eTrade 2011 Annual Report Download - page 52

We recognized $14.9 million of net impairment during the year ended December 31, 2011 on certain
securities in the non-agency CMO portfolio due to continued deterioration in the expected credit performance of
the underlying loans in those specific securities. The net impairment included gross OTTI of $9.2 million for the
year ended December 31, 2011. The amount that had been previously recorded through other comprehensive
income and was reclassified into earnings during the year ended December 31, 2011 was $5.7 million.
Provision for loan losses decreased 43% to $440.6 million for the year ended December 31, 2011 compared
to 2010. The decrease in provision for loan losses was driven by improving credit trends and loan portfolio
run-off, as evidenced by the lower levels of delinquent loans in the one- to four- family and home equity loan
portfolios.
Total balance sheet management operating expense increased 11% to $238.4 million for the year ended
December 31, 2011 compared to 2010. The increase in operating expense for the year ended December 31, 2011
was due primarily to increased FDIC insurance premiums as a result of an industry wide change in the FDIC
insurance premium assessment calculation, effective in the second quarter of 2011.
2010 Compared to 2009
The balance sheet management segment reported a loss of $391.4 million for the year ended December 31,
2010. The losses in this segment were due primarily to the provision for loan losses of $779.4 million for the year
ended December 31, 2010.
Gains on loans and securities, net were gains of $166.3 million and $169.2 million for the years ended
December 31, 2010 and 2009, respectively. The gains on loans and securities, net for the year ended
December 31, 2010 were due primarily to gains on the sale of certain agency mortgage-backed securities and
agency debentures.
We recognized $37.7 million and $89.1 million of net impairment during the years ended December 31,
2010 and 2009, respectively, on certain securities in our non-agency CMO portfolio due to continued
deterioration in the expected credit performance of the underlying loans in the securities. The net impairment
included gross OTTI of $41.5 million and $232.1 million for the years ended December 31, 2010 and 2009,
respectively. Of the gross OTTI for the years ended December 31, 2010 and 2009, $3.8 million and $143.0
million related to the noncredit portion of OTTI, which was recorded through other comprehensive income (loss).
Provision for loan losses decreased 48% to $779.4 million for the year ended December 31, 2010 compared
to 2009. The decrease in the provision for loan losses was driven by lower levels of delinquent loans in our one-
to four- family and home equity loan portfolios.
Total balance sheet management operating expense decreased 12% to $215.5 million for the year ended
December 31, 2010 compared to 2009. The decrease for the year ended December 31, 2010 was due to decreases
in clearing and servicing expense, FDIC insurance premiums and other expense. The decrease in the FDIC
insurance premiums for the year ended December 31, 2010 was a result of an industry wide assessment that
resulted in an additional $21.6 million of expense in the second quarter of 2009. There were no similar
assessments made during the year ended December 31, 2010.
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