eTrade 2008 Annual Report Download - page 117

The fair value of financial instruments whose estimated fair values were different from their carrying values
is summarized below (dollars in thousands):
December 31, 2008 December 31, 2007
Carrying
Value Fair Value
Carrying
Value Fair Value
Assets
Loans, net(1) $24,451,852 $24,072,373 $30,139,382 $29,415,679
Liabilities
Deposits $26,136,246 $26,194,430 $25,884,755 $25,864,725
Securities sold under agreements to repurchase $ 7,381,279 $ 7,488,380 $ 8,932,693 $ 8,937,647
Other borrowings $ 4,353,777 $ 4,349,862 $ 7,446,504 $ 7,495,949
Corporate debt $ 2,750,532 $ 1,645,136 $ 3,022,698 $ 2,800,758
(1) The carrying value of loans, net includes the allowance for loan losses of $1.1 billion and $0.5 billion as of December 31, 2008 and 2007,
respectively.
•Loans, net—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, when available.
•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
current offered rates for borrowings of similar remaining maturities. For Floating Rate Junior
Subordinated Debentures issued by ETBH, fair value is estimated by discounting future cash flows at
the rate implied by dealer pricing quotes. For margin collateral, overnight and other short-term
borrowings and collateralized borrowings, fair value approximates carrying value.
•Corporate debt—Fair value is estimated using 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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