eTrade 2004 Annual Report Download - page 20

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Table of Contents
Index to Financial Statements
Nonperforming Loans —We classify loans as nonperforming whenever principal or interest payments are more than 90 days past due or
when we have reason to believe the loan is uncollectible. When a loan is classified as nonperforming, we: 1) stop recognizing interest income
on the loan; 2) reverse any interest we accrued during the initial 90-day period; and 3) discontinue the accretion of deferred loan fees.
Whenever we receive a payment from a nonperforming loan, we apply the full payment to principal if we continue to doubt that both principal
and interest will be collected in full. We only recognize payments as interest income when the principal and interest on the loan is expected to
be collected in full or when the principal has been fully repaid.
Repossessed Assets —When we acquire the collateral underlying uncollectible loans, we record this Real Estate Owned (“REO”) and
other repossessed assets at estimated fair value, less estimated selling costs. We use appraisals and other appropriate valuation methods to
estimate the fair value of these assets. If the net estimated fair value of the collateral is less than the loan balance, the difference is charged to
the allowance for loan losses. We perform periodic valuations and establish a valuation allowance for REO and other repossessed assets
through a charge to income, if the carrying value of a property exceeds its estimated fair value less estimated selling costs. At December 31,
2004, the estimated fair value of REO and other repossessed assets totaled $1.8 million of one- to four-family real estate loans, $1.9 million of
RV loans, $1.1 million of marine loans and $0.6 million of automobile loans.
The following table presents information about our nonperforming assets (in thousands):
During 2004, our nonperforming assets, net decreased by $6.0 million, or 19%, primarily because of the continued seasoning of our real
estate loans, partially offset by an increase in the average balance of real estate loans outstanding in 2004.
14
December 31,
September 30,
2004
2003
2002
2001
2000
Loans:
Real estate loans:
One
-
to four
-
family
$
11,029
$
18,094
$
22,497
$
20,595
$
11,391
Home equity lines of credit and second mortgage
2,755
269
81
—
—
Other
—
—
—
—
657
Total real estate loans
13,784
18,363
22,578
20,595
12,048
Consumer and other loans:
Recreational vehicle
1,416
1,399
1,486
—
—
Marine
908
1,067
94
—
—
Automobile
826
1,602
2,277
91
—
Credit card
2,999
2,147
—
—
—
Other
22
16
53
—
—
Total consumer and other loans
6,171
6,231
3,910
91
—
Total nonperforming loans, net
19,955
24,594
26,488
20,686
12,048
REO and other repossessed assets, net
5,367
6,690
6,723
3,328
850
Total nonperforming assets, net
$
25,322
$
31,284
$
33,211
$
24,014
$
12,898
Total nonperforming assets, net, as a percentage of total bank
assets
0.10
%
0.15
%
0.19
%
0.18
%
0.14
%
Total allowance for loan losses as a percentage of total
nonperforming loans, net
238.94
%
153.89
%
104.45
%
96.07
%
90.72
%