eTrade 2006 Annual Report Download - page 105

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The Company actively sells loans including loans that it originally purchased from third parties. A summary
of these activities is presented below (dollars in thousands):
Year Ended December 31,
2006 2005 2004
Loans sold:
Originated $ 907,524 $2,728,094 $4,339,901
Purchased 590,211 1,028,747 2,395,886
Total loans sold $1,497,735 $3,756,841 $6,735,787
Gain on sales of loans:
Originated $ 12,018 $ 54,847 $ 82,716
Purchased (6,775) (1,208) (3,447)
Total gain on sales of loans, net $ 5,243 $ 53,639 $ 79,269
Activity in the allowance for loan losses is summarized as follows (dollars in thousands):
Year Ended December 31,
2006 2005 2004
Allowance for loan losses, beginning of period $ 63,286 $ 47,681 $ 37,847
Provision for loan losses 44,970 54,016 38,121
Acquired through acquisitions — — 1,547
Charge-offs (61,843) (56,847) (50,341)
Recoveries 21,215 18,436 20,507
Net charge-offs (40,628) (38,411) (29,834)
Allowance for loan losses, end of period $ 67,628 $ 63,286 $ 47,681
During 2006, the allowance for loan losses increased by $4.3 million. The allowance increased
approximately $8.5 million due to growth in the real estate loan portfolio of $7.5 billion during 2006. This
increase was offset by a decrease in consumer loan-related losses of $4.2 million, more specifically in the
recreational vehicle and credit card loan portfolios.
The $2.2 million increase in net charge-offs in 2006 was primarily due to higher net charge-offs on the real
estate loan portfolio of $10.9 million, offset by a decline in charge-offs for credit card loans of $6.3 million and
other consumer loans of $2.4 million. The increase in real estate charge-offs was due the growth in real estate
loans receivable, net and specific events affecting customer behavior during the period and not indicative of a
decline in credit quality. The decrease of credit card charge-offs was due to decline in the size of credit card
portfolio during 2006.
We classify loans as nonperforming when full and timely collection of interest or principal becomes
uncertain or when they are 90 days past due. The following table provides the breakout of nonperforming loans
by type (dollars in thousands):
December 31,
2006 2005
First mortgage loans, secured by one- to four-family residences $34,219 $18,067
HELOC and HEIL 32,216 9,568
Credit card 3,795 2,858
Recreational vehicle 2,579 2,826
Other 2,532 1,335
Total nonperforming loans $75,341 $34,654
102