REAL ESTATE OWNED, NET

9 Months Ended

Sep. 30, 2020

The following table presents the changes in REO for the three and nine months ended September 30, 2020 and 2019 (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Balance, beginning of the period	$	2,400	$	2,513	$	814	$	2,611
Additions from loan foreclosures	—		48		1,588		109


Proceeds from dispositions of REO	(707)		(2,333)		(805)		(2,483)
Gain (loss) on sale of REO	120		—		216		(9)
Valuation adjustments in the period	(18)		—		(18)		—
Balance, end of the period	$	1,795	$	228	$	1,795	$	228

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 $725,000 of foreclosed one- to four-family residential real estate properties held as REO at September 30, 2020 and $48,000 at December 31, 2019. The recorded investment in one- to four-family residential loans in the process of foreclosure was $403,000 at September 30, 2020 compared with $1.5 million at December 31, 2019.