E Trade Financial (ETFC) 8-K Results of Operations and Financial Condition

Exhibit 99.1

FOR IMMEDIATE RELEASE

E*TRADE FINANCIAL Media Contact

Pam Erickson

E*TRADE FINANCIAL Corporation

617-296-6080

pam.erickson@etrade.com

E*TRADE FINANCIAL Investor Relations Contact

Adam Townsend

E*TRADE FINANCIAL Corporation

703-236-8719

adam.townsend@etrade.com

E*TRADE FINANCIAL CORPORATION ANNOUNCES STRONGEST YEAR

IN COMPANY HISTORY AND REPORTS Q4 2004 GAAP EARNINGS OF $0.26

Total Client Assets Top $100 Billion Mark

• Generated full-year 2004 GAAP earnings of $1.01 per share on net income of $389.1 million

• Reported fourth quarter GAAP earnings of $0.26 per share on net income of $98.4 million

• Reported Total Daily Average Revenue Trades of 136,100 in Q4, an increase of 40 percent over Q304 and a decline of 3 percent year over year

• Increased margin debt 10 percent to $2.2 billion at quarter end from $2.0 billion at the end of the third quarter and $1.8 billion a year ago or 27 percent

• Improved bank spread to 220 basis points from 213 basis points in Q304 and 169 basis points in Q403

New York, January 26, 2005 – E*TRADE FINANCIAL Corporation (NYSE: ET) today announced results for its fourth quarter ended December 31, 2004, reporting net income of $98.4 million, or $0.26 per diluted share, compared to net income of $107.5 million, or $0.27 per share, in the same quarter a year ago. The reported fourth quarter earnings per share include a $0.02 benefit from a lower corporate tax rate. Net revenue for the fourth quarter totaled $409.5 million, a 21 percent increase over the prior quarter and a 10 percent increase over the year ago period.

For the year ending December 31, 2004, E*TRADE FINANCIAL reported earnings of $1.01 per share on net income of $389.1 million compared to $0.55 per share and net income of $203.0 million in 2003. Total assets/deposits in customer accounts reached a record level of $100.4 billion at year-end – an increase of 20 percent sequentially and 21 percent year over year.

“In 2004, we proved that you can increase profitability and earnings, while sharing the rewards of financial success with customers,” said Mitchell H. Caplan, Chief Executive Officer, E*TRADE FINANCIAL Corporation. “Our record-breaking year continues to validate the strength of our model and underscores our commitment to passing on unique advantages to customers. In 2005, we intend to deliver continued value to our customers and shareholders by enhancing our customer segmentation and increasing integration.”

(more)

E*TRADE FINANCIAL Results for the Quarter Ended December 31, 2004

Page 2

Other selected highlights from the fourth quarter of 2004:

• Added 61,000 net new brokerage accounts

• Generated a record-setting consolidated operating margin⁽¹⁾ of 31 percent

• Expanded E*TRADE FINANCIAL Center locations to include Palo Alto, CA and Washington, D.C.

• Repurchased approximately 4 million outstanding shares for $56 million at a weighted average price of $13.86 per share

• Announced an additional $200 million repurchase program in December

Historical monthly metric data from January 2003 to December 2004 can be found on the E*TRADE FINANCIAL investor relations site atwww.etrade.com.

About E*TRADE FINANCIAL

The E*TRADE FINANCIAL family of companies provide financial services including brokerage, banking and lending for retail, corporate and institutional customers. Securities products and services are offered by E*TRADE Securities LLC (Member NASD/SIPC). Bank and lending products and services are offered by E*TRADE Bank, a Federal savings bank, Member FDIC, or its subsidiaries.

# # #

Important Notice

E*TRADE FINANCIAL and the E*TRADE FINANCIAL logo are registered trademarks or trademarks of E*TRADE FINANCIAL Corporation. The statements contained in this news release that are forward-looking are based on current expectations that are subject to a number of uncertainties and risks, and actual results may differ materially. The uncertainties and risks include, but are not limited to, changes in market activity, anticipated increases in the rate of new customer acquisition, the conversion of new visitors to the site to customers, the activity of customers and assets held at the institution, seasonality, the development and enhancement of products and services, competitive pressures (including price competition), system failures, economic and political conditions, changes in consumer behavior and the introduction of competing products having technological and/or other advantages. Further information about these risks and uncertainties can be found in the information included in the annual reports previously filed by E*TRADE Group, Inc. or E*TRADE FINANCIAL Corporation with the SEC on Form 10-K (including information under the caption “Risk Factors”) and quarterly reports on Form 10-Q.

© 2005 E*TRADE FINANCIAL Corporation. All rights reserved.

E*TRADE FINANCIAL Results for the Quarter Ended December 31, 2004

Page 3

Financial Statements

Consolidated Statements of Operations

(in thousands, except per share amounts)

(unaudited)

	Three Months Ended
	December 31, 2004			September 30, 2004			December 31, 2003
Brokerage revenues:
Commissions	$	94,148		$	64,005		$	97,915
Principal transactions		67,074			48,212			64,822
Other brokerage-related revenues		43,131			35,600			44,232
Brokerage interest income		49,531			42,871			38,308
Brokerage interest expense		(6,475	)		(4,795	)		(3,473	)
Net brokerage revenues		247,409			185,893			241,804
Banking revenues:
Banking interest income		273,658			250,141			202,996
Banking interest expense		(134,364	)		(124,057	)		(119,056	)
Provision for loan losses		(12,420	)		(9,145	)		(12,374	)
Gain on sales of originated loans		10,069			12,917			20,739
Gain on sales of loans held-for-sale and securities, net		15,792			13,108			28,287
Other banking-related revenues		9,377			8,280			8,874
Net banking revenues		162,112			151,244			129,466
Total net revenues		409,521			337,137			371,270
Expenses excluding interest:
Compensation and benefits		95,562			87,264			98,361
Occupancy and equipment		19,954			19,176			20,162
Communications		18,559			18,465			21,568
Professional services		23,425			17,365			13,296
Commissions, clearance and floor brokerage		40,067			30,894			41,193
Advertising and market development		16,614			10,232			11,514
Servicing and other banking expenses		9,946			9,129			7,749
Fair value adjustments of financial derivatives		518			(696	)		(398	)
Depreciation and amortization		21,027			20,757			20,651
Amortization of other intangibles		6,932			6,271			9,779
Facility restructuring and other exit charges		2,799			(231	)		8,855
Acquisition-related expenses		62			62			(997	)
Other		28,942			18,682			22,421
Total expenses excluding interest		284,407			237,370			274,154
Income before other income, income taxes and discontinued operations		125,114			99,767			97,116
Other income:
Corporate interest income		1,937			1,698			1,569
Corporate interest expense		(11,774	)		(11,873	)		(11,319	)
Gain on sale and impairment of investments		20,597			47,229			85,326
Loss on early extinguishment of debt		—			(18,615	)		—
Equity in income of investments and venture funds		1,262			142			3,333
Total other income		12,022			18,581			78,909
Income before income taxes and discontinued operations		137,136			118,348			176,025
Income tax expense		38,623			38,464			67,141
Minority interest in subsidiaries		17			47			28
Income from continuing operations		98,496			79,837			108,856
Discontinued operations, net of tax:
Loss from discontinued operations		(74	)		(727	)		(1,401	)
Gain on disposal of discontinued operations		—			164			—
Net loss from discontinued operations		(74	)		(563	)		(1,401	)
Net income	$	98,422		$	79,274		$	107,455
Basic income per share from continuing operations	$	0.27		$	0.21		$	0.30
Basic loss per share from discontinued operations		(0.00	)		(0.00	)		(0.00	)
Basic net income per share	$	0.27		$	0.21		$	0.30
Diluted income per share from continuing operations	$	0.26		$	0.21		$	0.27
Diluted loss per share from discontinued operations		(0.00	)		(0.00	)		(0.00	)
Diluted net income per share	$	0.26		$	0.21		$	0.27
Shares used in computation of per share data:
Basic		367,603			369,103			362,944
Diluted (2)		381,061			380,557			421,121

E*TRADE FINANCIAL Results for the Quarter Ended December 31, 2004

Page 4

Consolidated Statements of Operations

(in thousands, except per share amounts)

(unaudited)

	Three Months Ended December 31,						Twelve Months Ended December 31,
	2004			2003			2004			2003
Brokerage revenues:
Commissions	$	94,148		$	97,915		$	349,539		$	337,468
Principal transactions		67,074			64,822			252,162			229,846
Other brokerage-related revenues		43,131			44,232			163,686			177,682
Brokerage interest income		49,531			38,308			177,362			144,379
Brokerage interest expense		(6,475	)		(3,473	)		(18,524	)		(10,305	)
Net brokerage revenues		247,409			241,804			924,225			879,070
Banking revenues:
Banking interest income		273,658			202,996			968,411			748,527
Banking interest expense		(134,364	)		(119,056	)		(491,931	)		(475,824	)
Provision for loan losses		(12,420	)		(12,374	)		(38,121	)		(38,523	)
Gain on sales of originated loans		10,069			20,739			71,561			192,467
Gain on sales of loans held-for-sale and securities, net		15,792			28,287			57,853			97,261
Other banking-related revenues		9,377			8,874			35,988			35,821
Net banking revenues		162,112			129,466			603,761			559,729
Total net revenues		409,521			371,270			1,527,986			1,438,799
Expenses excluding interest:
Compensation and benefits		95,562			98,361			382,184			393,271
Occupancy and equipment		19,954			20,162			78,244			85,462
Communications		18,559			21,568			74,559			82,215
Professional services		23,425			13,296			70,826			57,461
Commissions, clearance and floor brokerage		40,067			41,193			156,814			151,318
Advertising and market development		16,614			11,514			65,673			60,880
Servicing and other banking expenses		9,946			7,749			36,525			38,352
Fair value adjustments of financial derivatives		518			(398	)		(2,299	)		15,338
Depreciation and amortization		21,027			20,651			82,853			89,506
Amortization of other intangibles		6,932			9,779			26,899			30,138
Facility restructuring and other exit charges		2,799			8,855			1,657			134,191
Acquisition-related expenses		62			(997	)		248			1,859
Other		28,942			22,421			94,063			103,811
Total expenses excluding interest		284,407			274,154			1,068,246			1,243,802
Income before other income, income taxes and discontinued operations		125,114			97,116			459,740			194,997
Other income:
Corporate interest income		1,937			1,569			6,692			6,550
Corporate interest expense		(11,774	)		(11,319	)		(47,525	)		(45,592	)
Gain on sale and impairment of investments		20,597			85,326			128,103			147,967
Loss on early extinguishment of debt		—			—			(22,972	)		—
Equity in income of investments and venture funds		1,262			3,333			4,468			9,132
Total other income		12,022			78,909			68,766			118,057
Income before income taxes and discontinued operations		137,136			176,025			528,506			313,054
Income tax expense		38,623			67,141			168,090			113,423
Minority interest in subsidiaries		17			28			893			(5,061	)
Income from continuing operations		98,496			108,856			359,523			204,692
Discontinued operations, net of tax:
Loss from discontinued operations		(74	)		(1,401	)		(1,855	)		(1,665	)
Gain on disposal of discontinued operations		—			—			31,408			—
Net income (loss) from discontinued operations		(74	)		(1,401	)		29,553			(1,665	)
Net income	$	98,422		$	107,455		$	389,076		$	203,027
Basic income per share from continuing operations	$	0.27		$	0.30		$	0.98		$	0.57
Basic income per share from discontinued operations		(0.00	)		(0.00	)		0.08			(0.00	)
Basic net income per share	$	0.27		$	0.30		$	1.06		$	0.57
Diluted income per share from continuing operations	$	0.26		$	0.27		$	0.94		$	0.55
Diluted income per share from discontinued operations		(0.00	)		(0.00	)		0.07			(0.00	)
Diluted net income per share	$	0.26		$	0.27		$	1.01		$	0.55
Shares used in computation of per share data:
Basic		367,603			362,944			366,586			358,320
Diluted (2)		381,061			421,121			405,389			367,361

E*TRADE FINANCIAL Results for the Quarter Ended December 31, 2004

Page 5

Consolidated Balance Sheets

(dollars in thousands)

(unaudited)

	December 31, 2004			September 30, 2004			December 31, 2003
ASSETS
Cash and equivalents	$	939,906		$	731,031		$	921,364
Cash and investments required to be segregated under Federal or other regulations		724,026			716,643			1,644,605
Brokerage receivables, net		3,034,558			3,684,913			2,297,778
Trading securities		593,245			651,151			832,889
Available-for-sale mortgage-backed and investment securities		12,543,818			12,051,677			9,826,940
Other investments		46,269			41,431			49,272
Loans receivable, net		11,505,755			10,307,413			8,130,906
Loans held-for-sale, net		279,280			597,875			1,000,487
Property and equipment, net		302,291			287,111			287,097
Goodwill		395,043			408,187			392,845
Other intangibles, net		134,121			125,130			126,032
Other assets		555,175			734,162			539,001
Total assets	$	31,053,487		$	30,336,724		$	26,049,216
LIABILITIES AND SHAREHOLDERS’ EQUITY
Brokerage payables	$	3,618,902		$	4,132,583		$	3,696,225
Deposits		12,302,974			12,027,025			12,514,486
Securities sold under agreements to repurchase		9,896,872			9,044,660			5,283,609
Other borrowings by Bank subsidiary		1,760,732			1,617,072			1,203,554
Accounts payable, accrued and other liabilities		651,595			779,376			737,718
Convertible subordinated notes		185,165			185,165			695,330
Senior notes		400,452			400,000			—
Total liabilities		28,816,692			28,185,881			24,130,922
Shareholders’ equity:
Preferred stock, shares authorized: 1,000,000; issued and outstanding: none at December 31, 2004, September 30, 2004 and December 31, 2003		—			—			—
Shares exchangeable into common stock, $0.01 par value, shares authorized: 10,644,223; issued and outstanding: 1,302,801 at December 31, 2004, 1,326,125 at September 30, 2004 and 1,386,125 at December 31, 2003		13			13			14
Common stock, $0.01 par value, shares authorized: 600,000,000; issued and outstanding: 369,623,604 at December 31, 2004, 372,295,993 at September 30, 2004 and 366,636,406 at December 31, 2003		3,696			3,723			3,666
Additional paid-in-capital		2,234,093			2,270,445			2,247,930
Deferred stock compensation		(18,419	)		(16,889	)		(12,874	)
Retained earnings (deficit)		158,611			60,189			(230,465	)
Accumulated other comprehensive loss		(141,199	)		(166,638	)		(89,977	)
Total shareholders’ equity		2,236,795			2,150,843			1,918,294
Total liabilities and shareholders’ equity	$	31,053,487		$	30,336,724		$	26,049,216

E*TRADE FINANCIAL Results for the Quarter Ended December 31, 2004

Page 6

Segment Reporting

	Three Months Ended December 31, 2004
	Brokerage			Banking			Elimination (3)			Total
	(in thousands)
Net revenues:
Commissions	$	94,148		$	—		$	—		$	94,148
Principal transactions		67,074			—			—			67,074
Interest income		49,531			273,658			—			323,189
Interest expense		(6,475	)		(134,364	)		—			(140,839	)
Gain on sales of originated loans		—			10,069			—			10,069
Gain on sale of loans held-for-sale and securities, net		—			15,792			—			15,792
Provision for loan losses		—			(12,420	)		—			(12,420	)
Other revenues		57,925			9,377			(14,794	)		52,508
Net revenues		262,203			162,112			(14,794	)		409,521
Expenses excluding interest:
Compensation and benefits		63,510			32,052			—			95,562
Occupancy and equipment		12,864			7,090			—			19,954
Communications		16,839			1,720			—			18,559
Professional services		16,600			6,825			—			23,425
Commissions, clearance and floor brokerage		40,060			7			—			40,067
Advertising and market development		12,409			18,999			(14,794	)		16,614
Servicing and other banking expenses		—			9,946			—			9,946
Fair value adjustments of financial derivatives		—			518			—			518
Depreciation and amortization		16,545			4,482			—			21,027
Amortization of other intangibles		4,312			2,620			—			6,932
Facility restructuring and other exit charges		1,320			1,479			—			2,799
Acquisition-related expenses		—			62			—			62
Other		19,216			9,726			—			28,942
Total expenses excluding interest		203,675			95,526			(14,794	)		284,407
Income before other corporate items	$	58,528		$	66,586		$	—		$	125,114
	Three Months Ended September 30, 2004
	Brokerage			Banking			Elimination (3)			Total
	(in thousands)
Net revenues:
Commissions	$	64,005		$	—		$	—		$	64,005
Principal transactions		48,212			—			—			48,212
Interest income		42,871			250,141			—			293,012
Interest expense		(4,795	)		(124,057	)		—			(128,852	)
Gain on sales of originated loans		—			12,917			—			12,917
Gain on sale of loans held-for-sale and securities, net		—			13,108			—			13,108
Provision for loan losses		—			(9,145	)		—			(9,145	)
Other revenues		48,541			8,280			(12,941	)		43,880
Net revenues		198,834			151,244			(12,941	)		337,137
Expenses excluding interest:
Compensation and benefits		55,892			31,372			—			87,264
Occupancy and equipment		12,604			6,572			—			19,176
Communications		16,628			1,837			—			18,465
Professional services		10,820			6,545			—			17,365
Commissions, clearance and floor brokerage		30,890			4			—			30,894
Advertising and market development		5,376			17,797			(12,941	)		10,232
Servicing and other banking expenses		—			9,129			—			9,129
Fair value adjustments of financial derivatives		—			(696	)		—			(696	)
Depreciation and amortization		16,313			4,444			—			20,757
Amortization of other intangibles		4,021			2,250			—			6,271
Facility restructuring and other exit charges		(227	)		(4	)		—			(231	)
Acquisition-related expenses		—			62			—			62
Other		9,332			9,350			—			18,682
Total expenses excluding interest		161,649			88,662			(12,941	)		237,370
Income before other corporate items	$	37,185		$	62,582		$	—		$	99,767

E*TRADE FINANCIAL Results for the Quarter Ended December 31, 2004

Page 7

	Three Months Ended December 31, 2003
	Brokerage			Banking			Elimination (3)			Total
	(in thousands)
Net revenues:
Commissions	$	97,915		$	—		$	—		$	97,915
Principal transactions		64,822			—			—			64,822
Interest income		38,308			202,996			—			241,304
Interest expense		(3,473	)		(119,056	)		—			(122,529	)
Gain on sales of originated loans		—			20,739			—			20,739
Gain on sale of loans held-for-sale and securities, net		—			28,287			—			28,287
Provision for loan losses		—			(12,374	)		—			(12,374	)
Other revenues		51,958			8,874			(7,726	)		53,106
Net revenues		249,530			129,466			(7,726	)		371,270
Expenses excluding interest:
Compensation and benefits		62,802			35,559			—			98,361
Occupancy and equipment		14,557			5,605			—			20,162
Communications		20,176			1,392			—			21,568
Professional services		6,704			6,592			—			13,296
Commissions, clearance and floor brokerage		41,186			7			—			41,193
Advertising and market development		4,594			14,646			(7,726	)		11,514
Servicing and other banking expenses		207			7,542			—			7,749
Fair value adjustments of financial derivatives		—			(398	)		—			(398	)
Depreciation and amortization		15,521			5,130			—			20,651
Amortization of other intangibles		6,910			2,869			—			9,779
Facility restructuring and other exit charges		7,209			1,646			—			8,855
Acquisition-related expenses		471			(1,468	)		—			(997	)
Other		14,968			7,453			—			22,421
Total expenses excluding interest		195,305			86,575			(7,726	)		274,154
Income before other corporate items	$	54,225		$	42,891		$	—		$	97,116

E*TRADE FINANCIAL Results for the Quarter Ended December 31, 2004

Page 8

Key Performance Metrics⁽⁴⁾

Corporate Metrics	Qtr ended 12/31/04			Qtr ended 9/30/04			Qtr ended 12/31/04 vs. Qtr ended 9/30/04		Qtr ended 12/31/03			Qtr ended 12/31/04 vs. Qtr ended 12/31/03
Operating margin%(1)
Consolidated		31	%		30	%	1	%		26	%	5	%
Brokerage		22	%		19	%	3	%		22	%	0	%
Bank		41	%		41	%	0	%		33	%	8	%
Employees		3,320			3,325		0	%		3,455		(4	)%
Consultants and other		505			443		14	%		314		61	%
Total headcount		3,825			3,768		2	%		3,769		1	%
Revenue per headcount	$	107,064		$	89,474		20	%	$	98,506		9	%
Revenue per compensation and benefits dollar	$	4.29		$	3.86		11	%	$	3.77		14	%
Book value per share	$	6.03		$	5.76		5	%	$	5.21		16	%
Tangible book value per share	$	4.60		$	4.33		6	%	$	3.73		23	%
Cash & equivalents ($MM)	$	939.9		$	731.0		29	%	$	921.4		2	%
Free cash ($MM)	$	691.0		$	713.0		(3	)%	$	649.6		6	%
Earnings before interest, taxes, depreciation & amortization ($MM)
Net income from continuing operations	$	98.5		$	79.8		23	%	$	108.9		(10	)%
Tax expense		38.6			38.5		0	%		67.1		(42	)%
Depreciation & amortization		28.0			27.0		3	%		30.4		(8	)%
Corporate interest expense		11.8			11.9		(1	)%		11.3		4	%
EBITDA	$	176.9		$	157.2		13	%	$	217.7		(19	)%
Interest coverage		15.0			13.2		13	%		19.2		(22	)%
Active retail brokerage accounts		2,956,090			2,895,106		2	%		2,848,625		4	%
Active banking accounts		626,673			632,328		(1	)%		638,345		(2	)%
Total active accounts end of period		3,582,763			3,527,434		2	%		3,486,970		3	%
Total customer households end of period		2,739,071			2,703,373		1	%		2,656,025		3	%
Gross new accounts		203,809			166,868		N.M.			154,298		N.M.
Inactive accounts		(90,106	)		(103,090	)	N.M.			(105,214	)	N.M.
Customer closed accounts		(58,374	)		(65,051	)	N.M.			(74,660	)	N.M.
Net new accounts		55,329			(1,273	)	N.M.			(25,576	)	N.M.
Net new households		35,698			3,516		N.M.			(22,384	)	N.M.
Total client assets in investing accounts ($B)	$	88.1		$	71.4		23	%	$	70.8		24	%
Total deposits in banking accounts ($B)		12.3			12.0		2	%		12.5		(2	)%
Total assets / deposits in customer accounts ($B)	$	100.4		$	83.4		20	%	$	83.3		21	%
Average assets per household	$	36,669		$	30,860		19	%	$	31,376		17	%

E*TRADE FINANCIAL Results for the Quarter Ended December 31, 2004

Page 9

Brokerage Metrics	Qtr ended 12/31/04			Qtr ended 9/30/04			Qtr ended 12/31/04 vs. Qtr ended 9/30/04		Qtr ended 12/31/03			Qtr ended 12/31/04 vs. Qtr ended 12/31/03
Trading days		63.5			64.0		N.M.			62.5		N.M.
Daily Average Revenue Trades (DARTs)
Total Retail		89,604			62,771		43	%		91,972		(3	)%
- US		76,955			53,050		45	%		83,081		(7	)%
- International		12,649			9,721		30	%		8,891		42	%
Professional		46,529			34,633		34	%		48,154		(3	)%
Total DARTs		136,133			97,404		40	%		140,126		(3	)%
Total revenue trades (MM)		8.6			6.2		39	%		8.8		(1	)%
Average commission per revenue trade	$	10.89		$	10.27		6	%	$	11.18		(3	)%
Market Making
Equity shares traded (MM)		75,717			65,037		16	%		26,190		189	%
Average revenue capture per 1,000 equity shares	$	0.318		$	0.234		36	%	$	0.912		(65	)%
% of Bulletin Board equity shares to total equity shares		93.9	%		95.4	%	(2	)%		82.9	%	11	%
End of period margin debt ($B)	$	2.24		$	2.04		10	%	$	1.76		27	%
Average margin debt ($B)	$	2.09		$	2.04		2	%	$	1.64		27	%
Active retail brokerage accounts		2,956,090			2,895,106		2	%		2,848,625		4	%
Gross new brokerage accounts		161,737			105,870		N.M.			112,275		N.M.
Inactive accounts		(90,106	)		(103,090	)	N.M.			(105,214	)	N.M.
Customer closed accounts		(10,647	)		(8,814	)	N.M.			(13,336	)	N.M.
Net new brokerage accounts		60,984			(6,034	)	N.M.			(6,275	)	N.M.
New client assets ($MM)	$	6,467		$	2,717		138	%	$	3,266		98	%
Client asset outflow from closed accounts ($MM)		(595	)		(410	)	(45	)%		(400	)	(49	)%
Net new client assets ($MM)	$	5,873		$	2,307		155	%	$	2,867		105	%
Total Client Assets ($B)
Security holdings	$	53.5		$	45.8		17	%	$	43.9		22	%
Cash (including money market funds)		5.9			4.7		26	%		6.2		(5	)%
Unexercised options (vested)		28.7			20.9		37	%		20.7		39	%
Total client assets in investing accounts	$	88.1		$	71.4		23	%	$	70.8		24	%
Total client assets per active account	$	29,815		$	24,662		21	%	$	24,861		20	%
Unexercised options (unvested) ($B)	$	20.1		$	13.9		44	%	$	14.9		34	%

E*TRADE FINANCIAL Results for the Quarter Ended December 31, 2004

Page 10

Banking Metrics	Qtr ended 12/31/04			Qtr ended 9/30/04			Qtr ended 12/31/04 vs. Qtr ended 9/30/04		Qtr ended 12/31/03			Qtr ended 12/31/04 vs. Qtr ended 12/31/03
Gross new banking accounts		42,072			60,998		N.M.			42,023		N.M.
Inactive accounts		—			—		N.M.			—		N.M.
Customer closed accounts		(47,727	)		(56,237	)	N.M.			(61,324	)	N.M.
Net new banking accounts		(5,655	)		4,761		N.M.			(19,301	)	N.M.
Direct mortgage originations ($B)	$	0.7		$	0.6		8	%	$	0.9		(26	)%
Correspondent mortgage originations ($B)	$	1.0		$	0.6		59	%	$	1.2		(22	)%
Consumer loan originations, incl HELOCs ($B)	$	0.5		$	0.6		(7	)%	$	0.7		(22	)%
Acquired consumer loans ($B)	$	1.0		$	1.1		(10	)%	$	0.7		39	%
Mortgage pipeline (end of period) ($B)	$	0.2		$	0.4		(41	)%	$	0.3		(24	)%
Bank Asset Portfolio Detail ($MM)
Cash & equivalents	$	82		$	41		100	%	$	276		(70	)%
Trading securities		567			625		(9	)%		821		(31	)%
Investment securities, available-for-sale		3,367			3,251		4	%		2,413		40	%
Mortgage securities, available-for-sale		9,052			8,658		5	%		7,157		26	%
Loans receivable, net including loans held-for-sale:
- Mortgage and home equity loans, net		7,634			6,468		18	%		4,847		57	%
- Consumer loans, net		4,151			4,437		(6	)%		4,284		(3	)%
- Other		—			—		N.M.			1		N.M.
Other assets		700			710		(1	)%		587		19	%
Total assets	$	25,553		$	24,190		6	%	$	20,386		25	%
Bank Deposit Portfolio Detail ($MM)
Transaction accounts	$	9,939		$	9,448		5	%	$	8,988		11	%
CDs		2,364			2,579		(8	)%		3,527		(33	)%
Total	$	12,303		$	12,027		2	%	$	12,514		(2	)%
Bank interest rate spread (basis points)		220			213		3	%		169		30	%
Bank interest-earning assets, average ($MM)	$	24,780		$	23,091		7	%	$	19,095		30	%
Credit Quality and Reserve Metrics
Net charge-offs as a % of average held-for-investment loans, net (annualized)		0.27	%		0.35	%	(0.08	)%		0.44	%	(0.17	)%
Provision as a % of average held-for-investment loans, net (annualized)		0.44	%		0.37	%	0.07	%		0.65	%	(0.21	)%
Allowance as a % of total ending gross held-for-investment loans		0.41	%		0.41	%	0.00	%		0.46	%	(0.05	)%
Total non-performing loans, net, as a % of total gross held-for-investment loans		0.17	%		0.17	%	0.00	%		0.30	%	(0.13	)%
Total loan loss allowance as a % of total non-performing loans, net		239	%		240	%	(1	)%		154	%	85	%
Tier 1 Capital Ratio (5)		5.83	%		5.94	%	(0.11	)%		5.92	%	(0.09	)%
Risk Weighted Capital Ratio (5)		11.10	%		11.24	%	(0.14	)%		11.30	%	(0.20	)%

E*TRADE FINANCIAL Results for the Quarter Ended December 31, 2004

Page 11

Activity in Allowance for Loan Losses

	Three Months Ending December 31, 2004
	Mortgage			Consumer			Total
	(in thousands)
Allowance for loan losses, ending 9/30/04	$	13,039		$	29,855		$	42,894
Provision for loan losses		5,811			6,609			12,420
Charge-offs, net		(855	)		(6,778	)		(7,633	)
Allowance for loan losses, ending 12/31/04	$	17,995		$	29,686		$	47,681

Bank Average Balance Data

	Three Months Ended December 31, 2004						Three Months Ended December 31, 2003
	Average Balance		Interest Income/ Expense		Average Annualized Yield/Cost		Average Balance		Interest Income/ Expense		Average Annualized Yield/Cost
	(in thousands)
Interest-earning banking assets:
Loans receivable, net	$	11,678,476	$	143,885	4.93	%	$	8,608,426	$	101,423	4.71	%
Interest-bearing deposits		40,510		198	1.94	%		166,573		1,047	2.49	%
Mortgage-backed and related available-for-sale securities		9,031,367		89,563	3.97	%		7,151,508		70,315	3.93	%
Available-for-sale investment securities		3,347,929		36,904	4.41	%		2,303,438		24,247	4.21	%
Investment in FHLB stock		99,802		932	3.71	%		79,236		693	3.47	%
Trading securities		581,458		4,546	3.13	%		786,006		5,995	3.05	%
Total interest-earning banking assets(6)		24,779,542	$	276,028	4.45	%		19,095,187	$	203,720	4.27	%
Non-interest-earning banking assets		497,512						761,853
Total banking assets	$	25,277,054					$	19,857,040
Interest-bearing banking liabilities:
Retail deposits	$	11,834,734	$	40,663	1.37	%	$	11,331,066	$	58,496	2.05	%
Brokered certificates of deposit		325,269		2,176	2.66	%		243,210		1,742	2.84	%
FHLB advances		1,664,272		16,457	3.87	%		927,761		11,593	4.89	%
Other borrowings		9,905,559		75,068	2.97	%		5,798,868		47,225	3.19	%
Total interest-bearing banking liabilities		23,729,834	$	134,364	2.25	%		18,300,905	$	119,056	2.58	%
Non-interest bearing banking liabilities		389,355						596,475
Total banking liabilities		24,119,189						18,897,380
Total banking shareholder’s equity		1,157,865						959,660
Total banking liabilities and shareholder’s equity	$	25,277,054					$	19,857,040
Excess of interest-earning banking assets over interest-bearing banking liabilities/net interest income	$	1,049,708					$	794,282
Net interest spread			$	141,664	2.20	%			$	84,664	1.69	%

E*TRADE FINANCIAL Results for the Quarter Ended December 31, 2004

Page 12

SUPPLEMENTAL INFORMATION AND ENDNOTES

Explanation of Non-GAAP Measures and Certain Metrics

In order to better assess the Company’s financial operating results, management believes consolidated operating margins, free cash, EBITDA and interest coverage are appropriate measures of evaluating the operating and liquidity performance of the Company. We believe that the elimination of certain items from these measures is helpful to analysts and investors who may wish to use some or all of this information to analyze our current performance, prospects and valuation. Our management uses non-GAAP information internally to evaluate our operating performance and in formulating our budget for future periods.

Consolidated Operating Margin

Consolidated operating margin is defined as income before other income, income taxes and discontinued operations divided by net revenues. Operating margin for Brokerage and Bank is based on segment results. Our consolidated statements of operations contain a reconciliation of income before other income, income taxes and discontinued operations to net income.

Free Cash, EBITDA and Interest Coverage

Free cash as reported by the Company represents cash held at Parent and non-Bank or Brokerage subsidiaries less discretionary reserves and excess capital at Bank and Brokerage after regulatory capital requirements and the Company’s own regulatory capital guidelines. The Company believes that free cash is a useful measure of the Company’s liquidity as it excludes cash reflected on the balance sheet that may not be freely available to the Company.

Additionally, management utilizes EBITDA and interest coverage to measure business performance. EBITDA is defined as net income (loss) from continuing operations before corporate interest expense, taxes and depreciation & amortization. Interest coverage is defined as EBITDA divided by corporate interest expense.

It is important to note these metrics and other non-GAAP measures may involve judgment by management and should be considered in addition to, not as a substitute for, or superior to, net income, consolidated statements of cash flows, or other measures of financial performance prepared in accordance with GAAP. For complete information on the items excluded from these non-GAAP measures, please see our financial statements and “Management’s Discussion and Analysis of Results of Operations and Financial Condition” that will be included in the periodic report we expect to file with the SEC with respect to the financial periods discussed herein.

(1) Consolidated operating margin is defined as income before other income, income taxes and discontinued operations divided by net revenues. Operating margin for Brokerage and Bank is based on segment results.

(2) For the three months ended December 31, 2003 and for the twelve months ended December 31, 2004, diluted earnings per share is calculated using the ‘if converted’ method, which includes the additional dilutive impact assuming conversion of the Company’s subordinated convertible debt. Under the ‘if converted’ method the per share numerator excludes the interest expense and related amortization of offering costs from the convertible debt, net of tax, of $ 7.2 million for the three months ended December 31, 2003, and $19.9 million for the twelve months ended December 31, 2004. The denominator includes the shares issuable from the assumed conversion of the convertible debt of 45.4 million for the three months ended December 31, 2003 and 25.8 million for the twelve months ended December 31, 2004. For all other periods presented the ‘if converted’ method is not used as its effect would be anti-dilutive.

(3) Eliminates intercompany payment made by Bank to Brokerage related to Sweep Deposit Account (SDA) relationships, swept daily from Brokerage to Bank, which began in the third quarter of 2003. Under this relationship, Bank pays Brokerage a negotiated rate that approximates market on the average SDA balance. Bank reflects this payment as advertising and market development expense and Brokerage reflects this payment as other revenues.

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

(5) Q404 estimate.

(6) Amounts include a taxable equivalent increase in interest income of $2.4 million and $0.7 million for the three months ended December 31, 2004 and 2003, respectively.