Question-and-Answer Session
Operator
Thank you. (Operator Instructions). And our first question is from the line of Ee Lin See with Sirios Capital. Please go ahead.
Ee Lin See - Sirios Capital Management
Hi, thanks for taking my call. Could you just explain how you decide to have reserves as a percentage of NPLs of 28% for the fourth quarter compared to higher number towards 33.6% in the third quarter? Thank you.
Jay Sugarman
Sure. Remember the process for creating reserves is literally a asset-by-asset review by literally 100 people in the firm. So every asset is given a specific reserve based on all material information coming from all parts of the firm; risk management, investment, legal et cetera. There is no formulaic approach to specific reserves. So that number can jump around pretty materially.
We have NPLs that are on NPL simply because they couldn't repay maturity. Doesn't necessarily mean, there was going to be a loss. So again, it is not a formula. And I think you probably be down the wrong track if you're just looking at a simple percentage every quarter and trying to put those together. What we will tell you is that every single asset get looked at and every specific reserve is based on all facts available that moment in time.
Ee Lin See - Sirios Capital Management
I see. So what the change result of new NPLs expecting to have lower loss or was it a revaluation of pervious NPLs that resulted in this change?
Catherine Rice
It was actually a combination. And I think what Jay is referencing is probably the mix of assets that went NPL this quarter, may have been a few more assets that as he is referencing were really maturity defaults, where the borrower was not able to find an additional lender to refinance the loans. But we don't see although we are impaired in anyway with respect to where our loan basis is. But conversely, we also look at all of the NPLs and REO on the book each quarter and there were instances in this quarter where we bumped up reserve on prior NPLs, NPLs from prior quarters to reflect what we thought was currently happening to that asset in the market.
Ee Lin See - Sirios Capital Management
Okay. Thank you very much.
Jay Sugarman
John, next question?
Operator: And that's from the line of Shubhomoy Mukherjee with Barclays capital. Please go ahead.
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