eTrade 2008 Annual Report Download - page 51

Wholesale Borrowings
Wholesale borrowings, which consist of securities sold under agreements to repurchase and other
borrowings are summarized as follows (dollars in thousands):
Variance
December 31, 2008 vs. 2007
2008 2007 Amount %
Securities sold under agreements to repurchase $ 7,381,279 $ 8,932,693 $(1,551,414) (17)%
FHLB advances $ 3,903,600 $ 6,967,406 $(3,063,806) (44)%
Subordinated debentures 427,328 435,830 (8,502) (2)%
Other 22,849 43,268 (20,419) (47)%
Total other borrowings $ 4,353,777 $ 7,446,504 $(3,092,727) (42)%
Total wholesale borrowings $11,735,056 $16,379,197 $(4,644,141) (28)%
Wholesale borrowings represented 26% and 30% of total liabilities at December 31, 2008 and 2007,
respectively. The decrease in other borrowings of $3.1 billion for the period ended December 31, 2008 was due
primarily to a decrease in FHLB advances. Securities sold under agreements to repurchase coupled with FHLB
advances are the primary wholesale funding sources of the Bank. As a result, we expect these balances to
fluctuate over time as our deposits and our interest-earning assets fluctuate.
Corporate Debt
Corporate debt is summarized as follows (dollars in thousands):
Variance
December 31, 2008 vs. 2007
2008 2007 Amount %
Senior notes $1,144,662 $1,272,742 $(128,080) (10)%
Springing lien notes 1,605,870 1,304,391 301,479 23%
Mandatory convertible notes — 445,565 (445,565) *
Total corporate debt $2,750,532 $3,022,698 $(272,166) (9)%
* Percentage not meaningful.
Corporate debt decreased to $2.8 billion at December 31, 2008 compared to $3.0 billion at December 31,
2007, primarily due to the retirement of the $450 million in mandatory convertible notes during the fourth quarter
of 2008 and a decline in senior notes of $121 million in principal related to debt for equity exchanges. Offsetting
these decreases was an additional $150.0 million of 12
1
⁄ 2 % springing lien notes issued to Citadel in the first
quarter of 2008 and the issuance of $121 million of 12
1
⁄ 2 % springing lien notes in satisfaction of the November
2008 interest payment on these notes.
LIQUIDITY AND CAPITAL RESOURCES
We have established liquidity and capital policies. The objectives of these policies are to support the
successful execution of our business strategies while ensuring ongoing and sufficient liquidity through the
business cycle. These policies are especially important during periods of stress in the financial markets, which
have been ongoing since the fourth quarter of 2007 and will likely continue for the foreseeable future. During the
fourth quarter of 2007, we experienced a disruption in our customer base, which caused a significant decline in
customer deposits. We believe this disruption was due to uncertainty in connection with the credit related losses
in our institutional segment. Deposits are the primary source of liquidity for E*TRADE Bank, so this sudden and
rapid decline created a substantial amount of liquidity risk. We followed our existing liquidity policies and
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