Loans to Banking Clients and Related Allowance for Loan Losses (Tables)

12 Months Ended

Dec. 31, 2012

Composition of Loans to Banking Clients by Loan Segment

The composition of loans to banking clients by loan segment is as follows:

December 31,	2012		2011
Residential real estate mortgages	$	6,507	$	5,596
Home equity lines of credit		3,287		3,509
Personal loans secured by securities		963		742
Other		25		19
Total loans to banking clients (1)		10,782		9,866
Allowance for loan losses		(56)		(54)
Total loans to banking clients – net	$	10,726	$	9,812

⁽¹⁾  Loans are evaluated for impairment by loan segment.

Changes in Allowance for Loan Losses

Changes in the allowance for loan losses were as follows:

Year Ended		December 31, 2012							December 31, 2011
	Residential real estate mortgages		Home equity lines of credit		Total			Residential real estate mortgages		Home equity lines of credit		Total			December 31,   2010
Balance at beginning of period		$      40		$      14		$      54			$       38		$       15		$      53			$      45
Charge-offs		(7)		(9)		(16	)		(11)		(8)		(19	)		(20)
Recoveries		2		-		2			1		1		2			1
Provision for loan losses		1		15		16			12		6		18			27
Balance at end of period		$      36		$      20		$      56			$       40		$       14		$      54			$      53

Delinquency Aging Analysis by Loan Class

The delinquency aging analysis by loan class is as follows:

December 31, 2012	Current		30-59 days past due		60-89 days past due		Greater than 90 days		Total past due		Total     loans
Residential real estate mortgages:
First mortgages		$    6,291		$      22		$       2		$      33		$      57		$    6,348
Purchased first mortgages		154		1		-		4		5		159
Home equity lines of credit		3,269		5		2		11		18		3,287
Personal loans secured by securities		963		-		-		-		-		963
Other		22		3		-		-		3		25
Total loans to banking clients		$  10,699		$      31		$       4		$      48		$      83		$  10,782
December 31, 2011
Residential real estate mortgages:
First mortgages		$    5,380		$      16		$       2		$      39		$      57		$    5,437
Purchased first mortgages		152		2		-		5		7		159
Home equity lines of credit		3,494		5		2		8		15		3,509
Personal loans secured by securities		741		1		-		-		1		742
Other		19		-		-		-		-		19
Total loans to banking clients		$    9,786		$      24		$       4		$      52		$      80		$    9,866

Credit Quality of Residential Real Estate Mortgages and HELOCs by Reviewing FICO Scores at Origination, Current FICO Scores, Loan-To-Value Ratio

In addition to monitoring the delinquency characteristics, the Company monitors the credit quality of residential real estate mortgages and HELOCs by stratifying the portfolios by the year of origination, borrower FICO scores at origination (Origination FICO), updated borrower FICO scores (Updated FICO), LTV ratios at origination (Origination LTV), and estimated current LTV ratios (Estimated Current 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 December 2012. The Origination LTV and Estimated Current LTV ratios for a HELOC include any first lien mortgage outstanding on the same property at the time of the HELOC’s origination. The Estimated Current LTV for each loan is estimated by reference to a home price appreciation index.

	Residential real estate mortgages
December 31, 2012	First mortgages		Purchased first mortgages		Total		Home equity lines of credit
Year of origination
Pre-2008		$     465		$      56		$     521		$  1,187
2008		402		6		408		1,151
2009		305		6		311		338
2010		909		12		921		249
2011		1,270		53		1,323		198
2012		2,997		26		3,023		164
Total		$  6,348		$    159		$  6,507		$  3,287
Origination FICO
<620		$       10		$        1		$       11		$          -
620 - 679		98		16		114		23
680 - 739		1,141		40		1,181		633
³740		5,099		102		5,201		2,631
Total		$  6,348		$    159		$  6,507		$  3,287
Updated FICO
<620		$       54		$        6		$       60		$       49
620 - 679		191		13		204		117
680 - 739		940		34		974		510
³740		5,163		106		5,269		2,611
Total		$  6,348		$    159		$  6,507		$  3,287
Origination LTV
£70%		$  4,189		$      97		$  4,286		$  2,225
>70% - £90%		2,142		54		2,196		1,036
>90% - £100%		17		8		25		26
Total		$  6,348		$    159		$  6,507		$  3,287
December 31, 2012	Balance		Weighted Average Updated FICO		Utilization  Rate (1)		Percent of Loans     that are 90+ Days     Past Due and     Less than 90 Days     Past Due but on     Nonaccrual Status
Residential real estate mortgages:
Estimated Current LTV
£70%		$  4,162		772		N/A		0.05%
>70% - £90%		1,841		764		N/A		0.22%
>90% - £100%		168		750		N/A		0.51%
>100%		336		741		N/A		5.34%
Total		$  6,507		768		N/A		0.38%
Home equity lines of credit:
Estimated Current LTV
£70%		$  1,559		773		36%		0.14%
>70% - £90%		1,020		766		46%		0.18%
>90% - £100%		267		759		54%		0.44%
>100%		441		753		59%		1.06%
Total		$  3,287		767		42%		0.31%

⁽¹⁾    The Utilization Rate is calculated using the outstanding HELOC balance divided by the associated total line of credit.

N/A Not applicable.

	Residential real estate mortgages
December 31, 2011	First mortgages		Purchased first mortgages		Total		Home equity lines of credit
Year of origination
Pre-2008		$     569		$      60		$     629		$  1,306
2008		538		8		546		1,262
2009		553		10		563		412
2010		1,757		17		1,774		311
2011		2,020		64		2,084		218
Total		$  5,437		$    159		$  5,596		$  3,509
Origination FICO
<620		$         9		$        2		$       11		$          -
620 - 679		108		19		127		24
680 - 739		1,030		43		1,073		667
³740		4,290		95		4,385		2,818
Total		$  5,437		$    159		$  5,596		$  3,509
Updated FICO
<620		$       55		$        7		$       62		$       49
620 - 679		162		11		173		112
680 - 739		831		44		875		520
³740		4,389		97		4,486		2,828
Total		$  5,437		$    159		$  5,596		$  3,509
Origination LTV
£ 70%		$  3,507		$      91		$  3,598		$  2,378
>70% - £90%		1,904		60		1,964		1,091
>90% - £100%		26		8		34		40
Total		$  5,437		$    159		$  5,596		$  3,509
December 31, 2011	Balance		Weighted Average Updated FICO		Utilization  Rate (1)		Percent of Loans     that are 90+ Days     Past Due and     Less than 90 Days     Past Due but on     Nonaccrual Status
Residential real estate mortgages:
Estimated Current LTV
£ 70%		$  3,200		773		N/A		0.27%
>70% - £90%		1,764		766		N/A		0.41%
>90% - £100%		241		758		N/A		1.33%
>100%		391		748		N/A		2.34%
Total		$  5,596		768		N/A		0.50%
Home equity lines of credit:
Estimated Current LTV
£ 70%		$  1,561		774		37%		0.09%
>70% - £90%		1,099		769		46%		0.26%
>90% - £100%		328		765		54%		0.16%
>100%		521		755		58%		0.75%
Total		$  3,509		769		43%		0.25%

⁽¹⁾    The Utilization Rate is calculated using the outstanding HELOC balance divided by the associated total line of credit.

N/A Not applicable.