Exhibit 99.1
E*TRADE FINANCIAL Corporation Announces First Quarter Results and Progress of 2008 Turnaround Plan
First Quarter Results
- Total Net Revenue of $316 million, including $234 million in Provision for Loan Losses
- Net Loss of $91.2 million, or $0.20 per share
- Total Customer Cash and Deposits of $35 billion
- Total Customer Assets of $168 billion
- Total Daily Average Revenue Trades (DARTs) of 191,000
2008 Turnaround Plan Progress
Customer Metrics
- Opened 305,000 gross new accounts, up 10 percent quarter over quarter
- Produced 62,000 net new accounts, up from 7,000 in the prior quarter
- Ended the quarter with a record 4.8 million total customer accounts
- Increased customer cash and deposit balances for the fourth consecutive month
- Stabilized customer asset flows and generated net inflows of $300 million
Financial Progress
- Increased excess Bank risk-based capital (excess to the regulatory minimum well-capitalized threshold) to approximately $695 million, up $260 million quarter over quarter
- Improved Bank tier-1 and risk-based capital ratios to 6.8 percent and 12.4 percent, respectively
- Ended the quarter with $10.7 billion in excess FHLB borrowing capacity
- Completed $69 million in non-core asset sales
- Reduced holding company debt by $60 million, including $25 million in debt-for-equity swaps
NEW YORK--(BUSINESS WIRE)--E*TRADE FINANCIAL Corporation (NASDAQ: ETFC) today announced results for its first quarter ended March 31, 2008, reporting a net loss of $91.2 million, or $0.20 per share, compared to a net loss of $1.7 billion, or $3.98 per share, in the prior quarter and net income of $169.4 million, or $0.39 per share a year ago.
The first quarter results included various noteworthy items related to actions taken in conjunction with the execution of the Company’s Turnaround Plan and credit market-related losses. The combination of these items on a net basis negatively impacted the first quarter by approximately $35 million, or $0.05 per share, as described below:
- Provision expense of $234 million included an additional $9 million associated with a change in the timing of foreclosure and bankruptcy-related charge-offs
- Loss on loans and securities, net, of $9 million included $27 million of impairments on AAA-rated and AA-rated collateralized mortgage obligations
- Compensation and benefits of $129 million included $12 million in severance related expenses
- Facility restructuring and other exit activities were $10.5 million
- Other expense of $17.5 million included a $24 million gain on the sale of corporate aviation-related assets
First quarter customer engagement trends showed further improvement over the prior quarter, demonstrating progress of the Company’s Turnaround Plan. “While we entered January with some disruption to our customer base due to last year's challenges, we exited the quarter with increased stability and the beginnings of a return to growth,” said Donald H. Layton, Chairman and Chief Executive Officer, E*TRADE FINANCIAL Corporation. “The growth in new customer relationships, even during a difficult environment, speaks to the continued strength and appeal of the E*TRADE brand.”
- Net new customers increased 60,000 in the quarter, the largest increase since the fourth quarter of 2005.
- Total customer accounts grew 62,000 quarter over quarter to a record 4.8 million.
- Total Daily Average Revenue Trades declined 11 percent quarter over quarter, but increased 12 percent over the year ago period, reflecting market conditions as well as the residual impact of the fourth-quarter disruption.
- Total customer assets declined 11 percent quarter over quarter, along with weakness in the overall market; however, the Company did generate net new customer assets of $300 million – marking a return to growth.
Although the credit environment remained challenging in the first quarter, long-term loan performance trends remained within the range of management’s previous expectations. “I am pleased to report that our home equity portfolio – which is the largest source of potential losses – is performing broadly in line with expectations. We are therefore affirming our three-year cumulative loss forecast of $1 billion to $1.5 billion,” continued Mr. Layton. “Although the performance of our one- to four-family portfolio is somewhat outside of our anticipated range, the expected losses in dollar terms are comparatively low given our position in the underlying collateral.”
The primary performance trends for each loan portfolio included:
Home Equity
- Total delinquent loans increased $41 million, 65 percent below the increase in the prior quarter. In addition, special mention loans (30-89 days delinquent) declined $14 million quarter over quarter, and have shown an absolute decline in two of the last three months.
- Net charge-offs totaled $149.4 million, including $21.7 million related to the change in charge-off policy associated with a change in the timing of foreclosure and bankruptcy-related charge-offs.
One- to Four-Family
- Total delinquent loans increased $177 million quarter over quarter to $655 million.
- Net charge-offs totaled $14.6 million, including $8.3 million related to the change in charge-off policy associated with a change in the timing of foreclosure and bankruptcy-related charge-offs.
Consumer
- Total delinquent loans decreased $2 million quarter over quarter to $30 million. In addition, special mention loans and non-performing loans each declined by $1 million.
- Net charge-offs totaled $12 million.
Total allowance for loan losses increased to $566 million, as provision exceeded charge-offs by $58 million during the quarter. The Company increased its allowance for loan losses in all three categories of its loan portfolio.
The Company continued to make significant progress during the quarter to reduce risk and strengthen its balance sheet – efforts consistent with its previously announced plan. The plan to reduce risk includes shrinking the Bank balance sheet (down $3.5 billion in the quarter); reducing wholesale funding sources, including stock loan, (down $5 billion in the quarter); and lowering exposure to undrawn home equity lines (down $700 million in the quarter). The Company is taking action that will reduce undrawn home equity lines by an additional approximately $1.2 billion by the end of April.
The plan to strengthen the balance sheet consists of the following two components: increasing excess capital levels at the Bank and reducing holding company debt. In the first quarter, excess risk-based Bank capital increased from $435 million last quarter to approximately $695 million at quarter end. Consistent with its previously stated plan, the Company continues to expect excess capital at the Bank to approach $1 billion by the end of 2008. Management also expects to reduce holding company debt by at least $700 million this year through a combination of debt-for-equity exchanges and the conversion of its mandatory convertible notes in November. In addition, planned non-core asset sales, which are currently being implemented, are estimated to generate proceeds of over $500 million in 2008.
Management has also revised its view of the economic and market outlook since the fourth quarter earnings call in January, and assumes the now-consensus view that the U.S. has entered into a modest recession. As a result, the Company is announcing that it will undertake additional restructuring activities this year to further reduce operating expenses.
“We are clearly facing a cyclical downturn in the economy and markets, and because we will be a simpler company after the disposition of certain non-core assets, we need to reduce our overall expense base,” stated Mr. Layton. “Our revised expense reduction program is designed to lower annual run-rate compensation-related expenses by 10 percent, approximately $50 million per year. We expect the majority of the plan to be implemented by the end of the second quarter.”
Historical monthly metrics from January 2003 to March 2008 can be found on the E*TRADE FINANCIAL Investor Relations site at https://investor.etrade.com.
The Company will host a conference call to discuss its first quarter results beginning at 5:00 p.m. (EST) today. The conference call will be available to domestic participants by dialing (800) 683-1525 and (973) 872-3197 for international participants. The conference ID number is 42066498. A live audio webcast of this conference call will also be accessible at https://investor.etrade.com.
About E*TRADE FINANCIAL
The E*TRADE FINANCIAL family of companies provides financial services including trading, investing, banking and lending for retail and institutional customers. Securities products and services are offered by E*TRADE Securities LLC (Member FINRA/SIPC). Bank and lending products and services are offered by E*TRADE Bank, a Federal savings bank, Member FDIC, or its subsidiaries.
Important Notice
E*TRADE FINANCIAL, E*TRADE and the E*TRADE logo are trademarks or registered trademarks of E*TRADE FINANCIAL Corporation. The statements contained in this news release that are forward-looking are based on current expectations that are subject to a number of uncertainties and risks, and actual results may differ materially. The uncertainties and risks include, but are not limited to, changes in market activity, anticipated increases in the rate of new customer acquisition, the conversion of new visitors to the site to customers, the activity of customers and assets held at the institution, seasonality, macro trends of the economy in general and the residential real estate market, instability in the consumer credit markets and credit trends, rising mortgage interest rates, tighter mortgage lending guidelines across the industry, increased mortgage loan delinquency and default rates, portfolio growth, portfolio seasoning and resolution through collections, sales or charge-offs, the development and enhancement of products and services, competitive pressures (including price competition), system failures, economic and political conditions, changes in consumer behavior and the introduction of competing products having technological and/or other advantages. Further information about these risks and uncertainties can be found in the information included in the annual reports previously filed by E*TRADE FINANCIAL Corporation with the SEC on Form 10-K (including information under the caption "Risk Factors") and quarterly reports on Form 10-Q.
© 2008 E*TRADE FINANCIAL Corporation. All rights reserved.
Financial Statements
E*TRADE FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statement of Income (Loss) | |||||||||||||||
(In thousands, except per share amounts) | |||||||||||||||
(Unaudited) | |||||||||||||||
Three Months Ended | |||||||||||||||
March 31, | December 31, | March 31, | |||||||||||||
2008 | 2007 | 2007 | |||||||||||||
Revenue: | |||||||||||||||
Operating interest income | $ | 710,737 | $ | 882,308 | $ | 829,795 | |||||||||
Operating interest expense | (377,966 | ) | (496,035 | ) | (439,209 | ) | |||||||||
Net operating interest income | 332,771 | 386,273 | 390,586 | ||||||||||||
Provision for loan losses | (233,871 | ) | (402,311 | ) | (21,186 | ) | |||||||||
Net operating interest income (expense) after provision for loan losses | 98,900 | (16,038 | ) | 369,400 | |||||||||||
Commission | 129,764 | 176,946 | 158,993 | ||||||||||||
Fees and service charges | 62,612 | 68,329 | 59,498 | ||||||||||||
Principal transactions | 20,495 | 24,490 | 30,082 | ||||||||||||
Gain (loss) on loans and securities, net | (9,145 | ) | (2,275,682 | ) | 17,375 | ||||||||||
Other revenue | 13,610 | 14,009 | 9,650 | ||||||||||||
Total non-interest income (expense) | 217,336 | (1,991,908 | ) | 275,598 | |||||||||||
Total net revenue | 316,236 | (2,007,946 | ) | 644,998 | |||||||||||
Expense excluding interest: | |||||||||||||||
Compensation and benefits | 128,777 | 105,068 | 123,782 | ||||||||||||
Clearing and servicing | 48,579 | 65,931 | 67,252 | ||||||||||||
Advertising and market development | 60,472 | 41,535 | 45,592 | ||||||||||||
Communications | 27,439 | 28,024 | 26,156 | ||||||||||||
Professional services | 24,347 | 35,530 | 24,985 | ||||||||||||
Depreciation and amortization | 22,071 | 23,708 | 19,383 | ||||||||||||
Occupancy and equipment | 22,003 | 23,942 | 23,579 | ||||||||||||
Amortization of other intangibles | 10,910 | 9,532 | 10,268 | ||||||||||||
Impairment of goodwill | - | 101,208 | - | ||||||||||||
Facility restructuring and other exit activities | 10,492 | 28,122 | 733 | ||||||||||||
Other | 17,523 | 56,644 | 32,675 | ||||||||||||
Total expense excluding interest | 372,613 | 519,244 | 374,405 | ||||||||||||
Income (loss) before other income (expense) and income taxes | (56,377 | ) | (2,527,190 | ) | 270,593 | ||||||||||
Other income (expense): | |||||||||||||||
Corporate interest income | 2,426 | 2,031 | 1,705 | ||||||||||||
Corporate interest expense | (95,241 | ) | (59,460 | ) | (37,791 | ) | |||||||||
Gain (loss) on sales of investments, net | 502 | (1,025 | ) | 19,756 | |||||||||||
Loss on early extinguishment of debt | (2,851 | ) | (13 | ) | - | ||||||||||
Equity in income of investments and venture funds | 4,699 | 1,151 | 8,095 | ||||||||||||
Total other income (expense) | (90,465 | ) | (57,316 | ) | (8,235 | ) | |||||||||
Income (loss) before income taxes | (146,842 | ) | (2,584,506 | ) | 262,358 | ||||||||||
Income tax expense (benefit) | (55,649 | ) | (872,661 | ) | 92,948 | ||||||||||
Net income (loss) | $ | (91,193 | ) | $ | (1,711,845 | ) | $ | 169,410 | |||||||
Basic earnings (loss) per share | $ | (0.20 | ) | $ | (3.98 | ) | $ | 0.40 | |||||||
Diluted earnings (loss) per share | $ | (0.20 | ) | $ | (3.98 | ) | $ | 0.39 | |||||||
Shares used in computation of per share data: | |||||||||||||||
Basic | 460,857 | 429,670 | 423,786 | ||||||||||||
Diluted (1) | 460,857 | 429,670 | 437,535 |
E*TRADE FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheet | |||||||||||
(In thousands, except share amounts) | |||||||||||
(Unaudited) | |||||||||||
March 31, | December 31, | ||||||||||
2008 | 2007 | ||||||||||
ASSETS | |||||||||||
Cash and equivalents | $ | 3,061,987 | $ | 1,778,244 | |||||||
Cash and investments required to be segregated under Federal or other regulations | 427,918 | 334,831 | |||||||||
Trading securities | 422,941 | 130,018 | |||||||||
Available-for-sale mortgage-backed and investment securities | 8,402,077 | 11,255,048 | |||||||||
Loans held-for-sale | 19,327 | 100,539 | |||||||||
Margin receivables | 6,655,659 | 7,179,175 | |||||||||
Loans receivable, net | 28,424,838 | 30,038,843 | |||||||||
Investment in Federal Home Loan Bank stock | 241,392 | 338,585 | |||||||||
Property and equipment, net | 324,940 | 355,433 | |||||||||
Goodwill | 1,950,682 | 1,933,368 | |||||||||
Other intangibles, net | 419,105 | 430,007 | |||||||||
Other assets | 2,846,084 | 2,971,846 | |||||||||
Total assets | $ | 53,196,950 | $ | 56,845,937 | |||||||
LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||||||
Liabilities: | |||||||||||
Deposits | $ | 27,467,227 | $ | 25,884,755 | |||||||
Securities sold under agreements to repurchase | 7,109,716 | 8,932,693 | |||||||||
Customer payables | 5,413,283 | 5,514,675 | |||||||||
Other borrowings | 5,242,921 | 7,446,504 | |||||||||
Corporate debt | 3,156,699 | 3,022,698 | |||||||||
Accounts payable, accrued and other liabilities | 2,091,765 | 3,215,547 | |||||||||
Total liabilities | 50,481,611 | 54,016,872 | |||||||||
Shareholders' equity: | |||||||||||
| |||||||||||
Common stock, $0.01 par value, shares authorized: 600,000,000; shares issued and outstanding: 468,335,796 at March 31, 2008 and 460,897,875 at December 31, 2007 | 4,683 | 4,609 | |||||||||
Additional paid-in-capital | 3,507,223 | 3,463,220 | |||||||||
Accumulated deficit | (425,170 | ) | (247,368 | ) | |||||||
Accumulated other comprehensive loss | (371,397 | ) | (391,396 | ) | |||||||
Total shareholders' equity | 2,715,339 | 2,829,065 | |||||||||
Total liabilities and shareholders' equity | $ | 53,196,950 | $ | 56,845,937 |
SEGMENT REPORTING | ||||||||||||||||||
Three Months Ended March 31, 2008 | ||||||||||||||||||
Retail | Institutional | Eliminations(2) | Total | |||||||||||||||
Revenue: | (In thousands) | |||||||||||||||||
Operating interest income | $ | 427,323 | $ | 590,856 | $ | (307,442 | ) | $ | 710,737 | |||||||||
Operating interest expense | (214,336 | ) | (471,072 | ) | 307,442 | (377,966 | ) | |||||||||||
Net operating interest income | 212,987 | 119,784 | - | 332,771 | ||||||||||||||
Provision for loan losses | - | (233,871 | ) | - | (233,871 | ) | ||||||||||||
Net operating interest income (expense) after provision for loan losses | 212,987 | (114,087 | ) | - | 98,900 | |||||||||||||
Commission | 128,388 | 1,376 | - | 129,764 | ||||||||||||||
Fees and service charges | 59,213 | 5,324 | (1,925 | ) | 62,612 | |||||||||||||
Principal transactions | - | 20,495 | - | 20,495 | ||||||||||||||
Gain (loss) on loans and securities, net | 1,069 | (10,214 | ) | - | (9,145 | ) | ||||||||||||
Other revenue | 9,683 | 3,943 | (16 | ) | 13,610 | |||||||||||||
Total non-interest income | 198,353 | 20,924 | (1,941 | ) | 217,336 | |||||||||||||
Total net revenue | 411,340 | (93,163 | ) | (1,941 | ) | 316,236 | ||||||||||||
Expense excluding interest: | ||||||||||||||||||
Compensation and benefits | 88,865 | 39,912 | - | 128,777 | ||||||||||||||
Clearing and servicing | 20,149 | 30,371 | (1,941 | ) | 48,579 | |||||||||||||
Advertising and market development | 60,445 | 27 | - | 60,472 | ||||||||||||||
Communications | 25,201 | 2,238 | - | 27,439 | ||||||||||||||
Professional services | 15,398 | 8,949 | - | 24,347 | ||||||||||||||
Depreciation and amortization | 17,222 | 4,849 | - | 22,071 | ||||||||||||||
Occupancy and equipment | 20,713 | 1,290 | - | 22,003 | ||||||||||||||
Amortization of other intangibles | 8,777 | 2,133 | - | 10,910 | ||||||||||||||
Facility restructuring and other exit activities | 108 | 10,384 | - | 10,492 | ||||||||||||||
Other | 28,968 | (11,445 | ) | - | 17,523 | |||||||||||||
Total expense excluding interest | 285,846 | 88,708 | (1,941 | ) | 372,613 | |||||||||||||
Segment income (loss) | $ | 125,494 | $ | (181,871 | ) | $ | - | $ | (56,377 | ) | ||||||||
Three Months Ended December 31, 2007 | ||||||||||||||||||
Retail | Institutional | Eliminations(2) | Total | |||||||||||||||
Revenue: | (In thousands) | |||||||||||||||||
Operating interest income | $ | 511,671 | $ | 723,092 | $ | (352,455 | ) | $ | 882,308 | |||||||||
Operating interest expense | (261,845 | ) | (586,645 | ) | 352,455 | (496,035 | ) | |||||||||||
Net operating interest income | 249,826 | 136,447 | - | 386,273 | ||||||||||||||
Provision for loan losses | - | (402,311 | ) | - | (402,311 | ) | ||||||||||||
Net operating interest income (expense) after provision for loan losses | 249,826 | (265,864 | ) | - | (16,038 | ) | ||||||||||||
Commission | 152,449 | 24,497 | - | 176,946 | ||||||||||||||
Fees and service charges | 66,680 | 4,160 | (2,511 | ) | 68,329 | |||||||||||||
Principal transactions | - | 24,490 | - | 24,490 | ||||||||||||||
Loss on loans and securities, net | (2,801 | ) | (2,272,881 | ) | - | (2,275,682 | ) | |||||||||||
Other revenue | 9,977 | 4,136 | (104 | ) | 14,009 | |||||||||||||
Total non-interest income (expense) | 226,305 | (2,215,598 | ) | (2,615 | ) | (1,991,908 | ) | |||||||||||
Total net revenue | 476,131 | (2,481,462 | ) | (2,615 | ) | (2,007,946 | ) | |||||||||||
Expense excluding interest: | ||||||||||||||||||
Compensation and benefits | 74,757 | 30,311 | - | 105,068 | ||||||||||||||
Clearing and servicing | 23,706 | 44,840 | (2,615 | ) | 65,931 | |||||||||||||
Advertising and market development | 41,490 | 45 | - | 41,535 | ||||||||||||||
Communications | 24,549 | 3,475 | - | 28,024 | ||||||||||||||
Professional services | 23,524 | 12,006 | - | 35,530 | ||||||||||||||
Depreciation and amortization | 17,895 | 5,813 | - | 23,708 | ||||||||||||||
Occupancy and equipment | 22,794 | 1,148 | - | 23,942 | ||||||||||||||
Amortization of other intangibles | 9,372 | 160 | - | 9,532 | ||||||||||||||
Impairment of goodwill | - | 101,208 | - | 101,208 | ||||||||||||||
Facility restructuring and other exit activities | 10,462 | 17,660 | - | 28,122 | ||||||||||||||
Other | 38,170 | 18,474 | - | 56,644 | ||||||||||||||
Total expense excluding interest | 286,719 | 235,140 | (2,615 | ) | 519,244 | |||||||||||||
Segment income (loss) | $ | 189,412 | $ | (2,716,602 | ) | $ | - | $ | (2,527,190 | ) | ||||||||
Three Months Ended March 31, 2007 | ||||||||||||||||||
Retail | Institutional | Eliminations(2) | Total | |||||||||||||||
Revenue: | (In thousands) | |||||||||||||||||
Operating interest income | $ | 457,764 | $ | 671,243 | $ | (299,212 | ) | $ | 829,795 | |||||||||
Operating interest expense | (230,283 | ) | (508,138 | ) | 299,212 | (439,209 | ) | |||||||||||
Net operating interest income | 227,481 | 163,105 | - | 390,586 | ||||||||||||||
Provision for loan losses | - | (21,186 | ) | - | (21,186 | ) | ||||||||||||
Net operating interest income after provision for loan losses | 227,481 | 141,919 | - | 369,400 | ||||||||||||||
Commission | 123,305 | 35,688 | - | 158,993 | ||||||||||||||
Fees and service charges | 54,203 | 7,475 | (2,180 | ) | 59,498 | |||||||||||||
Principal transactions | - | 30,082 | - | 30,082 | ||||||||||||||
Gain on loans and securities, net | 4,911 | 12,464 | - | 17,375 | ||||||||||||||
Other revenue | 9,751 | 41 | (142 | ) | 9,650 | |||||||||||||
Total non-interest income | 192,170 | 85,750 | (2,322 | ) | 275,598 | |||||||||||||
Total net revenue | 419,651 | 227,669 | (2,322 | ) | 644,998 | |||||||||||||
Expense excluding interest: | ||||||||||||||||||
Compensation and benefits | 80,296 | 43,486 | - | 123,782 | ||||||||||||||
Clearing and servicing | 20,761 | 48,813 | (2,322 | ) | 67,252 | |||||||||||||
Advertising and market development | 43,924 | 1,668 | - | 45,592 | ||||||||||||||
Communications | 22,795 | 3,361 | - | 26,156 | ||||||||||||||
Professional services | 15,099 | 9,886 | - | 24,985 | ||||||||||||||
Depreciation and amortization | 14,809 | 4,574 | - | 19,383 | ||||||||||||||
Occupancy and equipment | 20,572 | 3,007 | - | 23,579 | ||||||||||||||
Amortization of other intangibles | 9,619 | 649 | - | 10,268 | ||||||||||||||
Facility restructuring and other exit activities | 1,017 | (284 | ) | - | 733 | |||||||||||||
Other | 19,301 | 13,374 | - | 32,675 | ||||||||||||||
Total expense excluding interest | 248,193 | 128,534 | (2,322 | ) | 374,405 | |||||||||||||
Segment income | $ | 171,458 | $ | 99,135 | $ | - | $ | 270,593 |
KEY PERFORMANCE METRICS(3) | ||||||||||||||||||
Corporate Metrics | Qtr ended 3/31/08 | Qtr ended 12/31/07 | Qtr ended 3/31/08 vs. 12/31/07 | Qtr ended 3/31/07 | Qtr ended 3/31/08 vs. 3/31/07 | |||||||||||||
Operating margin %(4) | ||||||||||||||||||
Consolidated | N.M. | N.M. | N.M. | 42 | % | N.M. | ||||||||||||
Retail | 31 | % | 40 | % | (9 | )% | 41 | % | (10 | )% | ||||||||
Institutional | N.M. | N.M. | N.M. | 44 | % | N.M. | ||||||||||||
Employees | 3,565 | 3,757 | (5 | )% | 4,217 | (15 | )% | |||||||||||
Consultants and other | 302 | 305 | (1 | )% | 266 | 14 | % | |||||||||||
Total headcount | 3,867 | 4,062 | (5 | )% | 4,483 | (14 | )% | |||||||||||
Revenue per headcount | $ | 81,778 | N.M. | N.M. | $ | 143,876 | (43 | )% | ||||||||||
Revenue per compensation and benefits dollar | $ | 2.46 | $ | (19.11 | ) | (113 | )% | $ | 5.21 | (53 | )% | |||||||
Book value per share | $ | 5.80 | $ | 6.14 | (6 | )% | $ | 10.19 | (43 | )% | ||||||||
Tangible book value per share | $ | 0.57 | $ | 0.84 | (32 | )% | $ | 4.22 | (86 | )% | ||||||||
Free cash ($MM) | $ | 1,061.1 | $ | 860.8 | 23 | % | $ | 464.7 | 128 | % | ||||||||
Enterprise net interest spread (basis points)(5) | 250 | 255 | (2 | )% | 274 | (9 | )% | |||||||||||
Enterprise interest-earning assets, average ($MM) | $ | 49,911 | $ | 57,378 | (13 | )% | $ | 52,871 | (6 | )% | ||||||||
Earnings before interest, taxes, depreciation & amortization ("EBITDA") ($MM) | ||||||||||||||||||
Net income (loss) from continuing operations | $ | (91.2 | ) | $ | (1,711.8 | ) | (95 | )% | $ | 169.4 | (154 | )% | ||||||
Tax expense (benefit) | (55.6 | ) | (872.7 | ) | (94 | )% | 92.9 | (160 | )% | |||||||||
Depreciation & amortization | 33.0 | 33.2 | (1 | )% | 29.7 | 11 | % | |||||||||||
Corporate interest expense | 95.2 | 59.5 | 60 | % | 37.8 | 152 | % | |||||||||||
EBITDA | $ | (18.6 | ) | $ | (2,491.8 | ) | (99 | )% | $ | 329.8 | (106 | )% | ||||||
Interest coverage | (0.2 | ) | (41.9 | ) | (100 | )% | 8.7 | (102 | )% | |||||||||
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Retail Metrics |
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Trading days | 61.0 | 63.0 | N.M. | 61.0 | N.M. | |||||||||||||
DARTs | ||||||||||||||||||
US | 155,706 | 179,298 | (13 | )% | 141,238 | 10 | % | |||||||||||
International | 35,018 | 34,768 | 1 | % | 28,798 | 22 | % | |||||||||||
Total DARTs | 190,724 | 214,066 | (11 | )% | 170,036 | 12 | % | |||||||||||
Total trades (MM) | 11.6 | 13.5 | (14 | )% | 10.4 | 12 | % | |||||||||||
Average commission per trade | $ | 11.04 | $ | 11.30 | (2 | )% | $ | 11.89 | (7 | )% | ||||||||
End of period margin debt ($B) | $ | 6.70 | $ | 7.26 | (8 | )% | $ | 7.03 | (5 | )% | ||||||||
Average margin debt($B) | $ | 6.99 | $ | 7.79 | (10 | )% | $ | 6.91 | 1 | % | ||||||||
Gross new investing/ trading accounts
| 185,169 | 186,750 | (1 | )% | 170,672 | 8 | % | |||||||||||
Gross new deposit/ lending accounts | 119,844 | 90,863 | 32 | % | 179,547 | (33 | )% | |||||||||||
Closed accounts | (243,205 | ) | (270,578 | ) | (10 | )% | (231,345 | ) | 5 | % | ||||||||
Net new accounts | 61,808 | 7,035 | 779 | % | 118,874 | (48 | )% | |||||||||||
End of period investing/ trading accounts | 3,633,666 | 3,632,218 | 0 | % | 3,613,762 | 1 | % | |||||||||||
End of period deposit/ lending accounts | 1,144,572 | 1,084,212 | 6 | % | 932,782 | 23 | % | |||||||||||
End of period total accounts | 4,778,238 | 4,716,430 | 1 | % | 4,546,544 | 5 | % | |||||||||||
Account Segmentation Detail | ||||||||||||||||||
Retail accounts within target segment(6) | 969,308 | 992,399 | (2 | )% | 912,057 | 6 | % | |||||||||||
Other retail accounts(7) | 2,780,316 | 2,669,271 | 4 | % | 2,583,257 | 8 | % | |||||||||||
Corporate Services accounts | 1,028,614 | 1,054,760 | (2 | )% | 1,051,230 | (2 | )% | |||||||||||
End of period total accounts | 4,778,238 | 4,716,430 | 1 | % | 4,546,544 | 5 | % | |||||||||||
Net new customers | 60,383 | 4,592 | N.M. | 37,100 | N.M. | |||||||||||||
End of period total customers | 3,620,657 | 3,560,274 | 2 | % | 3,477,068 | 4 | % | |||||||||||
End of period assets per customer | $ | 46,508 | $ | 53,361 | (13 | )% | $ | 57,659 | (19 | )% | ||||||||
Consolidated net revenue per customer | $ | 87 | N.M. | N.M. | $ | 186 | (53 | )% | ||||||||||
Consolidated segment income per customer | $ | (16 | ) | N.M. | N.M. | $ | 78 | (121 | )% | |||||||||
Products per customer | 2.1 | 2.1 | 0 | % | 2.1 | 0 | % | |||||||||||
Customer Assets ($B) | ||||||||||||||||||
Security holdings | $ | 109.0 | $ | 124.3 | (12 | )% | $ | 133.5 | (18 | )% | ||||||||
Customer payables (cash) | 5.4 | 5.5 | (2 | )% | 6.3 | (14 | )% | |||||||||||
Customer cash balances held by third parties | 3.3 | 3.3 | 0 | % | 3.9 | (15 | )% | |||||||||||
Unexercised Corporate Services customer options (vested) | 24.5 | 32.1 | (24 | )% | 31.0 | (21 | )% | |||||||||||
Customer assets in investing/ trading accounts | 142.2 | 165.2 | (14 | )% | 174.7 | (19 | )% | |||||||||||
Sweep deposit accounts | 10.0 | 10.1 | (1 | )% | 10.8 | (7 | )% | |||||||||||
Transaction accounts | 12.5 | 10.5 | 19 | % | 10.3 | 21 | % | |||||||||||
CDs | 3.7 | 4.2 | (12 | )% | 4.7 | (21 | )% | |||||||||||
Customer assets in deposit accounts | 26.2 | 24.8 | 6 | % | 25.8 | 2 | % | |||||||||||
Total customer assets | $ | 168.4 | $ | 190.0 | (11 | )% | $ | 200.5 | (16 | )% | ||||||||
Net new customer assets ($B)(8) | $ | 0.3 | $ | (16.5 | ) | N.M. | $ | 2.9 | N.M. | |||||||||
Total customer cash and deposits ($B) | $ | 34.9 | $ | 33.6 | 4 | % | $ | 36.0 | (3 | )% | ||||||||
Unexercised Corporate Services client options (unvested) ($B)
| $ | 20.2 | $ | 27.5 | (27 | )% | $ | 20.5 | (1 | ) % | ||||||||
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Institutional Metrics |
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Market Making | ||||||||||||||||||
Equity shares traded (MM) | 33,503 | 37,781 | (11 | )% | 47,425 | (29 | )% | |||||||||||
Average revenue capture per 1,000 equity shares | $ | 0.566 | $ | 0.586 | (3 | )% | $ | 0.576 | (2 | )% | ||||||||
% of Bulletin Board equity shares to total equity shares | 87.8 | % | 85.8 | % | 2 | % | 89.7 | % | (2 | )% | ||||||||
Capital Ratios | ||||||||||||||||||
Tier 1 Capital Ratio(9) | 6.78 | % | 6.22 | % | 0.56 | % | 6.24 | % | 0.54 | % | ||||||||
Risk Weighted Capital Ratio(9) | 12.36 | % | 11.37 | % | 0.99 | % | 10.48 | % | 1.88 | % | ||||||||
Loans receivable ($MM) | ||||||||||||||||||
Average loans receivable | $ | 29,890 | $ | 31,841 | (6 | )% | $ | 27,837 | 7 | % | ||||||||
Ending loans receivable, net | $ | 28,425 | $ | 30,039 | (5 | )% | $ | 29,672 | (4 | )% | ||||||||
One- to Four-Family | ||||||||||||||||||
Loan performance detail ($MM) | ||||||||||||||||||
Current | $ | 14,033 | $ | 15,083 | (7 | )% | $ | 13,178 | 6 | % | ||||||||
30-89 days delinquent (special mention loans) | 363 | 297 | 22 | % | 201 | 81 | % | |||||||||||
90+ days delinquent (non- performing loans) | 292 | 181 | 61 | % | 47 | 521 | % | |||||||||||
Total delinquent loans | 655 | 478 | 37 | % | 248 | 164 | % | |||||||||||
Gross loans receiv- able(10) | $ | 14,688 | $ | 15,561 | (6 | )% | $ | 13,426 | 9 | % | ||||||||
Credit Quality and Reserve Metrics | ||||||||||||||||||
Special mention loans (30-89 days delinquent) as a % of gross loans receivable | 2.47 | % | 1.91 | % | 0.56 | % | 1.50 | % | 0.97 | % | ||||||||
Nonperforming loans (90+ days delinquent) as a % of gross loans receivable | 1.99 | % | 1.17 | % | 0.82 | % | 0.35 | % | 1.64 | % | ||||||||
Total delinquent loans (30+ days delinquent) as a % of gross loans receivable | 4.46 | % | 3.07 | % | 1.39 | % | 1.85 | % | 2.61 | % | ||||||||
Allowance for loan losses as a % of gross loans receivable | 0.28 | % | 0.12 | % | 0.16 | % | 0.02 | % | 0.26 | % | ||||||||
Allowance for loan losses as a % of nonperforming loans | 14.17 | % | 10.39 | % | 3.78 | % | 7.04 | % | 7.13 | % | ||||||||
Net charge-offs as a % of average loans receivable (annualized) | 0.38 | % | 0.10 | % | 0.28 | % | 0.02 | % | 0.36 | % | ||||||||
Provision as a % of average loans receivable (annualized) | 0.98 | % | 0.33 | % | 0.65 | % | (0.13 | )% | 1.11 | % | ||||||||
Home Equity | ||||||||||||||||||
Loan performance detail ($MM) | ||||||||||||||||||
Current | $ | 11,029 | $ | 11,603 | (5 | )% | $ | 12,849 | (14 | )% | ||||||||
30-89 days delinquent (special mention loans) | 277 | 291 | (5 | )% | 141 | 96 | % | |||||||||||
90+ days delinquent (non- performing loans) | 285 | 230 | 24 | % | 63 | 352 | % | |||||||||||
Total delinquent loans | 562 | 521 | 8 | % | 204 | 175 | % | |||||||||||
Gross loans receiv- able(10) | $ | 11,591 | $ | 12,124 | (4 | )% | $ | 13,053 | (11 | )% | ||||||||
Credit Quality and Reserve Metrics | ||||||||||||||||||
Special mention loans (30-89 days delinquent) as a % of gross loans receivable | 2.39 | % | 2.41 | % | (0.02 | )% | 1.08 | % | 1.31 | % | ||||||||
Nonperforming loans (90+ days delinquent) as a % of gross loans receivable | 2.46 | % | 1.89 | % | 0.57 | % | 0.48 | % | 1.98 | % | ||||||||
Total delinquent loans (30+ days delinquent) as a % of gross loans receivable | 4.85 | % | 4.30 | % | 0.55 | % | 1.57 | % | 3.28 | % | ||||||||
Allowance for loan losses as a % of gross loans receivable | 4.23 | % | 3.79 | % | 0.44 | % | 0.31 | % | 3.92 | % | ||||||||
Allowance for loan losses as a % of nonperforming loans | 172.18 | % | 200.05 | % | (27.87 | )% | 64.61 | % | 107.57 | % | ||||||||
Net charge-offs as a % of average loans receivable (annualized) | 5.02 | % | 2.94 | % | 2.08 | % | 0.37 | % | 4.65 | % | ||||||||
Provision as a % of average loans receivable (annualized) | 6.09 | % | 12.11 | % | (6.02 | )% | 0.67 | % | 5.42 | % | ||||||||
Consumer and Other | ||||||||||||||||||
Loan performance detail ($MM) | ||||||||||||||||||
Current | $ | 2,682 | $ | 2,830 | (5 | )% | $ | 3,242 | (17 | )% | ||||||||
30-89 days delinquent (special mention loans) | 23 | 24 | (4 | )% | 13 | 77 | % | |||||||||||
90+ days delinquent (non- performing loans) | 7 | 8 | (13 | )% | 6 | 17 | % | |||||||||||
Total delinquent loans | 30 | 32 | (6 | )% | 19 | 58 | % | |||||||||||
Gross loans receiv- able(10) | $ | 2,712 | $ | 2,862 | (5 | )% | $ | 3,261 | (17 | )% | ||||||||
Credit Quality and Reserve Metrics | ||||||||||||||||||
Special mention loans (30-89 days delinquent) as a % of gross loans receivable | 0.84 | % | 0.83 | % | 0.01 | % | 0.39 | % | 0.45 | % | ||||||||
Nonperforming loans (90+ days delinquent) as a % of gross loans receivable | 0.26 | % | 0.27 | % | (0.01 | )% | 0.18 | % | 0.08 | % | ||||||||
Total delinquent loans (30+ days delinquent) as a % of gross loans receivable | 1.11 | % | 1.10 | % | 0.01 | % | 0.57 | % | 0.54 | % | ||||||||
Allowance for loan losses as a % of gross loans receivable | 1.24 | % | 1.05 | % | 0.19 | % | 0.73 | % | 0.51 | % | ||||||||
Allowance for loan losses as a % of nonperforming loans | 471.56 | % | 396.71 | % | 74.85 | % | 400.72 | % | 70.84 | % | ||||||||
Net charge-offs as a % of average loans receivable (annualized) | 1.74 | % | 1.11 | % | 0.63 | % | 1.03 | % | 0.71 | % | ||||||||
Provision as a % of average loans receivable (annualized) | 2.24 | % | 1.87 | % | 0.37 | % | 0.51 | % | 1.73 | % | ||||||||
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Total Loans Receivable | ||||||||||||||||||
Loan performance detail ($MM) | ||||||||||||||||||
Current | $ | 27,744 | $ | 29,516 | (6 | )% | $ | 29,269 | (5 | )% | ||||||||
30-89 days delinquent (special mention loans) | 663 | 612 | 8 | % | 355 | 87 | % | |||||||||||
90+ days delinquent (non- performing loans) | 584 | 419 | 39 | % | 116 | 403 | % | |||||||||||
Total delinquent loans | 1,247 | 1,031 | 21 | % | 471 | 165 | % | |||||||||||
Total gross loans receiv- able(10) | $ | 28,991 | $ | 30,547 | (5 | )% | $ | 29,740 | (3 | )% | ||||||||
Credit Quality and Reserve Metrics | ||||||||||||||||||
Special mention loans (30-89 days delinquent) as a % of gross loans receivable | 2.29 | % | 2.00 | % | 0.29 | % | 1.19 | % | 1.10 | % | ||||||||
Nonperforming loans (90+ days delinquent) as a % of gross loans receivable | 2.02 | % | 1.37 | % | 0.65 | % | 0.39 | % | 1.63 | % | ||||||||
Total delinquent loans (30+ days delinquent) as a % of gross loans receivable | 4.30 | % | 3.37 | % | 0.93 | % | 1.58 | % | 2.72 | % | ||||||||
Allowance for loan losses as a % of gross loans receivable | 1.95 | % | 1.66 | % | 0.29 | % | 0.23 | % | 1.72 | % | ||||||||
Allowance for loan losses as a % of nonperforming loans | 96.84 | % | 121.44 | % | (24.60 | )% | 58.68 | % | 38.16 | % | ||||||||
Net charge-offs as a % of average loans receivable (annualized) | 2.36 | % | 1.30 | % | 1.06 | % | 0.30 | % | 2.06 | % | ||||||||
Provision as a % of average loans receivable (annualized) | 3.13 | % | 5.05 | % | (1.92 | )% | 0.30 | % | 2.83 | % |
ACTIVITY IN ALLOWANCE FOR LOAN LOSSES | ||||||||||||||||
Three Months Ended March 31, 2008 | ||||||||||||||||
One- to Four- Family | Home Equity | Consumer and Other | Total | |||||||||||||
(In thousands) | ||||||||||||||||
Allowance for loan losses, ending 12/31/07 | $ | 18,831 | $ | 459,167 | $ | 30,166 | $ | 508,164 | ||||||||
Provision for loan losses | 37,175 | 181,030 | 15,666 | 233,871 | ||||||||||||
Charge-offs, net(11) | (14,603 | ) | (149,366 | ) | (12,158 | ) | (176,127 | ) | ||||||||
Allowance for loan losses, ending 3/31/08 | $ | 41,403 | $ | 490,831 | $ | 33,674 | $ | 565,908 | ||||||||
Three Months Ended December 31, 2007 | ||||||||||||||||
One- to Four- Family | Home Equity | Consumer and Other | Total | |||||||||||||
(In thousands) | ||||||||||||||||
Allowance for loan losses, ending 9/30/07 | $ | 9,363 | $ | 175,088 | $ | 24,587 | $ | 209,038 | ||||||||
Provision for loan losses | 13,473 | 375,132 | 13,706 | 402,311 | ||||||||||||
Charge-offs, net | (4,005 | ) | (91,053 | ) | (8,127 | ) | (103,185 | ) | ||||||||
Allowance for loan losses, ending 12/31/07 | $ | 18,831 | $ | 459,167 | $ | 30,166 | $ | 508,164 | ||||||||
Three Months Ended March 31, 2007 | ||||||||||||||||
One- to Four- Family | Home Equity | Consumer and Other | Total | |||||||||||||
(In thousands) | ||||||||||||||||
Allowance for loan losses, ending 12/31/06 | $ | 7,760 | $ | 31,671 | $ | 28,197 | $ | 67,628 | ||||||||
Provision for loan losses | (3,800 | ) | 20,688 | 4,298 | 21,186 | |||||||||||
Charge-offs, net | (674 | ) | (11,519 | ) | (8,632 | ) | (20,825 | ) | ||||||||
Allowance for loan losses, ending 3/31/07 | $ | 3,286 | $ | 40,840 | $ | 23,863 | $ | 67,989 |
AVERAGE ENTERPRISE BALANCE SHEET DATA
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| Three Months Ended | |||||||||||||||||
March 31, 2008 | December 31, 2007 | |||||||||||||||||
Average | Operating Interest | Average | Average | Operating Interest | Average | |||||||||||||
Balance | Inc./Exp. | Yield/Cost | Balance | Inc./Exp. | Yield/Cost | |||||||||||||
Enterprise interest-earning assets: | (In thousands) | |||||||||||||||||
Loans, net(12) | $ | 29,925,013 | $ | 451,574 | 6.04 | % | $ | 31,911,892 | $ | 508,925 | 6.38 | % | ||||||
Margin receivables | 6,936,549 | 94,913 | 5.50 | % | 7,702,385 | 129,488 | 6.67 | % | ||||||||||
Mortgage-backed and related available-for-sale securities | 9,281,381 | 110,072 | 4.74 | % | 11,820,948 | 150,820 | 5.10 | % | ||||||||||
Available-for-sale investment securities | 176,360 | 2,902 | 6.58 | % | 3,281,803 | 54,461 | 6.64 | % | ||||||||||
Trading securities | 572,817 | 10,708 | 7.48 | % | 91,437 | 2,012 | 8.80 | % | ||||||||||
Cash and cash equivalents(13) | 2,210,282 | 20,798 | 3.78 | % | 1,482,170 | 16,344 | 4.37 | % | ||||||||||
Stock borrow and other | 808,330 | 15,712 | 7.78 | % | 1,086,982 | 18,354 | 6.75 | % | ||||||||||
Total enterprise interest-earning assets | $ | 49,910,732 | 706,679 | 5.67 | % | $ | 57,377,617 | 880,404 | 6.13 | % | ||||||||
Enterprise interest-bearing liabilities: | ||||||||||||||||||
Retail deposits | $ | 25,383,594 | 171,535 | 2.72 | % | $ | 26,759,763 | 202,717 | 3.01 | % | ||||||||
Brokered certificates of deposit | 1,229,811 | 15,169 | 4.96 | % | 738,659 | 9,369 | 5.03 | % | ||||||||||
Customer payables | 5,261,612 | 14,635 | 1.12 | % | 6,298,654 | 20,812 | 1.31 | % | ||||||||||
Repurchase agreements and other borrowings | 7,980,130 | 94,934 | 4.71 | % | 10,776,229 | 143,089 | 5.20 | % | ||||||||||
FHLB advances | 5,974,084 | 70,802 | 4.69 | % | 8,433,904 | 107,259 | 4.98 | % | ||||||||||
Stock loan and other | 1,679,887 | 10,656 | 2.51 | % | 1,601,877 | 12,304 | 3.05 | % | ||||||||||
Total enterprise interest-bearing liabilities | $ | 47,509,118 | 377,731 | 3.17 | % | $ | 54,609,086 | 495,550 | 3.58 | % | ||||||||
Enterprise net interest income/spread(5) | $ | 328,948 | 2.50 | % |
| $ | 384,854 | 2.55 | % |
Three Months Ended | |||||||||||||
March 31, 2007 | |||||||||||||
Average | Operating Interest | Average | |||||||||||
Balance | Inc./Exp. | Yield/Cost | |||||||||||
Enterprise interest-earning assets: | (In thousands) | ||||||||||||
Loans, net(12) | $ | 28,093,409 | $ | 451,399 | 6.43 | % | |||||||
Margin receivables | 6,787,828 | 123,986 | 7.41 | % | |||||||||
Mortgage-backed and related available-for-sale securities | 12,040,109 | 157,967 | 5.25 | % | |||||||||
Available-for-sale investment securities | 3,651,560 | 59,860 | 6.56 | % | |||||||||
Trading securities | 119,779 | 3,269 | 10.92 | % | |||||||||
Cash and cash equivalents(13) | 1,358,120 | 15,930 | 4.76 | % | |||||||||
Stock borrow and other | 820,679 | 13,687 | 6.67 | % | |||||||||
Total enterprise interest-earning assets | $ | 52,871,484 | 826,098 | 6.27 | % | ||||||||
Enterprise interest-bearing liabilities: | |||||||||||||
Retail deposits | $ | 24,696,611 | 177,329 | 2.91 | % | ||||||||
Brokered certificates of deposit | 466,559 | 5,659 | 4.92 | % | |||||||||
Customer payables | 6,380,411 | 20,479 | 1.30 | % | |||||||||
Repurchase agreements and other borrowings | 12,137,872 | 159,031 | 5.24 | % | |||||||||
FHLB advances | 4,996,389 | 62,852 | 5.03 | % | |||||||||
Stock loan and other | 1,349,305 | 12,515 | 3.76 | % | |||||||||
Total enterprise interest-bearing liabilities | $ | 50,027,147 | 437,865 | 3.53 | % | ||||||||
Enterprise net interest income/spread(5) | $ | 388,233 | 2.74 | % | |||||||||
Reconciliation from Enterprise Net Interest Income to Net Operating Interest Income | |||||||||||||
Three Months Ended | |||||||||||||
March 31, | December 31, | March 31, | |||||||||||
2008 | 2007 | 2007 | |||||||||||
(In thousands) | |||||||||||||
Enterprise net interest income | $ | 328,948 | $ | 384,854 | $ | 388,233 | |||||||
Taxable equivalent interest adjustment(14) | (3,698 | ) | (7,537 | ) | (7,320 | ) | |||||||
Customer cash held by third parties and other(15) | 7,521 | 8,956 | 9,673 | ||||||||||
Net operating interest income | $ | 332,771 | $ | 386,273 | $ | 390,586 |
SUPPLEMENTAL PORTFOLIO DISCLOSURE | |||||||||||||||||||||||
Mortgage Loan Portfolio(16)(17) | |||||||||||||||||||||||
One-to Four-Family Mortgage Loan Distribution | |||||||||||||||||||||||
Unpaid principal balances at March 31, 2008 ($MM) | |||||||||||||||||||||||
FICO | |||||||||||||||||||||||
LTV | >=720 | 719-700 | 699-680 | 679-660 | 659-620 | <620 | Total | ||||||||||||||||
<70% | $ | 4,386 | $ | 778 | $ | 561 | $ | 356 | $ | 216 | $ | 4 | $ | 6,301 | |||||||||
70 | %-80% | 5,228 | 1,137 | 890 | 487 | 230 | 5 | 7,977 | |||||||||||||||
80 | %-90% | 88 | 30 | 28 | 23 | 12 | - | 181 | |||||||||||||||
>90% | 84 | 29 | 29 | 18 | 19 | 1 | 180 | ||||||||||||||||
Total | $ | 9,786 | $ | 1,974 | $ | 1,508 | $ | 884 | $ | 477 | $ | 10 | $ | 14,639 | |||||||||
One- to Four-Family 30+ Days Delinquent Loan Distribution | |||||||||||||||||||||||
Unpaid principal balances at March 31, 2008 ($MM) | |||||||||||||||||||||||
FICO | |||||||||||||||||||||||
LTV | >=720 | 719-700 | 699-680 | 679-660 | 659-620 | <620 | Total | ||||||||||||||||
<70% | $ | 63 | $ | 31 | $ | 23 | $ | 29 | $ | 18 | $ | 2 | $ | 166 | |||||||||
70 | %-80% | 175 | 83 | 85 | 55 | 40 | 1 | 439 | |||||||||||||||
80 | %-90% | 9 | 5 | 4 | 5 | 3 | - | 26 | |||||||||||||||
>90% | 8 | 3 | 4 | 4 | 5 | - | 24 | ||||||||||||||||
Total | $ | 255 | $ | 122 | $ | 116 | $ | 93 | $ | 66 | $ | 3 | $ | 655 | |||||||||
Home Equity Loan Distribution | |||||||||||||||||||||||
Unpaid principal balances at March 31, 2008 ($MM) | |||||||||||||||||||||||
FICO | |||||||||||||||||||||||
CLTV | >=720 | 719-700 | 699-680 | 679-660 | 659-620 | <620 | Total | ||||||||||||||||
<70% | $ | 2,438 | $ | 404 | $ | 332 | $ | 146 | $ | 112 | $ | 11 | $ | 3,443 | |||||||||
70 | %-80% | 1,158 | 334 | 282 | 113 | 101 | 2 | 1,990 | |||||||||||||||
80 | %-90% | 1,963 | 687 | 648 | 276 | 204 | 1 | 3,779 | |||||||||||||||
>90% | 1,141 | 404 | 336 | 183 | 110 | - | 2,174 | ||||||||||||||||
Total | $ | 6,700 | $ | 1,829 | $ | 1,598 | $ | 718 | $ | 527 | $ | 14 | $ | 11,386 | |||||||||
Home Equity 30+ Days Delinquent Loan Distribution | |||||||||||||||||||||||
Unpaid principal balances at March 31, 2008 ($MM) | |||||||||||||||||||||||
FICO | |||||||||||||||||||||||
CLTV | >=720 | 719-700 | 699-680 | 679-660 | 659-620 | <620 | Total | ||||||||||||||||
<70% | $ | 14 | $ | 6 | $ | 9 | $ | 4 | $ | 6 | $ | - | $ | 39 | |||||||||
70 | %-80% | 20 | 12 | 14 | 6 | 10 | - | 62 | |||||||||||||||
80 | %-90% | 81 | 47 | 56 | 31 | 33 | - | 248 | |||||||||||||||
>90% | 81 | 48 | 39 | 29 | 16 | - | 213 | ||||||||||||||||
Total | $ | 196 | $ | 113 | $ | 118 | $ | 70 | $ | 65 | $ | - | $ | 562 |
Investment Securities Porfolio | ||||||||||||||||||||||
Book value at March 31, 2008 ($MM) | ||||||||||||||||||||||
AAA | AA | A | BBB | Below Investment Grade | Non-Rated | Total | ||||||||||||||||
Agency mortgage-backed securities and collateralized mortgage obligations
| $ | 7,553 | $ | - | $ | - | $ | - | $ | - | $ | - | $ | 7,553 | ||||||||
Private label collateralized mortgage obligations | 1,004 | 126 | - | - | - | - | 1,130 | |||||||||||||||
Corporate bonds, municipal bonds and preferred stock
| 311 | 397 | 15 | - | - | - | 723 | |||||||||||||||
Total | $ | 8,868 | $ | 523 | $ | 15 | $ | - | $ | - | $ | - | $ | 9,406 |
SUPPLEMENTAL INFORMATION
Explanation of Non-GAAP Measures and Certain Metrics
Management believes that free cash, EBITDA, interest coverage, enterprise net interest income and enterprise interest-earning assets are appropriate measures for evaluating the operating and liquidity performance of the Company. We believe that the elimination of certain items from the related GAAP measures is helpful to investors and analysts who may wish to use some or all of this information to analyze our current performance, prospects and valuation. Management uses non-GAAP information internally to evaluate our operating performance and in formulating our budget for future periods.
Free Cash
Free cash represents cash held at the Company and its non-Bank and non-Brokerage subsidiaries, less discretionary reserves, plus excess capital at Bank and Brokerage after application of regulatory capital requirements and the Company’s own regulatory capital guidelines. The Company believes that free cash is a useful measure of the Company’s liquidity as it excludes cash reflected on the balance sheet that may not be freely available to the Company.
EBITDA
EBITDA represents net income from continuing operations before corporate interest expense, taxes and depreciation and amortization. Management believes that EBITDA provides a useful additional measure of our performance by excluding certain non-cash charges and expenses that are not directly related to the performance of our business.
Interest Coverage
Interest coverage represents EBITDA divided by corporate interest expense. Management believes that by excluding the charges and expenses that are excluded from EBITDA, interest coverage provides a useful additional measure of our ability to continue to meet our interest obligations and our liquidity.
Enterprise Net Interest Income
Enterprise net interest income is taxable equivalent basis net operating interest income excluding corporate interest income and corporate interest expense, stock conduit interest income and expense and interest earned on customer cash held by third parties. Management believes this non-GAAP measure is useful to investors and analysts as it is a measure of the net operating interest income generated by our core operations.
Enterprise Interest-Earning Assets
Enterprise interest-earning assets consists of the primary interest-earning assets of the Company and includes: loans receivable, mortgage-backed and available-for-sale securities, margin receivables, stock borrow balances, and cash required to be segregated under regulatory guidelines that earn interest for the Company. Management believes that this non-GAAP measure is useful to investors and analysts as it is a measure of the primary assets from which the Company generates net operating interest income.
It is important to note these metrics and other non-GAAP measures may involve judgment by management and should be considered in addition to, not as a substitute for, or superior to, net income, consolidated statements of cash flows, or other measures of financial performance prepared in accordance with GAAP. For complete information on the items excluded from these non-GAAP measures, please see our financial statements and “Management’s Discussion and Analysis of Results of Operations and Financial Condition” that will be included in the periodic report we expect to file with the SEC with respect to the financial periods discussed herein.
ENDNOTES
(1) Because the Company reported a net loss for the first quarter of 2008 and the fourth quarter of 2007, the calculation of diluted net loss per share does not include common stock equivalents as they are anti-dilutive and would result in a reduction of net loss per share.
(2) Reflects elimination of transactions between Retail and Institutional segments, which includes deposit and customer payable transfer pricing, servicing and order flow rebates.
(3) Amounts and percentages may not calculate due to rounding.
(4) Operating margin is the percentage of net revenue that results in income (loss) before other income (expense) and income taxes. The percentage is calculated by dividing our income (loss) before other income (expense) and income taxes by our total net revenue.
(5) Enterprise net interest spread is the taxable equivalent rate earned on average enterprise interest-earning assets less the rate paid on average enterprise interest-bearing liabilities, excluding corporate interest-earning assets and liabilities, stock conduit and customer cash held by third parties.
(6) Target segment accounts are accounts held by customers with over $50,000 in assets and/or generating 30 or more trades per quarter.
(7) Other retail accounts are accounts that (a) were opened less than 90 days prior to the end of the relevant quarter; (b) only include a lending relationship; or (c) that otherwise do not meet the definition of a target segment account.
(8) Net new client assets are total inflows to all new and existing client accounts less total outflows from all closed and existing client and closed accounts.
(9) Q108 estimate.
(10) Includes unpaid principal balances and premiums (discounts).
(11) The Q1 2008 results included $30.0 million in charge-offs associated with a change in the timing of foreclosure and bankruptcy-related charge-offs. Of the total, $8.3 million related to one- to four-family and $21.7 million related to home equity loans.
(12) Excludes loans to customers on margin.
(13) Includes segregated cash balances.
(14) Gross-up for tax-exempt securities.
(15) Includes interest earned on average customer assets of $3.3 billion, $3.8 billion and $3.9 billion for the quarters ended March 31, 2008, December 31, 2007 and March 31, 2007, respectively, held by parties outside E*TRADE FINANCIAL, including third party money market funds and sweep deposit accounts at unaffiliated financial institutions. Other consists of net operating interest income earned on average stock conduit assets of $0.01 million, $0.4 million and $2.7 million for the quarters ended March 31, 2008, December 31, 2007 and March 31, 2007, respectively.
(16) Includes unpaid principal balances.
(17) LTV/CLTV data is based on LTV/CLTV ratios at the time of loan origination, and has not been updated to reflect changes in property values since that time. FICO score is based on FICO scores at the time of loan origination, and has not been updated to reflect changes in credit scores since that time.
CONTACT:
E*TRADE FINANCIAL Media Relations Contact
Pam Erickson, 617-296-6080
pam.erickson@etrade.com
or
E*TRADE FINANCIAL Investor Relations Contact
Adam Townsend, 703-236-8719
adam.townsend@etrade.com