eTrade 2005 Annual Report Download - page 202

Table of Contents
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Loans receivable, net and loans held-for-sale, net
—For certain residential mortgage loans, fair value is estimated using quoted
market prices for similar types of products. The fair value of certain other types of loans is estimated using quoted market prices
for securities backed by similar loans. The fair value for loans that could not be reasonably established using the previous two
methods was estimated by discounting future cash flows using current rates for similar loans. Management adjusts the discount
rate to reflect the individual characteristics of the loan, such as credit risk, coupon, term, payment characteristics and the
liquidity of the secondary market for these types of loans. The fair value for certain consumer loans was calculated using a
discounted cash flow model incorporating prepayment and loss curves for the specific product type. Loans were valued in
groups based on rate and term with the discount rate applied to each group derived from the swap curve. The calculation of loss
and prepayment curves was based on past performance of similar credit quality originations by the same counterparty.
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Deposits
—For SDA, money market, passbook savings and checking accounts, fair value is estimated to be carrying value. For
fixed maturity certificates of deposit, fair value is estimated by discounting future cash flows at the currently offered rates for
deposits of similar remaining maturities.
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Securities sold under agreements to repurchase
—Fair value is determined by discounting future cash flows at the rate implied
for other similar instruments with similar remaining maturities.
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Other borrowings by Bank subsidiary
—For adjustable-rate borrowings, fair value is estimated to be carrying value. For
fixed-rate borrowings, fair value is estimated by discounting future cash flows at the currently offered rates for fixed-rate
borrowings of similar remaining maturities.
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Senior, mandatory convertible and convertible subordinated notes
—Fair value is estimated using quoted market prices.
NOTE 27—RELATED PARTY TRANSACTIONS
In the normal course of business, the Company extends credit to its principal officers, directors and employees to finance their
purchases of securities on margin. Margin loans to the Company’s principal officers totaled approximately $5.3 million at December31,
2005 and $6.6 million as of December31, 2004; however, there were revolving margin balances outstanding during 2005 and 2004 with
certain directors. These margin loans are made on the same terms and conditions as the Company’s loans to other non-affiliated
customers.
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2006. EDGAR Online, Inc.