Other Real Estate Owned ("OREO")

12 Months Ended

Dec. 31, 2020

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 the activity follows.


(dollars in thousands)	Years Ended December 31,
	2020		2019
Balance at beginning of year	$	7,773	$	8,111
Additions of underlying property	1,240		3,567
Disposals of underlying property	(2,882)		(3,004)

Valuation allowance	(3,022)		(901)
Balance at end of period	$	3,109	$	7,773

During the year ended December 31, 2020 and December 31, 2019, OREO additions were $1.2 million and $3.6 million, respectively. During the year ended December 31, 2020, additions of $1.2 million consisted of a commercial lot. During the year ended December 31, 2019, additions of $3.6 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 cost, establishing a new cost basis and $0.1 million for residential lots.

During the year ended December 31, 2020, the Company recognized net losses of $9,000 on disposals of $2.4 million for commercial real estate and $0.5 million for residential real estate. During the year ended December 31, 2019, the Company disposed of commercial real estate for proceeds of $3.1 million and gains of $0.2 million. 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. In connection with the sale of commercial real estate the Bank provided a loan of $0.3 million. The transaction qualified for sales treatment under ASC Topic 610-20 "Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets".

The Company had no impaired loans secured by residential real estate for which formal foreclosure proceedings were in process at December 31, 2020 and 2019.

To adjust properties to current appraised values, additions to the valuation allowance were taken for the years ended December 31, 2020, and 2019, respectively.

Expenses applicable to OREO assets included the following.


(dollars in thousands)	Years Ended December 31,
	2020		2019
Valuation allowance	$	3,022	$	901
Losses (gains) on dispositions	9		(188)
Operating expenses	169		250
	$	3,200	$	963