E Trade Financial (ETFC) 8-K E*TRADE Financial Corporation Announces Fourth Quarter and Full Year 2015 Results

Exhibit 99.1

E*TRADE Financial Corporation Announces Fourth Quarter and Full Year 2015 Results

NEW YORK--(BUSINESS WIRE)--January 21, 2016--E*TRADE Financial Corporation (NASDAQ:ETFC):

Fourth Quarter Results

• Net income of $89 million, or $0.30 per diluted share
• Total net revenue of $454 million
• Allowance for loan losses of $353 million resulting in a benefit to provision for loan losses of $23 million
• Total operating expenses of $305 million, including a one-time charge to communications expense of $8 million and executive severance of $6 million
• Daily Average Revenue Trades (DARTs) of 147,000
• End of period margin receivables of $7.4 billion
• Net new brokerage accounts of 13,000 and an annualized attrition rate of 8.2 percent, excluding the impact of shutting down the Company’s global trading platform⁽¹⁾
• Net new brokerage assets of $2.8 billion; end of period total customer assets of $288 billion
• Utilized $50 million to repurchase 1.7 million shares at an average price of $30.10

Full Year 2015 Results

• Net income of $268 million, or $0.91 per diluted share
• Adjusted net income of $344 million⁽²⁾, or $1.17 per diluted share⁽²⁾, excluding charges related to the termination of wholesale funding obligations in the third quarter, an income tax benefit related to finalizing an IRS audit in the second quarter, and charges related to early extinguishment of corporate debt in the first quarter
• Total adjusted net revenue of $1.8 billion⁽²⁾, excluding $370 million of losses related to the termination of wholesale funding obligations
• Total operating expenses of $1.2 billion, including executive severance of $12 million, a $9 million charge related to a third party contract amendment, and an $8 million one-time charge to communications expense
• Benefit to provision for loan losses of $40 million
• DARTs of 155,000
• Net new brokerage accounts of 96,000 and an attrition rate of 8.9% excluding the impact of escheatment and shutting down the Company’s global trading platform⁽¹⁾
• Net new brokerage assets of $9.3 billion

E*TRADE Financial Corporation (NASDAQ:ETFC) today announced results for its fourth quarter ended December 31, 2015, reporting net income of $89 million, or $0.30 per diluted share. This compares to a net loss of $153 million, or $0.53 per diluted share, in the prior quarter, which includes pre-tax charges of $413 million related to the termination of wholesale funding obligations⁽²⁾. This also compares to net income of $41 million, or $0.14 per diluted share, in the fourth quarter of 2014, which includes a pre-tax loss of $59 million related to the early extinguishment of corporate debt⁽²⁾. Total net revenue was $454 million, compared to $73 million, or adjusted net revenue of $443 million⁽²⁾, in the prior quarter and $461 million in the fourth quarter of 2014. The fourth quarter also included an elevated tax rate of 43%, largely related to the impact of the prior quarter’s wholesale funding transaction on the full year pre-tax income and the associated impact on non-deductible items.

“Closing the chapter on 2015, E*TRADE is in a better position than it has ever been,” said Paul Idzik, Chief Executive Officer. “Completing much of the foundational work, we turned our focus to customer-facing enhancements – providing a series of new tools and revamped functionality across our site, active trading platform, and mobile apps. We also covered significant ground on the financial side of things – embarking upon four major capital deployment actions during the year. We reduced corporate debt to target levels, repositioned our balance sheet by eliminating costly wholesale funding, began growing assets to maximize returns, and launched a share repurchase program. The totality of our efforts and progress are emblematic of our vastly improved state as an institution, and were reflected in our improved regulatory standing and investment grade credit ratings. Entering 2016 from a position of strength, we are focused on continuing to deliver for our customers and owners, and seizing opportunities to grow our franchise and deploy capital for their benefit.”

E*TRADE reported DARTs of 147,000 during the quarter, a decrease of 6 percent from the prior quarter and 13 percent versus the same quarter a year ago. DARTs for the full year were 155,000, down from 168,000 in 2014.

The Company ended the quarter with 3.2 million brokerage accounts, an increase of 13,000⁽¹⁾ from the prior quarter. This compared to 19,000⁽¹⁾ net new brokerage accounts in the third quarter and 17,000 in the fourth quarter of 2014. For the full year, the Company added 96,000 net new brokerage accounts⁽¹⁾. Brokerage account attrition for the fourth quarter was 8.2 percent annualized⁽¹⁾. For the full year, attrition was 8.9⁽¹⁾ percent compared to 8.7 percent in 2014.

The Company ended the quarter with $288 billion in total customer assets, compared with $277 billion at the end of the prior quarter and $290 billion a year ago.

During the quarter, customers added $2.8 billion in net new brokerage assets. Brokerage related cash increased by $1.5 billion to $41.7 billion during the fourth quarter as customers were net sellers of approximately $0.3 billion of securities. Margin receivables averaged $7.5 billion in the quarter, down 6 percent from the prior quarter and down 5 percent year over year, ending the quarter at $7.4 billion.

Corporate cash ended the quarter at $447 million⁽³⁾, an increase of $15 million from the prior quarter, as a $50 million dividend from E*TRADE Securities was offset by the utilization of $50 million to repurchase shares.

Net operating interest income⁽⁴⁾ for the fourth quarter was $285 million, up from $263 million in the prior quarter and $279 million a year ago. Fourth quarter results reflected a net interest spread of 2.88 percent on average interest-earning assets of $39.4 billion, compared with 2.58 percent on $40.4 billion in the prior quarter and 2.69 percent on $40.9 billion in the fourth quarter of 2014.

Commissions, fees and service charges⁽⁴⁾, and other revenue in the fourth quarter were $160 million, compared to $170 million in the prior quarter and $176 million in the fourth quarter of 2014. Average commission per trade for the quarter was $10.66, down from $10.87 in the prior quarter and $10.84 in the fourth quarter of 2014. Total net revenue in the quarter also included $9 million of net gains on securities and other. This compared with $10 million in the prior quarter and $6 million in the fourth quarter of 2014.

Total operating expenses in the quarter of $305 million increased $12 million sequentially and $11 million from the year ago period. Communications expense included a one-time third party contract charge of $8 million, and restructuring expense included executive severance of $6 million.

The Company’s total assets ended the quarter at $45.4 billion, an increase of $4.2 billion from the prior quarter. The increase was driven primarily by the movement of $3.7 billion of customer assets held at third party institutions onto the Company's balance sheet during the quarter.

The Company’s loan portfolio ended the quarter at $5.0 billion, contracting approximately $0.3 billion from the prior quarter. Net charge-offs in the quarter were $0 compared with $1 million in the prior quarter and $7 million in the fourth quarter of 2014. The allowance for loan losses ended the quarter at $353 million, down from $376 million in the prior quarter and $404 million in the fourth quarter of 2014. The decrease in the allowance resulted in a benefit to provision for loan losses of $23 million, which compared with a benefit of $25 million in the previous quarter and a provision of $10 million in the fourth quarter of 2014.

As of December 31, 2015, the Company reported bank and consolidated Tier 1 leverage ratios of 9.7 percent⁽⁵⁾ and 9.0 percent⁽⁶⁾, compared with 9.2 percent⁽⁵⁾ and 8.5 percent⁽⁶⁾ in the previous quarter.

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 p.m. ET today. This conference call will be available to domestic participants by dialing 800-682-8593 while international participants should dial +1 303-223-4395. A live audio webcast and replay of this conference call will also be available at about.etrade.com.

About E*TRADE Financial

E*TRADE Financial and its subsidiaries provide 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 (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 continued growth in our business and the ability to drive value for our customers and owners are “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995, and are subject to a number of uncertainties and risks. Actual results may differ materially from those indicated in the forward-looking statements. The uncertainties and risks include, but are not limited to, macro trends of the economy in general and the residential real estate market, market volatility, 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 more restrictive policies or interpretations of the Federal Reserve and 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.

© 2016 E*TRADE Financial Corporation. All rights reserved.

Financial Statements(4)
E*TRADE FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statement of Income
(In millions, except share data and per share amounts)
(Unaudited)
	Three Months Ended						Twelve Months Ended
	December 31,						December 31,
		2015			2014			2015			2014
Revenue:
Operating interest income	$	292		$	326		$	1,215		$	1,279
Operating interest expense		(7	)		(47	)		(129	)		(205	)
Net operating interest income		285			279			1,086			1,074
Commissions		99			115			424			456
Fees and service charges		51			52			210			200
Principal transactions		-			-			-			10
Gains (losses) on securities and other		9			6			(331	)		36
Other revenues		10			9			39			38
Total non-interest income		169			182			342			740
Total net revenue		454			461			1,428			1,814
Provision (benefit) for loan losses		(23	)		10			(40	)		36
Operating expense:
Compensation and benefits		112			107			466			412
Advertising and market development		35			32			124			120
Clearing and servicing		23			22			95			94
FDIC insurance premiums		5			18			41			79
Professional services		26			33			103			112
Occupancy and equipment		24			20			88			79
Communications		28			18			90			71
Depreciation and amortization		20			18			81			78
Amortization of other intangibles		5			6			20			22
Restructuring and other exit activities		9			2			17			8
Other operating expenses		18			18			82			70
Total operating expense		305			294			1,207			1,145
Income before other income (expense) and income tax expense (benefit)		172			157			261			633
Other income (expense):
Corporate interest expense		(15	)		(27	)		(65	)		(113	)
Losses on early extinguishment of debt		-			(59	)		(112	)		(71	)
Other		-			-			7			3
Total other income (expense)		(15	)		(86	)		(170	)		(181	)
Income before income tax expense (benefit)		157			71			91			452
Income tax expense (benefit)		68			30			(177	)		159
Net income	$	89		$	41		$	268		$	293
Basic earnings per share	$	0.31		$	0.14		$	0.92		$	1.02
Diluted earnings per share	$	0.30		$	0.14		$	0.91		$	1.00
Shares used in computation of per share data:
Basic (in thousands)		292,713			289,209			290,762			288,705
Diluted (in thousands)		294,947			294,364			295,011			294,103

E*TRADE FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statement of Income (Loss)
(In millions, except share data and per share amounts)
(Unaudited)
	Three Months Ended
	December 31,			September 30,			December 31,
		2015			2015			2014
Revenue:
Operating interest income	$	292		$	297		$	326
Operating interest expense		(7	)		(34	)		(47	)
Net operating interest income		285			263			279
Commissions		99			108			115
Fees and service charges		51			52			52
Gains (losses) on securities and other		9			(360	)		6
Other revenues		10			10			9
Total non-interest income (loss)		169			(190	)		182
Total net revenue		454			73			461
Provision (benefit) for loan losses		(23	)		(25	)		10
Operating expense:
Compensation and benefits		112			123			107
Advertising and market development		35			23			32
Clearing and servicing		23			23			22
FDIC insurance premiums		5			7			18
Professional services		26			24			33
Occupancy and equipment		24			21			20
Communications		28			24			18
Depreciation and amortization		20			21			18
Amortization of other intangibles		5			5			6
Restructuring and other exit activities		9			2			2
Other operating expenses		18			20			18
Total operating expense		305			293			294
Income (loss) before other income (expense) and income tax expense (benefit)		172			(195	)		157
Other income (expense):
Corporate interest expense		(15	)		(14	)		(27	)
Losses on early extinguishment of debt		-			(39	)		(59	)
Other		-			2			-
Total other income (expense)		(15	)		(51	)		(86	)
Income (loss) before income tax expense (benefit)		157			(246	)		71
Income tax expense (benefit)		68			(93	)		30
Net income (loss)	$	89		$	(153	)	$	41
Basic earnings (loss) per share	$	0.31		$	(0.53	)	$	0.14
Diluted earnings (loss) per share	$	0.30		$	(0.53	)	$	0.14
Shares used in computation of per share data:
Basic (in thousands)		292,713			290,480			289,209
Diluted (in thousands)		294,947			290,480			294,364

E*TRADE FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheet
(In millions, except share data)
(Unaudited)
	December 31,			September 30,			December 31,
		2015			2015			2014
ASSETS
Cash and equivalents	$	2,233		$	1,453		$	1,783
Cash required to be segregated under federal or other regulations		1,057			143			555
Available-for-sale securities		12,589			10,680			12,388
Held-to-maturity securities		13,013			11,586			12,248
Receivables from brokers, dealers and clearing organizations		520			530			884
Margin receivables		7,398			7,933			7,675
Loans receivable, net		4,613			4,906			5,979
Property and equipment, net		236			236			245
Goodwill		1,792			1,792			1,792
Other intangibles, net		174			179			194
Deferred tax assets, net		1,033			1,044			950
Other assets		769			723			837
Total assets	$	45,427		$	41,205		$	45,530
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits	$	29,445		$	25,610		$	24,890
Paybles to brokers, dealers and clearing organizations		1,576			1,729			1,699
Customer payables		6,544			6,040			6,455
Other borrowings		491			414			4,971
Corporate debt		997			1,023			1,366
Other liabilities		575			577			774
Total liabilities		39,628			35,393			40,155
Shareholders' equity:
Common stock, $0.01 par value, shares authorized: 400,000,000 at
December 31, 2015, September 30, 2015 and December 31, 2014, shares issued
and outstanding: 291,335,241 at December 31, 2015, 290,428,994 at
September 30, 2015 and 289,272,576 at December 31, 2014		3			3			3
Additional paid-in-capital		7,356			7,368			7,350
Accumulated deficit		(1,461	)		(1,550	)		(1,729	)
Accumulated other comprehensive loss		(99	)		(9	)		(249	)
Total shareholders' equity		5,799			5,812			5,375
Total liabilities and shareholders' equity	$	45,427		$	41,205		$	45,530

Segment Reporting
	Three Months Ended December 31, 2015
	Trading and Investing			Balance Sheet Management			Corporate/ Other			Eliminations(7)			Total
	(In millions)
Revenue:
Operating interest income	$	189		$	197		$	-		$	(94	)	$	292
Operating interest expense		(4	)		(97	)		-			94			(7	)
Net operating interest income		185			100			-			-			285
Commissions		99			-			-			-			99
Fees and service charges		51			-			-			-			51
Gains on securities and other		-			9			-			-			9
Other revenues		9			1			-			-			10
Total non-interest income (loss)		159			10			-			-			169
Total net revenue		344			110			-			-			454
Provision (benefit) for loan losses		-			(23	)		-			-			(23	)
Operating expense:
Compensation and benefits		73			3			36			-			112
Advertising and market development		35			-			-			-			35
Clearing and servicing		16			7			-			-			23
FDIC insurance premiums		-			5			-			-			5
Professional services		11			1			14			-			26
Occupancy and equipment		20			1			3			-			24
Communications		28			-			-			-			28
Depreciation and amortization		16			-			4			-			20
Amortization of other intangibles		5			-			-			-			5
Restructuring and other exit activities		-			-			9			-			9
Other operating expenses		9			3			6			-			18
Total operating expense		213			20			72			-			305
Segment income (loss) before other income (expense)		131			113			(72	)		-			172
Other income (expense):
Corporate interest expense		-			-			(15	)		-			(15	)
Total other income (expense)		-			-			(15	)		-			(15	)
Segment income (loss)	$	131		$	113		$	(87	)	$	-		$	157
	Three Months Ended September 30, 2015
	Trading and Investing			Balance Sheet Management			Corporate/ Other			Eliminations(7)			Total
	(In millions)
Revenue:
Operating interest income	$	179		$	201		$	-		$	(83	)	$	297
Operating interest expense		(5	)		(112	)		-			83			(34	)
Net operating interest income		174			89			-			-			263
Commissions		108			-			-			-			108
Fees and service charges		51			1			-			-			52
Gains (losses) on securities and other		-			(360	)		-			-			(360	)
Other revenues		9			1			-			-			10
Total non-interest income (loss)		168			(358	)		-			-			(190	)
Total net revenue		342			(269	)		-			-			73
Provision (benefit) for loan losses		-			(25	)		-			-			(25	)
Operating expense:
Compensation and benefits		80			3			40			-			123
Advertising and market development		23			-			-			-			23
Clearing and servicing		15			8			-			-			23
FDIC insurance premiums		-			7			-			-			7
Professional services		10			1			13			-			24
Occupancy and equipment		17			-			4			-			21
Communications		22			1			1			-			24
Depreciation and amortization		16			-			5			-			21
Amortization of other intangibles		5			-			-			-			5
Restructuring and other exit activities		-			-			2			-			2
Other operating expenses		9			3			8			-			20
Total operating expense		197			23			73			-			293
Segment income (loss) before other income (expense)		145			(267	)		(73	)		-			(195	)
Other income (expense):
Corporate interest expense		-			-			(14	)		-			(14	)
Losses on early extinguishment of debt		-			-			(39	)		-			(39	)
Other		-			-			2			-			2
Total other income (expense)		-			-			(51	)		-			(51	)
Segment income (loss)	$	145		$	(267	)	$	(124	)	$	-		$	(246	)
	Three Months Ended December 31, 2014
	Trading and Investing			Balance Sheet Management			Corporate/ Other			Eliminations(7)			Total
	(In millions)
Revenue:
Operating interest income	$	172		$	223		$	1		$	(70	)	$	326
Operating interest expense		(3	)		(114	)		-			70			(47	)
Net operating interest income		169			109			1			-			279
Commissions		115			-			-			-			115
Fees and service charges		52			-			-			-			52
Gains on securities and other		-			6			-			-			6
Other revenues		7			2			-			-			9
Total non-interest income (loss)		174			8			-			-			182
Total net revenue		343			117			1			-			461
Provision (benefit) for loan losses		-			10			-			-			10
Operating expense:
Compensation and benefits		69			3			35			-			107
Advertising and market development		32			-			-			-			32
Clearing and servicing		14			8			-			-			22
FDIC insurance premiums		-			18			-			-			18
Professional services		15			1			17			-			33
Occupancy and equipment		15			1			4			-			20
Communications		17			-			1			-			18
Depreciation and amortization		14			-			4			-			18
Amortization of other intangibles		6			-			-			-			6
Restructuring and other exit activities		-			-			2			-			2
Other operating expenses		10			4			4			-			18
Total operating expense		192			35			67			-			294
Segment income (loss) before other income (expense)		151			72			(66	)		-			157
Other income (expense):
Corporate interest expense		-			-			(27	)		-			(27	)
Losses on early extinguishment of debt		-			-			(59	)		-			(59	)
Total other income (expense)		-			-			(86	)		-			(86	)
Segment income (loss)	$	151		$	72		$	(152	)	$	-		$	71

Key Performance Metrics(8)
Corporate Metrics	Qtr ended 12/31/15		Qtr ended 9/30/15		Qtr ended 12/31/15 vs. 9/30/15		Qtr ended 12/31/14		Qtr ended 12/31/15 vs. 12/31/14
Operating margin %(9)
Consolidated		38 %	N.M.		N.M.			34 %		4 %
Trading and Investing		38 %		42 %		(4)%		44 %		(6)%
Balance Sheet Management		103 %	N.M.		N.M.			62 %		41 %
Employees		3,421		3,310		3 %		3,221		6 %
Consultants and other		120		105		14 %		156		(23)%
Total headcount		3,541		3,415		4 %		3,377		5 %
Book value per share(10)	$	19.90	$	20.01		(1)%	$	18.58		7 %
Tangible book value per share(10)	$	14.65	$	14.68		0 %	$	13.08		12 %
Corporate cash ($MM)(3)	$	447	$	432		3 %	$	233		92 %
Enterprise net interest spread (basis points)(11)		288		258		12 %		269		7 %
Enterprise interest-earning assets, average ($MM)	$	39,414	$	40,399		(2)%	$	40,905		(4)%
Earnings before interest, taxes, depreciation &
amortization ("EBITDA") ($MM)
Net income (loss)	$	89	$	(153)		158 %	$	41		117 %
Income tax expense (benefit)		68		(93)		173 %		30		127 %
Depreciation & amortization		25		26		(4)%		24		4 %
Corporate interest expense		15		14		7 %		27		(44)%
EBITDA	$	197	$	(206)		196 %	$	122		61 %
Loss on termination of wholesale funding obligations	$	-	$	413	N.M.		$	-	N.M.
Adjusted EBITDA	$	197	$	207		(5)%	$	122		61 %
EBITDA interest coverage(12)		13.8		(14.5)	N.M.			4.5	N.M.
Adjusted EBITDA interest coverage(12)		13.8		14.5	N.M.			4.5	N.M.
E*TRADE Bank net income (loss) ($MM)(13)	$	97	$	(186)		152 %	$	112		(13)%
Trading and Investing Metrics	Qtr ended 12/31/15		Qtr ended 9/30/15		Qtr ended 12/31/15 vs. 9/30/15		Qtr ended 12/31/14		Qtr ended 12/31/15 vs. 12/31/14
Trading days		63.0		64.0	N.M.			63.0	N.M.
DARTs		146,949		155,985		(6)%		168,318		(13)%
Total trades (MM)		9.3		10.0		(7)%		10.6		(12)%
Average commission per trade	$	10.66	$	10.87		(2)%	$	10.84		(2)%
End of period margin receivables ($B)	$	7.4	$	7.9		(6)%	$	7.7		(4)%
Average margin receivables ($B)	$	7.5	$	8.0		(6)%	$	7.9		(5)%
Gross new brokerage accounts		79,397		93,324		(15)%		88,689		(10)%
Gross new stock plan accounts		94,326		110,731		(15)%		55,746		69 %
Gross new banking accounts		1,037		1,158		(10)%		1,528		(32)%
Closed accounts(1)		(119,268)		(145,359)	N.M.			(138,043)	N.M.
Net new accounts		55,492		59,854	N.M.			7,920	N.M.
Net new brokerage accounts(1)		10,010		2,205	N.M.			17,447	N.M.
Net new stock plan accounts		49,683		64,513	N.M.			55	N.M.
Net new banking accounts		(4,201)		(6,864)	N.M.			(9,582)	N.M.
Net new accounts		55,492		59,854	N.M.			7,920	N.M.
End of period brokerage accounts(1)		3,213,541		3,203,531		0 %		3,143,923		2 %
End of period stock plan accounts		1,408,153		1,358,470		4 %		1,263,784		11 %
End of period banking accounts		339,888		344,089		(1)%		362,044		(6)%
End of period total accounts		4,961,582		4,906,090		1 %		4,769,751		4 %
Annualized brokerage account attrition rate(1)(14)		8.7%		11.4%	N.M.			9.1%	N.M.
Customer Assets ($B)
Security holdings	$	203.8	$	197.0		3 %	$	204.7		0 %
Customer payables (cash)		6.5		6.0		8 %		6.5		0 %
Customer assets held by third parties(15)		11.2		13.9		(19)%		15.5		(28)%
Sweep deposits		24.0		20.3		18 %		19.1		26 %
Brokerage customer assets		245.5		237.2		3 %		245.8		0 %
Unexercised stock plan customer holdings (vested)		36.9		34.1		8 %		38.7		(5)%
Savings, checking and other banking customer assets		5.5		5.3		4 %		5.8		(5)%
Total customer assets	$	287.9	$	276.6		4 %	$	290.3		(1)%
Net new brokerage assets ($B)(16)	$	2.8	$	2.1	N.M.		$	3.5	N.M.
Net new banking assets ($B)(16)		0.1		(0.2)	N.M.			(0.1)	N.M.
Net new customer assets ($B)(16)	$	2.9	$	1.9	N.M.		$	3.4	N.M.
Brokerage related cash ($B)	$	41.7	$	40.2		4 %	$	41.1		1 %
Other customer cash and deposits ($B)		5.5		5.3		4 %		5.8		(5)%
Total customer cash and deposits ($B)	$	47.2	$	45.5		4 %	$	46.9		1 %
Stock plan customer holdings (unvested) ($B)	$	70.7	$	66.6		6 %	$	79.5		(11)%
Customer net (buy) / sell activity ($B)	$	0.3	$	(3.7)	N.M.		$	(1.2)	N.M.
Balance Sheet Management Metrics	Qtr ended 12/31/15		Qtr ended 9/30/15		Qtr ended 12/31/15 vs. 9/30/15		Qtr ended 12/31/14		Qtr ended 12/31/15 vs. 12/31/14
Loans receivable ($MM)
Average loans receivable	$	5,097	$	5,441	$	(344)	$	6,520	$	(1,423)
Ending loans receivable, net	$	4,613	$	4,906	$	(293)	$	5,979	$	(1,366)
Loan performance detail (all loans, including TDRs) ($MM)
One- to Four-Family
Current	$	2,296	$	2,440	$	(144)	$	2,833	$	(537)
30-89 days delinquent		72		60		12		88		(16)
90-179 days delinquent		26		22		4		28		(2)
Total 30-179 days delinquent		98		82		16		116		(18)
180+ days delinquent (net of $41M, $43M and $48M in
charge-offs for Q415, Q315 and Q414, respectively)		111		116		(5)		131		(20)
Total delinquent loans(17)		209		198		11		247		(38)
Gross loans receivable(18)	$	2,505	$	2,638		(133)	$	3,080		(575)
Home Equity
Current	$	1,981	$	2,149	$	(168)	$	2,710	$	(729)
30-89 days delinquent		52		47		5		60		(8)
90-179 days delinquent		31		28		3		29		2
Total 30-179 days delinquent		83		75		8		89		(6)
180+ days delinquent (net of $26M, $26M and $25M in
charge-offs for Q415, Q315 and Q414, respectively)		53		50		3		43		10
Total delinquent loans(17)		136		125		11		132		4
Gross loans receivable(18)	$	2,117	$	2,274		(157)	$	2,842		(725)
Consumer and Other
Current	$	337	$	363	$	(26)	$	453	$	(116)
30-89 days delinquent		6		6		-		7		(1)
90-179 days delinquent		1		1		-		1		-
Total 30-179 days delinquent		7		7		-		8		(1)
180+ days delinquent		-		-		-		-		-
Total delinquent loans		7		7		-		8		(1)
Gross loans receivable(18)	$	344	$	370		(26)	$	461		(117)
Total Loans Receivable
Current	$	4,614	$	4,952	$	(338)	$	5,996	$	(1,382)
30-89 days delinquent		130		113		17		155		(25)
90-179 days delinquent		58		51		7		58		-
Total 30-179 days delinquent		188		164		24		213		(25)
180+ days delinquent		164		166		(2)		174		(10)
Total delinquent loans(17)		352		330		22		387		(35)
Gross loans receivable(18)	$	4,966	$	5,282		(316)	$	6,383		(1,417)
TDR performance detail ($MM)(19)
One- to Four-Family TDRs
Current	$	212	$	224	$	(12)	$	232	$	(20)
30-89 days delinquent		19		18		1		24		(5)
90-179 days delinquent		8		8		-		12		(4)
Total 30-179 days delinquent		27		26		1		36		(9)
180+ days delinquent (net of $23M, $23M and $23M in
charge-offs for Q415, Q315 and Q414, respectively)		47		46		1		48		(1)
Total delinquent TDRs		74		72		2		84		(10)
TDRs	$	286	$	296		(10)	$	316		(30)
Home Equity TDRs
Current	$	162	$	171	$	(9)	$	178	$	(16)
30-89 days delinquent		11		10		1		14		(3)
90-179 days delinquent		8		7		1		6		2
Total 30-179 days delinquent		19		17		2		20		(1)
180+ days delinquent (net of $17M, $15M and $15M in
charge-offs for Q415, Q315 and Q414, respectively)		21		20		1		19		2
Total delinquent TDRs		40		37		3		39		1
TDRs	$	202	$	208		(6)	$	217		(15)
Total TDRs
Current	$	374	$	395	$	(21)	$	410	$	(36)
30-89 days delinquent		30		28		2		38		(8)
90-179 days delinquent		16		15		1		18		(2)
Total 30-179 days delinquent		46		43		3		56		(10)
180+ days delinquent		68		66		2		67		1
Total delinquent TDRs		114		109		5		123		(9)
TDRs	$	488	$	504		(16)	$	533		(45)
Capital Metrics(20)	Qtr ended 12/31/15		Qtr ended 9/30/15		Qtr ended 12/31/15 vs. 9/30/15		Qtr ended 12/31/14		Qtr ended 12/31/15 vs. 12/31/14
E*TRADE Bank
Tier 1 leverage ratio(5)		9.7%		9.2 %		0.5%		10.6 %		(0.9)%
Tier 1 risk-based capital ratio(5)		36.5%		36.0 %		0.5%		25.7 %		10.8%
Total risk-based capital ratio(5)		37.8%		37.3 %		0.5%		26.9 %		10.9%
Common Equity Tier 1 ratio(5)		36.5%		36.0 %		0.5%		N/A	N.M.
E*TRADE Financial
Tier 1 leverage ratio(6)		9.0%		8.5 %		0.5%		8.1 %		0.9%
Tier 1 risk-based capital ratio(6)		39.3%		39.5 %		(0.2)%		19.6 %		19.7%
Total risk-based capital ratio(6)		43.9%		44.3 %		(0.4)%		20.8 %		23.1%
Common Equity Tier 1 ratio(6)		39.3%		39.5 %		(0.2)%		N/A	N.M.

Activity in Allowance for Loan Losses
	Three Months Ended December 31, 2015
	One- to Four- Family			Home Equity			Consumer and Other			Total
	(In millions)
Allowance for loan losses, ending 9/30/15	$	39		$	330		$	7		$	376
Provision (benefit) for loan losses		-			(23	)		-			(23	)
Charge-offs, net		1			-			(1	)		-
Allowance for loan losses, ending 12/31/15	$	40		$	307		$	6		$	353
	Three Months Ended September 30, 2015
	One- to Four- Family			Home Equity			Consumer and Other			Total
	(In millions)
Allowance for loan losses, ending 6/30/15	$	49		$	345		$	8		$	402
Provision (benefit) for loan losses		(10	)		(15	)		-			(25	)
Charge-offs, net		-			-			(1	)		(1	)
Allowance for loan losses, ending 9/30/15	$	39		$	330		$	7		$	376
	Three Months Ended December 31, 2014
	One- to Four- Family			Home Equity			Consumer and Other			Total
	(In millions)
Allowance for loan losses, ending 9/30/14	$	27		$	360		$	14		$	401
Provision (benefit) for loan losses		-			12			(2	)		10
Charge-offs, net		-			(5	)		(2	)		(7	)
Allowance for loan losses, ending 12/31/14	$	27		$	367		$	10		$	404

Specific Valuation Allowance Activity(21)
	As of December 31, 2015
	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(22)
	(Dollars in millions)
One- to four-family	$	216	$	(46	)	$	170	$	(9	)	$	161	5	%	25	%
Home equity		284		(120	)		164		(52	)		112	32	%	61	%
Total	$	500	$	(166	)	$	334	$	(61	)	$	273	18	%	45	%
	As of September 30, 2015
	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(22)
	(Dollars in millions)
One- to four-family	$	220	$	(45	)	$	175	$	(11	)	$	164	6	%	26	%
Home equity		294		(125	)		169		(56	)		113	33	%	62	%
Total	$	514	$	(170	)	$	344	$	(67	)	$	277	20	%	46	%
	As of December 31, 2014
	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(22)
	(Dollars in millions)
One- to four-family	$	231	$	(46	)	$	185	$	(9	)	$	176	5	%	24	%
Home equity		305		(136	)		169		(57	)		112	34	%	63	%
Total	$	536	$	(182	)	$	354	$	(66	)	$	288	19	%	46	%

Average Enterprise Balance Sheet
	Three Months Ended
	December 31, 2015
	Average		Operating Interest		Average
	Balance		Inc./Exp.		Yield/Cost
Enterprise interest-earning assets:	(In millions)
Loans(23)	$	5,097	$	53	4.11	%
Available-for-sale securities		11,660		56	1.92	%
Held-to-maturity securities		12,283		87	2.86	%
Margin receivables		7,549		68	3.58	%
Cash and equivalents		1,748		1	0.20	%
Segregated cash		692		-	0.17	%
Securities borrowed and other		385		27	28.21	%
Total enterprise interest-earning assets	$	39,414		292	2.96	%
Enterprise interest-bearing liabilities:
Deposits	$	27,578	$	-	0.01	%
Customer payables		6,430		1	0.07	%
Securities sold under agreements to repurchase		70		-	0.21	%
FHLB advances and other borrowings		419		5	4.16	%
Securities loaned and other		1,701		1	0.20	%
Total enterprise interest-bearing liabilities	$	36,198		7	0.08	%
Enterprise net interest income/spread(11)			$	285	2.88	%
	Three Months Ended
	September 30, 2015
	Average		Operating Interest		Average
	Balance		Inc./Exp.		Yield/Cost
Enterprise interest-earning assets:	(In millions)
Loans(23)	$	5,453	$	58	4.25	%
Available-for-sale securities		12,584		57	1.83	%
Held-to-maturity securities		11,879		85	2.84	%
Margin receivables		7,984		70	3.51	%
Cash and equivalents		1,720		1	0.19	%
Segregated cash		318		1	0.18	%
Securities borrowed and other		461		26	22.43	%
Total enterprise interest-earning assets	$	40,399		298	2.93	%
Enterprise interest-bearing liabilities:
Deposits	$	25,659	$	1	0.01	%
Customer payables		6,348		2	0.07	%
Securities sold under agreements to repurchase		2,558		18	2.64	%
FHLB advances and other borrowings		1,024		12	4.89	%
Securities loaned and other		1,749		1	0.32	%
Total enterprise interest-bearing liabilities	$	37,338		34	0.35	%
Enterprise net interest income/spread(11)			$	264	2.58	%
	Three Months Ended
	December 31, 2014
	Average		Operating Interest		Average
	Balance		Inc./Exp.		Yield/Cost
Enterprise interest-earning assets:	(In millions)
Loans(23)	$	6,532	$	66	4.07	%
Available-for-sale securities		12,231		68	2.20	%
Held-to-maturity securities		11,921		88	2.96	%
Margin receivables		7,859		70	3.53	%
Cash and equivalents		1,341		1	0.13	%
Segregated cash		406		-	0.15	%
Securities borrowed and other		615		32	21.27	%
Total enterprise interest-earning assets	$	40,905		325	3.17	%
Enterprise interest-bearing liabilities:
Deposits	$	24,694	$	2	0.03	%
Customer payables		6,420		1	0.08	%
Securities sold under agreements to repurchase		3,761		28	2.91	%
FHLB advances and other borrowings		1,295		15	4.68	%
Securities loaned and other		1,701		-	0.04	%
Total enterprise interest-bearing liabilities	$	37,871		46	0.48	%
Enterprise net interest income/spread(11)			$	279	2.69	%

Explanation of Non-GAAP Measures and Certain Metrics

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 this non-GAAP information internally to evaluate operating performance and in formulating the budget for future periods. Management believes that the non-GAAP measures and metrics discussed below are appropriate for evaluating the operating and liquidity performance of the Company.

Adjusted Net Revenue

Management believes that excluding the loss on termination of wholesale funding obligations from net revenue provides a useful additional measure of the Company’s ongoing operating performance because the charge is not directly related to our performance. See endnote (2) for a reconciliation of this non-GAAP measure to the comparable GAAP measure.

Adjusted Net Income and Adjusted EPS

Management believes that excluding the loss on termination of wholesale funding obligations, the income tax benefit related to finalizing an IRS audit, and the charge related to the early extinguishment of corporate debt from net income and EPS provides useful additional measures of the Company’s ongoing operating performance because the charges are not directly related to our performance. See endnote (2) for a reconciliation of these non-GAAP measures to the comparable GAAP measures.

Corporate Cash

Corporate cash represents cash held at the parent company as well as cash held in certain subsidiaries, not including bank and broker-dealer subsidiaries, that can distribute cash to the parent company without any regulatory approval or notification. 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 endnote (3) for a reconciliation of this non-GAAP measure to the comparable GAAP measure.

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 (10) 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. See the table entitled “Key Performance Metrics” for a reconciliation of this non-GAAP measure to the comparable GAAP measure.

Adjusted EBITDA

Adjusted EBITDA represents net income (loss) before taxes, depreciation and amortization, corporate interest expense, and the loss on termination of wholesale funding obligations. Management believes that adjusted EBITDA provides a useful additional measure of the Company’s performance by excluding certain non-cash charges and expenses, including the loss on termination of wholesale funding obligations, that are not directly related to the performance of the business. See the table entitled “Key Performance Metrics” for a reconciliation of these non-GAAP measures to the comparable GAAP measure.

EBITDA Interest Coverage and Adjusted EBITDA Interest Coverage

EBITDA interest coverage represents EBITDA divided by corporate interest expense. Adjusted EBITDA interest coverage represents adjusted EBITDA divided by corporate interest expense. Management believes that by excluding the charges and expenses that are excluded from EBITDA and adjusted EBITDA, EBITDA interest coverage and adjusted EBITDA interest coverage provide a useful additional measure of the Company’s ability to continue to meet interest obligations and liquidity needs. See endnote (12) for a calculation of this non-GAAP measure on a GAAP basis.

E*TRADE Bank Tier 1 Common Ratio and E*TRADE Financial Capital Ratios

Prior to Basel III becoming effective for the Company on January 1, 2015, E*TRADE Financial capital ratios, including Tier 1 leverage, Tier 1 risk-based capital and total risk-based capital ratios, were based on the Federal Reserve regulatory minimum well-capitalized threshold then applicable to bank holding companies. E*TRADE Bank’s and E*TRADE Financial’s Tier 1 common ratios were 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 capital ratios are an important measure of E*TRADE Bank’s and E*TRADE Financial’s capital strength. See endnotes (5) and (6) 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 substitutes for, or superior to, net income, 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) Net new brokerage accounts and end of period brokerage accounts were impacted by the closure of 3,007 and 16,818 accounts related to the shutdown of the Company’s global trading platform in the fourth and third quarters of 2015, respectively. For the full year 2015, net new and end of period brokerage accounts were impacted by the closure of 23,150 accounts related to the shutdown of the Company's global trading platform and the closure of 3,484 accounts related to the escheatment of unclaimed property.

(2) The following table provides a reconciliation of net revenue, net income and EPS after adjusting for the loss on termination of wholesale funding obligations in the third quarter 2015 and charges related to the early extinguishment of corporate debt in the fourth quarter 2014 to GAAP net revenue, net income and EPS (dollars in millions, except for per share amounts):

	Q4 2015				Q3 2015						Q4 2014
	Amount		Diluted EPS		Amount			Diluted EPS			Amount			Diluted EPS
Net income (loss)	$	89	$	0.30	$	(153	)		($0.53	)	$	41		$	0.14
Add back impact of termination of wholesale funding obligations
Loss included in Gains (losses) on securities and other(a)		-				370						-
Loss included in Losses on early extinguishment of debt		-				43						-
Total loss on termination of wholesale funding obligations		-				413						-
Income tax related to loss on termination of wholesale funding obligations		-				(162	)					-
Net of tax		-				251						-
Add back impact of corporate debt reduction and refinance
Loss on early extinguishment of corporate debt		-				-						59
Income tax related to loss on extinguishment of corporate debt		-				-						(22	)
Net of tax		-				-						37
Adjusted net income(b)	$	89	$	0.30	$	98		$	0.33		$	78		$	0.26

(a) Total net revenue of $73 million for the third quarter of 2015 includes a $370 million loss related to the termination of wholesale funding obligations. Excluding this loss, adjusted net revenue would have been $443 million.

(b) Adjusted net income per share for the third quarter 2015 is calculated based on 295,148 diluted shares (in thousands).

The following table provides a reconciliation of net revenue, net income and EPS for the full year after adjusting for the loss on termination of wholesale funding obligations in the third quarter 2015, the income tax benefit related to finalizing an IRS audit in the second quarter 2015, and the charges related to the early extinguishment of corporate debt in the first quarter 2015 and fourth quarter 2014, respectively, to GAAP net revenue, net income and EPS (dollars in millions, except for per share amounts):

	Twelve Months Ended					Twelve Months Ended
	December 31, 2015					December 31, 2014
	Amount			Diluted EPS		Amount			Diluted EPS
Net income (loss)	$	268		$	0.91	$	293		$	1.00
Add back impact of termination of wholesale funding obligations
Loss included in Gains (losses) on securities and other(a)		370					-
Loss included in Losses on early extinguishment of debt		43					-
Total loss on termination of wholesale funding obligations		413					-
Income tax related to loss on termination of wholesale funding obligations		(162	)				-
Net of tax		251					-
Deduct income tax benefit related to effectively settled IRS examination		(220	)				-
Add back impact of corporate debt reduction and refinance							-
Loss on early extinguishment of corporate debt		73					59
Income tax related to loss on extinguishment of corporate debt		(28	)				(22	)
Net of tax		45					37
Adjusted net income	$	344		$	1.17	$	330		$	1.12

(a) Total net revenue of $1.4 billion for the full year 2015 includes a $370 million loss related to the termination of wholesale funding obligations. Excluding this loss, adjusted net revenue would have been $1.8 billion.

(3) The following table provides a reconciliation of GAAP consolidated cash and equivalents to corporate cash at period end (dollars in millions):

	Q4 2015			Q3 2015			Q4 2014
Consolidated cash and equivalents	$	2,233		$	1,453		$	1,783
Less: Bank cash(a)		(1,264	)		(443	)		(1,523	)
Less: U.S. broker-dealers' cash(a)		(497	)		(549	)		N/A
Less: Other		(25	)		(29	)		(27	)
Corporate cash	$	447		$	432		$	233

(a) U.S. broker-dealers' cash include E*TRADE Securities and E*TRADE Clearing. Prior to the move of E*TRADE Securities and E*TRADE Clearing out from under E*TRADE Bank in the first and third quarters of 2015, respectively, related cash was included in the “Bank cash” line item.

(4) Beginning in the first quarter of 2015, the Company reclassified the revenue earned on customer assets held by third parties from operating interest income to fees and service charges. In the fourth quarter of 2015, the Company updated the presentation of its consolidated balance sheet line items as follows:

• Reclassified certain receivables from other assets to receivables from brokers, dealers, and clearing organizations;
• Reclassified its investment in FHLB stock to other assets;
• Reclassified its net deferred tax assets from other assets to deferred tax assets, net;
• Reclassified certain payables from other liabilities to payables to the brokers, dealers, and clearing organizations;
• Renamed FHLB advances and other borrowings to other borrowings; and
• Reclassified securities sold under agreements to repurchase to other borrowings.

Prior periods have been reclassified to conform to the current period presentation.

(5) E*TRADE Bank’s Tier 1 leverage, Tier 1 risk-based capital, total risk-based capital and Common Equity Tier 1 ratios are preliminary for the current period. Prior to Basel III becoming effective for E*TRADE Bank on January 1, 2015, E*TRADE Bank’s Tier 1 common ratio was a non-GAAP measure that management believes is an important measure of capital strength. E*TRADE Bank’s capital ratios are calculated as follows (dollars in millions):

	Q4 2015		Q3 2015		Q4 2014
E*TRADE Bank shareholder's equity(a)	$	3,181	$	3,171	$	6,102
ADD:
Losses in OCI on AFS debt securities and cash flow hedges, net of tax		102		14		255
DEDUCT:
Goodwill & other intangible assets, net of deferred tax liabilities		(38)		(38)		(1,467)
Disallowed deferred tax assets		(169)		(187)		(342)
E*TRADE Bank Tier 1 capital/Common Equity Tier 1 capital(b)		3,076		2,960		4,548
ADD:
Allowable allowance for loan losses		110		108		224
E*TRADE Bank total capital	$	3,186	$	3,068	$	4,772
E*TRADE Bank average/total assets(a)(c)	$	31,785	$	32,466	$	44,672
DEDUCT:
Disallowed deferred tax assets		(169)		(187)		(342)
Goodwill & other intangible assets, net of deferred tax liabilities		(38)		(38)		(1,467)
Other		-		-		13
E*TRADE Bank adjusted average/total assets for leverage capital purposes	$	31,578	$	32,241	$	42,876
E*TRADE Bank total risk-weighted assets(a)(d)	$	8,424	$	8,230	$	17,717
E*TRADE Bank Tier 1 leverage ratio (Tier 1 capital / Adjusted total assets for leverage capital purposes)		9.7%		9.2%		10.6%
E*TRADE Bank Tier 1 capital / Total risk-weighted assets		36.5%		36.0%		25.7%
E*TRADE Bank total capital / Total risk-weighted assets		37.8%		37.3%		26.9%
E*TRADE Bank Common Equity Tier 1 capital / Total risk-weighted assets		36.5%		36.0%		N/A

(a) Amounts presented for E*TRADE Bank exclude E*TRADE Securities as of February 1, 2015 and E*TRADE Clearing as of July 1, 2015.

(b) Common Equity Tier 1 capital under Basel III replaced Tier 1 common capital. Prior to Basel III becoming effective, E*TRADE Bank’s Tier 1 common ratio was 25.7% as of December 31, 2014.

(c) As of December 31, 2015 and September 30, 2015, E*TRADE Bank’s Tier 1 Leverage ratio was calculated using average total assets. Prior to Basel III becoming effective for E*TRADE Bank, E*TRADE Bank’s Tier 1 Leverage ratio was calculated using end of period total assets.

(d) 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.

(6) E*TRADE Financial’s Tier 1 leverage, Tier 1 risk-based capital, total risk-based capital and Common Equity Tier 1 ratios are preliminary for the current period. Prior to Basel III becoming effective for E*TRADE Financial on January 1, 2015, E*TRADE Financial’s capital ratios were non-GAAP measures and based on the Federal Reserve’s well-capitalized requirements as management believes these ratios are an important measure of the Company's capital strength and managed capital against ratios then applicable to bank holding companies in preparation for the application of these requirements. E*TRADE Financial’s capital ratios are calculated as follows (dollars in millions):

	Q4 2015			Q3 2015			Q4 2014
E*TRADE Financial shareholders' equity	$	5,799		$	5,812		$	5,375
ADD:
Losses in OCI on AFS debt securities and cash flow hedges, net of tax		102			14			255
DEDUCT:
Goodwill & other intangible assets, net of deferred tax liabilities		(1,419	)		(1,428	)		(1,592	)
Disallowed deferred tax assets		(839	)		(873	)		(1,008	)
Other(a)		104			105			-
E*TRADE Financial Common Equity Tier 1 capital(b)		3,747			3,630			3,030
ADD:
Qualifying restricted core capital elements (TRUPs)(a)		-			-			433
E*TRADE Financial Tier 1 capital		3,747			3,630			3,463
ADD:
Allowable allowance for loan losses		129			126			223
Non-qualifying capital instruments subject to phase-out (TRUPs)(a)		310			314			-
E*TRADE Financial total capital	$	4,186		$	4,070		$	3,686
E*TRADE Financial average total assets	$	44,016		$	44,732		$	45,445
DEDUCT:
Goodwill & other intangible assets, net of deferred tax liabilities		(1,419	)		(1,428	)		(1,592	)
Disallowed deferred tax assets		(839	)		(873	)		(1,008	)
Other(a)		104			105			-
E*TRADE Financial adjusted average total assets for leverage capital purposes	$	41,862		$	42,536		$	42,845
E*TRADE Financial total risk-weighted assets(c)	$	9,536		$	9,196		$	17,683
E*TRADE Financial Tier 1 leverage ratio (Tier 1 capital / Adjusted average total assets for leverage capital purposes)		9.0	%		8.5	%		8.1	%
E*TRADE Financial Tier 1 capital / Total risk-weighted assets		39.3	%		39.5	%		19.6	%
E*TRADE Financial total capital / Total risk-weighted assets		43.9	%		44.3	%		20.8	%
E*TRADE Financial Common Equity Tier 1 capital / Total risk-weighted assets		39.3	%		39.5	%		N/A

(a) As a result of applying the transition provisions under Basel III, the Company included 25% of the TRUPs in the calculation of E*TRADE Financial’s Tier 1 capital and 75% of the TRUPs in the calculation of E*TRADE Financial’s total capital. Prior to Basel III becoming effective for E*TRADE Financial, the Company included 100% of the TRUPs in E*TRADE Financial’s Tier 1 capital due to the regulatory agencies’ delay in the implementation of the TRUPs phase-out until January 1, 2015.

(b) Common Equity Tier 1 capital under Basel III replaced Tier 1 common capital. E*TRADE Financial’s Tier 1 common ratio was 17.1% as of December 31, 2014.

(c) 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.

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

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

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

(10) 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 at period end (dollars in millions, except per share amounts):

	Q4 2015					Q3 2015					Q4 2014
	Amount			Per Share		Amount			Per Share		Amount			Per Share
Book value	$	5,799		$	19.90	$	5,812		$	20.01	$	5,375		$	18.58
Less: Goodwill and other intangibles, net		(1,966	)				(1,971	)				(1,986	)
Add: Deferred tax liability related to goodwill		434					425					394
Tangible book value	$	4,267		$	14.65	$	4,266		$	14.68	$	3,783		$	13.08

(11) 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.

(12) The interest coverage ratio calculated based on the Company’s net income to its corporate interest expense was 5.9, (10.9), and 1.5 for the three months ended December 31, 2015, September 30, 2015, and December 31, 2014, respectively. The adjusted interest coverage ratio calculated based on the Company’s adjusted net income to its corporate interest expense was 5.9, 7.0, and 2.9 for the three months ended December 31, 2015, September 30, 2015, and December 31, 2014, respectively.

(13) E*TRADE Bank net income is calculated as follows (dollars in millions):

	Q4 2015	Q3 2015	Q4 2014
Total net revenue (loss)	$ 207	$ (183)	$ 448
Provision (benefit) for loan losses	(23)	(25)	10
Total operating expenses	85	84	254
Other income (expense)	-	(45)	(2)
Income (loss) before income taxes	145	(287)	182
Income tax expense (benefit)	48	(101)	70
Net income (loss)	$ 97	$ (186)	$ 112

(14) 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.

(15) Customer assets held by third parties are held outside E*TRADE Financial and include money market funds and sweep deposit accounts at unaffiliated financial institutions. Customer assets held by third parties are not reflected in the Company’s consolidated balance sheet and are not immediately available for liquidity purposes. We transferred $3.7 billion of money market funds and sweep deposits back onto our balance sheet during the fourth quarter 2015. The following table provides details of customer assets held by third parties (dollars in billions):

	Q4 2015		Q3 2015		Q4 2014
Money market fund	$	1.8	$	7.1	$	7.2
Sweep deposits at unaffiliated financial institutions		5.8		3.3		4.7
Subtotal		7.6		10.4		11.9
Municipal funds and other		3.6		3.5		3.6
Total customer assets held by third parties	$	11.2	$	13.9	$	15.5

(16) 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.

(17) 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 at the end of the periods presented (dollars in millions):

	Q4 2015		Q3 2015		Q4 2014
One- to four-family	$	113	$	117	$	127
Home equity		224		234		258
Total charge-offs	$	337	$	351	$	385

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

(19) 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 and loans that have been charged-off due to bankruptcy notification.

(20) Beginning on January 1, 2015, regulatory capital for E*TRADE Bank and E*TRADE Financial was calculated under the Basel III Standardized Approach, subject to transition provisions.

(21) 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 for which the Company received a notification of bankruptcy (dollars in millions):

	Q4 2015		Q3 2015		Q4 2014
Modified loans	$	334	$	344	$	354
Bankruptcy loans		154		160		179
Total TDRs	$	488	$	504	$	533

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

(23) Includes loans held-for-sale and excludes loans to customers on margin.

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