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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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