eTrade 2008 Annual Report Download - page 147

The table below summarizes the minimum excess capital requirements for the Company’s broker-dealer
subsidiaries (dollars in thousands):
December 31, 2008
Required
Net
Capital
Net
Capital
Excess
Net
Capital
E*TRADE Clearing LLC(1) $64,549 $685,205 $620,656
E*TRADE Securities LLC(1) 250 21,784 21,534
E*TRADE Capital Markets, LLC(2) 2,720 40,708 37,988
International broker-dealers 25,147 62,615 37,468
Total $92,666 $810,312 $717,646
(1) Elected to use the Alternative method to compute net capital.
(2) Elected to use the Aggregate Indebtedness method to compute net capital.
Banking
E*TRADE Bank is subject to various regulatory capital requirements administered by federal banking
agencies. Failure to meet minimum capital requirements can trigger certain mandatory and possibly additional
discretionary actions by regulators that, if undertaken, could have a direct material effect on E*TRADE Bank’s
financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective
action, E*TRADE Bank must meet specific capital guidelines that involve quantitative measures of E*TRADE
Bank’s assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices.
E*TRADE Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators
about components, risk weightings and other factors.
Quantitative measures established by regulation to ensure capital adequacy require E*TRADE Bank to
maintain minimum amounts and ratios of Total and Tier I Capital to Risk-weighted assets and Tier I Capital to
adjusted total assets. As shown in the table below, at December 31, 2008, the OTS categorized E*TRADE Bank
as “well capitalized” under the regulatory framework for prompt corrective action. However, events beyond
management’s control, such as a continued deterioration in residential real estate and credit markets, could
adversely affect future earnings and E*TRADE Bank’s ability to meet its future capital requirements.
E*TRADE Bank’s required actual capital amounts and ratios are presented in the table below (dollars in
thousands):
Actual
Minimum Required to
Qualify as Adequately
Capitalized
Minimum Required to
be Well Capitalized
Under Prompt
Corrective
Action Provisions
Amount Ratio Amount Ratio Amount Ratio
December 31, 2008:
Total Capital to risk-weighted assets $3,136,650 12.95% >$ 1,937,583 >8.0% >$2,421,979 >10.0%
Tier I Capital to risk-weighted assets $2,824,299 11.66% >$ 968,792 >4.0% >$1,453,187 > 6.0%
Tier I Capital to adjusted total assets $2,824,299 6.29% >$ 1,796,601 >4.0% >$2,245,751 > 5.0%
December 31, 2007:
Total Capital to risk-weighted assets $3,618,454 11.37% >$ 2,546,669 >8.0% >$3,183,336 >10.0%
Tier I Capital to risk-weighted assets $3,219,176 10.11% >$ 1,273,335 >4.0% >$1,910,002 > 6.0%
Tier I Capital to adjusted total assets $3,219,176 6.22% >$ 2,070,287 >4.0% >$2,587,858 > 5.0%
144