E Trade Financial (ETFC) 8-K E*TRADE FINANCIAL Corporation Announces Third Quarter 2008 Results

Exhibit 99.1

E*TRADE FINANCIAL Corporation Announces Third Quarter 2008 Results

Third Quarter Results

• Total Net Revenue of $378 million
• $518 million in Provision for Loan Losses
• Net Loss of $50.5 million, or $0.09 per share ($0.60 loss per share from continuing operations)

Customer Metrics

• Daily Average Revenue Trades (DARTs) of 184,000, up 7% from Q208
• Opened 215,000 gross new accounts with 41,000 net new accounts, up from 30,000 net new accounts last quarter
• Total customer cash and deposits of $33.4 billion, down 1% from Q208
• Net new customer asset flows of $800 million
• Record end of period retail accounts of 4.4 million, up 1% from Q208 and 4% from the previous year

Corporate Metrics

• Received proceeds of approximately $660 million for non-core asset sales, resulting in a pre-tax gain of $450 million
• Ended the quarter with Bank excess risk-based capital (excess to the regulatory well-capitalized threshold) of approximately $516 million, and corporate cash of $665 million
• Bank Tier-1 and risk-based capital ratios of 6.3%⁽¹⁾ and 11.9%, respectively

NEW YORK--(BUSINESS WIRE)--October 21, 2008--E*TRADE FINANCIAL Corporation (NASDAQ: ETFC) today announced results for its third quarter ended September 30, 2008, reporting a net loss of $50.5 million, or $0.09 per share ($0.60 loss per share from continuing operations), compared to a net loss of $94.6 million, or $0.19 per share, in the prior quarter and a net loss of $58.4 million, or $0.14 per share, a year ago.

Third quarter daily average revenue trades, usually seasonally low, were up 7% over last quarter, mainly due to the volatility of markets in September. Similarly, net new accounts were 41,000 and customer asset flows continued to be positive with $800 million of net inflows during the quarter. Margin loans, however, decreased as a result of declining markets and customer deleveraging.

“This quarter E*TRADE demonstrated both the strength of its customer franchise and the depth of its capital plan, even in the face of extraordinary market volatility and economic uncertainty,” said Donald H. Layton, Chairman and Chief Executive Officer, E*TRADE FINANCIAL Corporation. “We absorbed significant credit costs while generating the capital and liquidity to maintain substantial cushions of both.”

During the third quarter, the Company realized gains from previously announced non-core asset sales, resulting in net proceeds of approximately $660 million.

• The sale of the Company’s Canadian business to Scotiabank resulted in proceeds of approximately $515 million, and a pre-tax gain of $428 million.
• The sale of the Company’s equity stake in IL&FS Investsmart to HSBC resulted in proceeds of approximately $145 million, and a pre-tax gain of $22 million.

Provision for loan losses of $518 million increased by $199 million quarter over quarter, driven primarily by higher expectations for future charge-offs. Total allowance for loan losses increased $238 million to $874 million or 3.3% of gross loans receivable. The Company increased its allowance for loan losses across all three categories of its loan portfolio. “Upon completion of our previously announced special credit review in the third quarter, we have revised our forward-looking path of charge-offs in the Home Equity portfolio to be higher than we previously estimated,” said Layton. The Company increased its three-year 2008-2010 cumulative loss assumption for home equity by approximately 20% from its previous $1.5 billion estimate.

As previously disclosed, during the third quarter, the Company completed the liquidation of its long-standing investment in preferred shares of Fannie Mae and Freddie Mac, realizing a total pre-tax loss of $154 million net of hedges on a June 30th investment value of $330 million.

The Company continued to make progress during the third quarter in reducing risk and strengthening its balance sheet, shrinking total loans by $1.2 billion or more than $6.0 billion from a year ago. In addition, undrawn home equity lines have been reduced from more than $7 billion last year to approximately $3 billion as of the end of September.

At the end of the third quarter the Company down-streamed $250 million of preferred equity to the Bank to help bolster the Bank’s capital position. The Company reported excess risk-based capital at the Bank of approximately $516 million.

The Company estimates that provision expense has peaked in the third quarter and that charge-offs will begin to improve in 2009. While the Company continues to make progress toward returning to profitability, it does not expect to report a quarterly profit in the fourth quarter of 2008.

Emergency Economic Stabilization Act of 2008

• With the recent FDIC increase in deposit insurance levels, the Company estimates total uninsured bank customer deposits to be $1.4 billion as of the end of the third quarter, down sharply from $4.3 billion for the second quarter. This change means that approximately 95% of bank customer deposits are covered by FDIC insurance.
• The Company has determined that it is eligible for the government’s Capital Purchase Program and will be following up with the appropriate governmental agencies.

Historical monthly metrics from September 2004 to September 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 results beginning at 5:00 p.m. (EDT) today. This 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 67767152. A live audio webcast and replay 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 and banking for retail and institutional customers. Securities products and services are offered by E*TRADE Securities LLC (Member FINRA/SIPC). Bank 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						Nine Months Ended
			September 30,						September 30,
				2008			2007			2008			2007
Revenue:
	Operating interest income		$	604,071		$	938,979		$	1,929,736		$	2,654,364
	Operating interest expense			(279,297	)		(527,537	)		(935,827	)		(1,449,694	)
		Net operating interest income		324,774			411,442			993,909			1,204,670
	Commission			129,513			180,622			374,003			495,108
	Fees and service charges			49,612			57,838			155,515			171,272
	Principal transactions			20,664			20,734			59,546			77,743
	Loss on loans and securities, net			(159,799	)		(201,130	)		(184,073	)		(188,896	)
	Other revenue			12,968			12,614			40,263			33,262
		Total non-interest income		52,958			70,678			445,254			588,489
		Total net revenue		377,732			482,120			1,439,163			1,793,159
Provision for loan losses				517,800			186,536			1,070,792			237,767
Operating expense:
	Compensation and benefits			83,644			110,092			302,854			335,476
	Clearing and servicing			46,105			74,809			137,112			208,449
	Advertising and market development			30,381			25,190			130,566			100,131
	Communications			23,029			25,254			72,623			72,928
	Professional services			16,862			19,252			66,256			64,903
	Depreciation and amortization			20,569			21,618			62,607			60,045
	Occupancy and equipment			20,470			21,143			62,666			63,369
	Amortization of other intangibles			7,937			10,485			27,982			30,940
	Facility restructuring and other exit activities			5,526			5,037			28,525			3,115
	Other			41,367			42,599			77,575			144,709
		Total operating expense		295,890			355,479			968,766			1,084,065
Income (loss) before other income (expense), income taxes and discontinued operations				(435,958	)		(59,895	)		(600,395	)		471,327
Other income (expense):
	Corporate interest income			1,387			1,018			5,619			3,724
	Corporate interest expense			(88,772	)		(37,365	)		(274,262	)		(113,022	)
	Gain (loss) on sales of investments, net			(213	)		(18	)		307			37,005
	Gain (loss) on early extinguishment of debt			-			(37	)		10,084			(6	)
	Equity in income (loss) of investments and venture funds			21,965			(741	)		25,070			6,514
		Total other income (expense)		(65,633	)		(37,143	)		(233,182	)		(65,785	)
Income (loss) before income taxes and discontinued operations				(501,591	)		(97,038	)		(833,577	)		405,542
Income tax expense (benefit)				(180,802	)		(38,206	)		(300,418	)		136,192
Net income (loss) from continuing operations				(320,789	)		(58,832	)		(533,159	)		269,350
Discontinued operations, net of tax:
	Income from discontinued operations			2,178			384			28,796			741
	Gain on disposal of discontinued operations			268,136			-			268,136			-
		Income from discontinued operations, net of tax		270,314			384			296,932			741
Net income (loss)			$	(50,475	)	$	(58,448	)	$	(236,227	)	$	270,091
Basic earnings (loss) per share from continuing operations			$	(0.60	)	$	(0.14	)	$	(1.07	)	$	0.64
Basic earnings per share from discontinued operations				0.51			0.00			0.59			0.00
Basic net earnings (loss) per share			$	(0.09	)	$	(0.14	)	$	(0.48	)	$	0.64
Diluted earnings (loss) per share from continuing operations			$	(0.60	)	$	(0.14	)	$	(1.07	)	$	0.62
Diluted earnings per share from discontinued operations				0.51			0.00			0.59			0.00
Diluted net earnings (loss) per share			$	(0.09	)	$	(0.14	)	$	(0.48	)	$	0.62
Shares used in computation of per share data:
		Basic		536,521			420,964			496,842			422,676
		Diluted(2)		536,521			420,964			496,842			433,776

E*TRADE FINANCIAL CORPORATION AND SUBSIDIARIES

Consolidated Statement of Income (Loss)
(In thousands, except per share amounts)
(Unaudited)
			Three Months Ended
			September 30,			June 30,			September 30,
				2008			2008			2007
Revenue:
	Operating interest income		$	604,071		$	626,074		$	938,979
	Operating interest expense			(279,297	)		(283,310	)		(527,537	)
		Net operating interest income		324,774			342,764			411,442
	Commission			129,513			122,235			180,622
	Fees and service charges			49,612			50,962			57,838
	Principal transactions			20,664			18,392			20,734
	Loss on loans and securities, net			(159,799	)		(15,707	)		(201,130	)
	Other revenue			12,968			13,691			12,614
		Total non-interest income		52,958			189,573			70,678
		Total net revenue		377,732			532,337			482,120
Provision for loan losses				517,800			319,121			186,536
Operating expense:
	Compensation and benefits			83,644			96,082			110,092
	Clearing and servicing			46,105			46,122			74,809
	Advertising and market development			30,381			42,737			25,190
	Communications			23,029			24,500			25,254
	Professional services			16,862			25,749			19,252
	Depreciation and amortization			20,569			20,385			21,618
	Occupancy and equipment			20,470			21,698			21,143
	Amortization of other intangibles			7,937			9,135			10,485
	Facility restructuring and other exit activities			5,526			12,433			5,037
	Other			41,367			19,702			42,599
		Total operating expense		295,890			318,543			355,479
Loss before other income (expense), income taxes and discontinued operations				(435,958	)		(105,327	)		(59,895	)
Other income (expense):
	Corporate interest income			1,387			1,806			1,018
	Corporate interest expense			(88,772	)		(90,249	)		(37,365	)
	Gain (loss) on sales of investments, net			(213	)		18			(18	)
	Gain (loss) on early extinguishment of debt			-			12,935			(37	)
	Equity in income (loss) of investments and venture funds			21,965			(1,594	)		(741	)
		Total other income (expense)		(65,633	)		(77,084	)		(37,143	)
Loss before income taxes and discontinued operations				(501,591	)		(182,411	)		(97,038	)
Income tax benefit				(180,802	)		(62,968	)		(38,206	)
Loss from continuing operations				(320,789	)		(119,443	)		(58,832	)
Discontinued operations, net of tax:
	Income from discontinued operations			2,178			24,884			384
	Gain on disposal of discontinued operations			268,136			-			-
		Income from discontinued operations, net of tax		270,314			24,884			384
Net loss			$	(50,475	)	$	(94,559	)	$	(58,448	)
Basic loss per share from continuing operations			$	(0.60	)	$	(0.24	)	$	(0.14	)
Basic earnings per share from discontinued operations				0.51			0.05			0.00
Basic net loss per share			$	(0.09	)	$	(0.19	)	$	(0.14	)
Diluted loss per share from continuing operations			$	(0.60	)	$	(0.24	)	$	(0.14	)
Diluted earnings per share from discontinued operations				0.51			0.05			0.00
Diluted net loss per share			$	(0.09	)	$	(0.19	)	$	(0.14	)
Shares used in computation of per share data:
		Basic		536,521			492,712			420,964
		Diluted(2)		536,521			492,712			420,964

E*TRADE FINANCIAL CORPORATION AND SUBSIDIARIES

Consolidated Balance Sheet
(In thousands, except share amounts)
(Unaudited)
		September 30,			December 31,
			2008			2007
ASSETS
Cash and equivalents		$	3,019,259		$	1,778,244
Cash and investments required to be segregated under federal or other regulations			116,689			334,831
Trading securities			50,968			130,018
Available-for-sale mortgage-backed and investment securities			9,620,473			11,255,048
Margin receivables			5,619,593			7,179,175
Loans, net			25,543,121			30,139,382
Investment in Federal Home Loan Bank stock			200,892			338,585
Property and equipment, net			314,059			355,433
Goodwill			1,938,325			1,933,368
Other intangibles, net			393,889			430,007
Other assets			2,887,756			2,971,846
	Total assets	$	49,705,024		$	56,845,937
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits		$	26,615,589		$	25,884,755
Securities sold under agreements to repurchase			7,062,139			8,932,693
Customer payables			4,363,885			5,514,675
Other borrowings			4,403,637			7,446,504
Corporate debt			3,054,299			3,022,698
Accounts payable, accrued and other liabilities			1,668,346			3,215,547
	Total liabilities		47,167,895			54,016,872
Shareholders' equity:
Common stock, $0.01 par value, shares authorized: 1,200,000,000 at  September 30, 2008 and 600,000,000 at December 31, 2007; shares   issued and outstanding: 537,792,129 at September 30, 2008 and 460,897,875 at     December 31, 2007
			5,378			4,609
Additional paid-in-capital			3,612,297			3,463,220
Accumulated deficit			(570,204	)		(247,368	)
Accumulated other comprehensive loss			(510,342	)		(391,396	)
	Total shareholders' equity		2,537,129			2,829,065
	Total liabilities and shareholders' equity	$	49,705,024		$	56,845,937

SEGMENT REPORTING
			Three Months Ended September 30, 2008
			Retail			Institutional			Eliminations(3)			Total
Revenue:			(In thousands)
	Operating interest income		$	392,538		$	511,517		$	(299,984	)	$	604,071
	Operating interest expense			(175,562	)		(403,721	)		299,986			(279,297	)
		Net operating interest income		216,976			107,796			2			324,774
	Commission			129,459			54			-			129,513
	Fees and service charges			50,420			1,704			(2,512	)		49,612
	Principal transactions			-			20,664			-			20,664
	Loss on loans and securities, net			(37	)		(159,762	)		-			(159,799	)
	Other revenue			9,318			3,665			(15	)		12,968
		Total non-interest income		189,160			(133,675	)		(2,527	)		52,958
		Total net revenue		406,136			(25,879	)		(2,525	)		377,732
Provision for loan losses				-			517,800			-			517,800
Operating expense:
	Compensation and benefits			69,736			13,908			-			83,644
	Clearing and servicing			19,563			29,067			(2,525	)		46,105
	Advertising and market development			30,381			-			-			30,381
	Communications			22,120			909			-			23,029
	Professional services			11,931			4,931			-			16,862
	Depreciation and amortization			17,154			3,415			-			20,569
	Occupancy and equipment			19,501			969			-			20,470
	Amortization of other intangibles			7,545			392			-			7,937
	Facility restructuring and other exit activities			4,123			1,403			-			5,526
	Other			33,068			8,299			-			41,367
		Total operating expense		235,122			63,293			(2,525	)		295,890
Segment income (loss)			$	171,014		$	(606,972	)	$	-		$	(435,958	)
			Three Months Ended June 30, 2008
			Retail			Institutional			Eliminations(3)			Total
Revenue:			(In thousands)
	Operating interest income		$	404,078		$	531,841		$	(309,845	)	$	626,074
	Operating interest expense			(183,385	)		(409,770	)		309,845			(283,310	)
		Net operating interest income		220,693			122,071			-			342,764
	Commission			122,124			111			-			122,235
	Fees and service charges			50,989			2,451			(2,478	)		50,962
	Principal transactions			-			18,392			-			18,392
	Gain (loss) on loans and securities, net			18			(15,725	)		-			(15,707	)
	Other revenue			10,284			3,420			(13	)		13,691
		Total non-interest income		183,415			8,649			(2,491	)		189,573
		Total net revenue		404,108			130,720			(2,491	)		532,337
Provision for loan losses				-			319,121			-			319,121
Operating expense:
	Compensation and benefits			74,503			21,579			-			96,082
	Clearing and servicing			19,966			28,647			(2,491	)		46,122
	Advertising and market development			42,748			(11	)		-			42,737
	Communications			23,264			1,236			-			24,500
	Professional services			15,423			10,326			-			25,749
	Depreciation and amortization			16,430			3,955			-			20,385
	Occupancy and equipment			20,492			1,206			-			21,698
	Amortization of other intangibles			8,743			392			-			9,135
	Facility restructuring and other exit activities			5,725			6,708			-			12,433
	Other			6,438			13,264			-			19,702
		Total operating expense		233,732			87,302			(2,491	)		318,543
Segment income (loss)			$	170,376		$	(275,703	)	$	-		$	(105,327	)
			Three Months Ended September 30, 2007
			Retail			Institutional			Eliminations(3)			Total
Revenue:			(In thousands)
	Operating interest income		$	525,864		$	787,253		$	(374,138	)	$	938,979
	Operating interest expense			(273,492	)		(628,183	)		374,138			(527,537	)
		Net operating interest income		252,372			159,070			-			411,442
	Commission			135,721			44,901			-			180,622
	Fees and service charges			56,380			4,045			(2,587	)		57,838
	Principal transactions			-			20,734			-			20,734
	Loss on loans and securities, net			(98	)		(201,032	)		-			(201,130	)
	Other revenue			9,810			2,948			(144	)		12,614
		Total non-interest income		201,813			(128,404	)		(2,731	)		70,678
		Total net revenue		454,185			30,666			(2,731	)		482,120
Provision for loan losses				-			186,536			-			186,536
Operating expense:
	Compensation and benefits			74,379			35,713			-			110,092
	Clearing and servicing			20,481			57,059			(2,731	)		74,809
	Advertising and market development			25,125			65			-			25,190
	Communications			22,471			2,783			-			25,254
	Professional services			12,817			6,435			-			19,252
	Depreciation and amortization			15,629			5,989			-			21,618
	Occupancy and equipment			18,292			2,851			-			21,143
	Amortization of other intangibles			9,370			1,115			-			10,485
	Facility restructuring and other exit activities			427			4,610			-			5,037
	Other			30,849			11,750			-			42,599
		Total operating expense		229,840			128,370			(2,731	)		355,479
Segment income (loss)			$	224,345		$	(284,240	)	$	-		$	(59,895	)

KEY PERFORMANCE METRICS(4)
Corporate Metrics	Qtr ended 9/30/08		Qtr ended 6/30/08		Qtr ended 9/30/08 vs. 6/30/08	Qtr ended 9/30/07		Qtr ended 9/30/08 vs. 9/30/07
Operating margin %(5)
Consolidated	N.M.		N.M.		N.M.	N.M.		N.M.
Retail		42 %		42 %	0 %		49 %	(7)%
Institutional	N.M.		N.M.		N.M.	N.M.		N.M.
Employees		3,108		3,453	(10)%		3,880	(20)%
Consultants and other		196		243	(19)%		229	(14)%
Total headcount		3,304		3,696	(11)%		4,109	(20)%
Revenue per headcount	$	114,326	$	144,031	(21)%	$	117,333	(3)%
Revenue per compensation and benefits dollar	$	4.52	$	5.54	(18)%	$	4.38	3 %
Book value per share	$	4.72	$	4.91	(4)%	$	9.69	(51)%
Tangible book value per share	$	0.38	$	0.42	(10)%	$	3.66	(90)%
Free cash ($MM)	$	1,183.1	$	923.4	28 %	$	503.5	135 %
Enterprise net interest spread (basis points) (6)		263		272	(3)%		265	(1)%
Enterprise interest-earning assets, average ($MM)	$	46,618	$	47,616	(2)%	$	59,024	(21)%
Earnings before interest, taxes, depreciation & amortization ("EBITDA") ($MM)
Net income (loss) from continuing operations	$	(320.8)	$	(119.4)	169 %	$	(58.8)	446 %
Tax expense (benefit)		(180.8)		(63.0)	187 %		(38.2)	373 %
Depreciation & amortization		28.5		29.5	(3)%		32.1	(11)%
Corporate interest expense		88.8		90.2	(2)%		37.4	137 %
EBITDA	$	(384.3)	$	(62.7)	513 %	$	(27.5)	1297 %
Interest coverage		(4.3)		(0.7)	514 %		(0.7)	514 %
Discontinued operations ($MM)
Lending loss, net of tax	$	(0.6)	$	(4.6)	N.M.	$	(5.7)	N.M.
Canada income, net of tax		2.8		5.4	N.M.		6.1	N.M.
Canada gain on sale, net of tax		268.1		-	N.M.		-	N.M.
Canada - benefit of excess tax basis over book basis		-		24.1	N.M.		-	N.M.
Income from discontinued operations, net of tax	$	270.3	$	24.9	N.M.	$	0.4	N.M.
Bank earnings before taxes and before credit  losses ($MM)(7)	$	188.5	$	203.9	(8)%	$	225.0	(16)%
Retail Metrics
Trading days		63.5		64.0	N.M.		62.5	N.M.
DARTs
U.S.		161,257		151,102	7 %		161,459	0 %
International		22,434		21,212	6 %		23,952	(6)%
DARTs from continuing operations		183,691		172,314	7 %		185,411	(1)%
DARTs from discontinued operations		-		-	N.M.		8,974	N.M.
Total DARTs		183,691		172,314	7 %		194,385	(6)%
Total trades from continuing operations (MM)		11.7		11.0	6 %		11.6	1 %
Total trades from discontinued operations (MM)		-		-	N.M.		0.5	N.M.
Total trades (MM)		11.7		11.0	6 %		12.1	(3)%
Average commission per trade from continuing operations	$	11.10	$	11.07	0 %	$	11.71	(5)%
Average commission per trade from discontinued operations		-		-	N.M.		11.71	N.M.
Total average commission per trade	$	11.10	$	11.07	0 %	$	11.71	(5)%
End of period margin debt from continuing operations ($B)	$	5.65	$	7.15	(21)%	$	7.38	(23)%
End of period margin debt from discontinued operations ($B)		-		-	N.M.		0.25	N.M.
Total end of period margin debt ($B)	$	5.65	$	7.15	(21)%	$	7.63	(26)%
Average margin debt from continuing operations ($B)	$	6.45	$	6.86	(6)%	$	7.45	(13)%
Average margin debt from discontinued operations ($B)		-		-	N.M.		0.26	N.M.
Total average margin debt ($B)	$	6.45	$	6.86	(6)%	$	7.71	(16)%
Gross new investing / trading accounts		156,669		175,472	(11)%		163,478	(4)%
Gross new deposit/lending accounts		58,672		56,211	4 %		94,174	(38)%
Closed accounts		(174,453)		(201,794)	(14)%		(182,163)	(4)%
Net new accounts from continuing operations		40,888		29,889	37 %		75,489	(46)%
Net new accounts from discontinued operations		-		-	N.M.		(13,314)	N.M.
Net new accounts		40,888		29,889	37 %		62,175	(34)%
End of period investing / trading accounts		3,540,164		3,519,378	1 %		3,545,816	0 %
End of period deposit/lending accounts		896,061		875,959	2 %		728,885	23 %
End of period accounts from continuing operations		4,436,225		4,395,337	1 %		4,274,701	4 %
End of period accounts from discontinued operations		-		-	N.M.		434,694	N.M.
End of period total accounts		4,436,225		4,395,337	1 %		4,709,395	(6)%
Account Segmentation Detail
Retail accounts within target segment(8)		898,367		935,730	(4)%		972,904	(8)%
Other retail accounts(9)		2,517,796		2,440,794	3 %		2,248,086	12 %
Corporate Services accounts		1,020,062		1,018,813	0 %		1,053,711	(3)%
End of period accounts from continuing operations		4,436,225		4,395,337	1 %		4,274,701	4 %
End of period accounts from discontinued operations		-		-	N.M.		434,694	N.M.
End of period total accounts		4,436,225		4,395,337	1 %		4,709,395	(6)%
Net new customers from continuing operations		26,624		21,597	N.M.		25,178	N.M.
Net new customers from discontinued operations and  other (10)		-		(536,954)	N.M.		2,243	N.M.
Total net new customers (10)		26,624		(515,357)	N.M.		27,421	N.M.
End of period total customers (10)		3,131,924		3,105,300	1 %		3,555,682	(12)%
End of period assets per customer	$	45,399	$	52,172	(13)%	$	61,320	(26)%
Consolidated net revenue per customer	$	121	$	171	(29)%	$	136	(11)%
Consolidated segment income (loss) per customer	$	(139)	$	(34)	309 %	$	(17)	719 %
Products per customer (11)		2.4		2.4	0 %		2.1	14 %
Customer Assets ($B)
Security holdings	$	91.0	$	105.9	(14)%	$	138.5	(34)%
Customer payables (cash)(12)		4.4		4.4	0 %		6.0	(27)%
Customer cash balances held by third parties		3.2		3.2	0 %		4.0	(20)%
Unexercised Corporate Services customer options (vested)		17.8		22.4	(21)%		36.0	(51)%
Customer assets in investing / trading accounts		116.4		135.9	(14)%		184.5	(37)%
Sweep deposit accounts		10.1		9.8	3 %		11.5	(12)%
Savings and transaction accounts		12.9		13.0	(1)%		12.8	1 %
CDs		2.8		3.3	(15)%		4.3	(35)%
Customer assets in deposit accounts		25.8		26.1	(1)%		28.6	(10)%
Customer assets from continuing operations		142.2		162.0	(12)%		213.1	(33)%
Customer assets from discontinued operations		-		-	N.M.		4.9	N.M.
Total customer assets	$	142.2	$	162.0	(12)%	$	218.0	(35)%
Net new customer assets from continuing operations ($B)(13)	$	0.8	$	1.8	N.M.	$	1.1	N.M.
Net new customer assets from discontinued operations and  other ($B)(13)		-		(0.9)	N.M.		-	N.M.
Total net new customer  assets ($B)(13)	$	0.8	$	0.9	N.M.	$	1.1	N.M.
Brokerage related cash ($B)	$	17.7	$	17.4	2 %	$	21.5	(18)%
Other customer cash and deposits ($B)		15.7		16.3	(4)%		17.1	(8)%
Total customer cash and deposits from continuing operations ($B)		33.4		33.7	(1)%		38.6	(13)%
Total customer cash and deposits from discontinued operations ($B)		-		-	N.M.		1.0	N.M.
Total customer cash and  deposits ($B)	$	33.4	$	33.7	(1)%	$	39.6	(16)%
Unexercised Corporate Services client options  (unvested) ($B)	$	17.2	$	21.5	(20)%	$	27.2	(37)%
Institutional Metrics
Market Making
Equity shares  traded (MM)		43,784		36,999	18 %		46,389	(6)%
Average revenue capture per 1,000 equity shares	$	0.465	$	0.466	0 %	$	0.415	12 %
% of Bulletin Board equity shares to total equity shares		88.6%		88.2%	0 %		88.9%	0 %
Capital Ratios
Tier 1 Capital Ratio(1)(14)		6.34 %		6.67 %	(0.33)%		5.88 %	0.46 %
Risk Weighted Capital Ratio(14)		11.90 %		12.17 %	(0.27)%		10.55 %	1.35 %
E* TRADE Bank excess risk-based capital ($MM)(14)	$	515.6	$	622.3	(17)%	$	192.6	168 %
Loans receivable($MM)
Average loans receivable	$	26,927	$	28,211	(5)%	$	32,272	(17)%
Ending loans receivable, net	$	25,542	$	26,960	(5)%	$	32,390	(21)%
One- to Four-Family
Loan performance detail ($MM)
Current	$	12,559	$	13,231	(5)%	$	16,558	(24)%
30-89 days delinquent		386		368	5 %		250	54 %
90-179 days delinquent		229		192	19 %		62	269 %
Total 30-179 days delinquent		615		560	10 %		312	97 %
180+ days delinquent (net of $34M, $26M and $0 in charge-offs for Q308, Q208 and Q307, respectively)		248		180	38 %		53	368 %
Total delinquent loans		863		740	17 %		365	136 %
Gross loans receivable (15)	$	13,422	$	13,971	(4)%	$	16,923	(21)%
Credit Quality and Reserve Metrics
Special mention loans (30-89 days delinquent) as a % of gross loans receivable		2.88%		2.63%	0.25 %		1.47%	1.41 %
Nonperforming loans (90+ days delinquent) as a % of gross loans receivable		3.55%		2.66%	0.89 %		0.68%	2.87 %
Total delinquent loans (30+ days delinquent) as a % of gross loans receivable		6.43%		5.30%	1.13 %		2.15%	4.28 %
Total 30-179 days delinquent loans as a % of allowance for loan losses		491.74%		1073.97%	(582.23)%		3326.84%	(2835.10)%
Allowance for loan losses as a % of gross loans receivable		0.93%		0.37%	0.56 %		0.06%	0.87 %
Allowance for loan losses as a % of nonperforming loans		26.25%		14.03%	12.22 %		8.11%	18.14 %
Net charge-offs as a % of average loans receivable (annualized)		0.98%		0.91%	0.07 %		0.01%	0.97 %
Provision as a % of average loans receivable (annualized)		3.13%		1.21%	1.92 %		0.15%	2.98 %
Home Equity
Loan performance detail ($MM)
Current	$	9,935	$	10,454	(5)%	$	12,262	(19)%
30-89 days delinquent		310		282	10 %		253	23 %
90-179 days delinquent		251		250	0 %		117	115 %
Total 30-179 days delinquent		561		532	5 %		370	52 %
180+ days delinquent (net of $15M, $15M and $0 in charge-offs for Q308, Q208 and Q307, respectively)		62		55	13 %		34	82 %
Total delinquent loans		623		587	6 %		404	54 %
Gross loans receivable (15)	$	10,558	$	11,041	(4)%	$	12,666	(17)%
Credit Quality and Reserve Metrics
Special mention loans (30-89 days delinquent) as a % of gross loans receivable		2.93%		2.56%	0.37 %		1.99%	0.94 %
Nonperforming loans (90+ days delinquent) as a % of gross loans receivable		2.96%		2.76%	0.20 %		1.19%	1.77 %
Total delinquent loans (30+ days delinquent) as a % of gross loans receivable		5.90%		5.32%	0.58 %		3.19%	2.71 %
Total 30-179 days delinquent loans as a % of allowance for loan losses		81.08%		97.46%	(16.37)%		211.28%	(130.20)%
Allowance for loan losses as a % of gross loans receivable		6.55%		4.95%	1.60 %		1.38%	5.17 %
Allowance for loan losses as a % of nonperforming loans		220.88%		179.32%	41.56 %		115.69%	105.19 %
Net charge-offs as a % of average loans receivable (annualized)		8.57%		7.18%	1.39 %		1.46%	7.11 %
Provision as a % of average loans receivable (annualized)		13.94%		9.14%	4.80 %		5.45%	8.49 %
Consumer and Other
Loan performance detail ($MM)
Current	$	2,397	$	2,553	(6)%	$	2,985	(20)%
30-89 days delinquent		30		23	30 %		17	76 %
90-179 days delinquent		8		7	14 %		7	14 %
Total 30-179 days delinquent		38		30	27 %		24	58 %
180+ days delinquent		1		1	0 %		1	0 %
Total delinquent loans		39		31	26 %		25	56 %
Gross loans receivable (15)	$	2,436	$	2,584	(6)%	$	3,010	(19)%
Credit Quality and Reserve Metrics
Special mention loans (30-89 days delinquent) as a % of gross loans receivable		1.21%		0.88%	0.33 %		0.63%	0.58 %
Nonperforming loans (90+ days delinquent) as a % of gross loans receivable		0.38%		0.30%	0.08 %		0.25%	0.13 %
Total delinquent loans (30+ days delinquent) as a % of gross loans receivable		1.59%		1.18%	0.41 %		0.88%	0.71 %
Total 30-179 days delinquent loans as a % of allowance for loan losses		65.25%		79.58%	(14.32)%		102.53%	(37.28)%
Allowance for loan losses as a % of gross loans receivable		2.37%		1.45%	0.92 %		0.82%	1.55 %
Allowance for loan losses as a % of nonperforming loans		631.36%		482.78%	148.58 %		332.30%	299.06 %
Net charge-offs as a % of average loans receivable (annualized)		2.29%		2.01%	0.28 %		0.92%	1.37 %
Provision as a % of average loans receivable (annualized)		5.55%		2.57%	2.98 %		1.25%	4.30 %
Total Loans Receivable
Loan performance detail ($MM)
Current	$	24,891	$	26,238	(5)%	$	31,805	(22)%
30-89 days delinquent		726		673	8 %		520	40 %
90-179 days delinquent		488		449	9 %		186	162 %
Total 30-179 days delinquent		1,214		1,122	8 %		706	72 %
180+ days delinquent		311		236	32 %		88	253 %
Total delinquent loans		1,525		1,358	12 %		794	92 %
Total gross loans receivable (15)	$	26,416	$	27,596	(4)%	$	32,599	(19)%
Credit Quality and Reserve Metrics
Special mention loans (30-89 days delinquent) as a % of gross loans receivable		2.75%		2.44%	0.31 %		1.60%	1.15 %
Nonperforming loans (90+ days delinquent) as a % of gross loans receivable		3.02%		2.48%	0.54 %		0.84%	2.18 %
Total delinquent loans (30+ days delinquent) as a % of gross loans receivable		5.77%		4.92%	0.85 %		2.44%	3.33 %
Total 30-179 days delinquent loans as a % of allowance for loan losses		138.81%		176.49%	(37.68)%		338.04%	(199.23)%
Allowance for loan losses as a % of gross loans receivable		3.31%		2.30%	1.01 %		0.64%	2.67 %
Allowance for loan losses as a % of nonperforming loans		109.45%		92.95%	16.50 %		76.24%	33.21 %
Net charge-offs as a % of average loans receivable (annualized)		4.15%		3.53%	0.62 %		0.66%	3.49 %
Provision as a % of average loans receivable (annualized)		7.69%		4.52%	3.17 %		2.31%	5.38 %

ACTIVITY IN ALLOWANCE FOR LOAN LOSSES
	Three Months Ended September 30, 2008
	One- to Four- Family			Home Equity			Consumer and Other			Total
	(In thousands)
Allowance for loan losses, ending 6/30/08	$	52,149		$	546,338		$	37,396		$	635,883
Provision for loan losses		106,480			376,518			34,802			517,800
Charge-offs, net		(33,511	)		(231,572	)		(14,378	)		(279,461	)
Allowance for loan losses, ending 9/30/08	$	125,118		$	691,284		$	57,820		$	874,222
	Three Months Ended June 30, 2008
	One- to Four- Family			Home Equity			Consumer and Other			Total
	(In thousands)
Allowance for loan losses, ending 3/31/08	$	41,403		$	490,831		$	33,674		$	565,908
Provision for loan losses		42,917			259,185			17,019			319,121
Charge-offs, net		(32,171	)		(203,678	)		(13,297	)		(249,146	)
Allowance for loan losses, ending 6/30/08	$	52,149		$	546,338		$	37,396		$	635,883
	Three Months Ended September 30, 2007
	One- to Four- Family			Home Equity			Consumer and Other			Total
	(In thousands)
Allowance for loan losses, ending 6/30/07	$	3,554		$	50,090		$	22,060		$	75,704
Provision for loan losses		6,261			170,639			9,636			186,536
Charge-offs, net		(452	)		(45,641	)		(7,109	)		(53,202	)
Allowance for loan losses, ending 9/30/07	$	9,363		$	175,088		$	24,587		$	209,038

AVERAGE ENTERPRISE BALANCE SHEET DATA
	Three Months Ended
	September 30, 2008
	Average			Operating Interest			Average
	Balance			Inc./Exp.			Yield/Cost
Enterprise interest-earning assets:	(In thousands)
Loans, net(16)	$	26,928,190		$	379,195			5.63	%
Margin receivables		6,420,090			72,291			4.48	%
Mortgage-backed and related available-for-sale securities		9,494,421			108,511			4.57	%
Available-for-sale investment securities		131,332			2,140			6.52	%
Trading securities		272,677			3,211			4.71	%
Cash and cash equivalents(17)		2,630,478			17,850			2.70	%
Stock borrow and other		741,127			14,531			7.80	%
Total enterprise interest-earning assets	$	46,618,315			597,729			5.12	%
Enterprise interest-bearing liabilities:
Retail deposits	$	26,151,874			136,148			2.07	%
Brokered certificates of deposit		883,289			10,984			4.95	%
Customer payables		4,368,391			7,444			0.68	%
Repurchase agreements and other borrowings		7,581,472			71,648			3.70	%
FHLB advances		4,166,643			50,062			4.70	%
Stock loan and other		1,055,662			2,848			1.07	%
Total enterprise interest-bearing liabilities	$	44,207,331			279,134			2.49	%
Enterprise net interest income/spread(6)				$	318,595			2.63	%
	Three Months Ended
	June 30, 2008
	Average			Operating Interest			Average
	Balance			Inc./Exp.			Yield/Cost
Enterprise interest-earning assets:	(In thousands)
Loans, net(16)	$	28,225,411		$	402,103			5.70	%
Margin receivables		6,809,407			75,382			4.45	%
Mortgage-backed and related available-for-sale securities		8,643,520			98,587			4.56	%
Available-for-sale investment securities		132,572			2,148			6.48	%
Trading securities		528,495			9,151			6.93	%
Cash and cash equivalents(17)		2,367,936			17,777			3.02	%
Stock borrow and other		908,847			16,527			7.31	%
Total enterprise interest-earning assets	$	47,616,188			621,675			5.23	%
Enterprise interest-bearing liabilities:
Retail deposits	$	26,077,330			137,527			2.12	%
Brokered certificates of deposit		1,132,630			14,184			5.04	%
Customer payables		4,561,706			7,949			0.70	%
Repurchase agreements and other borrowings		7,474,092			68,630			3.63	%
FHLB advances		4,629,974			51,609			4.41	%
Stock loan and other		1,143,405			3,254			1.14	%
Total enterprise interest-bearing liabilities	$	45,019,137			283,153			2.51	%
Enterprise net interest income/spread(6)				$	338,522			2.72	%
	Three Months Ended
	September 30, 2007
	Average			Operating Interest			Average
	Balance			Inc./Exp.			Yield/Cost
Enterprise interest-earning assets:	(In thousands)
Loans, net(16)	$	32,445,828		$	528,193			6.51	%
Margin receivables		7,348,376			133,791			7.22	%
Mortgage-backed and related available-for-sale securities		12,811,113			169,603			5.30	%
Available-for-sale investment securities		4,667,136			77,187			6.62	%
Trading securities		118,195			3,052			10.33	%
Cash and cash equivalents(17)		591,227			6,260			4.20	%
Stock borrow and other		1,042,589			19,849			7.55	%
Total enterprise interest-earning assets	$	59,024,464			937,935			6.35	%
Enterprise interest-bearing liabilities:
Retail deposits	$	27,764,658			216,426			3.09	%
Brokered certificates of deposit		418,123			5,154			4.89	%
Customer payables		5,764,590			17,893			1.23	%
Repurchase agreements and other borrowings		12,582,907			165,925			5.16	%
FHLB advances		8,650,546			115,531			5.23	%
Stock loan and other		1,048,037			6,517			2.47	%
Total enterprise interest-bearing liabilities	$	56,228,861			527,446			3.70	%
Enterprise net interest income/spread(6)				$	410,489			2.65	%
Reconciliation from Enterprise Net Interest Income to Net Operating Interest Income
	Three Months Ended
	September 30,			June 30,			September 30,
		2008			2008			2007
	(In thousands)
Enterprise net interest income	$	318,595		$	338,522		$	410,489
Taxable equivalent interest adjustment(18)		(1,526	)		(3,205	)		(8,523	)
Customer cash held by third parties and other(19)		7,705			7,447			9,476
Net operating interest income	$	324,774		$	342,764		$	411,442

Mortgage Loan Portfolio(20)
	One- to Four-Family Mortgage Loan Distribution
	Unpaid principal balances at September 30, 2008 ($MM)
		FICO
	LTV	>=720			719-700		699-680		679-660		659-620	<620		Total
	<70%	$	4,014	$	709	$	525	$	329	$	198	$	3	$	5,778
	70%-80%		4,762		1,052		808		444		203		5		7,274
	80%-90%		79		28		25		22		11		-		165
	>90%		76		26		26		15		17		-		160
	Total	$	8,931	$	1,815	$	1,384	$	810	$	429	$	8	$	13,377
	One- to Four-Family 30+ Days Delinquent Loan Distribution
	September 30, 2008 ($MM)
		FICO
	LTV	>=720			719-700		699-680		679-660		659-620	<620		Total
	<70%	$	83	$	34	$	38	$	28	$	20	$	1	$	204
	70%-80%		266		118		105		69		40		-		598
	80%-90%		11		7		7		7		3		-		35
	>90%		9		3		4		4		6		-		26
	Total	$	369	$	162	$	154	$	108	$	69	$	1	$	863
	Home Equity Loan Distribution
	Unpaid principal balances at September 30, 2008 ($MM)
		FICO
	CLTV	>=720			719-700		699-680		679-660		659-620	<620		Total
	<70%	$	2,243	$	379	$	306	$	135	$	105	$	10	$	3,178
	70%-80%		1,099		309		264		104		91		2		1,869
	80%-90%		1,828		631		586		239		173		1		3,458
	>90%		1,001		343		289		151		93		-		1,877
	Total	$	6,171	$	1,662	$	1,445	$	629	$	462	$	13	$	10,382
	Home Equity 30+ Days Delinquent Loan Distribution
	September 30, 2008 ($MM)
		FICO
	CLTV	>=720			719-700		699-680		679-660		659-620	<620		Total
	<70%	$	20	$	8	$	12	$	5	$	7	$	1	$	53
	70%-80%		27		16		19		10		13		-		85
	80%-90%		95		58		59		29		30		-		271
	>90%		86		44		41		27		16		-		214
	Total	$	228	$	126	$	131	$	71	$	66	$	1	$	623

INVESTMENT SECURITIES PORTFOLIO
	Book value at September 30, 2008 ($MM)
		AAA		AA		A		BBB		Below Investment Grade and Non-Rated		Total
	Mortgage-backed securities backed by U.S. Government
	sponsored and federal agencies	$	9,068	$	-	$	-	$	-	$	-	$	9,068
	Collateralized mortgage obligations and other		739		113		33		21		101		1,007
	Municipal bonds, corporate bonds and FHLB stock		237		61		34		-		-		332
	Total	$	10,044	$	174	$	67	$	21	$	101	$	10,407

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. Management believes 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.

Discontinued Operations and Reporting Changes

Beginning in the second quarter of 2008, the Company re-classified the Consolidated Statement of Income (Loss) to reflect the Canadian brokerage business and lending business as discontinued operations. Additionally, the Company re-defined “Total net revenue” by separately stating “Provision for loan losses” as its own line item and reclassified SFAS 133 hedge ineffectiveness from “Other operating expenses” to the “Gain (loss) on loans and securities, net” line item. The Company has re-presented the income statement for the past two years on its Investor Relations website.

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.

Bank Earnings Before Taxes and Before Credit Losses

Bank earnings before taxes and before credit losses represents the pre-tax earnings of E*TRADE Bank Holding Company ("ETBH" or “Bank”) before discontinued operations, loss on securities, net and provision for loan losses. This metric shows the amount of earnings that the Bank, after accruing for the interest expense on its trust preferred securities, generates each quarter prior to credit related losses, primarily provision and loss on securities. Management believes this non-GAAP measure is useful to investors and analysts as it is an indicator of the level of credit related losses the Bank can absorb without causing a decline in E*TRADE Bank’s excess risk-based capital.

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 the Company expects to file with the SEC with respect to the financial periods discussed herein.

ENDNOTES

(1) Amounts reported reflect the impact of a technical correction to the terms of the purchase of preferred shares of E*TRADE Bank by E*TRADE Financial Corporation, the effect of which was to qualify a contribution of $250 million as Tier 1 Capital, which otherwise would have qualified only as risk-based capital. The contribution was effected on September 29 and the technical correction was effected on October 3. Prior to the technical correction on October 3, the September 30, 2008 Tier 1 Capital Ratio was 5.79% and Excess Tier 1 Capital based on the OTS well-capitalized limit was $359 million.

(2) Because the Company reported a net loss for the second and third quarters of 2008 and third 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.

(3) Reflects elimination of transactions between Retail and Institutional segments, which includes deposit and customer payable transfer pricing, servicing and order flow rebates.

(4) Amounts and percentages may not calculate due to rounding.

(5) Operating margin is the percentage of net revenue that results in income (loss) before other income (expense), income taxes and discontinued operations. The percentage is calculated by dividing income (loss) before other income (expense), income taxes and discontinued operations by total net revenue.

(6) 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.

(7) Bank earnings before taxes and before credit losses represents the pre-tax earnings of E*TRADE Bank Holding Company (“ETBH” or “Bank”) before discontinued operations, loss on securities, net and provision for loan losses. This metric shows the amount of earnings that the Bank, after accruing for the interest expense on its trust preferred securities, generates each quarter prior to credit related losses, primarily provision and loss on securities. Management believes this non-GAAP measure is useful to investors and analysts as it is an indicator of the level of credit related losses the Bank can absorb without causing a decline in E*TRADE Bank’s excess risk-based capital^(a). Below is a reconciliation of Bank earnings before taxes and before credit losses from Loss before income taxes and discontinued operations:

	Q3 2008			Q2 2008			Q3 2007
Loss before income taxes and discontinued operations	$	(501,591	)	$	(182,411	)	$	(97,038	)
Add back:
Non-bank (income) loss before tax and discontinued operations(b)		12,445			51,736			(63,174	)
Provision for loan losses		517,800			319,121			186,536
Loss on securities, net(c)		159,799			15,422			198,723
Bank earnings before taxes and before credit losses	$	188,453		$	203,868		$	225,047

^(a) Excess risk-based capital is the excess capital that E*TRADE Bank has compared to the regulatory minimum well-capitalized threshold.

^(b) Non-bank (income) loss represents all of the Company’s subsidiaries including Corporate and Brokerage, but excluding the Bank.

^(c) Loss on securities, net is included in the Loss on loans and securities, net line item on the consolidated statement of income (loss).

(8) Target segment accounts are accounts held by customers with over $50,000 in assets and/or generating 30 or more trades per quarter.

(9) 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.

(10) Net new customers from discontinued operations and other consists of customers related to our discontinued operations and the impact of an improvement in our customer identification methodology implemented during the second quarter of 2008. End of period total customers declined during Q208 as a result of these two items.

(11) Beginning in Q208, products per customer increased due to the impact of customers related to our discontinued operations and an improvement in our customer identification methodology implemented during the second quarter of 2008.

(12) Excludes customer payables (cash) from discontinued operations.

(13) Net new customer assets are total inflows to all new and existing customer accounts less total outflows from all closed and existing customer accounts. In Q208, net new customer assets from discontinued operations and other consists of the asset outflow related to the sale of Retirement Advisors of America.

(14) Q308 estimate.

(15) Includes unpaid principal balances and premiums (discounts).

(16) Excludes loans to customers on margin.

(17) Includes segregated cash balances.

(18) Gross-up for tax-exempt securities.

(19) Includes interest earned on average customer assets of $3.3 billion, $3.4 billion and $4.1 billion for the quarters ended September 30, 2008, June 30, 2008 and September 30, 2007, respectively, held by parties outside E*TRADE FINANCIAL, including third party money market funds and sweep deposit accounts at unaffiliated financial institutions.

(20) 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. CLTV calculations for home equity lines of credit are based on drawn balances. 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
Robert Simmons, 646-521-4406
robert.simmons@etrade.com