CHFC 2017 Annual Report

Other Real Estate and Repossessed Assets Other real estate and repossessed assets are components of nonperforming assets, included in "Interest receivable and other assets" on our Consolidated Statements of Financial Position. These include other real estate (ORE), comprised of residential and commercial real estate and land development properties acquired through foreclosure or by acceptance of a deed in lieu of foreclosure, and repossessed assets, comprised of other personal and commercial assets. ORE totaled $8.2 million at December 31, 2017, a decrease of $8.6 million, or 51.3%, from $16.8 million at December 31, 2016. The decrease in ORE during 2017 was primarily attributable to ORE sales. Repossessed assets increased to $0.6 million at December 31, 2017, compared to $0.4 million at December 31, 2016. The following schedule provides the composition of ORE at December 31, 2017 and 2016: December 31, (Dollars in thousands) 2017 2016 Composition of ORE: Vacant land $ 2,064 $ 5,473 Commercial real estate properties 3,363 6,812 Residential real estate properties 2,755 4,527 Total ORE $ 8,182 $ 16,812 The following schedule summarizes ORE activity: Years Ended December 31, (Dollars in thousands) 2017 2016 2015 Balance at beginning of year $ 16,812 $ 9,716 $ 13,953 Additions attributable to acquisitions (at fair value) — 13,227 440 Additions attributable to foreclosures 6,905 9,938 6,957 Write-downs to fair value (1,640) (636) (1,421) Net payments received (1,064) (1,560) (45) Dispositions (12,831) (13,873) (10,168) Balance at end of year $ 8,182 $ 16,812 $ 9,716 ORE is carried at the lower of cost or fair value less estimated cost to sell. We had $3.7 million in ORE at December 31, 2017 that had been held in excess of one year, of which $1.3 million had been held in excess of three years. We had $10.0 million of nonperforming loans that were in the process of foreclosure at December 31, 2017. All of our ORE properties have been written down to fair value through a charge-off against the allowance for loan losses at the time the loan was transferred to ORE, through a subsequent write-down, recorded as an operating expense, to recognize a further market value decline of the property after the initial transfer date, or due to recording at fair value as a result of acquisition transactions. Accordingly, at December 31, 2017, the carrying value of ORE of $8.2 million was reflective of $6.4 million in charge-offs, write-downs and acquisition-related fair value adjustments. During 2017, we sold 249 ORE properties for net proceeds of $15.9 million. On an average basis, the net proceeds from these sales represented 121% of the carrying value of the property at the time of sale, with the net proceeds representing 81% of the remaining contractual loan balance at the time these loans were classified as nonperforming. 58 Allowance for Loan Losses The allowance for loan losses ("allowance") provides for probable losses in the originated loan portfolio that have been identified for probable losses believed to be inherent in the loan portfolio.