(10) Interest coverage represents the ratio of the Company’s EBITDA to its corporate interest expense. The interest coverage ratio based on the Company’s net income was 0.9, 1.4, and 1.1 for the three months ended June 30, 2012, March 31, 2012, and June 30, 2011, respectively.
(11) Bank earnings before taxes and before credit losses represents the pre-tax earnings of E*TRADE Bank’s holding company, ETB Holdings, Inc. (“Bank”) before provision for loan losses, gains on loans and securities, net, net impairment and losses on early extinguishment of FHLB advances. This metric shows the amount of earnings that the Bank, after accruing for the interest expense on its trust preferred securities, generates each quarter prior to credit related losses, primarily provision and loss on securities. Management believes this non-GAAP measure is useful to investors and analysts as it is an indicator of the level of credit related losses the Bank can absorb without causing a decline in E*TRADE Bank’s excess risk-based capital (a). Below is a reconciliation of Bank earnings before taxes and before credit losses from income before income taxes (dollars in thousands):
|Q2 2012||Q1 2012||Q2 2011|
|Income before income taxes||$||60,540||$||65,994||$||82,608|
|Non-bank loss before income tax benefit (b)||45,478||47,075||58,578|
|Provision for loan losses||67,261||71,947||103,136|
|Gains on loans and securities, net||(24,685||)||(34,906||)||(31,011||)|
|Bank earnings before taxes and before credit losses||$||153,863||$||153,642||$||216,195|
(a) Excess risk-based capital is the excess capital that E*TRADE Bank has compared to the regulatory minimum well-capitalized threshold.
(b) Non-bank loss represents all of the Company’s subsidiaries, including Corporate, but excluding the Bank.(12) The brokerage account attrition rate is calculated by dividing attriting brokerage accounts, which are gross new brokerage accounts less net new brokerage accounts, by total brokerage accounts at the previous period end. This rate is presented on an annualized basis.