eTrade 2008 Annual Report Download - page 160

Parent Company Guarantees
Guarantees are contingent commitments issued by the Company for the purpose of guaranteeing the
financial obligations of a subsidiary to a financial institution. The collective obligation of the corporation does
not change by the existence of corporate guarantees. Rather, the guarantees shift ultimate payment responsibility
of an existing financial obligation from a subsidiary to the parent company.
In support of the Company’s brokerage business, the Company has provided guarantees on the settlement of
its subsidiaries’ financial obligations with several financial institutions related to its securities lending activities.
Terms and conditions of the guarantees, although typically undefined in the guarantees themselves, are governed
by the conditions of the underlying obligation that the guarantee covers. Thus, the Company’s obligation to pay
under these guarantees coincides exactly with the terms and conditions of those underlying obligations. At
December 31, 2008, no claims had been filed with the Company for payment under any guarantees. These
guarantees are not collateralized.
In addition to guarantees issued on behalf of subsidiaries participating in securities lending programs, the
Company also issues guarantees for the settlement of foreign exchange transactions. If a subsidiary fails to
deliver currency on the settlement date of a foreign exchange arrangement, the beneficiary financial institution
may seek payment from the Company. Terms are undefined, and are governed by the terms of the underlying
financial obligation. At December 31, 2008, no claims had been made on the Company under these guarantees
and thus, no obligations had been recorded. These guarantees are not collateralized.
NOTE 26—QUARTERLY DATA (UNAUDITED)
The information presented below reflects all adjustments, which, in the opinion of management, are of a
normal and recurring nature necessary to present fairly the results of operations for the quarterly periods
presented (dollars in thousands, except per share amounts):
2008 2007
1st 2nd 3rd 4th 1st 2nd 3rd 4th
Total net revenue $529,094 $ 532,337 $ 377,732 $ 486,433 $642,183 $668,856 $482,120 $(1,631,433)
Income (loss) from
continuing
operations $ (92,927) $(119,443) $(320,789) $(276,225) $170,494 $157,688 $ (58,832) $(1,711,687)
Net income (loss) $ (91,193) $ (94,559) $ (50,475) $(275,563) $169,410 $159,129 $ (58,448) $(1,711,845)
Earnings (loss) per
share from
continuing
operations:
Basic $ (0.20) $ (0.24) $ (0.60) $ (0.50) $ 0.40 $ 0.37 $ (0.14) $ (3.98)
Diluted $ (0.20) $ (0.24) $ (0.60) $ (0.50) $ 0.39 $ 0.36 $ (0.14) $ (3.98)
Net earnings (loss) per
share:
Basic $ (0.20) $ (0.19) $ (0.09) $ (0.50) $ 0.40 $ 0.38 $ (0.14) $ (3.98)
Diluted $ (0.20) $ (0.19) $ (0.09) $ (0.50) $ 0.39 $ 0.37 $ (0.14) $ (3.98)
The continued deterioration in the residential real estate and credit markets, as well as the nearly
unprecedented turmoil in the global financial markets, had a significant impact on the Company’s financial
performance during 2008. The decrease in income (loss) from continuing operations for the third and fourth
quarter of 2008 was due primarily to the $517.8 million and $512.9 million in provision for loan losses,
respectively. Additionally, the Company incurred losses of $153.8 million, net of hedges, on its preferred stock
in Fannie Mae and Freddie Mac during the third quarter of 2008. The decrease in net income for the fourth
quarter of 2007 was due principally to the $2.2 billion loss on the sale of the Company’s asset-backed securities
portfolio and $402.3 million in provision for loan losses.
157