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 RECORD FIRST QUARTER REVENUE

WITH EARNINGS OF $0.24 PER SHARE

WIDENS OPERATING MARGIN AND MAINTAINS 2005 EARNINGS GUIDANCE OF $0.93-$1.08 PER SHARE

• Reported first quarter earnings of $0.24 per share on net income of $92.0 million, compared to $0.23 per share on net income of $88.5 million a year ago

• Increased consolidated operating income⁽¹⁾ to $135.3 million, up from $119.0 million a year ago

• Widened operating margin⁽²⁾to 32 percent from 30 percent a year ago

• Reported Total Daily Average Revenue Trades of 134,770

• Increased average margin debt to $2.24 billion, up from $1.98 billion a year ago

• Generated bank spread of 220 basis points, up from 185 basis points a year ago

New York, April 20, 2005 – E*TRADE FINANCIAL Corporation (NYSE: ET) today announced results for its first quarter ended March 31, 2005, reporting net income of $92.0 million, or $0.24 per diluted share, compared to net income of $89.8 million, or $0.24 per share in the prior quarter and $88.5 million, or $0.23 per share, in the same quarter a year ago. Net revenue for the first quarter totaled $420.3 million, a 3 percent increase over the prior quarter and a 5 percent increase over the year ago period, achieving a new quarterly record. The Company also reported record consolidated operating income of $135 million, a 22 percent increase over the prior quarter and a 14 percent increase over the year ago period.

“The strength of our first quarter results again proves the power and flexibility of our integrated business model,” said Mitchell H. Caplan, Chief Executive Officer, E*TRADE FINANCIAL Corporation. “We generated record quarterly revenue and consolidated operating income amid an uncertain economic environment. By focusing on operational efficiencies and leverage points within—and between—our retail and institutional segments, we continue to create franchise value.”

As previously announced, the Company is changing its segment reporting structure to reflect its customer-centric focus beginning with today’s release of its first quarter results. Segment results will now be reported as retail and institutional as opposed to the previous structure of bank and brokerage. “We are now measuring and reporting our performance as it relates to the Company’s key customer segments,” said R. Jarrett Lilien, President and Chief Operating Officer, E*TRADE FINANCIAL Corporation. “Customer-centric management allows us to more effectively understand the dimensions of customer satisfaction while measuring our success in growing revenue per customer, profits per customer and overall customer engagement.”

(more)

E*TRADE FINANCIAL Results for the Quarter Ended March 31, 2005

Page 2

Other selected highlights from the first quarter of 2005:

• Added 192,000 gross new retail accounts, with 134,000 in trading/investing and 58,000 in deposit/lending accounts

• Increased products per customer 12 percent to 1.9 from 1.7 a year ago and total segment income per customer by 13 percent to $47 from $41 a year ago

• Lowered online stock and options commissions from $19.99 to $14.99 for customers with less than $50,000 in combined assets or less than 5 trades per month and eliminated the $3 order handling fee

• Reduced online stock and options commissions to $11.99 from $12.99 for clients with over $50,000 in combined assets and less than 5 trades per month

• Created two additional pricing tiers for Active Traders ranging from $6.99 to $9.99 for stock and options commissions based on activity qualifications

• Increased annual yield on Money Market Checking and Sweep Deposit Accounts to as much as 2.50% APY and 1.00% APY, respectively, based on balance qualifications

• Began initial phase of E*TRADE Complete rollout, upgrading 50,000 accounts

• Announced Digital Security ID program, a ground-breaking, two-factor authentication solution for customers to prevent unauthorized account access

• Repurchased approximately 2.5 million outstanding shares for $32.5 million

Historical monthly metric data from January 2003 to March 2005 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 provides financial services including trading, investing, banking and lending for retail 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 March 31, 2005

Page 3

Financial Statements

Consolidated Statements of Operations

(in thousands, except per share amounts)

(unaudited)

	Three Months Ended
	March 31, 2005			December 31, 2004			March 31, 2004
Revenues:
Commissions	$	114,176		$	119,387		$	142,713
Principal transactions		34,209			41,835			38,946
Gain on sales of loans and securities, net		36,739			25,861			41,162
Service charges and fees		33,372			24,671			24,900
Other revenues		25,994			27,837			26,898
Interest income		336,613			323,189			255,637
Interest expense		(148,791	)		(140,839	)		(120,726	)
Net interest income		187,822			182,350			134,911
Provision for loan losses		(12,040	)		(12,420	)		(9,055	)
Net interest income after provision for loan losses		175,782			169,930			125,856
Total net revenues		420,272			409,521			400,475
Expenses excluding interest:
Compensation and benefits		98,636			95,562			99,462
Occupancy and equipment		19,584			19,954			19,995
Communications		17,891			18,559			19,442
Professional services		19,816			23,425			14,364
Commissions, clearance and floor brokerage		39,712			40,067			43,927
Advertising and market development		26,821			16,614			24,054
Servicing and other banking expenses		10,199			9,946			8,466
Fair value adjustments of financial derivatives		888			518			274
Depreciation and amortization		18,089			21,027			20,523
Amortization of other intangibles		6,140			6,932			6,919
Facility restructuring and other exit charges		562			17,299			(959	)
Other		26,615			29,004			25,051
Total expenses excluding interest		284,953			298,907			281,518
Income before other income, income taxes and discontinued operations		135,319			110,614			118,957
Other income:
Corporate interest income		1,962			1,937			1,363
Corporate interest expense		(11,567	)		(11,774	)		(11,338	)
Gain on sale and impairment of investments		15,542			20,597			28,549
Equity in income of investments and venture funds		2,877			1,262			2,602
Total other income		8,814			12,022			21,176
Income before income taxes and discontinued operations		144,133			122,636			140,133
Income tax expense		52,089			32,716			49,808
Minority interest in subsidiaries		50			17			740
Income from continuing operations		91,994			89,903			89,585
Loss from discontinued operations		—			(74	)		(1,110	)
Net income	$	91,994		$	89,829		$	88,475
Basic income per share from continuing operations	$	0.25		$	0.24		$	0.24
Basic loss per share from discontinued operations		—			(0.00	)		(0.00	)
Basic net income per share	$	0.25		$	0.24		$	0.24
Diluted income per share from continuing operations	$	0.24		$	0.24		$	0.23
Diluted loss per share from discontinued operations		—			(0.00	)		(0.00	)
Diluted net income per share	$	0.24		$	0.24		$	0.23
Shares used in computation of per share data:
Basic		366,130			367,603			365,045
Diluted(3)		378,734			381,061			425,155

E*TRADE FINANCIAL Results for the Quarter Ended March 31, 2005

Page 4

Consolidated Balance Sheets

(dollars in thousands)

(unaudited)

	March 31, 2005			December 31, 2004
ASSETS
Cash and equivalents	$	720,996		$	939,906
Cash and investments required to be segregated under Federal or other regulations		2,014,189			724,026
Brokerage receivables, net		3,459,480			3,034,548
Trading securities		231,615			593,245
Available-for-sale mortgage-backed and investment securities		11,819,146			12,543,818
Other investments		57,105			46,269
Loans receivable, net		12,929,802			11,505,755
Loans held-for-sale, net		308,661			279,280
Property and equipment, net		308,135			302,291
Goodwill		395,626			395,043
Other intangibles, net		132,901			134,121
Other assets		732,349			534,281
Total assets	$	33,110,005		$	31,032,583
LIABILITIES AND SHAREHOLDERS’ EQUITY
Brokerage payables	$	5,205,026		$	3,618,892
Deposits		12,519,646			12,302,974
Securities sold under agreements to repurchase		9,491,271			9,896,872
Other borrowings by Bank subsidiary		2,344,821			1,760,732
Senior notes		398,538			400,452
Convertible subordinated notes		185,165			185,165
Accounts payable, accrued and other liabilities		671,664			639,294
Total liabilities		30,816,131			28,804,381
Shareholders’ equity:
Preferred stock, shares authorized: 1,000,000; issued and outstanding: none at March 31, 2005 and December 31, 2004		—			—
Shares exchangeable into common stock, $0.01 par value, shares authorized: 10,644,223; issued and outstanding: 1,300,301 at March 31, 2005 and 1,302,801 at December 31, 2004		13			13
Common stock, $0.01 par value, shares authorized: 600,000,000; issued and outstanding: 368,735,091 at March 31, 2005 and 369,623,604 at December 31, 2004		3,687			3,696
Additional paid-in-capital		2,217,413			2,234,093
Deferred stock compensation		(17,986	)		(18,419	)
Retained earnings		242,012			150,018
Accumulated other comprehensive loss		(151,265	)		(141,199	)
Total shareholders’ equity		2,293,874			2,228,202
Total liabilities and shareholders’ equity	$	33,110,005		$	31,032,583

E*TRADE FINANCIAL Results for the Quarter Ended March 31, 2005

Page 5

Segment Reporting

	Three Months Ended March 31, 2005
	Retail			Institutional			Elimination (4)			Total
	(in thousands)
Revenues:
Commissions	$	84,970		$	29,206					$	114,176
Principal transactions		—			34,048			161			34,209
Gain on sales of loans and securities, net		8,102			28,637						36,739
Service charges and fees		29,654			3,718						33,372
Other revenues		29,652			4,453			(8,111	)		25,994
Interest income		135,159			290,308			(88,854	)		336,613
Interest expense		(43,184	)		(194,299	)		88,692			(148,791	)
Net interest income		91,975			96,009			(162	)		187,822
Provision for loan losses		—			(12,040	)					(12,040	)
Net interest income after provision for loan losses		91,975			83,969			(162	)		175,782
Total net revenues		244,353			184,031			(8,112	)		420,272
Expenses excluding interest:
Compensation and benefits		62,197			36,439						98,636
Occupancy and equipment		15,307			4,277						19,584
Communications		14,903			2,988						17,891
Professional services		14,416			5,400						19,816
Commissions, clearance and floor brokerage		10,757			31,415			(2,460	)		39,712
Advertising and market development		23,420			3,401						26,821
Servicing and other banking expenses		1,492			14,359			(5,652	)		10,199
Fair value adjustments of financial derivatives		—			888						888
Depreciation and amortization		15,492			2,597						18,089
Amortization of other intangibles		3,047			3,093						6,140
Facility restructuring and other exit charges		(330	)		892						562
Other		15,457			11,158						26,615
Total expenses excluding interest		176,158			116,907			(8,112	)		284,953
Segment income	$	68,195		$	67,124		$	—		$	135,319
	Three Months Ended December 31, 2004
	Retail			Institutional			Elimination (4)			Total
	(in thousands)
Revenues:
Commissions	$	94,148		$	25,239					$	119,387
Principal transactions		—			41,835						41,835
Gain on sales of loans and securities, net		12,162			13,699						25,861
Service charges and fees		21,765			2,906						24,671
Other revenues		32,580			5,096			(9,839	)		27,837
Interest income		130,545			272,142			(79,498	)		323,189
Interest expense		(44,264	)		(176,073	)		79,498			(140,839	)
Net interest income		86,281			96,069						182,350
Provision for loan losses		—			(12,420	)					(12,420	)
Net interest income after provision for loan losses		86,281			83,649						169,930
Total net revenues		246,936			172,424			(9,839	)		409,521
Expenses excluding interest:
Compensation and benefits		62,235			33,327						95,562
Occupancy and equipment		15,858			4,096						19,954
Communications		15,960			2,599						18,559
Professional services		15,605			7,820						23,425
Commissions, clearance and floor brokerage		13,834			29,792			(3,559	)		40,067
Advertising and market development		15,709			905						16,614
Servicing and other banking expenses		1,781			14,445			(6,280	)		9,946
Fair value adjustments of financial derivatives		—			518						518
Depreciation and amortization		18,611			2,416						21,027
Amortization of other intangibles		2,984			3,948						6,932
Facility restructuring and other exit charges		5,926			11,373						17,299
Other		16,249			12,755						29,004
Total expenses excluding interest		184,752			123,994			(9,839	)		298,907
Segment income	$	62,184		$	48,430		$	—		$	110,614

E*TRADE FINANCIAL Results for the Quarter Ended March 31, 2005

Page 6

	Three Months Ended March 31, 2004
	Retail			Institutional			Elimination (4)			Total
	(in thousands)
Revenues:
Commissions	$	112,230		$	30,483					$	142,713
Principal transactions		—			38,946						38,946
Gain on sales of loans and securities, net		33,795			7,367						41,162
Service charges and fees		21,933			2,967						24,900
Other revenues		30,256			5,072			(8,430	)		26,898
Interest income		120,875			210,707			(75,945	)		255,637
Interest expense		(44,860	)		(151,811	)		75,945			(120,726	)
Net interest income		76,015			58,896						134,911
Provision for loan losses		—			(9,055	)					(9,055	)
Net interest income after provision for loan losses		76,015			49,841						125,856
Total net revenues		274,229			134,676			(8,430	)		400,475
Expenses excluding interest:
Compensation and benefits		61,445			38,017						99,462
Occupancy and equipment		16,830			3,165						19,995
Communications		16,253			3,189						19,442
Professional services		9,203			5,161						14,364
Commissions, clearance and floor brokerage		16,753			30,806			(3,632	)		43,927
Advertising and market development		22,085			1,969						24,054
Servicing and other banking expenses		2,212			11,052			(4,798	)		8,466
Fair value adjustments of financial derivatives		—			274						274
Depreciation and amortization		16,553			3,970						20,523
Amortization of other intangibles		4,360			2,559						6,919
Facility restructuring and other exit charges		(815	)		(144	)					(959	)
Other		12,259			12,792						25,051
Total expenses excluding interest		177,138			112,810			(8,430	)		281,518
Segment income	$	97,091		$	21,866		$	—		$	118,957

E*TRADE FINANCIAL Results for the Quarter Ended March 31, 2005

Page 7

Key Performance Metrics⁽⁵⁾

Corporate Metrics	Qtr ended 3/31/05			Qtr ended 12/31/04			Qtr ended 3/31/05 vs. Qtr ended 12/31/04		Qtr ended 3/31/04			Qtr ended 3/31/05 vs. Qtr ended 3/31/04
Operating margin %(2)
Consolidated		32	%		27	%	5	%		30	%	2	%
Retail		28	%		25	%	3	%		35	%	(7	)%
Institutional		36	%		28	%	8	%		16	%	20	%
Employees		3,273			3,320		(1	)%		3,374		(3	)%
Consultants and other		515			505		2	%		415		24	%
Total headcount		3,788			3,825		(1	)%		3,789		0	%
Revenue per headcount	$	110,948		$	107,064		4	%	$	105,694		5	%
Revenue per compensation and benefits dollar	$	4.26		$	4.29		(1	)%	$	4.03		6	%
Book value per share	$	6.20		$	6.01		3	%	$	5.37		15	%
Tangible book value per share	$	4.77		$	4.58		4	%	$	3.97		20	%
Cash & equivalents ($MM)	$	721.0		$	939.9		(23	)%	$	845.4		(15	)%
Free cash ($MM)	$	689.9		$	691.0		0	%	$	704.6		(2	)%
Earnings before interest, taxes, depreciation & amortization ($MM)
Net income from continuing operations	$	92.0		$	89.9		2	%	$	89.6		3	%
Tax expense		52.1			32.7		59	%		49.8		5	%
Depreciation & amortization		24.2			28.0		(13	)%		27.4		(12	)%
Corporate interest expense		11.6			11.8		(2	)%		11.3		2	%
EBITDA	$	179.9		$	162.4		11	%	$	178.2		1	%
Interest coverage		15.6			13.8		13	%		15.7		(1	)%

E*TRADE FINANCIAL Results for the Quarter Ended March 31, 2005

Page 8

Key Performance Metrics⁽⁵⁾

Retail Metrics	Qtr ended 3/31/05			Qtr ended 12/31/04			Qtr ended 3/31/05 vs. Qtr ended 12/31/04		Qtr ended 3/31/04			Qtr ended 3/31/05 vs. Qtr ended 3/31/04
Trading days		61.0			63.5		(4	)%		62.0		(2	)%
Daily Average Revenue Trades (DARTs)
Total Retail		88,075			89,604		(2	)%		103,052		(15	)%
- US		74,133			76,955		(4	)%		88,601		(16	)%
- International		13,942			12,649		10	%		14,451		(4	)%
Professional		46,695			46,529		0	%		53,983		(14	)%
Total DARTs		134,770			136,133		(1	)%		157,035		(14	)%
Total retail trades (MM)		8.2			8.6		(5	)%		9.7		(16	)%
Average commission per trade	$	10.34		$	10.89		(5	)%	$	11.53		(10	)%
End of period margin debt ($B)	$	2.27		$	2.24		1	%	$	2.14		6	%
Average margin debt ($B)	$	2.24		$	2.09		7	%	$	1.98		13	%
Gross new trading/investing accounts		133,951			161,737		(17	)%		141,717		(5	)%
Gross new deposit/lending accounts		58,454			42,072		39	%		61,638		(5	)%
Inactive accounts		(100,921	)		(90,106	)	(12	)%		(92,579	)	(9	)%
Customer closed accounts		(56,239	)		(58,374	)	4	%		(74,070	)	24	%
Net new retail accounts		35,245			55,329		(36	)%		36,706		(4	)%
End of period trading/investing accounts		2,975,744			2,956,090		1	%		2,880,436		3	%
End of period deposit/lending accounts		642,264			626,673		2	%		643,240		0	%
End of period retail accounts		3,618,008			3,582,763		1	%		3,523,676		3	%
Net new customers		8,584			28,429		(70	)%		66,883		(87	)%
End of period total retail customers		2,896,025			2,887,441		0	%		2,875,348		1	%
End of period assets per customer	$	32,754		$	34,785		(6	)%	$	30,331		8	%
Consolidated net revenue per customer	$	145		$	142		2	%	$	139		4	%
Consolidated segment income per customer	$	47		$	38		22	%	$	41		13	%
Products per customer		1.9			1.9		2	%		1.7		12	%
Total Retail Client Assets ($B)
Security holdings	$	51.6		$	53.5		(4	)%	$	47.7		8	%
Cash (including money market funds)		5.5			5.9		(7	)%		6.0		(8	)%
Unexercised options (vested)		25.2			28.7		(12	)%		21.5		17	%
Client assets in trading/investing accounts		82.3			88.1		(7	)%		75.2		9	%
Sweep Deposit Account		6.3			6.2		2	%		4.4		44	%
Transaction accounts		3.7			3.8		(2	)%		4.4		(16	)%
CDs		2.5			2.4		7	%		3.2		(21	)%
Client assets in deposit accounts		12.5			12.3		2	%		12.0		5	%
Total retail client assets	$	94.8		$	100.4		(6	)%	$	87.2		9	%
Unexercised options (unvested) ($B)	$	14.8		$	20.1		(26	)%	$	15.3		(3	)%
Direct mortgage originations ($B)	$	0.6		$	0.7		(11	)%	$	1.1		(43	)%
Consumer loan originations, incl HELOCs ($B)	$	0.5		$	0.5		(7	)%	$	0.7		(29	)%
Mortgage pipeline (end of period) ($B)	$	0.2		$	0.2		(14	)%	$	0.9		(79	)%

E*TRADE FINANCIAL Results for the Quarter Ended March 31, 2005

Page 9

Key Performance Metrics⁽⁵⁾

Institutional Metrics	Qtr ended 3/31/05			Qtr ended 12/31/04			Qtr ended 3/31/05 vs. Qtr ended 12/31/04		Qtr ended 3/31/04			Qtr ended 3/31/05 vs. Qtr ended 3/31/04
Market Making
Equity shares traded (MM)		57,385			75,717		(24	)%		34,696		65	%
Average revenue capture per 1,000 equity shares	$	0.329		$	0.318		3	%	$	0.768		(57	)%
% of Bulletin Board equity shares to total equity shares		93.3	%		93.9	%	(1	)%		86.4	%	7	%
Bank Asset Portfolio Detail ($MM)
Cash & equivalents	$	60		$	82		(27	)%	$	165		(64	)%
Trading securities		203			567		(64	)%		809		(75	)%
Investment securities, available-for-sale		3,317			3,367		(1	)%		2,850		16	%
Mortgage securities, available-for-sale		8,346			9,052		(8	)%		7,000		19	%
Loans receivable, net including loans held-for-sale:
- Mortgage and home equity loans, net		8,969			7,634		17	%		4,580		96	%
- Consumer loans, net		4,257			4,148		3	%		4,130		3	%
- Other		12			3		300	%		1		1100	%
Other assets		831			700		19	%		675		23	%
Total assets	$	25,995		$	25,553		2	%	$	20,210		29	%
Bank net interest spread (basis points)		220			220		0	%		185		19	%
Bank interest-earning assets, average ($MM)	$	25,280		$	24,780		2	%	$	19,847		27	%
Credit Quality and Reserve Metrics
Net charge-offs as a % of average held-for-investment loans, net (annualized)		0.26	%		0.27	%	(0.01	)%		0.34	%	(0.08	)%
Provision as a % of average held-for-investment loans, net (annualized)		0.40	%		0.44	%	(0.04	)%		0.44	%	(0.04	)%
Allowance as a % of total ending gross held-for-investment loans		0.40	%		0.41	%	(0.01	)%		0.48	%	(0.08	)%
Total non-performing loans, net, as a % of total gross held-for-investment loans		0.18	%		0.17	%	0.01	%		0.26	%	(0.08	)%
Total loan loss allowance as a % of total non-performing loans, net		228	%		239	%	(11	)%		186	%	42	%
Tier 1 Capital Ratio(6)		6.06	%		5.83	%	0.23	%		6.21	%	(0.15	)%
Risk Weighted Capital Ratio(6)		11.27	%		11.09	%	0.18	%		11.69	%	(0.42	)%
Other
Banking revenue ($MM)	$	179.1		$	162.1		10	%	$	137.5		30	%
Brokerage revenue (net of SDA elimination) ($MM)		241.2			247.4		(3	)%		262.9		(8	)%
Total revenue ($MM)	$	420.3		$	409.5		3	%	$	400.5		5	%

E*TRADE FINANCIAL Results for the Quarter Ended March 31, 2005

Page 10

Activity in Allowance for Loan Losses

	Three Months Ending March 31, 2005
	Mortgage			Consumer			Total
	(in thousands)
Allowance for loan losses, ending 12/31/04	$	17,995		$	29,686		$	47,681
Provision for loan losses		5,344			6,696			12,040
Charge-offs, net		(1,187	)		(6,650	)		(7,837	)
Allowance for loan losses, ending 3/31/05	$	22,152		$	29,732		$	51,884

Bank Average Balance Data

	Three Months Ended March 31, 2005						Three Months Ended March 31, 2004
	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	$	12,185,231	$	153,188	5.03	%	$	8,932,832	$	109,969	4.92	%
Mortgage-backed and related available-for-sale securities		8,909,307		88,974	3.99	%		7,297,956		72,031	3.95	%
Available-for-sale investment securities		3,512,809		42,335	4.82	%		2,575,419		25,179	3.91	%
Trading securities		526,644		4,511	3.43	%		818,509		6,487	3.17	%
Other		145,997		1,211	3.36	%		221,770		1,804	3.27	%
Total interest-earning banking assets(7)		25,279,988	$	290,219	4.59	%		19,846,486	$	215,470	4.34	%
Non-interest-earning banking assets		500,688						447,450
Total banking assets	$	25,780,676					$	20,293,936
Interest-bearing banking liabilities:
Retail deposits	$	11,865,690	$	40,231	1.38	%	$	12,018,832	$	48,875	1.64	%
Brokered certificates of deposit		288,635		2,221	3.12	%		372,034		2,328	2.52	%
Repurchase agreements and other borrowings		10,073,089		82,465	3.27	%		5,679,179		56,004	3.90	%
FHLB advances		1,961,644		17,944	3.66	%		920,000		10,399	4.47	%
Total interest-bearing banking liabilities		24,189,058	$	142,861	2.39	%		18,990,045	$	117,606	2.49	%
Non-interest bearing banking liabilities		364,362						276,570
Total banking liabilities		24,553,420						19,266,615
Total banking shareholder’s equity		1,227,256						1,027,321
Total banking liabilities and shareholder’s equity	$	25,780,676					$	20,293,936
Excess of interest-earning banking assets over interest-bearing banking liabilities/net interest income	$	1,090,930					$	856,441
Net interest spread			$	147,358	2.20	%			$	97,864	1.85	%

E*TRADE FINANCIAL Results for the Quarter Ended March 31, 2005

Page 11

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 Retail and Institutional 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

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.

EBITDA

EBITDA represents net income from continuing operations before corporate interest expense, taxes and depreciation and amortization. Management believes that EBITDA provides a useful additional measure of our performance by excluding certain non-cash charges and expenses that are not directly related to the performance of our business.

Interest Coverage

Interest coverage represents EBITDA divided by corporate interest expense. Management believes that by excluding the charges and expenses that are excluded from EBITDA, interest coverage provides a useful additional measure of our ability to continue to meet our interest obligations and our liquidity.

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) Operating income is defined as income before other income, income taxes and discontinued operations.

(2) Operating margin is defined as income before other income, income taxes and discontinued operations divided by net revenues. Operating margin for Retail and Institutional is based on segment results.

(3) For the three months ended March 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 $7.6 million. The denominator includes the shares issuable from the assumed conversion of the convertible debt of 45.4 million. For all other periods presented the ‘if converted’ method is not used as its effect would be anti-dilutive.

(4) Reflects elimination of transactions between Retail and Institutional segments, which include deposit transfer pricing, servicing and orderflow rebates.

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

(6) Q105 estimate.

(7) Amounts include a taxable equivalent increase in interest income of $2.6 million and $1.1 million for the three months ended March 31, 2005 and 2004, respectively.