispositions
 
(188
)
 
8

 
(43
)
Operating expenses
 
250

 
117

 
146

 
 
$
963

 
$
657

 
$
703