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E*TRADE Financial Corporation Announces Second Quarter 2012 Results

(3) The Tier 1 common ratio at E*TRADE Financial is a Q212 estimate and is a non-GAAP measure. Management believes this ratio is an important measure of the Company's capital strength. The Tier 1 common ratio is calculated as follows (dollars in thousands):

      Q2 2012 Q1 2012 Q2 2011
Shareholders' equity $ 5,079,609 $ 5,035,901 $ 4,812,345
DEDUCT:
Losses in OCI on AFS debt securities and cash flow hedges, net of tax (343,238 ) (345,336 ) (383,517 )
Goodwill and other intangible assets, net of deferred tax liabilities   1,914,018     1,930,657     1,992,814  
Subtotal 3,508,829 3,450,580 3,203,048
DEDUCT:
Disallowed servicing assets and deferred tax assets   1,304,810     1,353,189     1,248,393  
Tier 1 common $ 2,204,019   $ 2,097,391   $ 1,954,655  
 
Total risk-weighted assets $ 21,696,165 $ 22,243,997 $ 23,154,668
 
Tier 1 common ratio (Tier 1 common / Total risk-weighted assets) 10.2 % 9.4 % 8.4 %
 
 

(4) In Q112, the Company transitioned from reporting under the OTS reporting requirements to reporting under the OCC reporting requirements. The Tier 1 leverage ratio in this release is the OCC Tier 1 leverage ratio for Q212 and Q112 and the OTS Tier 1 capital ratio previously reported for Q211. The OTS Tier 1 capital ratio and OCC Tier 1 leverage ratio are both calculated using total adjusted assets.

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