eTrade 2009 Annual Report Download - page 134

The Company classifies loans as nonperforming when they are 90 days past due. The following table
provides the breakout of nonperforming loans by type (dollars in thousands):
December 31,
2009 2008
One- to four-family $1,229,678 $593,075
Home equity 250,576 341,255
Consumer and other 6,725 7,792
Total nonperforming loans $1,486,979 $942,122
If the Company’s nonperforming loans at December 31, 2009 had been performing in accordance with their
terms, the Company would have recorded additional interest income of approximately $108.7 million, $45.9
million and $19.9 million for the years ended December 31, 2009, 2008 and 2007, respectively. During 2009, the
Company recognized $37.2 million in interest on loans that were in nonperforming status at December 31, 2009.
At December 31, 2009 and 2008, there were no commitments to lend additional funds to any of these borrowers.
The Company has a CDS on a portion of its first-lien residential real estate loan portfolio through a
synthetic securitization structure that provides, for a fee, an assumption by a third party of a portion of the credit
risk related to the underlying loans. The CDS provides protection for losses in excess of $4.0 million, but not to
exceed approximately $30.3 million. During the year ended December 31, 2009, the entire $30.3 million in losses
had been recognized and as a result, there is not a related benefit reflected in the allowance for loan losses as of
December 31, 2009. The Company has received approximately $8 million in payments out of the total $30
million benefit as of December 31, 2009. The Company expects to receive the remaining $22 million in 2010.
The Company initiated a loan modification program in 2008 that in its early stages, resulted in an
insignificant number of minor modifications. This loan modification program became more active during 2009.
As part of the program, the Company considers modifications in which it made an economic concession to a
borrower experiencing financial difficulty a TDR. The Company has also modified a number of loans through
traditional collections actions taken in the normal course of servicing delinquent accounts. These actions
typically result in an insignificant delay in the timing of payments; therefore, the Company does not consider
such activities to be economic concessions to the borrowers.
Included in the allowance for loan losses at December 31, 2009 was a specific allowance of $193.6 million
that was established for TDRs. The specific allowance for these individually impaired loans represents the
expected loss over the remaining life of the loan, including the economic concession to the borrower. The
following table shows detailed information related to the Company’s modified loans accounted for as TDRs for
the year ended December 31, 2009 (dollars in thousands):
Recorded
Investment in
TDRs (1)
Specific
Valuation
Allowance
Specific Valuation
Allowance as a % of
TDR Loans
December 31, 2009
One- to four-family $207,581 $ 26,916 13%
Home equity 371,320 166,636 45%
Total(2) $578,901 $193,552 33%
(1) For the year ended December 31, 2009, the average recorded investment in TDR loans was $309.8 million, and the interest income
recognized on these loans was $6.8 million.
(2) At December 31, 2009, $519.2 million of TDRs had an associated specific valuation allowance and $59.7 million did not have an
associated specific valuation allowance as the amount of the loan balance in excess of the estimated current property value less costs to
sell has been charged-off.
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