eTrade 2007 Annual Report Download - page 5

The items in this transaction were negotiated at arms length and transacted simultaneously and in
contemplation of one another. As a result, the $2.5 billion in proceeds were allocated to each item based on their
relative fair values at the time of the transaction.
The key components of our accounting for this transaction were as follows:
• Asset-backed securities portfolio sale, which resulted in a pre-tax loss on sale of approximately
$2.2 billion;
• Issuance of common stock, which resulted in an increase to common stock/paid in capital of
approximately $340 million; and
• Issuance of springing lien notes, which had approximately $500 million of discount assigned to them and
will be amortized as an increase to interest expense using the effective interest method over the 10 year
term of the notes.
We believe this transaction provided timely stability for our business and helped alleviate customer
concerns.
PRODUCTS AND SERVICES
We offer a wide range of products and services to our customers to assist them with their financial needs.
Our primary retail products and services consist of:
• Trading and investing—includes automated order placement and execution of US and international
equities, currencies, futures, options, exchange-traded funds, mutual funds and bonds. We also offer quick
transfer, wireless account access, extended hours trading, quotes, research and advanced planning tools;
• Banking—includes checking, savings, sweep, money market and certificates of deposit (“CD”) products
that offer online bill pay, quick transfer, unlimited ATM transactions on eligible accounts and wireless
account access; and
• Lending—includes mortgage, home equity, margin and credit card products that offer online loan status
and quick transfer.
Our primary institutional product is market making.
Retail
Our retail segment offers a full suite of financial solutions to retail customers including trading, investing,
banking and lending products. Consistent with our philosophy of being a customer advocate, we offer retail
customers an opportunity to view their entire financial picture through E*TRADE Complete. E*TRADE
Complete helps customers optimize investing, cash and credit allocations by utilizing tools designed to help them
determine the appropriate mix of particular investing, banking and lending products that we offer. E*TRADE
Complete tools include the Intelligent Investing Optimizer and Risk Analyzer, the Intelligent Cash Optimizer and
the Intelligent Lending Optimizer. With the Intelligent Cash Optimizer, customers can review possible cash
allocations based on rate and liquidity preferences and quickly transfer funds to reallocate deposit balances
according to those preferences. The Intelligent Investing Optimizer and Risk Analyzer makes it easy for
customers to develop an investment strategy that is engineered to match their specific goals, time horizon and
risk tolerance. It suggests allocations for large cap, small cap, international investment, fixed income and cash.
The Intelligent Lending Optimizer is a tool that provides customers the ability to model multiple lending
scenarios. Customers can use E*TRADE Complete to optimize their utilization of our retail products described
below.
Retail trading and investing products and services include:
• automated order placement and execution, US equities, futures, options, exchange-traded funds and bond
orders;
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