eTrade 2006 Annual Report Download - page 123

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percent of the unpaid principal balance of its residential mortgage loans; one percent of 30 percent of its total
assets; or one-twentieth of its outstanding FHLB advances. In addition, the Company must maintain qualified
collateral equal to 85 to 90 percent of its advances, depending on the collateral type. These advances are secured
with specific mortgage loans and mortgage-backed securities. At December 31, 2006 and 2005, the Company
pledged $12.9 billion and $9.3 billion, respectively, of the one- to four-family first mortgage loans, HELOC and
HEIL as collateral.
Other—ETBH raises capital through the formation of trusts, which sell trust preferred stock in the capital
markets. The capital securities are mandatorily redeemable in whole at the due date, which is generally 30 years
after issuance. Each trust issued Floating Rate Cumulative Preferred Securities, at par with a liquidation amount
of $1,000 per capital security. The trusts use the proceeds from the sale of issuances to purchase Floating Rate
Junior Subordinated Debentures issued by ETBH, guarantees the trust obligations and contributes proceeds from
the sale of its subordinated debentures to the Bank in the form of a capital contribution.
During 2006, ETBH formed five trusts, ETBH Capital Trust XXIII through ETBH Capital Trust XXVII.
These trusts issued a total of 95,000 shares of Floating Rate Cumulative Preferred Securities for a total of
$95 million. Net proceeds from these issuances were invested in Floating Rate Junior Subordinated Debentures
that mature in 2036 or 2037 and have variable rates of 1.95% or 2.10% above the three-month LIBOR, payable
quarterly.
In December 2006, ETBH called Capital Trust III which had sold $15.0 million of trust preferred stock in
the capital markets in 2001, and generated a loss of $0.5 million.
The face values of outstanding trusts at December 31, 2006 are shown below (dollars in thousands):
Trusts
Face
Value
Maturity
Date Annual Interest Rate
Telebank Capital Trust I $ 9,000 2027 11.00%
ETBH Capital Trust II $ 5,000 2031 10.25%
ETBH Capital Trust I $20,000 2031 3.75% above 6-month LIBOR
ETBH Capital Trust V, VI, VIII $51,000 2032 3.25%-3.65% above 3-month LIBOR
ETBH Capital Trust IV $10,000 2032 3.70% above 6-month LIBOR
ETBH Capital Trust VII, IX—XII $65,000 2033 3.00%-3.30% above 3-month LIBOR
ETBH Capital Trust XIII—XVIII, XX $77,000 2034 2.45%-2.90% above 3-month LIBOR
ETBH Capital Trust XIX, XXI, XXII $60,000 2035 2.20%-2.40% above 3-month LIBOR
ETBH Capital Trust XXIII—XXIV $45,000 2036 2.10% above 3-month LIBOR
ETBH Capital Trust XXV—XXVII $50,000 2037 1.95% above 3-month LIBOR
The Company also has multiple term loans from financial institutions. These loans are collateralized by
equipment. Borrowings under these term loans bear interest at 1% above LIBOR, 5.43% or 5.50%. The Company
had approximately $38.0 million of principal outstanding under these loans at December 31, 2006.
Other borrowings also include $33.1 million margin collateral and $2.0 million of overnight and other short-
term borrowings in connection with the Federal Reserve Bank’s special direct investment and treasury, tax and
loan programs. The Company pledged $8.1 million of securities to secure these borrowings from the Federal
Reserve Bank.
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