Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from Paul Miller. Mr. Miller, your line is open.
Bob Ramsey - Friedman, Billings, Ramsey & Company
Thank you. This is actually Bob Ramsey. The question I have got for you, you will talk about $745 million of losses on your loan book over the next four quarters, but I also see at the end you have got your projections, you are looking for a provision expense, even if you sort of repeat that fourth quarter we are closer to $300 million. So there is a pretty significant difference between the two. You are you going to be drawing down the allowance by that amount?
Michael Perry
Yeah, I mean I think, clearly you build-up reserves in advance of having the credit losses, so at some point -- so as we kind of have those losses to run through we won’t need the reserves anymore as our NPAs decline.
Bob Ramsey - Friedman, Billings, Ramsey & Company
And you cut that over the next four quarters?
Michael Perry
Absolutely. I mean we really got those reserves ahead of the actual losses and that’s what they are there for. We don’t normally – wouldn’t normally be carrying $2.7 billion of credit reserves on our balance sheet.
Bob Ramsey - Friedman, Billings, Ramsey & Company
Okay and then if I could ask a quick follow-up question on the DSPP program that you all have, how much of a discount are you issuing those shares out?
Michael Perry
Its 2%
Bob Ramsey - Friedman, Billings, Ramsey & Company
2% okay, and then you said $199 million is that in quarters two through four of this year or did that include the first quarter?
Michael Perry
That excludes the first quarter. That’s a $199 million for the remaining three quarters.
Operator
Your next question comes from Frederick Cannon from KBW, your line is open.
Frederick Cannon - Keefe, Bruyette & Woods
Thanks. I noticed on page 82 of the Q that was about 84% of the mark-to-market assets of level 3 which imply to use internal models and I was wondering Mike you had suggested that the mark-to-market assets were fairly severe marks and different from the your expectation that you are using your own internal models to determine that, I was wondering if you could kind of explain the differences?
Michael Perry
Yes, I mean we’re not that’s one of the things that we’re using. If we were using our own internal models strictly I wouldn’t have taken any of that loss. That was my point on that one page where I showed that they actual performance of that book, which was page 15 right. The key expected cumulative lifetime losses actually decline and interest rates came down. If we were using our internal models we would have written securities up, okay. Why, they are classifieds as level three, is there is not an absorbable market out there. Were you have ARMs-length sale accruing right. If you look at the Alt-A and the Jombo marketplace, what you see largely is distress sales. I haven’t really seen one other then the one that we did on the April 1st, where we sold the AAA super senior to the Federal Home Loan Bank of Seattle at a 99 and three quarters price. I haven’t seen too many ARMs-length sales I think, you little get it and most of the sales have been guys who were forced to sell because of margin causing where they’ve got liquidated out, whether that’s Thornburg or Peloton or Coralville or some of those guys or an entity like UBS to have sold because there, they are basically saying, we want to be able to say to the market environment we are out of U.S. mortgage-backed securities that loss -- that we’ve taken that loss and its behind us. So, I think that’s a distress sale tier. So, I think what we saw in the marketplace out there was in terms of -- and we also looked at footnote disclosures and other disclosures of financial institutions who released. So we use the combination of what other financial instructions disclosed. We used a combination of the Federal Home Loan Bank trade that we did, we use as many of those inputs as we possibly could, but I would say if we were just using our own our internal models we will return those securities up, in my opinion because that would have been in the cash flow model. That would have - that would have come out of that marketplace. We saw prices from anywhere -- distress sale prices from anywhere from like 77 to 96, right and our portfolio I think was 899, as where we came out.
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