eTrade 2008 Annual Report Download - page 83

Notional amount—The specified dollar amount underlying a derivative on which the calculated payments
are based.
Operating margin—Income before other income (expense), income tax expense (benefit), minority interest,
discontinued operations and cumulative effect of accounting change.
Operating margin (%)—Percentage of net revenue that goes to income before other income (expense),
income tax expense (benefit), minority interest, discontinued operations and cumulative effect of accounting
change. It is calculated by dividing our income before other income (expense), income tax expense (benefit),
minority interest, discontinued operations and cumulative effect of accounting change by our total net revenue.
Option adjustable-rate mortgage (“ARM”) loan—An adjustable-rate mortgage loan that provides the
borrower with the option to make a fully-amortizing, interest-only, or minimum payment each month. The
minimum payment on an Option ARM loan is usually based on the interest rate charged during the introductory
period. This introductory rate is usually significantly below the fully-indexed rate for loans with short duration
introductory periods.
Options—Contracts that grant the purchaser, for a premium payment, the right, but not the obligation, to
either purchase or sell the associated financial instrument at a set price during a period or at a specified date in
the future.
Organic—Business related to new and existing customers as opposed to acquisitions.
Principal transactions—Transactions that primarily consist of revenue from market-making activities.
Real-estate owned (“REO”) and other repossessed assets—Ownership of real property by the Company,
generally acquired as a result of foreclosure or repossession.
Repurchase agreement—An agreement giving the seller of an asset the right or obligation to buy back the
same or similar securities at a specified price on a given date. These agreements are generally collateralized by
mortgage-backed or investment-grade securities.
Retail customer assets—Market value of all customer assets held by the Company including security
holdings, customer cash and deposits and vested unexercised options.
Retail deposits—Balances of retail customer cash held at the Bank; excludes brokered certificates of
deposit.
Return on average total assets—Annualized net income divided by average assets.
Return on average total shareholders’ equity—Annualized net income divided by average shareholders’
equity.
Risk-weighted assets—Primarily computed by the assignment of specific risk-weightings assigned by the
OTS to assets and off-balance sheet instruments for capital adequacy calculations. This calculation is for
E*TRADE Bank only.
Stock conduit—The borrowing of shares from a Broker-Dealer and subsequently lending the same shares to
another Broker-Dealer netting a fee.
Swaptions—Options to enter swaps starting on a given day.
Sweep deposit accounts—Accounts with the functionality to transfer brokerage cash balances to and from an
FDIC-insured money market account at the Bank.
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