E*TRADE Financial Corporation Announces Third Quarter 2012 Results

Forward-Looking Statements: The statements contained in this news release that are forward looking, including statements regarding our balance sheet reductions, cost reduction initiatives and the growth of our brokerage franchise, 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, our potential inability to reduce our balance sheet and costs, 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, 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										Nine Months Ended
				September 30,										September 30,
				2012					2011					2012					2011
Revenue:
Operating interest income				$	333,977				$	383,701				$	1,050,758				$	1,165,820
Operating interest expense					(73,100	)				(78,123	)				(225,924	)				(235,119	)
Net operating interest income					260,877					305,578					824,834					930,701
Commissions					90,424					113,407					291,168					341,690
Fees and service charges					30,915					29,446					91,976					103,299
Principal transactions					22,177					27,345					67,562					80,677
Gains on loans and securities, net					78,977					24,341					138,568					87,686
Net impairment					(2,395	)				(3,196	)				(11,196	)				(12,142	)
Other revenues					9,060					10,354					28,928					29,678
Total non-interest income					229,158					201,697					607,006					630,888
Total net revenue					490,035					507,275					1,431,840					1,561,589
Provision for loan losses					141,019					98,384					280,227					317,578
Operating expense:
Compensation and benefits					94,790					80,452					272,617					244,973
Clearing and servicing					30,856					34,748					98,248					113,095
Advertising and market development					26,001					27,258					110,156					108,642
FDIC insurance premiums					31,342					35,690					86,899					80,288
Professional services					20,421					19,772					60,690					64,732
Occupancy and equipment					19,423					17,021					55,521					50,998
Communications					17,560					16,930					55,038					49,712
Depreciation and amortization					23,044					22,873					68,387					67,644
Amortization of other intangibles					6,296					6,538					18,887					19,613
Facility restructuring and other exit activities					2,350					458					3,515					6,056
Other operating expenses					16,950					79,972					46,769					124,891
Total operating expense					289,033					341,712					876,727					930,644
Income before other income (expense) and income tax expense (benefit)					59,983					67,179					274,886					313,367
Other income (expense):
Corporate interest income					21					10					55					689
Corporate interest expense					(45,483	)				(44,769	)				(135,893	)				(132,870	)
Gains on sales of investments, net					18					-					17					38
Gains (losses) on early extinguishment of debt					(50,608	)				-					(50,608	)				3,091
Equity in income (loss) of investments and venture funds					(234	)				520					1,774					197
Total other income (expense)					(96,286	)				(44,239	)				(184,655	)				(128,855	)
Income (loss) before income tax expense (benefit)					(36,303	)				22,940					90,231					184,512
Income tax expense (benefit)					(7,678	)				(47,756	)				16,755					21,465
Net income (loss)				$	(28,625	)			$	70,696				$	73,476				$	163,047
Basic earnings (loss) per share				$	(0.10	)			$	0.25				$	0.26				$	0.62
Diluted earnings (loss) per share				$	(0.10	)			$	0.24				$	0.25				$	0.56
Shares used in computation of per share data:
Basic					285,850					283,807					285,658					261,272
Diluted					285,850					289,706					290,395					289,770

E*TRADE FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statement of Income
(In thousands, except per share amounts)
(Unaudited)
				Three Months Ended
				September 30,					June 30,					September 30,
				2012					2012					2011
Revenue:
Operating interest income				$	333,977				$	354,520				$	383,701
Operating interest expense					(73,100	)				(75,415	)				(78,123	)
Net operating interest income					260,877					279,105					305,578
Commissions					90,424					93,313					113,407
Fees and service charges					30,915					29,063					29,446
Principal transactions					22,177					21,239					27,345
Gains on loans and securities, net					78,977					24,685					24,341
Net impairment					(2,395	)				(5,269	)				(3,196	)
Other revenues					9,060					10,272					10,354
Total non-interest income					229,158					173,303					201,697
Total net revenue					490,035					452,408					507,275
Provision for loan losses					141,019					67,261					98,384
Operating expense:
Compensation and benefits					94,790					85,549					80,452
Clearing and servicing					30,856					32,837					34,748
Advertising and market development					26,001					36,567					27,258
FDIC insurance premiums					31,342					27,195					35,690
Professional services					20,421					19,934					19,772
Occupancy and equipment					19,423					18,244					17,021
Communications					17,560					18,358					16,930
Depreciation and amortization					23,044					23,104					22,873
Amortization of other intangibles					6,296					6,295					6,538
Facility restructuring and other exit activities					2,350					1,589					458
Other operating expenses					16,950					11,783					79,972
Total operating expense					289,033					281,455					341,712
Income before other income (expense) and income tax expense (benefit)					59,983					103,692					67,179
Other income (expense):
Corporate interest income					21					20					10
Corporate interest expense					(45,483	)				(45,285	)				(44,769	)
Gains on sales of investments, net					18					-					-
Losses on early extinguishment of debt					(50,608	)				-					-
Equity in income (loss) of investments and venture funds					(234	)				2,113					520
Total other income (expense)					(96,286	)				(43,152	)				(44,239	)
Income (loss) before income tax expense (benefit)					(36,303	)				60,540					22,940
Income tax expense (benefit)					(7,678	)				21,030					(47,756	)
Net income (loss)				$	(28,625	)			$	39,510				$	70,696
Basic earnings (loss) per share				$	(0.10	)			$	0.14				$	0.25
Diluted earnings (loss) per share				$	(0.10	)			$	0.14				$	0.24
Shares used in computation of per share data:
Basic					285,850					285,645					283,807
Diluted					285,850					290,044					289,706

E*TRADE FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheet
(In thousands, except share data)
(Unaudited)
				September 30,					June 30,					December 31,
				2012					2012					2011
ASSETS
Cash and equivalents				$	2,825,012				$	1,378,454				$	2,099,839
Cash required to be segregated under federal or other regulations					1,434,330					761,485					1,275,587
Trading securities					107,378					60,081					54,372
Available-for-sale securities					14,925,459					16,152,748					15,651,493
Held-to-maturity securities					9,684,568					8,433,682					6,079,512
Margin receivables					5,608,253					5,804,350					4,826,256
Loans receivable, net					10,627,434					11,225,848					12,332,807
Investment in FHLB stock					128,944					131,478					140,183
Property and equipment, net					294,517					297,344					299,693
Goodwill					1,934,232					1,934,232					1,934,232
Other intangibles, net					266,918					273,213					285,805
Other assets					2,518,560					2,702,915					2,960,673
Total assets				$	50,355,605				$	49,155,830				$	47,940,452
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits				$	29,127,826				$	27,911,100				$	26,459,985
Securities sold under agreements to repurchase					4,609,117					4,717,656					5,015,499
Customer payables					6,013,640					5,128,653					5,590,858
FHLB advances and other borrowings					2,325,846					2,741,383					2,736,935
Corporate debt					1,505,466					1,501,278					1,493,552
Other liabilities					1,679,856					2,076,151					1,715,673
Total liabilities					45,261,751					44,076,221					43,012,502
Shareholders' equity:
Common stock, $0.01 par value, shares authorized: 400,000,000 at  September 30, 2012, June 30, 2012 and December 31, 2011, shares issued  and outstanding: 286,056,306 at September 30, 2012, 285,740,705 at June 30, 2012  and 285,368,075 at December 31, 2011					2,861					2,857					2,854
Additional paid-in-capital					7,316,057					7,310,487					7,306,862
Accumulated deficit					(1,921,661	)				(1,893,036	)				(1,995,137	)
Accumulated other comprehensive loss					(303,403	)				(340,699	)				(386,629	)
Total shareholders' equity					5,093,854					5,079,609					4,927,950
Total liabilities and shareholders' equity				$	50,355,605				$	49,155,830				$	47,940,452

Segment Reporting
				Three Months Ended September 30, 2012
				Trading and Investing					Balance Sheet Management					Corporate/ Other					Eliminations (5)					Total
				(In thousands)
Revenue:
Operating interest income				$	165,523				$	264,977				$	-				$	(96,523	)			$	333,977
Operating interest expense					(8,718	)				(160,905	)				-					96,523					(73,100	)
Net operating interest income					156,805					104,072					-					-					260,877
Commissions					90,424					-					-					-					90,424
Fees and service charges					30,311					604					-					-					30,915
Principal transactions					22,177					-					-					-					22,177
Gains (losses) on loans and securities, net					3					78,980					(6	)				-					78,977
Net impairment					-					(2,395	)				-					-					(2,395	)
Other revenues					7,747					1,313					-					-					9,060
Total non-interest income					150,662					78,502					(6	)				-					229,158
Total net revenue					307,467					182,574					(6	)				-					490,035
Provision for loan losses					-					141,019					-					-					141,019
Operating expense:
Compensation and benefits					61,994					4,442					28,354					-					94,790
Clearing and servicing					17,409					13,447					-					-					30,856
Advertising and market development					26,000					1					-					-					26,001
FDIC insurance premiums					-					31,342					-					-					31,342
Professional services					7,218					388					12,815					-					20,421
Occupancy and equipment					17,381					453					1,589					-					19,423
Communications					16,819					330					411					-					17,560
Depreciation and amortization					18,946					167					3,931					-					23,044
Amortization of other intangibles					6,296					-					-					-					6,296
Facility restructuring and other exit activities					-					-					2,350					-					2,350
Other operating expenses					8,400					2,634					5,916					-					16,950
Total operating expense					180,463					53,204					55,366					-					289,033
Segment income (loss) before other income (expense)					127,004					(11,649	)				(55,372	)				-					59,983
Other income (expense):
Corporate interest income					-					-					21					-					21
Corporate interest expense					-					-					(45,483	)				-					(45,483	)
Gains on sale of investments, net					-					-					18					-					18
Losses on early extinguishment of debt					-					-					(50,608	)				-					(50,608	)
Equity in loss of investments and venture funds					-					-					(234	)				-					(234	)
Total other income (expense)					-					-					(96,286	)				-					(96,286	)
Segment income (loss)				$	127,004				$	(11,649	)			$	(151,658	)			$	-				$	(36,303	)
				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 September 30, 2011
				Trading and Investing					Balance Sheet Management					Corporate/ Other					Eliminations (5)					Total
				(In thousands)
Revenue:
Operating interest income				$	197,905				$	313,516				$	4				$	(127,724	)			$	383,701
Operating interest expense					(12,373	)				(193,474	)				-					127,724					(78,123	)
Net operating interest income					185,532					120,042					4					-					305,578
Commissions					113,407					-					-					-					113,407
Fees and service charges					29,268					178					-					-					29,446
Principal transactions					27,345					-					-					-					27,345
Gains (losses) on loans and securities, net					(935	)				25,278					(2	)				-					24,341
Net impairment					-					(3,196	)				-					-					(3,196	)
Other revenues					8,286					2,068					-					-					10,354
Total non-interest income					177,371					24,328					(2	)				-					201,697
Total net revenue					362,903					144,370					2					-					507,275
Provision for loan losses					-					98,384					-					-					98,384
Operating expense:
Compensation and benefits					58,558					4,607					17,287					-					80,452
Clearing and servicing					18,363					16,385					-					-					34,748
Advertising and market development					26,928					330					-					-					27,258
FDIC insurance premiums					-					35,690					-					-					35,690
Professional services					10,966					1,063					7,743					-					19,772
Occupancy and equipment					15,968					668					385					-					17,021
Communications					16,179					338					413					-					16,930
Depreciation and amortization					17,893					284					4,696					-					22,873
Amortization of other intangibles					6,538					-					-					-					6,538
Facility restructuring and other exit activities					-					-					458					-					458
Other operating expenses					66,460					7,060					6,452					-					79,972
Total operating expense					237,853					66,425					37,434					-					341,712
Segment income (loss) before other income (expense)					125,050					(20,439	)				(37,432	)				-					67,179
Other income (expense):
Corporate interest income					-					-					10					-					10
Corporate interest expense					-					-					(44,769	)				-					(44,769	)
Equity in income of investments and venture funds					-					-					520					-					520
Total other income (expense)					-					-					(44,239	)				-					(44,239	)
Segment income (loss)				$	125,050				$	(20,439	)			$	(81,671	)			$	-				$	22,940

Key Performance Metrics (6)
Corporate Metrics			Qtr ended 9/30/12				Qtr ended 6/30/12				Qtr ended 9/30/12 vs. 6/30/12			Qtr ended 9/30/11				Qtr ended 9/30/12 vs. 9/30/11
Operating margin % (7)
Consolidated				12 %				23 %			(11)%				13 %			(1)%
Trading and Investing				41 %				41 %			0 %				34 %			7 %
Balance Sheet Management			N.M.					9 %			N.M.			N.M.				N.M.
Employees				3,086				3,104			(1)%				3,122			(1)%
Consultants and other				100				110			(9)%				161			(38)%
Total headcount				3,186				3,214			(1)%				3,283			(3)%
Book value per share			$	17.81			$	17.78			0 %			$	17.34			3 %
Tangible book value per share (8)			$	11.17			$	11.08			1 %			$	10.41			7 %
Corporate cash ($MM)			$	430.8			$	436.5			(1)%			$	438.2			(2)%
Enterprise net interest spread (basis points) (9)				228				244			(7)%				281			(19)%
Enterprise interest-earning assets, average ($MM)			$	44,853			$	44,770			0 %			$	42,681			5 %
Earnings before interest, taxes, depreciation & amortization ("EBITDA") ($MM)
Net income (loss)			$	(28.6)			$	39.5			N.M.			$	70.7			N.M.
Income tax expense (benefit)				(7.7)				21.0			N.M.				(47.8)			N.M.
Depreciation & amortization				29.3				29.4			0 %				29.4			0 %
Corporate interest expense				45.5				45.3			0 %				44.8			2 %
EBITDA			$	38.5			$	135.2			(72)%			$	97.1			(60)%
Interest coverage (10)				0.8				3.0			N.M.				2.2			N.M.
Bank earnings before taxes and before credit losses ($MM) (11)			$	145.9			$	153.9			(5)%			$	152.3			(4)%
Trading and Investing Metrics
Trading days				62.5				63.0			N.M.				64.0			N.M.
DARTs				128,701				138,653			(7)%				164,715			(22)%
Total trades (MM)				8.0				8.7			(8)%				10.5			(24)%
Average commission per trade			$	11.24			$	10.68			5 %			$	10.76			4 %
End of period margin receivables ($B)			$	5.6			$	5.8			(3)%			$	5.2			8 %
Average margin receivables ($B)			$	5.6			$	5.6			0 %			$	5.4			4 %
Gross new brokerage accounts				79,534				104,659			(24)%				85,515			(7)%
Gross new stock plan accounts				55,539				52,173			6 %				49,421			12 %
Gross new banking accounts				3,492				4,328			(19)%				5,064			(31)%
Closed accounts				(114,044)				(102,587)			N.M.				(130,699)			N.M.
Net new accounts				24,521				58,573			N.M.				9,301			N.M.
Net new brokerage accounts				18,247				45,599			N.M.				13,043			N.M.
Net new stock plan accounts				14,538				22,899			N.M.				8,042			N.M.
Net new banking accounts				(8,264)				(9,925)			N.M.				(11,784)			N.M.
Net new accounts				24,521				58,573			N.M.				9,301			N.M.
End of period brokerage accounts				2,892,852				2,874,605			1 %				2,772,816			4 %
End of period stock plan accounts				1,118,840				1,104,302			1 %				1,062,088			5 %
End of period banking accounts				437,884				446,148			(2)%				472,783			(7)%
End of period total accounts				4,449,576				4,425,055			1 %				4,307,687			3 %
Annualized brokerage account attrition rate (12)				8.5%				8.4%			N.M.				10.5%			N.M.
Customer Assets ($B)
Security holdings			$	141.2			$	134.9			5 %			$	109.9			28 %
Customer payables (cash)				6.0				5.1			18 %				5.4			11 %
Customer cash balances held by third parties				4.7				3.6			31 %				3.3			42 %
Unexercised stock plan customer options (vested)				23.1				21.0			10 %				16.1			43 %
Customer assets in brokerage and stock plan accounts				175.0				164.6			6 %				134.7			30 %
Sweep deposits				21.9				20.5			7 %				17.4			26 %
Savings, transaction and other				7.2				7.4			(3)%				7.8			(8)%
Customer assets in banking accounts				29.1				27.9			4 %				25.2			15 %
Total customer assets			$	204.1			$	192.5			6 %			$	159.9			28 %
Net new brokerage assets ($B) (13)			$	1.9			$	2.2			N.M.			$	2.6			N.M.
Net new banking assets ($B) (13)				(0.2)				(0.5)			N.M.				(0.5)			N.M.
Net new customer assets ($B) (13)			$	1.7			$	1.7			N.M.			$	2.1			N.M.
Brokerage related cash ($B)			$	32.6			$	29.2			12 %			$	26.1			25 %
Other customer cash and deposits ($B)				7.2				7.4			(3)%				7.8			(8)%
Total customer cash and deposits ($B)			$	39.8			$	36.6			9 %			$	33.9			17 %
Unexercised stock plan customer options (unvested) ($B)			$	48.4			$	43.5			11 %			$	33.2			46 %
Customer net (purchase) / sell activity ($B)			$	2.2			$	(3.9)			N.M.			$	(2.2)			N.M.
Market Making
Equity shares traded (MM)				105,282				101,415			4 %				94,219			12 %
Average revenue capture per 1,000 equity shares			$	0.207			$	0.206			1 %			$	0.290			(29)%
% of Bulletin Board equity shares to total equity shares				93.5%				93.6%			(0)%				92.4%			1 %
Balance Sheet Management Metrics
Loans receivable ($MM)
Average loans receivable			$	11,711			$	12,310			(5)%			$	14,298			(18)%
Ending loans receivable, net			$	10,627			$	11,226			(5)%			$	13,000			(18)%
Loan performance detail (all loans, including TDRs) ($MM)
One- to Four-Family
Current			$	5,122			$	5,329			(4)%			$	6,000			(15)%
30-89 days delinquent				210				227			(7)%				292			(28)%
90-179 days delinquent				108				119			(9)%				141			(23)%
Total 30-179 days delinquent				318				346			(8)%				433			(27)%
180+ days delinquent (net of $157M, $181M and $243M in charge-offs for Q312, Q212 and Q311, respectively)				300				338			(11)%				556			(46)%
Total delinquent loans (14)				618				684			(10)%				989			(38)%
Gross loans receivable (15)			$	5,740			$	6,013			(5)%			$	6,989			(18)%
Home Equity
Current			$	4,277			$	4,543			(6)%			$	5,330			(20)%
30-89 days delinquent				99				104			(5)%				147			(33)%
90-179 days delinquent				65				71			(8)%				109			(40)%
Total 30-179 days delinquent				164				175			(6)%				256			(36)%
180+ days delinquent (net of $23M, $25M and $21M in charge-offs for Q312, Q212 and Q311, respectively)				42				43			(2)%				51			(18)%
Total delinquent loans (14)				206				218			(6)%				307			(33)%
Gross loans receivable (15)			$	4,483			$	4,761			(6)%			$	5,637			(20)%
Consumer and Other
Current			$	892			$	957			(7)%			$	1,170			(24)%
30-89 days delinquent				18				18			0 %				20			(10)%
90-179 days delinquent				3				3			0 %				4			(25)%
Total 30-179 days delinquent				21				21			0 %				24			(13)%
180+ days delinquent				-				-			N.M.				-			N.M.
Total delinquent loans				21				21			0 %				24			(13)%
Gross loans receivable (15)			$	913			$	978			(7)%			$	1,194			(24)%
Total Loans Receivable
Current			$	10,291			$	10,829			(5)%			$	12,500			(18)%
30-89 days delinquent				327				349			(6)%				459			(29)%
90-179 days delinquent				176				193			(9)%				254			(31)%
Total 30-179 days delinquent				503				542			(7)%				713			(29)%
180+ days delinquent				342				381			(10)%				607			(44)%
Total delinquent loans (14)				845				923			(8)%				1,320			(36)%
Total gross loans receivable (15)			$	11,136			$	11,752			(5)%			$	13,820			(19)%
TDR performance detail ($MM) (16)
One- to Four-Family TDRs
Current			$	849			$	843			1 %			$	726			17 %
30-89 days delinquent				95				89			7 %				66			44 %
90-179 days delinquent				40				46			(13)%				32			25 %
Total 30-179 days delinquent				135				135			0 %				98			38 %
180+ days delinquent (net of $47M, $49M and $49M in charge-offs for Q312, Q212 and Q311, respectively)				80				79			1 %				120			(33)%
Total delinquent TDRs				215				214			0 %				218			(1)%
TDRs			$	1,064			$	1,057			1 %			$	944			13 %
Home Equity TDRs
Current			$	215			$	242			(11)%			$	361			(40)%
30-89 days delinquent				18				20			(10)%				54			(67)%
90-179 days delinquent				9				11			(18)%				25			(64)%
Total 30-179 days delinquent				27				31			(13)%				79			(66)%
180+ days delinquent (net of $4M, $3M and $3M in charge-offs for Q312, Q212 and Q311, respectively)				6				5			20 %				4			50 %
Total delinquent TDRs				33				36			(8)%				83			(60)%
TDRs			$	248			$	278			(11)%			$	444			(44)%
Total TDRs
Current			$	1,064			$	1,085			(2)%			$	1,087			(2)%
30-89 days delinquent				113				109			4 %				120			(6)%
90-179 days delinquent				49				57			(14)%				57			(14)%
Total 30-179 days delinquent				162				166			(2)%				177			(8)%
180+ days delinquent				86				84			2 %				124			(31)%
Total delinquent TDRs				248				250			(1)%				301			(18)%
TDRs			$	1,312			$	1,335			(2)%			$	1,388			(5)%
Capital Metrics
E*TRADE Bank
Tier 1 leverage ratio (4)(17)				7.9 %				7.9 %			0.0 %				8.1 %			(0.2)%
Tier 1 risk-based capital ratio (17)				18.0 %				16.7 %			1.3 %				16.0 %			2.0 %
Total risk-based capital ratio (17)				19.3 %				18.0 %			1.3 %				17.2 %			2.1 %
Tier 1 common ratio (17)(18)				18.0 %				16.7 %			1.3 %				11.0 %			7.0 %
E*TRADE Bank excess Tier 1 capital ($MM) (17)			$	1,320.2			$	1,303.8			1 %			$	1,308.8			1 %
E*TRADE Bank excess Tier 1 risk-based capital ($MM) (17)			$	2,421.1			$	2,263.2			7 %			$	2,119.1			14 %
E*TRADE Bank excess risk-based capital ($MM) (17)			$	1,869.8			$	1,686.2			11 %			$	1,537.3			22 %
E*TRADE Financial
Tier 1 leverage ratio (19)				5.8 %				5.7 %			0.1 %				5.7 %			0.1 %
Tier 1 risk-based capital ratio (19)				13.0 %				12.2 %			0.8 %				11.2 %			1.8 %
Total risk-based capital ratio (19)				14.2 %				13.4 %			0.8 %				12.5 %			1.7 %
Tier 1 common ratio (3)				10.9 %				10.2 %			0.7 %				9.3 %			1.6 %

Activity in Allowance for Loan Losses
				Three Months Ended September 30, 2012
				One- to Four- Family					Home Equity					Consumer and Other					Total
				(In thousands)
Allowance for loan losses, ending 6/30/12				$	215,934				$	266,883				$	42,939				$	525,756
Provision for loan losses					24,702					105,022					11,295					141,019
Charge-offs, net					(34,236	)				(111,016	)				(13,241	)				(158,493	)
Allowance for loan losses, ending 9/30/12				$	206,400				$	260,889				$	40,993				$	508,282
				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 September 30, 2011
				One- to Four- Family					Home Equity					Consumer and Other					Total
				(In thousands)
Allowance for loan losses, ending 6/30/11				$	326,580				$	493,551				$	58,484				$	878,615
Provision for loan losses					29,202					65,114					4,068					98,384
Charge-offs, net					(44,331	)				(104,623	)				(7,990	)				(156,944	)
Allowance for loan losses, ending 9/30/11				$	311,451				$	454,042				$	54,562				$	820,055

Specific Valuation Allowance Activity (16)
				As of September 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				$	1,374,800			$	(311,122	)			$	1,063,678			$	(98,628	)			$	965,050			9	%			30	%
Home equity					405,302				(156,809	)				248,493				(92,702	)				155,791			37	%			62	%
Total				$	1,780,102			$	(467,931	)			$	1,312,171			$	(191,330	)			$	1,120,841			15	%			37	%
				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 September 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)
One- to four-family					1,147,693				(203,893	)				943,800				(104,502	)				839,298			11	%			27	%
Home equity					488,878				(45,013	)				443,865				(222,606	)				221,259			50	%			55	%
Total					1,636,571				(248,906	)				1,387,665				(327,108	)				1,060,557			24	%			35	%

Average Enterprise Balance Sheet Data
				Three Months Ended
				September 30, 2012
				Average					Operating Interest					Average
				Balance					Inc./Exp.					Yield/Cost
Enterprise interest-earning assets:				(In thousands)
Loans (21)				$	11,727,325				$	118,747					4.05	%
Margin receivables					5,604,036					55,465					3.94	%
Available-for-sale securities					14,992,705					82,959					2.21	%
Held-to-maturity securities					8,984,586					61,923					2.76	%
Cash and equivalents					2,268,833					1,219					0.21	%
Segregated cash					693,057					115					0.07	%
Securities borrowed and other					582,746					11,897					8.12	%
Total enterprise interest-earning assets				$	44,853,288					332,325					2.96	%
Enterprise interest-bearing liabilities:
Deposits				$	28,631,403					5,885					0.08	%
Customer payables					5,646,155					2,839					0.20	%
Securities sold under agreements to repurchase					4,709,203					40,136					3.34	%
FHLB advances and other borrowings					2,622,282					24,153					3.60	%
Securities loaned and other					705,235					30					0.02	%
Total enterprise interest-bearing liabilities				$	42,314,278					73,043					0.68	%
Enterprise net interest income/spread (9)									$	259,282					2.28	%
				Three Months Ended
				June 30, 2012
				Average					Operating Interest					Average
				Balance					Inc./Exp.					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
				September 30, 2011
				Average					Operating Interest					Average
				Balance					Inc./Exp.					Yield/Cost
Enterprise interest-earning assets:				(In thousands)
Loans (21)				$	14,302,016				$	169,704					4.75	%
Margin receivables					5,404,720					55,587					4.08	%
Available-for-sale securities					15,016,437					102,545					2.73	%
Held-to-maturity securities					4,854,034					40,546					3.34	%
Cash and equivalents					1,534,517					752					0.19	%
Segregated cash					965,083					180					0.07	%
Securities borrowed and other					604,633					13,069					8.58	%
Total enterprise interest-earning assets				$	42,681,440					382,383					3.58	%
Enterprise interest-bearing liabilities:
Deposits				$	25,858,216					10,240					0.16	%
Customer payables					5,492,074					2,267					0.16	%
Securities sold under agreements to repurchase					5,345,652					37,941					2.78	%
FHLB advances and other borrowings					2,733,920					27,257					3.90	%
Securities loaned and other					627,606					383					0.24	%
Total enterprise interest-bearing liabilities				$	40,057,468					78,088					0.77	%
Enterprise net interest income/spread (9)									$	304,295					2.81	%
Reconciliation from Enterprise Net Interest Income to Net Operating Interest Income
				Three Months Ended
				September 30,					June 30,					September 30,
				2012					2012					2011
				(In thousands)
Enterprise net interest income				$	259,282				$	277,232				$	304,295
Taxable equivalent interest adjustment (22)					(298	)				(300	)				(291	)
Earnings on customer cash held by third parties and other (23)					1,893					2,173					1,574
Net operating interest income				$	260,877				$	279,105				$	305,578

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