eTrade 2009 Annual Report Download - page 44

Net Operating Interest Income
Net operating interest income decreased 20% to $1.3 billion for the year ended December 31, 2008
compared to December 31, 2007. Net operating interest income is earned primarily through holding credit
balances, which include margin, real estate and consumer loans, and by holding customer cash and deposits,
which are a low cost source of funding. The decrease in net operating interest income was due primarily to the
planned decline in enterprise interest-earning assets during 2008.
Average enterprise interest-earning assets decreased 16% to $46.9 billion for the year ended December 31,
2008 compared to 2007, primarily the result of a decrease in our average available-for-sale portfolio, average
margin receivables and average loans, offset by an increase in average cash and equivalents. Average
available-for-sale mortgage-backed and investment securities decreased 41% to $9.6 billion for the year ended
December 31, 2008 compared to 2007. This decrease was primarily due to the sale of certain mortgage-backed
securities in the first quarter of 2008 and the sale of our asset-backed securities portfolio towards the end of the
fourth quarter of 2007. Average margin receivables decreased 17% to $5.8 billion for the year ended
December 31, 2008 compared to 2007. We believe this decrease was due to customers deleveraging and reducing
their risk exposure given the substantial volatility in the financial markets. Average loans decreased 10% to $27.8
billion for the year ended December 31, 2008 compared to 2007 as a result of our focus on growing the one- to
four-family loan portfolio in the first and second quarters of 2007. Beginning in the second half of 2007, we
altered our strategy and halted the focus on growing the balance sheet.
Average enterprise interest-bearing liabilities decreased 17% to $44.5 billion for the year ended
December 31, 2008 compared to 2007. The decrease in average enterprise interest-bearing liabilities was
primarily due to a decrease in average repurchase agreements and average other borrowings, average FHLB
advances and average customer payables. Average repurchase agreements and other borrowings decreased 37%
to $7.7 billion for the year ended December 31, 2008 compared to 2007. Average FHLB advances decreased
34% to $4.7 billion for the year ended December 31, 2008 compared to 2007. The decreases in these balances
were the result of paying down these liabilities as we decreased the size of our balance sheet during 2008.
Average customer payables decreased 25% to $4.3 billion for the year ended December 31, 2008 compared to
2007, which was related primarily to the sale of our Canadian brokerage business during the third quarter of
2008.
Enterprise net interest spread decreased by 12 basis points to 2.52% for the year ended December 31, 2008
compared to 2007. This decrease was driven in part by an atypical spread among two key benchmark interest
rates: federal funds and the London Interbank Offered Rate (“LIBOR”). The majority of our interest-earning
assets and liabilities are linked, either directly or indirectly, to these benchmark interest rates.
Commissions
Commissions revenue decreased 22% to $515.5 million for the year ended December 31, 2008 compared to
2007. This decrease was due almost entirely to a decrease of $142.6 million, or 99%, in our balance sheet
management commissions revenue as a result of the exit of our institutional brokerage operations.
DARTs increased 6% to 188,116 for the year ended December 31, 2008 compared to 2007. Our U.S. DART
volume increased 5% for the year ended December 31, 2008 compared to 2007, driven entirely by organic
growth. In addition, option-related DARTs as a percentage of our total U.S. DARTs represented 15% and 16% of
U.S. trading volume for the periods ending December 31, 2008 and 2007, respectively.
Average commission per trade decreased 7% to $10.88 for the year ended December 31, 2008 compared to
2007. The decrease was primarily a function of the product and customer mix. The overall poor performance of
the equity markets for the year ended December 31, 2008 disproportionately impacted higher commission
products, such as corporate services transactions and mutual funds. Our customers who have a higher
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