x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE |
Delaware | 94-2844166 | |
(State or other jurisdiction | (I.R.S. Employer | |
of incorporation or organization) | Identification Number) |
Item 1. | Legal and Administrative Proceedings | 47 | ||
Item 2. | Changes in Securities and Use of Proceeds | 47 | ||
Item 3. | Defaults Upon Senior Securities | 48 | ||
Item 4. | Submission of Matters to a Vote of Security Holders | 48 | ||
Item 5. | Other Information | 48 | ||
Item 6. | Exhibits and Reports on Form 8-K | 48 | ||
Signatures | 50 |
Three Months Ended March 31, | ||||||
---|---|---|---|---|---|---|
2001 | 2000 | |||||
Revenues: | ||||||
Transaction revenues | $ 131,362 | $ 254,596 | ||||
Interest income | 317,430 | 243,582 | ||||
Global and institutional | 36,841 | 49,676 | ||||
Other | 64,492 | 16,711 | ||||
Gross revenues | 550,125 | 564,565 | ||||
Interest expense | (219,101 | ) | (146,609 | ) | ||
Provision for loan losses | (1,443 | ) | (1,256 | ) | ||
Net revenues | 329,581 | 416,700 | ||||
Cost of services | 142,435 | 135,579 | ||||
Operating expenses: | ||||||
Selling and marketing | 93,698 | 180,605 | ||||
Technology development | 22,281 | 43,335 | ||||
General and administrative | 60,242 | 52,551 | ||||
Amortization of goodwill and other intangibles | 7,999 | 5,297 | ||||
Acquisition-related expenses | — | 24,599 | ||||
Total operating expenses | 184,220 | 306,387 | ||||
Total cost of services and operating expenses | 326,655 | 441,966 | ||||
Operating income (loss) | 2,926 | (25,266 | ) | |||
Non-operating income (expense): | ||||||
Corporate interest income | 5,778 | 3,620 | ||||
Corporate interest expense | (11,228 | ) | (7,128 | ) | ||
Gain (loss) on sale of investments | (2,531 | ) | 10,915 | |||
Equity in losses of investments | (3,341 | ) | (736 | ) | ||
Unrealized loss on venture funds | (11,611 | ) | (14,628 | ) | ||
Fair value adjustments of financial derivatives | 334 | — | ||||
Other | (700 | ) | (753 | ) | ||
Total non-operating expense | (23,299 | ) | (8,710 | ) | ||
Pre-tax loss | (20,373 | ) | (33,976 | ) | ||
Income tax benefit | (13,242 | ) | (8,918 | ) | ||
Minority interest in subsidiaries | 35 | 408 | ||||
Loss before extraordinary loss on early extinguishment of debt, net of tax (See Note 12) | (7,166 | ) | (25,466 | ) | ||
Extraordinary loss on early extinguishment of debt, net of tax | (2,037 | ) | — | |||
Net loss | $ (9,203 | ) | $ (25,466 | ) | ||
Loss per share before extraordinary loss on early extinguishment of debt: | ||||||
Basic | $ (0.02 | ) | $ (0.09 | ) | ||
Diluted | $ (0.02 | ) | $ (0.09 | ) | ||
Net loss per share: | ||||||
Basic | $ (0.03 | ) | $ (0.09 | ) | ||
Diluted | $ (0.03 | ) | $ (0.09 | ) | ||
Shares used in computation of per share data (See Note 11): | ||||||
Basic | 317,242 | 298,026 | ||||
Diluted | 317,242 | 298,026 |
March 31, 2001 | September 30, 2000 | |||||
---|---|---|---|---|---|---|
(unaudited) | ||||||
ASSETS | ||||||
Cash and equivalents | $ 156,094 | $ 175,443 | ||||
Cash and investments required to be segregated under Federal or other regulations | 134,368 | 125,862 | ||||
Brokerage receivables—net | 4,562,003 | 6,542,508 | ||||
Mortgage-backed securities | 3,970,223 | 4,188,553 | ||||
Loans receivable—net of allowance for loan losses of $13,821 at March 31, 2001 and $10,930 at September 30, 2000 | 6,345,377 | 4,172,754 | ||||
Investments | 1,722,330 | 985,218 | ||||
Property and equipment—net | 425,587 | 334,262 | ||||
Goodwill and other intangibles | 456,813 | 484,166 | ||||
Other assets | 642,740 | 308,671 | ||||
Total assets | $18,415,535 | $17,317,437 | ||||
LIABILITIES AND SHAREOWNERS’ EQUITY | ||||||
Liabilities: | ||||||
Brokerage payables | $ 4,273,285 | $ 6,055,530 | ||||
Banking deposits | 6,862,630 | 4,721,801 | ||||
Borrowings by bank subsidiary | 4,033,426 | 3,531,000 | ||||
Convertible subordinated notes | 650,000 | 650,000 | ||||
Accounts payable, accrued and other liabilities | 842,339 | 471,626 | ||||
Total liabilities | 16,661,680 | 15,429,957 | ||||
Company-obligated mandatorily redeemable preferred capital securities of subsidiary trusts holding solely junior subordinated debentures of the Company (redemption value $32,400) | 30,763 | 30,647 | ||||
Commitments and contingencies | ||||||
Shareowners’ equity: | ||||||
Preferred stock, shares authorized: 1,000,000; issued and outstanding: none at March 31, 2001 and September 30, 2000 | — | — | ||||
Shares exchangeable into common stock, $.01 par value, shares authorized: 10,644,223; issued and outstanding: 3,293,840 at March 31, 2001 and 5,619,543 at September 30, 2000 | 33 | 56 | ||||
Common stock, $.01 par value, shares authorized: 600,000,000; issued and outstanding: 318,908,996 at March 31, 2001 and 304,504,764 at September 30, 2000 | 3,189 | 3,045 | ||||
Additional paid-in capital | 1,907,837 | 1,814,581 | ||||
Unearned Employee Stock Ownership Plan shares | (1,286 | ) | (1,560 | ) | ||
Shareowners’ notes receivable | (19,640 | ) | (19,103 | ) | ||
Deferred stock compensation | (13,088 | ) | — | |||
Accumulated deficit | (14,758 | ) | (6,908 | ) | ||
Accumulated other comprehensive income (loss) | (139,195 | ) | 66,722 | |||
Total shareowners’ equity | 1,723,092 | 1,856,833 | ||||
Total liabilities and shareowners’ equity | $18,415,535 | $17,317,437 | ||||
Three Months Ended March 31, | ||||||
---|---|---|---|---|---|---|
2001 | 2000 | |||||
Net cash used in operating activities | $ (92,546 | ) | $ (142,230 | ) | ||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||
Purchase of mortgage-backed securities, available-for-sale securities, and other investments, net of securities received in business acquisitions | (6,709,043 | ) | (3,173,463 | ) | ||
Proceeds from sales, maturities of and principal payments on mortgage-backed securities, available-for- sale securities, and other investments | 7,229,679 | 2,114,438 | ||||
Net increase in loans receivable, net of loans received in business acquisitions | (928,813 | ) | (631,803 | ) | ||
Increase (decrease) in restricted deposits | 45 | (14,886 | ) | |||
Purchases of property and equipment, net of property and equipment received in business acquisitions | (62,715 | ) | (47,911 | ) | ||
Other | 1,460 | 943 | ||||
Net cash used in investing activities | (469,387 | ) | (1,752,682 | ) | ||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||
Net increase in banking deposits | 1,112,421 | 578,728 | ||||
Advances from the Federal Home Loan Bank of Atlanta | 1,489,000 | 1,173,000 | ||||
Payments on advances from the Federal Home Loan Bank of Atlanta | (2,039,000 | ) | (668,000 | ) | ||
Net increase (decrease) in securities sold under agreements to repurchase | (45,927 | ) | 305,931 | |||
Net proceeds from convertible subordinated notes | — | 631,312 | ||||
Repayments on loans to related parties, net of loans issued | 2,899 | — | ||||
Proceeds from issuance of common stock from associate stock transactions | 10,806 | 21,238 | ||||
Proceeds from bank loans and lines of credit, net of transaction costs | 2,172 | 75,000 | ||||
Payments on bank loans and lines of credit | (23,626 | ) | (150,589 | ) | ||
Repayment of capital lease obligations | (3,182 | ) | (2,037 | ) | ||
Other | 34 | 1,134 | ||||
Net cash provided by financing activities | 505,597 | 1,965,717 | ||||
INCREASE (DECREASE) IN CASH AND EQUIVALENTS | (56,336 | ) | 70,805 | |||
CASH AND EQUIVALENTS—Beginning of period | 212,430 | 326,227 | ||||
CASH AND EQUIVALENTS—End of period | $ 156,094 | $ 397,032 | ||||
SUPPLEMENTAL DISCLOSURES: | ||||||
Non-cash investing and financing activities: | ||||||
Unrealized loss on available-for-sale securities | $ (73,614 | ) | $ (139,844 | ) | ||
Tax benefit on exercise of stock options | $ 3,029 | $ 3,385 | ||||
Tax effect of gain on available-for-sale securities | $ (2,863 | ) | $ — | |||
Transfer of loans to REO | $ (480 | ) | $ — | |||
Assets acquired under capital lease obligations | $ 1,339 | $ — | ||||
Change in financial derivatives recorded at fair market value | $ (83,495 | ) | $ — | |||
Deferred stock compensation | $ 14,510 | $ — | ||||
Purchase acquisitions, net of cash acquired: | ||||||
Common stock issued and stock options assumed | $ 52,008 | $ — | ||||
Cash paid, less acquired (including acquisition costs) | 1,521 | — | ||||
Liabilities assumed | 10 | — | ||||
Reduction in payable for purchase of international subsidiary | (12,341 | ) | — | |||
Carrying value of joint-venture investment | 1,258 | — | ||||
Fair value of assets acquired (including goodwill of $38,452 and $0) | $ 42,456 | $ — | ||||
March 31, 2001 | September 30, 2000 | |||
---|---|---|---|---|
Receivable from customers and non-customers (less allowance for doubtful accounts of $5,398 at March 31, 2001 and $3,887 at September 30, 2000) | $2,559,096 | $5,173,220 | ||
Receivable from brokers, dealers and clearing organizations: | ||||
Net settlement and deposits with clearing organizations | 73,504 | 89,031 | ||
Deposits paid for securities borrowed | 1,909,781 | 1,267,109 | ||
Securities failed to deliver | 1,122 | 1,970 | ||
Other | 18,500 | 11,178 | ||
Total brokerage receivables—net | $4,562,003 | $6,542,508 | ||
Payable to customers and non-customers | $1,882,938 | $1,735,228 | ||
Payable to brokers, dealers and clearing organizations: | ||||
Deposits received for securities loaned | 2,376,666 | 4,296,399 | ||
Securities failed to receive | 1,421 | 6,266 | ||
Other | 12,260 | 17,637 | ||
Total brokerage payables | $4,273,285 | $6,055,530 | ||
March 31, 2001 | September 30, 2000 | |||
---|---|---|---|---|
Trading securities | $ 1,935 | $ 3,867 | ||
Available-for-sale investment securities(1) | 1,537,421 | 861,334 | ||
Equity method and other investments: | ||||
Joint ventures | 36,764 | 30,492 | ||
Venture capital funds | 36,331 | 50,974 | ||
Wit Soundview | 41,690 | — | ||
Archipelago | 25,274 | 25,658 | ||
Other investments | 42,915 | 12,893 | ||
Total investments | $1,722,330 | $985,218 | ||
(1) | Includes investments in the E*TRADE Financial Sector Index Fund, E*TRADE Russell 2000 Index Fund, E*TRADE Global Titan Fund and the E*TRADE S&P 500 Fund. |
Three Months Ended March 31, | ||||||
---|---|---|---|---|---|---|
2001 | 2000 | |||||
Net loss | $ (9,203 | ) | $ (25,466 | ) | ||
Changes in other comprehensive loss: | ||||||
Unrealized loss on available-for-sale securities, net of tax | (27,447 | ) | (81,030 | ) | ||
Unrealized loss on derivative instruments, net of tax (see Note 16) | (49,548 | ) | — | |||
Cumulative translation adjustments | (4,298 | ) | (1,455 | ) | ||
Total comprehensive loss | $(90,496 | ) | $(107,951 | ) | ||
Three Months Ended March 31, | ||||||
---|---|---|---|---|---|---|
2001 | 2000 | |||||
Basic and diluted | Basic and diluted | |||||
Numerator: | ||||||
Loss before extraordinary loss on early extinguishment of debt | $ (7,166 | ) | $(25,466 | ) | ||
Extraordinary loss on early extinguishment of debt, net of tax | (2,037 | ) | — | |||
Net loss | $ (9,203 | ) | $(25,466 | ) | ||
Denominator: | ||||||
Weighted average shares outstanding | 317,242 | 298,026 | ||||
Three Months Ended March 31, | ||||
---|---|---|---|---|
2001 | 2000 | |||
Options excluded from computation of diluted net loss per share | 18,784 | 5,149 | ||
Exercise price ranges: | ||||
High | $ 58.19 | $58.75 | ||
Low | $ 10.53 | $25.16 |
March 31, 2001 | September 30, 2000 | |||||
---|---|---|---|---|---|---|
Net capital | $414,103 | $479,036 | ||||
Percentage of aggregate debit balances | 17.2 | % | 9.2 | % | ||
Required net capital | $ 48,123 | $103,747 | ||||
Excess net capital | $365,980 | $375,289 |
March 31, 2001 | September 30, 2000 | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Required Net Capital | Net Capital | Excess Net Capital | Required Net Capital | Net Capital | Excess Net Capital | |||||||
E*TRADE Institutional Securities, Inc. | $250 | $ 2,779 | $ 2,529 | $250 | $ 1,161 | $ 911 | ||||||
E*TRADE Investor Select, Inc. | $ 5 | $ 230 | $ 225 | $ 5 | $ 351 | $ 346 | ||||||
Marquette Securities, Inc. | $250 | $ 795 | $ 545 | $250 | $ 536 | $ 286 | ||||||
E*TRADE Capital Markets, Inc. | $174 | $14,126 | $13,952 | $113 | $21,774 | $21,661 | ||||||
E*TRADE Canada Securities Corporation | $ 56 | $ 192 | $ 136 | $100 | $ 233 | $ 133 |
Actual | Required for Capital Adequacy Purposes | Required to be Well Capitalized Under Prompt Corrective Action Provisions | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Amount | Ratio | Amount | Ratio | Amount | Ratio | ||||||||||
As of March 31, 2001: | |||||||||||||||
Core Capital (to adjusted tangible assets) | $682,943 | 5.66 | % | >$482,993 | > 4.0 | % | >$603,741 | > 5.0 | % | ||||||
Tangible Capital (to tangible assets) | $682,943 | 5.66 | % | >$180,012 | > 1.5 | % | N/A | N/A | |||||||
Tier I Capital (to risk weighted assets) | $682,943 | 11.57 | % | N/A | N/A | >$354,124 | > 6.0 | % | |||||||
Total Capital (to risk weighted assets) | $696,595 | 11.80 | % | >$472,165 | > 8.0 | % | >$590,206 | > 10.0 | % | ||||||
As of September 30, 2000: | |||||||||||||||
Core Capital (to adjusted tangible assets) | $582,058 | 6.5 | % | >$359,874 | > 4.0 | % | >$449,843 | > 5.0 | % | ||||||
Tangible Capital (to tangible assets) | $582,058 | 6.5 | % | >$134,953 | > 1.5 | % | N/A | N/A | |||||||
Tier I Capital (to risk weighted assets) | $582,058 | 16.8 | % | N/A | N/A | >$207,890 | > 6.0 | % | |||||||
Total Capital (to risk weighted assets) | $592,597 | 17.1 | % | >$277,186 | > 8.0 | % | >$346,483 | > 10.0 | % |
To date, none of these putative class actions has been certified, and the Company believes that these claims are without merit and intends to defend against them vigorously. An unfavorable outcome in any of these matters for which the Company’s pending insurance claims are rejected could have a material adverse effect on the From time to time, the Company has been threatened with, or named as a defendant in, lawsuits, arbitrations and administrative claims. Compliance and trading problems that are reported to regulators such as the SEC or the NASDR by dissatisfied customers or others are investigated by such regulators, and may, if pursued, result in formal arbitration claims being filed against the Company by customers and/or disciplinary action being taken against the Company by regulators. Any such claims or disciplinary actions that are decided against the Company could have a material adverse effect on the Company’s business, financial condition and results of operations. The Company is also subject to periodic regulatory audits and inspections.
Domestic Retail Brokerage & Other | Banking | Global and Institutional | Total | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Three Months Ended March 31, 2001: | ||||||||||||
Interest income-net of interest expense | $ 59,648 | $ 36,319 | $ 2,362 | $ 98,329 | ||||||||
Non-interest revenue-net of provision for loan losses | 158,694 | 35,294 | 37,264 | 231,252 | ||||||||
Net revenues | $ 218,342 | $ 71,613 | $ 39,626 | $ 329,581 | ||||||||
Operating income (loss) | $ (8,181 | ) | $ 24,460 | $(13,353 | ) | $ 2,926 | ||||||
Three Months Ended March 31, 2000: | ||||||||||||
Interest income-net of interest expense | $ 66,385 | $ 29,304 | $ 1,284 | $ 96,973 | ||||||||
Non-interest revenue-net of provision for loan losses | 269,080 | (572 | ) | 51,219 | 319,727 | |||||||
Net revenues | $ 335,465 | $ 28,732 | $ 52,503 | $ 416,700 | ||||||||
Operating loss | $ (16,029 | ) | $ (8,474 | ) | $ (763 | ) | $ (25,266 | ) | ||||
As of March 31, 2001: | ||||||||||||
Segment assets | $5,916,185 | $12,083,532 | $415,818 | $18,415,535 | ||||||||
As of September 30, 2000: | ||||||||||||
Segment assets | $7,805,843 | $ 9,027,185 | $484,409 | $17,317,437 |
Three Months Ended March 31, | Percentage Change | ||||||
---|---|---|---|---|---|---|---|
2001 | 2000 | ||||||
Active domestic brokerage accounts | 3,223,404 | 2,423,076 | 33 | % | |||
Active banking accounts | 404,765 | 170,584 | 137 | % | |||
Active global and institutional accounts | 96,952 | 50,925 | 90 | % | |||
Total active accounts at period end | 3,725,121 | 2,644,585 | 41 | % | |||
Net new domestic brokerage accounts | 111,036 | 547,173 | (80 | )% | |||
Net new banking accounts | 42,148 | 39,949 | 6 | % | |||
Net new global and institutional accounts | 12,928 | 23,559 | (45 | )% | |||
Total net new accounts | 166,112 | 610,681 | (73 | )% | |||
Cost per new account | $ 387 | $ 258 | 50 | % | |||
Total assets in domestic brokerage accounts | $39,995,040 | $61,569,597 | (35 | )% | |||
Total deposits in banking accounts | 6,771,024 | 3,201,194 | 112 | % | |||
Total assets in global and institutional accounts | 1,102,736 | 1,142,355 | (3 | )% | |||
Total assets/deposits in customer accounts at period end | $47,868,800 | $65,913,146 | (27 | )% | |||
Total domestic brokerage transactions | 8,084,849 | 14,242,052 | (43 | )% | |||
Daily average domestic brokerage transactions | 130,401 | 226,064 | (42 | )% | |||
Average commission per domestic brokerage transaction | $ 13.62 | $ 15.85 | (14 | )% | |||
Rebates per domestic brokerage transaction | $ 2.62 | $ 2.02 | 30 | % | |||
Three Months Ended March 31, | Percentage Change | ||||||||
---|---|---|---|---|---|---|---|---|---|
2001 | 2000 | ||||||||
Transaction revenues: | |||||||||
Commission | $ 110,156 | $ 225,795 | (51 | )% | |||||
Order flow | 21,206 | 28,801 | (26 | )% | |||||
Total transaction revenues | 131,362 | 254,596 | (48 | )% | |||||
Interest income: | |||||||||
Brokerage-related activities | 100,745 | 133,241 | (24 | )% | |||||
Banking-related activities | 216,685 | 110,341 | 96 | % | |||||
Total interest income | 317,430 | 243,582 | 30 | % | |||||
Global and institutional | 36,841 | 49,676 | (26 | )% | |||||
Other | 64,492 | 16,711 | 286 | % | |||||
Gross revenues | 550,125 | 564,565 | (3 | )% | |||||
Interest expense: | |||||||||
Brokerage-related activities | (38,735 | ) | (65,572 | ) | (41 | )% | |||
Banking-related activities | (180,366 | ) | (81,037 | ) | 123 | % | |||
Total interest expense | (219,101 | ) | (146,609 | ) | 49 | % | |||
Provision for loan losses | (1,443 | ) | (1,256 | ) | 15 | % | |||
Net revenues | $ 329,581 | $ 416,700 | (21 | )% | |||||
Three Months Ended March 31, | Percentage Change | ||||||
---|---|---|---|---|---|---|---|
2001 | 2000 | ||||||
Average customer margin balances | $2,866 | $4,877 | (41 | )% | |||
Average customer money market fund balances | $8,596 | $6,698 | 28 | % | |||
Average customer credit balances | $1,373 | $1,530 | (10 | )% | |||
Average stock loan balances | $2,594 | $4,385 | (41 | )% |
Three Months Ended March 31, 2001 | Three Months Ended March 31, 2000 | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Average Balance | Interest Income/ Expense | Average Annualized Yield/Cost | Average Balance | Interest Income/ Expense | Average Annualized Yield/Cost | |||||||||
Interest-earning banking assets: | ||||||||||||||
Loans receivable, net | $ 5,705,108 | $111,342 | 7.81 | % | $2,777,617 | $ 56,119 | 8.08 | % | ||||||
Interest-bearing deposits | 39,825 | 642 | 6.54 | % | 104,930 | 1,450 | 5.56 | % | ||||||
Mortgage-backed and related available-for-sale securities | 4,803,455 | 85,438 | 7.11 | % | 2,539,374 | 48,005 | 7.56 | % | ||||||
Available-for-sale investment securities | 843,772 | 15,487 | 7.39 | % | 194,270 | 3,356 | 7.13 | % | ||||||
Investment in FHLB stock | 83,358 | 1,490 | 7.25 | % | 53,427 | 1,029 | 7.75 | % | ||||||
Trading securities | 128,797 | 2,286 | 7.10 | % | 24,100 | 382 | 6.34 | % | ||||||
Total interest-earning banking assets | 11,604,315 | $216,685 | 7.47 | % | 5,693,718 | $110,341 | 7.76 | % | ||||||
Non-interest-earning banking assets | 303,709 | 233,858 | ||||||||||||
Total banking assets | $11,908,024 | $5,927,576 | ||||||||||||
Interest-bearing banking liabilities: | ||||||||||||||
Retail deposits | $ 6,169,462 | $100,068 | 6.58 | % | $2,910,177 | $ 43,176 | 5.94 | % | ||||||
Brokered callable certificates of deposit | 91,644 | 1,425 | 6.31 | % | 91,836 | 1,483 | 6.48 | % | ||||||
FHLB advances | 1,625,322 | 27,599 | 6.79 | % | 1,056,637 | 16,317 | 6.11 | % | ||||||
Other borrowings | 3,160,833 | 51,274 | 6.49 | % | 1,257,613 | 20,061 | 6.31 | % | ||||||
Total interest-bearing banking liabilities | 11,047,261 | $180,366 | 6.62 | % | 5,316,263 | $ 81,037 | 6.13 | % | ||||||
Non-interest bearing banking liabilities | 208,214 | 112,924 | ||||||||||||
Total banking liabilities | 11,255,475 | 5,429,187 | ||||||||||||
Total banking shareowner’s equity | 652,549 | 498,389 | ||||||||||||
Total banking liabilities and shareowner’s equity | $11,908,024 | $5,927,576 | ||||||||||||
Excess of interest-earning banking assets over interest- bearing banking liabilities/net interest income | $ 557,054 | $ 36,319 | $ 377,455 | $ 29,304 | ||||||||||
Net interest spread | 0.85 | % | 1.63 | % | ||||||||||
Net interest margin (net yield on interest-earning banking assets) | 1.26 | % | 2.07 | % | ||||||||||
Ratio of interest-earning banking assets to interest- bearing banking liabilities | 105.04 | % | 107.10 | % | ||||||||||
Return on average total banking assets | 0.44 | % | 0.26 | % | ||||||||||
Return on average net banking assets | 8.12 | % | 3.15 | % | ||||||||||
Equity to total banking assets | 5.48 | % | 8.41 | % | ||||||||||
* | Ratios calculated by excluding Employee Stock Ownership Plan and merger related costs of $0.2 million and $13.8 million in the three months ended March 31, 2001 and 2000. |
Three Months Ended March 31, | Percentage Change | ||||||||
---|---|---|---|---|---|---|---|---|---|
2001 | 2000 | ||||||||
Cost of services | $142,435 | $135,579 | 5 | % | |||||
Cost of services as a percentage of net revenues | 43 | % | 33 | % | |||||
Operating expenses: | |||||||||
Selling and marketing | 93,698 | 180,605 | (48 | )% | |||||
Technology development | 22,281 | 43,335 | (49 | )% | |||||
General and administrative | 60,242 | 52,551 | 15 | % | |||||
Amortization of goodwill and other intangibles | 7,999 | 5,297 | 51 | % | |||||
Acquisition-related expenses | — | 24,599 | (100 | )% | |||||
Total operating expenses | $184,220 | $306,387 | (40 | )% | |||||
Ÿ | American Express Company |
Ÿ | AOL Time Warner Inc. |
Ÿ | Ameritrade, Inc. |
Ÿ | Bank of America Corporation |
Ÿ | Charles Schwab & Co., Inc. |
Ÿ | CSFBdirect (formerly DLJ direct) |
Ÿ | J.P. Morgan Chase & Co. |
Ÿ | Citigroup Inc. |
Ÿ | Datek Online Holdings Corporation |
Ÿ | Fidelity Investments |
Ÿ | FleetBoston Financial Corporation |
Ÿ | Intuit Inc. |
Ÿ | Merrill Lynch, Pierce, Fenner & Smith Incorporated |
Ÿ | Microsoft MoneyCentral |
Ÿ | Morgan Stanley Dean Witter & Co. |
Ÿ | National Discount Brokers Corporation (which is owned by Deutsche Bank) |
Ÿ | NetBank, Inc. |
Ÿ | PaineWebber Group, Inc. (which is owned by UBS AG) |
Ÿ | Salomon Smith Barney, Inc. (which is owned by Citigroup) |
Ÿ | TD Waterhouse Group, Inc. |
Ÿ | Wells Fargo & Company |
Ÿ | WingspanBank.com (a division of First USA Bank, N.A.) |
Ÿ | Yahoo! Inc. |
Ÿ | undetected errors in software programs or computer systems, |
Ÿ | our inability to effectively resolve any errors in our internal software programs or computer systems once they are detected, or |
Ÿ | heavy stress placed on systems in the transaction process during certain peak trading times. |
Ÿ | effectively using new technologies, |
Ÿ | adapting our services and products to meet emerging industry standards, |
Ÿ | developing, introducing and marketing service and product enhancements, or |
Ÿ | developing, introducing and marketing new services and products to meet customer demand. |
Ÿ | unexpected changes in regulatory requirements and trade barriers, |
Ÿ | difficulties in staffing and managing foreign operations, |
Ÿ | the level of investor interest in cross-border trading, |
Ÿ | authentication of online customers, |
Ÿ | political instability, |
Ÿ | fluctuations in currency exchange rates, |
Ÿ | reduced protection for intellectual property rights in some countries, |
Ÿ | seasonal reductions in business activity during the summer months in Europe and certain other parts of the world, |
Ÿ | the level of adoption of the Internet in international markets, and |
Ÿ | potentially adverse tax consequences. |
Ÿ | difficulties in the assimilation and integration of acquired operations and products, |
Ÿ | diversion of management’s attention from other business concerns, |
Ÿ | failure to achieve anticipated cost savings, |
Ÿ | amortization of acquired intangible assets, with the effect of reducing our reported earnings, and |
Ÿ | potential loss of key associates of acquired companies. |
Ÿ | enforce our intellectual property rights, |
Ÿ | protect our trade secrets, |
Ÿ | determine the validity and scope of the proprietary rights of others, or |
Ÿ | defend against claims of infringement or invalidity. |
Ÿ | sales methods, |
Ÿ | recommendations of securities, |
Ÿ | trading practices among broker-dealers, |
Ÿ | execution of customers’ orders, |
Ÿ | use and safekeeping of customers’ funds and securities, |
Ÿ | capital structure, |
Ÿ | record keeping, |
Ÿ | advertising, |
Ÿ | conduct of directors, officers and employees, and |
Ÿ | supervision. |
Required Net Capital | Net Capital | Excess Net Capital | ||||
---|---|---|---|---|---|---|
E*TRADE Securities Incorporated. | $48,123 | $414,103 | $365,980 | |||
E*TRADE Institutional Securities, Inc. | $ 250 | $ 2,779 | $ 2,529 | |||
E*TRADE Investor Select, Inc. | $ 5 | $ 230 | $ 225 | |||
Marquette Securities, Inc. | $ 250 | $ 795 | $ 545 | |||
E*TRADE Capital Markets, Inc. | $ 174 | $ 14,126 | $ 13,952 | |||
E*TRADE Canada Securities Corporation | $ 56 | $ 192 | $ 136 |
Actual | To Be Well Capitalized Under Prompt Corrective Action Provision | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
Amount | Ratio | Amount | Ratio | |||||||
Core Capital (to adjusted tangible assets) | $682,943 | 5.66 | % | >$603,741 | > 5.0 | % | ||||
Tier 1 Capital (to risk weighted assets) | $682,943 | 11.57 | % | >$354,124 | > 6.0 | % | ||||
Total Capital (to risk weighted assets) | $696,595 | 11.80 | % | >$590,206 | > 10.0 | % |
Ÿ | censures or fines, |
Ÿ | suspension of all advertising, |
Ÿ | the issuance of cease-and-desist orders, or |
Ÿ | the suspension or expulsion of a broker-dealer or any of its officers or employees. |
Ÿ | fluctuations in the fair market value of our equity investments in other companies, including through existing or future private investment funds managed by us, |
Ÿ | fluctuations in interest rates, which will impact our investment and loan portfolios, |
Ÿ | changes in trading volume in securities markets, |
Ÿ | the success of, or costs associated with, acquisitions, joint ventures or other strategic relationships, |
Ÿ | changes in key personnel, |
Ÿ | seasonal trends, |
Ÿ | purchases and sales of securities and other assets as part of the Bank’s portfolio restructuring efforts, |
Ÿ | customer acquisition costs, which may be affected by competitive conditions in the marketplace, |
Ÿ | the timing of introductions or enhancements to online financial services and products by us or our competitors, |
Ÿ | market acceptance of online financial services and products, |
Ÿ | domestic and international regulation of the brokerage, banking and Internet industries, |
Ÿ | accounting for derivative instruments and hedging activities, |
Ÿ | changes in domestic or international tax rates, |
Ÿ | changes in pricing policies by us or our competitors, |
Ÿ | fluctuation in foreign exchange rates, and |
Ÿ | changes in the level of operating expenses to support projected growth. |
Ÿ | quarterly variations in operating results, |
Ÿ | volatility in the stock market, |
Ÿ | volatility in the general economy, |
Ÿ | changes in interest rates, |
Ÿ | announcements of acquisitions, technological innovations or new software, services or products by us or our competitors, and |
Ÿ | changes in financial estimates and recommendations by securities analysts. |
Balance at March 31, 2001 | Percent of Total | Repricing Within 0-3 Months | Repricing Within 4-12 Months | Repricing Within 1-5 Years | Repricing in More Than 5 Years | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Interest-earning banking assets: | |||||||||||||||||
Loans receivable, net | $ 6,345,377 | 54.26 | % | $ 485,201 | $1,431,295 | $3,656,471 | $ 772,410 | ||||||||||
Mortgage-backed securities, available-for- sale and trading | 3,972,033 | 33.97 | 359,337 | 813,316 | 1,877,965 | 921,415 | |||||||||||
Investment securities, available-for-sale and FHLB stock | 1,327,805 | 11.35 | 161,441 | 149,929 | 587,111 | 429,324 | |||||||||||
Federal funds sold and interest bearing deposits | 49,356 | 0.42 | — | 9,871 | 39,485 | — | |||||||||||
Total interest-earning banking assets | 11,694,571 | 100.00 | % | $1,005,979 | $2,404,411 | $6,161,032 | $2,123,149 | ||||||||||
Non-interest-earning banking assets | 378,842 | ||||||||||||||||
Total banking assets | $12,073,413 | ||||||||||||||||
Interest-bearing banking liabilities: | |||||||||||||||||
Savings deposits | $ 1,279,438 | 11.75 | % | $ — | $ — | $1,279,438 | $ — | ||||||||||
Time deposits | 5,583,191 | 51.24 | 221,675 | 3,861,950 | 1,416,375 | 83,191 | |||||||||||
FHLB advances | 1,187,000 | 10.89 | 987,000 | — | 150,000 | 50,000 | |||||||||||
Other borrowings | 2,846,426 | 26.12 | 2,846,426 | — | — | — | |||||||||||
Total interest-bearing banking liabilities | 10,896,055 | 100.00 | % | $4,055,101 | $3,861,950 | $2,845,813 | $ 133,191 | ||||||||||
Non-interest-bearing banking liabilities | 456,828 | ||||||||||||||||
Total banking liabilities | $11,352,883 | ||||||||||||||||
Periodic gap | $(3,049,122 | ) | $(1,457,539 | ) | $ 3,315,219 | $ 1,989,958 | |||||||||||
Cumulative gap | $(3,049,122 | ) | $(4,506,661 | ) | $(1,191,442 | ) | $ 798,516 | ||||||||||
Cumulative gap to total assets | (25.3 | )% | (37.3 | )% | (9.9 | )% | 6.6 | % | |||||||||
Cumulative gap to total assets hedge affected | 85.5 | % | 87.1 | % | 55.9 | % | 70.3 | % | |||||||||
As of September 30, 2000: | |||||||||||||||||
Cumulative gap to total assets | (36.9 | )% | (49.1 | )% | (24.0 | )% | 6.5 | % | |||||||||
Cumulative gap to total assets hedge affected | 1.1 | % | (12.8 | )% | (21.5 | )% | 6.5 | % |
Exhibit Number | Description | |
---|---|---|
*10.1 | Form of Stock Pledge Agreement by and between the Company and Charles W. Thomson dated February 28, 2001 | |
*10.2 | Form of Loan, Note and Stock Pledge Agreements by and between the Company and Pamela Kramer dated March 30, 2001 | |
*10.3 | Form of Residential Lease with option to buy entered into between B.R.E. Holdings LLC, a wholly-owned subsidiary of the Company, and each of Jerry Gramaglia and Charles W. Thomson, as lessees |
* | Filed herewith. |
E*TRADE Group, Inc. |
(Registrant) |
Dated: May 15, 2001 |
By: | /s/ CHRISTOS M. COTSAKOS |
Christos M. Cotsakos |
Chairman of the Board and Chief Executive Officer |
(Principal Executive Officer) |
By: | /s/ LEONARD C. PURKIS |
Leonard C. Purkis |
Chief Financial Officer |
(Principal Financial and Accounting Officer) |