| Loans to Banking Clients and Related Allowance for Loan Losses |
| 5. |
|
Loans to Banking Clients
and Related Allowance for Loan Losses |
The composition of loans to
banking clients by loan segment is as follows:
|
|
|
September 30, |
|
|
|
September 30, |
|
| |
|
September 30,
2011 |
|
|
December 31,
2010 |
|
|
Residential real estate
mortgages
|
|
$ |
5,505 |
|
|
$ |
4,695 |
|
|
Home equity lines of
credit
|
|
|
3,527 |
|
|
|
3,500 |
|
|
Personal loans secured by
securities
|
|
|
701 |
|
|
|
562 |
|
|
Other
|
|
|
20 |
|
|
|
21 |
|
|
|
|
|
|
|
|
|
|
|
Total loans to banking
clients (1)
|
|
|
9,753 |
|
|
|
8,778 |
|
|
Allowance for loan
losses
|
|
|
(53 |
) |
|
|
(53 |
) |
|
|
|
|
|
|
|
|
|
|
Total loans to banking
clients – net
|
|
$ |
9,700 |
|
|
$ |
8,725 |
|
|
|
|
|
|
|
|
|
|
| (1) |
All loans are collectively evaluated for impairment by loan
segment.
|
Changes in the allowance
for loan losses were as follows:
|
|
|
00000000 |
|
|
|
00000000 |
|
|
|
00000000 |
|
|
|
00000000 |
|
|
|
00000000 |
|
|
|
00000000 |
|
| |
|
September 30,
2011 |
|
|
|
|
|
Three Months
Ended
|
|
Residential
real
estate
mortgages |
|
|
Home equity
lines of credit |
|
|
Personal
loans
secured
by securities |
|
|
Other |
|
|
Total |
|
|
September 30,
2010 |
|
|
Balance at beginning of
period
|
|
$ |
34 |
|
|
$ |
16 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
50 |
|
|
$ |
51 |
|
|
Charge-offs
|
|
|
(2 |
) |
|
|
(3 |
) |
|
|
— |
|
|
|
— |
|
|
|
(5 |
) |
|
|
(4 |
) |
|
Recoveries
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Provision for loan
losses
|
|
|
6 |
|
|
|
2 |
|
|
|
— |
|
|
|
— |
|
|
|
8 |
|
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of
period
|
|
$ |
38 |
|
|
$ |
15 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
53 |
|
|
$ |
50 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
September 30,
2011 |
|
|
|
|
|
Nine Months
Ended
|
|
Residential
real
estate
mortgages |
|
|
Home equity
lines of credit |
|
|
Personal
loans
secured
by securities |
|
|
Other |
|
|
Total |
|
|
September 30,
2010 |
|
|
Balance at beginning of
period
|
|
$ |
38 |
|
|
$ |
15 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
53 |
|
|
$ |
45 |
|
|
Charge-offs
|
|
|
(8 |
) |
|
|
(6 |
) |
|
|
— |
|
|
|
— |
|
|
|
(14 |
) |
|
|
(14 |
) |
|
Recoveries
|
|
|
— |
|
|
|
1 |
|
|
|
— |
|
|
|
— |
|
|
|
1 |
|
|
|
1 |
|
|
Provision for loan
losses
|
|
|
8 |
|
|
|
5 |
|
|
|
— |
|
|
|
— |
|
|
|
13 |
|
|
|
18 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of
period
|
|
$ |
38 |
|
|
$ |
15 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
53 |
|
|
$ |
50 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in the loan
portfolio are nonaccrual loans totaling $48 million and
$51 million at September 30, 2011 and December 31,
2010, respectively. There were no loans accruing interest that were
contractually 90 days or more past due at September 30, 2011
or December 31, 2010. The amount of interest revenue that
would have been earned on nonaccrual loans, versus actual interest
revenue recognized on these loans, was not material to the
Company’s results of operations in
the first nine months of
2011 or 2010. Nonperforming assets, which include nonaccrual loans
and other real estate owned, totaled $54 million at
September 30, 2011 and December 31, 2010. The Company
considers loan modifications in which it makes an economic
concession to a borrower experiencing financial difficulty to be a
troubled debt restructuring. Troubled debt restructurings were not
material at September 30, 2011 or December 31,
2010.
The delinquency aging
analysis by loan class is as follows:
|
|
|
$0000000 |
|
|
|
$0000000 |
|
|
|
$0000000 |
|
|
|
$0000000 |
|
|
|
$0000000 |
|
|
|
$0000000 |
|
|
September 30, 2011
|
|
Current |
|
|
30-59 days
past due |
|
|
60-89 days
past due |
|
|
Greater than
90 days |
|
|
Total
past due |
|
|
Total
loans |
|
|
Residential real estate
mortgages:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Originated first
mortgages
|
|
$ |
5,305 |
|
|
$ |
13 |
|
|
$ |
4 |
|
|
$ |
33 |
|
|
$ |
50 |
|
|
$ |
5,355 |
|
|
Purchased first
mortgages
|
|
|
145 |
|
|
|
1 |
|
|
|
— |
|
|
|
4 |
|
|
|
5 |
|
|
|
150 |
|
|
Home equity lines of
credit
|
|
|
3,515 |
|
|
|
4 |
|
|
|
2 |
|
|
|
6 |
|
|
|
12 |
|
|
|
3,527 |
|
|
Personal loans secured by
securities
|
|
|
694 |
|
|
|
2 |
|
|
|
— |
|
|
|
5 |
|
|
|
7 |
|
|
|
701 |
|
|
Other
|
|
|
20 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans to banking
clients
|
|
$ |
9,679 |
|
|
$ |
20 |
|
|
$ |
6 |
|
|
$ |
48 |
|
|
$ |
74 |
|
|
$ |
9,753 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate
mortgages:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Originated first
mortgages
|
|
$ |
4,527 |
|
|
$ |
18 |
|
|
$ |
5 |
|
|
$ |
38 |
|
|
$ |
61 |
|
|
$ |
4,588 |
|
|
Purchased first
mortgages
|
|
|
100 |
|
|
|
2 |
|
|
|
1 |
|
|
|
4 |
|
|
|
7 |
|
|
|
107 |
|
|
Home equity lines of
credit
|
|
|
3,489 |
|
|
|
5 |
|
|
|
2 |
|
|
|
4 |
|
|
|
11 |
|
|
|
3,500 |
|
|
Personal loans secured by
securities
|
|
|
557 |
|
|
|
— |
|
|
|
— |
|
|
|
5 |
|
|
|
5 |
|
|
|
562 |
|
|
Other
|
|
|
21 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
21 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans to banking
clients
|
|
$ |
8,694 |
|
|
$ |
25 |
|
|
$ |
8 |
|
|
$ |
51 |
|
|
$ |
84 |
|
|
$ |
8,778 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In addition to monitoring
the delinquency characteristics as presented in the aging analysis
above, the Company monitors the credit quality of residential real
estate mortgages and home equity lines of credit (HELOCs) by
stratifying the portfolios by the year of origination, borrower
Fair Issac & Company (FICO) scores at origination, updated
FICO scores, and loan-to-value ratios at origination (Origination
LTV), as presented in the following tables. Borrowers’ FICO
scores are provided by an independent third party credit reporting
service and were last updated in September 2011. The Company
monitors the credit quality of personal loans secured by securities
by reviewing the fair value of collateral to ensure adequate
collateralization of at least 100% of the principal amount of the
loans. All of these personal loans were fully collateralized by
securities with fair values in excess of borrowing amounts at
September 30, 2011 and December 31, 2010.
|
|
|
$00000000 |
|
|
|
$00000000 |
|
|
|
$00000000 |
|
|
|
$00000000 |
|
| |
|
Residential rea1 estate
mortgages |
|
|
|
|
|
September
30, 2011
|
|
Originated first
mortgages |
|
|
Purchased first
mortgages |
|
|
Total |
|
|
Home equity
lines of credit |
|
|
Year of
origination
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-2007
|
|
$ |
303 |
|
|
$ |
53 |
|
|
$ |
356 |
|
|
$ |
1,091 |
|
|
2007
|
|
|
303 |
|
|
|
8 |
|
|
|
311 |
|
|
|
236 |
|
|
2008
|
|
|
574 |
|
|
|
7 |
|
|
|
581 |
|
|
|
1,285 |
|
|
2009
|
|
|
644 |
|
|
|
11 |
|
|
|
655 |
|
|
|
430 |
|
|
2010
|
|
|
1,957 |
|
|
|
19 |
|
|
|
1,976 |
|
|
|
315 |
|
|
2011
|
|
|
1,574 |
|
|
|
52 |
|
|
|
1,626 |
|
|
|
170 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
5,355 |
|
|
$ |
150 |
|
|
$ |
5,505 |
|
|
$ |
3,527 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Origination FICO
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
< 620
|
|
$ |
10 |
|
|
$ |
2 |
|
|
$ |
12 |
|
|
$ |
— |
|
|
620 - 679
|
|
|
115 |
|
|
|
19 |
|
|
|
134 |
|
|
|
24 |
|
|
680 - 739
|
|
|
1,030 |
|
|
|
42 |
|
|
|
1,072 |
|
|
|
672 |
|
|
³ 740
|
|
|
4,200 |
|
|
|
87 |
|
|
|
4,287 |
|
|
|
2,831 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
5,355 |
|
|
$ |
150 |
|
|
$ |
5,505 |
|
|
$ |
3,527 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Updated FICO
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
< 620
|
|
$ |
59 |
|
|
$ |
8 |
|
|
$ |
67 |
|
|
$ |
48 |
|
|
620 - 679
|
|
|
158 |
|
|
|
10 |
|
|
|
168 |
|
|
|
100 |
|
|
680 - 739
|
|
|
798 |
|
|
|
38 |
|
|
|
836 |
|
|
|
493 |
|
|
³ 740
|
|
|
4,340 |
|
|
|
94 |
|
|
|
4,434 |
|
|
|
2,886 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
5,355 |
|
|
$ |
150 |
|
|
$ |
5,505 |
|
|
$ |
3,527 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Origination LTV
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
£ 70%
|
|
$ |
3,435 |
|
|
$ |
83 |
|
|
$ |
3,518 |
|
|
$ |
2,387 |
|
|
71% - 89%
|
|
|
1,893 |
|
|
|
59 |
|
|
|
1,952 |
|
|
|
1,099 |
|
|
³ 90%
|
|
|
27 |
|
|
|
8 |
|
|
|
35 |
|
|
|
41 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
5,355 |
|
|
$ |
150 |
|
|
$ |
5,505 |
|
|
$ |
3,527 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1) |
The computation of the Origination LTV ratio for a HELOC
includes any first lien mortgage outstanding on the same property
at the time of origination. At September 30, 2011,
$756 million of $3.5 billion in HELOCs were in a first
lien position.
|
|
|
|
$00000000 |
|
|
|
$00000000 |
|
|
|
$00000000 |
|
|
|
$00000000 |
|
| |
|
Residential rea1 estate
mortgages |
|
|
|
|
|
December 31,
2010
|
|
Originated first
mortgages |
|
|
Purchased first
mortgages |
|
|
Total |
|
|
Home equity
lines of credit |
|
|
Year of
origination
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-2007
|
|
$ |
352 |
|
|
$ |
58 |
|
|
$ |
410 |
|
|
$ |
1,132 |
|
|
2007
|
|
|
384 |
|
|
|
9 |
|
|
|
393 |
|
|
|
245 |
|
|
2008
|
|
|
728 |
|
|
|
8 |
|
|
|
736 |
|
|
|
1,345 |
|
|
2009
|
|
|
884 |
|
|
|
12 |
|
|
|
896 |
|
|
|
466 |
|
|
2010
|
|
|
2,240 |
|
|
|
20 |
|
|
|
2,260 |
|
|
|
312 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
4,588 |
|
|
$ |
107 |
|
|
$ |
4,695 |
|
|
$ |
3,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Origination FICO
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
< 620
|
|
$ |
9 |
|
|
$ |
2 |
|
|
$ |
11 |
|
|
$ |
— |
|
|
620 - 679
|
|
|
115 |
|
|
|
15 |
|
|
|
130 |
|
|
|
26 |
|
|
680 - 739
|
|
|
907 |
|
|
|
33 |
|
|
|
940 |
|
|
|
677 |
|
|
³ 740
|
|
|
3,557 |
|
|
|
57 |
|
|
|
3,614 |
|
|
|
2,797 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
4,588 |
|
|
$ |
107 |
|
|
$ |
4,695 |
|
|
$ |
3,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Updated FICO
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
< 620
|
|
$ |
63 |
|
|
$ |
9 |
|
|
$ |
72 |
|
|
$ |
49 |
|
|
620 - 679
|
|
|
147 |
|
|
|
8 |
|
|
|
155 |
|
|
|
99 |
|
|
680 - 739
|
|
|
730 |
|
|
|
29 |
|
|
|
759 |
|
|
|
499 |
|
|
³ 740
|
|
|
3,648 |
|
|
|
61 |
|
|
|
3,709 |
|
|
|
2,853 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
4,588 |
|
|
$ |
107 |
|
|
$ |
4,695 |
|
|
$ |
3,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Origination LTV
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
£ 70%
|
|
$ |
2,911 |
|
|
$ |
55 |
|
|
$ |
2,966 |
|
|
$ |
2,375 |
|
|
71% - 89%
|
|
|
1,659 |
|
|
|
51 |
|
|
|
1,710 |
|
|
|
1,092 |
|
|
³ 90%
|
|
|
18 |
|
|
|
1 |
|
|
|
19 |
|
|
|
33 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
4,588 |
|
|
$ |
107 |
|
|
$ |
4,695 |
|
|
$ |
3,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1) |
The computation of the Origination LTV ratio for a HELOC
includes any first lien mortgage outstanding on the same property
at the time of origination. At December 31, 2010,
$742 million of $3.5 billion in HELOCs were in a first
lien position.
|
|