eTrade 2004 Annual Report Download - page 131
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Table of Contents
Index to Financial Statements
loans is estimated using quoted market prices for securities backed by similar loans. The fair value for loans that could not be
reasonably established using the previous two methods was estimated by discounting future cash flows using current rates for similar
loans. Management adjusts the discount rate to reflect the individual characteristics of the loan, such as credit risk, coupon, term,
payment characteristics and the liquidity of the secondary market for these types of loans. The fair value for certain consumer loans
was calculated using a discounted cash flow model incorporating prepayment and loss curves for the specific product type. Loans were
valued in groups based on rate and term with the discount rate applied to each group derived from the swap curve. The calculation of
loss and prepayment curves was based on past performance of similar credit quality originations by the same company.
•
Deposits
—For passbook savings, checking and money market accounts, fair value is estimated to be carrying value. For fixed
maturity certificates of deposit, fair value is estimated by discounting future cash flows at the currently offered rates for deposits of
similar remaining maturities.
•
Securities sold under agreements to repurchase —Fair value is determined by discounting future cash flows at the rate implied for
other similar instruments with similar remaining maturities.
•
Other borrowings by Bank subsidiary —For adjustable-rate borrowings, fair value is estimated to be carrying value. For fixed-rate
borrowings, fair value is estimated by discounting future cash flows at the currently offered rates for fixed-rate borrowings of similar
remaining maturities.
NOTE 29—SEGMENT AND GEOGRAPHIC INFORMATION
•
Subordinated and senior notes —Fair value is estimated using quoted market prices.
The Company reviews its financial results as two segments: Brokerage and Banking.
Brokerage includes:
•
Retail operations—both domestic and international
•
Institutional operations—both domestic and international, as well as market-making activities
Banking includes:
•
Corporate operations—E*TRADE Financial Corporate Services and other operations
•
Retail operations—mortgage and consumer lending services, FDIC-insured deposit and banking products
The Company evaluates the performance of its segments based on segment contribution (net revenues less expenses excluding interest).
All corporate overhead, administrative and technology charges are allocated to segments either in proportion to their respective direct costs or
based upon specific operating criteria.
121
•
Institutional operations—global asset management activities