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E*TRADE Financial Corporation Announces Second Quarter 2012 Results

Forward-Looking Statements: 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, potential changes in market activity, anticipated changes in the rate of new customer acquisition and in rate of net acquisition of brokerage accounts and assets, macro trends of the economy in general and the residential real estate market, instability in the consumer credit markets and credit trends, potential changes in liability relating to auction rate securities, increased mortgage loan delinquency and default rates, portfolio growth, portfolio seasoning and resolution through collections, sales or charge-offs, the uncertainty surrounding the foreclosure process, and the potential negative regulatory consequences resulting from the implementation of financial regulatory reform as well as from actions by or potentially more restrictive policies or interpretations of the Federal Reserve and the Office of the Comptroller of the Currency or other regulators. 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.

© 2012 E*TRADE Financial Corporation. All rights reserved.

Financial Statements

E*TRADE FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statement of Income
(In thousands, except per share amounts)
(Unaudited)
             
Three Months Ended Six Months Ended
June 30, June 30,
2012 2011 2012 2011
 
Revenue:
Operating interest income $ 354,520 $ 394,653 $ 716,781 $ 782,119
Operating interest expense   (75,415 )   (79,232 )   (152,824 )   (156,996 )
Net operating interest income   279,105     315,421     563,957     625,123  
Commissions 93,313 103,850 200,744 228,283
Fees and service charges 29,063 36,608 61,061 73,853
Principal transactions 21,239 23,756 45,385 53,332
Gains on loans and securities, net 24,685 31,011 59,591 63,345
Net impairment (5,269 ) (2,884 ) (8,801 ) (8,946 )
Other revenues   10,272     9,857     19,868     19,324  
Total non-interest income   173,303     202,198     377,848     429,191  
Total net revenue   452,408     517,619     941,805     1,054,314  
Provision for loan losses 67,261 103,136 139,208 219,194
Operating expense:
Compensation and benefits 85,549 80,518 177,827 164,521
Clearing and servicing 32,837 39,192 67,392 78,347
Advertising and market development 36,567 37,019 84,155 81,384
FDIC insurance premiums 27,195 24,031 55,557 44,598
Professional services 19,934 21,492 40,269 44,960
Occupancy and equipment 18,244 17,163 36,098 33,977
Communications 18,358 17,227 37,478 32,782
Depreciation and amortization 23,104 22,724 45,343 44,771
Amortization of other intangibles 6,295 6,537 12,591 13,075
Facility restructuring and other exit activities 1,589 2,046 1,165 5,598
Other operating expenses   11,783     22,969     29,819     44,919  
Total operating expense   281,455     290,918     587,694     588,932  
Income before other income (expense) and income tax expense 103,692 123,565 214,903 246,188
Other income (expense):
Corporate interest income 20 63 34 679
Corporate interest expense (45,285 ) (44,824 ) (90,410 ) (88,101 )
Gains (losses) on sales of investments, net - 38 (1 ) 38
Gains on early extinguishment of debt - 3,091 - 3,091
Equity in income (loss) of investments and venture funds   2,113     675     2,008     (323 )
Total other income (expense)   (43,152 )   (40,957 )   (88,369 )   (84,616 )
Income before income tax expense 60,540 82,608 126,534 161,572
Income tax expense   21,030     35,490     24,433     69,221  
Net income $ 39,510   $ 47,118   $ 102,101   $ 92,351  
 
Basic earnings per share $ 0.14 $ 0.18 $ 0.36 $ 0.37
Diluted earnings per share $ 0.14 $ 0.16 $ 0.35 $ 0.32
Shares used in computation of per share data:
Basic 285,645 269,119 285,561 249,817
Diluted 290,044 289,643 290,184 289,725
 
 

E*TRADE FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statement of Income
(In thousands, except per share amounts)
(Unaudited)
         
 
Three Months Ended
June 30, March 31, June 30,
2012 2012 2011
Revenue:
Operating interest income $ 354,520 $ 362,261 $ 394,653
Operating interest expense   (75,415 )   (77,409 )   (79,232 )
Net operating interest income   279,105     284,852     315,421  
Commissions 93,313 107,431 103,850
Fees and service charges 29,063 31,998 36,608
Principal transactions 21,239 24,146 23,756
Gains on loans and securities, net 24,685 34,906 31,011
Net impairment (5,269 ) (3,532 ) (2,884 )
Other revenues   10,272     9,596     9,857  
Total non-interest income   173,303     204,545     202,198  
Total net revenue   452,408     489,397     517,619  
Provision for loan losses 67,261 71,947 103,136
Operating expense:
Compensation and benefits 85,549 92,278 80,518
Clearing and servicing 32,837 34,555 39,192
Advertising and market development 36,567 47,588 37,019
FDIC insurance premiums 27,195 28,362 24,031
Professional services 19,934 20,335 21,492
Occupancy and equipment 18,244 17,854 17,163
Communications 18,358 19,120 17,227
Depreciation and amortization 23,104 22,239 22,724
Amortization of other intangibles 6,295 6,296 6,537
Facility restructuring and other exit activities 1,589 (424 ) 2,046
Other operating expenses   11,783     18,036     22,969  
Total operating expense   281,455     306,239     290,918  
Income before other income (expense) and income tax expense 103,692 111,211 123,565
Other income (expense):
Corporate interest income 20 14 63
Corporate interest expense (45,285 ) (45,125 ) (44,824 )
Gains (losses) on sales of investments, net - (1 ) 38
Gains on early extinguishment of debt - - 3,091
Equity in income (loss) of investments and venture funds   2,113     (105 )   675  
Total other income (expense)   (43,152 )   (45,217 )   (40,957 )
Income before income tax expense 60,540 65,994 82,608
Income tax expense   21,030     3,403     35,490  
Net income $ 39,510   $ 62,591   $ 47,118  
 
Basic earnings per share $ 0.14 $ 0.22 $ 0.18
Diluted earnings per share $ 0.14 $ 0.22 $ 0.16
Shares used in computation of per share data:
Basic 285,645 285,478 269,119
Diluted 290,044 290,017 289,643
 
 

E*TRADE FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheet
(In thousands, except share data)
(Unaudited)
             
 
June 30, March 31, December 31,
2012   2012   2011
ASSETS
Cash and equivalents $ 1,378,454 $ 2,018,438 $ 2,099,839
Cash required to be segregated under federal or other regulations 761,485 1,411,678 1,275,587
Trading securities 60,081 58,830 54,372
Available-for-sale securities 16,152,748 17,496,733 15,651,493
Held-to-maturity securities 8,433,682 7,640,118 6,079,512
Margin receivables 5,804,350 5,285,791 4,826,256
Loans receivable, net 11,225,848 11,796,468 12,332,807
Investment in FHLB stock 131,478 140,330 140,183
Property and equipment, net 297,344 298,425 299,693
Goodwill 1,934,232 1,934,232 1,934,232
Other intangibles, net 273,213 279,509 285,805
Other assets   2,702,915       2,931,192       2,960,673  
Total assets $ 49,155,830     $ 51,291,744     $ 47,940,452  
 
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits $ 27,911,100 $ 29,581,388 $ 26,459,985
Securities sold under agreements to repurchase 4,717,656 5,022,253 5,015,499
Customer payables 5,128,653 5,706,213 5,590,858
FHLB advances and other borrowings 2,741,383 2,732,900 2,736,935
Corporate debt 1,501,278 1,497,376 1,493,552
Other liabilities   2,076,151       1,715,713       1,715,673  
Total liabilities   44,076,221       46,255,843       43,012,502  
 
Shareholders' equity:
Common stock, $0.01 par value, shares authorized: 400,000,000 at
June 30, 2012, March 31, 2012 and December 31, 2011, shares issued
and outstanding: 285,740,705 at June 30, 2012, 285,676,131 at March 31, 2012
and 285,368,075 at December 31, 2011 2,857 2,857 2,854
Additional paid-in-capital 7,310,487 7,307,207 7,306,862
Accumulated deficit (1,893,036 ) (1,932,546 ) (1,995,137 )
Accumulated other comprehensive loss   (340,699 )     (341,617 )     (386,629 )
Total shareholders' equity   5,079,609       5,035,901       4,927,950  
Total liabilities and shareholders' equity $ 49,155,830     $ 51,291,744     $ 47,940,452  
 
 

Segment Reporting
             
Three Months Ended June 30, 2012

Trading and Investing

Balance Sheet Management

Corporate/ Other

Eliminations (5)

Total
(In thousands)
Revenue:
Operating interest income $ 174,368 $ 284,682 $ 3 $ (104,533 ) $ 354,520
Operating interest expense   (9,165 )   (170,783 )   -     104,533     (75,415 )
Net operating interest income   165,203     113,899     3     -     279,105  
Commissions 93,313 - - - 93,313
Fees and service charges 28,395 668 - - 29,063
Principal transactions 21,239 - - - 21,239
Gains (losses) on loans and securities, net (114 ) 24,799 - - 24,685
Net impairment - (5,269 ) - - (5,269 )
Other revenues   8,887     1,385     -     -     10,272  
Total non-interest income   151,720     21,583     -     -     173,303  
Total net revenue   316,923     135,482     3     -     452,408  
Provision for loan losses - 67,261 - - 67,261
Operating expense:
Compensation and benefits 64,973 4,156 16,420 - 85,549
Clearing and servicing 16,327 16,510 - - 32,837
Advertising and market development 36,529 38 - - 36,567
FDIC insurance premiums - 27,195 - - 27,195
Professional services 10,632 1,307 7,995 - 19,934
Occupancy and equipment 16,502 452 1,290 - 18,244
Communications 17,570 356 432 - 18,358
Depreciation and amortization 18,984 159 3,961 - 23,104
Amortization of other intangibles 6,295 - - - 6,295
Facility restructuring and other exit activities - - 1,589 - 1,589
Other operating expenses   297     6,435     5,051     -     11,783  
Total operating expense   188,109     56,608     36,738     -     281,455  
 
Segment income (loss) before other income (expense)   128,814     11,613     (36,735 )   -     103,692  
Other income (expense):
Corporate interest income - - 20 - 20
Corporate interest expense - - (45,285 ) - (45,285 )
Equity in income of investments and venture funds   -     -     2,113     -     2,113  
Total other income (expense)   -     -     (43,152 )   -     (43,152 )
Segment income (loss) $ 128,814   $ 11,613   $ (79,887 ) $ -   $ 60,540  
 
 
Three Months Ended March 31, 2012

Trading and Investing

Balance Sheet Management

Corporate/ Other

Eliminations (5)

Total

(In thousands)
Revenue:
Operating interest income $ 181,250 $ 299,816 $ 1 $ (118,806 ) $ 362,261
Operating interest expense   (10,802 )   (185,413 )   -     118,806     (77,409 )
Net operating interest income   170,448     114,403     1     -     284,852  
Commissions 107,431 - - - 107,431
Fees and service charges 30,965 1,033 - - 31,998
Principal transactions 24,146 - - - 24,146
Gains (losses) on loans and securities, net (88 ) 35,007 (13 ) - 34,906
Net impairment - (3,532 ) - - (3,532 )
Other revenues   7,935     1,661     -     -     9,596  
Total non-interest income   170,389     34,169     (13 )   -     204,545  
Total net revenue   340,837     148,572     (12 )   -     489,397  
Provision for loan losses - 71,947 - - 71,947
Operating expense:
Compensation and benefits 69,200 4,731 18,347 - 92,278
Clearing and servicing 18,263 16,292 - - 34,555
Advertising and market development 47,374 214 - - 47,588
FDIC insurance premiums - 28,362 - - 28,362
Professional services 10,358 2,717 7,260 - 20,335
Occupancy and equipment 16,416 539 899 - 17,854
Communications 18,346 351 423 - 19,120
Depreciation and amortization 17,741 175 4,323 - 22,239
Amortization of other intangibles 6,296 - - - 6,296
Facility restructuring and other exit activities - - (424 ) - (424 )
Other operating expenses   7,547     5,214     5,275     -     18,036  
Total operating expense   211,541     58,595     36,103     -     306,239  
 
Segment income (loss) before other income (expense)   129,296     18,030     (36,115 )   -     111,211  
Other income (expense):
Corporate interest income - - 14 - 14
Corporate interest expense - - (45,125 ) - (45,125 )
Losses on sale of investments, net - - (1 ) - (1 )
Equity in loss of investments and venture funds   -     -     (105 )   -     (105 )
Total other income (expense)   -     -     (45,217 )   -     (45,217 )
Segment income (loss) $ 129,296   $ 18,030   $ (81,332 ) $ -   $ 65,994  
 
 
Three Months Ended June 30, 2011

Trading and Investing

Balance Sheet Management

Corporate/ Other

Eliminations (5) Total
(In thousands)
Revenue:
Operating interest income $ 205,372 $ 321,813 $ 6 $ (132,538 ) $ 394,653
Operating interest expense   (13,620 )   (198,150 )   -     132,538     (79,232 )
Net operating interest income   191,752     123,663     6     -     315,421  
Commissions 103,850 - - - 103,850
Fees and service charges 35,809 799 - - 36,608
Principal transactions 23,756 - - - 23,756
Gains (losses) on loans and securities, net (337 ) 31,391 (43 ) - 31,011
Net impairment - (2,884 ) - - (2,884 )
Other revenues   8,050     1,807     -     -     9,857  
Total non-interest income   171,128     31,113     (43 )   -     202,198  
Total net revenue   362,880     154,776     (37 )   -     517,619  
Provision for loan losses - 103,136 - - 103,136
Operating expense:
Compensation and benefits 58,968 4,204 17,346 - 80,518
Clearing and servicing 19,398 19,794 - - 39,192
Advertising and market development 37,019 - - - 37,019
FDIC insurance premiums - 24,031 - - 24,031
Professional services 12,181 1,336 7,975 - 21,492
Occupancy and equipment 15,650 716 797 - 17,163
Communications 16,550 300 377 - 17,227
Depreciation and amortization 17,692 351 4,681 - 22,724
Amortization of other intangibles 6,537 - - - 6,537
Facility restructuring and other exit activities - - 2,046 - 2,046
Other operating expenses   8,599     7,533     6,837     -     22,969  
Total operating expense   192,594     58,265     40,059     -     290,918  
 
Segment income (loss) before other income (expense)   170,286     (6,625 )   (40,096 )   -     123,565  
Other income (expense):
Corporate interest income - - 63 - 63
Corporate interest expense - - (44,824 ) - (44,824 )
Gains on sale of investments, net - - 38 - 38
Gains on early extinguishment of debt - - 3,091 - 3,091
Equity in income of investments and venture funds   -     -     675     -     675  
Total other income (expense)   -     -     (40,957 )   -     (40,957 )
Segment income (loss) $ 170,286   $ (6,625 ) $ (81,053 ) $ -   $ 82,608  
 
 

Key Performance Metrics (6)

     

Corporate Metrics

Qtr ended 6/30/12

Qtr ended 3/31/12

Qtr ended 6/30/12 vs. 3/31/12

Qtr ended 6/30/11

Qtr ended 6/30/12 vs. 6/30/11

   

Operating margin % (7)

Consolidated 23 % 23 % 0 % 24 % (1)%
Trading and Investing 41 % 38 % 3 % 47 % (6)%
Balance Sheet Management 9 % 12 % (3)% N.M. N.M.
 
Employees 3,104 3,162 (2)% 3,024 3 %
Consultants and other   110   136 (19)%   214 (49)%
Total headcount 3,214 3,298 (3)% 3,238 (1)%
 
Book value per share $ 17.78 $ 17.63 1 % $ 17.20 3 %
Tangible book value per share (8) $ 11.08 $ 10.87 2 % $ 10.08 10 %
 
Corporate cash ($MM) $ 436.5 $ 483.8 (10)% $ 423.7 3 %
 
Enterprise net interest spread (basis points) (9) 244 249 (2)% 289 (16)%
Enterprise interest-earning assets, average ($MM) $ 44,770 $ 44,890 0 % $ 42,908 4 %
 

Earnings before interest, taxes, depreciation & amortization ("EBITDA") ($MM)

Net income $ 39.5 $ 62.6 (37)% $ 47.1 (16)%
Income tax expense 21.0 3.4 N.M. 35.5 N.M.
Depreciation & amortization 29.4 28.6 3 % 29.3 0 %
Corporate interest expense   45.3   45.1 0 %   44.8 1 %
EBITDA $ 135.2 $ 139.7 (3)% $ 156.7 (14)%
 
Interest coverage (10) 3.0 3.1 N.M. 3.5 N.M.
 
Bank earnings before taxes and before credit losses ($MM) (11) $ 153.9 $ 153.6 0 % $ 216.2 (29)%
 

Trading and Investing Metrics

 
Trading days 63.0 62.0 N.M. 63.0 N.M.
 
DARTs 138,653 156,988 (12)% 147,908 (6)%
 
Total trades (MM) 8.7 9.7 (10)% 9.3 (6)%
Average commission per trade $ 10.68 $ 11.04 (3)% $ 11.14 (4)%
 
End of period margin receivables ($B) $ 5.8 $ 5.3 9 % $ 5.7 2 %
Average margin receivables ($B) $ 5.6 $ 4.9 14 % $ 5.7 (2)%
 
 
Gross new brokerage accounts 104,659 106,418 (2)% 97,888 7 %
Gross new stock plan accounts 52,173 61,234 (15)% 45,658 14 %
Gross new banking accounts 4,328 4,978 (13)% 5,366 (19)%
Closed accounts   (102,587)   (123,142) N.M.   (152,122) N.M.
Net new accounts 58,573 49,488 N.M. (3,210) N.M.
 
Net new brokerage accounts 45,599 45,994 N.M. 24,950 N.M.
Net new stock plan accounts 22,899 10,989 N.M. (14,059) N.M.
Net new banking accounts   (9,925)   (7,495) N.M.   (14,101) N.M.
Net new accounts 58,573 49,488 N.M. (3,210) N.M.
 
End of period brokerage accounts 2,874,605 2,829,006 2 % 2,759,773 4 %
End of period stock plan accounts 1,104,302 1,081,403 2 % 1,054,046 5 %
End of period banking accounts   446,148   456,073 (2)%   484,567 (8)%
End of period total accounts 4,425,055 4,366,482 1 % 4,298,386 3 %
 
Annualized brokerage account attrition rate (12) 8.4% 8.7% N.M. 10.7% N.M.
 

Customer Assets ($B)

Security holdings $ 134.9 $ 138.3 (2)% $ 127.4 6 %
Customer payables (cash) 5.1 5.7 (11)% 5.3 (4)%
Customer cash balances held by third parties 3.6 3.7 (3)% 3.4 6 %
Unexercised stock plan customer options (vested)   21.0   24.6 (15)%   23.5 (11)%
Customer assets in brokerage and stock plan accounts   164.6   172.3 (4)%   159.6 3 %
Sweep deposits 20.5 21.6 (5)% 17.6 16 %
Savings, transaction and other   7.4   8.0 (8)%   8.4 (12)%
Customer assets in banking accounts   27.9   29.6 (6)%   26.0 7 %
Total customer assets $ 192.5 $ 201.9 (5)% $ 185.6 4 %
 
Net new brokerage assets ($B) (13) $ 2.2 $ 4.0 N.M. $ 1.5 N.M.
Net new banking assets ($B) (13)   (0.5)   0.1 N.M.   (0.4) N.M.
Net new customer assets ($B) (13) $ 1.7 $ 4.1 N.M. $ 1.1 N.M.
 
Brokerage related cash ($B) $ 29.2 $ 31.0 (6)% $ 26.3 11 %

Other customer cash and deposits ($B)

  7.4   8.0 (8)%   8.4 (12)%
Total customer cash and deposits ($B) $ 36.6 $ 39.0 (6)% $ 34.7 5 %
 
Unexercised stock plan customer options (unvested) ($B) $ 43.5 $ 47.5 (8)% $ 42.8 2 %
 
Customer net purchase activity ($B) $ (3.9) $ (0.1) N.M. $ (0.2) N.M.
 

Market Making

Equity shares traded (MM) 101,415 108,613 (7)% 151,699 (33)%
Average revenue capture per 1,000 equity shares $ 0.206 $ 0.220 (6)% $ 0.154 34 %
% of Bulletin Board equity shares to total equity shares 93.6% 93.3% 0 % 95.7% (2)%
 

Balance Sheet Management Metrics

 

Loans receivable ($MM)

Average loans receivable $ 12,310 $ 12,958 (5)% $ 15,026 (18)%
Ending loans receivable, net $ 11,226 $ 11,796 (5)% $ 13,675 (18)%
 

Loan performance detail (all loans, including TDRs) ($MM)

 

One- to Four-Family

Current $ 5,329 $ 5,543 (4)% $ 6,277 (15)%
30-89 days delinquent 227 252 (10)% 286 (21)%
90-179 days delinquent   119   114 4 %   167 (29)%
Total 30-179 days delinquent 346 366 (5)% 453 (24)%

180+ days delinquent (net of $181M, $232M and $266M in charge-offs for Q212, Q112 and Q211, respectively)

  338   413 (18)%   645 (48)%
Total delinquent loans (14)   684   779 (12)%   1,098 (38)%
Gross loans receivable (15) $ 6,013 $ 6,322 (5)% $ 7,375 (18)%
 

Home Equity

Current $ 4,543 $ 4,776 (5)% $ 5,579 (19)%
30-89 days delinquent 104 106 (2)% 155 (33)%
90-179 days delinquent   71   80 (11)%   116 (39)%
Total 30-179 days delinquent 175 186 (6)% 271 (35)%

180+ days delinquent (net of $25M, $24M and $22M in charge-offsfor Q212, Q112 and Q211, respectively)

  43   49 (12)%   51 (16)%
Total delinquent loans (14)   218   235 (7)%   322 (32)%
Gross loans receivable (15) $ 4,761 $ 5,011 (5)% $ 5,901 (19)%
 

Consumer and Other

Current $ 957 $ 1,021 (6)% $ 1,254 (24)%
30-89 days delinquent 18 17 6 % 20 (10)%
90-179 days delinquent   3   5 (40)%   4 (25)%

Total 30-179 days delinquent

21 22 (5)% 24 (13)%
180+ days delinquent   -   - N.M.   - N.M.
Total delinquent loans   21   22 (5)%   24 (13)%
Gross loans receivable (15) $ 978 $ 1,043 (6)% $ 1,278 (23)%
 

Total Loans Receivable

Current $ 10,829 $ 11,340 (5)% $ 13,110 (17)%
30-89 days delinquent 349 375 (7)% 461 (24)%
90-179 days delinquent   193   199 (3)%   287 (33)%
Total 30-179 days delinquent 542 574 (6)% 748 (28)%
180+ days delinquent   381   462 (18)%   696 (45)%
Total delinquent loans (14)   923   1,036 (11)%   1,444 (36)%
Total gross loans receivable (15) $ 11,752 $ 12,376 (5)% $ 14,554 (19)%
 

TDR performance detail ($MM) (16)

 

One- to Four-Family TDRs

Current $ 843 $ 782 8 % $ 631 34 %
30-89 days delinquent 89 91 (2)% 58 53 %
90-179 days delinquent   46   38 21 %   20 130 %
Total 30-179 days delinquent 135 129 5 % 78 73 %

180+ days delinquent (net of $49M, $52M and $25M in charge-offsfor Q212, Q112 and Q211, respectively)

  79   83 (5)%   48 65 %
Total delinquent TDRs   214   212 1 %   126 70 %
TDRs $ 1,057 $ 994 6 % $ 757 40 %
 

Home Equity TDRs

Current $ 242 $ 272 (11)% $ 370 (35)%
30-89 days delinquent 20 21 (5)% 48 (58)%
90-179 days delinquent   11   13 (15)%   31 (65)%
Total 30-179 days delinquent 31 34 (9)% 79 (61)%

180+ days delinquent (net of $3M, $3M and $3M in charge-offs forQ212, Q112 and Q211, respectively)

  5   5 0 %   4 25 %
Total delinquent TDRs   36   39 (8)%   83 (57)%
TDRs $ 278 $ 311 (11)% $ 453 (39)%
 

Total TDRs

Current $ 1,085 $ 1,054 3 % $ 1,001 8 %
30-89 days delinquent 109 112 (3)% 106 3 %
90-179 days delinquent   57   51 12 %   51 12 %

Total 30-179 days delinquent

166 163 2 % 157 6 %
180+ days delinquent   84   88 (5)%   52 62 %
Total delinquent TDRs   250   251 0 %   209 20 %
TDRs $ 1,335 $ 1,305 2 % $ 1,210 10 %
 

Capital Metrics

 

E*TRADE Bank

Tier 1 leverage ratio (4)(17) 7.9 % 7.3 % 0.6 % 7.9 % 0.0 %
Tier 1 risk-based capital ratio (17) 16.7 % 15.7 % 1.0 % 15.0 % 1.7 %
Total risk-based capital ratio (17) 18.0 % 17.0 % 1.0 % 16.2 % 1.8 %
Tier 1 common ratio (17)(18) 16.7 % 15.7 % 1.0 % 10.3 % 6.4 %
E*TRADE Bank excess Tier 1 capital ($MM) (17) $ 1,303.8 $ 1,072.6 22 % $ 1,232.4 6 %
E*TRADE Bank excess Tier 1 risk-based capital ($MM) (17) $ 2,263.2 $ 2,101.7 8 % $ 2,001.3 13 %
E*TRADE Bank excess risk-based capital ($MM) (17) $ 1,686.2 $ 1,513.7 11 % $ 1,390.0 21 %
 

E*TRADE Financial

Tier 1 leverage ratio (19) 5.7 % 5.5 % 0.2 % 5.4 % 0.3 %
Tier 1 risk-based capital ratio (19) 12.2 % 11.4 % 0.8 % 10.3 % 1.9 %
Total risk-based capital ratio (19) 13.4 % 12.6 % 0.8 % 11.6 % 1.8 %
Tier 1 common ratio (3) 10.2 % 9.4 % 0.8 % 8.4 % 1.8 %
 
 

Activity in Allowance for Loan Losses

     
Three Months Ended June 30, 2012

One- to Four- Family

  Home Equity  

Consumer and Other

  Total
(In thousands)
Allowance for loan losses, ending 3/31/12 $ 239,602 $ 291,015 $ 48,558 $ 579,175
Provision for loan losses 247 65,050 1,964 67,261
Charge-offs, net (23,915) (89,182) (7,583) (120,680)
Allowance for loan losses, ending 6/30/12 $ 215,934 $ 266,883 $ 42,939 $ 525,756
 
 
Three Months Ended March 31, 2012

One- to Four- Family

Home Equity

Consumer and Other

Total
(In thousands)
Allowance for loan losses, ending 12/31/11 $ 314,187 $ 463,288 $ 45,341 $ 822,816
Provision for loan losses 15,867 42,977 13,103 71,947
Charge-offs, net (90,452) (215,250) (9,886) (315,588)
Allowance for loan losses, ending 3/31/12 $ 239,602 $ 291,015 $ 48,558 $ 579,175
 
 
Three Months Ended June 30, 2011

One- to Four- Family

Home Equity

Consumer and Other

Total
(In thousands)
Allowance for loan losses, ending 3/31/11 $ 353,117 $ 539,171 $ 61,318 $ 953,606
Provision for loan losses 33,067 64,664 5,405 103,136
Charge-offs, net (59,604) (110,284) (8,239) (178,127)
Allowance for loan losses, ending 6/30/11 $ 326,580 $ 493,551 $ 58,484 $ 878,615
 
 

Specific Valuation Allowance Activity

      As of June 30, 2012

Recorded Investment in TDRs before charge-offs

 

Charge-offs

 

Recorded Investment in TDRs

 

Specific Valuation Allowance

 

Net Investment in TDRs

 

Specific Valuation Allowance as a % of TDR Loans

 

Total Expected Losses (20)

(Dollars in thousands)
One- to four-family $ 1,356,888 $ (299,307 ) $ 1,057,581 $ (94,474 ) $ 963,107 9 % 29 %
Home equity   435,484   (158,072 )   277,412   (98,293 )   179,119 35 % 59 %
Total $ 1,792,372 $ (457,379 ) $ 1,334,993 $ (192,767 ) $ 1,142,226 14 % 36 %
 
As of March 31, 2012

Recorded Investment in TDRs before charge-offs

Charge-offs

Recorded Investment in TDRs

Specific Valuation Allowance

Net Investment in TDRs

Specific Valuation Allowance as a % of TDR Loans

Total Expected Losses (20)

(Dollars in thousands)
One- to four-family $ 1,282,541 $ (288,639 ) $ 993,902 $ (90,122 ) $ 903,780 9 % 30 %
Home equity   467,721   (156,836 )   310,885   (114,522 )   196,363 37 % 58 %
Total $ 1,750,262 $ (445,475 ) $ 1,304,787 $ (204,644 ) $ 1,100,143 16 % 37 %
 
As of June 30, 2011

Recorded Investment in TDRs before charge-offs

Charge-offs

Recorded Investment in TDRs

Specific Valuation Allowance

Net Investment in TDRs

Specific Valuation Allowance as a % of TDR Loans

Total Expected Losses (20)

(Dollars in thousands)
One- to four-family $ 901,011 $ (144,441 ) $ 756,570 $ (96,110 ) $ 660,460 13 % 27 %
Home equity   494,985   (42,117 )   452,868   (233,145 )   219,723 51 % 55 %
Total $ 1,395,996 $ (186,558 ) $ 1,209,438 $ (329,255 ) $ 880,183 27 % 37 %
 
 

Average Enterprise Balance Sheet Data

        Three Months Ended
June 30, 2012

Average Balance

 

Operating Interest Inc./Exp.

 

Average Yield/Cost

Enterprise interest-earning assets: (In thousands)
Loans (21) $ 12,324,567 $ 124,994 4.06 %
Margin receivables 5,633,453 55,418 3.96 %
Available-for-sale securities 16,336,062 98,625 2.41 %
Held-to-maturity securities 8,108,507 60,245 2.97 %
Cash and equivalents 1,115,736 527 0.19 %
Segregated cash 741,845 105 0.06 %
Securities borrowed and other   509,370     12,687   10.02 %
Total enterprise interest-earning assets $ 44,769,540     352,601   3.15 %
Enterprise interest-bearing liabilities:
Deposits $ 28,583,333 6,611 0.09 %
Customer payables 5,303,434 2,849 0.22 %
Securities sold under agreements to repurchase 4,802,784 40,473 3.33 %
FHLB advances and other borrowings 2,733,258 25,404 3.68 %
Securities loaned and other   702,216     32   0.02 %
Total enterprise interest-bearing liabilities $ 42,125,025     75,369   0.71 %
Enterprise net interest income/spread (9) $ 277,232   2.44 %
 
Three Months Ended
March 31, 2012

Average Balance

Operating Interest Inc./Exp.

Average Yield/Cost

Enterprise interest-earning assets: (In thousands)
Loans (21) $ 12,972,684 $ 139,501 4.30 %
Margin receivables 4,857,266 47,990 3.97 %
Available-for-sale securities 16,054,904 105,960 2.64 %
Held-to-maturity securities 6,917,621 53,406 3.09 %
Cash and equivalents 1,604,562 839 0.21 %
Segregated cash 1,830,021 365 0.08 %
Securities borrowed and other   653,097     12,664   7.80 %
Total enterprise interest-earning assets $ 44,890,155     360,725   3.22 %
Enterprise interest-bearing liabilities:
Deposits $ 27,927,872 8,342 0.12 %
Customer payables 5,965,680 2,670 0.18 %
Securities sold under agreements to repurchase 4,989,235 40,764 3.23 %
FHLB advances and other borrowings 2,732,185 25,422 3.68 %
Securities loaned and other   588,505     168   0.12 %
Total enterprise interest-bearing liabilities $ 42,203,477     77,366   0.73 %
Enterprise net interest income/spread (9) $ 283,359   2.49 %
 
Three Months Ended
June 30, 2011
Average Balance

Operating Interest Inc./Exp.

Average Yield/Cost
Enterprise interest-earning assets: (In thousands)
Loans (21) $ 15,029,986 $ 180,974 4.82 %
Margin receivables 5,732,452 58,682 4.11 %
Available-for-sale securities 15,428,197 107,051 2.78 %
Held-to-maturity securities 3,950,330 32,973 3.34 %
Cash and equivalents 1,489,236 741 0.20 %
Segregated cash 638,631 148 0.09 %
Securities borrowed and other   639,190     12,494   7.84 %
Total enterprise interest-earning assets $ 42,908,022     393,063   3.67 %
Enterprise interest-bearing liabilities:
Deposits $ 26,091,507 11,715 0.18 %
Customer payables 5,489,242 2,139 0.16 %
Securities sold under agreements to repurchase 5,369,083 37,981 2.80 %
FHLB advances and other borrowings 2,745,229 26,978 3.89 %
Securities loaned and other   655,202     385   0.24 %
Total enterprise interest-bearing liabilities $ 40,350,263     79,198   0.78 %
Enterprise net interest income/spread (9) $ 313,865   2.89 %
 

Reconciliation from Enterprise Net Interest Income to Net Operating Interest Income

Three Months Ended
June 30, March 31, June 30,
2012 2012 2011
(In thousands)
Enterprise net interest income $ 277,232 $ 283,359 $ 313,865
Taxable equivalent interest adjustment (22) (300 ) (298 ) (292 )
Earnings on customer cash held by third parties and other (23)   2,173     1,791     1,848  
Net operating interest income $ 279,105   $ 284,852   $ 315,421  
 
 




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