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Note 5 - Foreclosed Assets

9 Months Ended

Sep. 30, 2021

NOTE 5 - FORECLOSED ASSETS

Real estate that is acquired through foreclosure or a deed in lieu of foreclosure is classified as other real estate owned ("OREO") until it is sold. When real estate is acquired through foreclosure or by deed in lieu of foreclosure, it is recorded at its fair value, less the estimated costs of disposal. If the fair value of the property is less than the loan balance, the difference is charged against the allowance for loan losses.

Assets are classified as foreclosed when physical possession of the collateral is taken regardless of whether foreclosure proceedings have taken place. Other foreclosed assets received in satisfaction of borrowers debt are initially recorded at fair value of the asset less estimated costs to sell.

	*September 30, 2021*							*December 31, 2020*
	*Balance*		*Valuation Allowance*			*Net Balance*		*Balance*		*Valuation Allowance*		*Net Balance*
Other real estate owned:
One–to–four family residential	$	340	$	(228	)	$	112	$	157	$	—	$	157
Nonresidential real estate		170		(30	)		140		—		—		—
		510		(258	)		252		157		—		157

Other foreclosed assets		875		(78	)		797		—		—		—
	$	1,385	$	(336	)	$	1,049	$	157	$	—	$	157

The following represents the roll forward of foreclosed assets:

	*For the Three Months Ended*						*For the Nine Months Ended*
	*September 30,*						*September 30,*
	*2021*			*2020*			*2021*			*2020*
Beginning balance	$	1,702		$	143		$	157		$	186
New foreclosed assets		—			—			4,473			33
Valuation adjustments		(124	)		—			(405	)		—
Valuation reductions from sales		69			—			69			—
Sales		(598	)		(33	)		(3,245	)		(109	)
Ending balance	$	1,049		$	110		$	1,049		$	110

Activity in the valuation allowance is as follows:

	*For the Three Months Ended*					*For the Nine Months Ended*
	*September 30,*					*September 30,*
	*2021*			*2020*		*2021*			*2020*
Beginning balance	$	281		$	—	$	—		$	—
Additions charged to expense		124			—		405			—
Reductions from sales		(69	)		—		(69	)		—
Ending balance	$	336		$	—	$	336		$	—

There were no valuation allowances at December 31, 2020.

At September 30, 2021 and December 31, 2020, the balance of OREO includes no foreclosed residential real estate properties recorded as a result of obtaining physical possession of the property without title. At September 30, 2021 and December 31, 2020, the recorded investment of consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings were in process was $73,000 and $187,000, respectively. The other foreclosed assets consist of non real estate collateral repossessed related to a previously classified Chicago area commercial loan.