Investments in Distressed Loans and Foreclosed Real Estate

Investments in distressed loans and foreclosed real estate (“REO”) consisted of the following as of the dates indicated (amounts in thousands):



	January 31, 2015		October 31, 2014
Investment in distressed loans	$	4,001	$	4,001
Investment in REO	66,934		69,799
	$	70,935	$	73,800

In prior periods, we presented our investments in distressed loans and REO in two separate line items on our Condensed Consolidated Balance Sheets. Our Condensed Consolidated Balance Sheet at October 31, 2014 has been reclassified to conform to the fiscal 2015 presentation.

Investments in Distressed Loans

Our investments in distressed loans represent non-performing loans classified as nonaccrual in accordance with ASC 310-10, “Receivable.” Interest income is not recognized on nonaccrual loans. When a loan is classified as nonaccrual, any subsequent cash receipt is accounted for using the cost recovery method.

Investments in REO

The table below provides, for the periods indicated, the activity in REO (amounts in thousands):



	Three months ended January 31,
	2015			2014
Balance, beginning of period	$	69,799		$	72,972
Additions	1,676			7,165
Sales	(4,286		)	(808		)
Impairments	(169		)
Depreciation	(86		)	(62		)
Balance, end of period	$	66,934		$	79,267

As of January 31, 2015, approximately $10.0 million and $56.9 million of REO was classified as held-for-sale and held-and-used, respectively. As of January 31, 2014, approximately $18.9 million and $60.4 million of REO was classified as held-for-sale and held-and-used, respectively. For the three-month periods ended January 31, 2015 and 2014, we recorded gains of $0.2 million and $1.5 million, respectively, from acquisitions of REO through foreclosure.

General

Our earnings from Gibraltar’s operations, excluding our investment in the Structured Asset Joint Venture, are included in “Other income - net” in the Condensed Consolidated Statements of Operations and Comprehensive Income. In the three-month periods ended January 31, 2015 and 2014, we recognized $0.8 million and $4.3 million of earnings (excluding earnings from our investment in the Structured Asset Joint Venture), respectively, from Gibraltar’s operations.