eTrade 2007 Annual Report Download - page 123

percent of the unpaid principal balance of its residential mortgage loans; one percent of 30 percent of its total
assets; or one-twentieth of its outstanding FHLB advances. In addition, the Company must maintain qualified
collateral equal to 110 to 115 percent of its advances, depending on the collateral type. These advances are
secured with specific mortgage loans and mortgage-backed securities. At December 31, 2007 and 2006, the
Company pledged $16.8 billion and $12.9 billion, respectively, of the one- to four-family and home equity loans
as collateral.
Other—ETBH raises capital through the formation of trusts, which sell trust preferred stock in the capital
markets. The capital securities must be redeemed in whole at the due date, which is generally 30 years after
issuance. Each trust issued Floating Rate Cumulative Preferred Securities, at par with a liquidation amount of
$1,000 per capital security. The trusts use the proceeds from the sale of issuances to purchase Floating Rate
Junior Subordinated Debentures issued by ETBH, which guarantees the trust obligations and contributes
proceeds from the sale of its subordinated debentures to E*TRADE Bank in the form of a capital contribution.
During 2007, ETBH formed three trusts, ETBH Capital Trust XXVIII, ETBH Capital Trust XXIX and
ETBH Capital Trust XXX. These trusts issued a total of 60,000 shares of Floating Rate Cumulative Preferred
Securities for a total of $60.0 million. Net proceeds from these issuances were invested in Floating Rate Junior
Subordinated Debentures that mature in 2037 and have variable rates of 1.90%, 1.95%, or 2.10% above the three-
month LIBOR, payable quarterly.
During 2006, ETBH formed five trusts, ETBH Capital Trust XXIII through ETBH Capital Trust XXVII.
These trusts issued a total of 95,000 shares of Floating Rate Cumulative Preferred Securities for a total of
$95 million. Net proceeds from these issuances were invested in Floating Rate Junior Subordinated Debentures
that mature in 2036 or 2037 and have variable rates of 1.95% or 2.10% above the three-month LIBOR, payable
quarterly.
In April 2007, ETBH called ETBH Capital Trust IV which had sold $10.0 million of trust preferred stock in
the capital markets in 2002 and generated a loss of $0.3 million. In June 2007, ETBH called Telebank Capital
Trust I which had sold $9.0 million of trust preferred stock in the capital markets in 1997, and generated a loss of
$0.9 million. In December 2006, ETBH called ETBH Capital Trust III which had sold $15.0 million of trust
preferred stock in the capital markets in 2001, and generated a loss of $0.5 million.
The face values of outstanding trusts at December 31, 2007 are shown below (dollars in thousands):
Trusts
Face
Value
Maturity
Date Annual Interest Rate
ETBH Capital Trust II $ 5,000 2031 10.25%
ETBH Capital Trust I $ 20,000 2031 3.75% above 6-month LIBOR
ETBH Capital Trust V, VI, VIII $ 51,000 2032 3.25%-3.65% above 3-month LIBOR
ETBH Capital Trust VII, IX—XII $ 65,000 2033 3.00%-3.30% above 3-month LIBOR
ETBH Capital Trust XIII—XVIII, XX $ 77,000 2034 2.45%-2.90% above 3-month LIBOR
ETBH Capital Trust XIX, XXI, XXII $ 60,000 2035 2.20%-2.40% above 3-month LIBOR
ETBH Capital Trust XXIII—XXIV $ 45,000 2036 2.10% above 3-month LIBOR
ETBH Capital Trust XXV—XXX $110,000 2037 1.90%-2.00% above 3-month LIBOR
The Company also has multiple term loans from financial institutions. These loans are collateralized by
equipment. Borrowings under these term loans bear interest at 1% above LIBOR, 0.68% above LIBOR or 9.30%.
The Company had approximately $40 million of principal outstanding under these loans at December 31, 2007.
Other borrowings also includes $12.0 million of overnight and other short-term borrowings in connection
with the Federal Reserve Bank’s term investment option and treasury, tax and loan programs. The Company
pledged $12.0 million of securities to secure these borrowings from the Federal Reserve Bank.
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