REAL ESTATE OWNED, NET

9 Months Ended

Sep. 30, 2019

The following table presents the changes in REO for the three and nine months ended September 30, 2019 and 2018 (in thousands):



	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Balance, beginning of the period	$	2,513		$	473		$	2,611		$	360
Additions from loan foreclosures	48			—			109			502
Proceeds from dispositions of REO	(2,333		)	(90		)	(2,483		)	(385		)
Gain (loss) on sale of REO	—			8			(9		)	74
Valuation adjustments in the period	—			(27		)	—			(187		)
Balance, end of the period	$	228		$	364		$	228		$	364

REO properties are recorded at the estimated fair value of the property, less expected selling costs, establishing a new cost basis. Subsequently, REO properties are carried at the lower of the new cost basis or updated fair market values, based on updated appraisals of the underlying properties, as received. Valuation allowances on the carrying value of REO may be recognized based on updated appraisals or on management’s authorization to reduce the selling price of a property. The Company had $109,000 of foreclosed one- to four-family residential real estate properties held as REO at September 30, 2019 and none at December 31, 2018. The recorded investment in one- to four-family residential loans in the process of foreclosure was $2.3 million at September 30, 2019 compared with $1.2 million at December 31, 2018.