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Note 5 - Foreclosed Assets

12 Months Ended

Dec. 31, 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.

	*December 31, 2021*							*December 31, 2020*
	*Balance*		*Valuation Allowance*			*Net OREO Balance*		*Balance*		*Valuation Allowance*		*Net OREO Balance*
Foreclosed assets - OREO	$	—	$	—		$	—	$	157	$	—	$	157

Other foreclosed assets		952		(227	)		725		—		—		—
	$	952	$	(227	)	$	725	$	157	$	—	$	157

The following represents the roll forward of foreclosed assets:

	*At and For the Years Ended December 31,*
	*2021*			*2020*
Beginning balance	$	157		$	186
New foreclosed properties		4,473			33
Capitalized improvements		—			47
Valuation adjustments		(420	)		—
Valuation reductions from sales		193			—
Sales		(3,678	)		(109	)
Ending balance	$	725		$	157

Activity in the valuation allowance is as follows:

	*At and For the Years Ended December 31,*
	*2021*			*2020*
Beginning balance	$	—		$	—
Additions charged to expense		420			—
Reductions from sales		(193	)		—
Ending balance	$	227		$	—

At December 31, 2021 and 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. At December 31, 2021, other foreclosed assets consisted of non real estate collateral repossessed related to a previously classified Chicago area commercial loan. At 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.