E*TRADE FINANCIAL Corporation (NASDAQ: ETFC)
First Quarter Results
- Net loss of $48 million, or $0.02 per share, improved from $0.04 loss in prior quarter and $0.41 loss in first quarter 2009
- Total net revenue of $537 million, up from $523 million in prior quarter and $497 million in first quarter 2009
- Provision for loan losses of $268 million, down from $292 million in prior quarter and $454 million in first quarter 2009
- Daily Average Revenue Trades (DARTs) from U.S. operations of 155,000, down two percent from prior quarter and 11 percent from first quarter 2009
- Net new brokerage assets of $2.2 billion, up from $1.5 billion in prior quarter and down from $2.3 billion in first quarter 2009
Capital and Liquidity Metrics
- Bank Tier 1 capital ratios of 6.83% to total adjusted assetsand 13.08% to risk-weighted assets
- Excess risk-based total capital (excess to the regulatory
well-capitalized threshold) of
$947 million - Bank generated $45 million of Tier 1 capital and $48 million of risk-based capital
- Corporate cash of $418 million
E*TRADE Financial Corporation (NASDAQ: ETFC) today announced results for its first quarter ended March 31, 2010, reporting a net loss of $48 million, or $0.02 per share, compared with a net loss of $67 million, or $0.04 per share, in the prior quarter and a net loss of $233 million, or $0.41 per share, a year ago. The Company reported total net revenue of $537 million for the first quarter, compared with $523 million in the prior quarter and $497 million in the year ago period.
“E*TRADE’s first quarter results show improving trends and reflect continued progress toward our goal of returning to profitability,” said Steven Freiberg, CEO of E*TRADE Financial Corporation. “Our online brokerage business performed well during a period of decreased market volatility, delivering growth in customer assets, accounts, and margin receivables. At the same time, improving loan performance trends supported a continued decline in the provision expense while, for the first time since early 2008, the Bank internally generated, rather than used, risk-based capital.” Freiberg continued, “I am pleased to be joining the organization at a pivotal time and look forward to building on our momentum and progress as we continue to deliver increased value, innovation, and ease-of-use to customers.”
E*TRADE reported DARTs from U.S. operations of 155,000 during the quarter, a two percent decrease from the prior quarter and an 11 percent decrease versus the same quarter a year ago. At quarter end, the Company reported 4.3 million customer accounts, which included 2.6 million brokerage accounts. Brokerage accounts increased by 2,000 in the quarter.
Total customer assets increased to $162 billion, from $153 billion in the prior quarter and $110 billion in the prior year.
During the quarter, net new brokerage assets were positive $2.2 billion, reflecting the Company’s strategic focus on growing its online brokerage business. Customer security holdings increased seven percent, or $7.3 billion, and brokerage-related cash increased by $1.4 billion to $21.8 billion. Customers were net buyers of approximately $600 million of securities. Margin receivables increased from $3.8 billion to $4.0 billion.
Net new customer assets were positive $0.5 billion and were impacted by a $1.8 billion decline in savings and other bank-related customer deposits, including the sale of $1 billion of predominantly non-brokerage related savings accounts to Discover Financial Services, as the Company continued to execute its balance sheet reduction strategy.
Total net revenue of $537 million increased $13 million from the prior quarter and $39 million versus the year ago period.
Net operating interest income was essentially flat from the prior quarter at $320 million, as a $1.4 billion sequential decline in average interest-earning assets to $42.4 billion was offset by a 10 basis point expansion in the net interest income spread.
Commissions, fees and service charges, principal transactions, and other revenue in the first quarter were $196 million, compared with $205 million in the fourth quarter. This reflected the sequential decline in trading activity and a $0.10 decline in the average commission per trade.
Total net revenue this quarter also included $29 million of gains on loans and securities, net, offset partially by a net impairment of $9 million.
Total operating expense decreased by $23 million to $295 million from the prior quarter, including lower compensation and restructuring costs.
The Company continued to make progress during the first quarter in reducing balance sheet risk as its loan portfolio contracted by $1.0 billion from the prior quarter, of which $0.7 billion was due to prepayments or scheduled principal reductions.
First quarter provision for loan losses decreased $24 million from the prior quarter to $268 million. Net charge-offs in the quarter were $288 million, a decrease of $36 million from the prior quarter. The allowance for loan losses declined by $20 million to $1.2 billion, or six percent of gross loans receivable, at quarter end.
For the Company’s entire loan portfolio, special mention delinquencies (30-89 days) declined by four percent and at-risk delinquencies (30-179 days) declined by eight percent in the quarter.
During the quarter, the Bank generated $45 million of Tier 1 capital and $48 million of risk-based capital. As of March 31, 2010 the Company reported Bank Tier 1 capital ratios of 6.83 percent to total adjusted assets and 13.08 percent to risk-weighted assets. The Bank had excess risk-based total capital (i.e., above the level regulators define as well-capitalized) of $947 million at quarter end.
Historical metrics and financials through March 2010 can be found on the E*TRADE Financial Investor Relations website at https://investor.etrade.com.
The Company will host a conference call to discuss the results beginning at 5:00 p.m. EDT today. This conference call will be available to domestic participants by dialing 800-683-1525 and 973-872-3197 for international participants. The conference ID number is 66187519. A live audio webcast and replay of this conference call will also be available at https://investor.etrade.com.
About E*TRADE Financial
The E*TRADE Financial family of companies provides financial services including online brokerage and related banking products and services to retail investors. Specific business segments include Trading and Investing, and Balance Sheet Management. Securities products and services are offered by E*TRADE Securities LLC (Member FINRA/SIPC). Bank products and services are offered by E*TRADE Bank, a Federal savings bank, Member FDIC, or its subsidiaries. ETFC-E
Important Notices
E*TRADE Financial, E*TRADE and the E*TRADE logo are trademarks or registered trademarks of E*TRADE Financial Corporation.
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. Such statements include those relating to the ability of the Company to achieve profitability. The uncertainties and risks include, but are not limited to, potential changes in market activity, anticipated changes in the rate of new customer acquisition, 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 and the potential negative regulatory consequences resulting from actions by the Office of Thrift Supervision 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 (“SEC”) (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.
© 2010 E*TRADE Financial Corporation. All rights reserved.
Financial Statements | |||||||||||||||||
| E*TRADE FINANCIAL CORPORATION AND SUBSIDIARIES | |||||||||||||||||
| Consolidated Statement of Loss | |||||||||||||||||
| (In thousands, except per share amounts) | |||||||||||||||||
| (Unaudited) | |||||||||||||||||
| Three Months Ended | |||||||||||||||||
| March 31, | December 31, | March 31, | |||||||||||||||
| 2010 | 2009 | 2009 | |||||||||||||||
| Revenue: | |||||||||||||||||
| Operating interest income | $ | 406,966 | $ | 420,365 | $ | 486,637 | |||||||||||
| Operating interest expense | (86,569 | ) | (99,393 | ) | (207,975 | ) | |||||||||||
| Net operating interest income | 320,397 | 320,972 | 278,662 | ||||||||||||||
| Commissions | 113,252 | 123,771 | 125,626 | ||||||||||||||
| Fees and service charges | 42,230 | 47,494 | 46,715 | ||||||||||||||
| Principal transactions | 26,211 | 22,830 | 17,642 | ||||||||||||||
| Gains on loans and securities, net | 29,046 | 18,667 | 35,290 | ||||||||||||||
| Other-than-temporary impairment ("OTTI") | (14,524 | ) | (4,301 | ) | (18,783 | ) | |||||||||||
Less: noncredit portion of OTTI recognized in (out of) other | 5,872 | (17,111 | ) | - | |||||||||||||
| Net impairment | (8,652 | ) | (21,412 | ) | (18,783 | ) | |||||||||||
| Other revenues | 14,019 | 11,118 | 12,191 | ||||||||||||||
| Total non-interest income | 216,106 | 202,468 | 218,681 | ||||||||||||||
| Total net revenue | 536,503 | 523,440 | 497,343 | ||||||||||||||
| Provision for loan losses | 267,979 | 292,402 | 453,963 | ||||||||||||||
| Operating expense: | |||||||||||||||||
| Compensation and benefits | 87,210 | 94,051 | 84,172 | ||||||||||||||
| Clearing and servicing | 39,159 | 40,723 | 42,671 | ||||||||||||||
| Advertising and market development | 38,135 | 26,384 | 43,591 | ||||||||||||||
| FDIC insurance premiums | 19,315 | 19,424 | 12,712 | ||||||||||||||
| Communications | 20,447 | 21,316 | 21,561 | ||||||||||||||
| Professional services | 20,290 | 17,022 | 19,630 | ||||||||||||||
| Occupancy and equipment | 18,207 | 19,278 | 19,541 | ||||||||||||||
| Depreciation and amortization | 20,646 | 20,699 | 20,274 | ||||||||||||||
| Amortization of other intangibles | 7,142 | 7,434 | 7,436 | ||||||||||||||
| Facility restructuring and other exit activities | 3,373 | 13,820 | (112 | ) | |||||||||||||
| Other operating expenses | 21,412 | 38,254 | 22,508 | ||||||||||||||
| Total operating expense | 295,336 | 318,405 | 293,984 | ||||||||||||||
| Loss before other income (expense) and income tax benefit | (26,812 | ) | (87,367 | ) | (250,604 | ) | |||||||||||
| Other income (expense): | |||||||||||||||||
| Corporate interest income | 23 | 67 | 424 | ||||||||||||||
| Corporate interest expense | (41,043 | ) | (39,897 | ) | (87,315 | ) | |||||||||||
| Gains (losses) on sales of investments, net | 109 | 311 | (433 | ) | |||||||||||||
| Losses on early extinguishment of debt | - | - | (2,999 | ) | |||||||||||||
| Equity in income (loss) of investments and venture funds | 1,794 | (1,644 | ) | (3,129 | ) | ||||||||||||
| Total other income (expense) | (39,117 | ) | (41,163 | ) | (93,452 | ) | |||||||||||
| Loss before income tax benefit | (65,929 | ) | (128,530 | ) | (344,056 | ) | |||||||||||
| Income tax benefit | (18,092 | ) | (61,381 | ) | (111,371 | ) | |||||||||||
| Net loss | $ | (47,837 | ) | $ | (67,149 | ) | $ | (232,685 | ) | ||||||||
| Basic net loss per share | $ | (0.02 | ) | $ | (0.04 | ) | $ | (0.41 | ) | ||||||||
| Diluted net loss per share | $ | (0.02 | ) | $ | (0.04 | ) | $ | (0.41 | ) | ||||||||
| Shares used in computation of per share data: | |||||||||||||||||
| Basic | 1,921,951 | 1,867,174 | 567,833 | ||||||||||||||
| Diluted(1) | 1,921,951 | 1,867,174 | 567,833 | ||||||||||||||
| E*TRADE FINANCIAL CORPORATION AND SUBSIDIARIES | |||||||||||||||||
| Consolidated Balance Sheet | |||||||||||||||||
| (In thousands, except share amounts) | |||||||||||||||||
| (Unaudited) | |||||||||||||||||
| March 31, | December 31, | March 31, | |||||||||||||||
| 2010 | 2009 | 2009 | |||||||||||||||
| ASSETS | |||||||||||||||||
| Cash and equivalents | $ | 3,068,351 | $ | 3,483,238 | $ | 4,492,306 | |||||||||||
| Cash and investments required to be segregated under federal or other regulations | 2,087,569 | 1,545,280 | 1,900,235 | ||||||||||||||
| Trading securities | 47,047 | 38,303 | 46,309 | ||||||||||||||
| Available-for-sale mortgage-backed and investment securities | 13,278,363 | 13,319,712 | 11,823,392 | ||||||||||||||
| Margin receivables | 3,986,749 | 3,827,212 | 2,436,611 | ||||||||||||||
| Loans, net | 18,187,958 | 19,174,933 | 23,271,969 | ||||||||||||||
| Investment in Federal Home Loan Bank ("FHLB") stock | 183,949 | 183,863 | 183,863 | ||||||||||||||
| Property and equipment, net | 321,183 | 320,169 | 321,934 | ||||||||||||||
| Goodwill | 1,952,326 | 1,952,326 | 1,952,326 | ||||||||||||||
| Other intangibles, net | 349,263 | 356,404 | 378,699 | ||||||||||||||
| Other assets | 3,215,916 | 3,165,045 | 2,639,232 | ||||||||||||||
| Total assets | $ | 46,678,674 | $ | 47,366,485 | $ | 49,446,876 | |||||||||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||||||||||||
| Liabilities: | |||||||||||||||||
| Deposits | $ | 24,632,882 | $ | 25,597,721 | $ | 27,641,485 | |||||||||||
| Securities sold under agreements to repurchase | 6,385,272 | 6,441,875 | 6,946,160 | ||||||||||||||
| Customer payables | 5,620,063 | 5,234,199 | 4,181,332 | ||||||||||||||
| FHLB advances and other borrowings | 2,748,438 | 2,746,959 | 4,083,033 | ||||||||||||||
| Corporate debt | 2,400,437 | 2,458,691 | 2,752,673 | ||||||||||||||
| Accounts payable, accrued and other liabilities | 1,075,183 | 1,137,485 | 1,384,042 | ||||||||||||||
| Total liabilities | 42,862,275 | 43,616,930 | 46,988,725 | ||||||||||||||
| Shareholders' equity: | |||||||||||||||||
Common stock, $0.01 par value, shares authorized: 4,000,000,000 at both March 31, 2010 and December 31, 2009, and 1,200,000,000 at March 31, 2009; shares issued and outstanding: 1,959,785,425 at March 31, 2010, 1,893,970,995 at December 31, 2009, and 572,051,743 at March 31, 2009 | 19,598 | 18,940 | 5,721 | ||||||||||||||
| Additional paid-in-capital | 6,355,505 | 6,258,111 | 4,084,643 | ||||||||||||||
| Accumulated deficit | (2,171,203 | ) | (2,123,366 | ) | (1,078,452 | ) | |||||||||||
| Accumulated other comprehensive loss | (387,501 | ) | (404,130 | ) | (553,761 | ) | |||||||||||
| Total shareholders' equity | 3,816,399 | 3,749,555 | 2,458,151 | ||||||||||||||
| Total liabilities and shareholders' equity | $ | 46,678,674 | $ | 47,366,485 | $ | 49,446,876 | |||||||||||
| Segment Reporting | ||||||||||||||||||||||||
| Three Months Ended March 31, 2010 | ||||||||||||||||||||||||
Trading and | Balance Sheet | Corporate/ | Eliminations(2) | Total | ||||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||
| Revenue: | ||||||||||||||||||||||||
| Operating interest income | $ | 214,577 | $ | 352,290 | $ | 8 | $ | (159,909 | ) | $ | 406,966 | |||||||||||||
| Operating interest expense | (20,936 | ) | (225,542 | ) | - | 159,909 | (86,569 | ) | ||||||||||||||||
| Net operating interest income | 193,641 | 126,748 | 8 | - | 320,397 | |||||||||||||||||||
| Commissions | 113,252 | - | - | - | 113,252 | |||||||||||||||||||
| Fees and service charges | 41,229 | 1,001 | - | - | 42,230 | |||||||||||||||||||
| Principal transactions | 26,211 | - | - | - | 26,211 | |||||||||||||||||||
| Gains on loans and securities, net | - | 29,042 | 4 | - | 29,046 | |||||||||||||||||||
| Other-than-temporary impairment ("OTTI") | - | (14,524 | ) | - | - | (14,524 | ) | |||||||||||||||||
|
Less: noncredit portion of OTTI recognized
in other comprehensive loss (before tax) | - | 5,872 | - | - | 5,872 | |||||||||||||||||||
| Net impairment | - | (8,652 | ) | - | - | (8,652 | ) | |||||||||||||||||
| Other revenues | 11,428 | 2,591 | - | - | 14,019 | |||||||||||||||||||
| Total non-interest income | 192,120 | 23,982 | 4 | - | 216,106 | |||||||||||||||||||
| Total net revenue | 385,761 | 150,730 | 12 | - | 536,503 | |||||||||||||||||||
| Provision for loan losses | - | 267,979 | - | - | 267,979 | |||||||||||||||||||
| Operating expense: | ||||||||||||||||||||||||
| Compensation and benefits | 62,811 | 3,311 | 21,088 | - | 87,210 | |||||||||||||||||||
| Clearing and servicing | 19,490 | 19,669 | - | - | 39,159 | |||||||||||||||||||
| Advertising and market development | 38,135 | - | - | - | 38,135 | |||||||||||||||||||
| FDIC insurance premiums | - | 19,315 | - | - | 19,315 | |||||||||||||||||||
| Communications | 19,717 | 229 | 501 | - | 20,447 | |||||||||||||||||||
| Professional services | 11,354 | 589 | 8,347 | - | 20,290 | |||||||||||||||||||
| Occupancy and equipment | 16,897 | 682 | 628 | - | 18,207 | |||||||||||||||||||
| Depreciation and amortization | 15,464 | 312 | 4,870 | - | 20,646 | |||||||||||||||||||
| Amortization of other intangibles | 7,142 | - | - | - | 7,142 | |||||||||||||||||||
| Facility restructuring and other exit activities | - | - | 3,373 | - | 3,373 | |||||||||||||||||||
| Other operating expenses | 9,004 | 7,595 | 4,813 | - | 21,412 | |||||||||||||||||||
| Total operating expense | 200,014 | 51,702 | 43,620 | - | 295,336 | |||||||||||||||||||
| Income (loss) before other income (expense) and income taxes | 185,747 | (168,951 | ) | (43,608 | ) | - | (26,812 | ) | ||||||||||||||||
| Other income (expense): | ||||||||||||||||||||||||
| Corporate interest income | - | - | 23 | - | 23 | |||||||||||||||||||
| Corporate interest expense | - | - | (41,043 | ) | - | (41,043 | ) | |||||||||||||||||
| Gains on sales of investments, net | - | - | 109 | - | 109 | |||||||||||||||||||
| Equity in income of investments and venture funds | - | - | 1,794 | - | 1,794 | |||||||||||||||||||
| Other income (expense) | - | - | (39,117 | ) | - | (39,117 | ) | |||||||||||||||||
| Income (loss) before income taxes | $ | 185,747 | $ | (168,951 | ) | $ | (82,725 | ) | $ | - | $ | (65,929 | ) | |||||||||||
| Three Months Ended December 31, 2009 | ||||||||||||||||||||||||
Trading and | Balance Sheet | Corporate/ | Eliminations(2) | Total | ||||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||
| Revenue: | ||||||||||||||||||||||||
| Operating interest income | $ | 221,259 | $ | 367,089 | $ | 15 | $ | (167,998 | ) | $ | 420,365 | |||||||||||||
| Operating interest expense | (24,565 | ) | (242,826 | ) | - | 167,998 | (99,393 | ) | ||||||||||||||||
| Net operating interest income | 196,694 | 124,263 | 15 | - | 320,972 | |||||||||||||||||||
| Commissions | 123,771 | - | - | - | 123,771 | |||||||||||||||||||
| Fees and service charges | 45,864 | 1,630 | - | - | 47,494 | |||||||||||||||||||
| Principal transactions | 22,830 | - | - | - | 22,830 | |||||||||||||||||||
| Gains (losses) on loans and securities, net | - | 18,729 | (62 | ) | - | 18,667 | ||||||||||||||||||
| Other-than-temporary impairment ("OTTI") | - | (4,301 | ) | - | - | (4,301 | ) | |||||||||||||||||
|
Less: noncredit portion of OTTI recognized
out of other comprehensive loss (before tax) | - | (17,111 | ) | - | - | (17,111 | ) | |||||||||||||||||
| Net impairment | - | (21,412 | ) | - | - | (21,412 | ) | |||||||||||||||||
| Other revenues | 8,570 | 2,548 | - | - | 11,118 | |||||||||||||||||||
| Total non-interest income (loss) | 201,035 | 1,495 | (62 | ) | - | 202,468 | ||||||||||||||||||
| Total net revenue | 397,729 | 125,758 | (47 | ) | - | 523,440 | ||||||||||||||||||
| Provision for loan losses | - | 292,402 | - | - | 292,402 | |||||||||||||||||||
| Operating expense: | ||||||||||||||||||||||||
| Compensation and benefits | 71,981 | 5,283 | 16,787 | - | 94,051 | |||||||||||||||||||
| Clearing and servicing | 21,469 | 19,254 | - | - | 40,723 | |||||||||||||||||||
| Advertising and market development | 26,384 | - | - | - | 26,384 | |||||||||||||||||||
| FDIC insurance premiums | - | 19,424 | - | - | 19,424 | |||||||||||||||||||
| Communications | 20,771 | 57 | 488 | - | 21,316 | |||||||||||||||||||
| Professional services | 6,897 | 1,131 | 8,994 | - | 17,022 | |||||||||||||||||||
| Occupancy and equipment | 17,076 | 760 | 1,442 | - | 19,278 | |||||||||||||||||||
| Depreciation and amortization | 15,733 | 211 | 4,755 | - | 20,699 | |||||||||||||||||||
| Amortization of other intangibles | 7,434 | - | - | - | 7,434 | |||||||||||||||||||
| Facility restructuring and other exit activities | - | - | 13,820 | - | 13,820 | |||||||||||||||||||
| Other operating expenses | 19,418 | 11,594 | 7,242 | - | 38,254 | |||||||||||||||||||
| Total operating expense | 207,163 | 57,714 | 53,528 | - | 318,405 | |||||||||||||||||||
| Income (loss) before other income (expense) and income taxes | 190,566 | (224,358 | ) | (53,575 | ) | - | (87,367 | ) | ||||||||||||||||
| Other income (expense): | ||||||||||||||||||||||||
| Corporate interest income | - | - | 67 | - | 67 | |||||||||||||||||||
| Corporate interest expense | - | - | (39,897 | ) | - | (39,897 | ) | |||||||||||||||||
| Gains on sales of investments, net | - | - | 311 | - | 311 | |||||||||||||||||||
| Equity in loss of investments and venture funds | - | - | (1,644 | ) | - | (1,644 | ) | |||||||||||||||||
| Other income (expense) | - | - | (41,163 | ) | - | (41,163 | ) | |||||||||||||||||
| Income (loss) before income taxes | $ | 190,566 | $ | (224,358 | ) | $ | (94,738 | ) | $ | - | $ | (128,530 | ) | |||||||||||
| Three Months Ended March 31, 2009 | ||||||||||||||||||||||||
Trading and | Balance Sheet | Corporate/ | Eliminations(2) | Total | ||||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||
| Revenue: | ||||||||||||||||||||||||
| Operating interest income | $ | 247,037 | $ | 444,266 | $ | 38 | $ | (204,704 | ) | $ | 486,637 | |||||||||||||
| Operating interest expense | (97,951 | ) | (314,728 | ) | - | 204,704 | (207,975 | ) | ||||||||||||||||
| Net operating interest income | 149,086 | 129,538 | 38 | - | 278,662 | |||||||||||||||||||
| Commissions | 125,626 | - | - | - | 125,626 | |||||||||||||||||||
| Fees and service charges | 45,055 | 1,660 | - | - | 46,715 | |||||||||||||||||||
| Principal transactions | 17,642 | - | - | - | 17,642 | |||||||||||||||||||
| Gains (losses) on loans and securities, net | (32 | ) | 35,291 | 31 | - | 35,290 | ||||||||||||||||||
| Other-than-temporary impairment ("OTTI") | - | (18,783 | ) | - | - | (18,783 | ) | |||||||||||||||||
|
Less: noncredit portion of OTTI recognized in
other comprehensive loss (before tax) | - | - | - | - | - | |||||||||||||||||||
| Net impairment | - | (18,783 | ) | - | - | (18,783 | ) | |||||||||||||||||
| Other revenues | 8,894 | 3,297 | - | - | 12,191 | |||||||||||||||||||
| Total non-interest income | 197,185 | 21,465 | 31 | - | 218,681 | |||||||||||||||||||
| Total net revenue | 346,271 | 151,003 | 69 | - | 497,343 | |||||||||||||||||||
| Provision for loan losses | - | 453,963 | - | - | 453,963 | |||||||||||||||||||
| Operating expense: | ||||||||||||||||||||||||
| Compensation and benefits | 61,352 | 2,857 | 19,963 | - | 84,172 | |||||||||||||||||||
| Clearing and servicing | 20,776 | 21,895 | - | - | 42,671 | |||||||||||||||||||
| Advertising and market development | 43,586 | 5 | - | - | 43,591 | |||||||||||||||||||
| FDIC insurance premiums | - | 12,712 | - | - | 12,712 | |||||||||||||||||||
| Communications | 21,028 | 49 | 484 | - | 21,561 | |||||||||||||||||||
| Professional services | 8,841 | 620 | 10,169 | - | 19,630 | |||||||||||||||||||
| Occupancy and equipment | 19,038 | 750 | (247 | ) | - | 19,541 | ||||||||||||||||||
| Depreciation and amortization | 15,397 | 184 | 4,693 | - | 20,274 | |||||||||||||||||||
| Amortization of other intangibles | 7,436 | - | - | - | 7,436 | |||||||||||||||||||
| Facility restructuring and other exit activities | - | - | (112 | ) | - | (112 | ) | |||||||||||||||||
| Other operating expenses | 8,816 | 9,301 | 4,391 | - | 22,508 | |||||||||||||||||||
| Total operating expense | 206,270 | 48,373 | 39,341 | - | 293,984 | |||||||||||||||||||
| Income (loss) before other income (expense) and income taxes | 140,001 | (351,333 | ) | (39,272 | ) | - | (250,604 | ) | ||||||||||||||||
| Other income (expense): | ||||||||||||||||||||||||
| Corporate interest income | - | - | 424 | - | 424 | |||||||||||||||||||
| Corporate interest expense | - | - | (87,315 | ) | - | (87,315 | ) | |||||||||||||||||
| Losses on sales of investments, net | - | - | (433 | ) | - | (433 | ) | |||||||||||||||||
| Losses on early extinguishment of debt | - | (2,999 | ) | - | - | (2,999 | ) | |||||||||||||||||
| Equity in loss of investments and venture funds | - | - | (3,129 | ) | - | (3,129 | ) | |||||||||||||||||
| Other income (expense) | - | (2,999 | ) | (90,453 | ) | - | (93,452 | ) | ||||||||||||||||
| Income (loss) before income taxes | $ | 140,001 | $ | (354,332 | ) | $ | (129,725 | ) | $ | - | $ | (344,056 | ) | |||||||||||
Key Performance Metrics(3) | |||||||||||||||||
Corporate Metrics | Qtr ended | Qtr ended | Qtr ended | Qtr ended | Qtr ended | ||||||||||||
Operating margin %(4) | |||||||||||||||||
| Consolidated | N.M. | N.M. | N.M. | N.M. | N.M. | ||||||||||||
| Trading and Investing | 48 % | 48 % | 0 % | 40 % | 8 % | ||||||||||||
| Balance Sheet Management | N.M. | N.M. | N.M. | N.M. | N.M. | ||||||||||||
| Employees | 3,018 | 3,084 | (2)% | 3,178 | (5)% | ||||||||||||
| Consultants and other | 159 | 140 | 14 % | 138 | 15 % | ||||||||||||
| Total headcount | 3,177 | 3,224 | (1)% | 3,316 | (4)% | ||||||||||||
| Revenue per headcount | $ | 168,871 | $ | 162,357 | 4 % | $ | 149,983 | 13 % | |||||||||
| Revenue per compensation and benefits dollar | $ | 6.15 | $ | 5.57 | 10 % | $ | 5.91 | 4 % | |||||||||
| Book value per share | $ | 1.95 | $ | 1.98 | (2)% | $ | 4.30 | (55)% | |||||||||
| Tangible book value per share | $ | 0.77 | $ | 0.76 | 1 % | $ | 0.22 | 250 % | |||||||||
| Corporate cash ($MM)(5) | $ | 418.4 | $ | 393.2 | 6 % | $ | 406.2 | 3 % | |||||||||
| Enterprise net interest spread (basis points)(6) | 296 | 286 | 3 % | 234 | 26 % | ||||||||||||
| Enterprise interest-earning assets, average ($MM) | $ | 42,409 | $ | 43,828 | (3)% | $ | 44,696 | (5)% | |||||||||
Earnings before interest, taxes, depreciation & amortization ("EBITDA") ($MM) | |||||||||||||||||
| Net loss | $ | (47.8) | $ | (67.1) | N.M. | $ | (232.7) | N.M. | |||||||||
| Income tax benefit | (18.1) | (61.4) | N.M. | (111.4) | N.M. | ||||||||||||
| Depreciation & amortization | 27.8 | 28.1 | (1)% | 27.7 | 0 % | ||||||||||||
| Corporate interest expense | 41.0 | 39.9 | 3 % | 87.3 | (53)% | ||||||||||||
| EBITDA | $ | 2.9 | $ | (60.5) | N.M. | $ | (229.1) | N.M. | |||||||||
| Interest coverage | 0.1 | (1.5) | N.M. | (2.6) | N.M. | ||||||||||||
| Bank earnings before taxes and before credit losses ($MM) (7) | $ | 239.7 | $ | 246.9 | (3)% | $ | 180.9 | 33 % | |||||||||
Trading and Investing Metrics | |||||||||||||||||
| Trading days | 61.0 | 63.0 | N.M. | 61.0 | N.M. | ||||||||||||
DARTs | |||||||||||||||||
| U.S.(8) | 155,310 | 158,146 | (2)% | 175,403 | (11)% | ||||||||||||
| International local | 10,262 | 15,632 | (34)% | 19,079 | (46)% | ||||||||||||
| Total DARTs | 165,572 | 173,778 | (5)% | 194,482 | (15)% | ||||||||||||
| Total trades (MM) | 10.1 | 10.9 | (7)% | 11.9 | (15)% | ||||||||||||
| U.S. average commission per trade | $ | 11.38 | $ | 11.41 | 0 % | $ | 10.98 | 4 % | |||||||||
| International local average commission per trade | $ | 8.61 | $ | 10.28 | (16)% | $ | 6.99 | 23 % | |||||||||
| Average commission per trade | $ | 11.21 | $ | 11.31 | (1)% | $ | 10.59 | 6 % | |||||||||
| U.S. end of period margin receivables ($B) | $ | 3.84 | $ | 3.67 | 5 % | $ | 2.30 | 67 % | |||||||||
| International local end of period margin receivables ($B) | 0.15 | 0.16 | (6)% | 0.14 | 7 % | ||||||||||||
| End of period margin receivables ($B) | $ | 3.99 | $ | 3.83 | 4 % | $ | 2.44 | 64 % | |||||||||
| U.S. average margin receivables ($B) | $ | 3.87 | $ | 3.53 | 10 % | $ | 2.62 | 48 % | |||||||||
| International local average margin receivables ($B) | 0.15 | 0.15 | 0 % | 0.13 | 15 % | ||||||||||||
| Average margin receivables ($B) | $ | 4.02 | $ | 3.68 | 9 % | $ | 2.75 | 46 % | |||||||||
| Gross new brokerage accounts | 102,796 | 85,030 | 21 % | 142,438 | (28)% | ||||||||||||
| Gross new stock plan accounts | 41,648 | 47,144 | (12)% | 41,216 | 1 % | ||||||||||||
| Gross new banking accounts | 7,252 | 6,519 | 11 % | 49,906 | (85)% | ||||||||||||
| Gross new international local brokerage accounts | 1,788 | 3,406 | (48)% | 5,208 | (66)% | ||||||||||||
| Closed accounts | (275,004) | (186,571) | N.M. | (182,819) | N.M. | ||||||||||||
| Net new accounts | (121,520) | (44,472) | N.M. | 55,949 | N.M. | ||||||||||||
| Net new brokerage accounts | 1,898 | (9,203) | N.M. | 59,389 | N.M. | ||||||||||||
| Net new stock plan accounts | 390 | 7,798 | N.M. | (15,868) | N.M. | ||||||||||||
| Net new banking accounts | (122,804) | (35,651) | N.M. | 8,576 | N.M. | ||||||||||||
| Net new international local brokerage accounts | (1,004) | (7,416) | N.M. | 3,852 | N.M. | ||||||||||||
| Net new accounts | (121,520) | (44,472) | N.M. | 55,949 | N.M. | ||||||||||||
| End of period brokerage accounts | 2,631,977 | 2,630,079 | 0 % | 2,575,195 | 2 % | ||||||||||||
| End of period stock plan accounts | 1,026,203 | 1,025,813 | 0 % | 1,002,862 | 2 % | ||||||||||||
| End of period banking accounts | 600,600 | 723,404 | (17)% | 825,799 | (27)% | ||||||||||||
| End of period international local brokerage accounts | 81,435 | 82,439 | (1)% | 85,389 | (5)% | ||||||||||||
| End of period total accounts | 4,340,215 | 4,461,735 | (3)% | 4,489,245 | (3)% | ||||||||||||
| Net new customers | (91,302) | (26,902) | N.M. | 50,989 | N.M. | ||||||||||||
| End of period brokerage customers | 2,284,158 | 2,289,430 | 0 % | 2,258,726 | 1 % | ||||||||||||
| End of period all other customers | 834,211 | 920,241 | (9)% | 955,203 | (13)% | ||||||||||||
| End of period total customers | 3,118,369 | 3,209,671 | (3)% | 3,213,929 | (3)% | ||||||||||||
| Segment revenue per brokerage customer | $ | 169 | $ | 174 | (3)% | $ | 153 | 10 % | |||||||||
Customer Assets ($B) | |||||||||||||||||
| Security holdings | $ | 106.9 | $ | 99.6 | 7 % | $ | 65.5 | 63 % | |||||||||
| Customer payables (cash) | 5.2 | 4.7 | 11 % | 3.9 | 33 % | ||||||||||||
| Customer cash balances held by third parties | 3.2 | 3.2 | 0 % | 2.7 | 19 % | ||||||||||||
| Unexercised stock plan customer options (vested) | 19.0 | 17.6 | 8 % | 9.0 | 111 % | ||||||||||||
| Customer assets in brokerage and stock plan accounts | 134.3 | 125.1 | 7 % | 81.1 | 66 % | ||||||||||||
| Sweep deposit accounts | 13.4 | 12.5 | 7 % | 10.2 | 31 % | ||||||||||||
| Savings and transaction accounts | 10.0 | 11.7 | (15)% | 15.1 | (34)% | ||||||||||||
| CDs | 1.1 | 1.2 | (8)% | 2.1 | (48)% | ||||||||||||
| Customer assets in banking accounts | 24.5 | 25.4 | (4)% | 27.4 | (11)% | ||||||||||||
| Customer assets in international local brokerage accounts | 2.7 | 2.7 | 0 % | 1.9 | 42 % | ||||||||||||
| Total customer assets | $ | 161.5 | $ | 153.2 | 5 % | $ | 110.4 | 46 % | |||||||||
| Net new brokerage assets ($B)(9) | $ | 2.2 | $ | 1.5 | N.M. | $ | 2.3 | N.M. | |||||||||
| Net new banking assets ($B)(9) | (1.8) | (1.3) | N.M. | 1.1 | N.M. | ||||||||||||
| Net new international local brokerage assets ($B)(9) | 0.1 | (0.5) | N.M. | 0.1 | N.M. | ||||||||||||
| Net new customer assets ($B)(9) | $ | 0.5 | $ | (0.3) | N.M. | $ | 3.5 | N.M. | |||||||||
| Brokerage related cash ($B) | $ | 21.8 | $ | 20.4 | 7 % | $ | 16.8 | 30 % | |||||||||
| International local brokerage cash ($B) | 0.4 | 0.5 | (20)% | 0.4 | 0 % | ||||||||||||
| Other customer cash and deposits ($B) | 11.1 | 12.9 | (14)% | 17.2 | (35)% | ||||||||||||
| Total customer cash and deposits ($B) | $ | 33.3 | $ | 33.8 | (1)% | $ | 34.4 | (3)% | |||||||||
| Unexercised stock plan customer options (unvested) ($B) | $ | 30.9 | $ | 27.8 | 11 % | $ | 12.0 | 158 % | |||||||||
Market Making | |||||||||||||||||
| Equity shares traded (MM) | 185,282 | 120,691 | 54 % | 49,824 | 272 % | ||||||||||||
| Average revenue capture per 1,000 equity shares | $ | 0.135 | $ | 0.184 | (27)% | $ | 0.339 | (60)% | |||||||||
| % of Bulletin Board equity shares to total equity shares | 96.4% | 94.9% | 2 % | 86.8% | 10 % | ||||||||||||
Balance Sheet Management Metrics | |||||||||||||||||
Capital Ratios | |||||||||||||||||
| Tier 1 capital ratio(10) | 6.83 % | 6.69 % | 0.14 % | 5.63 % | 1.20 % | ||||||||||||
| Tier 1 capital to risk-weighted assets ratio(10) | 13.08 % | 12.79 % | 0.29 % | 10.53 % | 2.55 % | ||||||||||||
| Risk-based capital ratio(10) | 14.37 % | 14.08 % | 0.29 % | 11.82 % | 2.55 % | ||||||||||||
| E*TRADE Bank excess Tier 1 capital ($MM)(10) | $ | 768.3 | $ | 723.6 | 6 % | $ | 288.1 | 167 % | |||||||||
| E*TRADE Bank excess Tier 1 capital to risk weighted assets(10) | $ | 1,534.7 | $ | 1,496.3 | 3 % | $ | 1,104.7 | 39 % | |||||||||
| E*TRADE Bank excess risk-based capital ($MM)(10) | $ | 946.8 | $ | 899.1 | 5 % | $ | 444.2 | 113 % | |||||||||
Loans receivable ($MM) | |||||||||||||||||
| Average loans receivable | $ | 19,921 | $ | 20,998 | (5)% | $ | 25,083 | (21)% | |||||||||
| Ending loans receivable, net | $ | 17,933 | $ | 19,167 | (6)% | $ | 23,272 | (23)% | |||||||||
One- to Four-Family | |||||||||||||||||
Loan performance detail ($MM) | |||||||||||||||||
| Current | $ | 8,038 | $ | 8,845 | (9)% | $ | 11,112 | (28)% | |||||||||
| 30-89 days delinquent | 527 | 528 | 0 % | 587 | (10)% | ||||||||||||
| 90-179 days delinquent | 339 | 387 | (12)% | 453 | (25)% | ||||||||||||
| Total 30-179 days delinquent | 866 | 915 | (5)% | 1,040 | (17)% | ||||||||||||
| 180+ days delinquent (net of $327M, $296M and $110M in charge-offs for Q110, Q409 and Q109, respectively) | 881 | 842 | 5 % | 429 | 105 % | ||||||||||||
| Total delinquent loans | 1,747 | 1,757 | (1)% | 1,469 | 19 % | ||||||||||||
| Gross loans receivable(11) | $ | 9,785 | $ | 10,602 | (8)% | $ | 12,581 | (22)% | |||||||||
Credit Quality and Reserve Metrics | |||||||||||||||||
| Special mention loans (30-89 days delinquent) as a % of gross loans receivable | 5.38% | 4.98% | 0.40 % | 4.67% | 0.71 % | ||||||||||||
| Nonperforming loans (90+ days delinquent) as a % of gross loans receivable | 12.47% | 11.60% | 0.87 % | 7.01% | 5.46 % | ||||||||||||
| Total delinquent loans (30+ days delinquent) as a % of gross loans receivable | 17.85% | 16.58% | 1.27 % | 11.68% | 6.17 % | ||||||||||||
| Total 30-179 days delinquent loans as a % of allowance for loan losses | 199.43% | 186.73% | 12.70 % | 336.78% | (137.35)% | ||||||||||||
| Allowance for loan losses as a % of gross loans receivable | 4.43% | 4.62% | (0.19)% | 2.45% | 1.98 % | ||||||||||||
| Allowance for loan losses as a % of nonperforming loans | 35.55% | 39.84% | (4.29)% | 35.01% | 0.54 % | ||||||||||||
| Net charge-offs as a % of average loans receivable (annualized) | 4.00% | 4.04% | (0.04)% | 2.10% | 1.90 % | ||||||||||||
| Provision as a % of average loans receivable (annualized) | 1.82% | 5.48% | (3.66)% | 5.97% | (4.15)% | ||||||||||||
Home Equity | |||||||||||||||||
Loan performance detail ($MM) | |||||||||||||||||
| Current | $ | 7,086 | $ | 7,386 | (4)% | $ | 8,961 | (21)% | |||||||||
| 30-89 days delinquent | 214 | 247 | (13)% | 305 | (30)% | ||||||||||||
| 90-179 days delinquent | 170 | 194 | (12)% | 347 | (51)% | ||||||||||||
| Total 30-179 days delinquent | 384 | 441 | (13)% | 652 | (41)% | ||||||||||||
| 180+ days delinquent (net of $27M, $27M and $21M in charge-offs for Q110, Q409 and Q109, respectively) | 56 | 56 | 0 % | 72 | (22)% | ||||||||||||
| Total delinquent loans | 440 | 497 | (11)% | 724 | (39)% | ||||||||||||
| Gross loans receivable(11) | $ | 7,526 | $ | 7,883 | (5)% | $ | 9,685 | (22)% | |||||||||
Credit Quality and Reserve Metrics | |||||||||||||||||
| Special mention loans (30-89 days delinquent) as a % of gross loans receivable | 2.84% | 3.12% | (0.28)% | 3.15% | (0.31)% | ||||||||||||
| Nonperforming loans (90+ days delinquent) as a % of gross loans receivable | 3.00% | 3.18% | (0.18)% | 4.33% | (1.33)% | ||||||||||||
| Total delinquent loans (30+ days delinquent) as a % of gross loans receivable | 5.84% | 6.30% | (0.46)% | 7.48% | (1.64)% | ||||||||||||
| Total 30-179 days delinquent loans as a % of allowance for loan losses | 58.39% | 71.09% | (12.70)% | 79.62% | (21.23)% | ||||||||||||
| Allowance for loan losses as a % of gross loans receivable | 8.73% | 7.87% | 0.86 % | 8.45% | 0.28 % | ||||||||||||
| Allowance for loan losses as a % of nonperforming loans | 290.97% | 247.46% | 43.51 % | 195.07% | 95.90 % | ||||||||||||
| Net charge-offs as a % of average loans receivable (annualized) | 8.69% | 9.52% | (0.83)% | 9.79% | (1.10)% | ||||||||||||
| Provision as a % of average loans receivable (annualized) | 10.58% | 5.96% | 4.62 % | 9.18% | 1.40 % | ||||||||||||
Consumer and Other | |||||||||||||||||
Loan performance detail ($MM) | |||||||||||||||||
| Current | $ | 1,750 | $ | 1,828 | (4)% | $ | 2,157 | (19)% | |||||||||
| 30-89 days delinquent | 28 | 30 | (7)% | 41 | (32)% | ||||||||||||
| 90-179 days delinquent | 5 | 6 | (17)% | 8 | (38)% | ||||||||||||
| Total 30-179 days delinquent | 33 | 36 | (8)% | 49 | (33)% | ||||||||||||
| 180+ days delinquent | 1 | 1 | 0 % | 1 | 0 % | ||||||||||||
| Total delinquent loans | 34 | 37 | (8)% | 50 | (32)% | ||||||||||||
| Gross loans receivable(11) | $ | 1,784 | $ | 1,865 | (4)% | $ | 2,207 | (19)% | |||||||||
Credit Quality and Reserve Metrics | |||||||||||||||||
| Special mention loans (30-89 days delinquent) as a % of gross loans receivable | 1.57% | 1.63% | (0.06)% | 1.85% | (0.28)% | ||||||||||||
| Nonperforming loans (90+ days delinquent) as a % of gross loans receivable | 0.34% | 0.36% | (0.02)% | 0.41% | (0.07)% | ||||||||||||
| Total delinquent loans (30+ days delinquent) as a % of gross loans receivable | 1.90% | 1.99% | (0.09)% | 2.26% | (0.36)% | ||||||||||||
| Total 30-179 days delinquent loans as a % of allowance for loan losses | 46.53% | 50.01% | (3.48)% | 66.47% | (19.94)% | ||||||||||||
| Allowance for loan losses as a % of gross loans receivable | 4.00% | 3.90% | 0.10 % | 3.32% | 0.68 % | ||||||||||||
| Allowance for loan losses as a % of nonperforming loans | 1186.68% | 1082.29% | 104.39 % | 804.96% | 381.72 % | ||||||||||||
| Net charge-offs as a % of average loans receivable (annualized) | 3.39% | 3.93% | (0.54)% | 3.77% | (0.38)% | ||||||||||||
| Provision as a % of average loans receivable (annualized) | 3.08% | 4.43% | (1.35)% | 5.83% | (2.75)% | ||||||||||||
Total Loans Receivable | |||||||||||||||||
Loan performance detail ($MM) | |||||||||||||||||
| Current | $ | 16,874 | $ | 18,059 | (7)% | $ | 22,230 | (24)% | |||||||||
| 30-89 days delinquent | 769 | 805 | (4)% | 933 | (18)% | ||||||||||||
| 90-179 days delinquent | 514 | 587 | (12)% | 808 | (36)% | ||||||||||||
| Total 30-179 days delinquent | 1,283 | 1,392 | (8)% | 1,741 | (26)% | ||||||||||||
| 180+ days delinquent | 938 | 899 | 4 % | 502 | 87 % | ||||||||||||
| Total delinquent loans | 2,221 | 2,291 | (3)% | 2,243 | (1)% | ||||||||||||
| Total gross loans receivable(11) | $ | 19,095 | $ | 20,350 | (6)% | $ | 24,473 | (22)% | |||||||||
Credit Quality and Reserve Metrics | |||||||||||||||||
| Special mention loans (30-89 days delinquent) as a % of gross loans receivable | 4.02% | 3.95% | 0.07 % | 3.81% | 0.21 % | ||||||||||||
| Nonperforming loans (90+ days delinquent) as a % of gross loans receivable | 7.60% | 7.31% | 0.29 % | 5.36% | 2.24 % | ||||||||||||
| Total delinquent loans (30+ days delinquent) as a % of gross loans receivable | 11.63% | 11.26% | 0.37 % | 9.17% | 2.46 % | ||||||||||||
| Total 30-179 days delinquent loans as a % of allowance for loan losses | 110.30% | 117.69% | (7.39)% | 144.95% | (34.65)% | ||||||||||||
| Allowance for loan losses as a % of gross loans receivable | 6.09% | 5.81% | 0.28 % | 4.91% | 1.18 % | ||||||||||||
| Allowance for loan losses as a % of nonperforming loans | 80.05% | 79.54% | 0.51 % | 91.60% | (11.55)% | ||||||||||||
| Net charge-offs as a % of average loans receivable (annualized) | 5.79% | 6.18% | (0.39)% | 5.32% | 0.47 % | ||||||||||||
| Provision as a % of average loans receivable (annualized) | 5.38% | 5.57% | (0.19)% | 7.24% | (1.86)% | ||||||||||||
| Activity in Allowance for Loan Losses | ||||||||||||||||||||
| Three Months Ended March 31, 2010 | ||||||||||||||||||||
One- to Four- | Home Equity | Consumer | Total | |||||||||||||||||
| (In thousands) | ||||||||||||||||||||
| Allowance for loan losses, ending 12/31/09 | $ | 489,887 | $ | 620,067 | $ | 72,784 | $ | 1,182,738 | ||||||||||||
| Provision for loan losses | 46,533 | 207,332 | 14,114 | 267,979 | ||||||||||||||||
| Charge-offs, net | (102,557 | ) | (170,226 | ) | (15,543 | ) | (288,326 | ) | ||||||||||||
| Allowance for loan losses, ending 3/31/10 | $ | 433,863 | $ | 657,173 | $ | 71,355 | $ | 1,162,391 | ||||||||||||
| Three Months Ended December 31, 2009 | ||||||||||||||||||||
One- to Four- | Home Equity | Consumer | Total | |||||||||||||||||
| (In thousands) | ||||||||||||||||||||
| Allowance for loan losses, ending 9/30/09 | $ | 450,975 | $ | 693,185 | $ | 70,358 | $ | 1,214,518 | ||||||||||||
| Provision for loan losses | 148,742 | 122,338 | 21,322 | 292,402 | ||||||||||||||||
| Charge-offs, net | (109,830 | ) | (195,456 | ) | (18,896 | ) | (324,182 | ) | ||||||||||||
| Allowance for loan losses, ending 12/31/09 | $ | 489,887 | $ | 620,067 | $ | 72,784 | $ | 1,182,738 | ||||||||||||
| Three Months Ended March 31, 2009 | ||||||||||||||||||||
One- to Four- | Home Equity | Consumer | Total | |||||||||||||||||
| (In thousands) | ||||||||||||||||||||
| Allowance for loan losses, ending 12/31/08 | $ | 185,163 | $ | 833,835 | $ | 61,613 | $ | 1,080,611 | ||||||||||||
| Provision for loan losses | 190,687 | 230,102 | 33,174 | 453,963 | ||||||||||||||||
| Charge-offs, net | (67,044 | ) | (245,291 | ) | (21,431 | ) | (333,766 | ) | ||||||||||||
| Allowance for loan losses, ending 3/31/09 | $ | 308,806 | $ | 818,646 | $ | 73,356 | $ | 1,200,808 | ||||||||||||
| Average Enterprise Balance Sheet Data | |||||||||||||||
| Three Months Ended | |||||||||||||||
| March 31, 2010 | |||||||||||||||
| Average | Operating | Average | |||||||||||||
| Balance | Inc./Exp. | Yield/Cost | |||||||||||||
| Enterprise interest-earning assets: | (In thousands) | ||||||||||||||
| Loans (12) | $ | 19,928,531 | $ | 241,580 | 4.85 | % | |||||||||
| Margin receivables | 4,022,171 | 44,713 | 4.51 | % | |||||||||||
| Available-for-sale mortgage-backed securities | 9,692,701 | 81,860 | 3.38 | % | |||||||||||
| Available-for-sale investment securities | 4,027,737 | 27,725 | 2.75 | % | |||||||||||
| Trading securities | 2,097 | 34 | 6.43 | % | |||||||||||
| Cash and cash equivalents(13) | 4,050,303 | 2,350 | 0.24 | % | |||||||||||
| Stock borrow and other | 685,352 | 7,038 | 4.16 | % | |||||||||||
| Total enterprise interest-earning assets | $ | 42,408,892 | 405,300 | 3.83 | % | ||||||||||
| Enterprise interest-bearing liabilities: | |||||||||||||||
| Retail deposits | $ | 24,821,581 | 18,471 | 0.30 | % | ||||||||||
| Brokered certificates of deposit | 119,802 | 1,489 | 5.04 | % | |||||||||||
| Customer payables | 5,206,873 | 1,925 | 0.15 | % | |||||||||||
| Securities sold under agreements to repurchase | 6,371,964 | 34,746 | 2.18 | % | |||||||||||
| FHLB advances and other borrowings | 2,761,366 | 29,428 | 4.26 | % | |||||||||||
| Stock loan and other | 620,335 | 495 | 0.32 | % | |||||||||||
| Total enterprise interest-bearing liabilities | $ | 39,901,921 | 86,554 | 0.87 | % | ||||||||||
| Enterprise net interest income/spread(6) | $ | 318,746 | 2.96 | % | |||||||||||
| Three Months Ended | |||||||||||||||
| December 31, 2009 | |||||||||||||||
| Average | Operating | Average | |||||||||||||
| Balance | Inc./Exp. | Yield/Cost | |||||||||||||
| Enterprise interest-earning assets: | (In thousands) | ||||||||||||||
| Loans (12) | $ | 21,005,149 | $ | 255,433 | 4.86 | % | |||||||||
| Margin receivables | 3,681,814 | 42,329 | 4.56 | % | |||||||||||
| Available-for-sale mortgage-backed securities | 8,943,055 | 84,150 | 3.76 | % | |||||||||||
| Available-for-sale investment securities | 3,734,197 | 24,851 | 2.66 | % | |||||||||||
| Trading securities | 12,047 | 725 | 24.07 | % | |||||||||||
| Cash and cash equivalents(13) | 5,738,265 | 3,597 | 0.25 | % | |||||||||||
| Stock borrow and other | 713,897 | 6,989 | 3.88 | % | |||||||||||
| Total enterprise interest-earning assets | $ | 43,828,424 | 418,074 | 3.81 | % | ||||||||||
| Enterprise interest-bearing liabilities: | |||||||||||||||
| Retail deposits | $ | 25,656,265 | 22,214 | 0.34 | % | ||||||||||
| Brokered certificates of deposit | 131,083 | 1,724 | 5.22 | % | |||||||||||
| Customer payables | 5,288,419 | 1,815 | 0.14 | % | |||||||||||
| Securities sold under agreements to repurchase | 6,514,694 | 42,726 | 2.57 | % | |||||||||||
| FHLB advances and other borrowings | 2,748,656 | 30,419 | 4.33 | % | |||||||||||
| Stock loan and other | 553,679 | 481 | 0.34 | % | |||||||||||
| Total enterprise interest-bearing liabilities | $ | 40,892,796 | 99,379 | 0.95 | % | ||||||||||
| Enterprise net interest income/spread(6) | $ | 318,695 | 2.86 | % | |||||||||||
| Three Months Ended | |||||||||||||||
| March 31, 2009 | |||||||||||||||
| Average | Operating | Average | |||||||||||||
| Balance | Inc./Exp. | Yield/Cost | |||||||||||||
| Enterprise interest-earning assets: | (In thousands) | ||||||||||||||
| Loans (12) | $ | 25,083,318 | $ | 313,328 | 5.00 | % | |||||||||
| Margin receivables | 2,751,510 | 26,937 | 3.97 | % | |||||||||||
| Available-for-sale mortgage-backed securities | 11,173,259 | 125,749 | 4.50 | % | |||||||||||
| Available-for-sale investment securities | 126,307 | 2,034 | 6.44 | % | |||||||||||
| Trading securities | 35,528 | 671 | 7.56 | % | |||||||||||
| Cash and cash equivalents(13) | 4,937,608 | 5,736 | 0.47 | % | |||||||||||
| Stock borrow and other | 588,748 | 8,101 | 5.58 | % | |||||||||||
| Total enterprise interest-earning assets | $ | 44,696,278 | 482,556 | 4.32 | % | ||||||||||
| Enterprise interest-bearing liabilities: | |||||||||||||||
| Retail deposits | $ | 26,375,688 | 93,433 | 1.44 | % | ||||||||||
| Brokered certificates of deposit | 293,714 | 3,581 | 4.94 | % | |||||||||||
| Customer payables | 3,771,868 | 2,802 | 0.30 | % | |||||||||||
| Securities sold under agreements to repurchase | 7,094,805 | 61,169 | 3.45 | % | |||||||||||
| FHLB advances and other borrowings | 4,178,620 | 46,110 | 4.41 | % | |||||||||||
| Stock loan and other | 422,639 | 868 | 0.83 | % | |||||||||||
| Total enterprise interest-bearing liabilities | $ | 42,137,334 | 207,963 | 1.98 | % | ||||||||||
| Enterprise net interest income/spread(6) | $ | 274,593 | 2.34 | % | |||||||||||
| Reconciliation from Enterprise Net Interest Income to Net Operating Interest Income | |||||||||||||||
| Three Months Ended | |||||||||||||||
| March 31, | December 31, | March 31, | |||||||||||||
| 2010 | 2009 | 2009 | |||||||||||||
| (In thousands) | |||||||||||||||
| Enterprise net interest income | $ | 318,746 | $ | 318,695 | $ | 274,593 | |||||||||
| Taxable equivalent interest adjustment(14) | (292 | ) | (315 | ) | (714 | ) | |||||||||
| Customer cash held by third parties and other(15) | 1,943 | 2,592 | 4,783 | ||||||||||||
| Net operating interest income | $ | 320,397 | $ | 320,972 | $ | 278,662 | |||||||||
SUPPLEMENTAL INFORMATION
Explanation of Non-GAAP Measures and Certain Metrics
Management believes that corporate cash, EBITDA, interest coverage, Bank earnings before taxes and before credit losses, enterprise net interest income and enterprise interest-earning assets are appropriate measures for evaluating the operating and liquidity performance of the Company. Management believes that adjusting GAAP measures by excluding or including certain items is helpful to investors and analysts who may wish to use some or all of this information to analyze our current performance, prospects and valuation. Management uses non-GAAP information internally to evaluate our operating performance and in formulating our budget for future periods.
Reporting Changes
In the first quarter of 2010, the Company revised its segment financial reporting to reflect the manner in which its chief operating decision maker had begun assessing the Company’s performance and making resource allocation decisions. The Company no longer allocates costs associated with certain functions that are centrally managed to its operating segments. These costs are separately reported in a “Corporate/Other” category.
In addition, the Company now reports FDIC insurance premiums expense in its balance sheet management segment. These expenses were previously reported in its trading and investing segment. Balance sheet management pays the trading and investing segment for the use of its deposits via the deposit transfer pricing arrangement, including a reimbursement of the cost associated with FDIC insurance. This change did not impact the income (loss) before income taxes of either segment as the component of the deposit transfer pricing payment for FDIC insurance premiums expense was removed.
Corporate Cash
Corporate cash represents cash held at the parent company. The Company believes that corporate cash is a useful measure of the parent company’s liquidity as it is the primary source of capital above and beyond the capital deployed in our regulated subsidiaries.
EBITDA
EBITDA represents net income (loss) before taxes, depreciation and amortization and corporate interest expense. Management believes that EBITDA provides a useful additional measure of our performance by excluding certain non-cash charges and expenses that are not directly related to the performance of our business.
Interest Coverage
Interest coverage represents EBITDA divided by corporate interest expense. Management believes that by excluding the charges and expenses that are excluded from EBITDA, interest coverage provides a useful additional measure of our ability to continue to meet our interest obligations and our liquidity.
Bank Earnings Before Taxes and Before Credit Losses
Bank earnings before taxes and before credit losses represents the pre-tax earnings of E*TRADE Bank Holding Company (“Bank”), provision for loan losses, gains (losses) on loans and securities, net, net impairment and losses on early extinguishment of FHLB advances. See endnote (7) for a reconciliation of this non-GAAP measure to the comparable GAAP measure.
This metric shows the amount of earnings that the Bank, after accruing for the interest expense on its trust preferred securities, generates each quarter prior to credit related losses, primarily provision and losses on securities. Management believes this non-GAAP measure is useful to investors and analysts as it is an indicator of the level of credit related losses the Bank can absorb without causing a decline in E*TRADE Bank’s excess risk-based capital.
Enterprise Net Interest Income
Enterprise net interest income is taxable equivalent basis net operating interest income excluding corporate interest income, corporate interest expense and interest earned on customer cash held by third parties. Management believes this non-GAAP measure is useful to investors and analysts as it is a measure of the net operating interest income generated by our core operations.
Enterprise Interest-Earning Assets
Enterprise interest-earning assets consists of the primary interest-earning assets of the Company and includes: loans receivable, mortgage-backed and available-for-sale securities, margin receivables, stock borrow balances and cash that earns interest for the Company. Management believes that this non-GAAP measure is useful to investors and analysts as it is a measure of the primary assets from which the Company generates net operating interest income.
It is important to note these metrics and other non-GAAP measures may involve judgment by management and should be considered in addition to, not as a substitute for, or superior to, net income (loss), consolidated statements of cash flows, or other measures of financial performance prepared in accordance with GAAP. For additional information on the adjustments to these non-GAAP measures, please see our financial statements and “Management’s Discussion and Analysis of Results of Operations and Financial Condition” that will be included in the periodic report the Company expects to file with the SEC with respect to the financial periods discussed herein.
ENDNOTES
(1) Because the Company reported a net loss for the periods presented, the calculation of diluted net loss per share does not include common stock equivalents as they are anti-dilutive and would result in a reduction of net loss per share.
(2) Reflects elimination of transactions between Trading and Investing and Balance Sheet Management segments, which includes deposit and intercompany transfer pricing arrangements.
(3) Amounts and percentages may not calculate due to rounding.
(4) Operating margin is the percentage of net revenue that results in income (loss) before other income (expense) and income taxes. The percentage is calculated by dividing income (loss) before other income (expense) and income taxes by total net revenue.
(5) Corporate cash is an indicator of the liquidity at the parent company. Corporate cash for December 31, 2009 and March 31, 2009 included $15.2 million and $30.0 million, respectively, which was invested in The Primary Fund and included as a receivable in the other assets line item as The Reserve Fund had not indicated when the remaining funds would be distributed back to investors. We received the final distribution from The Primary Fund during Q110.
(6) Enterprise net interest spread is the taxable equivalent rate earned on average enterprise interest-earning assets less the rate paid on average enterprise interest-bearing liabilities, excluding corporate interest-earning assets and liabilities and customer cash held by third parties.
(7) Bank earnings before taxes and before credit losses represents the pre-tax earnings of E*TRADE Bank Holding Company (“Bank”), provision for loan losses, gains (losses) on loans and securities, net, net impairment and losses on early extinguishment of FHLB advances. This metric shows the amount of earnings that the Bank, after accruing for the interest expense on its trust preferred securities, generates each quarter prior to credit related losses, primarily provision and loss on securities. Management believes this non-GAAP measure is useful to investors and analysts as it is an indicator of the level of credit related losses the Bank can absorb without causing a decline in E*TRADE Bank’s excess risk-based capital(a). Below is a reconciliation of Bank earnings before taxes and before credit losses from loss before income taxes:
| Q1 2010 | Q4 2009 | Q1 2009 | |||||||||||||
| Loss before income taxes | $ | (65,929 | ) | $ | (128,530 | ) | $ | (344,056 | ) | ||||||
| Add back: | |||||||||||||||
| Non-bank loss before income tax benefit(b) | 58,016 | 80,286 | 84,525 | ||||||||||||
| Provision for loan losses | 267,979 | 292,402 | 453,963 | ||||||||||||
| Gains on loans and securities, net | (29,046 | ) | (18,667 | ) | (35,290 | ) | |||||||||
| Net impairment | 8,652 | 21,412 | 18,783 | ||||||||||||
| Losses on early extinguishment of FHLB advances | - | - | 2,999 | ||||||||||||
| Bank earnings before taxes and before credit losses | $ | 239,672 | $ | 246,903 | $ | 180,924 | |||||||||
(a) Excess risk-based capital is the excess capital that E*TRADE Bank has compared to the regulatory minimum well-capitalized threshold.
(b) Non-bank loss represents all of the Company’s subsidiaries, including Corporate, but excluding the Bank.
(8) U.S. DARTs are defined as transactions executed on the Company’s domestic platforms.
(9) Net new customer assets are total inflows to all new and existing customer accounts less total outflows from all closed and existing customer accounts. The net new banking assets and net new brokerage assets metrics treat asset flows between E*TRADE entities in the same manner as unrelated third party accounts.
(10) Capital ratios are at the E*TRADE Bank level. The ratios and excess capital amounts are Q110 estimates based on the regulatory minimum well-capitalized threshold. Below is a reconciliation of beginning E*TRADE Bank excess risk-based capital to ending E*TRADE Bank excess risk-based capital for the quarterly periods presented:
| Q1 2010 | Q4 2009 | Q1 2009 | |||||||||||||
| Beginning E*TRADE Bank excess risk-based capital ($MM) | $ | 899 | $ | 985 | $ | 715 | |||||||||
| Bank earnings before taxes and before credit losses | 240 | 247 | 181 | ||||||||||||
| Provision for loan losses | (268 | ) | (292 | ) | (454 | ) | |||||||||
| Loan portfolio run-off (a) | 85 | 81 | 84 | ||||||||||||
| Margin decrease (increase) | (17 | ) | (37 | ) | 36 | ||||||||||
| Capital upstream (b) | (39 | ) | (28 | ) | - | ||||||||||
| Other capital changes (c) | 47 | (57 | ) | (118 | ) | ||||||||||
| Ending E*TRADE Bank excess risk-based capital ($MM) | $ | 947 | $ | 899 | $ | 444 | |||||||||
(a) The capital release from loan portfolio run-off includes the decrease in risk-based capital required for our one- to four-family, home equity and consumer loan portfolios.
(b) Represents cash flows to and from the parent company.
(c) Represents the capital impact related to changes in other risk-weighted assets.
(11) Includes unpaid principal balances and premiums (discounts).
(12) Excludes loans to customers on margin.
(13) Includes segregated cash balances.
(14) Gross-up for tax-exempt securities.
(15) Includes interest earned on average customer assets of $3.1 billion, $3.1 billion and $2.8 billion for the quarters ended March 31, 2010, December 31, 2009 and March 31, 2009, respectively, held by parties outside E*TRADE Financial, including third party money market funds and sweep deposit accounts at unaffiliated financial institutions.
Contacts:
Susan Hickey, 646-521-4675
susan.hickey@etrade.com
or
E*TRADE
Financial Investor Relations Contact
Brett Goodman,
646-521-4406
brett.goodman@etrade.com
