eTrade 2007 Annual Report Download - page 147

The fair value of financial instruments whose estimated fair values were different from their carrying values
is summarized below (dollars in thousands):
December 31, 2007 December 31, 2006
Carrying
Value Fair Value
Carrying
Value Fair Value
Assets:
Loans, net $30,139,382 $29,415,679 $26,656,193 $26,416,079
Liabilities:
Deposits $25,884,755 $25,864,725 $24,071,012 $23,320,015
Securities sold under agreements to repurchase $ 8,932,693 $ 8,937,647 $ 9,792,422 $ 9,809,313
Other borrowings $ 7,446,504 $ 7,495,949 $ 5,323,962 $ 5,345,326
Corporate debt $ 3,002,698 $ 2,800,758 $ 1,842,169 $ 1,996,560
•Loans, net—For loans held-for sale, fair value is estimated using quoted market prices for securities
backed by similar types of loans, dealer rate sheets and dealer commitments to purchase loans. The
carrying value of closed loans held-for-sale designated in fair value hedge relationships approximates fair
value. For the held-for-investment portfolio, including one- to four-family, home equity, recreational
vehicle, marine and auto loans, fair value is estimated by differentiating loans based on their individual
characteristics, such as product classification, loan category, pricing features and remaining maturity.
Management adjusts assumptions for expected losses, prepayments and discount rates to reflect the
individual characteristics of the loans, such as credit risk, coupon, term, and payment characteristics, as
well as the secondary market conditions for these types of loans. For commercial and credit card loans,
fair value is estimated based on both individual and portfolio characteristics and recent market
transactions.
•Deposits—For sweep deposit accounts, money market and savings accounts and checking accounts, fair
value is the amount payable on demand at the reporting date. For certificates of deposit and brokered
certificates of deposits, 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—For FHLB advances, fair value is estimated by discounting future cash flows at the
currently offered rates for borrowings of similar remaining maturities. For trust preferred stock, fair value
is estimated by discounting future cash flows at the rate implied by dealer pricing quotes for other similar
instruments, adjusting the price to reflect differences between the securities, such as credit risk, liquidity,
term coupon, payment characteristics and other information. For margin collateral, overnight and other
short-term borrowings and collateralized borrowings, fair value is estimated to be carrying value.
•Corporate debt—Fair value is estimated using quoted market prices or dealer pricing quotes.
In the normal course of business, the Company makes various commitments to extend credit and incur
contingent liabilities that are not reflected in the consolidated balance sheet. Significant changes in the economy
or interest rates influence the impact that these commitments and contingencies have on the Company in the
future. Information related to such commitments and contingent liabilities is detailed in Note 23—Commitments,
Contingencies and Other Regulatory Matters.
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