eTrade 2005 Annual Report Download - page 63

Table of Contents
An analysis of changes in certain balance sheet components follows:
Loans Receivable, net
Loans receivable, net are summarized as follows (dollars in thousands):
December31,
Variance
2005
2004
2005vs.2004
Real estate loans:
One- to four-family
$
7,091,664
$
3,669,594
93
%
HELOC, second mortgage and other
8,106,820
3,618,740
124
%
Consumer and other loans:
RV
2,692,055
2,542,645
6
%
Marine
752,645
720,513
4
%
Automobile
235,388
583,354
(60
)
%
Credit card
188,600
203,169
(7
)
%
Other
97,436
19,493
400
%
Unamortized premiums, net
323,573
195,928
65
%
Allowance for loan losses
(63,286
)
(47,681
)
(33
)
%
Total loans receivable, net
$
19,424,895
$
11,505,755
69
%
Loans receivable, net represented 44% of total assets at December31, 2005 and 37% of total assets at December31, 2004. The increase
of $7.9 billion to $19.4 billion at December31, 2005 was due to a targeted effort to grow our one- to four-family and HELOC portfolios.
These two portfolios now represent 79% of total loans receivable, net, up from 64% at December31, 2004. We anticipate that our
mortgage and HELOC portfolios will increase in the next year as we focus on these product lines; enhance our credit risk profile and
focus on cross sell opportunities. We anticipate that RV and marine loan balances will decline over time due to the sale of the
Consumer Finance Corporation and the continued decline in automobile loans due to the exit of the automobile origination business in
2004. Other loans include commercial loans which have increased during 2005. The increase in unamortized premiums is volume-related
and represents purchase premiums, net on real estate loans.
Allowance for Loan Losses
The allowance for loan losses is management’s estimate of credit losses inherent in our loan portfolio as of the balance sheet date. The
estimate of the allowance for loan losses is based on a variety of factors, including the composition and quality of the portfolio,
delinquency levels and trends, expected losses for the next twelve months, current and historical charge-off and loss experience,
current industry charge-off and loss experience, the condition of the real estate market and geographic concentrations within the loan
portfolio, the interest rate climate as it affects adjustable-rate loans and general economic conditions. Determining the adequacy of the
allowance is complex and requires judgment by management about the effect of matters that are inherently uncertain. Subsequent
evaluations of the loan portfolio, in light of the factors then prevailing, may result in significant changes in the allowance for loan
losses in future periods. In general, the allowance for loan losses should be at least equal to twelve months of projected losses for all
loan types. We believe this level is representative of probable losses inherent in the loan portfolio at the balance sheet date.
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