CONSOLIDATED STATEMENTS OF OPERATIONS (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010
Revenue	$ 17,215	$ 15,116	$ 31,339	$ 34,102
Cost of revenue (exclusive of depreciation shown separately below)	1,522	1,118	2,871	2,592
Gross margin	15,693	13,998	28,468	31,510
Operating expenses
Selling and marketing expense	15,423	11,497	31,054	26,160
General and administrative expense	5,606	6,328	11,563	12,911
Product development	861	717	2,150	1,827
Litigation settlements and contingencies	25		4,525
Restructuring expense	398	68	491	2,671
Amortization of intangibles	267	943	574	1,886
Depreciation	1,225	892	2,404	1,777
Asset impairments	250		5,257
Total operating expenses	24,055	20,445	58,018	47,232
Operating loss	(8,362)	(6,447)	(29,550)	(15,722)
Other income (expense)
Interest income				7
Interest expense	(76)	(166)	(155)	(333)
Total other expense, net	(76)	(166)	(155)	(326)
Loss before income taxes	(8,438)	(6,613)	(29,705)	(16,048)
Income tax provision	(37)	(265)	(302)	(808)
Net loss from continuing operations	(8,475)	(6,878)	(30,007)	(16,856)
Income (loss) from discontinued operations, net of tax	(9,343)	6,079	(27,306)	9,911
Net loss available to common shareholders	$ (17,818)	$ (799)	$ (57,313)	$ (6,945)
Weighted average common shares outstanding (in shares)	11,014	11,240	10,948	11,039
Weighted average diluted shares outstanding (in shares)	11,014	11,240	10,948	11,039
Net loss per share from continuing operations
Basic (in dollars per share)	$ (0.77)	$ (0.61)	$ (2.74)	$ (1.53)
Diluted (in dollars per share)	$ (0.77)	$ (0.61)	$ (2.74)	$ (1.53)
Net loss per share available to common shareholders
Basic (in dollars per share)	$ (1.62)	$ (0.07)	$ (5.23)	$ (0.63)
Diluted (in dollars per share)	$ (1.62)	$ (0.07)	$ (5.23)	$ (0.63)

CONSOLIDATED BALANCE SHEETS (USD $) In Thousands, unless otherwise specified	Jun. 30, 2011	Dec. 31, 2010
ASSETS:
Cash and cash equivalents	$ 34,276	$ 68,819
Restricted cash and cash equivalents	10,321	8,155
Accounts receivable, net of allowance of $146 and $213, respectively	6,989	3,534
Prepaid and other current assets	937	1,159
Current assets of discontinued operations	140,177	130,615
Total current assets	192,700	212,282
Property and equipment, net	9,340	8,505
Goodwill	3,632	3,632
Intangible assets, net	40,496	45,419
Other non-current assets	116	116
Non-current assets of discontinued operations	10,759	12,848
Total assets	257,043	282,802
LIABILITIES:
Accounts payable, trade	15,951	6,485
Deferred revenue	81	1,540
Deferred income taxes	2,358	2,358
Accrued expenses and other current liabilities	22,125	22,912
Current liabilities of discontinued operations	135,049	118,038
Total current liabilities	175,564	151,333
Income taxes payable	101	96
Other long-term liabilities	3,363	3,168
Deferred income taxes	14,241	13,962
Non-current liabilities of discontinued operations	18,073	12,422
Total liabilities	211,342	180,981
Commitments and contingencies (Note 9)
SHAREHOLDERS' EQUITY:
Preferred stock $.01 par value; authorized 5,000,000 shares; none issued or outstanding
Common stock $.01 par value; authorized 50,000,000 shares; issued 12,151,330 and 11,893,468 shares, respectively, and outstanding 11,028,069 and 10,770,207 shares, respectively	121	118
Additional paid-in capital	910,027	908,837
Accumulated deficit	(855,915)	(798,602)
Treasury stock 1,123,261 shares	(8,532)	(8,532)
Total shareholders' equity	45,701	101,821
Total liabilities and shareholders' equity	$ 257,043	$ 282,802

CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Jun. 30, 2011	Dec. 31, 2010
CONSOLIDATED BALANCE SHEETS
Accounts receivable, allowance (in dollars)	$ 146	$ 213
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, authorized shares	5,000,000	5,000,000
Preferred stock, issued shares	0	0
Preferred stock, outstanding shares	0	0
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, authorized shares	50,000,000	50,000,000
Common stock, issued shares	12,151,330	11,893,468
Common stock, outstanding shares	11,028,069	10,770,207
Treasury stock, shares	1,123,261	1,123,261

CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (USD $) In Thousands, unless otherwise specified	Total	Common Stock	Additional Paid-in Capital	Accumulated Deficit	Treasury Stock	Comprehensive Loss
Balance at Dec. 31, 2010	$ 101,821	$ 118	$ 908,837	$ (798,602)	$ (8,532)
Balance (in shares) at Dec. 31, 2010		11,893			1,123
Comprehensive loss:
Net loss for the six months ended June 30, 2011	(57,313)			(57,313)		(57,313)
Comprehensive loss	(57,313)					(57,313)
Non-cash compensation	2,094		2,094
Issuance of common stock upon exercise of stock options and vesting of restricted stock units, net of withholding taxes	(901)	3	(904)
Issuance of common stock upon exercise of stock options and vesting of restricted stock units, net of withholding taxes (in shares)		258
Balance at Jun. 30, 2011	$ 45,701	$ 121	$ 910,027	$ (855,915)	$ (8,532)
Balance (in shares) at Jun. 30, 2011		12,151			1,123

- Definition

This element represents the amount of recognized equity-based compensation during the period, that is, the amount recognized as expense in the income statement (or as asset if compensation is capitalized). Alternate captions include the words "stock-based compensation".

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- Definition

The change in equity [net assets] of a business enterprise during a period from transactions and other events and circumstances from non-owner sources which are attributable to the economic entity, including both controlling (parent) and noncontrolling interests. It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners, including any and all transactions which are directly or indirectly attributable to that ownership interest in subsidiary equity which is not attributable to the parent.

+ References+ Details

- Definition

The consolidated profit or loss for the period, net of income taxes, including the portion attributable to the noncontrolling interest.

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- Definition

Total of Stockholders' Equity (deficit) items, net of receivables from officers, directors, owners, and affiliates of the entity including portions attributable to both the parent and noncontrolling interests (previously referred to as minority interest), if any. The entity including portions attributable to the parent and noncontrolling interests is sometimes referred to as the economic entity. This excludes temporary equity and is sometimes called permanent equity.

+ References+ Details

CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010
Cash flows from operating activities attributable to continuing operations:
Net loss	$ (57,313)	$ (6,945)
Less (income) loss from discontinued operations, net of tax	27,306	(9,911)
Net loss from continuing operations	(30,007)	(16,856)
Adjustments to reconcile net loss from continuing operations to net cash used in operating activities attributable to continuing operations:
Loss on disposal of fixed assets	111	9
Amortization of intangibles	574	1,886
Depreciation	2,404	1,777
Intangible impairment	4,350
Property and equipment impairment	907
Non-cash compensation expense	1,870	1,857
Non-cash restructuring expense		93
Deferred income taxes	278	658
Bad debt expense		92
Changes in current assets and liabilities:
Accounts receivable	(3,455)	959
Prepaid and other current assets	222	(28)
Accounts payable and other current liabilities	8,711	(15,575)
Income taxes payable	(28)	84
Deferred revenue	(1,475)	(134)
Other, net	209	2,897
Net cash used in operating activities attributable to continuing operations	(15,329)	(22,281)
Cash flows from investing activities attributable to continuing operations:
Capital expenditures	(4,257)	(3,010)
Other, net	(1,466)	2,187
Net cash used in investing activities attributable to continuing operations	(5,723)	(823)
Cash flows from financing activities attributable to continuing operations:
Issuance of common stock, net of withholding taxes	(901)	(381)
Purchase of treasury stock		(3,431)
(Increase) decrease in restricted cash	(700)	150
Net cash used in financing activities attributable to continuing operations	(1,601)	(3,662)
Total cash used in continuing operations	(22,653)	(26,766)
Net cash used in operating activities attributable to discontinued operations	(16,337)	(8,479)
Net cash used in investing activities attributable to discontinued operations	(9,185)	(557)
Net cash provided by financing activities attributable to discontinued operations	13,632	12,586
Total cash provided by (used in) discontinued operations	(11,890)	3,550
Net decrease in cash and cash equivalents	(34,543)	(23,216)
Cash and cash equivalents at beginning of period	68,819	86,093
Cash and cash equivalents at end of period	$ 34,276	$ 62,877

ORGANIZATION

6 Months Ended

Jun. 30, 2011

ORGANIZATION

ORGANIZATION

NOTE 1—ORGANIZATION

Company Overview

Tree.com, Inc. ("we," "Tree.com" or the "Company") is the parent of LendingTree, LLC, which owns several brands and businesses that provide information, tools, advice, products and services for critical transactions in our customers' lives. Our family of brands includes: LendingTree.com®, GetSmart.com®, RealEstate.com®, DegreeTree.com^SM, HealthTree.com^SM, LendingTreeAutos.com, DoneRight.com®, and InsuranceTree.com^SM. Together, these brands serve as an ally for consumers who are looking to comparison shop for loans, real estate and other services from multiple businesses and professionals that will compete for their business.

Segment Reporting

The overall concept that Tree.com employs in determining its reportable segments and related financial information is to present them in a manner consistent with how the chief operating decision maker and executive management view the Tree.com businesses, how the businesses are organized as to segment management, and the focus of the Tree.com businesses with regards to the types of products or services offered or the target market.

Through the quarter ended March 31, 2011, we operated in two reportable business segments: LendingTree Loans and Exchanges. The LendingTree Loans segment originates, processes, approves and funds various residential real estate loans through Home Loan Center, Inc. dba LendingTree Loans ("HLC"). The HLC and LendingTree Loans brand names are collectively referred to in these consolidated financial statements as "LendingTree Loans." The Exchanges segment consists of online lead generation networks and call centers that connect consumers and service providers principally in the lending, real estate, higher education, home services, insurance and automobile marketplaces.

In connection with entering into an agreement in the second quarter of 2011 that provides for the sale of substantially all of the operating assets of our LendingTree Loans segment to Discover Bank that is discussed below and in Note 6, the Company re-evaluated its reporting segments based on the continuing operations of the Company. We have determined that our continuing operations are now one reportable segment, which represents the previous "Exchanges" segment.

Tree.com maintains operations solely in the United States.

Discontinued Operations

The businesses of RealEstate.com, REALTORS® and LendingTree Loans are presented as discontinued operations in the accompanying consolidated balance sheet and consolidated statements of operations and cash flows for all periods presented. The notes accompanying these consolidated financial statements reflect our continuing operations and, unless otherwise noted, exclude information related to the discontinued operations.

RealEstate.com, REALTORS®

LendingTree Loans

On May 12, 2011, we entered into an asset purchase agreement with Discover Bank, a wholly-owned subsidiary of Discover Financial Services. The asset purchase agreement provides for the sale of substantially all of the operating assets of our LendingTree Loans business to Discover Bank.

Under the terms of the asset purchase agreement, Discover Bank has agreed to pay approximately $55.9 million in cash for the assets, subject to certain adjustments as described in the asset purchase agreement. $35.9 million is due upon the closing of the transaction and $10 million is due on each of the first and second anniversaries of the closing, subject to certain conditions as described in the asset purchase agreement, including maintenance of the LendingTree Exchange and certain financial and operational metrics associated with the LendingTree Exchange business.

Discover Bank generally will not assume liabilities of the LendingTree Loans business that arose before the closing date, except for certain liabilities directly related to assets included in the purchase. A portion of the initial purchase price payment will be held in escrow pending the discharge of certain liabilities that will remain with us.

The transaction is subject to various closing conditions, including the receipt of regulatory approvals and loan repurchase proposals for Discover Bank and the approval of our stockholders. A special meeting of stockholders to approve the transaction and certain other related matters is scheduled for August 26, 2011. Our board of directors has unanimously recommended that our stockholders approve the transaction. Douglas Lebda, our Chairman and Chief Executive Officer, who beneficially owns approximately 20% of our outstanding shares, a subsidiary of Liberty Media Corporation which owns approximately 25% of our outstanding shares, and various funds managed by Second Curve, LLC, which own less than 5% of our outstanding shares, have entered into voting and support agreements with Discover Bank which obligate them to vote in favor of the transaction. The transaction is expected to close by the end of 2011.

The asset purchase agreement contains customary representations, warranties, covenants and indemnification obligations of the parties.

The asset purchase agreement also includes covenants of us and Discover Bank. Subject to certain exceptions stated in the asset purchase agreement, we have agreed to operate the LendingTree Loans business in the ordinary course and to maintain certain operational and financial metrics until the closing of the transaction. Our covenants include requirements to maintain personnel in our LendingTree Loans business, to maintain certain quality thresholds for our loan pipeline, to maintain warehouse line capacity and compliance with our warehouse lending agreement, and subject to certain exceptions, not to introduce new loan products without Discover Bank's consent. If the requirements of these covenants are not met, Discover Bank has the option to terminate the asset purchase agreement. Subject to certain exceptions, we have also agreed not to solicit or initiate discussion with third parties regarding other proposals to acquire the assets of the LendingTree Loans business or substantial equity interests in our company, and to certain restrictions on our ability to respond to or accept any such proposals.

The asset purchase agreement also includes customary termination provisions, including that each of our company and Discover Bank may terminate the asset purchase agreement if the other party has materially breached any representation, warranty or covenant contained in the asset purchase agreement and failed to cure such breach, if our stockholders do not approve the transaction or if the closing has not occurred within 150 days from the signing (subject to certain extensions for up to 150 additional days). Discover Bank may terminate the asset purchase agreement if our board of directors determines, after considering any modified proposals from Discover Bank, to change its recommendation to our stockholders because a failure to do so would constitute a breach of its fiduciary duties, or if we materially breach our non-solicitation obligations or our obligation to hold a meeting of our stockholders to approve the transaction. If the asset purchase agreement is terminated under certain circumstances, including due to a change of recommendation by our board of directors, we will be required to pay Discover Bank a termination fee of $2.2 million. If Discover Bank does not complete the acquisition as a result of its inability to obtain proposals for loan purchase arrangements that are customary for a bank that is similarly situated to Discover Bank, Discover Bank will be required to pay us a termination fee of $5 million.

Separate from the asset purchase agreement, Tree.com has also agreed to provide certain marketing related services to Discover Bank in connection with its mortgage origination business for a two-year term commencing on the date of entry into the asset purchase agreement. Discover Bank has also agreed to be a participating lender in the LendingTree Network following the closing of the acquisition.

Basis of Presentation

The accompanying unaudited interim consolidated financial statements as of June 30, 2011 and 2010 and for the three and six months then ended have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the rules and regulations of the U.S. Securities and Exchange Commission ("SEC"). Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for annual financial statements. In the opinion of the Company's management, the unaudited interim consolidated financial statements have been prepared on the same basis as the audited financial statements, and include all adjustments, consisting only of normal recurring adjustments, necessary for the fair presentation of the Company's financial position for the periods presented. The results for the three and six months ended June 30, 2011 are not necessarily indicative of the results to be expected for the year ending December 31, 2011, or any other period. These financial statements and notes should be read in conjunction with the audited financial statements and notes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 2010.

- Definition

The entire disclosure for organization, consolidation and basis of presentation of financial statements disclosure.

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SIGNIFICANT ACCOUNTING POLICIES

6 Months Ended

Jun. 30, 2011

SIGNIFICANT ACCOUNTING POLICIES

SIGNIFICANT ACCOUNTING POLICIES

NOTE 2—SIGNIFICANT ACCOUNTING POLICIES

Accounting Estimates

Tree.com's management is required to make certain estimates and assumptions during the preparation of the consolidated financial statements in accordance with U.S. generally accepted accounting principles ("GAAP"). These estimates and assumptions impact the reported amount of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the consolidated financial statements. They also impact the reported amount of net earnings during any period. Actual results could differ from those estimates.

Significant estimates underlying the accompanying consolidated financial statements include: valuation allowance for impaired loans held for sale; loan loss obligations; the fair value of loans held for sale and related derivatives; the recoverability of long-lived assets, goodwill and intangible assets; the determination of income taxes payable and deferred income taxes, including related valuation allowances; restructuring reserves; contingent consideration related to business combinations; various other allowances, reserves and accruals; and assumptions related to the determination of stock-based compensation.

Cash and Cash Equivalents

Cash and cash equivalents include cash and short-term, highly liquid money market investments.

Restricted Cash

Restricted cash and cash equivalents consists of the following (in thousands):

		June 30, 2011		December 31, 2010

Cash in escrow for surety bonds		$	6,500	$	5,030
Cash in escrow for corporate purchasing card program			800		800
Minimum required balances for warehouse lines of credit			2,625		1,925
Other			396		400

	Total restricted cash and cash equivalents	$	10,321	$	8,155

New Accounting Pronouncements

On January 21, 2010, the FASB amended and Tree.com adopted the accounting standard for fair value measurements and disclosures, which added new requirements for disclosures about transfers into and out of Level 1 and 2 and separate disclosures about purchases, sales, issuances and settlements relating to Level 3 measurements. The amendment also clarifies existing fair value disclosures about the level of disaggregation and the inputs and valuation techniques used to measure fair value. This amendment is effective for the first reporting period (including interim periods) beginning after December 15, 2009, except for the requirement to provide the Level 3 activity of purchases, sales, issuances and settlements on a gross basis, which will be effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. See Note 6 for further information.

- Definition

The entire disclosure for all significant accounting policies of the reporting entity.

+ References+ Details

GOODWILL AND INTANGIBLE ASSETS

6 Months Ended

Jun. 30, 2011

GOODWILL AND INTANGIBLE ASSETS

GOODWILL AND INTANGIBLE ASSETS

NOTE 3—GOODWILL AND INTANGIBLE ASSETS

The balance of goodwill and intangible assets, net is as follows (in thousands):

		June 30, 2011		December 31, 2010

Goodwill		$	3,632	$	3,632

Intangible assets with indefinite lives		$	39,142	$	43,242
Intangible assets with definite lives, net			1,354		2,177

	Total intangible assets, net	$	40,496	$	45,419

Intangible assets with indefinite lives relate principally to trade names and trademarks acquired in various acquisitions.

At June 30, 2011, intangible assets with definite lives relate to the following (in thousands):

		Cost		Accumulated Amortization			Net

Purchase agreements		$	75,453	$	(75,312	)	$	141	5.8
Technology			27,294		(27,063	)		231	3.1
Customer lists			7,318		(6,652	)		666	3.9
Other			5,582		(5,266	)		316	5.3

	Total	$	115,647	$	(114,293	)	$	1,354

At December 31, 2010, intangible assets with definite lives relate to the following (in thousands):

		Cost		Accumulated Amortization			Net

Purchase agreements		$	75,453	$	(75,288	)	$	165	5.8
Technology			28,191		(27,538	)		653	3.1
Customer lists			7,318		(6,622	)		696	3.9
Other			5,685		(5,022	)		663	5.3

	Total	$	116,647	$	(114,470	)	$	2,177

Amortization of intangible assets with definite lives is computed on a straight-line basis and, based on June 30, 2011 balances, such amortization for the next five years is estimated to be as follows (in thousands):

		Amount

Six months ending December 31, 2011		$	317
Year ending December 31, 2012			354
Year ending December 31, 2013			143
Year ending December 31, 2014			84
Year ending December 31, 2015			60
Thereafter			396

	Total	$	1,354

In connection with closing all of the field offices of RealEstate.com, REALTORS® as described in Note 1, the Company incurred impairment charges totaling $5.0 million in the first quarter of 2011. Trademark impairment totaled $4.1 million and property and equipment impairment totaled $0.9 million.

- Definition

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

+ References+ Details

PROPERTY AND EQUIPMENT

6 Months Ended

Jun. 30, 2011

PROPERTY AND EQUIPMENT

PROPERTY AND EQUIPMENT

NOTE 4—PROPERTY AND EQUIPMENT

The balance of property and equipment, net is as follows (in thousands):

		June 30, 2011			December 31, 2010

Computer equipment and capitalized software		$	24,712		$	22,494
Leasehold improvements			1,382			1,362
Furniture and other equipment			1,450			1,382
Projects in progress			1,499			2,780

			29,043			28,018
Less: accumulated depreciation and amortization			(19,703	)		(19,513	)

	Total property and equipment, net	$	9,340		$	8,505

- Definition

The entire disclosure for long-lived, physical assets that are used in the normal conduct of business to produce goods and services and not intended for resale. Examples include land, buildings, machinery and equipment, and other types of furniture and equipment including, but not limited to, office equipment, furniture and fixtures, and computer equipment and software. This disclosure may include property plant and equipment accounting policies and methodology, a schedule of property, plant and equipment gross, additions, deletions, transfers and other changes, depreciation, depletion and amortization expense, net, accumulated depreciation, depletion and amortization expense and useful lives, income statement disclosures, assets held for sale and public utility disclosures.

+ References+ Details

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

6 Months Ended

Jun. 30, 2011

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

NOTE 5—ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities consist of the following (in thousands):

		June 30, 2011		December 31, 2010

Litigation accruals		$	4,325	$	520
Accrued advertising expense			4,951		8,714
Accrued compensation and benefits			1,063		2,913
Accrued professional fees			970		1,166
Accrued restructuring costs			838		1,199
Customer deposits and escrows			2,198		2,263
Deferred rent			388		482
Other			7,392		5,655

	Total accrued expenses and other current liabilities	$	22,125	$	22,912

The other category above reflects an earnout payable related to an acquisition, franchise taxes, self-insured health claims and other miscellaneous accrued expenses.

An additional $1.0 million and $1.2 million of accrued restructuring liabilities are classified in other long term liabilities at June 30, 2011 and December 31, 2010, respectively.

DISCONTINUED OPERATIONS

6 Months Ended

Jun. 30, 2011

DISCONTINUED OPERATIONS

DISCONTINUED OPERATIONS

NOTE 6—DISCONTINUED OPERATIONS

On March 10, 2011, management of the Company made the decision and finalized a plan to close all of the field offices of the proprietary full service real estate brokerage business known as RealEstate.com, REALTORS®. The Company exited all markets by March 31, 2011. Accordingly, RealEstate.com, REALTORS® is presented as discontinued operations in the accompanying consolidated balance sheet and consolidated statements of operations and cash flows for all periods presented.

On May 12, 2011, we entered into an Asset Purchase Agreement with Discover Bank, a wholly-owned subsidiary of Discover Financial Services, which provides for the sale of substantially all of the operating assets of our LendingTree Loans business to Discover Bank. The transaction is expected to close by the end of 2011. The Company has evaluated the facts and circumstances of the pending transaction and the applicable accounting guidance for discontinued operations, and has concluded that the LendingTree Loans business should be reflected as discontinued operations in the accompanying consolidated balance sheet and consolidated statements of operations and cash flows for all periods presented.

The revenue and net loss for RealEstate.com, REALTORS® that are reported as discontinued operations for the applicable periods were as follows (in thousands):

	Three Months Ended June 30,

	2011		2010
Revenue	$	837	$	4,031

Income (loss) before income taxes	$	201	$	(737	)
Income tax benefit		—		102

Net income (loss)	$	201	$	(635	)

	Six Months Ended June 30,

	2011			2010
Revenue	$	2,629		$	7,318

Loss before income taxes	$	(10,459	)	$	(1,914	)
Income tax provision		—			—

Net loss	$	(10,459	)	$	(1,914	)

Net loss for the six months ended June 30, 2011 includes goodwill disposal charges totaling $8.0 million and restructuring charges totaling $2.0 million. The amount of goodwill allocated to discontinued operations and subsequently disposed of was based on the relative fair values prior to disposition of the business disposed of and the business retained.

The revenue and net income (loss) for LendingTree Loans that are reported as discontinued operations for the applicable periods were as follows (in thousands):

	Three Months Ended June 30,

	2011			2010
Revenue	$	25,382		$	26,649

Income (loss) before income taxes	$	(9,544	)	$	6,714
Income tax provision		—			—

Net income (loss)	$	(9,544	)	$	6,714

	Six Months Ended June 30,

	2011			2010
Revenue	$	44,632		$	52,387

Income (loss) before income taxes	$	(16,847	)	$	11,825
Income tax provision		—			—

Net income (loss)	$	(16,847	)	$	11,825

Net loss for the three and six months ended June 30, 2011 includes restructuring charges totaling $3.7 million and $4.0 million, respectively.

The assets and liabilities of RealEstate.com, REALTORS® that are reported as discontinued operations as of June 30, 2011 and December 31, 2010 were as follows (in thousands):

		June 30, 2011			December 31, 2010

Current assets		$	151		$	219

Property and equipment			—			1,215
Goodwill			—			7,967
Other non-current assets			177			186

	Non-current assets		177			9,368

Current liabilities			723			1,031
Non-current liabilities			165			288

Net assets (liabilities)		$	(560	)	$	8,268

The assets and liabilities of LendingTree Loans that are reported as discontinued operations as of June 30, 2011 and December 31, 2010 were as follows (in thousands):

		June 30, 2011			December 31, 2010

Loans held for sale		$	126,978		$	116,681
Other current assets			13,048			13,715

	Current assets		140,026			130,396

Property and equipment			3,794			3,074
Goodwill			5,637			—
Other non-current assets			1,151			406

	Non-current assets		10,582			3,480

Warehouse lines of credit			114,255			100,623
Other current liabilities			20,071			16,384

	Current liabilities		134,326			117,007

Non-current liabilities			17,908			12,134

Net assets (liabilities)		$	(1,626	)	$	4,735

Significant Assets and Liabilities of LendingTree Loans

Upon closing of the sale of substantially all of the operating assets of our LendingTree Loans business to Discover Bank, LendingTree Loans will cease to originate consumer loans and will no longer have additional borrowings available under the warehouse lines of credit. The remaining operations will be wound down over the next quarter following the closing of the transaction. These wind-down activities include selling the balance of loans held for sale to investors, which historically has occurred within thirty days of funding, and repaying and then terminating the lines of credit. Additionally, the liability for losses on previously sold loans will remain with LendingTree Loans. Below is a discussion of these significant items.

Loans Held for Sale

LendingTree Loans originates all of its residential real estate loans with the intent to sell them in the secondary market. Loans held for sale consist primarily of residential first mortgage loans that are secured by residential real estate throughout the United States.

The following table represents the loans held for sale by type of loan as of June 30, 2011 and December 31, 2010 ($ amounts in thousands):

	June 30, 2011					December 31, 2010

	Amount		%			Amount		%
Conforming	$	95,426		75	%	$	86,451		74	%
FHA and Alt-A		26,733		21	%		20,431		18	%
Jumbo		4,339		3	%		9,129		8	%
Subprime		406		1	%		580		—	%
Home equity		74		—	%		90		—	%

Total	$	126,978		100	%	$	116,681		100	%

The following presents the difference between the aggregate principal balance of loans on nonaccrual status for which the fair value option has been elected and for loans measured at lower of cost or market valuation as of June 30, 2011 and December 31, 2010 (in thousands):

	As of June 30, 2011

	Loans on Nonaccrual— Measured at Fair Value			Loans on Nonaccrual— Measured at LOCOM			Total Loans on Nonaccrual
Aggregate unpaid principal balance	$	1,348		$	1,890		$	3,238
Difference between fair value and aggregate unpaid principal balance		(487	)		—			(487	)
Lower of cost or market valuation allowance		—			(1,301	)		(1,301	)
Deferred loan fees, net of costs		—			(8	)		(8	)

Loans on nonaccrual	$	861		$	581		$	1,442

	As of December 31, 2010

	Loans on Nonaccrual— Measured at Fair Value			Loans on Nonaccrual— Measured at LOCOM			Total Loans on Nonaccrual
Aggregate unpaid principal balance	$	1,380		$	2,290		$	3,670
Difference between fair value and aggregate unpaid principal balance		(496	)		—			(496	)
Lower of cost or market valuation allowance		—			(1,508	)		(1,508	)
Deferred loan fees, net of costs		—			(9	)		(9	)

Loans on nonaccrual	$	884		$	773		$	1,657

Included within the loans on nonaccrual status are repurchased loans with a net book value of $0.2 million at June 30, 2011 and December 31, 2010. During the six months ended June 30, 2011, LendingTree Loans did not repurchase any loans. During the six months ended June 30, 2010, LendingTree Loans repurchased one loan with a balance of $0.3 million.

Fair Value Measurements

Tree.com categorizes its assets and liabilities measured at fair value into a fair value hierarchy that prioritizes the assumptions used in pricing the asset or liability into the following three levels:

•

Level 1:    Observable inputs such as quoted prices for identical assets and liabilities in active markets obtained from independent sources.

•

Level 2:    Other inputs that are observable directly or indirectly, such as quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active and inputs that are derived principally from or corroborated by observable market data.

•

Level 3:    Unobservable inputs for which there is little or no market data and which require Tree.com to develop its own assumptions, based on the best information available in the circumstances, about the assumptions market participants would use in pricing the asset or liability.

LendingTree Loans enters into commitments with consumers to originate loans at a specified interest rate (interest rate lock commitments—"IRLCs"). Tree.com reports IRLCs as derivative instruments at fair value with changes in fair value being recorded in discontinued operations. IRLCs for loans to be sold to investors using a mandatory or assignment of trade ("AOT") method are hedged using "to be announced mortgage-backed securities" ("TBA MBS") and are valued using quantitative risk models. The IRLCs derive their base value from an underlying loan type with similar characteristics using the TBA MBS market which is actively quoted and easily validated through external sources. The most significant data inputs used in this valuation include, but are not limited to, loan type, underlying loan amount, note rate, loan program, and expected sale date of the loan. IRLCs for loans sold to investors on a best efforts basis are hedged using best efforts forward delivery commitments and are valued on an individual loan basis using a proprietary database program. These valuations are based on investor pricing tables stratified by product, note rate and term. The valuation is adjusted at the loan level to consider the servicing release premium and loan pricing adjustments specific to each loan. The Company applies an anticipated loan funding probability based on its own experience to value IRLCs, which results in the classification of these derivatives as Level 3. The value of the underlying loan and the anticipated loan funding probability are the most significant assumptions affecting the valuation of IRLCs. There were no significant changes to the methods and assumptions for valuing IRLCs in the period ended June 30, 2011. At June 30, 2011 and December 31, 2010, there were $321.3 million and $216.6 million, respectively, of IRLCs notional value outstanding.

Loans held for sale measured at fair value and sold to investors using a mandatory or AOT method are also hedged using TBA MBS and valued using quantitative risk models. The valuation is based on the loan amount, note rate, loan program, and expected sale date of the loan. Loans held for sale measured at fair value and sold to investors on a best efforts basis are hedged using best efforts forward delivery commitments and are valued using a proprietary database program. The best efforts valuations are based on daily investor pricing tables stratified by product, note rate and term. These valuations are adjusted at the loan level to consider the servicing release premium and loan pricing adjustments specific to each loan. Loans held for sale, excluding impaired loans, are classified as Level 2. Loans held for sale measured at fair value that become impaired are transferred from Level 2 to Level 3, as the estimate of fair value is based on the Company's experience considering lien position and current status of the loan. There were no significant changes to the method and assumptions used to estimate the fair value of impaired loans in the period ended June 30, 2011. LendingTree Loans recognizes interest income separately from other changes in fair value.

Under LendingTree Loans' risk management policy, LendingTree Loans economically hedges the changes in fair value of IRLCs and loans held for sale caused by changes in interest rates by using TBA MBS and entering into best efforts forward delivery commitments. These hedging instruments are recorded at fair value with changes in fair value recorded in current earnings as a component of revenue from the origination and sale of loans. There were no significant changes to the methods and assumptions for valuing hedging instruments in the period ended June 30, 2011. TBA MBS used to hedge both IRLCs and loans are valued using quantitative risk models based primarily on inputs related to characteristics of the MBS stratified by product, coupon, and settlement date. These derivatives are classified as Level 2. Best efforts forward delivery commitments are valued using a proprietary database program using investor pricing tables considering the current base loan price. An anticipated loan funding probability is applied to value best efforts commitments hedging IRLCs, which results in the classification of these contracts as Level 3. The current base loan price and the anticipated loan funding probability are the most significant assumptions affecting the value of the best efforts commitments. The best efforts forward delivery commitments hedging loans held for sale are classified as Level 2, so such contracts are transferred from Level 3 to Level 2 at the time the underlying loan is originated. For the purposes of the tables below, we refer to TBA MBS and best efforts forward delivery commitments collectively as "Forward Delivery Contracts".

The following presents Tree.com's assets and liabilities that are measured at fair value on a recurring basis at June 30, 2011 and December 31, 2010 (in thousands):

	As of June 30, 2011

	Recurring Fair Value Measurements Using
	Quoted Market Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value Measurements
Loans held for sale	$	—	$	125,536	$	861	$	126,397
Interest rate lock commitments ("IRLCs")		—		—		6,278		6,278
Forward delivery contracts		—		320		220		540

Total	$	—	$	125,856	$	7,359	$	133,215

	As of December 31, 2010

	Recurring Fair Value Measurements Using
	Quoted Market Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value Measurements
Loans held for sale	$	—	$	115,024	$	884	$	115,908
Interest rate lock commitments ("IRLCs")		—		—		5,986		5,986
Forward delivery contracts		—		1,001		3		1,004

Total	$	—	$	116,025	$	6,873	$	122,898

The following presents the changes in Tree.com's assets and liabilities that are measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three and six months ended June 30, 2011 and 2010 (in thousands):

			Three Months Ended June 30, 2011

			Interest Rate Lock Commitments			Forward Delivery Contracts		Loans Held for Sale
Balance at April 1, 2011			$	5,628		$	112	$	962
	Transfers into Level 3			—			—		325
	Transfers out of Level 3			—			70		—
	Total net gains (losses) included in earnings (realized and unrealized)			25,226			38		29
	Purchases, sales, and settlements
		Purchases		—			—		—
		Sales		—			—		(283	)
		Settlements		(2,555	)		—		(172	)
	Transfers of IRLCs to closed loans			(22,021	)		—		—

Balance at June 30, 2011			$	6,278		$	220	$	861

			Six Months Ended June 30, 2011

			Interest Rate Lock Commitments			Forward Delivery Contracts			Loans Held for Sale
Balance at January 1, 2011			$	5,986		$	3		$	884
	Transfers into Level 3			—			—			660
	Transfers out of Level 3			—			42			—
	Total net gains (losses) included in earnings (realized and unrealized)			41,167			233			(3	)
	Purchases, sales, and settlements
		Purchases(a)		970			(58	)		—
		Sales		—			—			(503	)
		Settlements		(5,997	)		—			(177	)
	Transfers of IRLCs to closed loans			(35,848	)		—			—

Balance at June 30, 2011			$	6,278		$	220		$	861

(a): Purchased in conjunction with the acquisition of certain assets of SurePoint.

			Three Months Ended June 30, 2010

			Interest Rate Lock Commitments			Forward Delivery Contracts			Loans Held for Sale
Balance at April 1, 2010			$	5,508		$	153		$	776
	Transfers into Level 3			—			—			262
	Transfers out of Level 3			—			100			—
	Total net gains (losses) included in earnings (realized and unrealized)			28,735			(273	)		(78	)
	Purchases, sales, and settlements			—			—			—
		Purchases(a)		—			—			—
		Sales		—			—			—
		Settlements		(4,002	)		—			(3	)
	Transfers of IRLCs to closed loans			(19,393	)		—			—

Balance at June 30, 2010			$	10,848		$	(20	)	$	957

			Six Months Ended June 30, 2010

			Interest Rate Lock Commitments			Forward Delivery Contracts			Loans Held for Sale
Balance at January 1, 2010			$	3,680		$	487		$	777
	Transfers into Level 3			—			—			262
	Transfers out of Level 3			—			126			—
	Total net gains (losses) included in earnings (realized and unrealized)			50,068			(633	)		(77	)
	Purchases, sales, and settlements			—			—			—
		Purchases(a)		—			—			—
		Sales		—			—			—
		Settlements		(8,716	)		—			(5	)
	Transfers of IRLCs to closed loans			(34,184	)		—			—

Balance at June 30, 2010			$	10,848		$	(20	)	$	957

The following presents the gains (losses) included in earnings for the three and six months ended June 31, 2011 and 2010 relating to Tree.com's assets and liabilities that are measured at fair value on a recurring basis using significant unobservable inputs (Level 3) (in thousands):

	Three Months Ended June 30, 2011							Six Months Ended June 30, 2011

	Interest Rate Lock Commitments		Forward Delivery Contracts		Loans Held for Sale			Interest Rate Lock Commitments		Forward Delivery Contracts		Loans Held for Sale
Total net gains (losses) included in earnings, which are included in discontinued operations	$	25,226	$	38	$	29		$	41,167	$	233	$	(3	)

Change in unrealized gains (losses) relating to assets and liabilities still held at June 30, 2011, which are included in discontinued operations	$	6,278	$	220	$	(96	)		6,278	$	220	$	(95	)

	Three Months Ended June 30, 2010								Six Months Ended June 30, 2010

	Interest Rate Lock Commitments		Forward Delivery Contracts			Loans Held for Sale			Interest Rate Lock Commitments		Forward Delivery Contracts			Loans Held for Sale
Total net gains (losses) included in earnings, which are included in discontinued operations	$	28,735	$	(273	)	$	(78	)	$	50,068	$	(633	)	$	(77	)

Change in unrealized gains (losses) relating to assets and liabilities still held at June 30, 2010, which are included in discontinued operations	$	10,848	$	(20	)	$	(78	)	$	10,848	$	(20	)	$	(77	)

The following table summarizes the Company's derivative instruments not designated as hedging instruments as of June 30, 2011 and December 31, 2010 (in thousands):

	June 30, 2011				December 31, 2010

	Balance Sheet Location	Fair Value			Balance Sheet Location	Fair Value
Interest Rate Lock Commitments	Current assets of discontinued operations	$	6,525		Current assets of discontinued operations	$	5,991
Forward Delivery Contracts	Current assets of discontinued operations		1,183		Current assets of discontinued operations		2,633
Interest Rate Lock Commitments	Current liabilities of discontinued operations		(247	)	Current liabilities of discontinued operations		(5	)
Forward Delivery Contracts	Current liabilities of discontinued operations		(643	)	Current liabilities of discontinued operations		(1,629	)

Total Derivatives		$	6,818			$	6,990

The gain/(loss) recognized in the consolidated statements of operations for derivatives for the periods ended June 30, 2011 and 2010 was as follows (in thousands):

			Three Months Ended					Six Months Ended

		Location of Gain/(Loss) Recognized in Income on Derivative	June 30, 2011		June 30, 2010			June 30, 2011			June 30, 2010
Interest Rate Lock Commitments		Discontinued operations	$	25,226	$	28,735		$	41,166		$	50,068
Forward Delivery Contracts		Discontinued operations		348		(5,083	)		(556	)		(7,157	)

	Total		$	25,574	$	23,652		$	40,610		$	42,911

Tree.com has elected to account for loans held for sale originated on or after January 1, 2008 at fair value. Electing the fair value option allows a better offset of the changes in fair values of the loans and the forward delivery contracts used to economically hedge them without the burden of complying with the requirements for hedge accounting.

Tree.com did not elect the fair value option on loans held for sale originated prior to January 1, 2008 and on loans that were repurchased from investors on or subsequent to that date. As of June 30, 2011 and December 31, 2010, 20 and 23 such loans, respectively, all of which were impaired, were included in loans held for sale and were carried at the lower of cost or market ("LOCOM") value assessed on an individual loan basis. The market value (or fair value) of these impaired loans at June 30, 2011 and December 31, 2010, measured on a non-recurring basis using significant unobservable inputs (Level 3), was $0.6 million and $0.8 million, respectively. This fair value measurement is management's best estimate of the market value of such loans and considers the lien position and loan status.

The following presents the difference between the aggregate principal balance of loans held for sale for which the fair value option has been elected and for loans measured at LOCOM as of June 30, 2011 and December 31, 2010 (in thousands):

	As of June 30, 2011

	Loans Held for Sale— Measured at Fair Value		Loans Held for Sale— Measured at LOCOM			Total Loans Held For Sale
Aggregate unpaid principal balance	$	122,654	$	1,890		$	124,544
Difference between fair value and aggregate unpaid principal balance		3,743		—			3,743
Lower of cost or market valuation allowance		—		(1,301	)		(1,301	)
Deferred loan fees, net of costs		—		(8	)		(8	)

Loans held for sale	$	126,397	$	581		$	126,978

	As of December 31, 2010

	Loans Held for Sale— Measured at Fair Value		Loans Held for Sale— Measured at LOCOM			Total Loans Held For Sale
Aggregate unpaid principal balance	$	113,116	$	2,290		$	115,406
Difference between fair value and aggregate unpaid principal balance		2,792		—			2,792
Lower of cost or market valuation allowance		—		(1,508	)		(1,508	)
Deferred loan fees, net of costs		—		(9	)		(9	)

Loans held for sale	$	115,908	$	773		$	116,681

During the six months ended June 30, 2011 and 2010, the change in fair value of loans held for sale for which the fair value option was elected was a gain of $0.5 million and $2.0 million, respectively, and is included as a component of LendingTree Loans revenue in the accompanying consolidated statements of operations.

Loan Loss Obligations

LendingTree Loans sells loans it originates to investors on a servicing released basis so the risk of loss or default by the borrower is generally transferred to the investor. However, LendingTree Loans is required by these investors to make certain representations relating to credit information, loan documentation and collateral. These representations and warranties may extend through the contractual life of the mortgage loan. Subsequent to the sale, if underwriting deficiencies, borrower fraud or documentation defects are discovered in individual mortgage loans, LendingTree Loans may be obligated to repurchase the respective mortgage loan or indemnify the investors for any losses from borrower defaults if such deficiency or defect cannot be cured within the specified period following discovery.

In the case of early loan payoffs and early defaults on certain loans, LendingTree Loans may be required to repay all or a portion of the premium initially paid by the investor. The estimated obligation associated with early loan payoffs and early defaults is calculated based on historical loss experience by type of loan.

The obligation for losses related to the representations and warranties and other provisions discussed above is initially recorded at its estimated fair value, which includes a projection of expected future losses as well as a market based premium. Because LendingTree Loans does not service the loans it sells, it does not maintain nor have access to the current balances and loan performance data with respect to the individual loans previously sold to investors. Accordingly, the Company is unable to determine, with precision, its maximum exposure under its representations and warranties. However, LendingTree Loans utilizes the original loan balance (before it was sold to an investor), historical and projected loss frequency and loss severity ratios by loan type as well as analyses of losses in process to estimate its exposure to losses on loans previously sold. The Company maintains a liability related to this exposure based, in part, on historical and projected loss frequency and loss severity using its loan loss history (adjusted for recent trends in loan loss experience), the original principal amount of the loans previously sold, the year the loans were sold, and loan type. Accordingly, subsequent adjustments to the obligation, if any, are not made based on changes in the fair value of the obligation, which might include an estimated change in losses that may be expected in the future, but are made once further losses are estimated to be both probable and estimable. As such, given current general industry trends in mortgage loans as well as housing prices, market expectations around losses related to the Company's obligations could vary significantly from the obligation recorded as of the balance sheet date or the range estimated below. In estimating its exposure to loan losses, LendingTree Loans segments its loan sales into four segments based on the extent of the documentation provided by the borrower to substantiate income and/or assets (full or limited documentation) and the lien position of the mortgage in the underlying property (first or second position). Each of these segments has a different loss experience with full documentation, first lien position loans generally having the lowest loss ratios and limited documentation, second lien position loans generally having the highest loss ratios.

The following table represents the loans sold for the period shown and the aggregate loan losses through June 30, 2011:

	As of June 30, 2011

Period of Loan Sales	Number of loans sold		Original principal balance		Number of loans with losses		Original principal balance of loans with losses		Amount of aggregate losses
			(in billions)				(in millions)		(in millions)
Six months ended June 30, 2011		5,300	$	1.1		—	$	—	$	—
2010		12,400		2.8		2		0.6		0.1
2009		12,800		2.8		3		0.8		0.1
2008		11,000		2.2		22		4.7		1.1
2007		36,300		6.1		149		20.2		7.0
2006		55,000		7.9		202		23.4		12.7
2005 and prior years		86,700		13.0		87		11.7		4.7

Total		219,500	$	35.9		465	$	61.4	$	25.7

The pipeline of 158 loan repurchase requests and indemnifications as of June 30, 2011 was considered in determining the appropriate reserve amount. The status of these 158 loans varied from an initial review stage, which may result in a rescission of the request, to in process, where the probability of incurring a loss is high, to indemnification, whereby the Company has agreed to reimburse the purchaser of that loan if and when losses are incurred. The indemnification may have a specific term, thereby limiting the Company's exposure. The original principal amount of these loans is approximately $31.1 million, comprised of approximately 81% full documentation first liens, 2% full documentation second liens, 14% limited documentation first liens, and 3% limited documentation second liens.

In the fourth quarter of 2009, LendingTree Loans entered into settlement negotiations with two buyers of previously purchased limited documentation loans. The settlement with one buyer was completed in December 2009 and included a payment of $1.9 million related to all second lien loans sold to this buyer, including both full and limited documentation. This amount was not determined on an individual loan basis and is, therefore, not included in the loss amounts disclosed above based on the year such loans were sold. The settlement was included as a charge off to the reserve in 2009. Negotiations with the second buyer were completed in January 2010. This settlement of $4.5 million, which was paid in four equal quarterly installments in 2010, relates to all future losses on limited documentation second lien loans sold to this buyer. LendingTree Loans must also pay an additional amount of up to $0.3 million in conjunction with this settlement since it did not sell a certain volume of loans to this buyer in 2010. This amount is included in the total settlement amount and the estimated settlement payments remaining to be paid. This settlement amount was included as a charge off to the reserve in 2010 and is not included in the table above.

Based on historical experience, it is anticipated that the Company will continue to receive repurchase requests and incur losses on loans sold in prior years. However, the two settlements discussed above will eliminate future repurchase requests from those buyers for the loan types included in those settlements. As of June 30, 2011, LendingTree Loans estimated the range of remaining possible losses due to representations and warranty issues based on the methodology described above, excluding the $0.3 million settlement remaining to be paid in 2011, as $21 million to $30 million. The Company believes that it has adequately reserved for these losses.

The activity related to loss reserves on previously sold loans for the six months ended June 30, 2011 and 2010, is as follows (in thousands):

	Six Months Ended June 30,

	2011			2010
Balance, beginning of period	$	16,984		$	16,985
Provisions		7,562			4,462
Charge offs to reserves(a)		(229	)		(6,752	)

Balance, end of period	$	24,317		$	14,695

(a): The six months ended June 30, 2010 includes a charge off for the amount of the $4.5 million loan loss settlement plus a portion of the $0.3 million additional accrual discussed above. The remaining settlement payment due of $0.3 million is tracked as a liability separate from the loan loss reserve (see table below).

Based on an analysis of the Company's historical loan loss experience, it has been determined that a portion of the loan losses expected to be made by investors will be made more than twelve months following the initial sale of the underlying loans. Accordingly, the Company has estimated the portion of its loans sold reserve that it anticipates it will be liable for after twelve months and has classified that portion of the reserve as a long-term liability. The liability for losses on previously sold loans is presented in the accompanying consolidated balance sheet as of June 30, 2011 and December 31, 2010 as follows (in thousands):

	As of June 30, 2011		As of December 31, 2010

Current portion related to settlement above, included in current liabilities of discontinued operations	$	300	$	300
Other current portion, included in current liabilities of discontinued operations		8,075		5,459
Long term portion, included in non-current liabilities of discontinued operations		16,242		11,525

Total	$	24,617	$	17,284

Warehouse Lines of Credit

Borrowings on warehouse lines of credit were $114.3 million and $100.6 million at June 30, 2011 and December 31, 2010, respectively.

As of June 30, 2011, LendingTree Loans had two committed lines of credit totaling $150.0 million of borrowing capacity. LendingTree Loans also has a $25.0 million uncommitted line with one of these lenders. Borrowings under these lines of credit are used to fund, and are secured by, consumer residential loans that are held for sale. Loans under these lines of credit are repaid using proceeds from the sales of loans by LendingTree Loans.

The $50.0 million first line was scheduled to expire on June 29, 2011, was extended through July 13, 2011, and on July 12, 2011 the Company extended the expiration date to September 1, 2011. On August 11, 2011, the Company again extended the expiration date to the earliest of (i) the closing date of the proposed asset sale transaction with Discover Bank or (ii) October 1, 2011. This line can be cancelled at the option of the lender without default upon sixty days notice. This first line includes an additional uncommitted credit facility of $25.0 million. This first line is also guaranteed by Tree.com, Inc., LendingTree, LLC and LendingTree Holdings Corp. The interest rate under the first line is the 30-day London InterBank Offered Rate ("LIBOR") or 2.00% (whichever is greater) plus 2.25%. The interest rate under the $25.0 million uncommitted line is the 30-day LIBOR plus 1.50%. LendingTree Loans is also required to sell at least 25% of the loans it originates to the lender under this line or pay a "pair-off fee" of 0.25% on the difference between the required and actual volume of loans sold.

The $100.0 million second line is scheduled to expire on October 28, 2011. This line is also guaranteed by Tree.com, Inc., LendingTree, LLC and LendingTree Holdings Corp. The interest rate under this line is the 30-day Adjusted LIBOR or 2.0% (whichever is greater) plus 2.25% to 2.5% for loans being sold to the lender and 30-day Adjusted LIBOR or 2.0% (whichever is greater) plus 2.25% for loans not being sold to the lender.

Under the terms of these warehouse lines, LendingTree Loans is required to maintain various financial and other covenants. These financial covenants include, but are not limited to, maintaining (i) minimum tangible net worth of $20.0 million, (ii) minimum liquidity, (iii) a minimum current ratio, (iv) a maximum ratio of total liabilities to net worth, (v) a maximum leverage ratio, (vi) pre-tax net income requirements and (vii) a maximum warehouse capacity ratio. During the quarter ended June 30, 2011, LendingTree Loans was in compliance with the covenants under these lines.

The LendingTree Loans business is highly dependent on the availability of these warehouse lines. Although we believe that our existing lines of credit are adequate for our current operations, reductions in our available credit, or the inability to extend, renew or replace these lines before completion of the pending sale of the operating assets of LendingTree Loans, would have a material adverse effect on our business, financial condition and results of operations. Management has determined that it could continue to operate the LendingTree Loans business at a reduced capacity if one, but not both, of the warehouse lines were lost.

- Definition

The entire disclosure for the facts and circumstances leading to the completed or expected disposal, manner and timing of disposal, the gain (loss) recognized in the income statement and the income statement caption that includes that gain (loss), amounts of revenues and pretax profit or loss reported in discontinued operations, the segment in which the disposal group was reported, and the classification (whether sold or classified as held for sale) and carrying value of the assets and liabilities comprising the disposal group. Includes all disposal groups, including those classified as components of the entity (discontinued operations).

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

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+ Details

EARNINGS PER SHARE AND STOCK-BASED COMPENSATION

6 Months Ended

Jun. 30, 2011

EARNINGS PER SHARE AND STOCK-BASED COMPENSATION

EARNINGS PER SHARE AND STOCK-BASED COMPENSATION

NOTE 7—EARNINGS PER SHARE AND STOCK-BASED COMPENSATION

The following table sets forth the computation of Basic and Diluted earnings per share:

	Three Months Ended June 30,

	2011						2010
	Basic			Diluted			Basic			Diluted
	(In thousands, except per share data)
Numerator:
Loss from continuing operations	$	(8,475	)	$	(8,475	)	$	(6,878	)	$	(6,878	)
Income (loss) from discontinued operations, net of tax		(9,343	)		(9,343	)		6,079			6,079

Net loss available to common shareholders	$	(17,818	)	$	(17,818	)	$	(799	)	$	(799	)

Denominator:
Weighted average common shares		11,014			11,014			11,240			11,240

Loss per Share:
Loss from continuing operations	$	(0.77	)	$	(0.77	)	$	(0.61	)	$	(0.61	)
Income (loss) from discontinued operations, net of tax		(0.85	)		(0.85	)		0.54			0.54

Net loss per common share	$	(1.62	)	$	(1.62	)	$	(0.07	)	$	(0.07	)

	Six Months Ended June 30,

	2011						2010
	Basic			Diluted			Basic			Diluted
	(In thousands, except per share data)
Numerator:
Loss from continuing operations	$	(30,007	)	$	(30,007	)	$	(16,856	)	$	(16,856	)
Income (loss) from discontinued operations, net of tax		(27,306	)		(27,306	)		9,911			9,911

Net loss available to common shareholders	$	(57,313	)	$	(57,313	)	$	(6,945	)	$	(6,945	)

Denominator:
Weighted average common shares		10,948			10,948			11,039			11,039

Loss per Share:
Loss from continuing operations	$	(2.74	)	$	(2.74	)	$	(1.53	)	$	(1.53	)
Income (loss) from discontinued operations, net of tax		(2.49	)		(2.49	)		0.90			0.90

Net loss per common share	$	(5.23	)	$	(5.23	)	$	(0.63	)	$	(0.63	)

Non-cash compensation expense related to equity awards is included in the following line items in the accompanying consolidated statements of operations for the three and six months ended June 30, 2011 and 2010 (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,

	2011		2010		2011		2010
Cost of revenue	$	1	$	1	$	3	$	16
Selling and marketing expense		105		41		265		109
General and administrative expense		624		813		1,514		1,640
Product development		58		38		154		92

Non-cash compensation expense	$	788	$	893	$	1,936	$	1,857

The forms of stock-based awards granted to Tree.com employees are principally restricted stock units ("RSUs"), restricted stock and stock options. RSUs are awards in the form of units, denominated in a hypothetical equivalent number of shares of Tree.com common stock and with the value of each award equal to the fair value of Tree.com common stock at the date of grant. RSUs may be settled in cash, stock or both, as determined by the Compensation Committee at the time of grant. Each stock-based award is subject to service-based vesting, where a specific period of continued employment must pass before an award vests. Certain restricted stock awards also include performance-based vesting, where certain performance targets set at the time of grant must be achieved before an award vests. Tree.com recognizes expense for all stock-based awards for which vesting is considered probable. For stock-based awards, the accounting charge is measured at the grant date as the fair value of Tree.com common stock and expensed ratably as non-cash compensation over the vesting term. For performance-based awards, the expense is measured at the grant date as the fair value of Tree.com common stock and expensed as non-cash compensation over the vesting period if the performance targets are considered probable of being achieved.

The amount of stock-based compensation expense recognized in the consolidated statement of operations is reduced by estimated forfeitures, as the amount recorded is based on awards ultimately expected to vest. The forfeiture rate is estimated at the grant date based on historical experience and revised, if necessary, in subsequent periods if the actual forfeiture rate differs from the estimated rate.

A summary of changes in outstanding stock options for the six months ended June 30, 2011 is as follows:

			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value

					(In years)		(In thousands)
Outstanding at January 1, 2011	952,669		$	9.58
Granted	153,868			5.89
Exercised	(5,162	)		4.14
Forfeited	(4,257	)		7.46
Expired	(19,324	)		9.38

Outstanding at June 30, 2011	1,077,794		$	9.09		6.4	$	15

Options exercisable at June 30, 2011	300,544		$	12.12		4.4	$	15

The following table summarizes the information about stock options outstanding and exercisable as of June 30, 2011:

	Options Outstanding						Options Exercisable

Range of Exercise Prices	Outstanding at June 30, 2011		Weighted Average Remaining Contractual Life in Years		Weighted Average Exercise Price		Exercisable at June 30, 2011		Weighted Average Exercise Price
$.01 to $4.99		6,871		2.02	$	2.93		6,871	$	2.93
$5.00 to $7.45		162,589		9.36		5.92		8,721		6.52
$7.46 to $9.99		734,896		6.49		8.29		111,514		7.56
$10.00 to $14.99		45,387		1.96		12.28		45,387		12.28
$15.00 to $19.99		81,388		3.90		15.03		81,388		15.03
$20.00 to $24.99		46,663		3.94		20.19		46,663		20.19

		1,077,794		6.40	$	9.09		300,544	$	12.12

Nonvested RSUs and restricted stock outstanding as of June 30, 2011 and changes during the six months ended June 30, 2011 were as follows:

	RSUs					Restricted Stock

	Number of Shares			Weighted Average Grant Date Fair Value		Number of Shares			Weighted Average Grant Date Fair Value
Nonvested at January 1, 2011		634,771		$	7.53		412,500		$	6.80
Granted		344,084			7.19		—			—
Vested		(232,409	)		7.16		(137,500	)		6.80
Forfeited		(94,984	)		7.54		—			—

Nonvested at June 30, 2011		651,462		$	7.52		275,000		$	6.80

INCOME TAXES

6 Months Ended

Jun. 30, 2011

INCOME TAXES

INCOME TAXES

NOTE 8—INCOME TAXES

For the three months ended June 30, 2011 and 2010, Tree.com recorded a tax provision of $0.04 million and $0.3 million, respectively, which represents an effective tax rate of (0.4)% and (4.0)%, respectively. The tax rates are lower than the federal statutory rate of 35% primarily due to an increase in the valuation allowance on deferred tax assets.

For the six months ended June 30, 2011 and 2010, Tree.com recorded a tax provision of $0.3 million and $0.8 million, respectively, which represents an effective tax rate of (1.0)% and (5.0)%, respectively. The tax rates are lower than the federal statutory rate of 35% primarily due to an increase in the valuation allowance on deferred tax assets.

Tree.com's unrecognized tax benefits increased by an immaterial amount in the first six months of 2011. The increase was due to penalty and interest on uncertain tax positions in prior years. Tree.com believes that it is reasonably possible that its remaining unrecognized tax benefits could decrease by approximately $0.06 million within twelve months of the current reporting date due to the expiration of state statute of limitations. An estimate of other changes in unrecognized tax benefits cannot be made, but are not expected to be significant.

For the six months ended June 30, 2011, Tree.com determined that its activity yielded an unusual effective tax rate; therefore, Tree.com utilized the actual year to date effective tax rate for purposes of determining year to date tax expense. This approach is consistent with the six months ended June 30, 2010.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

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-Publisher SEC

-Name Regulation S-X (SX)

-Number 210

-Section 08

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-Article 4

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-Paragraph 136, 172

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+ Details

CONTINGENCIES

6 Months Ended

Jun. 30, 2011

CONTINGENCIES

CONTINGENCIES

NOTE 9—CONTINGENCIES

During the six months ended June 30, 2011 and 2010, provisions for litigation settlements and contingencies of $4.5 million and $-0- million, respectively, were recorded in litigation settlements and contingencies in the accompanying consolidated statements of operations. The balance of the related liability was $4.3 million and $0.5 million at June 30, 2011 and December 31, 2010, respectively.

In the ordinary course of business, Tree.com is a party to various lawsuits. Tree.com establishes reserves for specific legal matters when it determines that the likelihood of an unfavorable outcome is probable and the loss is reasonably estimable. Management has also identified certain other legal matters for which it believes an unfavorable outcome is not probable and, therefore, no reserve is established. If no reserve is established but the loss contingency is reasonably possible, we disclose the nature of the contingency and the related estimate of possible loss or range of loss if such an estimate can be made. Although management currently believes that an unfavorable resolution of claims against Tree.com, including claims where an unfavorable outcome is reasonably possible, will not have a material impact on the liquidity, results of operations, or financial condition of Tree.com, these matters are subject to inherent uncertainties and management's view of these matters may change in the future. It is possible that an unfavorable outcome of one or more of these lawsuits could have a material impact on the liquidity, results of operations, or financial condition of Tree.com. Tree.com also evaluates other contingent matters, including tax contingencies, to assess the probability and estimated extent of potential loss.

RESTRUCTURING EXPENSE

6 Months Ended

Jun. 30, 2011

RESTRUCTURING EXPENSE

RESTRUCTURING EXPENSE

NOTE 10—RESTRUCTURING EXPENSE

Restructuring expense in 2011 primarily relates to severance costs for headcount reductions in the corporate infrastructure departments. Restructuring expense in 2010 primarily relates to continuing lease obligations on facilities previously used for call center operations, for which management had a plan to exit at December 31, 2009, but the cease-use date did not occur until January 2010. Costs that relate to ongoing operations are not part of restructuring expense. Restructuring expense by type are as follows (in thousands):

	For The Three Months Ended June 30, 2011

	Employee Termination Costs		Continuing Lease Obligations		Asset Write-offs		Total
Restructuring expense	$	398	$	—	$	—	$	398

	For The Three Months Ended June 30, 2010

	Employee Termination Costs		Continuing Lease Obligations		Asset Write-offs		Total
Restructuring expense	$	68	$	—	$	—	$	68

	For The Six Months Ended June 30, 2011

	Employee Termination Costs		Continuing Lease Obligations		Asset Write-offs		Total
Restructuring expense	$	491	$	—	$	—	$	491

	For The Six Months Ended June 30, 2010

	Employee Termination Costs		Continuing Lease Obligations		Asset Write-offs		Total
Restructuring expense	$	115	$	2,463	$	93	$	2,671

Restructuring expense and payments against liabilities are as follows (in thousands):

		For The Six Months Ended June 30, 2011

		Employee Termination Costs			Continuing Lease Obligations			Asset Write-offs		Total
Balance, beginning of period		$	19		$	2,339		$	—	$	2,358
	Restructuring expense		491			—			—		491
	Payments		(325	)		(661	)		—		(986	)
	Write-offs		—			—			—		—

Balance, end of period		$	185		$	1,678		$	—	$	1,863

At June 30, 2011, restructuring liabilities of $0.9 million are included in accrued expenses and other current liabilities and $1.0 million are included in other long-term liabilities in the accompanying consolidated balance sheet. At December 31, 2010, restructuring liabilities of $1.2 million are included in accrued expenses and other current liabilities and $1.2 million are included in other long-term liabilities in the accompanying consolidated balance sheet. Tree.com does not expect to incur significant additional costs related to the prior restructurings noted above.

- Definition

The entire disclosure for restructuring and related activities. Description of restructuring activities such as exit and disposal activities, include facts and circumstances leading to the plan, the expected plan completion date, the major types of costs associated with the plan activities, total expected costs, the accrual balance at the end of the period, and the periods over which the remaining accrual will be settled.

+ References+ Details

Document and Entity Information	6 Months Ended
Document and Entity Information	Jun. 30, 2011	Aug. 11, 2011
Document And Entity Information
Entity Registrant Name	Tree.com, Inc.
Entity Central Index Key	0001434621
Document Type	10-Q
Document Period End Date	Jun. 30, 2011
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		11,037,670
Document Fiscal Year Focus	2011
Document Fiscal Period Focus	Q2