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Note 5 - Foreclosed Assets

6 Months Ended

Jun. 30, 2022

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.

	*June 30, 2022*							*December 31, 2021*
	*Balance*		*Valuation Allowance*			*Net Balance*		*Balance*		*Valuation Allowance*			*Net Balance*

Foreclosed assets - Nonresidential real estate OREO	$	274	$	—		$	274	$	—	$	—		$	—
Other foreclosed assets		768		(200	)		568		952		(227	)		725
	$	1,042	$	(200	)	$	842	$	952	$	(227	)	$	725

The following represents the roll forward of foreclosed assets:

	*For the Three Months Ended*						*For the Six Months Ended*
	*June 30,*						*June 30,*
	*2022*			*2021*			*2022*			*2021*
Beginning balance	$	968		$	4,630		$	725		$	157
New foreclosed assets		45			—			319			4,473
Valuation adjustments		—			(281	)		—			(281	)
Valuation reductions from sales		19			—			27			—
Sales		(190	)		(2,647	)		(229	)		(2,647	)
Ending balance	$	842		$	1,702		$	842		$	1,702

Activity in the valuation allowance is as follows:

	*For the Three Months Ended*					*For the Six Months Ended*
	*June 30,*					*June 30,*
	*2022*			*2021*		*2022*			*2021*
Beginning balance	$	219		$	—	$	227		$	—
Additions charged to expense		—			281		—			281
Reductions from sales		(19	)		—		(27	)		—
Ending balance	$	200		$	281	$	200		$	281

The recorded investment of consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings were in process was $73,000 at June 30, 2022 and December 31, 2021. At June 30, 2022, other foreclosed assets consisted of non real estate collateral repossessed related to a previously classified Chicago area commercial loan and a repossessed vehicle. At June 30, 2022, the balance of OREO includes no foreclosed residential real estate properties recorded as a result of obtaining physical possession of the property without title.