eTrade 2004 Annual Report Download - page 109

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Table of Contents
Index to Financial Statements
Payables for Bank Securities Purchased, Collateral Not Received
The Bank has payables to third-party brokers for mortgage-backed securities the Bank committed to buy, but did not receive from the
brokers by the settlement date.
Other Short-Term Borrowing Arrangements
The principal source of financing for E*TRADE Clearing’s margin lending activity is cash balances in customers’
accounts and financing
obtained from other broker-dealers through E*TRADE Clearing’s stock loan program. E*TRADE Clearing also maintains financing facilities
with banks totaling $400 million to finance margin lending. There was none outstanding under these lines at December 31, 2004 and 2003. The
Company also has multiple term loans from financial institutions. These loans are collateralized by equipment. Borrowings under these term
loans bear interest at 2.95% to 3.25% above LIBOR. The Company had approximately $39.8 million of principal outstanding under these loans
at December 31, 2004.
NOTE 19—INCOME TAXES
The components of income tax expense from continuing operations are as follows (in thousands):
The Company is subject to examination by the Internal Revenue Service (the “IRS”), taxing authorities in foreign countries, and states in
which the Company has significant business operations. The tax years subject to examination vary by jurisdiction; for example, the IRS just
completed their examination through fiscal year 2000. The Company regularly assesses the likelihood of additional tax deficiencies in each of
the taxing jurisdictions resulting from on-going and subsequent years’
examinations. Included in current tax expense are changes to accruals for
expected tax deficiencies in accordance with SFAS No. 5.
The components of income before income taxes and discontinued operations are as follows (in thousands):
100
Year Ended December 31,
2004
2003
2002
Current:
$
69,881
$
84,623
$
(142
)
Foreign
4,442
5,894
(4,209
)
State
8,073
19,350
6,722
Total current
82,396
109,867
2,371
Deferred:
54,312
(7,452
)
79,170
Foreign
2,328
5,418
—
State
23,147
5,590
4,968
Total deferred
79,787
3,556
84,138
Income tax expense from continuing operations
$
162,183
$
113,423
$
86,509
Year Ended December 31,
2004
2003
2002
Domestic
$
494,716
$
314,894
$
201,936
Foreign
19,290
(1,840
)
(4,398
)
Total income before income taxes and discontinued operations
$
514,006
$
313,054
$
197,538