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Note 5 - Foreclosed Assets

9 Months Ended

Sep. 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’ debts are initially recorded at fair value of the asset less estimated costs to sell.

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

Foreclosed assets - Nonresidential real estate OREO	$	274	$	(31	)	$	243	$	—	$	—		$	—
Other foreclosed assets		324		(43	)		281		952		(227	)		725
	$	598	$	(74	)	$	524	$	952	$	(227	)	$	725

The following represents the roll forward of foreclosed assets:

	*For the Three Months Ended*						*For the Nine Months Ended*
	*September 30,*						*September 30,*
	*2022*			*2021*			*2022*			*2021*
Beginning balance	$	842		$	1,702		$	725		$	157
New foreclosed assets		—			—			319			4,473
Valuation adjustments		(31	)		(124	)		(31	)		(405	)
Valuation reductions from sales		157			69			184			69
Sales		(444	)		(598	)		(673	)		(3,245	)
Ending balance	$	524		$	1,049		$	524		$	1,049

Activity in the valuation allowance is as follows:

	*For the Three Months Ended*						*For the Nine Months Ended*
	*September 30,*						*September 30,*
	*2022*			*2021*			*2022*			*2021*
Beginning balance	$	200		$	281		$	227		$	—
Additions charged to expense		31			124			31			405
Reductions from sales		(157	)		(69	)		(184	)		(69	)
Ending balance	$	74		$	336		$	74		$	336

There were no consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings were in process at September 30, 2022 compared to $73,000 at December 31, 2021. At September 30, 2022, other foreclosed assets consisted of non-real estate collateral repossessed in connection with a previously classified Chicago area commercial loan. At September 30, 2022, the balance of OREO included no foreclosed residential real estate properties recorded as a result of obtaining physical possession of the property without title.