eTrade 2006 Annual Report Download - page 139
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Institutional includes:
• balance sheet management activities including generation of institutional net interest spread, gain on sales
of loans and securities, net and management income;
• market-making; and
• global equity execution and settlement services.
The retail segment originates loans through lending activities. Retail segment loan originations that are not
sold directly to outside parties are sold at arm’s length prices to the institutional segment which manages the
Company’s balance sheet. The Company evaluates the performance of its segments based on segment
contribution (net revenue less expense excluding operating 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.
Financial information for the Company’s reportable segments is presented in the following tables (dollars in
thousands):
Year Ended December 31, 2006
Retail Institutional Eliminations(1) Total
Revenue:
Operating interest income $1,522,811 $ 2,163,127 $(911,259) $ 2,774,679
Operating interest expense (639,248) (1,646,658) 911,259 (1,374,647)
Net operating interest income 883,563 516,469 — 1,400,032
Provision for loan losses — (44,970) — (44,970)
Net operating interest income after provision
for loan losses 883,563 471,499 — 1,355,062
Commission 479,876 145,389 — 625,265
Service charges and fees 115,672 21,769 — 137,441
Principal transactions — 110,235 — 110,235
Gain on sales of loans and securities, net 36,698 19,288 — 55,986
Other revenue 138,316 9,269 (11,253) 136,332
Total non-interest income 770,562 305,950 (11,253) 1,065,259
Total net revenue 1,654,125 777,449 (11,253) 2,420,321
Expense excluding interest:
Compensation and benefits 306,994 162,208 — 469,202
Clearing and servicing 74,483 189,810 (11,253) 253,040
Advertising and market development 112,723 7,059 — 119,782
Communications 97,352 12,994 — 110,346
Professional services 68,097 28,850 — 96,947
Depreciation and amortization 57,151 16,694 — 73,845
Occupancy and equipment 76,948 8,620 — 85,568
Amortization of other intangibles 39,602 6,618 — 46,220
Facility restructuring and other exit activities 29,588 (1,051) — 28,537
Other 95,944 40,098 — 136,042
Total expense excluding interest 958,882 471,900 (11,253) 1,419,529
Segment income $ 695,243 $ 305,549 $ — $ 1,000,792
(1) Reflects elimination of transactions between retail and institutional segments, which includes deposit and free credit transfer pricing and
order flow rebates.
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