eTrade 2010 Annual Report Download - page 146

Securities Sold Under Agreements to Repurchase
Repurchase agreements are collateralized by fixed- and variable-rate mortgage-backed securities or
investment grade securities. The brokers retain possession of the securities collateralizing the repurchase
agreements until maturity of the repurchase agreement. At December 31, 2010, there were no counterparties with
whom the Company’s amount of risk exceeded 10% of its shareholders’ equity.
Below is a summary of repurchase agreements and collateral associated with the repurchase agreements at
December 31, 2010 (dollars in thousands):
Collateral
Repurchase Agreements
U.S. Government Sponsored
Enterprise Obligations
Contractual Maturity
Weighted
Average
Interest Rate Amount
Amortized
Cost Fair Value
Up to 30 days 0.14% $2,504,196 $2,678,213 $2,640,741
30 to 90 days 0.44% 544,168 601,692 597,934
Over 90 days 1.10% 2,839,885 3,137,594 3,117,996
Total 0.63% $5,888,249 $6,417,499 $6,356,671
FHLB Advances and Other Borrowings
FHLB Advances—The Company had $0.4 billion and $0.1 billion in floating-rate and $1.9 billion and $2.2
billion in fixed-rate FHLB advances at December 31, 2010 and 2009, respectively. The floating-rate advances
adjust quarterly based on the LIBOR. As a condition of its membership in the FHLB Atlanta, the Company is
required to maintain a FHLB stock investment currently equal to the lesser of: a percentage of 0.2% of total Bank
assets; or a dollar cap amount of $25 million. Additionally, the Bank must maintain an Activity Based Stock
investment which is currently equal to 4.5% of the Bank’s outstanding advances. The Company had an
investment in FHLB stock of $164.4 million and $183.9 million at December 31, 2010 and 2009, respectively.
The Company must also maintain qualified collateral as a percent of its advances, which varies based on the
collateral type, and is further adjusted by the outcome of the most recent annual collateral audit and by FHLB’s
internal ranking of the Bank’s creditworthiness. These advances are secured by a pool of mortgage loans and
mortgage-backed securities. At December 31, 2010 and 2009, the Company pledged loans with a lendable value
of $5.6 billion and $8.3 billion, respectively, of the one- to four-family and home equity loans as collateral in
support of both its advances and unused borrowing lines.
During the years ended December 31, 2009 and 2008, the Company paid down in advance of maturity $1.6
billion and $1.8 billion, respectively, of its FHLB advances. The Company recorded a loss on the early
extinguishment of FHLB advances of $50.6 million and $10.9 million for the years ended December 31, 2009
and 2008, respectively. These losses are recorded in the gains (losses) on early extinguishment of debt line item
in the consolidated statement of loss. The Company did not have any similar transactions for the year ended
December 31, 2010.
Other Borrowings—ETBH raised capital through the formation of trusts, which sell trust preferred
securities in the capital markets. The capital securities must be redeemed in whole at the due date, which is
generally 30 years after issuance. Each trust issued Floating Rate Cumulative Preferred Securities (“trust
preferred securities”), at par with a liquidation amount of $1,000 per capital security. The trusts used the
proceeds from the sale of issuances to purchase Floating Rate Junior Subordinated Debentures (“subordinated
debentures”) issued by ETBH, which guarantees the trust obligations and contributed proceeds from the sale of
its subordinated debentures to E*TRADE Bank in the form of a capital contribution.
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