eTrade 2010 Annual Report Download - page 58

During the second quarter of 2009, our primary banking regulator, the OTS, advised us to raise additional
equity capital for E*TRADE Bank and to substantially reduce our corporate debt service burden. This was also
consistent with management’s belief during the same period. In response, we implemented a plan to strengthen
our capital structure by raising cash equity primarily to support E*TRADE Bank and also to enhance our
liquidity. As part of this plan, we raised $733 million in net proceeds from three separate common stock
offerings, as detailed in the table below (dollars and shares in millions):
Net Proceeds Shares
Equity Drawdown Program, May 2009 $ 63 4.1
Public Equity Offering, June 2009 523 50.0
At the Market Offering, September 2009 147 8.0
Total $733 62.1
Also as part of our 2009 capital plan, we completed an exchange of $1.7 billion aggregate principal amount
of our corporate debt, which included $1.3 billion principal amount of our 12
1
⁄ 2 % Notes and $0.4 billion
principal amount of our 8% Notes, for an equal principal amount of newly-issued non-interest-bearing
convertible debentures. As a result of the completion of this exchange in 2009, we reduced our annual corporate
interest payments by approximately $200 million and eliminated any substantial debt maturities until 2013. As of
December 31, 2010, a cumulative total of $1.0 billion of the non-interest-bearing convertible debentures had
been converted.
Consolidated Cash and Equivalents
The consolidated cash and equivalents balance decreased by $1.1 billion to $2.4 billion for the year ended
December 31, 2010. The majority of this balance is cash held in regulated subsidiaries, primarily the Bank,
outlined as follows (dollars in millions):
December 31, Variance
2010 2009 2010 vs. 2009
Corporate cash $ 470.5 $ 393.2 $ 77.3
Bank cash 1,812.1 2,863.2 (1,051.1)
International brokerage and other cash 91.7 275.8 (184.1)
Less:
Cash reported in other assets(1) — (49.0) 49.0
Total consolidated cash $2,374.3 $3,483.2 $(1,108.9)
(1) Cash reported in other assets consisted of cash that we invested in The Reserve Primary Fund and was included as a receivable in the
other assets line item. In the first quarter of 2010, we received a distribution from The Reserve Primary Fund in an amount that was
greater than what we originally estimated we would receive and had established as a receivable.
Corporate cash is the primary source of liquidity at the parent company and is available to invest in our
regulated subsidiaries. We define corporate cash as cash held at the parent company as well as cash held in
certain subsidiaries that can distribute cash to the parent company without any regulatory approval. We believe
corporate cash is a useful measure of the parent company’s liquidity as it is the primary source of capital above
and beyond the capital deployed in our regulated subsidiaries.
Cash and Equivalents Held in the Reserve Primary Fund
On January 29, 2010, we received a distribution from The Reserve Primary Fund in the amount of $49.8
million. This distribution resulted in a gain of $0.8 million in the first quarter of 2010 as the pro-rata distribution
was greater than what we originally estimated we would receive. This gain was recorded in the gains (losses) on
loans and securities, net and gains (losses) on sales of investments, net line items on the consolidated statement
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