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REAL ESTATE OWNED, NET
 9 Months Ended
Sep. 30, 2013
Real Estate [Abstract]  
REAL ESTATE OWNED, NET
REAL ESTATE OWNED, NET

The following table presents the changes in REO, net of valuation adjustments, for the three and nine months ended September 30, 2013 and 2012 (in thousands):
 
Three Months Ended
September 30
 
Nine Months Ended
September 30
 
2013

 
2012

 
2013

 
2012

Balance, beginning of the period
$
6,714

 
$
25,816

 
$
15,778

 
$
42,965

Additions from loan foreclosures
963

 
3,111

 
2,467

 
11,598

Additions from capitalized costs
297

 
97

 
344

 
231

Dispositions of REO
(3,970
)
 
(10,368
)
 
(15,758
)
 
(33,608
)
Gain on sale of REO
1,005

 
2,955

 
2,477

 
3,621

Valuation adjustments in the period
(191
)
 
(1,255
)
 
(490
)
 
(4,451
)
Balance, end of the period
$
4,818

 
$
20,356

 
$
4,818

 
$
20,356



The following table shows REO by type and geographic location by state as of September 30, 2013 (in thousands):
 
Washington
 
Oregon
 
Idaho
 
Total
Commercial real estate
$
—

 
$
—

 
$
199

 
$
199

Land development—residential
1,179

 
1,819

 
69

 
3,067

One- to four-family real estate
1,197

 
355

 
—

 
1,552

Balance, end of period
$
2,376

 
$
2,174

 
$
268

 
$
4,818



REO properties are recorded at the lower of the estimated fair value of the property, less expected selling costs, or the carrying value of the defaulted loan, 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.