eTrade 2011 Annual Report Download - page 138

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The following table shows the balance in accumulated other comprehensive loss attributable to cash flow
hedges by type of hedged item (dollars in thousands):
December 31,
2011 2010
Repurchase agreements $(595,202) $(424,509)
FHLB advances (154,082) (111,170)
Home equity lines of credit 15,772 42,199
Other (655) (628)
Total balance of cash flow hedges before tax (734,167) (494,108)
Tax benefit 276,214 185,610
Total balance of cash flow hedges, net of tax $(457,953) $(308,498)
Fair Value Hedges
Fair value hedges are accounted for by recording the fair value of the derivative instrument and the fair
value of the asset or liability being hedged on the consolidated balance sheet. Changes in the fair value of both
the derivatives and the underlying assets or liabilities are recognized in the gains on loans and securities, net line
item in the consolidated statement of income (loss). To the extent that the hedge is ineffective, the changes in the
fair values will not offset and the difference, or hedge ineffectiveness, is reflected in the gains on loans and
securities, net line item in the consolidated statement of income (loss).
Hedge accounting is discontinued for fair value hedges if a derivative instrument is sold, terminated or
otherwise de-designated. If fair value hedge accounting is discontinued, the previously hedged item is no longer
adjusted for changes in fair value through the consolidated statement of income (loss) and the cumulative net
gain or loss on the hedged asset or liability at the time of de-designation is amortized to interest income or
interest expense using the effective interest method over the expected remaining life of the hedged item. Changes
in the fair value of the derivative instruments after de-designation of fair value hedge accounting are recorded in
the gains on loans and securities, net line item in the consolidated statement of income (loss).
The following table summarizes the effect of interest rate contracts designated and qualifying as hedging
instruments in fair value hedges and related hedged items on the consolidated statement of income (loss) (dollars
in thousands):
Year Ended December 31,
2011 2010
Hedging
Instrument
Hedged
Item
Hedge
Ineffectiveness(1)
Hedging
Instrument
Hedged
Item
Hedge
Ineffectiveness(1)
U.S. Treasury securities and
agency debentures $(144,968) $142,242 $(2,726) $ 55,743 $(57,816) $(2,073)
Agency mortgage-backed
securities (51,557) 48,835 (2,722) — — —
FHLB advances 52,658 (49,109) 3,549 (18,099) 19,456 1,357
Corporate debt — — — (1,714) 1,714 —
Total gains (losses)
included in earnings $(143,867) $141,968 $(1,899) $ 35,930 $(36,646) $ (716)
(1) Reflected in the gains on loans and securities, net line item on the consolidated statement of income (loss).
135