eTrade 2010 Annual Report Download - page 45

Losses on the sales of loans were due to the sale of a $0.4 billion pool of home equity loans during the third
quarter of 2009. Losses on loans and securities, net during the year ended December 31, 2008 were due primarily
to losses on our preferred stock in Federal National Mortgage Association (“Fannie Mae”) and Federal Home
Loan Mortgage Corporation (“Freddie Mac”).
Net Impairment
We recognized $89.1 million of net impairment during the year ended December 31, 2009, on certain
securities in our non-agency CMO portfolio due to continued deterioration in the expected credit performance of
the underlying loans in the securities. The net impairment included gross OTTI of $232.1 million for the year
ended December 31, 2009. Of the $232.1 million of gross OTTI for the year ended December 31, 2009, $143.0
million related to the noncredit portion of OTTI, which was recorded through other comprehensive income (loss).
We had net impairment of $95.0 million for the year ended December 31, 2008, which represented the total
decline in the fair value of impaired securities in accordance with the OTTI accounting guidance that was in
effect prior to April 1, 2009.
Other Revenues
Other revenues decreased 9% to $47.8 million for the year ended December 31, 2009 compared to 2008.
The decrease in other revenue was driven by lower employee stock option management fees from our corporate
services business.
Provision for Loan Losses
Provision for loan losses decreased $85.6 million to $1.5 billion for the year ended December 31, 2009
compared to 2008. The provision for loan losses for the year ended December 31, 2009 was due primarily to the
high levels of delinquent loans in our one- to four-family and home equity loan portfolios.
Operating Expenses
The components of operating expense and the resulting variances are as follows (dollars in millions):
Variance
Year Ended December 31, 2009 vs. 2008
2009 2008 Amount %
Compensation and benefits $ 366.2 $ 383.4 $(17.2) (4)%
Clearing and servicing 170.7 185.1 (14.4) (8)%
Advertising and market development 114.4 175.2 (60.8) (35)%
Professional services 78.7 94.1 (15.4) (16)%
FDIC insurance premiums 94.3 31.2 63.1 202%
Communications 84.4 96.8 (12.4) (13)%
Occupancy and equipment 78.4 85.8 (7.4) (9)%
Depreciation and amortization 83.3 82.5 0.8 1%
Amortization of other intangibles 29.7 35.7 (6.0) (17)%
Facility restructuring and other exit activities 20.7 29.5 (8.8) (30)%
Other operating expenses 122.5 90.9 31.6 35%
Total operating expense $1,243.3 $1,290.2 $(46.9) (4)%
Operating expense decreased 4% to $1.2 billion for the year ended December 31, 2009 compared to 2008.
The decrease during the year ended December 31, 2009 compared to 2008 was driven by decreases in the
majority of the operating expense categories, offset by increases in FDIC insurance premiums and other
operating expenses.
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