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

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


	September 30, 2012			December 31, 2011
Residential real estate mortgages	$	5,982		$	5,596
Home equity lines of credit		3,346			3,509
Personal loans secured by securities		807			742
Other		24			19

Total loans to banking clients ⁽¹⁾		10,159			9,866
Allowance for loan losses		(57	)		(54	)

Total loans to banking clients – net	$	10,102		$	9,812

⁽¹⁾	All loans are evaluated for impairment by loan segment.

Changes in the allowance for loan losses were as follows:


Three Months Ended	September 30, 2012									September 30, 2011
	Residential real estate mortgages			Home equity lines of credit			Total			Residential real estate mortgages			Home equity lines of credit			Total
Balance at beginning of period	$	34		$	17		$	51		$	34		$	16		$	50
Charge-offs		(2	)		(3	)		(5	)		(2	)		(3	)		(5	)
Recoveries		1			—			1			—			—			—
Provision for loan losses		2			8			10			6			2			8

Balance at end of period	$	35		$	22		$	57		$	38		$	15		$	53


Nine Months Ended	September 30, 2012									September 30, 2011
	Residential real estate mortgages			Home equity lines of credit			Total			Residential real estate mortgages			Home equity lines of credit			Total
Balance at beginning of period	$	40		$	14		$	54		$	38		$	15		$	53
Charge-offs		(6	)		(7	)		(13	)		(8	)		(6	)		(14	)
Recoveries		2			—			2			—			1			1
Provision for loan losses		(1	)		15			14			8			5			13

Balance at end of period	$	35		$	22		$	57		$	38		$	15		$	53

The delinquency aging analysis by loan class is as follows:


September 30, 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:
Originated and purchased first mortgages	$	5,751	$	30	$	3	$	33	$	66	$	5,817
Other purchased first mortgages		160		1		—		4		5		165
Home equity lines of credit		3,326		8		3		9		20		3,346
Personal loans secured by securities		807		—		—		—		—		807
Other		24		—		—		—		—		24

Total loans to banking clients	$	10,068	$	39	$	6	$	46	$	91	$	10,159


December 31, 2011
Residential real estate mortgages:
Originated 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

In addition to monitoring 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 September 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
September 30, 2012	Originated and purchased first mortgages		Other purchased first mortgages		Total		Home equity lines of credit
Year of origination
Pre-2008	$	489	$	57	$	546	$	1,220
2008		430		6		436		1,180
2009		354		6		360		362
2010		1,128		14		1,142		270
2011		1,606		62		1,668		214
2012		1,810		20		1,830		100

Total	$	5,817	$	165	$	5,982	$	3,346

Origination FICO
< 620	$	10	$	1	$	11	$	—
620 - 679		96		18		114		24
680 - 739		1,061		40		1,101		643
³740		4,650		106		4,756		2,679

Total	$	5,817	$	165	$	5,982	$	3,346

Updated FICO
< 620	$	56	$	6	$	62	$	47
620 - 679		163		11		174		111
680 - 739		862		39		901		505
³740		4,736		109		4,845		2,683

Total	$	5,817	$	165	$	5,982	$	3,346

Origination LTV
£70%	$	3,807	$	103	$	3,910	$	2,263
>70% - £90%		1,994		55		2,049		1,056
>90% - £100%		16		7		23		27

Total	$	5,817	$	165	$	5,982	$	3,346


September 30, 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%	$	4,024		774		N/A			0.26	%
>70% - £90%		1,557		764		N/A			0.41	%
>90% - £100%		171		748		N/A			1.31	%
>100%		230		748		N/A			1.96	%

Total	$	5,982		769		N/A			0.39	%

Home equity lines of credit:
Estimated Current LTV
£70%	$	1,704		775		37	%		0.07	%
>70% - £90%		1,013		767		47	%		0.33	%
>90% - £100%		265		762		54	%		0.40	%
>100%		364		754		61	%		0.83	%

Total	$	3,346		769		42	%		0.26	%

⁽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						Home equity lines of credit
December 31, 2011	Originated 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.