eTrade 2002 Annual Report Download - page 72

Table of Contents
Index to Financial Statements
resulted in further increases in depreciation and amortization expense as we increased our fixed asset and intangible balances. Capital
expenditures related to current operations are expected to decrease in fiscal 2003.
Contributing to cash provided by operations, brokerage-related activities provided $103.0 million in fiscal 2002, reflecting a 68% decrease
from cash provided in fiscal 2001. The fluctuation in the brokerage receivable balance is correlated with changes in the brokerage payable
balance.
Fiscal 2001
During fiscal 2001, cash used in operating activities increased by 84% from fiscal 2000, primarily as a result of an increase in the purchase of
loans held-for-sale activity, net of sales, and a significant increase in accounts payable, accrued and other liabilities. Offsetting this outflow of
cash was an increase in cash provided through net brokerage-related activities and non-cash activities recorded in fiscal 2001, including
non-cash charges related to our facility restructuring activities (See Note 21 to Consolidated Financial Statements). Cash used in operating
activities in fiscal 2001 reflects the activities related to the acquisitions of E*TRADE Mortgage and Dempsey.
Cash Used in/ Provided by Investing and Financing Activities
Cash used in investing activities was $5.3 billion, $1.3 billion and $5.0 billion for fiscal 2002, fiscal 2001 and fiscal 2000, respectively. For
fiscal 2002, cash used in investing activities resulted primarily from purchases of mortgage-backed and investment securities, available-for-sale,
net of $3.5 billion and the acquisition of Ganis for $1.9 billion. For fiscal 2001, cash used in investing activities resulted primarily from an
increase in loans receivable of $2.2 billion partially offset by the sale/maturity of mortgage-backed and investment securities available-for-sale,
net of $1.2 billion.
Cash provided by financing activities was $3.3 billion, $1.9 billion and $5.3 billion for fiscal 2002, fiscal 2001 and fiscal 2000, respectively.
For fiscal 2002, cash provided by financing activities primarily resulted from a net increase in securities sold under agreements to repurchase of
$2.7 billion, an increase in banking deposits of $317.5million and a net increase in advances from the FHLB of $404.0 million. For fiscal 2001,
cash provided by financing activities primarily resulted from an increase in banking deposits of $2.3 billion and the net proceeds from the
issuance of convertible subordinated debt of $315.3 million, partially offset by a net decrease in advances from the FHLB of $830.7 million.
Regulatory Capital Requirements
The SEC, NYSE, NASD, OTS and various other international regulatory agencies have stringent rules with respect to the maintenance of
specific levels of net capital by securities broker-dealers and regulatory capital by banks. Net capital is the net worth of a broker or dealer
(assets minus liabilities), less deductions for certain types of assets. Minimum net capital requirements for our broker-dealer subsidiaries as of
December 31, 2002 were fully met.
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Quantitative measures established
by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios of total and Tier I capital to risk-weighted
assets, Core Capital to adjusted tangible assets and of Tangible Capital to tangible assets. To be categorized as well capitalized the Bank must
maintain a minimum Total Capital to risk-weighted assets ratio of 10.0%, Tier I Capital to risk-weighted assets ratio of 6.0% and Core Capital
to adjusted tangible assets ratio of 5.0%. As of December 31, 2002, the Bank was in compliance with all of its regulatory capital requirements
and its capital ratios exceeded the ratios for “well capitalized” institutions under OTS regulations (See Note 25 to Consolidated Financial
Statements).
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2003. EDGAR Online, Inc.