eTrade 2010 Annual Report Download - page 39
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both of these portfolios were caused by several factors, including: significant continued home price depreciation;
weak demand for homes and high inventories of unsold homes; significant contraction in the availability of
credit; and a general decline in economic growth along with higher levels of unemployment. In addition, the
combined impact of home price depreciation and the reduction of available credit made it difficult for borrowers
to refinance existing loans. The provision for loan losses has declined for two consecutive years and we expect it
to continue to decline in 2011 when compared to 2010, although performance is subject to variability in any
given quarter.
Operating Expenses
The components of operating expense and the resulting variances are as follows (dollars in millions):
Variance
Year Ended December 31, 2010 vs. 2009
2010 2009 Amount %
Compensation and benefits $ 325.0 $ 366.2 $ (41.2) (11)%
Clearing and servicing 147.5 170.7 (23.2) (14)%
Advertising and market development 132.2 114.4 17.8 16%
Professional services 81.2 78.7 2.5 3%
FDIC insurance premiums 77.7 94.3 (16.6) (18)%
Communications 73.3 84.4 (11.1) (13)%
Occupancy and equipment 70.9 78.4 (7.5) (10)%
Depreciation and amortization 87.9 83.3 4.6 6%
Amortization of other intangibles 28.5 29.7 (1.2) (4)%
Facility restructuring and other exit activities 14.4 20.7 (6.3) (31)%
Other operating expenses 104.0 122.5 (18.5) (15)%
Total operating expense $1,142.6 $1,243.3 $(100.7) (8)%
Operating expense decreased 8% to $1.1 billion for the year ended December 31, 2010 compared to 2009.
The fluctuation was driven by decreases in the majority of operating expense categories, offset by a planned
increase in advertising and market development.
Compensation and Benefits
Compensation and benefits decreased 11% to $325.0 million for the year ended December 31, 2010
compared to 2009. This decrease resulted from lower incentive compensation expense and lower salary expense
due to a reduction in our employee base compared to the same period in 2009.
Clearing and Servicing
Clearing and servicing expense decreased 14% to $147.5 million for the year ended December 31, 2010
compared to 2009. This decrease resulted primarily from lower trading volumes and lower loan balances
compared to the same period in 2009.
Advertising and Market Development
Advertising and market development expense increased 16% to $132.2 million for the year ended
December 31, 2010 compared to 2009. This fluctuation was due largely to a planned increase in advertising
expense to attract new accounts and customer assets during the year ended December 31, 2010.
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