CHFC 2018 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 $5.8 million at December 31, 2018, a decrease of $2.4 million, or 28.7%, from $8.2 million at December 31, 2017. The decrease in ORE during 2018 was primarily attributable to ORE sales. Repossessed assets decreased to $0.4 million at December 31, 2018, compared to $0.6 million at December 31, 2017. The following schedule provides the composition of ORE at December 31, 2018 and 2017: December 31, (Dollars in thousands) 2018 2017 Composition of ORE: Vacant land $ 305 $ 2,064 Commercial real estate properties 2,465 3,363 Residential real estate properties 3,062 2,755 Total ORE $ 5,832 $ 8,182 The following schedule summarizes ORE activity for the years ended December 31, 2018, 2017, and 2016: Years Ended December 31, (Dollars in thousands) 2018 2017 2016 Balance at beginning of year $ 8,182 $ 16,812 $ 9,716 Transfers based on adoption of ASU 2014-09 (1) (189) — — Additions attributable to acquisitions (at fair value) — — 13,227 Additions (2) 7,179 6,905 9,938 Write-downs (1,266) (1,640) (636) Net payments received (249) (1,064) (1,560) Dispositions (7,825) (12,831) (13,873) Balance at end of year $ 5,832 $ 8,182 $ 16,812 (1) In accordance with the updates to Topic 606 adopted by us effective January 1, 2018, $1.1 million of other real estate owned sold with seller financing were reclassified on the Classified Statements of Financial Position to loans and the related $0.9 million of deferred gains were recognized in income as an adjustment to opening retained earnings. Refer to Note 1, Summary of Significant Accounting Policies to our Consolidated Financial Statements for further information. (2) Includes loans transferred to other real estate owned. Our ORE is carried at the lower of cost or fair value less estimated cost to sell. We had $0.7 million in ORE at December 31, 2018 that had been held in excess of one year, of which $0.1 million had been held in excess of three years. We had $10.7 million of nonperforming loans that were in the process of foreclosure at December 31, 2018. 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, 2018, the carrying value of ORE of $5.8 million was reflective of $1.1 million in charge-offs, write-downs and acquisition-related fair value adjustments. During 2018, we sold 119 ORE properties for net proceeds of $9.2 million. On an average basis, the net proceeds from these sales represented 116% of the carrying value of the property at the time of sale, with the net proceeds representing 62% of the remaining contractual loan balance at the time these loans were classified as nonperforming. 62