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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: russwinter who wrote (67781)8/9/2006 2:09:21 PM
From: Perspective  Read Replies (1) of 110194
 
I was trying to understand LEND reserves for bad debts, can someone do a sanity check on this?

The 6.6% increase in total net revenues from Q2 2005 to Q2 2006 resulted primarily from an increase in the portfolio and higher whole loan sales, which were partially offset by a lower gain on sale of loans. Net interest income after provision increased 18.4% from $54.9 million in Q2 2005 to $65.0 million in Q2 2006, primarily due to the larger loan portfolio, partially offset by a lower net interest margin percentage. While the weighted average coupon increased during the quarter, it was more than offset by higher cost of funds. The increase in the size of the loan portfolio from Q2 2005 resulted primarily from four large quarterly securitizations structured as financings. Provision for losses decreased 27.8% from Q2 2005 to Q2 2006 due primarily to lower growth in loans held for investment, which was $46.3 million this quarter, compared to $611.9 million for the same period in 2005. However, the reserve balance on loans held for investment increased in dollars and as a percentage of the principal balance outstanding from last year and the last quarter. The reserve rate is now 1.6%, compared to 1.4% at June 30, 2005 and 1.5% at March 31, 2006.

So, let me get this straight. Loans held for investment only grew a little, and delinquent loans grew almost 50%, so you decided to reduce your loss provision by 27.8%? Am I really reading that correctly?!?

BC
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