E Trade Financial (ETFC) 8-K E*TRADE Financial Corporation Announces Third Quarter 2013 Results

Exhibit 99.1

E*TRADE Financial Corporation Announces Third Quarter 2013 Results

Company to sell market making business to an affiliate of Susquehanna International Group, LLP for $75 million⁽¹⁾

NEW YORK--(BUSINESS WIRE)--October 23, 2013--E*TRADE Financial Corporation (NASDAQ: ETFC):

Third Quarter Results

• Net income of $47 million, or $0.16 per share on total net revenue of $417 million
• Total operating expenses of $271 million, including restructuring charges of $6 million
• Provision for loan losses of $37 million; net charge-offs of $29 million
• Corporate cash of $373 million, including a dividend from the Bank of $100 million
• Daily Average Revenue Trades (DARTs) of 145,000
• End of period margin receivables of $6.2 billion
• Net new brokerage accounts of 13,000
• Net new brokerage assets of $2.4 billion; end of period customer assets of $241 billion

E*TRADE Financial Corporation (NASDAQ: ETFC) today announced results for its third quarter ended September 30, 2013, reporting net income of $47 million, or $0.16 per share. This compares with a net loss of $54 million, or $0.19 loss per share in the prior quarter, and a net loss of $29 million, or $0.10 loss per share in the third quarter of 2012. The prior periods’ net losses were driven primarily by a $142 million impairment to goodwill in the second quarter, and $50 million in charge-offs related to untimely reporting of borrower bankruptcies in the year-ago quarter. Total net revenue of $417 million for the third quarter of 2013 compares with $440 million in the prior quarter, and was down from $490 million in the third quarter of 2012.

E*TRADE also announced today that it has entered into a definitive agreement to sell its market making business, G1 Execution Services, to an affiliate of Susquehanna International Group, LLP for $75 million. The transaction is subject to regulatory approvals and other customary closing conditions and is expected to close in three to six months. In addition, the Company will enter into an order flow arrangement whereby E*TRADE agrees, subject to best execution standards, to route 70 percent of its customer equity order flow to G1 Execution Services over the next five years.

“Our core business delivered solid performance in the third quarter as customers continued to engage, with DARTs up 13 percent over the year-ago quarter and customer margin at a five-year high,” said Paul Idzik, Chief Executive Officer. “Our consolidated results benefited from the ongoing improvement to the Company’s risk profile, which contributed to our ability to distribute capital from the Bank to the Parent this quarter — a significant milestone for E*TRADE. Finally, we are pleased to strike a deal to sell our market maker that will serve our customers and shareholders well, and allow Management to concentrate our time and attention on the core business and our customers.”

E*TRADE reported DARTs of 145,000 during the quarter, a decrease of three percent from the prior quarter and an increase of 13 percent versus the same quarter a year ago.

The Company ended the quarter with 3.0 million brokerage accounts, an increase of 13,000 from the prior quarter and representing 9.0 percent annualized attrition. This compared with 30,000 net new brokerage accounts in the prior quarter and 18,000 in the third quarter of 2012, and annualized attrition rates of 8.4 percent and 8.5 percent, respectively.

The Company ended the quarter with $241 billion in total customer assets, compared with $220 billion at the end of the second quarter and $204 billion from the year-ago period.

During the quarter, customers added $2.4 billion in net new brokerage assets. Brokerage related cash increased by $2.6 billion to $38.2 billion during the period. Customers were net sellers of approximately $0.7 billion of securities. Margin receivables averaged $5.9 billion in the quarter, up four percent over last quarter and up five percent year over year, ending the quarter at $6.2 billion.

Corporate cash ended the period at $373 million, an increase of $122 million from the prior period, driven primarily by a $100 million dividend distributed from the Company’s Bank subsidiary to its Parent during the quarter.

Net operating interest income for the third quarter was $241 million, down from $243 million in the prior quarter and down from $261 million a year ago. Third quarter results reflected a net interest spread of 2.30 percent on average interest-earning assets of $40.8 billion, compared with 2.35 percent and $40.2 billion in the prior quarter.

Commissions, fees and service charges, principal transactions, and other revenue in the third quarter were $164 million, compared with $177 million in the prior quarter and $153 million in the third quarter of 2012. Average commission per trade for the quarter was $11.15, compared with $11.10 in the prior quarter, and $11.24 in the third quarter of 2012.

Total net revenue in the quarter also included $12 million of net gains on loans and securities, net of impairment, compared with $20 million in the prior quarter, and $77 million in the third quarter of 2012, driven by the Company’s deleveraging efforts.

Total operating expenses for the quarter were $271 million, including $6 million of restructuring charges. Excluding this quarter’s restructuring charge, as well as the second quarter’s goodwill impairment and restructuring charges, operating expenses increased $3 million sequentially, to $265 million⁽²⁾.

The Company’s loan portfolio ended the quarter at $9.0 billion, contracting approximately $0.5 billion from the prior quarter. Third quarter provision for loan losses of $37 million was down from $46 million in the prior quarter.

Net charge-offs in the quarter were $29 million, a decrease of $21 million from the prior quarter. The allowance for loan losses ended the quarter at $459 million, up $8 million from the previous quarter.

As of September 30, 2013, the Company reported Bank and consolidated Tier 1 leverage ratios of 9.5 percent⁽³⁾ and 6.6 percent⁽⁴⁾, respectively, compared with 9.5 percent⁽³⁾ and 6.4 percent⁽⁴⁾ at the end of the prior period.

Historical metrics and financials can be found on the E*TRADE Financial corporate website at about.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 800-771-6759 while international participants should dial +1 212-231-2928. A live audio webcast and replay of this conference call will also be available at about.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 and affiliates. 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, including statements regarding continuing improvements to the Company’s risk profile, and future capital distributions from the Company’s Bank to its Parent are subject to a number of uncertainties and risks, and actual results may differ materially. The uncertainties and risks include, but are not limited to, our potential inability to reduce our balance sheet and costs, potential changes in market activity, anticipated changes in the rate of new customer acquisition and in rate of net acquisition of brokerage accounts and assets, 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 or potentially more restrictive policies or interpretations of the Federal Reserve and the Office of the Comptroller of the Currency or other regulators. Other forward-looking statements include certain statements relating to our announcement of our sale of our market making business. The transaction is subject to regulatory approval and other closing conditions. 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.

© 2013 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,
				2013			2012			2013			2012
Revenue:
	Operating interest income		$	300,915		$	333,977		$	902,805		$	1,050,758
	Operating interest expense			(60,068	)		(73,100	)		(178,088	)		(225,924	)
		Net operating interest income		240,847			260,877			724,717			824,834
	Commissions			102,753			90,424			309,846			291,168
	Fees and service charges			39,924			30,915			112,801			91,976
	Principal transactions			12,631			22,177			55,553			67,562
	Gains on loans and securities, net			12,213			78,977			48,954			138,568
	Net impairment			(586	)		(2,395	)		(2,331	)		(11,196	)
	Other revenues			9,020			9,060			27,058			28,928
		Total non-interest income		175,955			229,158			551,881			607,006
		Total net revenue		416,802			490,035			1,276,598			1,431,840
Provision for loan losses				37,399			141,019			126,198			280,227
Operating expense:
	Compensation and benefits			88,405			94,790			270,077			272,617
	Advertising and market development			20,925			26,001			80,793			110,156
	Clearing and servicing			30,941			30,856			93,647			98,248
	FDIC insurance premiums			24,707			31,342			79,052			86,899
	Professional services			22,842			20,421			58,778			60,690
	Occupancy and equipment			17,675			19,423			53,344			55,521
	Communications			15,279			17,560			52,411			55,038
	Depreciation and amortization			21,839			23,044			67,684			68,387
	Amortization of other intangibles			5,699			6,296			17,833			18,887
	Impairment of goodwill			-			-			142,423			-
	Facility restructuring and other exit activities			6,410			2,350			23,871			3,515
	Other operating expenses			16,022			16,950			40,293			46,769
		Total operating expense		270,744			289,033			980,206			876,727
Income before other income (expense) and income tax expense (benefit)				108,659			59,983			170,194			274,886
Other income (expense):
	Corporate interest income			9			21			33			55
	Corporate interest expense			(28,605	)		(45,483	)		(85,838	)		(135,893	)
	Losses on early extinguishment of debt			-			(50,608	)		-			(50,608	)
	Equity in income (loss) of investments and other			(133	)		(216	)		5,127			1,791
		Total other income (expense)		(28,729	)		(96,286	)		(80,678	)		(184,655	)
Income (loss) before income tax expense (benefit)				79,930			(36,303	)		89,516			90,231
Income tax expense (benefit)				32,502			(7,678	)		61,367			16,755
Net income (loss)			$	47,428		$	(28,625	)	$	28,149		$	73,476
Basic earnings (loss) per share			$	0.17		$	(0.10	)	$	0.10		$	0.26
Diluted earnings (loss) per share			$	0.16		$	(0.10	)	$	0.10		$	0.25
Shares used in computation of per share data:
		Basic		287,111			285,850			286,882			285,658
		Diluted		292,630			285,850			292,249			290,395

E*TRADE FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statement of Income (Loss)
(In thousands, except per share amounts)
(Unaudited)
			Three Months Ended
			September 30,			June 30,			September 30,
				2013			2013			2012
Revenue:
	Operating interest income		$	300,915		$	301,830		$	333,977
	Operating interest expense			(60,068	)		(59,289	)		(73,100	)
		Net operating interest income		240,847			242,541			260,877
	Commissions			102,753			106,361			90,424
	Fees and service charges			39,924			40,367			30,915
	Principal transactions			12,631			21,176			22,177
	Gains on loans and securities, net			12,213			21,061			78,977
	Net impairment			(586	)		(580	)		(2,395	)
	Other revenues			9,020			9,005			9,060
		Total non-interest income		175,955			197,390			229,158
		Total net revenue		416,802			439,931			490,035
Provision for loan losses				37,399			46,149			141,019
Operating expense:
	Compensation and benefits			88,405			86,021			94,790
	Advertising and market development			20,925			23,284			26,001
	Clearing and servicing			30,941			31,062			30,856
	FDIC insurance premiums			24,707			25,054			31,342
	Professional services			22,842			18,634			20,421
	Occupancy and equipment			17,675			18,153			19,423
	Communications			15,279			18,618			17,560
	Depreciation and amortization			21,839			22,797			23,044
	Amortization of other intangibles			5,699			6,067			6,296
	Impairment of goodwill			-			142,423			-
	Facility restructuring and other exit activities			6,410			9,892			2,350
	Other operating expenses			16,022			11,922			16,950
		Total operating expense		270,744			413,927			289,033
Income (loss) before other income (expense) and income tax expense (benefit)				108,659			(20,145	)		59,983
Other income (expense):
	Corporate interest income			9			11			21
	Corporate interest expense			(28,605	)		(28,613	)		(45,483	)
	Losses on early extinguishment of debt			-			-			(50,608	)
	Equity in income (loss) of investments and other			(133	)		966			(216	)
		Total other income (expense)		(28,729	)		(27,636	)		(96,286	)
Income (loss) before income tax expense (benefit)				79,930			(47,781	)		(36,303	)
Income tax expense (benefit)				32,502			6,622			(7,678	)
Net income (loss)			$	47,428		$	(54,403	)	$	(28,625	)
Basic earnings (loss) per share			$	0.17		$	(0.19	)	$	(0.10	)
Diluted earnings (loss) per share			$	0.16		$	(0.19	)	$	(0.10	)
Shares used in computation of per share data:
		Basic		287,111			286,903			285,850
		Diluted		292,630			286,903			285,850

E*TRADE FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheet
(In thousands, except share data)
(Unaudited)
			September 30,			June 30,			December 31,
				2013			2013			2012
ASSETS
Cash and equivalents			$	1,796,181		$	1,045,252		$	2,761,494
Cash required to be segregated under federal or other regulations				738,221			855,352			376,898
Trading securities				-			-			101,270
Available-for-sale securities				13,281,458			13,060,921			13,443,020
Held-to-maturity securities				9,944,153			9,900,743			9,539,948
Margin receivables				6,188,708			5,970,042			5,804,041
Loans receivable, net				8,564,614			9,105,916			10,098,723
Investment in FHLB stock				61,400			77,150			67,400
Property and equipment, net				246,186			261,939			288,170
Goodwill				1,791,809			1,791,809			1,934,232
Other intangibles, net				221,628			227,327			260,622
Other assets				2,713,121			2,710,074			2,710,921
		Total assets	$	45,547,479		$	45,006,525		$	47,386,739
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits			$	25,869,797		$	25,548,527		$	28,392,552
Securities sold under agreements to repurchase				4,449,665			4,598,487			4,454,661
Customer payables				5,830,257			5,082,970			4,964,922
FHLB advances and other borrowings				1,285,011			1,627,658			1,260,916
Corporate debt				1,767,749			1,766,827			1,764,982
Other liabilities				1,515,426			1,621,428			1,644,236
		Total liabilities		40,717,905			40,245,897			42,482,269
Shareholders' equity:
Common stock, $0.01 par value, shares authorized: 400,000,000 at
	September 30, 2013, June 30, 2013 and December 31, 2012, shares issued
	and outstanding: 287,182,972 at September 30, 2013, 286,900,541 at
	June 30, 2013, and 286,114,334 at December 31, 2012			2,872			2,869			2,861
Additional paid-in-capital				7,326,891			7,324,425			7,319,257
Accumulated deficit				(2,079,571	)		(2,126,999	)		(2,107,720	)
Accumulated other comprehensive loss				(420,618	)		(439,667	)		(309,928	)
		Total shareholders' equity		4,829,574			4,760,628			4,904,470
		Total liabilities and shareholders' equity	$	45,547,479		$	45,006,525		$	47,386,739

Segment Reporting
	Three Months Ended September 30, 2013
	Trading and Investing			Balance Sheet Management			Corporate/ Other			Eliminations(5)			Total
	(In thousands)
Revenue:
Operating interest income		138,865		$	230,427		$	-		$	(68,377	)	$	300,915
Operating interest expense		(5,487	)		(122,958	)		-			68,377			(60,068	)
Net operating interest income		133,378			107,469			-			-			240,847
Commissions		102,753			-			-			-			102,753
Fees and service charges		39,468			456			-			-			39,924
Principal transactions		12,631			-			-			-			12,631
Gains on loans and securities, net		-			12,213			-			-			12,213
Net impairment		-			(586	)		-			-			(586	)
Other revenues		7,883			1,137			-			-			9,020
Total non-interest income		162,735			13,220			-			-			175,955
Total net revenue		296,113			120,689			-			-			416,802
Provision for loan losses		-			37,399			-			-			37,399
Operating expense:
Compensation and benefits		60,502			3,163			24,740			-			88,405
Advertising and market development		20,925			-			-			-			20,925
Clearing and servicing		18,881			12,060			-			-			30,941
FDIC insurance premiums		-			24,707			-			-			24,707
Professional services		9,703			411			12,728			-			22,842
Occupancy and equipment		15,359			386			1,930			-			17,675
Communications		14,504			343			432			-			15,279
Depreciation and amortization		17,365			104			4,370			-			21,839
Amortization of other intangibles		5,699			-			-			-			5,699
Facility restructuring and other exit activities		-			-			6,410			-			6,410
Other operating expenses		7,406			2,315			6,301			-			16,022
Total operating expense		170,344			43,489			56,911			-			270,744
Segment income (loss) before other income (expense)		125,769			39,801			(56,911	)		-			108,659
Other income (expense):
Corporate interest income		-			-			9			-			9
Corporate interest expense		-			-			(28,605	)		-			(28,605	)
Equity in loss of investments and other		-			-			(133	)		-			(133	)
Total other income (expense)		-			-			(28,729	)		-			(28,729	)
Segment income (loss)	$	125,769		$	39,801		$	(85,640	)	$	-		$	79,930
	Three Months Ended June 30, 2013
	Trading and Investing			Balance Sheet Management			Corporate/ Other			Eliminations(5)			Total
	(In thousands)
Revenue:
Operating interest income	$	138,419		$	231,054		$	-		$	(67,643	)	$	301,830
Operating interest expense		(5,183	)		(121,749	)		-			67,643			(59,289	)
Net operating interest income		133,236			109,305			-			-			242,541
Commissions		106,361			-			-			-			106,361
Fees and service charges		39,822			545			-			-			40,367
Principal transactions		21,176			-			-			-			21,176
Gains (losses) on loans and securities, net		-			21,062			(1	)		-			21,061
Net impairment		-			(580	)		-			-			(580	)
Other revenues		7,997			1,008			-			-			9,005
Total non-interest income		175,356			22,035			(1	)		-			197,390
Total net revenue		308,592			131,340			(1	)		-			439,931
Provision for loan losses		-			46,149			-			-			46,149
Operating expense:
Compensation and benefits		59,978			3,442			22,601			-			86,021
Advertising and market development		23,284			-			-			-			23,284
Clearing and servicing		18,555			12,507			-			-			31,062
FDIC insurance premiums		-			25,054			-			-			25,054
Professional services		7,965			526			10,143			-			18,634
Occupancy and equipment		16,035			441			1,677			-			18,153
Communications		17,856			336			426			-			18,618
Depreciation and amortization		18,554			134			4,109			-			22,797
Amortization of other intangibles		6,067			-			-			-			6,067
Impairment of goodwill		142,423			-			-			-			142,423
Facility restructuring and other exit activities		-			-			9,892			-			9,892
Other operating expenses		8,060			(1,026	)		4,888			-			11,922
Total operating expense		318,777			41,414			53,736			-			413,927
Segment income (loss) before other income (expense)		(10,185	)		43,777			(53,737	)		-			(20,145	)
Other income (expense):
Corporate interest income		-			-			11			-			11
Corporate interest expense		-			-			(28,613	)		-			(28,613	)
Equity in income of investments and other		-			-			966			-			966
Total other income (expense)		-			-			(27,636	)		-			(27,636	)
Segment income (loss)	$	(10,185	)	$	43,777		$	(81,373	)	$	-		$	(47,781	)
	Three Months Ended September 30, 2012
	Trading and Investing			Balance Sheet Management			Corporate/ Other			Eliminations(5)			Total
	(In thousands)
Revenue:
Operating interest income	$	165,523		$	264,977		$	-		$	(96,523	)	$	333,977
Operating interest expense		(8,718	)		(160,905	)		-			96,523			(73,100	)
Net operating interest income		156,805			104,072			-			-			260,877
Commissions		90,424			-			-			-			90,424
Fees and service charges		30,311			604			-			-			30,915
Principal transactions		22,177			-			-			-			22,177
Gains (losses) on loans and securities, net		3			78,980			(6	)		-			78,977
Net impairment		-			(2,395	)		-			-			(2,395	)
Other revenues		7,747			1,313			-			-			9,060
Total non-interest income		150,662			78,502			(6	)		-			229,158
Total net revenue		307,467			182,574			(6	)		-			490,035
Provision for loan losses		-			141,019			-			-			141,019
Operating expense:
Compensation and benefits		61,994			4,442			28,354			-			94,790
Advertising and market development		26,000			1			-			-			26,001
Clearing and servicing		17,409			13,447			-			-			30,856
FDIC insurance premiums		-			31,342			-			-			31,342
Professional services		7,218			388			12,815			-			20,421
Occupancy and equipment		17,381			453			1,589			-			19,423
Communications		16,819			330			411			-			17,560
Depreciation and amortization		18,946			167			3,931			-			23,044
Amortization of other intangibles		6,296			-			-			-			6,296
Facility restructuring and other exit activities		-			-			2,350			-			2,350
Other operating expenses		8,400			2,634			5,916			-			16,950
Total operating expense		180,463			53,204			55,366			-			289,033
Segment income (loss) before other income (expense)		127,004			(11,649	)		(55,372	)		-			59,983
Other income (expense):
Corporate interest income		-			-			21			-			21
Corporate interest expense		-			-			(45,483	)		-			(45,483	)
Losses on early extinguishment of debt		-			-			(50,608	)		-			(50,608	)
Equity in loss of investments and other		-			-			(216	)		-			(216	)
Total other income (expense)		-			-			(96,286	)		-			(96,286	)
Segment income (loss)	$	127,004		$	(11,649	)	$	(151,658	)	$	-		$	(36,303	)

Key Performance Metrics(6)
Corporate Metrics	Qtr ended 9/30/13		Qtr ended 6/30/13		Qtr ended 9/30/13 vs. 6/30/13	Qtr ended 9/30/12		Qtr ended 9/30/13 vs. 9/30/12
Operating margin %(7)
Consolidated		26 %	N.M.		N.M.		12 %	14 %
Trading and Investing		42 %	N.M.		N.M.		41 %	1 %
Balance Sheet Management		33 %		33 %	0 %	N.M.		N.M.
Employees		2,913		2,871	1 %		3,086	(6)%
Consultants and other		92		78	18 %		100	(8)%
Total headcount		3,005		2,949	2 %		3,186	(6)%
Book value per share	$	16.82	$	16.59	1 %	$	17.81	(6)%
Tangible book value per share(8)	$	10.96	$	10.66	3 %	$	11.17	(2)%
Corporate cash ($MM)	$	372.9	$	250.9	49 %	$	430.8	(13)%
Enterprise net interest spread (basis points)(9)		230		235	(2)%		228	1 %
Enterprise interest-earning assets, average ($MM)	$	40,812	$	40,166	2 %	$	44,853	(9)%
Earnings before interest, taxes, depreciation & amortization ("EBITDA") ($MM)
Net Income (loss)	$	47.4	$	(54.4)	N.M.	$	(28.6)	N.M.
Income tax expense		32.5		6.6	N.M.		(7.7)	N.M.
Depreciation & amortization		27.6		28.9	(4)%		29.3	(6)%
Corporate interest expense		28.6		28.6	0 %		45.5	(37)%
EBITDA		136.1		9.7	N.M.		38.5	N.M.
Impairment of goodwill		-		142.4	N.M.		-	N.M.
Adjusted EBITDA	$	136.1	$	152.1	(11)%	$	38.5	254 %
Interest coverage(10)		4.8		0.3	N.M.		0.8	N.M.
Adjusted interest coverage(10)		4.8		5.3	N.M.		0.8	N.M.
Bank earnings before taxes and before credit losses ($MM)(11)	$	161.4	$	162.4	(1)%	$	145.9	11 %
Trading and Investing Metrics
Trading days		63.5		64.0	N.M.		62.5	N.M.
DARTs		145,150		149,670	(3)%		128,701	13 %
Total trades (MM)		9.2		9.6	(4)%		8.0	15 %
Average commission per trade	$	11.15	$	11.10	0 %	$	11.24	(1)%
End of period margin receivables ($B)	$	6.2	$	6.0	3 %	$	5.6	11 %
Average margin receivables ($B)	$	5.9	$	5.7	4 %	$	5.6	5 %
Gross new brokerage accounts		79,923		90,963	(12)%		79,534	0 %
Gross new stock plan accounts		61,614		56,015	10 %		55,539	11 %
Gross new banking accounts		2,406		2,541	(5)%		3,492	(31)%
Closed accounts		(119,123)		(110,369)	N.M.		(114,044)	N.M.
Net new accounts		24,820		39,150	N.M.		24,521	N.M.
Net new brokerage accounts		13,111		29,506	N.M.		18,247	N.M.
Net new stock plan accounts		18,885		18,040	N.M.		14,538	N.M.
Net new banking accounts		(7,176)		(8,396)	N.M.		(8,264)	N.M.
Net new accounts		24,820		39,150	N.M.		24,521	N.M.
End of period brokerage accounts		2,975,842		2,962,731	0 %		2,892,852	3 %
End of period stock plan accounts		1,204,692		1,185,807	2 %		1,118,840	8 %
End of period banking accounts		406,420		413,596	(2)%		437,884	(7)%
End of period total accounts		4,586,954		4,562,134	1 %		4,449,576	3 %
Annualized brokerage account attrition rate(12)		9.0%		8.4%	N.M.		8.5%	N.M.
Customer Assets ($B)
Security holdings	$	162.8	$	150.8	8 %	$	141.2	15 %
Customer payables (cash)		5.8		5.1	14 %		6.0	(3)%
Customer cash balances held by third parties(13)		12.9		11.5	12 %		4.7	174 %
Unexercised stock plan customer options (vested)		33.2		27.2	22 %		23.1	44 %
Customer assets in brokerage and stock plan accounts		214.7		194.6	10 %		175.0	23 %
Sweep deposits		19.5		19.0	3 %		21.9	(11)%
Savings, transaction and other		6.4		6.5	(2)%		7.2	(11)%
Customer assets in banking accounts		25.9		25.5	2 %		29.1	(11)%
Total customer assets	$	240.6	$	220.1	9 %	$	204.1	18 %
Net new brokerage assets ($B)(14)	$	2.4	$	1.7	N.M.	$	1.9	N.M.
Net new banking assets ($B)(14)		(0.1)		(0.4)	N.M.		(0.2)	N.M.
Net new customer assets ($B)(14)	$	2.3	$	1.3	N.M.	$	1.7	N.M.
Brokerage related cash ($B)	$	38.2	$	35.6	7 %	$	32.6	17 %
Other customer cash and deposits ($B)		6.4		6.5	(2)%		7.2	(11)%
Total customer cash and deposits ($B)	$	44.6	$	42.1	6 %	$	39.8	12 %
Unexercised stock plan customer options (unvested) ($B)	$	63.4	$	52.1	22 %	$	48.4	31 %
Customer net (purchase) / sell activity ($B)	$	0.7	$	(0.3)	N.M.	$	2.2	N.M.
Market Making
Equity shares traded (MM)		86,246		103,003	(16)%		105,282	(18)%
Average revenue capture per 1,000 equity shares	$	0.142	$	0.202	(30)%	$	0.207	(31)%
% of Bulletin Board equity shares to total equity shares		93.5%		94.0%	(1)%		93.5%	0 %
Balance Sheet Management Metrics
Loans receivable ($MM)
Average loans receivable	$	9,246	$	9,766	(5)%	$	11,711	(21)%
Ending loans receivable, net	$	8,565	$	9,106	(6)%	$	10,627	(19)%
Loan performance detail (all loans, including TDRs) ($MM)
One- to Four-Family
Current	$	4,226	$	4,495	(6)%	$	5,122	(17)%
30-89 days delinquent		197		187	5 %		210	(6)%
90-179 days delinquent		71		76	(7)%		108	(34)%
Total 30-179 days delinquent		268		263	2 %		318	(16)%
180+ days delinquent (net of $111M, $127M and $157M in charge-offs for Q313, Q213 and Q312, respectively)		239		262	(9)%		300	(20)%
Total delinquent loans(15)		507		525	(3)%		618	(18)%
Gross loans receivable(16)	$	4,733	$	5,020	(6)%	$	5,740	(18)%
Home Equity
Current	$	3,498	$	3,689	(5)%	$	4,277	(18)%
30-89 days delinquent		69		70	(1)%		99	(30)%
90-179 days delinquent		38		42	(10)%		65	(42)%
Total 30-179 days delinquent		107		112	(4)%		164	(35)%
180+ days delinquent (net of $23M, $22M and $23M in charge-offs for Q313, Q213 and Q312, respectively)		38		41	(7)%		42	(10)%
Total delinquent loans(15)		145		153	(5)%		206	(30)%
Gross loans receivable(16)	$	3,643	$	3,842	(5)%	$	4,483	(19)%
Consumer and Other
Current	$	633	$	681	(7)%	$	892	(29)%
30-89 days delinquent		12		12	0 %		18	(33)%
90-179 days delinquent		3		2	50 %		3	0 %
Total 30-179 days delinquent		15		14	7 %		21	(29)%
180+ days delinquent		-		-	N.M.		-	N.M.
Total delinquent loans		15		14	7 %		21	(29)%
Gross loans receivable(16)	$	648	$	695	(7)%	$	913	(29)%
Total Loans Receivable
Current	$	8,357	$	8,865	(6)%	$	10,291	(19)%
30-89 days delinquent		278		269	3 %		327	(15)%
90-179 days delinquent		112		120	(7)%		176	(36)%
Total 30-179 days delinquent		390		389	0 %		503	(22)%
180+ days delinquent		277		303	(9)%		342	(19)%
Total delinquent loans(15)		667		692	(4)%		845	(21)%
Gross loans receivable(16)	$	9,024	$	9,557	(6)%	$	11,136	(19)%
TDR performance detail ($MM)(17)
One- to Four-Family TDRs
Current	$	921	$	917	0 %	$	849	8 %
30-89 days delinquent		101		108	(6)%		95	6 %
90-179 days delinquent		44		46	(4)%		40	10 %
Total 30-179 days delinquent		145		154	(6)%		135	7 %
180+ days delinquent (net of $68M, $76M and $47M in charge-offs for Q313, Q213 and Q312, respectively)		130		139	(6)%		80	63 %
Total delinquent TDRs		275		293	(6)%		215	28 %
TDRs	$	1,196	$	1,210	(1)%	$	1,064	12 %
Home Equity TDRs
Current	$	210	$	216	(3)%	$	215	(2)%
30-89 days delinquent		15		13	15 %		18	(17)%
90-179 days delinquent		10		9	11 %		9	11 %
Total 30-179 days delinquent		25		22	14 %		27	(7)%
180+ days delinquent (net of $14M, $14M and $4M in charge-offs for Q313, Q213 and Q312, respectively)		18		21	(14)%		6	200 %
Total delinquent TDRs		43		43	0 %		33	30 %
TDRs	$	253	$	259	(2)%	$	248	2 %
Total TDRs
Current	$	1,131	$	1,133	0 %	$	1,064	6 %
30-89 days delinquent		116		121	(4)%		113	3 %
90-179 days delinquent		54		55	(2)%		49	10 %
Total 30-179 days delinquent		170		176	(3)%		162	5 %
180+ days delinquent		148		160	(8)%		86	72 %
Total delinquent TDRs		318		336	(5)%		248	28 %
TDRs	$	1,449	$	1,469	(1)%	$	1,312	10 %
Capital Metrics	Qtr ended 9/30/13		Qtr ended 6/30/13		Qtr ended 9/30/13 vs. 6/30/13	Qtr ended 9/30/12		Qtr ended 9/30/13 vs. 9/30/12
E*TRADE Bank
Tier 1 leverage ratio(3)		9.5 %		9.5 %	0.0 %		7.9 %	1.6 %
Tier 1 risk-based capital ratio(3)		22.2 %		21.7 %	0.5 %		18.0 %	4.2 %
Total risk-based capital ratio(3)		23.5 %		22.9 %	0.6 %		19.3 %	4.2 %
Tier 1 common ratio(18)		22.2 %		21.7 %	0.5 %		18.0 %	4.2 %
E*TRADE Financial
Tier 1 leverage ratio(4)		6.6 %		6.4 %	0.2 %		5.8 %	0.8 %
Tier 1 risk-based capital ratio(4)		15.3 %		14.5 %	0.8 %		13.0 %	2.3 %
Total risk-based capital ratio(4)		16.6 %		15.8 %	0.8 %		14.3 %	2.3 %
Tier 1 common ratio(19)		12.9 %		12.2 %	0.7 %		10.9 %	2.0 %

Activity in Allowance for Loan Losses
	Three Months Ended September 30, 2013
	One- to Four- Family			Home Equity			Consumer and Other			Total
	(In thousands)
Allowance for loan losses, ending 6/30/13	$	143,569		$	279,037		$	28,340		$	450,946
Provision for loan losses		(23,748	)		59,927			1,220			37,399
Charge-offs, net		(6,700	)		(19,886	)		(2,838	)		(29,424	)
Allowance for loan losses, ending 9/30/13	$	113,121		$	319,078		$	26,722		$	458,921
	Three Months Ended June 30, 2013
	One- to Four- Family			Home Equity			Consumer and Other			Total
	(In thousands)
Allowance for loan losses, ending 3/31/13	$	161,035		$	263,126		$	30,871		$	455,032
Provision for loan losses		(8,212	)		53,290			1,071			46,149
Charge-offs, net		(9,254	)		(37,379	)		(3,602	)		(50,235	)
Allowance for loan losses, ending 6/30/13	$	143,569		$	279,037		$	28,340		$	450,946
	Three Months Ended September 30, 2012
	One- to Four- Family			Home Equity			Consumer and Other			Total
	(In thousands)
Allowance for loan losses, ending 6/30/12	$	215,934		$	266,883		$	42,939		$	525,756
Provision for loan losses		24,702			105,022			11,295			141,019
Charge-offs, net		(34,236	)		(111,016	)		(13,241	)		(158,493	)
Allowance for loan losses, ending 9/30/12	$	206,400		$	260,889		$	40,993		$	508,282

Specific Valuation Allowance Activity(20)
	As of September 30, 2013
	Recorded Investment in Modifications before charge- offs		Charge-offs			Recorded Investment in Modifications		Specific Valuation Allowance			Net Investment in Modifications		Specific Valuation Allowance as a % of Modifications		Total Expected Losses(21)
	(Dollars in thousands)
One- to four-family	$	1,374,603	$	(319,418	)	$	1,055,185	$	(67,764	)	$	987,421	6	%	28	%
Home equity		347,926		(150,036	)		197,890		(67,575	)		130,315	34	%	63	%
Total	$	1,722,529	$	(469,454	)	$	1,253,075	$	(135,339	)	$	1,117,736	11	%	35	%
	As of June 30, 2013
	Recorded Investment in Modifications before charge- offs		Charge-offs			Recorded Investment in Modifications		Specific Valuation Allowance			Net Investment in Modifications		Specific Valuation Allowance as a % of Modifications		Total Expected Losses(21)
	(Dollars in thousands)
One- to four-family	$	1,386,364	$	(323,727	)	$	1,062,637	$	(76,945	)	$	985,692	7	%	29	%
Home equity		359,447		(153,666	)		205,781		(65,147	)		140,634	32	%	61	%
Total	$	1,745,811	$	(477,393	)	$	1,268,418	$	(142,092	)	$	1,126,326	11	%	35	%
	As of September 30, 2012
	Recorded Investment in Modifications before charge- offs		Charge-offs			Recorded Investment in Modifications		Specific Valuation Allowance			Net Investment in Modifications		Specific Valuation Allowance as a % of Modifications		Total Expected Losses(21)
	(Dollars in thousands)
One- to four-family	$	1,374,800	$	(311,122	)	$	1,063,678	$	(98,628	)	$	965,050	9	%	30	%
Home equity		405,302		(156,809	)		248,493		(92,702	)		155,791	37	%	62	%
Total	$	1,780,102	$	(467,931	)	$	1,312,171	$	(191,330	)	$	1,120,841	15	%	37	%

Average Enterprise Balance Sheet Data
	Three Months Ended
	September 30, 2013
	Average			Operating Interest			Average
	Balance			Inc./Exp.			Yield/Cost
Enterprise interest-earning assets:	(In thousands)
Loans(22)	$	9,288,330		$	96,365			4.15	%
Available-for-sale securities		13,011,124			68,764			2.11	%
Held-to-maturity securities		9,853,077			64,486			2.62	%
Margin receivables		5,938,256			56,073			3.75	%
Cash and equivalents		1,543,689			766			0.20	%
Segregated cash		516,756			114			0.09	%
Securities borrowed and other		661,039			11,793			7.08	%
Total enterprise interest-earning assets	$	40,812,271			298,361			2.92	%
Enterprise interest-bearing liabilities:
Deposits	$	25,804,278			3,306			0.05	%
Customer payables		5,547,910			2,053			0.15	%
Securities sold under agreements to repurchase		4,445,606			37,431			3.29	%
FHLB advances and other borrowings		1,291,738			17,152			5.20	%
Securities loaned and other		874,193			33			0.01	%
Total enterprise interest-bearing liabilities	$	37,963,725			59,975			0.62	%
Enterprise net interest income/spread(9)				$	238,386			2.30	%
	Three Months Ended
	June 30, 2013
	Average			Operating Interest			Average
	Balance			Inc./Exp.			Yield/Cost
Enterprise interest-earning assets:	(In thousands)
Loans(22)	$	9,810,788		$	102,188			4.17	%
Available-for-sale securities		12,399,516			66,808			2.16	%
Held-to-maturity securities		9,769,854			61,264			2.51	%
Margin receivables		5,674,983			53,939			3.81	%
Cash and equivalents		1,364,796			718			0.21	%
Segregated cash		467,944			118			0.10	%
Securities borrowed and other		678,591			13,456			7.95	%
Total enterprise interest-earning assets	$	40,166,472			298,491			2.97	%
Enterprise interest-bearing liabilities:
Deposits	$	25,598,389			3,221			0.05	%
Customer payables		5,292,674			1,842			0.14	%
Securities sold under agreements to repurchase		4,464,506			37,010			3.28	%
FHLB advances and other borrowings		1,287,348			17,101			5.26	%
Securities loaned and other		856,421			34			0.02	%
Total enterprise interest-bearing liabilities	$	37,499,338			59,208			0.62	%
Enterprise net interest income/spread(9)				$	239,283			2.35	%
	Three Months Ended
	September 30, 2012
	Average			Operating Interest			Average
	Balance			Inc./Exp.			Yield/Cost
Enterprise interest-earning assets:	(In thousands)
Loans(22)	$	11,727,325		$	118,747			4.05	%
Available-for-sale securities		14,992,705			82,959			2.21	%
Held-to-maturity securities		8,984,586			61,923			2.76	%
Margin receivables		5,604,036			55,465			3.94	%
Cash and equivalents		2,268,833			1,219			0.21	%
Segregated cash		693,057			115			0.07	%
Securities borrowed and other		582,746			11,897			8.12	%
Total enterprise interest-earning assets	$	44,853,288			332,325			2.96	%
Enterprise interest-bearing liabilities:
Deposits	$	28,631,403			5,885			0.08	%
Customer payables		5,646,155			2,839			0.20	%
Securities sold under agreements to repurchase		4,709,203			40,136			3.34	%
FHLB advances and other borrowings		2,622,282			24,153			3.60	%
Securities loaned and other		705,235			30			0.02	%
Total enterprise interest-bearing liabilities	$	42,314,278			73,043			0.68	%
Enterprise net interest income/spread(9)				$	259,282			2.28	%
Reconciliation from Enterprise Net Interest Income to Net Operating Interest Income
	Three Months Ended
	September 30,			June 30,			September 30,
		2013			2013			2012
	(In thousands)
Enterprise net interest income	$	238,386		$	239,283		$	259,282
Taxable equivalent interest adjustment(23)		(294	)		(254	)		(298	)
Earnings on customer cash held by third parties and other(24)		2,755			3,512			1,893
Net operating interest income	$	240,847		$	242,541		$	260,877

Explanation of Non-GAAP Measures and Certain Metrics

Management believes that tangible book value per share, corporate cash, EBITDA, adjusted EBITDA, interest coverage, adjusted interest coverage, Bank earnings before taxes and before credit losses, E*TRADE Bank Tier 1 common ratio 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 the Company’s current performance, prospects and valuation. Management uses non-GAAP information internally to evaluate operating performance and in formulating the 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 (8) 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 regulated subsidiaries. See the Company’s 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 the Company’s performance by excluding certain non-cash charges and expenses that are not directly related to the performance of the business.

Adjusted EBITDA

Adjusted EBITDA represents net income (loss) before taxes, depreciation and amortization, corporate interest expense and impairment of goodwill. Management believes that adjusted EBITDA provides a useful additional measure of the Company’s performance by excluding certain non-cash charges and expenses, including impairment of goodwill, that are not directly related to the performance of the 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 the Company’s ability to continue to meet interest obligations and liquidity needs. See endnote (10) for a reconciliation of this non-GAAP measure to the comparable GAAP measure.

Adjusted Interest Coverage

Adjusted interest coverage represents adjusted EBITDA divided by corporate interest expense. Management believes that by excluding the charges and expenses, including impairment of goodwill, that are excluded from adjusted EBITDA, adjusted interest coverage provides a useful additional measure of the Company’s ability to continue to meet interest obligations and liquidity needs. See endnote (10) 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 wholesale borrowings. 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 (11) for a reconciliation of this non-GAAP measure to the comparable GAAP measure.

E*TRADE Bank Tier 1 Common Ratio and 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 Bank’s and E*TRADE Financial’s Tier 1 common ratios are 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 E*TRADE Bank’s and the Company’s capital strength. See endnotes (4), (18) and (19) for reconciliations of these non-GAAP measures to the comparable GAAP measures.

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 the Company’s 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 $75 million sale price is based on the tangible capital in G1 Execution Services as of September 30, 2013 as well as $27 million of additional purchase price. The amount of tangible capital in the business could change through the closing of a sale which could impact the final sales price.

(2) The following table provides reconciliation for the operating expense, excluding one-time items related to impairment of goodwill and restructuring and severance costs (dollars in millions):

	Q3 2013		Q2 2013
Total operating expense	$	271	$	414
Add back:
Impairment of goodwill related to the market making business		-		142
Facility restructuring and severance expense		6		10
Adjusted total operating expense	$	265	$	262

(3) The Tier 1 leverage, Tier 1 risk-based capital and total risk-based capital ratios at E*TRADE Bank are Q313 estimates and calculated as follows (dollars in millions):

	Q3 2013			Q2 2013			Q3 2012
E*TRADE Bank shareholder's equity	$	5,752.9		$	5,749.5		$	5,676.0
DEDUCT:
Losses in OCI on AFS debt securities and cash flow hedges, net of tax		(426.2	)		(444.7	)		(307.4	)
Goodwill & other intangible assets, net of deferred tax liabilities		1,546.8			1,568.6			1,607.4
Subtotal		4,632.3			4,625.6			4,376.0
DEDUCT:
Disallowed servicing assets and deferred tax assets		619.2			653.7			735.1
E*TRADE Bank Tier 1 capital		4,013.1			3,971.9			3,640.9
ADD:
Allowable allowance for loan losses		229.5			232.4			256.9
E*TRADE Bank total capital	$	4,242.6		$	4,204.3		$	3,897.8
E*TRADE Bank total assets	$	44,395.2		$	43,951.6		$	48,752.5
DEDUCT:
Gains (losses) in OCI on AFS debt securities and cash flow asset hedges, net of tax		(106.8	)		(112.4	)		140.2
Goodwill & other intangible assets, net of deferred tax liabilities		1,546.8			1,568.6			1,607.4
Subtotal		42,955.2			42,495.4			47,004.9
DEDUCT:
Disallowed servicing assets and deferred tax assets		619.2			653.7			735.1
E*TRADE Bank total assets for leverage capital purposes	$	42,336.0		$	41,841.7		$	46,269.8
E*TRADE Bank total risk-weighted assets(a)	$	18,075.0		$	18,320.2		$	20,211.2
E*TRADE Bank Tier 1 leverage ratio (Tier 1 capital / Average total assets for leverage capital purposes)		9.5	%		9.5	%		7.9	%
E*TRADE Bank Tier 1 capital / Total risk-weighted assets		22.2	%		21.7	%		18.0	%
E*TRADE Bank total capital / Total risk-weighted assets		23.5	%		22.9	%		19.3	%

^(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.

(4) The Tier 1 leverage, Tier 1 risk-based capital and total risk-based capital ratios at E*TRADE Financial are Q313 estimates based on the Federal Reserve regulatory minimum well-capitalized requirements. E*TRADE Financial is not currently subject to capital requirements; however, the implementation of holding company capital requirements are expected to become effective in 2015 as a result of the Dodd-Frank Act. Management believes these ratios are an important measure of the Company's capital strength and accordingly manages capital against the current capital ratios that apply to bank holding companies in preparation for the application of these requirements. The Tier 1 leverage, Tier 1 risk-based capital and total risk-based capital ratios are calculated as follows (dollars in millions):

	Q3 2013			Q2 2013			Q3 2012
E*TRADE Financial shareholders' equity	$	4,829.6		$	4,760.6		$	5,093.9
DEDUCT:
Losses in OCI on AFS debt securities and cash flow hedges, net of tax		(426.2	)		(444.7	)		(307.6	)
Goodwill & other intangible assets, net of deferred tax liabilities		1,681.4			1,703.2			1,897.6
ADD:
Qualifying restricted core capital elements (TRUPs)(a)		433.0			433.0			433.0
Subtotal		4,007.4			3,935.1			3,936.9
DEDUCT:
Disallowed servicing assets and deferred tax assets		1,223.6			1,252.8			1,259.1
E*TRADE Financial Tier 1 capital		2,783.8			2,682.3			2,677.8
ADD:
Allowable allowance for loan losses		230.9			234.5			261.6
E*TRADE Financial total capital	$	3,014.7		$	2,916.8		$	2,939.4
E*TRADE Financial total average assets	$	45,123.9		$	44,917.8		$	49,400.8
DEDUCT:
Goodwill & other intangible assets, net of deferred tax liabilities		1,681.4			1,703.2			1,897.6
Subtotal		43,442.5			43,214.6			47,503.2
DEDUCT:
Disallowed servicing assets and deferred tax assets		1,223.6			1,252.8			1,259.1
Average total assets for leverage capital purposes	$	42,218.9		$	41,961.8		$	46,244.1
E*TRADE Financial total risk-weighted assets(b)	$	18,199.6		$	18,502.1		$	20,614.9
E*TRADE Financial Tier 1 leverage ratio (Tier 1 capital / Average total assets for leverage capital purposes)		6.6	%		6.4	%		5.8	%
E*TRADE Financial Tier 1 capital / Total risk-weighted assets		15.3	%		14.5	%		13.0	%
E*TRADE Financial total capital / Total risk-weighted assets		16.6	%		15.8	%		14.3	%

^(a) The Company is continuing to include TRUPs in E*TRADE Financial’s Tier 1 capital due to the regulatory agencies announcement of a delay in the implementation of the TRUPs phase-out.

^(b) 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.

(5) Reflects elimination of transactions between Trading and Investing and Balance Sheet Management segments, which includes deposit and intercompany transfer pricing arrangements.

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

(7) 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.

(8) 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 millions, except per share amounts):

	Q3 2013			Q2 2013			Q3 2012
Book value	$	4,829.6		$	4,760.6		$	5,093.9
Less: Goodwill and other intangibles, net		(2,013.4	)		(2,019.1	)		(2,201.2	)
Less: Deferred tax liability related to goodwill		332.0			316.0			303.6
Tangible book value	$	3,148.2		$	3,057.5		$	3,196.3

	Q3 2013			Q2 2013			Q3 2012
Book value per share	$	16.82		$	16.59		$	17.81
Less: Goodwill and other intangibles, net per share		(7.01	)		(7.03	)		(7.70	)
Less: Deferred tax liability related to goodwill per share		1.15			1.10			1.06
Tangible book value per share	$	10.96		$	10.66		$	11.17

(9) 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.

(10) Interest coverage represents the ratio of the Company’s EBITDA to its corporate interest expense. Adjusted interest coverage represents the ratio of the Company’s adjusted EBITDA to its corporate interest expense. The interest coverage ratio based on the Company’s net income (loss) was 1.7, (1.9), and (0.6) for the three months ended September 30, 2013, June 30, 2013, and September 30, 2012, respectively.

(11) 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 wholesale borrowings. 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 (loss) before income taxes (dollars in millions):

	Q3 2013			Q2 2013			Q3 2012
Income (loss) before income taxes	$	79.9		$	(47.8	)	$	(36.3	)
Add back:
Non-bank loss before income tax benefit(b)		55.7			184.5			67.2
Provision for loan losses		37.4			46.1			141.0
Gains on loans and securities, net		(12.2	)		(21.0	)		(79.0	)
Net impairment		0.6			0.6			2.4
Losses on early extinguishment of wholesale borrowings		-			-			50.6
Bank earnings before taxes and before credit losses	$	161.4		$	162.4		$	145.9

^(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.

(12) The brokerage account attrition rate is calculated by dividing attriting brokerage accounts, which are gross new brokerage accounts less net new brokerage accounts, by total brokerage accounts at the previous period end. This rate is presented on an annualized basis.

(13) Customer cash balances held by third parties are held outside E*TRADE Financial and include money market funds and sweep deposit accounts at unaffiliated financial institutions. Customer cash balances held by third parties are not reflected in the Company’s consolidated balance sheet.

(14) 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.

(15) 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 2013		Q2 2013		Q3 2012
One- to four-family	$	424	$	439	$	463
Home equity		286		293		310
Total charge-offs	$	710	$	732	$	773

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

(17) The TDR loan performance detail is a subset of the Company’s total loan performance. TDRs include loan modifications performed under the Company’s modification programs. Beginning in Q412, loans that had been charged-off due to bankruptcy notification were also considered TDRs.

(18) The Tier 1 common ratio at E*TRADE Bank is a Q313 estimate and is a non-GAAP measure. Management believes this ratio is an important measure of E*TRADE Bank's capital strength. The E*TRADE Bank Tier 1 common ratio is calculated as follows (dollars in millions):

	Q3 2013			Q2 2013			Q3 2012
E*TRADE Bank shareholder's equity	$	5,752.9		$	5,749.5		$	5,676.0
DEDUCT:
Losses in OCI on AFS debt securities and cash flow hedges, net of tax		(426.2	)		(444.7	)		(307.4	)
Goodwill and other intangible assets, net of deferred tax liabilities		1,546.8			1,568.6			1,607.4
Subtotal		4,632.3			4,625.6			4,376.0
DEDUCT:
Disallowed servicing assets and deferred tax assets		619.2			653.7			735.1
E*TRADE Bank Tier 1 common	$	4,013.1		$	3,971.9		$	3,640.9
E*TRADE Bank total risk-weighted assets(a)	$	18,075.0		$	18,320.2		$	20,211.2
E*TRADE Bank Tier 1 common / Total risk-weighted assets		22.2	%		21.7	%		18.0	%

^(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.

(19) The Tier 1 common ratio at E*TRADE Financial is a Q313 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 millions):

	Q3 2013			Q2 2013			Q3 2012
E*TRADE Financial shareholders' equity	$	4,829.6		$	4,760.6		$	5,093.9
DEDUCT:
Losses in OCI on AFS debt securities and cash flow hedges, net of tax		(426.2	)		(444.7	)		(307.6	)
Goodwill & other intangible assets, net of deferred tax liabilities		1,681.4			1,703.2			1,897.6
Subtotal		3,574.4			3,502.1			3,503.9
DEDUCT:
Disallowed servicing assets and deferred tax assets		1,223.6			1,252.8			1,259.1
E*TRADE Financial Tier 1 common	$	2,350.8		$	2,249.3		$	2,244.8
E*TRADE Financial total risk-weighted assets(a)	$	18,199.6		$	18,502.1		$	20,614.9
E*TRADE Financial Tier 1 common / Total risk-weighted assets		12.9	%		12.2	%		10.9	%

^(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.

(20) Modifications are a subset of TDRs, and represent loan modifications performed under the Company’s modification programs. They do not include loans that have been charged-off due to the Company receiving notification of bankruptcy if the loan has not been modified previously by the Company. The following table shows the reconciliation of total TDRs that had a modification and those which the Company received a notification of bankruptcy (dollars in millions):

	Q3 2013		Q2 2013		Q3 2012
Modified loans	$	1,253	$	1,268	$	1,312
Bankruptcy loans		196		201		-
Total TDRs	$	1,449	$	1,469	$	1,312

(21) The total expected losses on modifications includes both the previously recorded charge-offs and the specific valuation allowance.

(22) Excludes loans to customers on margin.

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

(24) Includes interest earned on average customer assets of $12.0 billion, $11.2 billion, and $3.9 billion for the quarters ended September 30, 2013, June 30, 2013, and September 30, 2012, respectively, held by third parties outside E*TRADE Financial, including money market funds and sweep deposit accounts at unaffiliated financial institutions.

CONTACT:
E*TRADE Financial Media Relations
Thayer Fox, 646-521-4418
thayer.fox@etrade.com
or
E*TRADE Financial Investor Relations
Brett Goodman, 646-521-4406
brett.goodman@etrade.com