eTrade 2008 Annual Report Download - page 127

The gains (losses) accumulated in other comprehensive loss on the derivative instruments terminated shown
in the preceding table will be included in operating interest expense and operating interest income over the
periods the variable rate liabilities and hedged forecasted issuance of liabilities will affect earnings, ranging from
188 days to approximately 14 years.
The following table shows the balance in accumulated other comprehensive loss attributable to open cash
flow hedges and discontinued cash flow hedges (dollars in thousands):
Year Ended December 31,
2008 2007 2006
Accumulated other comprehensive loss balance (net of tax)
related to:
Open cash flow hedges $(266,704) $(144,337) $(50,158)
Discontinued cash flow hedges (150,785) 12,114 22,314
Total cash flow hedges $(417,489) $(132,223) $(27,844)
The following table shows the balance in accumulated other comprehensive loss attributable to cash flow
hedges by type of hedged item (dollars in thousands):
As of December 31,
2008 2007
Accumulated other comprehensive income (loss) related to:
FHLB advances $(104,839) $ (68,029)
Repurchase agreements (664,847) (177,416)
Home equity lines of credit 99,453 36,485
Other (1,068) (1,017)
Total other comprehensive income (loss) before tax (671,301) (209,977)
Tax benefit 253,812 77,754
Total cash flow hedges, net of tax $(417,489) $(132,223)
Hedge Ineffectiveness
In accordance with SFAS No. 133, as amended, the Company recognizes hedge ineffectiveness on both fair
value and cash flow hedge relationships. The amount of ineffectiveness recorded in earnings for cash flow
hedges is equal to the excess of the cumulative change in the fair value of the actual derivative over the
cumulative change in the fair value of a hypothetical derivative which is created to match the exact terms of the
underlying instruments being hedged. These amounts are reflected in the gain (loss) on loans and securities, net
line item in the consolidated statement of income (loss). Cash flow and fair value ineffectiveness are re-measured
on a quarterly basis. The following table summarizes income (expense) recognized by the Company as fair value
and cash flow hedge ineffectiveness (dollars in thousands):
Year Ended December 31,
2008 2007 2006
Fair value hedges $2,037 $(4,673) $(1,409)
Cash flow hedges 180 (336) (93)
Total hedge ineffectiveness $2,217 $(5,009) $(1,502)
Economic Hedges
During the year ended December 31, 2008, the Company used equity put options and credit default swaps as
economic hedges against potential changes in the value of the Fannie Mae and Freddie Mac preferred stock.
124