eTrade 2010 Annual Report Download - page 40

FDIC Insurance Premiums
FDIC insurance premiums decreased 18% to $77.7 million for the year ended December 31, 2010 compared
to 2009. The decrease was due primarily to an industry wide special assessment that resulted in an additional
$21.6 million of expense in the second quarter of 2009. There were no similar assessments made during the year
ended December 31, 2010.
Other Operating Expenses
Other operating expenses decreased 15% to $104.0 million for the year ended December 31, 2010 compared
to 2009. The decrease was driven primarily by a decline in bad debt expense, real-estate owned and legal
reserves compared to 2009.
Other Income (Expense)
Other income (expense) was an expense of $159.0 million and $1.3 billion for the 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 %
Corporate interest income $ 6.2 $ 0.9 $ 5.3 620%
Corporate interest expense (167.1) (282.7) 115.6 (41)%
Gains (losses) on sales of investments, net 2.7 (1.7) 4.4 *
Losses on early extinguishment of debt — (1,018.9) 1,018.9 (100)%
Equity in loss of investments and venture funds (0.8) (8.6) 7.8 (91)%
Total other income (expense) $(159.0) $(1,311.0) $1,152.0 (88)%
* Percentage not meaningful.
Total other income (expense) for the year ended December 31, 2010 primarily consisted of corporate
interest expense resulting from our interest-bearing corporate debt. Corporate interest expense decreased 41% to
$167.1 million for the year ended December 31, 2010 compared to 2009. This was due to the reduction in
interest-bearing debt in connection with our Debt Exchange in 2009. The losses on early extinguishment of debt
for the year ended December 31, 2009 were related primarily to the Debt Exchange. The loss on the Debt
Exchange resulted from the de-recognition of the debt that was exchanged and the corresponding recognition of
the newly-issued non-interest-bearing convertible debentures at fair value. Corporate interest income increased to
$6.2 million for the year ended December 31, 2010 when compared to 2009 due to a benefit of $6.0 million in
connection with a legal settlement.
Income Tax Expense (Benefit)
Income tax expense was $25.3 million and a benefit of $537.7 million for the years ended December 31,
2010 and 2009, respectively. Our effective tax rates were 806.3% and (29.3)% for the years ended December 31,
2010 and 2009, respectively. The effective tax rate for the year ended December 31, 2010 was higher than in
2009 for two reasons: 1) our pre-tax loss included items not deductible for tax purposes, predominantly about
one-third of the interest expense on the 12
1
⁄ 2 % springing lien notes; and 2) our reported pre-tax loss is relatively
close to breakeven for the year ended December 31, 2010. As a result, our income subject to taxation is higher,
resulting in an unusually high effective tax rate for the year ended December 31, 2010. We expect our effective
tax rate to be volatile in periods where pre-tax income or loss is relatively close to breakeven, but expect a more
normalized rate as, and to the extent, we become profitable in future periods.
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