eTrade 2006 Annual Report Download - page 50

Download and view the complete annual report

Please find page 50 of the 2006 eTrade annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 163

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152
  • 153
  • 154
  • 155
  • 156
  • 157
  • 158
  • 159
  • 160
  • 161
  • 162
  • 163

a $3.1 billion increase in sweep deposit accounts, a $3.0 billion increase in money market and savings accounts
and a $2.0 billion increase in certificates of deposit.
The increase in sweep deposit accounts was driven primarily by the Harrisdirect and BrownCo conversions.
Prior to the conversions, Harrisdirect customer cash balances were swept to a third party and not reflected on our
balance sheet, and BrownCo customer cash balances were generally kept in free credits. Our other deposit
products have shown significant growth as a result of our focused sales and retention efforts, as well as the
overall impact of the E*TRADE Complete Intelligent Cash Optimizer. E*TRADE Complete Intelligent Cash
Optimizer enables customers to better determine the optimal use of their funds and has resulted in higher money
market and certificates of deposit balances. The sweep deposit accounts, money market accounts and certificates
of deposit generally provide us the benefit of lower interest costs, compared with wholesale funding alternatives.
The deposits balance is a component of the total customer cash and deposits balance reported as a customer
activity metric of $33.6 billion for the year ended December 31, 2006. The total customer cash and deposits
balance is summarized as follows (dollars in thousands):
Variance
December 31, 2006 vs. 2005
2006 2005 Amount %
Deposits $24,071,012 $15,948,015 $ 8,122,997 51 %
Less: brokered certificates of deposit (483,777) (484,612) 835 0%
Deposits excluding brokered certificates of
deposit 23,587,235 15,463,403 8,123,832 53 %
Free credits 6,368,749 5,770,751 597,998 10 %
Customer cash balances held by third parties 3,633,783 6,955,830 (3,322,047) (48)%
Total customer cash and deposits $33,589,767 $28,189,984 $ 5,399,783 19 %
The decrease in customer cash balances held by third parties was due primarily to the Harrisdirect
conversion wherein cash from this account (which is off-balance sheet) was converted to deposits and free credits
(which is on balance sheet).
Securities Sold Under Agreements to Repurchase and Other Borrowings
Securities sold under agreements to repurchase and other borrowings are summarized as follows (dollars in
thousands):
December 31, Variance
2006 2005 2006 vs. 2005
Securities sold under agreements to repurchase $9,792,422 $11,101,542 (12)%
FHLB advances $4,865,466 $ 3,856,106 26 %
Subordinated debentures 385,502 305,046 26 %
Other 72,994 45,844 59 %
Total other borrowings $5,323,962 $ 4,206,996 27 %
Securities sold under agreements to repurchase decreased by 12% at December 31, 2006 compared to
December 31, 2005. Securities sold under agreements to repurchase coupled with FHLB advances are the
primary wholesale funding sources of the Bank. During 2006, the Bank used these wholesale sources along with
deposit growth to fund the increase in loans receivable. Other borrowings represented 11% and 10% of total
liabilities at December 31, 2006 and 2005, respectively. The increase of $1.1 billion during 2006 was due
primarily to an increase in FHLB advances. We actively manage our funding sources and determine the optimal
mix based on pricing, liquidity and capacity during each period.
47