eTrade 2008 Annual Report Download - page 115

Recurring Fair Value Measurements
Assets and liabilities measured at fair value on a recurring basis are summarized below (dollars in
thousands):
December 31, 2008
Level 1 Level 2 Level 3 Fair Value
Assets
Trading securities $ 2,363 $ 19,712 $ 33,406 $ 55,481
Available-for-sale securities:
Mortgage-backed securities — 10,408,528 304,661 10,713,189
Investment securities — 92,735 170 92,905
Total available-for-sale securities — 10,501,263 304,831 10,806,094
Other assets:
Derivative assets — 137,308 8 137,316
Deposits with clearing organizations(1) 28,000 11,659 — 39,659
Servicing rights — — 6,478 6,478
Total other assets measured at fair value on a
recurring basis 28,000 148,967 6,486 183,453
Total assets measured at fair value on a
recurring basis $30,363 $10,669,942 $344,723 $11,045,028
Liabilities
Derivative liabilities $ — $ 484,681 $ 500 $ 485,181
Securities sold, not yet purchased 1,844 4,926 — 6,770
Total liabilities measured at fair value
on a recurring basis $ 1,844 $ 489,607 $ 500 $ 491,951
(1) Deposits with clearing organizations includes U.S. Treasuries and investment securities deposited with clearing organizations by broker-
dealer subsidiaries.
Both observable and unobservable inputs may be used to determine the fair value of positions that the
Company has classified within the Level 3 category. As a result, the realized and unrealized gains and losses for
assets and liabilities within the Level 3 category presented in the tables below may include changes in fair value
that were attributable to both observable and unobservable inputs. The following table presents additional
information about Level 3 assets and liabilities measured at fair value on a recurring basis for the year ended
December 31, 2008 (dollars in thousands):
Realized and Unrealized Gains (Losses)
January 1,
2008
Included
in
Earnings(1)
Included in
Other
Comprehensive
Loss Total(2)
Purchases,
Sales, Other
Settlements
and Issuances
Net
Net
Transfers
In and/or
(Out) of
Level 3(3)(4)
December 31,
2008
Trading securities $ 37,795 $ 387 $ — $ 387 $ (2,386) $ (2,390) $ 33,406
Available-for-sale securities:
Mortgage-backed securities $768,815 $(99,895) $(144,947) $(244,842) $(72,177) $(147,135) $304,661
Investment securities $ 2,117 $ (970) $ (1,096) $ (2,066) $ 119 $ — $ 170
Servicing rights $ 8,282 $ (2,134) $ — $ (2,134) $ 330 $ — $ 6,478
Derivative instruments, net(5) $ (3,644) $ 2,896 $ — $ 2,896 $ 256 $ — $ (492)
(1) The majority of realized and unrealized gains (losses) included in earnings are reported in the gain (loss) on loans and securities, net line item.
(2) The majority of total realized and unrealized gains (losses) were related to Level 3 instruments held at December 31, 2008.
(3) The Company’s transfers in and out of Level 3 are as of the beginning of the reporting period on a quarterly basis.
(4) The level classification transfers of certain CMOs were driven by changes in price transparency for the securities.
(5) Represents Derivative assets net of Derivative liabilities for presentation purposes only.
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