eTrade 2009 Annual Report Download - page 33

Balance Sheet Highlights (dollars in millions):
December 31, Variance
2009 2008 2009 vs. 2008
Total assets $47,366.5 $48,538.2 (2)%
Less: Goodwill and other intangibles, net (2,308.7) (2,324.5) (1)%
Add: Deferred tax liability related to goodwill 176.9 127.7 39%
Tangible assets(1) $45,234.7 $46,341.4 (2)%
Loans, net $19,174.9 $24,451.8 (22)%
Corporate debt(2)
Interest-bearing $ 1,591.7 $ 3,150.4 (49)%
Non-interest-bearing $ 1,020.9 $ — *
Shareholders’ equity $ 3,749.6 $ 2,591.5 45%
Less: Goodwill and other intangibles, net (2,308.7) (2,324.5) (1)%
Add: Deferred tax liability related to goodwill 176.9 127.7 39%
Tangible common equity(3) $ 1,617.8 $ 394.7 310%
Tangible common equity to tangible assets(4) 3.58% 0.85% 2.73%
* Percentage not meaningful.
(1) Tangible assets is calculated as total assets less goodwill (net of related deferred tax liability) and other intangible assets and is a
non-GAAP measure. Management believes that tangible assets is a measure of the Company’s capital strength and is additional useful
information that supplements the regulatory capital ratios of E*TRADE Bank.
(2) The corporate debt balances represent the amount of principal outstanding.
(3) Tangible common equity is calculated as shareholders’ equity less goodwill (net of related deferred tax liability) and other intangible
assets and is a non-GAAP measure. Management believes that tangible common equity is a measure of the Company’s capital strength
and is additional useful information that supplements the regulatory capital ratios of E*TRADE Bank.
(4) Tangible common equity to tangible assets is a non-GAAP measure, the components of which are defined above. Management believes
that tangible common equity to tangible assets ratio is a measure of the Company’s capital strength and is additional useful information
that supplements the regulatory capital ratios of E*TRADE Bank.
During the third quarter of 2009, we exchanged $1.7 billion principal amount of our interest-bearing debt
for an equal principal amount of non-interest-bearing convertible debentures. Subsequent to the Debt Exchange,
$720.9 million debentures were converted into 696.6 million shares of common stock during the third and fourth
quarters of 2009. The subsequent debt conversions combined with the common stock issued in connection with
our equity offerings resulted in an increase of $1.5 billion in tangible common equity during the year ended
December 31, 2009.
EARNINGS OVERVIEW
2009 Compared to 2008
We incurred a net loss of $1.3 billion for the year ended December 31, 2009 due principally to the Debt
Exchange that resulted in a non-cash loss of $772.9 million (pre-tax loss of $968.3 million) on early
extinguishment of debt during the third quarter of 2009. Our trading and investing segment income was $659.1
million for the year ended December 31, 2009. However, the provision for loan losses in our balance sheet
management segment more than offset this strong performance, resulting in an overall segment loss of $524.4
million for the year ended December 31, 2009.
On April 1, 2009, we adopted the amended guidance for the recognition of other-than-temporary
impairment (“OTTI”) for debt securities as well as the presentation of OTTI on the consolidated financial
statements. As a result of the adoption, we recognized a $20.2 million after-tax decrease to beginning
accumulated deficit and a corresponding offset in accumulated other comprehensive loss on our consolidated
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