E*Trade Financial Corp said on Thursday it swung to a loss in the third-quarter, due in large part to the failure of third-parties to report important data about loan holders to the online brokerage in a timely manner.
E*Trade said it lost $28.6 million, or 10 cents a share in the period ended Sept. 30. A year earlier, it earned $70.7 million, or 24 cents a diluted share.
Revenues fell to $490 million from $507.3 million a year earlier.
The New York-based company was also hurt by an industry-wide decline in equity trading levels, and a number of one-time charges, including $13 million in severance paid to E*Trade's former chief executive, who left during the period.
Shares of E*Trade, which reported its results after the markets closed, fell to $8.99 from a close of $9.42.
E*Trade was expected to report earnings of 8 cents a share, not including unusual items, on revenue of $440.1 million, according to Thomson Reuters I/B/E/S.
E*Trade has been chipping away at an outsized portfolio of soured mortgage loans, which pummeled its balance sheet and profits when the housing market collapsed in 2007.
The company said it uses third-party servicers to obtain bankruptcy data specific to its loan portfolio. It said it discovered that one of the servicers, which it did not name, had not been reporting all prior bankruptcy data on a timely basis.
After checks on all of its third-party servicers, E*Trade said it identified around $90 million of loans in which the servicers failed to re port the bankruptcy filings t o th e company. Of those loans, about 90 percent are current, the company said.
"In accordance with the company's long-standing policy to write down loans to their collateral value when notified of a borrower bankruptcy, these loans were written down during the third quarter, resulting in an increase to provision for loan losses of approximately $50 million."
Total provisions for loan losses in the quarter were $141 million. That compares to $98.4 million in loan loss provisions a year earlier.
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