eTrade 2008 Annual Report Download - page 126

The following table summarizes information related to the Company’s financial derivatives in cash flow
hedge relationships, hedging variable-rate assets and liabilities and the forecasted issuances of liabilities (dollars
in thousands):
Notional
Amount of
Derivatives
Fair Value of Derivatives Weighted-Average
Remaining
Life (Years)Asset Liability Net
Pay
Rate
Receive
Rate
Strike
Rate
December 31, 2008:
Pay-fixed interest rate swaps:
Repurchase agreements $2,080,000 $ — $(415,410) $(415,410) 4.88% 2.61% N/A 9.89
FHLB advances 330,000 — (44,135) (44,135) 4.50% 1.91% N/A 7.85
Purchased interest rate forward-
starting swaps:
Repurchase agreements 100,000 — (11,254) (11,254) 3.90% N/A N/A 10.15
Purchased interest rate options(1) :
Caps 1,635,000 2,620 — 2,620 N/A N/A 5.19% 3.13
Floors 1,900,000 99,473 — 99,473 N/A N/A 6.43% 2.46
Total cash flow hedges $ 6,045,000 $102,093 $ (470,799) $ (368,706) 4.79% 2.52% 5.86% 5.62
December 31, 2007:
Pay-fixed interest rate swaps:
Repurchase agreements $ 2,105,000 $ — $ (136,867) $ (136,867) 5.47% 5.13% N/A 11.38
FHLB advances 800,000 — (37,748) (37,748) 5.25% 5.15% N/A 9.65
Purchased interest rate options(1) :
Caps 4,410,000 26,260 — 26,260 N/A N/A 5.06% 2.62
Floors 1,400,000 31,205 — 31,205 N/A N/A 6.86% 2.61
Total cash flow hedges $ 8,715,000 $ 57,465 $ (174,615) $ (117,150) 5.41% 5.14% 5.50% 5.38
(1) Caps are used to hedge repurchase agreements and FHLB advances. Floors are used to hedge home equity lines of credit.
Under SFAS No. 133, as amended, the Company is required to record the fair value of gains and losses on
derivatives designated as cash flow hedges in accumulated other comprehensive loss in the consolidated balance
sheet. In addition, during the normal course of business, the Company terminates certain interest rate swaps and
options.
The following tables show: 1) amounts recorded in accumulated other comprehensive loss related to
derivative instruments accounted for as cash flow hedges; 2) the notional amounts and fair values of derivatives
terminated for the periods presented; and 3) the amortization of terminated interest rate swaps included in
operating interest expense and operating interest income (dollars in thousands):
Year Ended December 31,
2008 2007 2006
Impact on accumulated other comprehensive loss (net of tax):
Beginning balance $ (132,223) $ (27,844) $ (70,831)
Unrealized gains (losses), net (302,132) (116,101) 36,409
Reclassifications into earnings, net 16,866 11,722 6,578
Ending balance $ (417,489) $ (132,223) $ (27,844)
Derivatives terminated during the period:
Notional $7,135,000 $11,435,000 $10,675,000
Fair value of net gains (losses) recognized in accumulated other
comprehensive loss $ (268,364) $ (17,530) $ 80,198
Amortization of terminated interest rate swaps and options included in operating
interest expense and operating interest income $ 5,811 $ 1,090 $ 10,043
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