* Reports loss of 10 cents a share
* Shares decline in after-hours trading
By John McCrank
Oct 18 (Reuters) - E*Trade Financial Corp reported a loss for its third quarter, largely because of the failure of third parties to report important data about loan holders to the company in a timely manner, the online financial services company said on Thursday.
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 share.
Shares of E*Trade, which reported its results after the markets closed, fell to $8.97 from a close of $9.42.
The New York-based firm has been chipping away at an outsized portfolio of soured mortgage loans, which pummeled its balance sheet when the housing market collapsed in 2007.
The company said it uses roughly 50 third-party servicers to obtain bankruptcy data specific to its loan portfolio. It said it discovered just last weekend that one of those servicers, which it did not name, had not been reporting all bankruptcy data on a timely basis.
"We worked throughout the weekend to make sure that we were comfortable with the data," E*Trade's chief financial officer Matthew Audette said on a call with analysts. The company was in talks with its regulators over the issue, he added.
In the end, E*Trade said it identified around $90 million of loans in which servicers failed to report bankruptcy filings in a timely manner to the company. About 90 percent of the loans were current.
In keeping with its policy of writing down loans to their collateral value when it receives data on borrower bankruptcies, E*Trade said it wrote down an extra $50 million in loan-loss provisions.
Total provisions for loan losses in the quarter were $141 million. That compares to $98.4 million in loan loss provisions a year earlier.
E*Trade's loan portfolio was worth $11.1 billion, down $616 million from the end of the second quarter.
E*Trade announced on Aug. 9 that it replaced its Chief Executive, Steven Freiberg, with board chairman Frank Petrilli stepping in as interim CEO, surprising industry watchers and sending the firm's shares higher as speculation resurfaced that the firm may soon be sold.
The company said it took a $13 million charge related to Freiberg's severance.
Petrilli said the company was still looking for a new CEO, but added that he was "impressed" by the quality of candidates the board had seen so far.
Audette said the extra loan provision charge and the severance change added up to 13 cents a share, which would have put earnings at 3 cents a share had those items not been included.
Analysts expected E*Trade to report earnings of 8 cents a share, not including unusual items, according to Thomson Reuters I/B/E/S.
The company, which gets around 30 percent of its revenue from client trading fees and commission, was also hurt by an industry-wide decline in equity trading levels as retail investors largely disengaged with the market amid global economic concerns.
Daily average revenue trades were down 22 percent from a year earlier at 129,000.
Revenues fell to $490 million from $507.3 million a year earlier.
E*Trade ended the quarter with $204 billion in total customer assets, up from $160 billion a year ago.
The company reported about 18,000 net new brokerage accounts during the quarter, compared with 13,000 a year earlier.
Total assets came to $50.4 billion at the end of the quarter, up $1.2 billion from the prior quarter, as cash and deposits rose by $3.2 billion.