Note 5 – Other Real Estate Owned Details related to the activity in the other real estate owned (“OREO”) portfolio, net of valuation reserve, for the periods presented are itemized in the following table: | | | | | | | | | | | | | | | Three Months Ended | | Six Months Ended | | | June 30, | | June 30, | Other real estate owned | | 2026 | | 2025 | | 2026 | | 2025 | Balance at beginning of period | | $ | 632 | | $ | 2,878 | | $ | 1,427 | | $ | 21,617 | Property additions, net of participation sold | | | - | | | 4,989 | | | 632 | | | 4,989 | Less: | | | | | | | | | | | | | Carrying value of property disposals, net of participation sold | | | - | | | 1,224 | | | 1,427 | | | 19,509 | Period valuation adjustments | | | 10 | | | 157 | | | 10 | | | 611 | Balance at end of period | | $ | 622 | | $ | 6,486 | | $ | 622 | | $ | 6,486 |
Activity in the valuation allowance was as follows: | | | | | | | | | | | | | | | Three Months Ended | | Six Months Ended | | | June 30, | | June 30, | | | 2026 | | 2025 | | 2026 | | 2025 | Balance at beginning of period | | $ | - | | $ | 853 | | $ | 632 | | $ | 1,862 | Provision for valuation reserves | | | 10 | | | 157 | | | 10 | | | 611 | Reductions taken on sales | | | - | | | (448) | | | (632) | | | (1,911) | Balance at end of period | | $ | 10 | | $ | 562 | | $ | 10 | | $ | 562 | | | | | | | | | | | | | |
Expenses related to OREO, net of lease revenue, include: | | | | | | | | | | | | | | | Three Months Ended | | Six Months Ended | | | June 30, | | June 30, | | | 2026 | | 2025 | | 2026 | | 2025 | (Gain) loss on sales, net | | $ | - | | $ | (76) | | $ | (98) | | $ | 160 | Provision for valuation reserves | | | 10 | | | 157 | | | 10 | | | 611 | Operating expense (income) (1) | | | 42 | | | (393) | | | (44) | | | 1,520 | Less: | | | | | | | | | | | | | Lease revenue | | | - | | | (347) | | | 2 | | | 383 | Net OREO expense (income) | | $ | 52 | | $ | 35 | | $ | (134) | | $ | 1,908 |
1 Operating income for the six months ended June 30, 2026 includes a $235,000 net gain on transfer as the fair value less cost to sell on one property transfer exceeded the book value of the loan.
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