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Table of Contents
Index to Financial Statements
of operations for 2003 however, the prior years’ classification of the operating results of these trusts continues to be included in minority
interests of subsidiaries.
Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity—SFAS No. 150
In 2003, the Company adopted SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and
Equity
. SFAS No. 150 requires certain mandatorily redeemable financial instruments with characteristics of both equity and debt to be
150 did not have any further impact on the Company’s financial position or results of operations.
Classification of Gains (Losses) from Financial Derivatives
During the second half of 2003, the SEC’s Office of the Chief Accountant provided additional guidance to all registrants regarding the
classification on the statement of operations of realized gains and losses resulting from financial derivatives that are not in fair value or cash
flow hedge relationships. All registrants were requested to comply with this guidance in future filings and to reclassify this activity for all prior
periods presented. As a result of the application of this additional guidance, the net interest income and expense realized on financial
derivatives that are not in fair value or cash flow hedge relationships have been reclassified from net interest income into gain on sales of loans
held-for-sale and securities, net. For the years ended December 31, 2003, 2002 and 2001, this reclassification resulted in increases of net
interest income and offsetting decreases in gain on sales of loans held-for-
sale and securities, net of $0.3 million, $3.7 million and $5.7 million,
respectively.
NOTE 3—BUSINESS COMBINATIONS
During the past three years, the Company completed several business combinations that were accounted for under the purchase method of
accounting. The results of operations of each are included in the Company’s consolidated statements of operations from the date of each
acquisition.
Acquisition
Segment
Purchase
Consideration
Goodwill at
December 31, 2003
2003
DRAFCO
Bank
$ 59.7 million
$ 3.4 million
Trading Relationships
Brokerage
$ 11.7 million
$ 4.5 million
2002
E*TRADE Consumer Finance (formerly Ganis Credit Corporation)
Bank
$ 1.9 billion
$ 28.6 million
Engelman Securities, Inc.
Brokerage
$ 7.5 million(1)
—
E*TRADE Professional Trading
Brokerage
$ 96.2 million
$ 98.0 million
2001
Dempsey & Company, LLC
Brokerage
$173.4 million(2)
$143.8 million
Web Street, Inc.
Brokerage
$ 44.2 million(3)
—
E*TRADE Mortgage (formerly LoansDirect, Inc.)
Bank
$ 34.5 million(4)
$ 32.6 million
59
(1)
Includes 1.3 million shares of common stock, $0.5 million of cash and $0.5 million of acquisitions costs.
(2) Includes 28.9 million shares of common stock and $20.0 million of cash. Under the terms of the Dempsey acquisition, certain key executives were to receive payments up to $12.0
million if they continued to be employed by the Company through October 2003. Acquisition-related expenses included $1.9 million for 2003, $4.4 million for 2002 and $4.9 million
for 2001 related to these arrangements.
(3) Includes 5.3 million shares of common stock. The net losses incurred by Web Street during the three month transition period of $5.8 million are included in acquisition-
related expenses
for 2001.
(4) Includes 3.0 million shares of common stock and $1.5 million of assumed vested employee stock options.