eTrade 2005 Annual Report Download - page 56

Table of Contents
Other Revenues
Other revenues increased 3% to $89.1 million in 2004 compared to $86.5 million in 2003. The increase is primarily due to a $6.0 million
increase in payments for order flow from an overall increase in trades including option trades. Payments for order flow are payments for
orders which are sent between broker-dealers.
Net Interest Income
Net interest income increased 56% to $635.1 million in 2004 compared to 2003. The increase in net interest income is primarily due to an
increase in average interest-earning banking assets, margin loan balances and growth in customer deposits. Net interest income
represents interest earned on interest-earning banking assets (primarily loans receivable and mortgage-backed and related
available-for-sale securities), margin loans, stock borrow balances, cash required to be segregated under regulatory guidelines and fees
on customer assets invested in money market accounts, net of interest paid on interest-bearing banking liabilities (primarily customer
deposits, repurchase agreements, other borrowings and advances from the FHLB), paid to customers on certain credit balances and to
banks and other broker-dealers through our brokerage subsidiary’s stock loan program. Net interest spread is the difference between
the weighted-average yields earned on interest-earning banking assets less the weighted-average rate paid on interest-bearing banking
liabilities.
Provision for Loan Losses
Provision for loan losses decreased $0.4 million to $38.1 million in 2004 from $38.5 million in 2003. The $12.4 million decrease in the
provision for consumer loans was due to the continued seasoning and lower charge-offs related to our consumer loan portfolio, which
consisted primarily of RVs, marine and automobiles. The $12.0 million increase related to real estate and home equity loans was driven
by the purchase of $2.1 billion of unseasoned HELOC, which generally have higher delinquencies and charge-offs than one-to-four
family loans.
Expenses Excluding Interest
In 2004, total expenses excluding interest decreased 14% to $987.1 million from $1,153.6 million in 2003. The primary driver of this
decrease was due to significantly reduced facility restructuring and other exit activities, down $118.5 million. In mid-2003, we initiated
the 2003 Restructuring Plan, which was focused on creating additional operating leverage by exiting unprofitable product offerings and
consolidating operations. The 2003 Restructuring Plan also had a positive impact on reduced costs in 2004 as compensation and
benefits, occupancy and equipment and amortization of other intangibles declined in 2004 due to our efforts in 2003.
Discontinued Operations
The net loss from discontinued operations was $1.3 million in 2004, compared to a net gain of $2.5 million in 2003. The net loss in 2004
reflected both losses on the operations of our discontinued businesses of $32.7 million, nearly offset by a one-time $31.4 million gain
on disposal of discontinued operations, recognized from our sale of the E*TRADE Access business. Net losses from discontinued
operations were higher in 2004 due to operating losses of the Consumer Finance origination business, which was later sold in 2005.
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2006. EDGAR Online, Inc.