eTrade 2012 Annual Report Download - page 142

Allowance for Loan Losses
The following table provides a roll forward by loan portfolio of the allowance for loan losses for the years
ended December 31, 2012, 2011 and 2010 (dollars in thousands):
Year Ended December 31, 2012
One- to
Four-Family
Home
Equity
Consumer
and Other Total
Allowance for loan losses, beginning of period $ 314,187 $ 463,288 $ 45,341 $ 822,816
Provision for loan losses 50,402 271,030 33,205 354,637
Charge-offs (189,918) (517,223) (51,060) (758,201)
Recoveries 9,266 40,238 11,995 61,499
Charge-offs, net (180,652) (476,985) (39,065) (696,702)
Allowance for loan losses, end of period $ 183,937 $ 257,333 $ 39,481 $ 480,751
Year Ended December 31, 2011
One- to
Four-Family
Home
Equity
Consumer
and Other Total
Allowance for loan losses, beginning of period $ 389,594 $ 576,089 $ 65,486 $1,031,169
Provision for loan losses 132,655 286,396 21,563 440,614
Charge-offs (228,857) (457,302) (59,290) (745,449)
Recoveries 20,795 58,105 17,582 96,482
Charge-offs, net (208,062) (399,197) (41,708) (648,967)
Allowance for loan losses, end of period $ 314,187 $ 463,288 $ 45,341 $ 822,816
Year Ended December 31, 2010
One- to
Four-Family
Home
Equity
Consumer
and Other Total
Allowance for loan losses, beginning of period $ 489,887 $ 620,067 $ 72,784 $1,182,738
Provision for loan losses 202,302 529,461 47,649 779,412
Charge-offs (302,595) (600,035) (80,359) (982,989)
Recoveries — 26,596 25,412 52,008
Charge-offs, net (302,595) (573,439) (54,947) (930,981)
Allowance for loan losses, end of period $ 389,594 $ 576,089 $ 65,486 $1,031,169
During the year ended December 31, 2012, the allowance for loan losses decreased by $342.1 million from
$822.8 million at December 31, 2011. As a result of the evaluation of certain programs and practices discussed
above, loan modification policies and procedures were aligned with the guidance from the OCC. The review
resulted in a significant increase in charge-offs during the first quarter of 2012. The majority of the losses
associated with these charge-offs were previously reflected in the specific valuation allowance and qualitative
component of the general allowance for loan losses.
The Company utilizes third party loan servicers to obtain bankruptcy data on our borrowers and during the
third quarter of 2012, the Company identified an increase in bankruptcies reported by one specific servicer. In
researching this increase, it was discovered that the servicer had not been reporting historical bankruptcy data on
a timely basis. As a result, the Company implemented an enhanced procedure around all servicer reporting to
corroborate bankruptcy reporting with independent third party data. Through this additional process,
approximately $90 million of loans were identified in which servicers failed to report the bankruptcy filing to us.
As a result, these loans were written down to the estimated current value of the underlying property less
estimated selling costs, or approximately $40 million, during the third quarter of 2012. These newly identified
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