eTrade 2007 Annual Report Download - page 50

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Wholesale Borrowings
Wholesale borrowings, which consist of securities sold under agreements to repurchase and other
borrowings are summarized as follows (dollars in thousands):
December 31,
Variance
2007 vs. 2006
2007 2006 Amount %
Securities sold under agreements to repurchase $ 8,932,693 $ 9,792,422 $ (859,729) (9)%
FHLB advances $ 6,967,406 $ 4,865,466 $2,101,940 43 %
Subordinated debentures 435,830 385,502 50,328 13 %
Other 43,268 72,994 (29,726) (41)%
Total other borrowings $ 7,446,504 $ 5,323,962 $2,122,542 40 %
Total wholesale borrowings $16,379,197 $15,116,384 $1,262,813 8 %
Wholesale borrowings represented 30% and 31% of total liabilities at December 31, 2007 and 2006,
respectively. The increase in other borrowings of $2.1 billion during the year ended December 31, 2007 was due
primarily to an increase in FHLB advances. Securities sold under agreements to repurchase coupled with FHLB
advances are the primary wholesale funding sources of the Bank. During the first and second quarters of 2007,
the Bank used these wholesale sources along with deposit growth to fund the increase in loans receivable. We
expect total other borrowings to decline in future periods as we focus on replacing this funding with growth in
retail deposits.
Corporate Debt
Corporate debt is summarized as follows (dollars in thousands):
December 31,
Variance
2007 vs. 2006
2007 2006 Amount %
Senior notes $1,272,742 $1,401,592 $ (128,850) (9)%
Springing lien notes 1,304,391 — 1,304,391 *
Mandatory convertible notes 445,565 440,577 4,988 1 %
Total corporate debt $3,022,698 $1,842,169 $1,180,529 64 %
* Percentage not meaningful.
Corporate debt increased to $3.0 billion at December 31, 2007 compared to $1.8 billion at
December 31, 2006. The increase is related to the $1.8 billion of 12
1
⁄
2
% springing lien notes issued to Citadel at
a discount of $481.6 million in the fourth quarter of 2007.
LIQUIDITY AND CAPITAL RESOURCES
We have established liquidity and capital policies. The objectives of these policies are to support the
successful execution of our business strategies while ensuring ongoing and sufficient liquidity through the
business cycle and during periods of financial distress. During the fourth quarter of 2007, we experienced a
disruption in our customer base, which caused a significant decline in customer deposits. We believe this
disruption was due to the uncertainty surrounding the Company in connection with the credit related losses in our
institutional segment. Deposits are the primary source of liquidity for E*TRADE Bank, so this sudden and rapid
decline created a substantial amount of liquidity risk. We followed our existing liquidity policies and contingency
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