E Trade Financial (ETFC) 8-K E*TRADE Financial Corporation Announces First Quarter 2011 Results

Exhibit 99.1

E*TRADE Financial Corporation Announces First Quarter 2011 Results

NEW YORK--(BUSINESS WIRE)--April 20, 2011--E*TRADE Financial Corporation (NASDAQ: ETFC):

First Quarter Results

• Net income of $45 million, or $0.16 per share, improved from $0.11 loss per share in prior quarter and $0.25 loss per share in first quarter 2010
• Total net revenue of $537 million, up from $518 million in prior quarter and flat compared with $537 million in first quarter 2010
• Provision for loan losses of $116 million, down from $194 million in prior quarter and down from $268 million in first quarter 2010
• Special mention delinquencies (30-89 days) down 14 percent from prior quarter; at-risk delinquencies (30-179 days) down 11 percent from prior quarter
• Daily Average Revenue Trades (DARTs) of 177,000, up 18 percent from prior quarter and up 14 percent from first quarter 2010
• Net new brokerage accounts of 51,000, up from 28,000 in prior quarter and 2,000 in first quarter 2010
• Net new brokerage assets of $3.9 billion, up from $2.4 billion in prior quarter and $2.2 billion in first quarter 2010

E*TRADE Financial Corporation (NASDAQ: ETFC) today announced results for its first quarter ended March 31, 2011, reporting net income of $45 million, or $0.16 per share, compared with a net loss of $24 million, or $0.11 loss per share, in the prior quarter and a net loss of $48 million, or $0.25 loss per share, in the first quarter of 2010. The company reported total net revenue of $537 million for the first quarter, compared with $518 million in the prior quarter and $537 million in the year-ago period.

“E*TRADE is off to a terrific start in 2011,” said Steven Freiberg, Chief Executive Officer of E*TRADE Financial Corporation. “Our first quarter results benefited from strength in our brokerage franchise, growth in both interest and non-interest revenue, positive loan performance trends and ongoing expense management. We reported impressive sequential and year-over-year growth in DARTs, brokerage accounts and margin receivables, and net new brokerage assets of $3.9 billion were the highest we’ve ever recorded. With increased capacity to invest in the franchise, continued improvement in loan performance trends and a focus on expenses, E*TRADE is well positioned for growth.”

E*TRADE reported DARTs of 177,000 during the quarter, an increase of 18 percent from the prior quarter and an increase of 14 percent versus the same quarter a year ago.

At quarter end, the company reported 4.3 million customer accounts, which included 2.7 million brokerage accounts. Net new brokerage accounts were 51,000 during the quarter compared with 28,000 in the prior quarter and 2,000 in the first quarter of 2010.

The company ended the quarter with $189 billion in total customer assets, compared with $176 billion in the prior quarter.

During the quarter, net new brokerage assets were positive $3.9 billion, the highest level on record by the company. Brokerage related cash increased by $1.4 billion to $25.9 billion during the period, while customers were net buyers of approximately $2.3 billion of securities. Average margin receivables increased 10 percent sequentially from $4.9 billion to $5.4 billion.

Net operating interest income for the first quarter was $310 million, reflecting a net interest spread of 2.84 percent on average interest-earning assets of $42.7 billion. The $5 million sequential increase in net operating interest income resulted from a $1.3 billion increase in average interest-earning assets, reflecting the increase in brokerage customer cash.

Commissions, fees and service charges, principal transactions, and other revenue in the first quarter were $201 million, compared with $181 million in the fourth quarter of 2010. This reflected the sequential increase in trading activity. Average commission per trade was $11.32, a slight decline sequentially from $11.37 in the fourth quarter.

Total net revenue in the quarter also included $26 million of net gains on loans and securities, including net impairment of $6 million.

Total operating expense declined two percent, or $7 million, to $298 million from the prior quarter, and included a seasonal increase in advertising spend and $4 million in restructuring expenses. Mr. Freiberg commented: “We are committed to managing expenses in line with 2010 levels, while, at the same time, investing in the franchise. Our advertising spend is driving meaningful results and our sales force, which we plan to grow by 35 percent this year, is focused on building and extending relationships with retail investors and with corporate clients of our equity compensation solutions business. We believe these initiatives will drive profitable growth and shareholder value.”

The company’s loan portfolio contracted by $0.9 billion from the prior quarter, including $0.7 billion related to prepayments or scheduled principal reductions. First quarter provision for loan losses decreased $78 million from the prior quarter to $116 million.

Net charge-offs in the quarter were $194 million, a decrease of $2 million from the prior quarter. The allowance for loan losses remained at $1.0 billion, or six percent of gross loans receivable, at quarter end.

For the company’s entire loan portfolio, special mention delinquencies declined by 14 percent, and at-risk delinquencies declined by 11 percent in the quarter. As compared to the year-ago period, special mention delinquencies declined 34 percent and at-risk delinquencies declined 33 percent.

As of March 31, 2011, the company reported E*TRADE Bank Tier 1 capital ratios of 7.54 percent to total adjusted assets and 14.29 percent to risk-weighted assets. E*TRADE Bank had excess risk-based total capital (i.e., above the level regulators define as well-capitalized) of $1.3 billion at quarter end.

Historical metrics and financials through March 2011 can be found on the E*TRADE Financial Investor Relations website at https://investor.etrade.com.

The company will host a conference call to discuss the 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 55555314. A live audio webcast and replay of this conference call will also be available at https://investor.etrade.com.

About E*TRADE Financial

The E*TRADE Financial family of companies provides financial services including online brokerage and related banking products and services to retail investors. Specific business segments include Trading and Investing and Balance Sheet Management. 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. More information is available at www.etrade.com. ETFC-E

Important Notices

E*TRADE Financial, E*TRADE and the E*TRADE logo are trademarks or registered trademarks of E*TRADE Financial Corporation.

Forward-Looking Statements: 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. Such statements include those relating to the ability of the company to build and extend relationships with retail investors and corporate clients, invest in our franchise and grow our sales force, drive profitable growth and shareholder value, manage expenses in line with 2010 levels, and continue progress in our legacy loan portfolio. The uncertainties and risks include, but are not limited to, potential changes in market activity, anticipated changes in the rate of new customer acquisition, macro trends of the economy in general and the residential real estate market, instability in the consumer credit markets and credit trends, increased mortgage loan delinquency and default rates, portfolio growth, portfolio seasoning and resolution through collections, sales or charge-offs, the uncertainty surrounding the foreclosure process, and the potential negative regulatory consequences resulting from the implementation of financial regulatory reform as well as from actions by the Office of Thrift Supervision or other regulators. Further information about these risks and uncertainties can be found in the annual, quarterly, and current reports on Form 10-K, Form 10-Q, and Form 8-K previously filed by E*TRADE Financial Corporation with the Securities and Exchange Commission (“SEC”) (including information in these reports under the caption “Risk Factors”). Any forward-looking statement included in this release speaks only as of the date of this communication; the company disclaims any obligation to update any information.

© 2011 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,
				2011			2010			2010
Revenue:
	Operating interest income		$	387,466		$	381,901		$	406,966
	Operating interest expense			(77,764	)		(76,977	)		(86,569	)
		Net operating interest income		309,702			304,924			320,397
	Commissions			124,433			108,677			113,252
	Fees and service charges			37,245			35,364			42,230
	Principal transactions			29,576			26,917			26,211
	Gains on loans and securities, net			32,334			41,354			29,046
	Net impairment			(6,062	)		(9,559	)		(8,652	)
	Other revenues			9,467			10,272			14,019
		Total non-interest income		226,993			213,025			216,106
		Total net revenue		536,695			517,949			536,503
Provision for loan losses				116,058			193,784			267,979
Operating expense:
	Compensation and benefits			84,003			81,110			87,210
	Clearing and servicing			39,155			36,393			39,159
	Advertising and market development			44,365			38,648			38,135
	Professional services			23,468			25,304			20,290
	FDIC insurance premiums			20,567			19,382			19,315
	Communications			15,555			16,948			20,447
	Occupancy and equipment			16,814			17,238			18,207
	Depreciation and amortization			22,047			22,088			20,646
	Amortization of other intangibles			6,538			7,076			7,142
	Facility restructuring and other exit activities			3,552			9,872			3,373
	Other operating expenses			21,950			30,627			21,412
		Total operating expense		298,014			304,686			295,336
Income (loss) before other income (expense) and income tax expense (benefit)				122,623			19,479			(26,812	)
Other income (expense):
	Corporate interest income			616			55			23
	Corporate interest expense			(43,277	)		(43,069	)		(41,043	)
	Gains on sales of investments, net			-			855			109
	Equity in income (loss) of investments and venture funds			(998	)		(2,335	)		1,794
		Total other income (expense)		(43,659	)		(44,494	)		(39,117	)
Income (loss) before income tax expense (benefit)				78,964			(25,015	)		(65,929	)
Income tax expense (benefit)				33,731			(900	)		(18,092	)
Net income (loss)			$	45,233		$	(24,115	)	$	(47,837	)
Basic earnings (loss) per share(1)			$	0.20		$	(0.11	)	$	(0.25	)
Diluted earnings (loss) per share(1)			$	0.16		$	(0.11	)	$	(0.25	)
Shares used in computation of per share data (1):
		Basic		230,301			220,545			192,195
		Diluted(2)		289,677			220,545			192,195

E*TRADE FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheet
(In thousands, except share amounts)
(Unaudited)
			March 31,			December 31,
				2011			2010
ASSETS
Cash and equivalents			$	1,864,328		$	2,374,346
Cash and investments required to be segregated under federal or other regulations				319,667			609,510
Trading securities				83,751			62,173
Available-for-sale securities				16,124,004			14,805,677
Held-to-maturity securities				3,381,135			2,462,710
Margin receivables				5,707,702			5,120,575
Loans, net				14,340,566			15,127,390
Investment in FHLB stock				164,579			164,381
Property and equipment, net				300,140			302,658
Goodwill				1,934,232			1,939,976
Other intangibles, net				305,418			325,403
Other assets				3,071,021			3,078,202
		Total assets	$	47,596,543		$	46,373,001
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits			$	25,971,630		$	25,240,297
Securities sold under agreements to repurchase				5,866,189			5,888,249
Customer payables				5,353,540			5,020,086
FHLB advances and other borrowings				2,728,147			2,731,714
Corporate debt				1,868,607			2,145,881
Other liabilities				1,410,638			1,294,329
		Total liabilities		43,198,751			42,320,556
Shareholders' equity:
Common stock, $0.01 par value, shares authorized: 400,000,000 at
	March 31, 2011 and December 31, 2010, shares issued and outstanding:
	248,242,656 at March 31, 2011 and 220,840,821 at December 31, 2010			2,482			2,208
Additional paid-in-capital				6,920,812			6,640,715
Accumulated deficit				(2,106,605	)		(2,151,838	)
Accumulated other comprehensive loss				(418,897	)		(438,640	)
		Total shareholders' equity		4,397,792			4,052,445
		Total liabilities and shareholders' equity	$	47,596,543		$	46,373,001

Segment Reporting
	Three Months Ended March 31, 2011
	Trading and Investing			Balance Sheet Management			Corporate/ Other			Eliminations(3)			Total
	(In thousands)
Revenue:
Operating interest income	$	202,487		$	319,205		$	6		$	(134,232	)	$	387,466
Operating interest expense		(13,635	)		(198,361	)		-			134,232			(77,764	)
Net operating interest income		188,852			120,844			6			-			309,702
Commissions		124,433			-			-			-			124,433
Fees and service charges		36,148			1,097			-			-			37,245
Principal transactions		29,576			-			-			-			29,576
Gains on loans and securities, net		112			32,222			-			-			32,334
Net impairment		-			(6,062	)		-			-			(6,062	)
Other revenues		7,936			1,531			-			-			9,467
Total non-interest income		198,205			28,788			-			-			226,993
Total net revenue		387,057			149,632			6			-			536,695
Provision for loan losses		-			116,058			-			-			116,058
Operating expense:
Compensation and benefits		61,841			4,494			17,668			-			84,003
Clearing and servicing		21,096			18,059			-			-			39,155
Advertising and market development		44,365			-			-			-			44,365
Professional services		13,308			612			9,548			-			23,468
FDIC insurance premiums		-			20,567			-			-			20,567
Communications		14,967			267			321			-			15,555
Occupancy and equipment		15,144			702			968			-			16,814
Depreciation and amortization		16,966			326			4,755			-			22,047
Amortization of other intangibles		6,538			-			-			-			6,538
Facility restructuring and other exit activities		-			-			3,552			-			3,552
Other operating expenses		8,389			8,438			5,123			-			21,950
Total operating expense		202,614			53,465			41,935			-			298,014
Segment income (loss) before other income (expense)		184,443			(19,891	)		(41,929	)		-			122,623
Other income (expense):
Corporate interest income		-			-			616			-			616
Corporate interest expense		-			-			(43,277	)		-			(43,277	)
Equity in loss of investments and venture funds		-			-			(998	)		-			(998	)
Total other income (expense)		-			-			(43,659	)		-			(43,659	)
Segment income (loss)	$	184,443		$	(19,891	)	$	(85,588	)	$	-		$	78,964
	Three Months Ended December 31, 2010
	Trading and Investing			Balance Sheet Management			Corporate/ Other			Eliminations(3)			Total
	(In thousands)
Revenue:
Operating interest income	$	202,982		$	317,665		$	6		$	(138,752	)	$	381,901
Operating interest expense		(13,973	)		(201,756	)		-			138,752			(76,977	)
Net operating interest income		189,009			115,909			6			-			304,924
Commissions		108,677			-			-			-			108,677
Fees and service charges		33,554			1,810			-			-			35,364
Principal transactions		26,917			-			-			-			26,917
Gains (losses) on loans and securities, net		(58	)		41,441			(29	)		-			41,354
Net impairment		-			(9,559	)		-			-			(9,559	)
Other revenues		8,581			1,691			-			-			10,272
Total non-interest income		177,671			35,383			(29	)		-			213,025
Total net revenue		366,680			151,292			(23	)		-			517,949
Provision for loan losses		-			193,784			-			-			193,784
Operating expense:
Compensation and benefits		54,734			4,832			21,544			-			81,110
Clearing and servicing		18,125			18,268			-			-			36,393
Advertising and market development		38,648			-			-			-			38,648
Professional services		12,824			1,321			11,159			-			25,304
FDIC insurance premiums		-			19,382			-			-			19,382
Communications		16,332			260			356			-			16,948
Occupancy and equipment		16,087			726			425			-			17,238
Depreciation and amortization		16,910			327			4,851			-			22,088
Amortization of other intangibles		7,076			-			-			-			7,076
Facility restructuring and other exit activities		-			-			9,872			-			9,872
Other operating expenses		11,249			11,008			8,370			-			30,627
Total operating expense		191,985			56,124			56,577			-			304,686
Segment income (loss) before other income (expense)		174,695			(98,616	)		(56,600	)		-			19,479
Other income (expense):
Corporate interest income		-			-			55			-			55
Corporate interest expense		-			-			(43,069	)		-			(43,069	)
Gains on sales of investments, net		-			-			855			-			855
Equity in loss of investments and venture funds		-			-			(2,335	)		-			(2,335	)
Total other income (expense)		-			-			(44,494	)		-			(44,494	)
Segment income (loss)	$	174,695		$	(98,616	)	$	(101,094	)	$	-		$	(25,015	)
	Three Months Ended March 31, 2010
	Trading and Investing			Balance Sheet Management			Corporate/ Other			Eliminations(3)			Total
	(In thousands)
Revenue:
Operating interest income	$	214,577		$	352,290		$	8		$	(159,909	)	$	406,966
Operating interest expense		(20,936	)		(225,542	)		-			159,909			(86,569	)
Net operating interest income		193,641			126,748			8			-			320,397
Commissions		113,252			-			-			-			113,252
Fees and service charges		41,229			1,001			-			-			42,230
Principal transactions		26,211			-			-			-			26,211
Gains on loans and securities, net		-			29,042			4			-			29,046
Net impairment		-			(8,652	)		-			-			(8,652	)
Other revenues		11,428			2,591			-			-			14,019
Total non-interest income		192,120			23,982			4			-			216,106
Total net revenue		385,761			150,730			12			-			536,503
Provision for loan losses		-			267,979			-			-			267,979
Operating expense:
Compensation and benefits		62,811			3,311			21,088			-			87,210
Clearing and servicing		19,490			19,669			-			-			39,159
Advertising and market development		38,135			-			-			-			38,135
Professional services		11,354			589			8,347			-			20,290
FDIC insurance premiums		-			19,315			-			-			19,315
Communications		19,717			229			501			-			20,447
Occupancy and equipment		16,897			682			628			-			18,207
Depreciation and amortization		15,464			312			4,870			-			20,646
Amortization of other intangibles		7,142			-			-			-			7,142
Facility restructuring and other exit activities		-			-			3,373			-			3,373
Other operating expenses		9,004			7,595			4,813			-			21,412
Total operating expense		200,014			51,702			43,620			-			295,336
Segment income (loss) before other income (expense)		185,747			(168,951	)		(43,608	)		-			(26,812	)
Other income (expense):
Corporate interest income		-			-			23			-			23
Corporate interest expense		-			-			(41,043	)		-			(41,043	)
Gains on sales of investments, net		-			-			109			-			109
Equity in income of investments and venture funds		-			-			1,794			-			1,794
Other income (expense)		-			-			(39,117	)		-			(39,117	)
Segment income (loss)	$	185,747		$	(168,951	)	$	(82,725	)	$	-		$	(65,929	)

Key Performance Metrics(4)
Corporate Metrics	Qtr ended 3/31/11		Qtr ended 12/31/10		Qtr ended 3/31/11 vs. 12/31/10	Qtr ended 3/31/10		Qtr ended 3/31/11 vs. 3/31/10
Operating margin %(5)
Consolidated		23 %		4 %	19 %	N.M.		N.M.
Trading and Investing		48 %		48 %	0 %		48 %	0 %
Balance Sheet Management	N.M.		N.M.		N.M.	N.M.		N.M.
Employees		2,958		2,962	0 %		3,018	(2)%
Consultants and other		200		209	(4)%		159	26 %
Total headcount		3,158		3,171	0 %		3,177	(1)%
Book value per share	$	17.72	$	18.35	(3)%	$	19.47	(9)%
Tangible book value per share(6)	$	9.62	$	9.08	6 %	$	8.69	11 %
Corporate cash ($MM)	$	460.9	$	470.5	(2)%	$	418.4	10 %
Enterprise net interest spread (basis points)(7)		284		288	(1)%		296	(4)%
Enterprise interest-earning assets, average ($MM)	$	42,742	$	41,467	3 %	$	42,409	1 %
Earnings before interest, taxes, depreciation & amortization ("EBITDA") ($MM)
Net income (loss)	$	45.2	$	(24.1)	N.M.	$	(47.8)	N.M.
Income tax expense (benefit)		33.7		(0.9)	N.M.		(18.1)	N.M.
Depreciation & amortization		28.6		29.1	(2)%		27.8	3 %
Corporate interest expense		43.3		43.1	0 %		41.0	6 %
EBITDA	$	150.8	$	47.2	219 %	$	2.9	N.M.
Interest coverage(8)		3.5		1.1	N.M.		0.1	N.M.
Bank earnings before taxes and before credit losses ($MM)(9)	$	229.7	$	208.9	10 %	$	239.7	(4)%
Trading and Investing Metrics
Trading days		62.0		63.5	N.M.		61.0	N.M.
DARTs		177,279		150,540	18 %		155,310	14 %
Total trades (MM)(10)		11.0		9.6	15 %		9.5	16 %
Average commission per trade	$	11.32	$	11.37	0 %	$	11.38	(1)%
End of period margin receivables ($B)	$	5.7	$	5.1	12 %	$	3.8	50 %
Average margin receivables ($B)	$	5.4	$	4.9	10 %	$	3.9	38 %
Gross new brokerage accounts		116,753		96,057	22 %		102,796	14 %
Gross new stock plan accounts		56,169		49,612	13 %		41,648	35 %
Gross new banking accounts		5,794		4,994	16 %		7,252	(20)%
Closed accounts(10)		(124,952)		(129,589)	N.M.		(272,212)	N.M.
Net new accounts		53,764		21,074	N.M.		(120,516)	N.M.
Net new brokerage accounts		50,512		27,609	N.M.		1,898	N.M.
Net new stock plan accounts		19,581		15,074	N.M.		390	N.M.
Net new banking accounts		(16,329)		(21,609)	N.M.		(122,804)	N.M.
Net new accounts		53,764		21,074	N.M.		(120,516)	N.M.
End of period brokerage accounts		2,734,823		2,684,311	2 %		2,631,977	4 %
End of period stock plan accounts		1,068,105		1,048,524	2 %		1,026,203	4 %
End of period banking accounts		498,668		514,997	(3)%		600,600	(17)%
End of period total accounts		4,301,596		4,247,832	1 %		4,258,780	1 %
Customer Assets ($B)
Security holdings	$	130.0	$	121.1	7 %	$	106.9	22 %
Customer payables (cash)		5.4		5.0	8 %		5.2	4 %
Customer cash balances held by third parties		3.4		3.4	0 %		3.2	6 %
Unexercised stock plan customer options (vested)		24.2		21.6	12 %		19.0	27 %
Customer assets in brokerage and stock plan accounts		163.0		151.1	8 %		134.3	21 %
Sweep deposits		17.1		16.1	6 %		13.4	28 %
Savings, transaction and other		8.8		9.0	(2)%		11.1	(21)%
Customer assets in banking accounts		25.9		25.1	3 %		24.5	6 %
Total customer assets	$	188.9	$	176.2	7 %	$	158.8	19 %
Net new brokerage assets ($B)(11)	$	3.9	$	2.4	N.M.	$	2.2	N.M.
Net new banking assets ($B)(11)		(0.2)		(0.2)	N.M.		(1.8)	N.M.
Net new customer assets ($B)(11)	$	3.7	$	2.2	N.M.	$	0.4	N.M.
Brokerage related cash ($B)	$	25.9	$	24.5	6 %	$	21.8	19 %
Other customer cash and deposits ($B)		8.8		9.0	(2)%		11.1	(21)%
Total customer cash and deposits ($B)	$	34.7	$	33.5	4 %	$	32.9	5 %
Unexercised stock plan customer options (unvested) ($B)	$	42.8	$	37.9	13 %	$	30.9	39 %
Market Making
Equity shares traded (MM)		190,332		166,399	14 %		185,282	3 %
Average revenue capture per 1,000 equity shares	$	0.153	$	0.158	(3)%	$	0.135	13 %
% of Bulletin Board equity shares to total equity shares		95.5%		95.9%	(0)%		96.4%	(1)%
Balance Sheet Management Metrics
Capital Ratios
Tier 1 capital ratio(12)		7.54 %		7.30 %	0.24 %		6.83 %	0.71 %
Tier 1 capital to risk-weighted assets ratio(12)		14.29 %		13.75 %	0.54 %		13.07 %	1.22 %
Risk-based capital ratio(12)		15.56 %		15.02 %	0.54 %		14.36 %	1.20 %
E*TRADE Bank excess Tier 1 capital ($MM)(12)	$	1,094.1	$	960.5	14 %	$	768.3	42 %
E*TRADE Bank excess Tier 1 capital to risk-weighted assets(12)	$	1,872.2	$	1,706.6	10 %	$	1,534.0	22 %
E*TRADE Bank excess risk-based capital ($MM)(12)	$	1,255.0	$	1,105.6	14 %	$	945.6	33 %
Loans receivable ($MM)
Average loans receivable	$	15,820	$	16,739	(5)%	$	19,921	(21)%
Ending loans receivable, net	$	14,336	$	15,122	(5)%	$	17,933	(20)%
Loan performance detail (all loans, including TDRs) ($MM)
One- to Four-Family
Current	$	6,464	$	6,800	(5)%	$	8,038	(20)%
30-89 days delinquent		330		389	(15)%		527	(37)%
90-179 days delinquent		213		226	(6)%		339	(37)%
Total 30-179 days delinquent		543		615	(12)%		866	(37)%
180+ days delinquent (net of $295M, $309M and $327M in charge-offs for Q111, Q410 and Q110, respectively)		741		785	(6)%		881	(16)%
Total delinquent loans(13)		1,284		1,400	(8)%		1,747	(27)%
Gross loans receivable(14)	$	7,748	$	8,200	(6)%	$	9,785	(21)%
Home Equity
Current	$	5,844	$	6,121	(5)%	$	7,086	(18)%
30-89 days delinquent		155		175	(11)%		214	(28)%
90-179 days delinquent		136		143	(5)%		170	(20)%
Total 30-179 days delinquent		291		318	(8)%		384	(24)%
180+ days delinquent (net of $25M, $25M and $27M in charge-offs for Q111, Q410 and Q110, respectively)		54		52	4 %		56	(4)%
Total delinquent loans(13)		345		370	(7)%		440	(22)%
Gross loans receivable(14)	$	6,189	$	6,491	(5)%	$	7,526	(18)%
Consumer and Other
Current	$	1,324	$	1,431	(7)%	$	1,750	(24)%
30-89 days delinquent		24		25	(4)%		28	(14)%
90-179 days delinquent		3		5	(40)%		5	(40)%
Total 30-179 days delinquent		27		30	(10)%		33	(18)%
180+ days delinquent		1		1	0 %		1	0 %
Total delinquent loans		28		31	(10)%		34	(18)%
Gross loans receivable(14)	$	1,352	$	1,462	(8)%	$	1,784	(24)%
Total Loans Receivable
Current	$	13,632	$	14,352	(5)%	$	16,874	(19)%
30-89 days delinquent		509		589	(14)%		769	(34)%
90-179 days delinquent		352		374	(6)%		514	(32)%
Total 30-179 days delinquent		861		963	(11)%		1,283	(33)%
180+ days delinquent		796		838	(5)%		938	(15)%
Total delinquent loans		1,657		1,801	(8)%		2,221	(25)%
Total gross loans receivable(14)	$	15,289	$	16,153	(5)%	$	19,095	(20)%
TDR performance detail ($MM)(15)
One- to Four-Family TDRs
Current	$	526	$	420	25 %	$	170	209 %
30-89 days delinquent		49		56	(13)%		55	(11)%
90-179 days delinquent		24		22	9 %		28	(14)%
Total 30-179 days delinquent		73		78	(6)%		83	(12)%
180+ days delinquent		47		51	(8)%		31	52 %
Total delinquent TDRs		120		129	(7)%		114	5 %
TDRs	$	646	$	549	18 %	$	284	127 %
Home Equity TDRs
Current	$	372	$	389	(4)%	$	335	11 %
30-89 days delinquent		56		57	(2)%		57	(2)%
90-179 days delinquent		35		39	(10)%		34	3 %
Total 30-179 days delinquent		91		96	(5)%		91	0 %
180+ days delinquent		4		3	33 %		1	300 %
Total delinquent TDRs		95		99	(4)%		92	3 %
TDRs	$	467	$	488	(4)%	$	427	9 %
Total TDRs
Current	$	898	$	809	11 %	$	505	78 %
30-89 days delinquent		105		113	(7)%		112	(6)%
90-179 days delinquent		59		61	(3)%		62	(5)%
Total 30-179 days delinquent		164		174	(6)%		174	(6)%
180+ days delinquent		51		54	(6)%		32	59 %
Total delinquent TDRs		215		228	(6)%		206	4 %
TDRs	$	1,113	$	1,037	7 %	$	711	57 %

Activity in Allowance for Loan Losses
	Three Months Ended March 31, 2011
	One- to Four- Family			Home Equity			Consumer and Other			Total
	(In thousands)
Allowance for loan losses, ending 12/31/10	$	389,594		$	576,089		$	65,486		$	1,031,169
Provision for loan losses		17,839			90,349			7,870			116,058
Charge-offs, net		(54,316	)		(127,267	)		(12,038	)		(193,621	)
Allowance for loan losses, ending 3/31/11	$	353,117		$	539,171		$	61,318		$	953,606
	Three Months Ended December 31, 2010
	One- to Four- Family			Home Equity			Consumer and Other			Total
	(In thousands)
Allowance for loan losses, ending 9/30/10	$	397,130		$	571,357		$	64,354		$	1,032,841
Provision for loan losses		55,791			123,155			14,838			193,784
Charge-offs, net		(63,327	)		(118,423	)		(13,706	)		(195,456	)
Allowance for loan losses, ending 12/31/10	$	389,594		$	576,089		$	65,486		$	1,031,169
	Three Months Ended March 31, 2010
	One- to Four- Family			Home Equity			Consumer and Other			Total
	(In thousands)
Allowance for loan losses, ending 12/31/09	$	489,887		$	620,067		$	72,784		$	1,182,738
Provision for loan losses		46,533			207,332			14,114			267,979
Charge-offs, net		(102,557	)		(170,226	)		(15,543	)		(288,326	)
Allowance for loan losses, ending 3/31/10	$	433,863		$	657,173		$	71,355		$	1,162,391

Specific Valuation Allowance Activity
	As of March 31, 2011
	Recorded Investment in TDRs		Specific Valuation Allowance		Net Investment in TDRs		Specific Valuation Allowance as a % of TDR Loans		Total Expected Losses(16)
	(Dollars in thousands)
One- to four-family	$	646,064	$	84,990	$	561,074	13	%	27	%
Home equity		467,111		253,492		213,619	54	%	58	%
Total	$	1,113,175	$	338,482	$	774,693	30	%	39	%
	As of December 31, 2010
	Recorded Investment in TDRs		Specific Valuation Allowance		Net Investment in TDRs		Specific Valuation Allowance as a % of TDR Loans		Total Expected Losses(16)
	(Dollars in thousands)
One- to four-family	$	548,542	$	84,492	$	464,050	15	%	28	%
Home equity		488,329		272,475		215,854	56	%	59	%
Total	$	1,036,871	$	356,967	$	679,904	34	%	42	%
	As of March 31, 2010
	Recorded Investment in TDRs		Specific Valuation Allowance		Net Investment in TDRs		Specific Valuation Allowance as a % of TDR Loans		Total Expected Losses(16)
	(Dollars in thousands)
One- to four-family	$	283,511	$	34,474	$	249,037	12	%	21	%
Home equity		427,404		196,503		230,901	46	%	49	%
Total	$	710,915	$	230,977	$	479,938	32	%	38	%

Average Enterprise Balance Sheet Data
	Three Months Ended
	March 31, 2011
	Average			Operating Interest			Average
	Balance			Inc./Exp.			Yield/Cost
Enterprise interest-earning assets:	(In thousands)
Loans(17)	$	15,824,906		$	186,345			4.71	%
Margin receivables		5,443,336			56,293			4.19	%
Available-for-sale mortgage-backed securities		14,416,931			104,876			2.91	%
Available-for-sale investment securities		1,335,947			6,296			1.88	%
Held-to-maturity securities		2,518,499			20,750			3.30	%
Cash and equivalents		1,831,111			943			0.21	%
Segregated cash and investments		727,193			234			0.13	%
Securities borrowed and other		643,782			9,781			6.16	%
Total enterprise interest-earning assets	$	42,741,705			385,518			3.61	%
Enterprise interest-bearing liabilities:
Retail deposits	$	25,564,928			11,353			0.18	%
Brokered certificates of deposit		70,385			921			5.31	%
Customer payables		5,319,100			1,866			0.14	%
Securities sold under agreements to repurchase		5,885,044			37,993			2.58	%
FHLB advances and other borrowings		2,752,190			25,264			3.67	%
Securities loaned and other		684,968			334			0.20	%
Total enterprise interest-bearing liabilities	$	40,276,615			77,731			0.77	%
Enterprise net interest income/spread(7)				$	307,787			2.84	%
	Three Months Ended
	December 31, 2010
	Average			Operating Interest			Average
	Balance			Inc./Exp.			Yield/Cost
Enterprise interest-earning assets:	(In thousands)
Loans(17)	$	16,745,093		$	199,817			4.77	%
Margin receivables		4,889,694			52,849			4.29	%
Available-for-sale mortgage-backed securities		11,812,514			85,386			2.89	%
Available-for-sale investment securities		2,171,437			11,549			2.13	%
Held-to-maturity securities		2,465,678			20,051			3.25	%
Cash and equivalents		1,966,205			1,071			0.22	%
Segregated cash and investments		756,426			319			0.17	%
Securities borrowed and other		660,104			8,882			5.34	%
Total enterprise interest-earning assets	$	41,467,151			379,924			3.66	%
Enterprise interest-bearing liabilities:
Retail deposits	$	24,560,235			11,780			0.19	%
Brokered certificates of deposit		110,501			1,445			5.19	%
Customer payables		4,868,911			1,748			0.14	%
Securities sold under agreements to repurchase		5,904,736			32,883			2.18	%
FHLB advances and other borrowings		2,754,626			28,739			4.08	%
Securities loaned and other		656,858			359			0.22	%
Total enterprise interest-bearing liabilities	$	38,855,867			76,954			0.78	%
Enterprise net interest income/spread(7)				$	302,970			2.88	%
	Three Months Ended
	March 31, 2010
	Average			Operating Interest			Average
	Balance			Inc./Exp.			Yield/Cost
Enterprise interest-earning assets:	(In thousands)
Loans(17)	$	19,928,531		$	241,580			4.85	%
Margin receivables		4,022,171			44,713			4.51	%
Available-for-sale mortgage-backed securities		9,692,701			81,860			3.38	%
Available-for-sale investment securities		4,027,737			27,725			2.75	%
Held-to-maturity securities		-			-			-
Cash and equivalents		2,449,327			1,401			0.23	%
Segregated cash and investments		1,600,976			949			0.24	%
Securities borrowed and other		687,449			7,072			4.17	%
Total enterprise interest-earning assets	$	42,408,892			405,300			3.83	%
Enterprise interest-bearing liabilities:
Retail deposits	$	24,821,581			18,471			0.30	%
Brokered certificates of deposit		119,802			1,489			5.04	%
Customer payables		5,206,873			1,925			0.15	%
Securities sold under agreements to repurchase		6,371,964			34,746			2.18	%
FHLB advances and other borrowings		2,761,366			29,428			4.26	%
Securities loaned and other		620,335			495			0.32	%
Total enterprise interest-bearing liabilities	$	39,901,921			86,554			0.87	%
Enterprise net interest income/spread(7)				$	318,746			2.96	%
Reconciliation from Enterprise Net Interest Income to Net Operating Interest Income
	Three Months Ended
	March 31,			December 31,			March 31,
		2011			2010			2010
	(In thousands)
Enterprise net interest income	$	307,787		$	302,970		$	318,746
Taxable equivalent interest adjustment(18)		(291	)		(293	)		(292	)
Customer cash held by third parties and other(19)		2,206			2,247			1,943
Net operating interest income	$	309,702		$	304,924		$	320,397

SUPPLEMENTAL INFORMATION

Reporting Changes

All prior periods have been adjusted to reflect the Company’s 1-for-10 reverse stock split that became effective in the second quarter of 2010. See endnote (1) for line items that have been impacted by this change.

Explanation of Non-GAAP Measures and Certain Metrics

Management believes that tangible book value per share, corporate cash, EBITDA, interest coverage and Bank earnings before taxes and before credit losses are appropriate measures for evaluating the operating and liquidity performance of the Company. Management believes that adjusting GAAP measures by excluding or including certain items 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.

Tangible Book Value per Share

Tangible book value per share represents shareholders’ equity less goodwill (net of related deferred tax liability) and other intangible assets divided by common stock outstanding. The Company believes that tangible book value per share is a measure of the Company’s capital strength. See endnote (6) for a reconciliation of this non-GAAP measure to the comparable GAAP measure.

Corporate Cash

Corporate cash represents cash held at the parent company as well as cash held in certain subsidiaries that can distribute cash to the parent company without any regulatory approval. The Company believes that corporate cash is a useful measure of the parent company’s liquidity as it is the primary source of capital above and beyond the capital deployed in our regulated subsidiaries. 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 for a reconciliation of this non-GAAP measure to the comparable GAAP measure.

EBITDA

EBITDA represents net income (loss) before taxes, depreciation and amortization and corporate interest expense. 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. See endnote (8) for a reconciliation of this non-GAAP measure to the comparable GAAP measure.

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’s holding company, ETB Holdings, Inc. (“Bank”) before provision for loan losses, gains on loans and securities, net, net impairment and losses on early extinguishment of FHLB advances. 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 losses 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. See endnote (9) for a reconciliation of this non-GAAP measure to the comparable GAAP measure.

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 (loss), consolidated statements of cash flows, or other measures of financial performance prepared in accordance with GAAP. For additional information on the adjustments to 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) All prior periods have been adjusted to reflect the Company’s 1-for-10 reverse stock split that became effective in the second quarter of 2010. Financial information impacted by this capital change includes EPS, weighted average shares, outstanding shares, common stock and APIC.

(2) Because the Company reported a net loss for the three months ended December 31, 2010 and March 31, 2010, 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 Trading and Investing and Balance Sheet Management segments, which includes deposit and intercompany transfer pricing arrangements.

(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) and income taxes. The percentage is calculated by dividing income (loss) before other income (expense) and income taxes by total net revenue.

(6) The following tables provide a reconciliation of GAAP book value and book value per share to non-GAAP tangible book value and tangible book value per share (dollars in thousands, except per share amounts):

	Q1 2011			Q4 2010			Q1 2010
Book value	$	4,397,792		$	4,052,445		$	3,816,399
Less: Goodwill and other intangibles, net		(2,239,650	)		(2,265,379	)		(2,301,589	)
Less: Deferred tax liability related to goodwill		229,805			219,028			188,795
Tangible book value	$	2,387,947		$	2,006,094		$	1,703,605

	Q1 2011			Q4 2010			Q1 2010
Book value per share	$	17.72		$	18.35		$	19.47
Less: Goodwill and other intangibles, net per share		(9.02	)		(10.26	)		(11.74	)
Less: Deferred tax liability related to goodwill per share		0.92			0.99			0.96
Tangible book value per share	$	9.62		$	9.08		$	8.69

(7) 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 and customer cash held by third parties.

(8) Interest coverage represents the ratio of the Company’s EBITDA to its corporate interest expense. The interest coverage ratio based on the Company’s net income was 1.0, (0.6) and (1.2) for the three months ended March 31, 2011, December 31, 2010 and March 31, 2010, respectively.

(9) Bank earnings before taxes and before credit losses represents the pre-tax earnings of E*TRADE Bank’s holding company, ETB Holdings, Inc. (“Bank”) before provision for loan losses, gains on loans and securities, net, net impairment and losses on early extinguishment of FHLB advances. 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 (dollars in thousands):

	Q1 2011			Q4 2010			Q1 2010
Income (loss) before income taxes	$	78,964		$	(25,015	)	$	(65,929	)
Add back:
Non-bank loss before income tax benefit(b)		60,927			71,910			58,016
Provision for loan losses		116,058			193,784			267,979
Gains on loans and securities, net		(32,334	)		(41,354	)		(29,046	)
Net impairment		6,062			9,559			8,652
Bank earnings before taxes and before credit losses	$	229,677		$	208,884		$	239,672

^(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 loss represents all of the Company’s subsidiaries, including Corporate, but excluding the Bank.

(10) These metrics have been updated for prior periods to exclude international local activity.

(11) Net new customer assets are total inflows to all new and existing customer accounts less total outflows from all closed and existing customer accounts. The net new banking assets and net new brokerage assets metrics treat asset flows between E*TRADE entities in the same manner as unrelated third party accounts.

(12) Capital ratios are at the E*TRADE Bank level. The ratios and excess capital amounts are Q111 estimates based on the regulatory minimum well-capitalized threshold. Below is a reconciliation of beginning E*TRADE Bank excess risk-based capital to ending E*TRADE Bank excess risk-based capital for the quarterly periods presented:

	Q1 2011			Q4 2010			Q1 2010
Beginning E*TRADE Bank excess risk-based capital ($MM)	$	1,106		$	1,090		$	899
Bank earnings before taxes and before credit losses		230			209			240
Provision for loan losses		(116	)		(194	)		(268	)
Loan portfolio run-off (a)		66			73			85
Margin decrease (increase)		(58	)		(56	)		(17	)
Capital upstream(b)		(28	)		(26	)		(39	)
Other capital changes (c)		55			10			46
Ending E*TRADE Bank excess risk-based capital ($MM)	$	1,255		$	1,106		$	946

^(a) The capital release from loan portfolio run-off includes the decrease in risk-based capital required for our one- to four-family, home equity and consumer loan portfolios.

^(b) Represents cash flows to and from the parent company.

^(c) Represents the capital impact related to changes in other risk-weighted assets.

(13) Delinquent loans include charge-offs for loans that are in bankruptcy or are 180 days past due which have been written down to their fair value. The following table shows the total amount of charge-offs on loans that are still held by the Company as of the periods presented (dollars in millions):

	Q1 2011		Q4 2010		Q1 2010
One- to four-family	$	427	$	419	$	385
Home equity		143		141		124
Total charge-offs	$	570	$	560	$	509

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

(15) The TDR loan performance detail is a subset of the Company’s total loan performance.

(16) The total expected loss on TDRs includes both the previously recorded charge-offs and the specific valuation allowance.

(17) Excludes loans to customers on margin.

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

(19) Includes interest earned on average customer assets of $3.6 billion, $3.3 billion and $3.1 billion for the quarters ended March 31, 2011, December 31, 2010 and March 31, 2010, respectively, held by parties outside E*TRADE Financial, including third party money market funds and sweep deposit accounts at unaffiliated financial institutions.

CONTACT:
E*TRADE Financial Media Relations Contact
Susan Hickey, 646-521-4675
susan.hickey@etrade.com
or
E*TRADE Financial Investor Relations Contact
Brett Goodman, 646-521-4406
brett.goodman@etrade.com