eTrade 2012 Annual Report Download - page 143

bankruptcy filings resulted in an increase to net charge-offs and provision for loan losses of $50 million for the
year ended December 31, 2012, with approximately 80% related to prior years.
During the years ended December 31, 2012, 2011 and 2010, the Company agreed to settlements with five
particular originators specific to loans sold to the Company by those originators. One-time payments were made
to the Company to satisfy in full all pending and future repurchase requests with those specific originators.
During the years ended December 31, 2012, 2011 and 2010, the Company applied $11.2 million, $46.0 million
and $24.6 million, respectively, as recoveries to the allowance for loan losses, resulting in a corresponding
reduction in net charge-offs as well as provision for loan losses.
Impaired Loans—Troubled Debt Restructurings
TDRs include loan modifications completed under the Company’s programs that involve granting an
economic concession to a borrower experiencing financial difficulty. Beginning in the fourth quarter of
December 31, 2012, loans that have been charged off based on the estimated current value of the underlying
property less estimated selling costs due to bankruptcy notification were also considered TDRs. Upon being
classified as a TDR, such loan is categorized as an impaired loan and is considered impaired until maturity
regardless of whether the borrower performs under the terms of the loan. Impairment on TDRs is measured on an
individual basis.
TDR loan modifications are accounted for as nonaccrual loans at the time of modification and return to
accrual status after six consecutive payments are made in accordance with the modified terms. TDRs are
classified as nonperforming until six consecutive payments have been made.
The unpaid principal balance in one- to four-family TDRs was $1.2 billion and $968.2 million at
December 31, 2012 and 2011, respectively. For home equity loans, the recorded investment in TDRs represents
the unpaid principal balance. As of December 31, 2012 the Company had $216.6 million recorded investment of
TDRs that had been charged-off due to bankruptcy notification, $119.2 million of which were classified as
performing.
The following table shows a summary of the Company’s recorded investment in TDRs that were on accrual
and nonaccrual status, in addition to the recorded investment of TDRs as of December 31, 2012 and 2011
(dollars in thousands):
Nonaccrual TDRs
Accrual TDRs(1) Current(2)
30-89 Days
Delinquent
90+ Days
Delinquent
Recorded
Investment in TDRs
December 31, 2012
One- to four-family $785,199 $142,373 $118,834 $182,719 $1,229,125
Home equity 196,199 35,750 17,634 27,440 277,023
Total $981,398 $178,123 $136,468 $210,159 $1,506,148
December 31, 2011
One- to four-family $516,314 $250,989 $ 88,195 $117,455 $ 972,953
Home equity 279,031 72,578 51,433 42,897 445,939
Total $795,345 $323,567 $139,628 $160,352 $1,418,892
(1) Represents TDRs that are current and have made six or more consecutive payments.
(2) Represents TDRs that are current but have not yet made six consecutive payments and certain junior lien TDRs that have a delinquent
senior lien.
140