eTrade 2009 Annual Report Download - page 55

Loans, net decreased 22% to $19.2 billion at December 31, 2009 from $24.5 billion at December 31, 2008.
This decline was due primarily to our strategy of reducing balance sheet risk by allowing our loan portfolio to
pay down, which we plan to do for the foreseeable future. In addition, we sold a $0.4 billion pool of home equity
loans during the year ended December 31, 2009. We purchased this particular pool of loans from the originator
of the loans in a prior period. This same originator, who continued to service the loans subsequent to our
purchase, made an unsolicited offer to repurchase the loans back from us at a price of 98% of the balance of the
loan portfolio and we accepted this offer. We believe transactions of this nature are rare and are unlikely to occur
again in future periods.
Loans held-for-sale of $7.9 million as of December 31, 2009 represents loans originated through, but not yet
purchased by, a third party company that we partnered with to provide access to real estate loans for our
customers. The product is offered as a convenience to our customers and is not one of our primary product
offerings. The third party company providing this product performs all processing and underwriting of these
loans and is responsible for the credit risk associated with these loans, which minimizes our assumption of any of
the typical risks commonly associated with mortgage lending. There is a short period of time after closing of the
loans in which we record the originated loan as held-for-sale prior to the third party company purchasing the
loan.
We have a credit default swap (“CDS”) on a portion of our first-lien residential real estate loan portfolio
through a synthetic securitization structure that provides, for a fee, an assumption by a third party of a portion of
the credit risk related to the underlying loans. The CDS provides protection for losses in excess of $4 million, but
not to exceed $30 million. During the year ended December 31, 2009, the entire $30 million in losses had been
recognized and as a result, there is not a related benefit reflected in the allowance for loan losses as of
December 31, 2009. We have received approximately $8 million in payments out of the total $30 million benefit
as of December 31, 2009. We expect to receive the remaining $22 million in 2010.
Deposits
Deposits are summarized as follows (dollars in millions):
December 31,
Variance
2009 vs. 2008
2009 2008 Amount %
Sweep deposit accounts $12,551.5 $ 9,650.4 $ 2,901.1 30%
Complete savings accounts 9,704.0 11,298.5 (1,594.5) (14)%
Certificates of deposit 1,215.8 2,363.4 (1,147.6) (49)%
Other money market and savings accounts 1,183.4 1,394.2 (210.8) (15)%
Checking accounts 813.7 991.5 (177.8) (18)%
Brokered certificates of deposit 129.3 438.2 (308.9) (70)%
Total deposits $25,597.7 $26,136.2 $ (538.5) (2)%
Deposits represented 59% and 57% of total liabilities at December 31, 2009 and 2008, respectively.
Deposits generally provide us the benefit of lower interest costs compared with wholesale funding alternatives.
The complete savings accounts and certificates of deposits decreased 14% and 49%, respectively, during the year
ended December 31, 2009 compared to 2008 as we are no longer focused on growing these specific products.
These decreases were offset by a 30% increase in sweep deposit accounts. We expect the non-sweep deposit
balances to continue to decrease in 2010. At December 31, 2009, 95% of our customer deposits were covered by
FDIC insurance.
During the fourth quarter of 2009, we entered into an agreement to sell up to $1.4 billion of our complete
savings accounts to a third party. This transaction requires notification to each customer account being sold;
therefore, we expect that upon closing, the amount of deposits ultimately transferred will be less than $1.4
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