eTrade 2011 Annual Report Download - page 71
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Loan losses are recognized when it is probable that a loss has been incurred. The charge-off policy for both
one- to four-family and home equity loans is to assess the value of the property when the loan has been
delinquent for 180 days or is in bankruptcy, regardless of whether or not the property is in foreclosure, and
charge-off the amount of the loan balance in excess of the estimated current value of the underlying property less
estimated costs to sell. Closed-end consumer loans are charged-off when the loan has been 120 days delinquent
or when it is determined that collection is not probable.
Net charge-offs for the year ended December 31, 2011 compared to 2010 decreased by $281.9 million. Net
charge-offs declined for two consecutive years, down 54% from its peak of $1.4 billion for the year ended
December 31, 2009. The overall decrease was due primarily to lower delinquencies in both one- to four- family
and home equity loans. We believe net charge-offs will continue to decline in future periods as a result of the
downward trend in special mention delinquencies, which is discussed below. However, because the timing and
magnitude of the improvement is affected by many factors, we anticipate variability from quarter to quarter while
continuing to see a downward trend over the long term. The following graph illustrates the net charge-offs by
quarter:
Net charge-offs Trend
$0
$50
$100
$150
$200
$250
$300
$350
Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11
Quarter ended
Net charge-offs (dollars in millions)
One- to four-family Home equity Consumer and other Total
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