eTrade 2001 Annual Report Download - page 25
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Mae and Freddie Mac certificates are each guaranteed by their respective agencies. Mortgage-backed securities generally entitle us to
receive a pro rata portion of the cash flows from an identified pool of mortgages. We also invest in collateralized mortgage obligations
(“CMOs”). CMOs are securities issued by special purpose entities generally collateralized by pools of mortgage-backed securities.
The cash flows from these pools are segmented and paid in accordance with a predetermined priority to various classes of securities
issued by the entity. Our CMOs are senior tranches collateralized by federal agency securities or whole loans.
21
Table of Contents
Over 95% of our CMO portfolio is comprised of securities with a triple “A” rating. Although our CMOportfolio has maturity periods
similar to our mortgage-backed pass-through securities, the nature of the CMObonds acquired, primarily sequential pay bonds,
provides for more predictable cash flows than the mortgage-backed securities. This reduces the duration risk, extension risk and price
volatility of the CMO compared to mortgage-backed pass-through securities and thus allows us to target liabilities with shorter
durations.
In accordance with Statement of Financial Accounting Standards (“SFAS”) No. 115, Accounting for Certain Investments in Debt and
Equity Securities , we classify our mortgage-backed securities in one of three categories:held-to-maturity, available-for-sale or trading.
During the year ended December 31, 2001, three months ended December 31, 2000, and the fiscal years ended September 30, 2000
and September 30, 1999, we held no mortgage-backed securities classified as held-to-maturity.
The following table shows the activity in our available-for-sale mortgage-backed securities portfolio during the periods indicated.
December 31, 2001 December 31, 2000 September30, 2000 September30, 1999
(in thousands)
Mortgage-backed
securities at beginning
of period
$ 5,058,919 $ 4,188,553 $ 1,426,053 $ 798,860
Purchases:
CMOs 3,420,669 3,891,680 3,579,379 1,159,652
Fannie Mae 2,778,515 1,195 590,236 92,378
Ginnie Mae — — 8,891 —
Freddie Mac 104,439 24,586 173,732 —
Other 15 — — —
Sales(1) (6,198,758 ) (2,740,943 ) (1,140,935 )
(285,414 )
Repayments and
amortization and
accretion
(1,574,835 ) (326,213 ) (463,985 )
(332,092 )
Transfer to trading 27,357 — — —
Mark-to-market
adjustments and other
(59,702 ) 20,061 15,182 (7,331 )
Mortgage-backed
securities at end of
period
$ 3,556,619 $ 5,058,919 $ 4,188,553 $ 1,426,053
(1) Includes mortgage-backed securities on which call options have been exercised.
2002. EDGAR Online, Inc.