eTrade 2005 Annual Report Download - page 138

Table of Contents
Other-Than-Temporary Impairment of Investments
The following tables show the fair value and unrealized losses on investments, aggregated by investment category and the length of
time that individual securities have been in a continuous unrealized loss position (in thousands):
Less than 12 Months
12 Months or More
Total
Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
December 31, 2005:
Mortgage-backed
securities:
Backed by Federal
agencies
$
5,914,808
$
(142,245
)
$
3,512,713
$
(117,900
)
$
9,427,521
$
(260,145
)
Other
351,565
(5,177
)
546,291
(13,829
)
897,856
(19,006
)
Asset-backed securities
412,142
(3,064
)
411,595
(9,308
)
823,737
(12,372
)
Municipal bonds
21,006
(165
)
22,775
(717
)
43,781
(882
)
Corporate bonds
—
—
72,760
(2,171
)
72,760
(2,171
)
Other debt securities
—
—
73,485
(5,504
)
73,485
(5,504
)
Publicly traded equity
securities
86,538
(1,335
)
11,759
(971
)
98,297
(2,306
)
Total temporarily
impaired securities
$
6,786,059
$
(151,986
)
$
4,651,378
$
(150,400
)
$
11,437,437
$
(302,386
)
December 31, 2004:
Mortgage-backed
securities:
Backed by Federal
agencies
$
5,504,676
$
(85,020
)
$
2,135,727
$
(60,460
)
$
7,640,403
$
(145,480
)
Other
704,369
(6,715
)
175,678
(6,167
)
880,047
(12,882
)
Asset-backed securities
771,250
(5,851
)
20,769
(8,853
)
792,019
(14,704
)
Municipal bonds
72,146
(1,082
)
—
—
72,146
(1,082
)
Corporate bonds
—
—
84,515
(3,444
)
84,515
(3,444
)
Other debt securities
—
—
74,700
(4,767
)
74,700
(4,767
)
Publicly traded equity
securities
52,717
(2,055
)
—
—
52,717
(2,055
)
Total temporarily
impaired securities
$
7,105,158
$
(100,723
)
$
2,491,389
$
(83,691
)
$
9,596,547
$
(184,414
)
The Company does not believe any individual loss as of December31, 2005 represents an other-than-temporary impairment. The
majority of the unrealized losses on mortgage- and asset-backed securities are attributable to changes in interest rates and not
reflective of deterioration in the credit quality of the issuer and/or securitization. Substantially all mortgage-backed securities backed
by Federal agencies are “AAA” rated and have unrealized losses due to changes in market interest rates. As market interest rates
increase, the fair value of fixed-rate securities will decrease. During 2005, increasing market interest rates caused higher unrealized
losses on our fixed-rate securities including mortgage- and asset-backed securities. The Company has the ability and intent to hold
these securities until the market value recovers or the securities mature. Asset-backed securities, corporate bonds and other debt
securities are evaluated by reviewing the credit worthiness of the lender and based on market conditions. As of December31, 2005,
unrealized losses on mortgage- and asset-backed securities were primarily attributed to rising interest rates and not underlying credit
impairment. Based on its evaluation, the Company recorded other-than-temporary charges of $38.3 million, $14.0 million and $2.2 million
for 2005, 2004 and 2003, respectively, for its asset- and mortgage-backed securities and interest-only securities. Additionally, the
Company recognized $2.0million and $4.4 million of other-than-temporary impairments for 2005 and 2004, respectively, from retained
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2006. EDGAR Online, Inc.