eTrade 2001 Annual Report Download - page 76

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receivable of $2,185.7 million and purchases of property and equipment of $129.7 million, partially offset by an excess of the net
sale/maturity of investments over the purchases of investments of $1,183.5 million. For the fiscal years ended September 30, 2000 and
1999, cash used in investing activities resulted primarily from an increase in loans receivable, purchases of property and equipment
and an excess of the purchases of investments over the net sale/maturity of investments.
Cash provided by financing activities was $1,889.2 million, $5,342.0 million and $2,000.0 million for the year ended December 31,
2001 and the fiscal years ended September 30, 2000 and 1999, respectively. For the year ended December 31, 2001, cash provided by
financing activities primarily resulted from an increase in banking deposits of $2,332.7 million, proceeds from convertible
subordinated notes of $315.3 million and a net increase in securities sold under agreements to repurchase of $368.6 million, offset by a
net reduction on advances from the FHLB of $830.7 million. For the year ended September 30, 2000 and 1999, cash provided by
financing activities primarily resulted from an increase in banking deposits, net advances from the FHLB and a net increase in
securities sold under agreements to repurchase, offset by payments on advances from the FHLB and, in fiscal 2000, proceeds from
convertible subordinated notes.
Regulatory Capital Requirements
The SEC, NASDR, OTS and various other regulatory agencies have stringent rules with respect to the maintenance of specific levels
of net capital by securities broker-dealers and regulatory capital by banks. Net capital is the net worth of a broker or dealer (assets
minus liabilities), less deductions for certain types of assets. Minimum net capital requirements for our broker-dealer subsidiaries as of
December 31, 2001 were fully met.
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Quantitative measures
established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios of total and Tier I
capital to risk-weighted assets, Core Capital to adjusted tangible assets and of Tangible Capital to tangible assets. To be categorized as
well capitalized the Bank must maintain a minimum Total Capital to risk-weighted assets ratio of 10.0%, Tier I Capital to
risk-weighted assets ratio of 6.0% and Core Capital to adjusted tangible assets ratio of 5.0%. As of December 31, 2001, the Bank was
in compliance with all of its regulatory capital requirements and its capital ratios exceeded the ratios for “well capitalized” institutions
under OTS regulations (See Note 21 to Consolidated Financial Statements).
Impact of Recently Issued Accounting Pronouncements
In June 2001, the FASB issued SFAS No. 142, Goodwill and Other Intangible Assets , effective for fiscal years beginning after
December 15, 2001. SFAS No. 141 requires that all business combinations initiated after June 30, 2001 be accounted for under the
purchase method of accounting and addresses the initial recognition and measurement of goodwill and intangible assets acquired in the
business combination and the accounting for goodwill and other intangible assets subsequent to their acquisition. SFAS No. 142
provides that intangible assets with finite useful lives be amortized and that goodwill and intangible assets with indefinite lives not be
amortized, but rather be tested at least annually for impairment. The acquisition of Dempsey occurred subsequent to June 30, 2001,
and has been accounted for in accordance with SFAS Nos. 141 and 142; accordingly, the goodwill recognized of $143.8 million was
not amortized during the year ended December 31, 2001. For all other acquisitions previously accounted for under the purchase
method of accounting, the Company will adopt SFAS No. 142 effective January 1, 2002. Upon adoption of SFAS No. 142, we will
stop the amortization of goodwill with an estimated net carrying value of approximately $417.6million at December 31, 2001
(excludes Dempsey goodwill of $143.8 million) and annual amortization expense of $27.8million that resulted from business
combinations initiated prior to the adoption of SFAS No.141. We are currently evaluating goodwill under the SFAS No. 142
transitional impairment test and expect to record an impairment charge of approximately $300.0million to $350.0 million primarily
attributed to the goodwill from our international acquisitions. Transitional impairment losses will be recognized as the effect of a
change in accounting principle in the first quarter of fiscal year 2002.
2002. EDGAR Online, Inc.