eTrade 2006 Annual Report Download - page 47

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The following table allocates the allowance for loan losses by loan category (dollars in thousands):
December 31,
2006 2005 2004 2003 2002
Amount %(1) Amount %(1) Amount %(1) Amount %(1) Amount %(1)
Real estate loans:
One- to four- family $ 7,760 41.7% $ 4,858 37.0% $ 2,812 32.3% $ 2,360 28.6% $ 3,343 29.8%
HELOC, HEIL and other 31,671 45.3 26,049 42.3 15,183 31.9 3,302 19.1 851 6.8
Total real estate loans 39,431 87.0 30,907 79.3 17,995 64.2 5,662 47.7 4,194 36.6
Consumer and other loans:
Recreational vehicle 11,077 8.8 13,465 14.1 11,343 22.4 11,386 28.3 9,480 24.8
Marine 3,648 2.5 4,590 3.9 4,116 6.3 2,503 7.9 3,108 8.4
Commercial 1,635 0.9 669 0.5 22 — 4 — — —
Credit card 10,611 0.5 11,714 1.0 9,078 1.8 5,583 1.4 — —
Automobile 534 0.3 1,080 1.2 4,195 5.1 11,876 14.5 8,190 27.4
Other 692 — 861 — 932 0.2 833 0.2 2,694 2.8
Total consumer and other loans 28,197 13.0 32,379 20.7 29,686 35.8 32,185 52.3 23,472 63.4
Total allowance for loan losses $67,628 100.0% $63,286 100.0% $47,681 100.0% $37,847 100.0% $27,666 100.0%
(1) Represents percentage of loans receivable in category to total loans receivable, excluding premium (discount).
Losses are recognized when it is probable that a loss will be incurred. Our policy is to charge-off closed-end
consumer loans when the loan is 120 days delinquent or when we determine that collection is not probable. For
first-lien mortgages, a charge-off is recognized when we foreclose on the property. For revolving loans, our
policy is to charge-off loans when collection is not probable or the loan has been delinquent for 180 days.
During 2006, the allowance for loan losses increased by $4.3 million from the level at December 31, 2005.
The increase was due primarily to growth in the real estate loan portfolio, which increased approximately
$7.5 billion over the same period and is not indicative of a decline in our overall credit standards. The allowance
increased by $8.5 million related to the growth of the real estate portfolio. Offsetting this increase was a decrease
in the allowance for loan losses of $4.2 million related to the decline in the size of the consumer loan portfolio.
Net charge-offs for the year ended 2006 compared to 2005 increased by $2.2 million. The overall increase
was due to higher net charge-offs on real estate loans offset by lower net charge-offs on consumer loans. The
increase in real estate loan charge-offs was due to the growth of the portfolio and the decrease in consumer loan
charge-offs was due primarily to a decline in loan balances as we exited the consumer finance business in 2005.
Annualized net charge-offs as a percentage of average loans receivable, net were 0.18% at December 31, 2006
compared to 0.26% at December 31, 2005.
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