eTrade 2002 Annual Report Download - page 17
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Table of Contents
Index to Financial Statements
Bank’ s decision to shift a portion of its assets into consumer loans which are higher-yielding asset classes that have higher risk characteristics.
If our non-accruing loans as of December 31, 2002 had been performing in accordance with their terms, we would have recorded additional
interest income of approximately $1.4 million in fiscal 2002. In fiscal 2002, $0.6million of interest was recognized on non-accrual loans.
Special Mention Loans .In certain situations, a borrower’ s past credit history may cast doubt on the borrower’ s ability to repay under the loan’ s
contractual terms, whether or not the loan is delinquent. Such loans, classified as “special mention” loans, continue to accrue interest and
remain as a component of the loans receivable balance. These loans represented $31.0 million of the total loan portfolio at December 31, 2002,
and are actively monitored.
Allowance for Loan Losses. As an investor in mortgage and consumer loans, we recognize that we will experience credit losses. We believe the
risk of credit loss varies based on a variety of factors including the following:
•
type of loan;
•
creditworthiness of the borrower over the term of the loan;
•
general economic conditions; and
•
in the case of a secured loan, the type and quality of the loan’ s security and the loan-to-value ratio.
Our policy is to maintain an adequate allowance for loan losses based on a variety of factors including the following:
•
our historical loan loss experience;
•
regular reviews of delinquencies and loan portfolio quality;
•
the industry’ s historical loan loss experience for similar asset types; and
•
evaluation of economic conditions.
We increase our allowance for loan losses when we estimate that losses have been incurred by charging provisions for probable loan losses
against income. Charge-offs reduce the allowance when losses are recognized.
In establishing the allowance for loan losses, we record specific allowances for probable losses that we have identified for commercial and
certain large dollar real estate and consumer loans specifically reviewed for impairment. We provide a general allowance for estimated
expected losses for real estate and consumer loans not specifically reviewed. The allowances established by management are subject to review
2003. EDGAR Online, Inc.