eTrade 2002 Annual Report Download - page 57

Table of Contents
Index to Financial Statements
Activity in the allowance for loan losses is summarized as follows (in thousands):
YearEnded December31, Three MonthsEnded December 31,
2000 YearEnded September30, 2000
2002 2001
Allowance for loan losses, beginning of period $ 19,874 $ 12,565 $ 10,930 $ 7,161
Provision for loan losses 14,664 7,476 1,647 4,003
Acquired through acquisitions 14,428 4,699 — —
Charge-offs, net (21,300 ) (4,866 ) (12 ) (234 )
Allowance for loan losses, end of period $ 27,666 $ 19,874 $ 12,565 $ 10,930
The following table allocates the allowance for loan losses by major loan category. This allocation does not necessarily restrict the use of the
allowance from absorbing losses in other categories (dollars in thousands):
Consumer(1) Real Estate and HomeEquity(2) Total
Allowance Allowance
as % of
consumer
loansheld-for-
investment
Allowance Allowance
as% of
realestate
loansheld-for-
investment
Allowance Allowance
as % of
total loans-held-for-investment
December 31,
2002
$ 23,472 0.68 % $ 4,194 0.21 % $ 27,666 0.50 %
December 31,
2001
$ 11,001 0.66 % $ 8,873 0.19 % $ 19,874 0.31 %
(1) Primarily includes automobiles, RVs and marine loans.
(2) Primarily includes one-to-four family mortgage and home equity loans.
Provision for loan losses was $14.7 million for fiscal 2002, $7.5 million for fiscal 2001 and $4.0million for fiscal 2000.
Charge-offs —Loans are charged-off when, in the estimation of management, principal and interest due on an impaired loan will not be fully
collected.
Net charge-offs increased from $4.9 million to $21.3 million from fiscal 2001 to fiscal 2002, and from $0.2million to $4.9 million from fiscal
2000 to fiscal 2001. The increase in net charge-offs primarily relates to the seasoning of the consumer loan portfolio, as well as an increase in
the consumer loan balance. Net charge-offs were also higher during fiscal 2002 due to losses related to purchased consumer loans. These losses
were charged against a related $4.7 million component of the allowance acquired with the purchase of certain delinquent consumer loans in the
fourth quarter of fiscal 2001.
The Bank’ s portfolio of held-for-investment loans decreased to $5.6 billion at December 31, 2002 from $6.4billion at December 31, 2001,
principally due to a reclassification of $2.6 billion in loans from held-for-investment to held-for-sale in anticipation of the future sale of these
loans, consistent with our plans to achieve a more diversified loan portfolio through the future purchase and acquisition of consumer loans
including the $1.9billion of consumer loans acquired with the December 2002 acquisition of Ganis Credit Corporation. See Note6 to the
Consolidated Financial Statements.
37
2003. EDGAR Online, Inc.