eTrade 2001 Annual Report Download - page 103

Parallel Change
in Interest Rates (bps)
Change in NPVE
As of December 31, 2001 Change in NPVE As of December 31, 2000
Board
Limit
+300 -13% -40% -55%
+200 -11% -18% -30%
+100 -6% -4% -15%
BaseCase — — —
-100 3% -19% -15%
-200 -7% -45% -30%
+200 -29% -68% -55%
As of December 31, 2001 the Bank’ s overall interest rate risk exposure would be classified as “minimal” under the criteria published
by the Bank’ s regulator, the Office of Thrift Supervision.
The fair value of derivative financial instruments is best viewed in the context of the overall balance sheet, and the value of any single
component of the balance sheet or off-balance sheet positions should not be viewed in isolation.
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Table of Contents
Gap Analysis
A simple tool used in interest rate risk measurement is a gap analysis. A gap analysis quantifies the difference between the amount of
interest-earning assets maturing or repricing within a specific period and the amount of interest-bearing liabilities that mature or
reprice in the same time period. This difference is referred to as the interest rate sensitivity gap. When the assets repricing within a
time period exceed the liabilities repricing within the same period, an institution is said to be “Positively Gapped” and presumably its
earnings will rise if interest rates rise and decline if interest rates fall.
The “cumulative gap to total assets” quantifies the interest rate sensitivity gaps for periods in the future. The “cumulative gap to total
assets hedge affected” also includes the impact of repricing of interest rate swaps, discussed more fully in the “Derivative Financial
Instrument” section below. In either line item, a positive number indicates that maturing or repricing assets during the period. At
December 31, 2001, the cumulative gap to total assets for repricing within 12 months was 35.1% compared to 49.1% at September 30,
2000. The decline was due primarily to deposit growth of transactional deposits (included in “savings account” in the table). For the
“hedge affected” cumulative gap, the derivatives portfolio put the Bank’ s gap for repricing within 12 months as more asset heavy at
December 31, 2001. The shift in the Bank’ s risk profile and the impact of its derivative positions is discussed more fully in the section
entitled “Scenario Analysis” above.
The following table sets forth our gap at December 31, 2001:
Balance at December31,
2001
Percent
ofTotal Repricing Within 0-3Months Repricing Within 4-12Months Repricing Within 1-5Years Repricingin MoreThan 5Years
(dollars in thousands)
Interest-earning banking assets:
Loans receivable $ 8,010,457 61.80 %
$ 794,231 $ 1,279,743 $ 3,501,757 $ 2,434,726
2002. EDGAR Online, Inc.