eTrade 2012 Annual Report Download - page 138

NOTE 5—LOANS RECEIVABLE, NET
Loans receivable, net at December 31, 2012 and 2011 are summarized as follows (dollars in thousands):
December 31,
2012 2011
One- to four-family $ 5,442,174 $ 6,615,808
Home equity 4,223,461 5,328,657
Consumer and other 844,942 1,113,257
Total loans receivable 10,510,577 13,057,722
Unamortized premiums, net 68,897 97,901
Allowance for loan losses (480,751) (822,816)
Total loans receivable, net $10,098,723 $12,332,807
At December 31, 2012, we pledged $8.2 billion and $0.8 billion of loans as collateral to the FHLB and
Federal Reserve Bank, respectively. At December 31, 2011, we pledged $10.0 billion and $1.0 billion of loans as
collateral to the FHLB and Federal Reserve Bank, respectively. Additionally, the Company’s entire loans
receivable portfolio was serviced by other companies at December 31, 2012 and 2011.
The following table represents the breakdown of the total recorded investment in loans receivable and
allowance for loan losses by loans that have been collectively evaluated for impairment and those that have been
individually evaluated for impairment December 31, 2012 and 2011 (dollars in thousands):
Recorded Investment
Allowance for Loan
Losses
December 31, December 31,
2012 2011 2012 2011
Loans collectively evaluated for impairment $ 9,073,326 $11,736,731 $309,377 $502,673
Loans individually evaluated for impairment (TDRs) 1,506,148 1,418,892 171,374 320,143
Total recorded investment in loans receivable $10,579,474 $13,155,623 $480,751 $822,816
Credit Quality
The Company tracks and reviews factors to predict and monitor credit risk in its mortgage loan portfolio on
an ongoing basis. These factors include: loan type, estimated current LTV/CLTV ratios, delinquency history,
documentation type, borrowers’ current credit scores, housing prices, loan acquisition channel, loan vintage and
geographic location of the property. In economic conditions in which housing prices generally appreciate, the
Company believes that loan type, LTV/CLTV ratios, documentation type and credit scores are the key factors in
determining future loan performance. In a housing market with declining home prices and less credit available
for refinance, the Company believes the LTV/CLTV ratio becomes a more important factor in predicting and
monitoring credit risk. The factors are updated on at least a quarterly basis. The Company tracks and reviews
delinquency status to predict and monitor credit risk in the consumer and other loan portfolio on at least a
quarterly basis.
The home equity loan portfolio is primarily second lien loans on residential real estate properties, which
have a higher level of credit risk than first lien mortgage loans. Approximately 15% of the home equity portfolio
was in the first lien position as of December 31, 2012. The Company holds both the first and second lien
positions in less than 1% of the home equity loan portfolio. The home equity loan portfolio consists of
approximately 21% of home equity installment loans and approximately 79% of home equity lines of credit.
Home equity installment loans are primarily fixed rate and fixed term, fully amortizing loans that do not
offer the option of an interest-only payment. Home equity lines of credit convert to amortizing loans at the end of
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