eTrade 2008 Annual Report Download - page 64

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Net charge-offs for the year ended December 31, 2008 compared to the same period in 2007 increased by
$811.7 million. The overall increase was primarily due to higher net charge-offs on home equity loans, which
was driven mainly by the same factors as described above. The continued pressure in the residential real estate
market, specifically home price depreciation combined with tighter mortgage lending guidelines, could lead to a
higher level of charge-offs in future periods. The following graph illustrates the net charge-offs by quarter:
Charge-offs, Net Trend
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
7.00%
8.00%
9.00%
10.00%
Q107 Q207 Q307 Q407 Q108 Q208 Q308 Q408
Quarter ended
Charge-offs, net as a % of average loans
One- to four-family Home equity Consumer and other Total
Nonperforming Assets
We classify loans as nonperforming when they are 90 days past due. The following table shows the
comparative data for nonperforming loans and assets (dollars in thousands):
December 31,
2008 2007 2006 2005 2004
One- to four-family $ 593,075 $181,315 $33,588 $17,393 $ 8,009
Home equity 341,255 229,523 32,216 9,568 2,755
Consumer and other loans:
Recreational vehicle 2,353 2,235 2,579 2,826 1,416
Marine 1,248 1,130 1,439 873 908
Credit card 4,146 3,769 3,795 2,858 2,999
Other 45 470 1,093 462 848
Total consumer and other loans 7,792 7,604 8,906 7,019 6,171
Total nonperforming loans 942,122 418,442 74,710 33,980 16,935
Real estate owned (“REO”) and other repossessed assets, net 108,105 45,895 12,904 6,555 5,367
Total nonperforming assets, net $1,050,227 $464,337 $87,614 $40,535 $22,302
Nonperforming loans receivable as a percentage of gross loans
receivable 3.69% 1.37% 0.28% 0.17% 0.15%
One- to four-family allowance for loan losses as a percentage of one-
to four-family nonperforming loans receivable 31.22% 10.39% 23.10% 27.93% 35.11%
Home equity allowance for loan losses as a percentage of home
equity nonperforming loans receivable 244.34% 200.05% 98.31%272.25%551.11%
Consumer and other allowance for loan losses as a percentage of
consumer and other nonperforming loans receivable 790.72% 396.71%316.61%461.31%481.06%
Total allowance for loan losses as a percentage of total
nonperforming loans receivable 114.70% 121.44% 90.52%186.24%281.55%
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