eTrade 2011 Annual Report Download - page 40
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Net Impairment
We recognized $14.9 million of net impairment during the year ended December 31, 2011, on certain
securities in our non-agency CMO portfolio due to continued deterioration in the expected credit performance of
the underlying loans in those specific securities. The gross other-than-temporary impairment (“OTTI”) and the
noncredit portion of OTTI, which was or had been previously recorded through other comprehensive income, are
shown in the table below (dollars in millions):
Year Ended
December 31,
2011 2010
Other-than-temporary impairment (“OTTI”) $ (9.2) $(41.5)
Less: noncredit portion of OTTI recognized into (out of)other comprehensive
income (loss) (before tax) (5.7) 3.8
Net impairment $(14.9) $(37.7)
Other Revenues
Other revenues decreased 15% to $39.3 million for the year ended December 31, 2011 compared to 2010.
The decrease was due primarily to the gain on sale of approximately $1 billion in savings accounts to Discover
Financial Services in the first quarter of 2010, which increased other revenues during the year ended
December 31, 2010.
Provision for Loan Losses
Provision for loan losses decreased 43% to $440.6 million for the year ended December 31, 2011 compared
to 2010. The decrease in provision for loan losses was driven by improving credit trends and loan portfolio
run-off, as evidenced by the lower levels of delinquent loans in the one- to four-family and home equity loan
portfolios. The provision for loan losses has declined for three consecutive years, down 72% from its peak of
$1.6 billion for the year ended December 31, 2008. We expect provision for loan losses to continue to decline in
2012 compared to 2011, although it is subject to variability from quarter to quarter.
As we transition from the OTS to the OCC, we are evaluating programs and practices that were designed in
accordance with guidance from the OTS. We are working to align certain policies and procedures to the guidance
from the OCC and have suspended certain loan modification programs that will require changes. We increased
the qualitative reserve in 2011 to reflect additional estimated losses during the period of reduced activity in our
modification programs, as well as uncertainty around certain loans modified under our previous programs. Once
the evaluation of the existing programs and practices is complete and any necessary changes have been
implemented, we will re-assess the overall qualitative reserve.
37