eTrade 2010 Annual Report Download - page 137

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instrument continue to be reported in accumulated other comprehensive loss until the forecasted transaction
affects earnings. Derivative instruments no longer in hedging relationships continue to be recorded at fair value
with changes in fair value being reported in the gains (losses) on loans and securities, net line item in the
consolidated statement of loss.
The future issuances of liabilities, including repurchase agreements, are largely dependent on the market
demand and liquidity in the wholesale borrowings market. As of December 31, 2010, the Company believes the
forecasted issuance of all debt in cash flow hedge relationships is probable. However, unexpected changes in
market conditions in future periods could impact the ability to issue this debt. The Company believes the
forecasted issuance of debt in the form of repurchase agreements is most susceptible to an unexpected change in
market conditions.
The following table summarizes information related to the Company’s interest rate contracts in cash flow
hedge relationships, hedging variable-rate assets and liabilities and the forecasted issuances of liabilities (dollars
in thousands):
Notional
Amount
Fair Value Weighted-Average
Asset Liability Net Pay Rate
Receive
Rate
Strike
Rate
Remaining
Life (Years)
December 31, 2010
Pay-fixed interest rate
swaps:
Repurchase agreements $1,475,000 $ 15,314 $ (50,587) $ (35,273) 3.59% 0.29% N/A 9.29
FHLB advances 450,000 — (36,907) (36,907) 4.19% 0.30% N/A 8.13
Purchased interest rate
forward-starting swaps:
Repurchase agreements 200,000 — (581) (581) 2.88% N/A N/A 7.03
Purchased interest rate
options:(1)
Caps 3,330,000 84,045 — 84,045 N/A N/A 3.70% 3.68
Floors 900,000 39,516 — 39,516 N/A N/A 6.36% 1.98
Total cash flow hedges $6,355,000 $138,875 $ (88,075) $ 50,800 3.65% 0.30% 4.27% 5.16
December 31, 2009
Pay-fixed interest rate
swaps:
Repurchase agreements $1,565,000 $ — $(125,954) $(125,954) 4.87% 0.26% N/A 9.68
FHLB advances 530,000 — (17,648) (17,648) 4.32% 0.25% N/A 8.11
Purchased interest rate
forward-starting swaps:
Repurchase agreements 200,000 2,031 — 2,031 3.88% N/A N/A 10.09
Purchased interest rate
options:(1)
Caps 2,185,000 36,233 — 36,233 N/A N/A 4.76% 3.42
Floors 1,900,000 49,270 — 49,270 N/A N/A 6.43% 1.46
Total cash flow hedges $6,380,000 $ 87,534 $(143,602) $ (56,068) 4.66% 0.25% 5.54% 4.97
(1) Caps are used to hedge repurchase agreements and FHLB advances. Floors are used to hedge home equity lines of credit.
Additionally, the Company enters into forward purchase and sale agreements, which may be considered
cash flow hedges, when the terms of the commitments exactly match the terms of the securities purchased or
sold. As of December 31, 2010, there were no forward contracts accounted for as cash flow hedges.
134