Exhibit 99.1
E*TRADE Financial Corporation Announces Third Quarter 2011 Results
NEW YORK--(BUSINESS WIRE)--October 19, 2011--Third Quarter Results
- Net income of $71 million, or $0.24 per share, compared with net income of $0.16 per share in prior quarter and $0.03 per share in third quarter 2010
- Income tax included a benefit of approximately $62 million, or $0.21 per share(1), related to the taxable liquidation of an international subsidiary
- Other expenses included a reserve of $55 million, or $0.13 per share(1), related to E*TRADE Securities LLC’s intention to initiate an offer to purchase auction rate securities purchased through the firm by individual investors before Feb. 11, 2008
- FDIC expense increased $12 million from the prior quarter, including $6 million related to second quarter premiums
- Total net revenue of $507 million, down from $518 million in prior quarter and up from $489 million in third quarter 2010
- Provision for loan losses of $98 million, down from $103 million in prior quarter and $152 million in third quarter 2010
- Special mention delinquencies (30-89 days) were flat compared with prior quarter; at-risk delinquencies (30-179 days) down five percent from prior quarter
- Daily Average Revenue Trades (DARTs) of 165,000, up 11 percent from prior quarter and up 30 percent from third quarter 2010
- Net new brokerage assets of $2.6 billion, up from $1.5 billion in prior quarter and $1.4 billion in third quarter 2010
- Net new brokerage accounts of 13,000, down from 25,000 in prior quarter and up from 7,000 in third quarter 2010
E*TRADE Financial Corporation (NASDAQ: ETFC) today announced results for its third quarter ended Sept. 30, 2011, reporting net income of $71 million, or $0.24 per share, compared with net income of $47 million, or $0.16 per share, in the prior quarter and net income of $8 million, or $0.03 per share, in the third quarter of 2010. The company reported total net revenue of $507 million for the third quarter, compared with $518 million in the prior quarter and $489 million in the year-ago period.
During the quarter, the company recorded an income tax benefit of approximately $62 million related to the taxable liquidation of a European subsidiary. The subsidiary was liquidated in connection with the company’s international restructuring activities. This liquidation resulted in the taxable recognition of certain losses, including historical acquisition premiums that the company incurred internationally. This tax benefit resulted in a corresponding increase to the company’s deferred tax asset which currently stands at $1.5 billion.
“We are pleased with our third quarter results which – amid significant market volatility – demonstrated strength in our brokerage business, continued improvement in our loan portfolio and measurable progress against our strategic initiatives,” said Steven Freiberg, Chief Executive Officer of E*TRADE Financial Corporation. “The retail investor was highly engaged, particularly in early August when we successfully managed periods of record trade, call, online chat and login volumes. Over the course of the quarter, we benefited from growth in net new assets and accounts, supported by a stable customer retention rate. Delinquency trends in our loan portfolio continue to improve and our quarterly loan provision is down approximately 80 percent from its peak. Our solid execution continues to move the firm forward as we focus on delivering the best investing experience and creating franchise value.”
During the quarter, the company reserved $55 million, recorded in other operating expenses, related to its intention to initiate an offer to buy auction rate securities (ARS) held by customers of E*TRADE Securities LLC. This reserve relates primarily to the company’s estimate of the securities’ current fair value relative to their par value, and includes other estimated settlement costs.
Mr. Freiberg commented: "While we played a limited role in the market for these securities, we believe these actions will put this matter behind us and are in the best interest of our customers and stakeholders."
E*TRADE reported DARTs of 165,000 during the quarter, an increase of 11 percent from the prior quarter and an increase of 30 percent versus the same quarter a year ago.
At quarter end, the company reported 4.3 million customer accounts, which included 2.8 million brokerage accounts. Net new brokerage accounts were 13,000 during the quarter compared with 25,000 in the prior quarter and 7,000 in the third quarter of 2010. Year to date, net new brokerage accounts total 89,000, compared with 27,000 through the end of the third quarter of 2010.
The company ended the quarter with $160 billion in total customer assets, compared with $186 billion in the prior quarter and $159 billion in the year-ago period.
During the quarter, customers added $2.6 billion in net new brokerage assets. Brokerage related cash decreased by $0.2 billion to $26.1 billion during the period, as customers were net buyers of approximately $2.2 billion of securities. Average margin receivables declined five percent sequentially to $5.4 billion, and increased 15 percent from the year-ago period.
Net operating interest income for the third quarter was $306 million, down from $315 million in the prior quarter and up from $299 million in the third quarter of 2010. Third quarter results reflected a net interest spread of 2.81 percent on average interest-earning assets of $42.7 billion, compared with a net interest spread of 2.89 percent on average interest-earning assets of $42.9 billion in the prior quarter.
Commissions, fees and service charges, principal transactions, and other revenue in the third quarter were $181 million, compared with $174 million in the prior quarter. This increase reflected a sequential increase in DARTs, partially offset by a decline in average commission per trade. Average commission per trade was $10.76, down from $11.14 in the prior quarter and $11.03 in the third quarter of 2010, driven by a lower mix of trades from stock plan customers related to market performance and volatility during the quarter.
Total net revenue in the quarter also included $21 million of net gains on loans and securities, including net impairment of $3 million.
Total operating expenses increased $51 million sequentially to $342 million. Expenses included $55 million related to the company’s intent to initiate an offer to purchase ARS from its customers, and a $12 million sequential increase in FDIC insurance premiums, including approximately $6 million related to the prior quarter. The FDIC changed its assessment methodology effective in the second quarter, and when the company’s calculation of the assessment was finalized in the third quarter, it resulted in an increase to the second quarter estimate.
The company’s loan portfolio contracted by $0.7 billion from the prior quarter, including $0.6 billion related to prepayments and scheduled principal reductions. The third quarter provision for loan losses decreased $5 million from the prior quarter to $98 million.
Net charge-offs in the quarter were $157 million, a decrease of $21 million from the prior quarter. The allowance for loan losses at quarter end was $0.8 billion, or six percent of gross loans receivable.
For the company’s entire loan portfolio, special mention delinquencies were flat sequentially, while total at-risk delinquencies declined by five percent. As compared to the year-ago period, special mention delinquencies declined 24 percent and total at-risk delinquencies declined 28 percent.
As of Sept. 30, 2011, the company reported a consolidated Tier 1 common ratio of 9.3 percent(2), up from 8.4 percent at the end of the prior period and 5.4 percent at the end of the third quarter 2010. E*TRADE Bank ended the quarter with a Tier 1 capital ratio of 8.1 percent and a risk-based capital ratio of 17.2 percent.
Historical metrics and financials through September 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 15073557. 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 intention of E*TRADE Securities LLC to initiate an offer to purchase auction rate securities from its customers, delinquency trends in the company’s loan portfolio and the ability of the company to deliver the best investing experience and create franchise value. 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 the Comptroller of the Currency 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 (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 | Nine Months Ended | |||||||||||||||||||
| September 30, | September 30, | |||||||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||||||
| Revenue: | ||||||||||||||||||||
| Operating interest income | $ | 383,701 | $ | 376,066 | $ | 1,165,820 | $ | 1,164,812 | ||||||||||||
| Operating interest expense | (78,123 | ) | (77,131 | ) | (235,119 | ) | (243,453 | ) | ||||||||||||
Net operating interest income | 305,578 | 298,935 | 930,701 | 921,359 | ||||||||||||||||
| Commissions | 113,407 | 89,517 | 341,690 | 322,323 | ||||||||||||||||
| Fees and service charges | 29,446 | 29,579 | 103,299 | 107,013 | ||||||||||||||||
| Principal transactions | 27,345 | 21,512 | 80,677 | 76,429 | ||||||||||||||||
| Gains on loans and securities, net | 24,341 | 46,904 | 87,686 | 124,858 | ||||||||||||||||
| Net impairment | (3,196 | ) | (7,301 | ) | (12,142 | ) | (28,111 | ) | ||||||||||||
| Other revenues | 10,354 | 10,276 | 29,678 | 36,055 | ||||||||||||||||
| Total non-interest income | 201,697 | 190,487 | 630,888 | 638,567 | ||||||||||||||||
| Total net revenue | 507,275 | 489,422 | 1,561,589 | 1,559,926 | ||||||||||||||||
| Provision for loan losses | 98,384 | 151,983 | 317,578 | 585,628 | ||||||||||||||||
| Operating expense: | ||||||||||||||||||||
| Compensation and benefits | 80,452 | 75,784 | 244,973 | 243,934 | ||||||||||||||||
| Clearing and servicing | 34,748 | 33,800 | 113,095 | 111,100 | ||||||||||||||||
| Advertising and market development | 27,258 | 25,590 | 108,642 | 93,502 | ||||||||||||||||
| Professional services | 19,772 | 16,103 | 64,732 | 55,873 | ||||||||||||||||
| FDIC insurance premiums | 35,690 | 19,771 | 80,288 | 58,346 | ||||||||||||||||
| Communications | 16,930 | 17,523 | 49,712 | 56,394 | ||||||||||||||||
| Occupancy and equipment | 17,021 | 17,856 | 50,998 | 53,677 | ||||||||||||||||
| Depreciation and amortization | 22,873 | 23,196 | 67,644 | 65,843 | ||||||||||||||||
| Amortization of other intangibles | 6,538 | 7,116 | 19,613 | 21,399 | ||||||||||||||||
| Facility restructuring and other exit activities | 458 | 2,954 | 6,056 | 4,474 | ||||||||||||||||
| Other operating expenses | 79,972 | 27,201 | 124,891 | 73,349 | ||||||||||||||||
| Total operating expense | 341,712 | 266,894 | 930,644 | 837,891 | ||||||||||||||||
Income before other income (expense) and income tax expense (benefit) | 67,179 | 70,545 | 313,367 | 136,407 | ||||||||||||||||
| Other income (expense): | ||||||||||||||||||||
| Corporate interest income | 10 | 6,053 | 689 | 6,133 | ||||||||||||||||
| Corporate interest expense | (44,769 | ) | (41,813 | ) | (132,870 | ) | (124,061 | ) | ||||||||||||
| Gains on sales of investments, net | - | 1,691 | 38 | 1,800 | ||||||||||||||||
| Gains on early extinguishment of debt | - | - | 3,091 | - | ||||||||||||||||
| Equity in income (loss) of investments and venture funds | 520 | (932 | ) | 197 | 1,595 | |||||||||||||||
| Total other income (expense) | (44,239 | ) | (35,001 | ) | (128,855 | ) | (114,533 | ) | ||||||||||||
Income before income tax expense (benefit) | 22,940 | 35,544 | 184,512 | 21,874 | ||||||||||||||||
| Income tax expense (benefit) | (47,756 | ) | 27,140 | 21,465 | 26,231 | |||||||||||||||
| Net income (loss) | $ | 70,696 | $ | 8,404 | $ | 163,047 | $ | (4,357 | ) | |||||||||||
| Basic earnings (loss) per share | $ | 0.25 | $ | 0.04 | $ | 0.62 | $ | (0.02 | ) | |||||||||||
| Diluted earnings (loss) per share | $ | 0.24 | $ | 0.03 | $ | 0.56 | $ | (0.02 | ) | |||||||||||
| Shares used in computation of per share data: | ||||||||||||||||||||
| Basic | 283,807 | 220,415 | 261,272 | 208,187 | ||||||||||||||||
Diluted(3) | 289,706 | 289,271 | 289,770 | 208,187 | ||||||||||||||||
| E*TRADE FINANCIAL CORPORATION AND SUBSIDIARIES | |||||||||||||||
| Consolidated Statement of Income | |||||||||||||||
| (In thousands, except per share amounts) | |||||||||||||||
| (Unaudited) | |||||||||||||||
| Three Months Ended | |||||||||||||||
| September 30, | June 30, | September 30, | |||||||||||||
| 2011 | 2011 | 2010 | |||||||||||||
| Revenue: | |||||||||||||||
| Operating interest income | $ | 383,701 | $ | 394,653 | $ | 376,066 | |||||||||
| Operating interest expense | (78,123 | ) | (79,232 | ) | (77,131 | ) | |||||||||
| Net operating interest income | 305,578 | 315,421 | 298,935 | ||||||||||||
| Commissions | 113,407 | 103,850 | 89,517 | ||||||||||||
| Fees and service charges | 29,446 | 36,608 | 29,579 | ||||||||||||
| Principal transactions | 27,345 | 23,756 | 21,512 | ||||||||||||
| Gains on loans and securities, net | 24,341 | 31,011 | 46,904 | ||||||||||||
| Net impairment | (3,196 | ) | (2,884 | ) | (7,301 | ) | |||||||||
| Other revenues | 10,354 | 9,857 | 10,276 | ||||||||||||
| Total non-interest income | 201,697 | 202,198 | 190,487 | ||||||||||||
| Total net revenue | 507,275 | 517,619 | 489,422 | ||||||||||||
| Provision for loan losses | 98,384 | 103,136 | 151,983 | ||||||||||||
| Operating expense: | |||||||||||||||
| Compensation and benefits | 80,452 | 80,518 | 75,784 | ||||||||||||
| Clearing and servicing | 34,748 | 39,192 | 33,800 | ||||||||||||
| Advertising and market development | 27,258 | 37,019 | 25,590 | ||||||||||||
| Professional services | 19,772 | 21,492 | 16,103 | ||||||||||||
| FDIC insurance premiums | 35,690 | 24,031 | 19,771 | ||||||||||||
| Communications | 16,930 | 17,227 | 17,523 | ||||||||||||
| Occupancy and equipment | 17,021 | 17,163 | 17,856 | ||||||||||||
| Depreciation and amortization | 22,873 | 22,724 | 23,196 | ||||||||||||
| Amortization of other intangibles | 6,538 | 6,537 | 7,116 | ||||||||||||
| Facility restructuring and other exit activities | 458 | 2,046 | 2,954 | ||||||||||||
| Other operating expenses | 79,972 | 22,969 | 27,201 | ||||||||||||
| Total operating expense | 341,712 | 290,918 | 266,894 | ||||||||||||
Income before other income (expense) and income tax expense (benefit) | 67,179 | 123,565 | 70,545 | ||||||||||||
| Other income (expense): | |||||||||||||||
| Corporate interest income | 10 | 63 | 6,053 | ||||||||||||
| Corporate interest expense | (44,769 | ) | (44,824 | ) | (41,813 | ) | |||||||||
| Gains on sales of investments, net | - | 38 | 1,691 | ||||||||||||
| Gains on early extinguishment of debt | - | 3,091 | - | ||||||||||||
| Equity in income (loss) of investments and venture funds | 520 | 675 | (932 | ) | |||||||||||
| Total other income (expense) | (44,239 | ) | (40,957 | ) | (35,001 | ) | |||||||||
Income before income tax expense (benefit) | 22,940 | 82,608 | 35,544 | ||||||||||||
Income tax expense (benefit) | (47,756 | ) | 35,490 | 27,140 | |||||||||||
| Net income | $ | 70,696 | $ | 47,118 | $ | 8,404 | |||||||||
| Basic earnings per share | $ | 0.25 | $ | 0.18 | $ | 0.04 | |||||||||
| Diluted earnings per share | $ | 0.24 | $ | 0.16 | $ | 0.03 | |||||||||
| Shares used in computation of per share data: | |||||||||||||||
| Basic | 283,807 | 269,119 | 220,415 | ||||||||||||
| Diluted | 289,706 | 289,643 | 289,271 | ||||||||||||
E*TRADE FINANCIAL CORPORATION AND SUBSIDIARIES | ||||||||||||||
| Consolidated Balance Sheet | ||||||||||||||
| (In thousands, except share amounts) | ||||||||||||||
| (Unaudited) | ||||||||||||||
| September 30, | June 30, | December 31, | ||||||||||||
| 2011 | 2011 | 2010 | ||||||||||||
| ASSETS | ||||||||||||||
| Cash and equivalents | $ | 1,678,897 | $ | 1,369,711 | $ | 2,374,346 | ||||||||
| Cash and investments required to be segregated under federal or other regulations | 1,205,425 | 668,004 | 609,510 | |||||||||||
| Trading securities | 49,007 | 79,852 | 62,173 | |||||||||||
| Available-for-sale securities | 15,013,134 | 15,032,599 | 14,805,677 | |||||||||||
| Held-to-maturity securities | 4,923,252 | 4,834,512 | 2,462,710 | |||||||||||
| Margin receivables | 5,167,910 | 5,661,002 | 5,120,575 | |||||||||||
| Loans, net | 13,002,990 | 13,679,679 | 15,127,390 | |||||||||||
| Investment in FHLB stock | 146,967 | 152,772 | 164,381 | |||||||||||
| Property and equipment, net | 305,825 | 301,153 | 302,658 | |||||||||||
| Goodwill | 1,934,232 | 1,934,232 | 1,939,976 | |||||||||||
| Other intangibles, net | 292,342 | 298,880 | 325,403 | |||||||||||
| Other assets | 2,804,677 | 2,971,916 | 3,078,202 | |||||||||||
| Total assets | $ | 46,524,658 | $ | 46,984,312 | $ | 46,373,001 | ||||||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||||||||
| Liabilities: | ||||||||||||||
| Deposits | $ | 25,238,897 | $ | 25,998,073 | $ | 25,240,297 | ||||||||
| Securities sold under agreements to repurchase | 5,044,746 | 5,184,169 | 5,888,249 | |||||||||||
| Customer payables | 5,394,680 | 5,341,714 | 5,020,086 | |||||||||||
| FHLB advances and other borrowings | 2,761,724 | 2,730,831 | 2,731,714 | |||||||||||
| Corporate debt | 1,489,844 | 1,543,421 | 2,145,881 | |||||||||||
| Other liabilities | 1,648,552 | 1,373,759 | 1,294,329 | |||||||||||
| Total liabilities | 41,578,443 | 42,171,967 | 42,320,556 | |||||||||||
| Shareholders' equity: | ||||||||||||||
Common stock, $0.01 par value, shares authorized: 400,000,000 at | 2,853 | 2,797 | 2,208 | |||||||||||
| Additional paid-in-capital | 7,307,880 | 7,247,894 | 6,640,715 | |||||||||||
| Accumulated deficit | (1,988,791 | ) | (2,059,487 | ) | (2,151,838 | ) | ||||||||
| Accumulated other comprehensive loss | (375,727 | ) | (378,859 | ) | (438,640 | ) | ||||||||
| Total shareholders' equity | 4,946,215 | 4,812,345 | 4,052,445 | |||||||||||
| Total liabilities and shareholders' equity | $ | 46,524,658 | $ | 46,984,312 | $ | 46,373,001 | ||||||||
Segment Reporting | |||||||||||||||||||||||||
| Three Months Ended September 30, 2011 | |||||||||||||||||||||||||
Trading and | Balance Sheet | Corporate/ | Eliminations(4) | Total | |||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||||
| Revenue: | |||||||||||||||||||||||||
| Operating interest income | $ | 197,905 | $ | 313,516 | $ | 4 | $ | (127,724 | ) | $ | 383,701 | ||||||||||||||
| Operating interest expense | (12,373 | ) | (193,474 | ) | - | 127,724 | (78,123 | ) | |||||||||||||||||
| Net operating interest income | 185,532 | 120,042 | 4 | - | 305,578 | ||||||||||||||||||||
| Commissions | 113,407 | - | - | - | 113,407 | ||||||||||||||||||||
| Fees and service charges | 29,268 | 178 | - | - | 29,446 | ||||||||||||||||||||
| Principal transactions | 27,345 | - | - | - | 27,345 | ||||||||||||||||||||
| Gains (losses) on loans and securities, net | (935 | ) | 25,278 | (2 | ) | - | 24,341 | ||||||||||||||||||
| Net impairment | - | (3,196 | ) | - | - | (3,196 | ) | ||||||||||||||||||
| Other revenues | 8,286 | 2,068 | - | - | 10,354 | ||||||||||||||||||||
| Total non-interest income | 177,371 | 24,328 | (2 | ) | - | 201,697 | |||||||||||||||||||
| Total net revenue | 362,903 | 144,370 | 2 | - | 507,275 | ||||||||||||||||||||
| Provision for loan losses | - | 98,384 | - | - | 98,384 | ||||||||||||||||||||
| Operating expense: | |||||||||||||||||||||||||
| Compensation and benefits | 58,558 | 4,607 | 17,287 | - | 80,452 | ||||||||||||||||||||
| Clearing and servicing | 18,363 | 16,385 | - | - | 34,748 | ||||||||||||||||||||
| Advertising and market development | 26,928 | 330 | - | - | 27,258 | ||||||||||||||||||||
| Professional services | 10,966 | 1,063 | 7,743 | - | 19,772 | ||||||||||||||||||||
| FDIC insurance premiums | - | 35,690 | - | - | 35,690 | ||||||||||||||||||||
| Communications | 16,179 | 338 | 413 | - | 16,930 | ||||||||||||||||||||
| Occupancy and equipment | 15,968 | 668 | 385 | - | 17,021 | ||||||||||||||||||||
| Depreciation and amortization | 17,893 | 284 | 4,696 | - | 22,873 | ||||||||||||||||||||
| Amortization of other intangibles | 6,538 | - | - | - | 6,538 | ||||||||||||||||||||
| Facility restructuring and other exit activities | - | - | 458 | - | 458 | ||||||||||||||||||||
| Other operating expenses | 66,460 | 7,060 | 6,452 | - | 79,972 | ||||||||||||||||||||
| Total operating expense | 237,853 | 66,425 | 37,434 | - | 341,712 | ||||||||||||||||||||
| Segment income (loss) before other income (expense) | 125,050 | (20,439 | ) | (37,432 | ) | - | 67,179 | ||||||||||||||||||
| Other income (expense): | |||||||||||||||||||||||||
| Corporate interest income | - | - | 10 | - | 10 | ||||||||||||||||||||
| Corporate interest expense | - | - | (44,769 | ) | - | (44,769 | ) | ||||||||||||||||||
| Equity in income of investments and venture funds | - | - | 520 | - | 520 | ||||||||||||||||||||
| Total other income (expense) | - | - | (44,239 | ) | - | (44,239 | ) | ||||||||||||||||||
| Segment income (loss) | $ | 125,050 | $ | (20,439 | ) | $ | (81,671 | ) | $ | - | $ | 22,940 | |||||||||||||
| Three Months Ended June 30, 2011 | |||||||||||||||||||||||||
Trading and | Balance Sheet | Corporate/ | Eliminations(4) | Total | |||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||||
| Revenue: | |||||||||||||||||||||||||
| Operating interest income | $ | 205,372 | $ | 321,813 | $ | 6 | $ | (132,538 | ) | $ | 394,653 | ||||||||||||||
| Operating interest expense | (13,620 | ) | (198,150 | ) | - | 132,538 | (79,232 | ) | |||||||||||||||||
| Net operating interest income | 191,752 | 123,663 | 6 | - | 315,421 | ||||||||||||||||||||
| Commissions | 103,850 | - | - | - | 103,850 | ||||||||||||||||||||
| Fees and service charges | 35,809 | 799 | - | - | 36,608 | ||||||||||||||||||||
| Principal transactions | 23,756 | - | - | - | 23,756 | ||||||||||||||||||||
| Gains (losses) on loans and securities, net | (337 | ) | 31,391 | (43 | ) | - | 31,011 | ||||||||||||||||||
| Net impairment | - | (2,884 | ) | - | - | (2,884 | ) | ||||||||||||||||||
| Other revenues | 8,050 | 1,807 | - | - | 9,857 | ||||||||||||||||||||
| Total non-interest income | 171,128 | 31,113 | (43 | ) | - | 202,198 | |||||||||||||||||||
| Total net revenue | 362,880 | 154,776 | (37 | ) | - | 517,619 | |||||||||||||||||||
| Provision for loan losses | - | 103,136 | - | - | 103,136 | ||||||||||||||||||||
| Operating expense: | |||||||||||||||||||||||||
| Compensation and benefits | 58,968 | 4,204 | 17,346 | - | 80,518 | ||||||||||||||||||||
| Clearing and servicing | 19,398 | 19,794 | - | - | 39,192 | ||||||||||||||||||||
| Advertising and market development | 37,019 | - | - | - | 37,019 | ||||||||||||||||||||
| Professional services | 12,181 | 1,336 | 7,975 | - | 21,492 | ||||||||||||||||||||
| FDIC insurance premiums | - | 24,031 | - | - | 24,031 | ||||||||||||||||||||
| Communications | 16,550 | 300 | 377 | - | 17,227 | ||||||||||||||||||||
| Occupancy and equipment | 15,650 | 716 | 797 | - | 17,163 | ||||||||||||||||||||
| Depreciation and amortization | 17,692 | 351 | 4,681 | - | 22,724 | ||||||||||||||||||||
| Amortization of other intangibles | 6,537 | - | - | - | 6,537 | ||||||||||||||||||||
| Facility restructuring and other exit activities | - | - | 2,046 | - | 2,046 | ||||||||||||||||||||
| Other operating expenses | 8,599 | 7,533 | 6,837 | - | 22,969 | ||||||||||||||||||||
| Total operating expense | 192,594 | 58,265 | 40,059 | - | 290,918 | ||||||||||||||||||||
| Segment income (loss) before other income (expense) | 170,286 | (6,625 | ) | (40,096 | ) | - | 123,565 | ||||||||||||||||||
| Other income (expense): | |||||||||||||||||||||||||
| Corporate interest income | - | - | 63 | - | 63 | ||||||||||||||||||||
| Corporate interest expense | - | - | (44,824 | ) | - | (44,824 | ) | ||||||||||||||||||
| Gains on sales of investments, net | - | - | 38 | - | 38 | ||||||||||||||||||||
| Gains on early extinguishment of debt | - | - | 3,091 | - | 3,091 | ||||||||||||||||||||
| Equity in income of investments and venture funds | - | - | 675 | - | 675 | ||||||||||||||||||||
| Total other income (expense) | - | - | (40,957 | ) | - | (40,957 | ) | ||||||||||||||||||
Segment income (loss) | $ | 170,286 | $ | (6,625 | ) | $ | (81,053 | ) | $ | - | $ | 82,608 | |||||||||||||
| Three Months Ended September 30, 2010 | |||||||||||||||||||||||||
Trading and | Balance Sheet | Corporate/ | Eliminations(4) | Total | |||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||||
| Revenue: | |||||||||||||||||||||||||
| Operating interest income | $ | 202,004 | $ | 314,567 | $ | 6 | $ | (140,511 | ) | $ | 376,066 | ||||||||||||||
| Operating interest expense | (14,064 | ) | (203,578 | ) | - | 140,511 | (77,131 | ) | |||||||||||||||||
| Net operating interest income | 187,940 | 110,989 | 6 | - | 298,935 | ||||||||||||||||||||
| Commissions | 89,517 | - | - | - | 89,517 | ||||||||||||||||||||
| Fees and service charges | 28,937 | 642 | - | - | 29,579 | ||||||||||||||||||||
| Principal transactions | 21,512 | - | - | - | 21,512 | ||||||||||||||||||||
| Gains (losses) on loans and securities, net | 13 | 46,896 | (5 | ) | - | 46,904 | |||||||||||||||||||
| Net impairment | - | (7,301 | ) | - | - | (7,301 | ) | ||||||||||||||||||
| Other revenues | 8,258 | 2,018 | - | - | 10,276 | ||||||||||||||||||||
| Total non-interest income | 148,237 | 42,255 | (5 | ) | - | 190,487 | |||||||||||||||||||
| Total net revenue | 336,177 | 153,244 | 1 | - | 489,422 | ||||||||||||||||||||
| Provision for loan losses | - | 151,983 | - | - | 151,983 | ||||||||||||||||||||
| Operating expense: | |||||||||||||||||||||||||
| Compensation and benefits | 54,205 | 3,896 | 17,683 | - | 75,784 | ||||||||||||||||||||
| Clearing and servicing | 15,625 | 18,175 | - | - | 33,800 | ||||||||||||||||||||
| Advertising and market development | 25,590 | - | - | - | 25,590 | ||||||||||||||||||||
| Professional services | 13,158 | 631 | 2,314 | - | 16,103 | ||||||||||||||||||||
| FDIC insurance premiums | - | 19,771 | - | - | 19,771 | ||||||||||||||||||||
| Communications | 16,823 | 293 | 407 | - | 17,523 | ||||||||||||||||||||
| Occupancy and equipment | 16,312 | 742 | 802 | - | 17,856 | ||||||||||||||||||||
| Depreciation and amortization | 17,997 | 328 | 4,871 | - | 23,196 | ||||||||||||||||||||
| Amortization of other intangibles | 7,116 | - | - | - | 7,116 | ||||||||||||||||||||
| Facility restructuring and other exit activities | - | - | 2,954 | - | 2,954 | ||||||||||||||||||||
| Other operating expenses | 11,355 | 10,534 | 5,312 | - | 27,201 | ||||||||||||||||||||
| Total operating expense | 178,181 | 54,370 | 34,343 | - | 266,894 | ||||||||||||||||||||
| Segment income (loss) before other income (expense) | 157,996 | (53,109 | ) | (34,342 | ) | - | 70,545 | ||||||||||||||||||
| Other income (expense): | |||||||||||||||||||||||||
| Corporate interest income | - | - | 6,053 | - | 6,053 | ||||||||||||||||||||
| Corporate interest expense | - | - | (41,813 | ) | - | (41,813 | ) | ||||||||||||||||||
| Gains on sales of investments, net | - | - | 1,691 | - | 1,691 | ||||||||||||||||||||
| Equity in loss of investments and venture funds | - | - | (932 | ) | - | (932 | ) | ||||||||||||||||||
| Total other income (expense) | - | - | (35,001 | ) | - | (35,001 | ) | ||||||||||||||||||
| Segment income (loss) | $ | 157,996 | $ | (53,109 | ) | $ | (69,343 | ) | $ | - | $ | 35,544 | |||||||||||||
Key Performance Metrics(5) | ||||||||||||||||||
Corporate Metrics | Qtr ended | Qtr ended | Qtr ended | Qtr ended | Qtr ended | |||||||||||||
Operating margin %(6) | ||||||||||||||||||
| Consolidated | 13 % | 24 % | (11)% | 14 % | (1)% | |||||||||||||
| Trading and Investing | 34 % | 47 % | (13)% | 47 % | (13)% | |||||||||||||
| Balance Sheet Management | N.M. | N.M. | N.M. | N.M. | N.M. | |||||||||||||
| Employees | 3,122 | 3,024 | 3 % | 2,959 | 6 % | |||||||||||||
| Consultants and other | 161 | 214 | (25)% | 192 | (16)% | |||||||||||||
| Total headcount | 3,283 | 3,238 | 1 % | 3,151 | 4 % | |||||||||||||
| Book value per share | $ | 17.34 | $ | 17.20 | 1 % | $ | 18.87 | (8)% | ||||||||||
| Tangible book value per share(7) | $ | 10.41 | $ | 10.08 | 3 % | $ | 9.53 | 9 % | ||||||||||
| Corporate cash ($MM) | $ | 438.2 | $ | 423.7 | 3 % | $ | 490.3 | (11)% | ||||||||||
| Enterprise net interest spread (basis points)(8) | 281 | 289 | (3)% | 295 | (5)% | |||||||||||||
| Enterprise interest-earning assets, average ($MM) | $ | 42,681 | $ | 42,908 | (1)% | $ | 39,689 | 8 % | ||||||||||
Earnings before interest, taxes, depreciation & amortization ("EBITDA") ($MM) | ||||||||||||||||||
| Net income | $ | 70.7 | $ | 47.1 | 50 % | $ | 8.4 | 742 % | ||||||||||
| Income tax expense (benefit) | (47.8) | 35.5 | N.M. | 27.2 | N.M. | |||||||||||||
| Depreciation & amortization | 29.4 | 29.3 | 0 % | 30.3 | (3)% | |||||||||||||
| Corporate interest expense | 44.8 | 44.8 | 0 % | 41.8 | 7 % | |||||||||||||
| EBITDA | $ | 97.1 | $ | 156.7 | (38)% | $ | 107.7 | (10)% | ||||||||||
| Interest coverage(9) | 2.2 | 3.5 | N.M. | 2.6 | N.M. | |||||||||||||
| Bank earnings before taxes and before credit losses ($MM)(10) | $ | 152.3 | $ | 216.2 | (30)% | $ | 197.7 | (23)% | ||||||||||
Trading and Investing Metrics | ||||||||||||||||||
| Trading days | 64.0 | 63.0 | N.M. | 64.0 | N.M. | |||||||||||||
| DARTs | 164,715 | 147,908 | 11 % | 126,530 | 30 % | |||||||||||||
| Total trades (MM) | 10.5 | 9.3 | 13 % | 8.1 | 30 % | |||||||||||||
| Average commission per trade | $ | 10.76 | $ | 11.14 | (3)% | $ | 11.03 | (2)% | ||||||||||
| End of period margin receivables ($B) | $ | 5.2 | $ | 5.7 | (9)% | $ | 4.6 | 13 % | ||||||||||
| Average margin receivables ($B) | $ | 5.4 | $ | 5.7 | (5)% | $ | 4.7 | 15 % | ||||||||||
| Gross new brokerage accounts | 85,515 | 97,888 | (13)% | 73,306 | 17 % | |||||||||||||
| Gross new stock plan accounts | 49,421 | 45,658 | 8 % | 41,867 | 18 % | |||||||||||||
| Gross new banking accounts | 5,064 | 5,366 | (6)% | 4,801 | 5 % | |||||||||||||
| Closed accounts | (130,699) | (152,122) | N.M. | (138,751) | N.M. | |||||||||||||
| Net new accounts | 9,301 | (3,210) | N.M. | (18,777) | N.M. | |||||||||||||
| Net new brokerage accounts | 13,043 | 24,950 | N.M. | 7,202 | N.M. | |||||||||||||
| Net new stock plan accounts | 8,042 | (14,059) | N.M. | 2,803 | N.M. | |||||||||||||
| Net new banking accounts | (11,784) | (14,101) | N.M. | (28,782) | N.M. | |||||||||||||
| Net new accounts | 9,301 | (3,210) | N.M. | (18,777) | N.M. | |||||||||||||
| End of period brokerage accounts | 2,772,816 | 2,759,773 | 0 % | 2,656,702 | 4 % | |||||||||||||
| End of period stock plan accounts | 1,062,088 | 1,054,046 | 1 % | 1,033,450 | 3 % | |||||||||||||
| End of period banking accounts | 472,783 | 484,567 | (2)% | 536,606 | (12)% | |||||||||||||
| End of period total accounts | 4,307,687 | 4,298,386 | 0 % | 4,226,758 | 2 % | |||||||||||||
Customer Assets ($B) | ||||||||||||||||||
| Security holdings | $ | 109.9 | $ | 127.4 | (14)% | $ | 108.8 | 1 % | ||||||||||
| Customer payables (cash) | 5.4 | 5.3 | 2 % | 4.6 | 17 % | |||||||||||||
| Customer cash balances held by third parties | 3.3 | 3.4 | (3)% | 3.2 | 3 % | |||||||||||||
| Unexercised stock plan customer options (vested) | 16.1 | 23.5 | (31)% | 18.7 | (14)% | |||||||||||||
| Customer assets in brokerage and stock plan accounts | 134.7 | 159.6 | (16)% | 135.3 | 0 % | |||||||||||||
| Sweep deposits | 17.4 | 17.6 | (1)% | 14.8 | 18 % | |||||||||||||
| Savings, transaction and other | 7.8 | 8.4 | (7)% | 9.3 | (16)% | |||||||||||||
| Customer assets in banking accounts | 25.2 | 26.0 | (3)% | 24.1 | 5 % | |||||||||||||
| Total customer assets | $ | 159.9 | $ | 185.6 | (14)% | $ | 159.4 | 0 % | ||||||||||
| Net new brokerage assets ($B)(11) | $ | 2.6 | $ | 1.5 | N.M. | $ | 1.4 | N.M. | ||||||||||
| Net new banking assets ($B)(11) | (0.5) | (0.4) | N.M. | (0.7) | N.M. | |||||||||||||
| Net new customer assets ($B)(11) | $ | 2.1 | $ | 1.1 | N.M. | $ | 0.7 | N.M. | ||||||||||
| Brokerage related cash ($B) | $ | 26.1 | $ | 26.3 | (1)% | $ | 22.6 | 15 % | ||||||||||
| Other customer cash and deposits ($B) | 7.8 | 8.4 | (7)% | 9.3 | (16)% | |||||||||||||
| Total customer cash and deposits ($B) | $ | 33.9 | $ | 34.7 | (2)% | $ | 31.9 | 6 % | ||||||||||
| Unexercised stock plan customer options (unvested) ($B) | $ | 33.2 | $ | 42.8 | (22)% | $ | 31.4 | 6 % | ||||||||||
Market Making | ||||||||||||||||||
| Equity shares traded (MM) | 94,219 | 151,699 | (38)% | 144,586 | (35)% | |||||||||||||
| Average revenue capture per 1,000 equity shares | $ | 0.290 | $ | 0.154 | 88 % | $ | 0.144 | 101 % | ||||||||||
| % of Bulletin Board equity shares to total equity shares | 92.4% | 95.7% | (3)% | 96.1% | (4)% | |||||||||||||
Balance Sheet Management Metrics |
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Loans receivable ($MM) | ||||||||||||||||||
| Average loans receivable | $ | 14,298 | $ | 15,026 | (5)% | $ | 17,726 | (19)% | ||||||||||
| Ending loans receivable, net | $ | 13,000 | $ | 13,675 | (5)% | $ | 16,102 | (19)% | ||||||||||
Loan performance detail (all loans, including TDRs) ($MM) | ||||||||||||||||||
One- to Four-Family | ||||||||||||||||||
| Current | $ | 6,000 | $ | 6,277 | (4)% | $ | 7,286 | (18)% | ||||||||||
| 30-89 days delinquent | 292 | 286 | 2 % | 376 | (22)% | |||||||||||||
| 90-179 days delinquent | 141 | 167 | (16)% | 241 | (41)% | |||||||||||||
| Total 30-179 days delinquent | 433 | 453 | (4)% | 617 | (30)% | |||||||||||||
| 180+ days delinquent (net of $243M, $266M and $308M in charge-offs for Q311, Q211 and Q310, respectively) | 556 | 645 | (14)% | 818 | (32)% | |||||||||||||
| Total delinquent loans(12) | 989 | 1,098 | (10)% | 1,435 | (31)% | |||||||||||||
| Gross loans receivable(13) | $ | 6,989 | $ | 7,375 | (5)% | $ | 8,721 | (20)% | ||||||||||
Home Equity | ||||||||||||||||||
| Current | $ | 5,330 | $ | 5,579 | (4)% | $ | 6,434 | (17)% | ||||||||||
| 30-89 days delinquent | 147 | 155 | (5)% | 202 | (27)% | |||||||||||||
| 90-179 days delinquent | 109 | 116 | (6)% | 142 | (23)% | |||||||||||||
| Total 30-179 days delinquent | 256 | 271 | (6)% | 344 | (26)% | |||||||||||||
| 180+ days delinquent (net of $21M, $22M and $24M in charge-offs for Q311, Q211 and Q310, respectively) | 51 | 51 | 0 % | 56 | (9)% | |||||||||||||
| Total delinquent loans(12) | 307 | 322 | (5)% | 400 | (23)% | |||||||||||||
| Gross loans receivable(13) | $ | 5,637 | $ | 5,901 | (4)% | $ | 6,834 | (18)% | ||||||||||
Consumer and Other | ||||||||||||||||||
| Current | $ | 1,170 | $ | 1,254 | (7)% | $ | 1,548 | (24)% | ||||||||||
| 30-89 days delinquent | 20 | 20 | 0 % | 26 | (23)% | |||||||||||||
| 90-179 days delinquent | 4 | 4 | 0 % | 5 | (20)% | |||||||||||||
Total 30-179 days delinquent | 24 | 24 | 0 % | 31 | (23)% | |||||||||||||
| 180+ days delinquent | - | - | N.M. | 1 | (100)% | |||||||||||||
| Total delinquent loans | 24 | 24 | 0 % | 32 | (25)% | |||||||||||||
| Gross loans receivable(13) | $ | 1,194 | $ | 1,278 | (7)% | $ | 1,580 | (24)% | ||||||||||
Total Loans Receivable | ||||||||||||||||||
| Current | $ | 12,500 | $ | 13,110 | (5)% | $ | 15,268 | (18)% | ||||||||||
| 30-89 days delinquent | 459 | 461 | 0 % | 604 | (24)% | |||||||||||||
| 90-179 days delinquent | 254 | 287 | (11)% | 388 | (35)% | |||||||||||||
| Total 30-179 days delinquent | 713 | 748 | (5)% | 992 | (28)% | |||||||||||||
| 180+ days delinquent | 607 | 696 | (13)% | 875 | (31)% | |||||||||||||
| Total delinquent loans | 1,320 | 1,444 | (9)% | 1,867 | (29)% | |||||||||||||
| Total gross loans receivable(13) | $ | 13,820 | $ | 14,554 | (5)% | $ | 17,135 | (19)% | ||||||||||
TDR performance detail ($MM)(14) | ||||||||||||||||||
One- to Four-Family TDRs | ||||||||||||||||||
| Current | $ | 726 | $ | 631 | 15 % | $ | 361 | 101 % | ||||||||||
| 30-89 days delinquent | 66 | 58 | 14 % | 45 | 47 % | |||||||||||||
| 90-179 days delinquent | 32 | 20 | 60 % | 23 | 39 % | |||||||||||||
| Total 30-179 days delinquent | 98 | 78 | 26 % | 68 | 44 % | |||||||||||||
| 180+ days delinquent(15) | 120 | 48 | 150 % | 45 | 167 % | |||||||||||||
| Total delinquent TDRs | 218 | 126 | 73 % | 113 | 93 % | |||||||||||||
| TDRs | $ | 944 | $ | 757 | 25 % | $ | 474 | 99 % | ||||||||||
Home Equity TDRs | ||||||||||||||||||
| Current | $ | 361 | $ | 370 | (2)% | $ | 379 | (5)% | ||||||||||
| 30-89 days delinquent | 54 | 48 | 13 % | 62 | (13)% | |||||||||||||
| 90-179 days delinquent | 25 | 31 | (19)% | 36 | (31)% | |||||||||||||
| Total 30-179 days delinquent | 79 | 79 | 0 % | 98 | (19)% | |||||||||||||
| 180+ days delinquent | 4 | 4 | 0 % | 2 | 100 % | |||||||||||||
| Total delinquent TDRs | 83 | 83 | 0 % | 100 | (17)% | |||||||||||||
| TDRs | $ | 444 | $ | 453 | (2)% | $ | 479 | (7)% | ||||||||||
Total TDRs | ||||||||||||||||||
| Current | $ | 1,087 | $ | 1,001 | 9 % | $ | 740 | 47 % | ||||||||||
| 30-89 days delinquent | 120 | 106 | 13 % | 107 | 12 % | |||||||||||||
| 90-179 days delinquent | 57 | 51 | 12 % | 59 | (3)% | |||||||||||||
| Total 30-179 days delinquent | 177 | 157 | 13 % | 166 | 7 % | |||||||||||||
| 180+ days delinquent(15) | 124 | 52 | 138 % | 47 | 164 % | |||||||||||||
| Total delinquent TDRs | 301 | 209 | 44 % | 213 | 41 % | |||||||||||||
| TDRs | $ | 1,388 | $ | 1,210 | 15 % | $ | 953 | 46 % | ||||||||||
Capital Metrics | ||||||||||||||||||
E*TRADE Bank | ||||||||||||||||||
| Tier 1 capital ratio(16) | 8.1 % | 7.9 % | 0.2 % | 7.4 % | 0.7 % | |||||||||||||
| Tier 1 capital to risk-weighted assets ratio(16) | 16.0 % | 15.0 % | 1.0 % | 13.8 % | 2.2 % | |||||||||||||
| Risk-based capital ratio(16) | 17.2 % | 16.2 % | 1.0 % | 15.0 % | 2.2 % | |||||||||||||
| E*TRADE Bank excess Tier 1 capital ($MM)(16) | $ | 1,308.8 | $ | 1,232.4 | 6 % | $ | 976.1 | 34 % | ||||||||||
| E*TRADE Bank excess Tier 1 capital to risk-weighted assets($MM)(16) | $ | 2,119.1 | $ | 2,001.3 | 6 % | $ | 1,680.5 | 26 % | ||||||||||
| E*TRADE Bank excess risk-based capital ($MM)(16) | $ | 1,537.3 | $ | 1,390.0 | 11 % | $ | 1,089.7 | 41 % | ||||||||||
E*TRADE Financial | ||||||||||||||||||
| Tier 1 leverage ratio(17) | 5.7 % | 5.4 % | 0.3 % | 4.1 % | 1.6 % | |||||||||||||
| Tier 1 risk-based capital ratio(17) | 11.2 % | 10.3 % | 0.9 % | 7.4 % | 3.8 % | |||||||||||||
| Total risk-based capital ratio(17) | 12.5 % | 11.6 % | 0.9 % | 8.6 % | 3.9 % | |||||||||||||
| Tier 1 common ratio(2) | 9.3 % | 8.4 % | 0.9 % | 5.4 % | 3.9 % | |||||||||||||
Activity in Allowance for Loan Losses | ||||||||||||||||||||
| Three Months Ended September 30, 2011 | ||||||||||||||||||||
One- to Four- | Home Equity | Consumer | Total | |||||||||||||||||
| (In thousands) | ||||||||||||||||||||
| Allowance for loan losses, ending 6/30/11 | $ | 326,580 | $ | 493,551 | $ | 58,484 | $ | 878,615 | ||||||||||||
| Provision for loan losses | 29,202 | 65,114 | 4,068 | 98,384 | ||||||||||||||||
| Charge-offs, net | (44,331 | ) | (104,623 | ) | (7,990 | ) | (156,944 | ) | ||||||||||||
| Allowance for loan losses, ending 9/30/11 | $ | 311,451 | $ | 454,042 | $ | 54,562 | $ | 820,055 | ||||||||||||
| Three Months Ended June 30, 2011 | ||||||||||||||||||||
One- to Four- | Home Equity | Consumer | Total | |||||||||||||||||
| (In thousands) | ||||||||||||||||||||
| Allowance for loan losses, ending 3/31/11 | $ | 353,117 | $ | 539,171 | $ | 61,318 | $ | 953,606 | ||||||||||||
| Provision for loan losses | 33,067 | 64,664 | 5,405 | 103,136 | ||||||||||||||||
| Charge-offs, net | (59,604 | ) | (110,284 | ) | (8,239 | ) | (178,127 | ) | ||||||||||||
| Allowance for loan losses, ending 6/30/11 | $ | 326,580 | $ | 493,551 | $ | 58,484 | $ | 878,615 | ||||||||||||
| Three Months Ended September 30, 2010 | ||||||||||||||||||||
One- to Four- | Home Equity | Consumer | Total | |||||||||||||||||
| (In thousands) | ||||||||||||||||||||
| Allowance for loan losses, ending 6/30/10 | $ | 433,658 | $ | 602,867 | $ | 66,418 | $ | 1,102,943 | ||||||||||||
| Provision for loan losses | 30,570 | 110,117 | 11,296 | 151,983 | ||||||||||||||||
| Charge-offs, net | (67,098 | ) | (141,627 | ) | (13,360 | ) | (222,085 | ) | ||||||||||||
| Allowance for loan losses, ending 9/30/10 | $ | 397,130 | $ | 571,357 | $ | 64,354 | $ | 1,032,841 | ||||||||||||
Specific Valuation Allowance Activity | ||||||||||||||||||||
| As of September 30, 2011 | ||||||||||||||||||||
Recorded | Specific | Net | Specific | Total | ||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||
| One- to four-family | $ | 943,800 | $ | 104,502 | $ | 839,298 | 11 | % | 27 | % | ||||||||||
| Home equity | 443,865 | 222,606 | 221,259 | 50 | % | 55 | % | |||||||||||||
| Total | $ | 1,387,665 | $ | 327,108 | $ | 1,060,557 | 24 | % | 35 | % | ||||||||||
| As of June 30, 2011 | ||||||||||||||||||||
Recorded | Specific | Net | Specific | Total | ||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||
| One- to four-family | $ | 756,570 | $ | 96,110 | $ | 660,460 | 13 | % | 27 | % | ||||||||||
| Home equity | 452,868 | 233,145 | 219,723 | 51 | % | 55 | % | |||||||||||||
| Total | $ | 1,209,438 | $ | 329,255 | $ | 880,183 | 27 | % | 37 | % | ||||||||||
| As of September 30, 2010 | ||||||||||||||||||||
Recorded | Specific | Net | Specific | Total | ||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||
| One- to four-family | $ | 474,697 | $ | 71,207 | $ | 403,490 | 15 | % | 26 | % | ||||||||||
| Home equity | 478,747 | 263,508 | 215,239 | 55 | % | 58 | % | |||||||||||||
| Total | $ | 953,444 | $ | 334,715 | $ | 618,729 | 35 | % | 42 | % | ||||||||||
Average Enterprise Balance Sheet Data | |||||||||||||||
| Three Months Ended | |||||||||||||||
| September 30, 2011 | |||||||||||||||
| Average | Operating | Average | |||||||||||||
| Balance | Inc./Exp. | Yield/Cost | |||||||||||||
| Enterprise interest-earning assets: | (In thousands) | ||||||||||||||
Loans(19) | $ | 14,302,016 | $ | 169,704 | 4.75 | % | |||||||||
| Margin receivables | 5,404,720 | 55,587 | 4.08 | % | |||||||||||
| Available-for-sale securities | 15,016,437 | 102,545 | 2.73 | % | |||||||||||
| Held-to-maturity securities | 4,854,034 | 40,546 | 3.34 | % | |||||||||||
| Cash and equivalents | 1,534,517 | 752 | 0.19 | % | |||||||||||
| Segregated cash and investments | 965,083 | 180 | 0.07 | % | |||||||||||
| Securities borrowed and other | 604,633 | 13,069 | 8.58 | % | |||||||||||
| Total enterprise interest-earning assets | $ | 42,681,440 | 382,383 | 3.58 | % | ||||||||||
| Enterprise interest-bearing liabilities: | |||||||||||||||
| Retail deposits | $ | 25,817,902 | 9,656 | 0.15 | % | ||||||||||
| Brokered certificates of deposit | 40,314 | 584 | 5.75 | % | |||||||||||
| Customer payables | 5,492,074 | 2,267 | 0.16 | % | |||||||||||
| Securities sold under agreements to repurchase | 5,345,652 | 37,941 | 2.78 | % | |||||||||||
| FHLB advances and other borrowings | 2,733,920 | 27,257 | 3.90 | % | |||||||||||
| Securities loaned and other | 627,606 | 383 | 0.24 | % | |||||||||||
| Total enterprise interest-bearing liabilities | $ | 40,057,468 | 78,088 | 0.77 | % | ||||||||||
Enterprise net interest income/spread(8) | $ | 304,295 | 2.81 | % | |||||||||||
| Three Months Ended | |||||||||||||||
| June 30, 2011 | |||||||||||||||
| Average | Operating | Average | |||||||||||||
| Balance | Inc./Exp. | Yield/Cost | |||||||||||||
| Enterprise interest-earning assets: | (In thousands) | ||||||||||||||
Loans(19) | $ | 15,029,986 | $ | 180,974 | 4.82 | % | |||||||||
| Margin receivables | 5,732,452 | 58,682 | 4.11 | % | |||||||||||
| Available-for-sale securities | 15,428,197 | 107,051 | 2.78 | % | |||||||||||
| Held-to-maturity securities | 3,950,330 | 32,973 | 3.34 | % | |||||||||||
| Cash and equivalents | 1,489,236 | 741 | 0.20 | % | |||||||||||
| Segregated cash and investments | 638,631 | 148 | 0.09 | % | |||||||||||
| Securities borrowed and other | 639,190 | 12,494 | 7.84 | % | |||||||||||
| Total enterprise interest-earning assets | $ | 42,908,022 | 393,063 | 3.67 | % | ||||||||||
| Enterprise interest-bearing liabilities: | |||||||||||||||
| Retail deposits | $ | 26,042,523 | 11,026 | 0.17 | % | ||||||||||
| Brokered certificates of deposit | 48,984 | 689 | 5.64 | % | |||||||||||
| Customer payables | 5,489,242 | 2,139 | 0.16 | % | |||||||||||
| Securities sold under agreements to repurchase | 5,369,083 | 37,981 | 2.80 | % | |||||||||||
| FHLB advances and other borrowings | 2,745,229 | 26,978 | 3.89 | % | |||||||||||
| Securities loaned and other | 655,202 | 385 | 0.24 | % | |||||||||||
| Total enterprise interest-bearing liabilities | $ | 40,350,263 | 79,198 | 0.78 | % | ||||||||||
Enterprise net interest income/spread(8) | $ | 313,865 | 2.89 | % | |||||||||||
| Three Months Ended | |||||||||||||||
| September 30, 2010 | |||||||||||||||
| Average | Operating | Average | |||||||||||||
| Balance | Inc./Exp. | Yield/Cost | |||||||||||||
| Enterprise interest-earning assets: | (In thousands) | ||||||||||||||
Loans(19) | $ | 17,732,499 | $ | 212,276 | 4.79 | % | |||||||||
| Margin receivables | 4,723,210 | 52,735 | 4.43 | % | |||||||||||
| Available-for-sale securities | 12,849,006 | 86,775 | 2.70 | % | |||||||||||
| Held-to-maturity securities | 1,708,531 | 14,618 | 3.42 | % | |||||||||||
| Cash and equivalents | 1,861,457 | 1,008 | 0.21 | % | |||||||||||
| Segregated cash and investments | 172,469 | 87 | 0.20 | % | |||||||||||
| Securities borrowed and other | 642,136 | 6,842 | 4.23 | % | |||||||||||
| Total enterprise interest-earning assets | $ | 39,689,308 | 374,341 | 3.77 | % | ||||||||||
| Enterprise interest-bearing liabilities: | |||||||||||||||
| Retail deposits | $ | 23,563,424 | 11,985 | 0.20 | % | ||||||||||
| Brokered certificates of deposit | 115,064 | 1,498 | 5.17 | % | |||||||||||
| Customer payables | 4,124,972 | 1,631 | 0.16 | % | |||||||||||
| Securities sold under agreements to repurchase | 6,014,572 | 31,224 | 2.03 | % | |||||||||||
| FHLB advances and other borrowings | 2,754,055 | 30,426 | 4.32 | % | |||||||||||
| Securities loaned and other | 609,622 | 347 | 0.23 | % | |||||||||||
| Total enterprise interest-bearing liabilities | $ | 37,181,709 | 77,111 | 0.82 | % | ||||||||||
Enterprise net interest income/spread(8) | $ | 297,230 | 2.95 | % | |||||||||||
| Reconciliation from Enterprise Net Interest Income to Net Operating Interest Income | |||||||||||||||
| Three Months Ended | |||||||||||||||
| September 30, | June 30, | September 30, | |||||||||||||
| 2011 | 2011 | 2010 | |||||||||||||
| (In thousands) | |||||||||||||||
| Enterprise net interest income | $ | 304,295 | $ | 313,865 | $ | 297,230 | |||||||||
Taxable equivalent interest adjustment(20) | (291 | ) | (292 | ) | (292 | ) | |||||||||
Customer cash held by third parties and other(21) | 1,574 | 1,848 | 1,997 | ||||||||||||
| Net operating interest income | $ | 305,578 | $ | 315,421 | $ | 298,935 | |||||||||
SUPPLEMENTAL INFORMATION
Explanation of Non-GAAP Measures and Certain Metrics
Management believes that tangible book value per share, corporate cash, EBITDA, interest coverage, Bank earnings before taxes and before credit losses and E*TRADE Financial ratios 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 (7) 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 (9) 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 (10) for a reconciliation of this non-GAAP measure to the comparable GAAP measure.
E*TRADE Financial Ratios
E*TRADE Financial ratios, including Tier 1 leverage, Tier 1 risk-based capital and total risk-based capital ratios, are based on the Federal Reserve regulatory minimum well-capitalized threshold. E*TRADE Financial’s Tier 1 common ratio is defined as the Tier 1 capital less elements of Tier 1 capital that are not in the form of common equity, such as trust preferred securities, divided by total risk-weighted assets. Management believes these ratios are an important measure of the Company’s capital strength. See endnotes (2) and (17) for a reconciliation of these non-GAAP measures 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) The following tables provide reconciliations for the calculation of the income tax benefit impact related to the taxable liquidation of an international subsidiary on diluted EPS and the calculation of the impact of the reserve related to E*TRADE Securities LLC's intention to initiate an offer to purchase auction rate securities on diluted EPS (dollars in thousands, except per share amounts):
| Q3 2011 | ||||||||||
Amount | Diluted EPS | |||||||||
Income before income tax benefit | $ | 22,940 | $ | 0.08 | ||||||
| Income tax benefit from liquidation of international subsidiary | (61,688 | ) | (0.21 | ) | ||||||
| Other income tax expense | 13,932 | 0.05 | ||||||||
| Total income tax benefit | (47,756 | ) | (0.16 | ) | ||||||
| Net income | $ | 70,696 | $ | 0.24 | ||||||
| Q3 2011 | ||||||||||
Amount | Diluted EPS | |||||||||
| ARS reserve | $ | 55,000 | $ | 0.19 | ||||||
Income tax benefit related to ARS reserve | (17,020 | ) | (0.06 | ) | ||||||
| ARS reserve, net of tax | $ | 37,980 | $ | 0.13 | ||||||
(2) The Tier 1 common ratio at E*TRADE Financial is a Q311 estimate and is a non-GAAP measure. Management believes this ratio is an important measure of the Company's capital strength. The Tier 1 common ratio is calculated as follows (dollars in thousands):
| Q3 2011 | Q2 2011 | Q3 2010 | |||||||||||||
| Shareholders' equity | $ | 4,946,215 | $ | 4,812,345 | $ | 4,164,471 | |||||||||
| DEDUCT: | |||||||||||||||
| Losses in OCI on AFS debt securities and cash flow hedges, net of tax | (378,676 | ) | (383,517 | ) | (348,687 | ) | |||||||||
| Goodwill and other intangible assets, net of deferred tax liabilities | 1,975,293 | 1,992,814 | 2,060,739 | ||||||||||||
| Subtotal | 3,349,598 | 3,203,048 | 2,452,419 | ||||||||||||
| DEDUCT: | |||||||||||||||
| Disallowed servicing assets and deferred tax assets | 1,312,423 | 1,248,393 | 1,220,841 | ||||||||||||
| Tier 1 common | $ | 2,037,175 | $ | 1,954,655 | $ | 1,231,578 | |||||||||
| Total risk-weighted assets | $ | 21,998,899 | $ | 23,154,668 | $ | 22,628,634 | |||||||||
| Tier 1 common / Total risk-weighted assets | 9.3 | % | 8.4 | % | 5.4 | % | |||||||||
(3) Because the Company reported a net loss for the nine months ended September 30, 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.
(4) Reflects elimination of transactions between Trading and Investing and Balance Sheet Management segments, which includes deposit and intercompany transfer pricing arrangements.
(5) Amounts and percentages may not calculate due to rounding.
(6) 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.
(7) 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):
| Q3 2011 | Q2 2011 | Q3 2010 | |||||||||||||
| Book value | $ | 4,946,215 | $ | 4,812,345 | $ | 4,164,471 | |||||||||
| Less: Goodwill and other intangibles, net | (2,226,574 | ) | (2,233,112 | ) | (2,272,406 | ) | |||||||||
| Less: Deferred tax liability related to goodwill | 251,281 | 240,298 | 211,667 | ||||||||||||
| Tangible book value | $ | 2,970,922 | $ | 2,819,531 | $ | 2,103,732 | |||||||||
| Q3 2011 | Q2 2011 | Q3 2010 | |||||||||||||
| Book value per share | $ | 17.34 | $ | 17.20 | $ | 18.87 | |||||||||
| Less: Goodwill and other intangibles, net per share | (7.81 | ) | (7.98 | ) | (10.30 | ) | |||||||||
| Less: Deferred tax liability related to goodwill per share | 0.88 | 0.86 | 0.96 | ||||||||||||
| Tangible book value per share | $ | 10.41 | $ | 10.08 | $ | 9.53 | |||||||||
(8) 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.
(9) 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 1.6, 1.1, and 0.2 for the three months ended September 30, 2011, June 30, 2011 and September 30, 2010, respectively.
(10) 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 income before income taxes (dollars in thousands):
| Q3 2011 | Q2 2011 | Q3 2010 | |||||||||||||
| Income before income taxes | $ | 22,940 | $ | 82,608 | $ | 35,544 | |||||||||
| Add back: | |||||||||||||||
| Non-bank loss before income tax benefit(b) | 52,131 | 58,578 | 49,775 | ||||||||||||
| Provision for loan losses | 98,384 | 103,136 | 151,983 | ||||||||||||
| Gains on loans and securities, net | (24,341 | ) | (31,011 | ) | (46,904 | ) | |||||||||
| Net impairment | 3,196 | 2,884 | 7,301 | ||||||||||||
| Bank earnings before taxes and before credit losses | $ | 152,310 | $ | 216,195 | $ | 197,699 | |||||||||
(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.
(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) Delinquent loans include charge-offs for loans that are in bankruptcy or are 180 days past due which have been written down to their expected recovery 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):
| Q3 2011 | Q2 2011 | Q3 2010 | |||||||||||||
| One- to four-family | $ | 430 | $ | 431 | $ | 400 | |||||||||
| Home equity | 150 | 142 | 141 | ||||||||||||
| Total charge-offs | $ | 580 | $ | 573 | $ | 541 | |||||||||
(13) Includes unpaid principal balances and premiums (discounts).
(14) The TDR loan performance detail is a subset of the Company’s total loan performance.
(15) In connection with the Company’s loan transfer to servicers that specialize in managing troubled assets, certain servicers have been aggressively pursuing 180+ delinquent loans for a trial modification program. The increase reflects trial modifications, which remain delinquent until the modification becomes permanent. When the modification is permanent, it is reclassified to be current.
(16) Capital ratios are at the E*TRADE Bank level. The ratios and excess capital amounts are Q311 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:
| Q3 2011 | Q2 2011 | Q3 2010 | |||||||||||||
| Beginning E*TRADE Bank excess risk-based capital ($MM) | $ | 1,390 | $ | 1,255 | $ | 1,008 | |||||||||
| Bank earnings before taxes and before credit losses | 152 | 216 | 198 | ||||||||||||
| Provision for loan losses | (98 | ) | (103 | ) | (152 | ) | |||||||||
Loan portfolio run-off(a) | 61 | 55 | 72 | ||||||||||||
| Margin decrease | 48 | 5 | 22 | ||||||||||||
Capital upstream(b) | - | (34 | ) | (34 | ) | ||||||||||
Other capital changes(c) | (16 | ) | (4 | ) | (24 | ) | |||||||||
| Ending E*TRADE Bank excess risk-based capital ($MM) | $ | 1,537 | $ | 1,390 | $ | 1,090 | |||||||||
(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.
(17) The Tier 1 leverage, Tier 1 risk-based capital and total risk-based capital ratios at E*TRADE Financial are Q311 estimates based on the Federal Reserve regulatory minimum well-capitalized threshold. E*TRADE Financial is not currently subject to capital requirements; however, the implementation of holding company capital requirements are expected to become effective within the next four years as a result of the Dodd-Frank Act. Management believes this ratio is an important measure of the Company's capital strength and has begun to track this ratio internally, using the current capital guidelines that apply to bank holding companies. The Tier 1 leverage, Tier 1 risk-based capital and total risk-based capital ratios are calculated as follows (dollars in thousands):
| Q3 2011 | Q2 2011 | Q3 2010 | |||||||||||||
| Shareholders' equity | $ | 4,946,215 | $ | 4,812,345 | $ | 4,164,471 | |||||||||
| DEDUCT: | |||||||||||||||
| Losses in OCI on AFS debt securities and cash flow hedges, net of tax | (378,676 | ) | (383,517 | ) | (348,687 | ) | |||||||||
| Goodwill and other intangible assets, net of deferred tax liabilities | 1,975,293 | 1,992,814 | 2,060,739 | ||||||||||||
| ADD: | |||||||||||||||
| Qualifying restricted core capital elements (TRUPs) | 433,000 | 433,000 | 433,000 | ||||||||||||
| Subtotal | 3,782,598 | 3,636,048 | 2,885,419 | ||||||||||||
| DEDUCT: | |||||||||||||||
| Disallowed servicing assets and deferred tax assets | 1,312,423 | 1,248,393 | 1,220,841 | ||||||||||||
| Tier 1 capital | 2,470,175 | 2,387,655 | 1,664,578 | ||||||||||||
| ADD: | |||||||||||||||
| Allowable allowance for loan losses | 281,715 | 296,707 | 292,117 | ||||||||||||
| Total capital | $ | 2,751,890 | $ | 2,684,362 | $ | 1,956,695 | |||||||||
| Total average assets | $ | 46,880,301 | $ | 47,198,483 | $ | 44,174,329 | |||||||||
| DEDUCT: | |||||||||||||||
| Goodwill and other intangible assets, net of deferred tax liabilities | 1,975,293 | 1,992,814 | 2,060,739 | ||||||||||||
| Subtotal | 44,905,008 | 45,205,669 | 42,113,590 | ||||||||||||
| DEDUCT: | |||||||||||||||
| Disallowed servicing assets and deferred tax assets | 1,312,423 | 1,248,393 | 1,220,841 | ||||||||||||
| Average total assets for leverage capital purposes | $ | 43,592,585 | $ | 43,957,276 | $ | 40,892,749 | |||||||||
| Total risk-weighted assets(a) | $ | 21,998,899 | $ | 23,154,668 | $ | 22,628,634 | |||||||||
| Tier 1 capital / Average total assets for leverage capital purposes | 5.7 | % | 5.4 | % | 4.1 | % | |||||||||
| Tier 1 capital / Total risk-weighted assets | 11.2 | % | 10.3 | % | 7.4 | % | |||||||||
| Total capital / Total risk-weighted assets | 12.5 | % | 11.6 | % | 8.6 | % | |||||||||
(a) Under the regulatory guidelines for risk-based capital, on-balance sheet assets and credit equivalent amounts of derivatives and off-balance sheet items are assigned to one of several broad risk categories according to the obligor or, if relevant, the guarantor or the nature of any collateral. The aggregate dollar amount in each risk category is then multiplied by the risk weight associated with that category. The resulting weighted values from each of the risk categories are aggregated for determining total risk-weighted assets.
(18) The total expected loss on TDRs includes both the previously recorded charge-offs and the specific valuation allowance.
(19) Excludes loans to customers on margin.
(20) Gross-up for tax-exempt securities.
(21) Includes interest earned on average customer assets of $3.7 billion, $3.7 billion and $3.0 billion for the quarters ended September 30, 2011, June 30, 2011 and September 30, 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