eTrade 2009 Annual Report Download - page 45

commission per trade traded less during the period compared to our active trader customers, who generally have
a lower commission per trade. Customer appreciation, win-back and other promotional campaigns also
contributed to the decrease in average commission per trade.
Fees and Service Charges
Fees and service charges decreased 13% to $200.0 million for the year ended December 31, 2008 compared
to 2007. This decrease was primarily due to a lower order flow revenue, advisory management fees and CDO
management fees. The decrease in advisory management fees was primarily due to our sale of RAA. The
decrease in CDO management fees was due to the sale of our collateral management agreements during the first
quarter of 2008.
Principal Transactions
Principal transactions decreased 17% to $84.9 million for the year ended December 31, 2008 compared to
2007. The decrease in principal transactions resulted from lower trading volumes.
Losses on Loans and Securities, Net
The losses on loans and securities, net during the year ended December 31, 2008 was due principally to
losses on our preferred stock in Fannie Mae and Freddie Mac, which experienced record price declines and
volatility during the third quarter of 2008. Based upon our concerns about continuing market instability, all of
our positions were liquidated during the third quarter of 2008, resulting in a pre-tax loss of $153.8 million, net of
hedges, that was recognized in loss on trading securities, net. In addition, we recognized $7.7 million of
impairment related to the funds held in the Reserve Funds’ Primary Fund.
The loss on loans and securities, net during the year ended December 31, 2007 was due primarily to the $2.2
billion loss on the sale of our asset-backed securities portfolio in the fourth quarter of 2007.
Net Impairment
We recognized $95.0 million of impairment on certain securities in our CMO portfolio during the year
ended December 31, 2008, which was a result of the deterioration in the expected credit performance of the
underlying loans in the securities. We recognized $168.7 million of impairment on certain asset-backed securities
during the third quarter of 2007, which was a result of anticipated deterioration in the expected credit
performance of the underlying assets in the securities and our decision to sell these securities. The net
impairment for the periods ended December 31, 2008 and 2007 represented the total decline in the fair value of
impaired securities in accordance with the OTTI accounting guidance that was in effect prior to April 1, 2009.
Other Revenues
Other revenues increased 12% to $52.7 million for the year ended December 31, 2008 compared to 2007.
The increase in other revenues was due to income from the cash surrender value of Bank-Owned Life Insurance
(“BOLI”), which was entered into during the third quarter of 2007.
Provision for Loan Losses
Provision for loan losses increased $943.6 million to $1.6 billion for the year ended December 31, 2008
compared to 2007. The increase in the provision for loan losses was related primarily to deterioration in the
performance of our home equity loan portfolio, which began in the second half of 2007. During the year ended
December 31, 2008, we also experienced deterioration in the performance of our one- to four-family loan
portfolio.
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