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Note 5 - Foreclosed Assets

9 Months Ended

Sep. 30, 2023

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 credit 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, 2023*							*December 31, 2022*
	*Balance*		*Valuation Allowance*			*Net Balance*		*Balance*		*Valuation Allowance*		*Net Balance*

Other real estate owned	$	472	$	(4	)	$	468	$	472	$	—	$	472
Other foreclosed assets		478		(44	)		434		4		—		4
	$	950	$	(48	)	$	902	$	476	$	—	$	476

The following represents the roll forward of foreclosed assets:

	*For the Three Months Ended*						*For the Nine Months Ended*
	*September 30,*						*September 30,*
	*2023*			*2022*			*2023*			*2022*
Beginning balance	$	950		$	842		$	476		$	725
New foreclosed assets		—			—			921			319
Valuation adjustments		(48	)		(31	)		(48	)		(31	)
Valuation reductions from sales		—			157			—			184
Direct write-downs		—			—			(70	)		—
Sales		—			(444	)		(377	)		(673	)
Ending balance	$	902		$	524		$	902		$	524

Activity in the valuation allowance is as follows:

	*For the Three Months Ended*					*For the Nine Months Ended*
	*September 30,*					*September 30,*
	*2023*		*2022*			*2023*		*2022*
Beginning balance	$	—	$	200		$	—	$	227
Additions charged to expense		48		31			48		31
Reductions from sales		—		(157	)		—		(184	)
Ending balance	$	48	$	74		$	48	$	74

The were no consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings were in process at September 30, 2023 and December 31, 2022. At September 30, 2023, other foreclosed assets consisted of vehicles repossessed in connection with equipment finance leases. At September 30, 2023, the balance of OREO included no foreclosed residential real estate properties recorded as a result of obtaining physical possession of the property without title.