eTrade 2010 Annual Report Download - page 38

Principal Transactions
Principal transactions increased 17% to $103.4 million for the year ended December 31, 2010 compared to
2009. Our principal transactions are derived from our market making business in which we act as a market maker
for our brokerage customers’ orders as well as orders from third party customers. The increase in principal
transactions was driven by an increase in the volume of orders from our third party customers which was
partially offset by a decrease in our average revenue earned per share traded when compared to the same period
in 2009.
Gains on Loans and Securities, Net
Gains on loans and securities, net were $166.2 million and $169.1 million for years ended December 31,
2010 and 2009, respectively, as shown in the following table (dollars in millions):
Variance
Year Ended December 31, 2010 vs. 2009
2010 2009 Amount %
Gains (losses) on loans, net $ 6.3 $ (12.5) $ 18.8 *
Gains on available-for-sale securities and other investments, net 160.7 173.2 (12.5) (7)%
Gains on trading securities, net 0.2 7.8 (7.6) (98)%
Hedge ineffectiveness (1.0) 0.6 (1.6) *
Gains on securities, net 159.9 181.6 (21.7) (12)%
Gains on loans and securities, net $166.2 $169.1 $ (2.9) (2)%
* Percentage not meaningful.
Net Impairment
We recognized $37.7 million and $89.1 million of net impairment during the years ended December 31,
2010 and 2009, respectively, on certain securities in our non-agency CMO portfolio due to continued
deterioration in the expected credit performance of the underlying loans in the securities. The gross other-than-
temporary impairment (“OTTI”) and the noncredit portion of OTTI, which was or had been previously recorded
through other comprehensive income (loss), are shown in the table below (dollars in millions):
Year Ended December 31,
2010 2009
Other-than-temporary impairment (“OTTI”) $(41.5) $(232.1)
Less: noncredit portion of OTTI recognized into other comprehensive
income (loss) (before tax) 3.8 143.0
Net impairment $(37.7) $ (89.1)
Other Revenues
Other revenues decreased 3% to $46.3 million for the year ended December 31, 2010 compared to 2009.
The decrease was due to a decline in the income from the cash surrender value of our bank-owned life insurance,
partially offset by the gain on the sale of approximately $1 billion in savings accounts to Discover Financial
Services in the first quarter of 2010.
Provision for Loan Losses
Provision for loan losses decreased 48% to $779.4 million for the year ended December 31, 2010 compared
2009. The decrease in our provision for loan losses was driven by lower levels of at-risk (30-179 days
delinquent) loans in our one- to four-family and home equity loan portfolios. We believe the delinquencies in
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