Investments in Foreclosed Real Estate and Distressed Loans

Investments in REO and distressed loans consisted of the following at October 31, 2015 and 2014 (amounts in thousands):



	2015		2014
Investment in REO	$	50,233	$	69,799
Investment in distressed loans	1,497		4,001
	$	51,730	$	73,800

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

Investments in REO

The following table presents the activity in REO at October 31, 2015, 2014, and 2013 (amounts in thousands):



	2015			2014			2013
Balance, beginning of period	$	69,799		$	72,972		$	58,353
Additions	2,833			22,220			23,470
Sales	(21,293		)	(23,696		)	(7,842		)
Impairments	(767		)	(1,358		)	(505		)
Depreciation	(339		)	(339		)	(504		)
Balance, end of period	$	50,233		$	69,799		$	72,972

As of October 31, 2015, approximately $1.7 million and $48.5 million of REO were classified as held-for-sale and held-and-used, respectively. As of October 31, 2014, approximately $11.7 million and $58.1 million of REO were classified as held-for-sale and held-and-used, respectively. For the years ended October 31, 2015, 2014, and 2013, we recorded gains of $0.2 million, $4.5 million, and $3.6 million from acquisitions of REO through foreclosure, respectively.

Investments in Distressed Loans

Prior to October 31, 2014, we had investments in distressed loans where it is probable that we would collect less than the contractual amounts due under the terms of the loan based, at least in part, on the assessment of the credit quality of the borrowers. These loans were accounted for under ASC 310-30, “Receivable,” (“ASC 310-30”). Under ASC 310-30, provided we did not have the intention to utilize real estate secured by the loans for use in our operations or to significantly improve the collateral for resale, the amount by which the future cash flows expected to be collected at the acquisition date exceeded the estimated fair value of the loan, or accretable yield, was recognized in “Other income – net” over the estimated remaining life of the loan using a level yield methodology. The difference between the contractually required payments of the loan as of the acquisition date and the total cash flows expected to be collected, or nonaccretable difference, was not recognized.

The accretable yield activity for investments in distressed loans accounted for under ASC 310-30 for the years ended October 31, 2014 and 2013, was as follows (amounts in thousands):



	2014			2013
Balance, beginning of period	$	6,606		$	17,196
Additions	554			1,654
Deletions	(6,204		)	(7,728		)
Accretion	(956		)	(4,516		)
Balance, end of period	$	—		$	6,606

Additions primarily represented the reclassification to accretable yield from nonaccretable yield and the impact of impairments. Deletions primarily represented loan dispositions, which include foreclosure of the underlying collateral and resulting removal of the loans from the accretable yield portfolios, and reclassifications from accretable yield to nonaccretable yield. The reclassifications between accretable and nonaccretable yield and the accretion of interest income are based on various estimates regarding loan performance and the value of the underlying real estate securing the loans. As of October 31, 2014, we have no distressed loans where interest is accreting.

General

Our earnings from Gibraltar’s operations, excluding our investment in the Structured Asset Joint Venture, are included in “Other income – net” in the Consolidated Statements of Operations and Comprehensive Income. In the years ended October 31, 2015, 2014, and 2013, we recognized $10.2 million, $14.4 million, and $10.2 million, of earnings (excluding earnings from our investment in the Structured Asset Joint Venture), respectively, from Gibraltar’s operations.