E*TRADE Financial Corporation (NASDAQ: ETFC):
Second Quarter Results
- Net income of $292 million, or $0.99
per diluted share
- Net income of $72 million(1), or $0.25
per diluted share(1), excluding an income tax benefit related to
finalizing an IRS audit
- Total net revenue of $445 million
- Total operating expenses of $309
million, including severance of $6 million and $9 million related
to a third party contract amendment
- Provision for loan losses of $3
million
- Daily Average Revenue Trades (DARTs) of
149,000
- End of period margin receivables of
$8.1 billion
- Net new brokerage accounts of 25,000
and an annualized attrition rate of 8.7 percent, excluding the
impact of escheatment and shutting down the global trading
platform(2)
- Net new brokerage assets of $0.9
billion; end of period total customer assets of $302 billion
E*TRADE Financial Corporation (NASDAQ: ETFC) today announced
results for its second quarter ended June 30, 2015, reporting net
income of $292 million, or $0.99 per diluted share. This compares
to $40 million, or $0.14 per diluted share, in the prior quarter
and net income of $69 million, or $0.24 per diluted share, in the
second quarter of 2014. Excluding a $220 million income tax benefit
related to finalizing an IRS audit, net income would have been $72
million(1), or $0.25 per diluted share(1). This compares with
adjusted net income of $85 million(1), or $0.29 per diluted
share(1), in the prior quarter which excludes a charge related to
early extinguishment of corporate debt. Total net revenue of $445
million decreased from $456 million in the prior quarter and
increased from $438 million in the second quarter of 2014.
“We had a sound second quarter as we continued to make progress
on key customer and capital initiatives,” said Paul Idzik, Chief
Executive Officer. “Despite slower trading volumes across the
industry, our business continued to grow, with customer margin
receivables just below record highs and total customer assets
surpassing $300 billion. We maintained our steady drumbeat of
customer-led innovations, and on the capital front, we performed
well in our second annual Dodd-Frank Act Stress Tests, distributed
more than $140 million in capital to the parent, and recently
finalized the move of our clearing broker out from under our bank.
I am encouraged by the runway we’ve established and by the team’s
ability to continue driving value for our customers and
owners.”
E*TRADE reported DARTs of 149,000 during the quarter, a decrease
of 12 percent from the prior quarter and a decrease of 4 percent
versus the same quarter a year ago.
The Company ended the quarter with 3.2 million brokerage
accounts, an increase of 19,000 from the prior quarter. Excluding
closed accounts from the escheatment of unclaimed property, and the
shutdown of the Company’s global trading platform, net new accounts
were 25,000. This compared with 39,000 net new brokerage accounts
in the prior quarter and 33,000 in the second quarter of 2014.
Excluding these unique items, brokerage account attrition would
have been 8.7 percent annualized.
The Company ended the quarter with $302 billion in total
customer assets, compared with $299 billion at the end of the prior
quarter and $281 billion from a year ago.
During the quarter, customers added $0.9 billion in net new
brokerage assets. Brokerage related cash increased by $0.4 billion
to $42.0 billion during the second quarter. Customers were net
buyers of approximately $0.3 billion of securities. Margin
receivables averaged $8.1 billion in the quarter, up 3 percent from
the prior quarter and 11 percent year over year, ending the quarter
at $8.1 billion.
Corporate cash ended the quarter at $406 million(3), an increase
of $148 million from the prior quarter, primarily due to a $51
million dividend from E*TRADE Securities and a $92 million dividend
from the bank.
Net operating interest income(4) for the second quarter was $267
million, down from $271 million in the prior quarter and flat with
$267 million a year ago. Second quarter results reflected a net
interest spread of 2.50 percent on average interest-earning assets
of $42.3 billion, compared with 2.62 percent on $41.1 billion in
the prior quarter and 2.55 percent on $41.4 billion in the second
quarter of 2014.
Commissions, fees and service charges(4), and other revenue in
the second quarter were $167 million, down from $176 million in the
prior quarter and up from $164 million in the second quarter of
2014. Average commission per trade for the quarter was $10.96,
compared with $10.94 in the prior quarter and $10.72 in the second
quarter of 2014.
Total net revenue in the quarter also included $11 million of
net gains on loans and securities. This compared with $9 million in
the prior quarter and $7 million in the second quarter of 2014.
Total operating expenses in the quarter of $309 million
increased $9 million sequentially and increased $25 million from
the year ago period. Expenses included $6 million of executive
severance and $9 million related to a third party contract
amendment.
The Company’s loan portfolio ended the quarter at $5.7 billion,
contracting approximately $0.4 billion from the prior quarter.
Second quarter provision for loan losses of $3 million decreased
from $5 million in the previous quarter.
Net charge-offs in the quarter were $3 million compared with $7
million in the prior quarter. The allowance for loan losses ended
the quarter at $402 million, flat with the prior quarter.
As of June 30, 2015, the Company reported bank and consolidated
Tier 1 leverage ratios of 9.8 percent(5) and 8.5 percent(6),
compared with 9.8 percent(5) and 8.4 percent(6) in the previous
quarter.
Historical metrics and financials can be found on the E*TRADE
Financial corporate website at about.etrade.com.
The Company will host a conference call to discuss the results
beginning at 5 p.m. ET today. This conference call will be
available to domestic participants by dialing 800-617-1412 while
international participants should dial +1 303-223-4365. A live
audio webcast and replay of this conference call will also be
available at about.etrade.com.
About E*TRADE Financial
E*TRADE Financial and its subsidiaries provide 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
(Member FINRA/SIPC). Bank products and services are offered by
E*TRADE Bank, a Federal savings bank, Member FDIC, or its
subsidiaries and affiliates. More information is available at
www.etrade.com. 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, including statements regarding progress on key customer
and capital initiatives, continued growth in our business and the
ability to drive value for customers and owners are
“forward-looking statements” within the meaning of the safe harbor
provisions of the U.S. Private Securities Litigation Reform Act of
1995, and are subject to a number of uncertainties and risks.
Actual results may differ materially from those indicated in the
forward-looking statements. The uncertainties and risks include,
but are not limited to, 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 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.
© 2015 E*TRADE Financial Corporation. All rights reserved.
Financial Statements
E*TRADE FINANCIAL CORPORATION AND
SUBSIDIARIES Consolidated Statement of Income (In
millions, except share data and per share amounts)
(Unaudited) Three Months Ended
Six Months Ended June 30, June 30, 2015
2014 2015 2014 Revenue: Operating interest
income $ 310 $ 319 $ 626 $ 638 Operating interest expense
(43 ) (52 ) (88 ) (108 ) Net operating
interest income 267 267 538
530 Commissions 103 105 217 233 Fees and
service charges 55 49 107 99 Principal transactions - - - 10 Gains
on loans and securities, net 11 7 20 22 Other revenues 9
10 19 19 Total
non-interest income 178 171 363
383 Total net revenue 445
438 901 913 Provision for loan
losses 3 12 8 16 Operating expense: Compensation and benefits 118
99 231 197 Advertising and market development 32 33 66 67 Clearing
and servicing 25 23 49 51 FDIC insurance premiums 11 19 29 43
Professional services 26 28 53 52 Occupancy and equipment 22 19 43
37 Communications 19 18 38 36 Depreciation and amortization 20 20
40 41 Amortization of other intangibles 5 6 10 11 Facility
restructuring and other exit activities 2 1 6 4 Other operating
expenses 29 18 44
35 Total operating expense 309 284
609 574 Income before other
income (expense) and income tax (benefit) expense 133 142 284 323
Other income (expense): Corporate interest expense (15 ) (29 ) (36
) (57 ) Losses on early extinguishment of debt - - (73 ) (12 )
Equity in income (loss) of investments and other (1 )
(1 ) 5 2 Total other income (expense)
(16 ) (30 ) (104 ) (67 ) Income before
income tax (benefit) expense 117 112 180 256 Income tax (benefit)
expense (175 ) 43 (152 ) 90
Net income $ 292 $ 69 $ 332 $ 166
Basic earnings per share $ 1.01 $ 0.24 $ 1.15 $ 0.57
Diluted earnings per share $ 0.99 $ 0.24 $ 1.13 $ 0.56 Shares used
in computation of per share data: Basic (in thousands) 290,086
288,705 289,915 288,380 Diluted (in thousands) 294,936 293,826
294,912 293,813
E*TRADE FINANCIAL CORPORATION AND
SUBSIDIARIES Consolidated Statement of Income (In
millions, except share data and per share amounts)
(Unaudited) Three
Months Ended June 30, March 31, June 30,
2015 2015 2014 Revenue: Operating
interest income $ 310 $ 316 $ 319 Operating interest expense
(43 ) (45 ) (52 ) Net operating interest income
267 271 267 Commissions
103 114 105 Fees and service charges 55 52 49 Gains on loans and
securities, net 11 9 7 Other revenues 9 10
10 Total non-interest income 178
185 171 Total net revenue 445
456 438 Provision for loan
losses 3 5 12 Operating expense: Compensation and benefits 118 113
99 Advertising and market development 32 34 33 Clearing and
servicing 25 24 23 FDIC insurance premiums 11 18 19 Professional
services 26 27 28 Occupancy and equipment 22 21 19 Communications
19 19 18 Depreciation and amortization 20 20 20 Amortization of
other intangibles 5 5 6 Facility restructuring and other exit
activities 2 4 1 Other operating expenses 29
15 18 Total operating expense 309
300 284 Income before other
income (expense) and income tax (benefit) expense 133 151 142 Other
income (expense): Corporate interest expense (15 ) (21 ) (29 )
Losses on early extinguishment of debt - (73 ) - Equity in income
(loss) of investments and other (1 ) 6
(1 ) Total other income (expense) (16 ) (88 )
(30 ) Income before income tax (benefit) expense 117 63 112 Income
tax (benefit) expense (175 ) 23 43
Net income $ 292 $ 40 $ 69 Basic
earnings per share $ 1.01 $ 0.14 $ 0.24 Diluted earnings per share
$ 0.99 $ 0.14 $ 0.24 Shares used in computation of per share data:
Basic (in thousands) 290,086 289,741 288,705 Diluted (in thousands)
294,936 294,722 293,826
E*TRADE FINANCIAL
CORPORATION AND SUBSIDIARIES Consolidated Balance Sheet
(In millions, except share data) (Unaudited)
June 30, March 31,
December 31, 2015 2015 2014
ASSETS Cash and equivalents $ 1,872 $ 1,025 $ 1,783 Cash
required to be segregated under federal or other regulations 767
849 555 Available-for-sale securities 13,866 13,841 12,388
Held-to-maturity securities 12,291 12,517 12,248 Margin receivables
8,139 8,220 7,675 Loans receivable, net 5,252 5,664 5,979
Investment in FHLB stock 89 86 88 Property and equipment, net 238
241 245 Goodwill 1,792 1,792 1,792 Other intangibles, net 184 189
194 Other assets 2,625 2,401
2,583 Total assets $ 47,115 $ 46,825 $ 45,530
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities: Deposits $ 26,214 $ 26,272 $ 24,890 Securities
sold under agreements to repurchase 3,617 3,668 3,672 Customer
payables 6,702 6,293 6,455 FHLB advances and other borrowings 1,309
1,304 1,299 Corporate debt 1,023 1,025 1,366 Other liabilities
2,536 2,810 2,473 Total
liabilities 41,401 41,372 40,155
Shareholders' equity: Common stock, $0.01 par
value, shares authorized: 400,000,000 at June 30, 2015, March 31,
2015 and December 31, 2014, shares issued and outstanding:
290,236,778 at June 30, 2015, 289,897,529 at March 31, 2015 and
289,272,576 at December 31, 2014 3 3 3 Additional paid-in-capital
7,361 7,350 7,350 Accumulated deficit (1,397 ) (1,689 ) (1,729 )
Accumulated other comprehensive loss (253 ) (211 )
(249 ) Total shareholders' equity 5,714
5,453 5,375 Total liabilities and
shareholders' equity $ 47,115 $ 46,825 $ 45,530
Segment Reporting
Three Months Ended June 30,
2015
Trading and Investing
Balance Sheet Management
Corporate/ Other
Eliminations(7) Total (In millions) Revenue:
Operating interest income $ 180 $ 209 $ 1 $ (80 ) $ 310 Operating
interest expense (2 ) (121 ) -
80 (43 ) Net operating interest income 178
88 1 - 267
Commissions 103 - - - 103 Fees and service charges 55 - - -
55 Gains on loans and securities, net - 11 - - 11 Other revenues
8 1 - -
9 Total non-interest income 166
12 - - 178 Total
net revenue 344 100 1
- 445 Provision for loan losses - 3 - -
3 Operating expense: Compensation and benefits 75 3 40 - 118
Advertising and market development 32 - - - 32 Clearing and
servicing 17 8 - - 25 FDIC insurance premiums - 11 - - 11
Professional services 13 - 13 - 26 Occupancy and equipment 18 1 3 -
22 Communications 18 - 1 - 19 Depreciation and amortization 15 - 5
- 20 Amortization of other intangibles 5 - - - 5 Facility
restructuring and other exit activities - - 2 - 2 Other operating
expenses 21 3 5 -
29 Total operating expense 214
26 69 - 309
Segment income (loss) before other income (expense) 130
71 (68 ) - 133
Other income (expense): Corporate interest expense - - (15 )
- (15 ) Equity in income (loss) of investments and other -
- (1 ) - (1 )
Total other income (expense) - -
(16 ) - (16 ) Segment income (loss) $ 130
$ 71 $ (84 ) $ - $ 117
Three Months Ended March 31, 2015
Trading and Investing
Balance Sheet Management
Corporate/ Other
Eliminations(7) Total (In
millions) Revenue: Operating interest income $ 169 $ 218 $ -
$ (71 ) $ 316 Operating interest expense (4 ) (112 )
- 71 (45 ) Net operating
interest income 165 106 -
- 271 Commissions 114 - - - 114 Fees
and service charges 52 - - - 52 Gains on loans and securities, net
- 9 - - 9 Other revenues 8 2 -
- 10 Total non-interest income
174 11 - -
185 Total net revenue 339 117
- - 456 Provision
for loan losses - 5 - - 5 Operating expense: Compensation and
benefits 78 4 31 - 113 Advertising and market development 34 - - -
34 Clearing and servicing 16 8 - - 24 FDIC insurance premiums - 18
- - 18 Professional services 13 2 12 - 27 Occupancy and equipment
17 - 4 - 21 Communications 19 - - - 19 Depreciation and
amortization 16 - 4 - 20 Amortization of other intangibles 5 - - -
5 Facility restructuring and other exit activities - - 4 - 4 Other
operating expenses 5 4 6
- 15 Total operating expense 203
36 61 - 300
Segment income (loss) before other income (expense)
136 76 (61 ) - 151
Other income (expense): Corporate interest expense - - (21 )
- (21 ) Losses on early extinguishment of debt - - (73 ) - (73 )
Equity in income of investments and other - -
6 - 6 Total other
income (expense) - - (88 )
- (88 ) Segment income (loss) $ 136 $
76 $ (149 ) $ - $ 63
Three Months Ended June 30, 2014
Trading and Investing
Balance Sheet Management
Corporate/ Other
Eliminations(7) Total (In
millions) Revenue: Operating interest income $ 152 $ 233 $ - $ (66
) $ 319 Operating interest expense (4 ) (114 )
- 66 (52 ) Net operating interest
income 148 119 - -
267 Commissions 105 - - - 105 Fees and service
charges 48 1 - - 49 Gains on loans and securities, net - 7 - - 7
Other revenues 8 2 -
- 10 Total non-interest income
161 10 - -
171 Total net revenue 309 129
- - 438 Provision for
loan losses - 12 - - 12 Operating expense: Compensation and
benefits 69 3 27 - 99 Advertising and market development 33 - - -
33 Clearing and servicing 14 9 - - 23 FDIC insurance premiums - 19
- - 19 Professional services 15 1 12 - 28 Occupancy and equipment
15 - 4 - 19 Communications 17 - 1 - 18 Depreciation and
amortization 16 - 4 - 20 Amortization of other intangibles 6 - - -
6 Facility restructuring and other exit activities - - 1 - 1 Other
operating expenses 11 4 3
- 18 Total operating expense 196
36 52 - 284
Segment income (loss) before other income (expense)
113 81 (52 ) - 142
Other income (expense): Corporate interest expense - - (29 )
- (29 ) Equity in income (loss) of investments and other -
- (1 ) - (1 )
Total other income (expense) - -
(30 ) - (30 ) Segment income (loss) $ 113
$ 81 $ (82 ) $ - $ 112
Key Performance
Metrics(8)
Corporate
Metrics
Qtr ended 6/30/15
Qtr ended 3/31/15
Qtr ended 6/30/15 vs.
3/31/15
Qtr ended 6/30/14
Qtr ended 6/30/15 vs.
6/30/14
Operating margin
%(9)
Consolidated 30 % 33 % (3)% 32 % (2)% Trading and Investing 38 % 40
% (2)% 37 % 1 % Balance Sheet Management 71 % 65 % 6 % 63 % 8 %
Employees 3,260 3,250 0 % 3,113 5 % Consultants and other
100 105 (5)% 142 (30)% Total headcount 3,360
3,355 0 % 3,255 3 % Book value per share $ 19.69 $ 18.81 5 %
$ 17.97 10 % Tangible book value per share(10) $ 14.31 $ 13.38 7 %
$ 12.34 16 % Corporate cash ($MM)(3) $ 406 $ 258 57 % $ 570
(29)% Enterprise net interest spread (basis points)(11) 250
262 (5)% 255 (2)% Enterprise interest-earning assets, average ($MM)
$ 42,331 $ 41,086 3 % $ 41,395 2 %
Earnings before
interest, taxes, depreciation & amortization ("EBITDA")
($MM)
Net income $ 292 $ 40 630 % $ 69 323 % Income tax (benefit) expense
(175) 23 (861)% 43 (507)% Depreciation & amortization 25 25 0 %
26 (4)% Corporate interest expense 15 21 (29)%
29 (48)% EBITDA $ 157 $ 109 44 % $ 167 (6)% Interest
coverage(12) 10.9 5.2 N.M. 5.8 N.M. E*TRADE Bank net income
($MM)(13) $ 114 $ 92 24 % $ 106 8 %
Trading and
Investing Metrics
Trading days 63.0 61.0 N.M. 63.0 N.M. DARTs 149,448
169,951 (12)% 155,194 (4)% Total trades (MM) 9.4 10.4 (10)%
9.8 (4)% Average commission per trade $ 10.96 $ 10.94 0 % $ 10.72 2
% End of period margin receivables ($B) $ 8.1 $ 8.2 (1)% $
7.3 11 % Average margin receivables ($B) $ 8.1 $ 7.9 3 % $ 7.3 11 %
Gross new brokerage accounts 94,716 107,887 (12)% 99,136
(4)% Gross new stock plan accounts 66,870 65,133 3 % 59,084 13 %
Gross new banking accounts 1,208 1,249 (3)% 2,001 (40)% Closed
accounts (129,538) (131,040) N.M. (117,670)
N.M. Net new accounts 33,256 43,229 N.M. 42,551 N.M. Net new
brokerage accounts(2) 18,687 38,716 N.M. 33,005 N.M. Net new stock
plan accounts 20,489 9,684 N.M. 17,787 N.M. Net new banking
accounts (5,920) (5,171) N.M. (8,241) N.M. Net
new accounts 33,256 43,229 N.M. 42,551 N.M. End of period
brokerage accounts(2) 3,201,326 3,182,639 1 % 3,102,966 3 % End of
period stock plan accounts 1,293,957 1,273,468 2 % 1,246,182 4 %
End of period banking accounts 350,953 356,873 (2)%
379,307 (7)% End of period total accounts 4,846,236
4,812,980 1 % 4,728,455 2 % Annualized brokerage account
attrition rate(2)(14) 9.6% 8.8% N.M. 8.6% N.M.
Customer Assets
($B)
Security holdings $ 215.2 $ 213.8 1 % $ 197.8
9 %
Customer payables (cash) 6.7 6.3 6 % 6.6
2 %
Customer assets held by third parties(15) 14.6 14.9 (2)% 14.3
2 %
Sweep deposits 20.7 20.4 1 % 19.1
8 %
Brokerage customer assets 257.2 255.4 1 %
237.8
8 %
Unexercised stock plan customer holdings (vested) 39.7 38.2 4 %
37.1
7 %
Savings, checking and other banking customer assets 5.5
5.8 (5)% 6.0
(8)%
Total customer assets $ 302.4 $ 299.4 1 % $ 280.9
8 %
Net new brokerage assets ($B)(16) $ 0.9 $ 3.5 N.M. $ 1.0
N.M.
Net new banking assets ($B)(16) (0.3) 0.0 N.M.
(0.3)
N.M.
Net new customer assets ($B)(16) $ 0.6 $ 3.5 N.M. $ 0.7
N.M.
Brokerage related cash ($B) $ 42.0 $ 41.6 1 % $ 40.0
5 %
Other customer cash and deposits ($B) 5.5 5.8 (5)%
6.0
(8)%
Total customer cash and deposits ($B) $ 47.5 $ 47.4 0 % $ 46.0
3 %
Stock plan customer holdings (unvested) ($B) $ 78.9 $ 79.2 0 % $
73.6
7 %
Customer net buy activity ($B) $ (0.3) $ (3.1) N.M. $ (0.4)
N.M.
Balance Sheet
Management Metrics
Loans receivable
($MM)
Average loans receivable $ 5,862 $ 6,203 $ (341) $ 7,201 $ (1,339)
Ending loans receivable, net $ 5,252 $ 5,664 $ (412) $ 6,656 $
(1,404)
Loan performance
detail (all loans, including TDRs) ($MM)
One- to
Four-Family
Current $ 2,578 $ 2,687 $ (109) $ 3,100 $ (522) 30-89 days
delinquent 76 107 (31) 88 (12) 90-179 days delinquent 17
25 (8) 27 (10) Total 30-179 days delinquent 93 132
(39) 115 (22)
180+ days delinquent (net of $48M, $47M
and $58M in charge-offs forQ215, Q115 and Q214, respectively)
125 129 (4) 145 (20) Total delinquent
loans(17) 218 261 (43) 260 (42) Gross loans
receivable(18) $ 2,796 $ 2,948 (152) $ 3,360 (564)
Home
Equity
Current $ 2,322 $ 2,541 $ (219) $ 3,033 $ (711) 30-89 days
delinquent 61 77 (16) 56 5 90-179 days delinquent 33
27 6 32 1 Total 30-179 days delinquent 94 104 (10) 88 6
180+ days delinquent (net of $25M, $25M
and $24M in charge-offs forQ215, Q115 and Q214, respectively)
42 42 - 45 (3) Total delinquent loans(17)
136 146 (10) 133 3 Gross loans receivable(18)
$ 2,458 $ 2,687 (229) $ 3,166 (708)
Consumer and
Other
Current $ 393 $ 423 $ (30) $ 519 $ (126) 30-89 days delinquent 6 7
(1) 11 (5) 90-179 days delinquent 1 1 - 1 -
Total 30-179 days delinquent 7 8 (1) 12 (5) 180+ days delinquent
- - - - - Total delinquent loans(17) 7
8 (1) 12 (5) Gross loans receivable(18) $ 400 $ 431
(31) $ 531 (131)
Total Loans
Receivable
Current $ 5,293 $ 5,651 $ (358) $ 6,652 $ (1,359) 30-89 days
delinquent 143 191 (48) 155 (12) 90-179 days delinquent 51
53 (2) 60 (9) Total 30-179 days delinquent 194 244
(50) 215 (21) 180+ days delinquent 167 171 (4)
190 (23) Total delinquent loans(17) 361 415 (54)
405 (44) Total gross loans receivable(18) $ 5,654 $ 6,066
(412) $ 7,057 (1,403)
TDR performance
detail ($MM)(19)
One- to Four-Family
TDRs
Current $ 225 $ 219 $ 6 $ 244 $ (19) 30-89 days delinquent 23 30
(7) 19 4 90-179 days delinquent 5 10 (5) 6 (1)
Total 30-179 days delinquent 28 40 (12) 25 3
180+ days delinquent (net of $26M, $24M
and $25M in charge-offs forQ215, Q115 and Q214, respectively)
51 50 1 50 1 Total delinquent TDRs 79
90 (11) 75 4 TDRs $ 304 $ 309 (5) $ 319 (15)
Home Equity
TDRs
Current $ 176 $ 184 $ (8) $ 184 $ (8) 30-89 days delinquent 14 17
(3) 15 (1) 90-179 days delinquent 7 6 1 8 (1)
Total 30-179 days delinquent 21 23 (2) 23 (2)
180+ days delinquent (net of $15M, $16M
and $14M in charge-offs forQ215, Q115 and Q214, respectively)
19 18 1 19 - Total delinquent TDRs 40
41 (1) 42 (2) TDRs $ 216 $ 225 (9) $ 226 (10)
Total
TDRs
Current $ 401 $ 403 $ (2) $ 428 $ (27) 30-89 days delinquent 37 47
(10) 34 3 90-179 days delinquent 12 16 (4) 14
(2) Total 30-179 days delinquent 49 63 (14) 48 1 180+ days
delinquent 70 68 2 69 1 Total delinquent TDRs
119 131 (12) 117 2 TDRs $ 520 $ 534 (14) $ 545
(25)
Capital
Metrics(20)
E*TRADE
Bank
Tier 1 leverage ratio(5) 9.8% 9.8 % 0.0% 10.2 % (0.4)% Tier 1
risk-based capital ratio(5) 45.4% 42.4 % 3.0% 24.7 % 20.7% Total
risk-based capital ratio(5) 46.7% 43.7 % 3.0% 26.0 % 20.7% Common
Equity Tier 1 ratio(5) 45.4% 42.4 % 3.0% 24.7 % N.M.
E*TRADE
Financial
Tier 1 leverage ratio(6) 8.5% 8.4 % 0.1% 7.5 % 1.0% Tier 1
risk-based capital ratio(6) 37.7% 35.0 % 2.7% 18.3 % 19.4% Total
risk-based capital ratio(6) 42.3% 39.4 % 2.9% 19.5 % 22.8% Common
Equity Tier 1 ratio(6) 37.7% 35.0 % 2.7% 15.8 % N.M.
Activity in Allowance for Loan Losses
Three Months Ended June 30,
2015
One- to Four- Family
Home Equity
Consumer and Other
Total (In millions) Allowance for loan losses, ending
3/31/15 $ 31 $ 360 $ 11 $ 402 Provision for loan losses 20 (15 ) (2
) 3 Charge-offs, net (2 ) - (1 )
(3 ) Allowance for loan losses, ending 6/30/15 $ 49 $ 345
$ 8 $ 402
Three Months Ended March 31,
2015
One- to Four- Family
Home Equity
Consumer and Other
Total (In millions) Allowance for loan losses, ending
12/31/14 $ 27 $ 367 $ 10 $ 404 Provision for loan losses 5 (2 ) 2 5
Charge-offs, net (1 ) (5 ) (1 ) (7 )
Allowance for loan losses, ending 3/31/15 $ 31 $ 360
$ 11 $ 402
Three Months Ended June 30,
2014
One- to Four- Family
Home Equity
Consumer and Other
Total (In millions) Allowance for loan losses, ending
3/31/14 $ 52 $ 327 $ 24 $ 403 Provision for loan losses (8 ) 21 (1
) 12 Charge-offs, net - (11 ) (3 )
(14 ) Allowance for loan losses, ending 6/30/14 $ 44
$ 337 $ 20 $ 401
Specific Valuation Allowance
Activity(21)
As of June 30, 2015
Recorded Investment in
Modifications before charge-offs
Charge-offs
Recorded Investment in
Modifications
Specific Valuation
Allowance
Net Investment in
Modifications
Specific Valuation
Allowance as a % of Modifications
Total Expected
Losses(22)
(Dollars in millions) One- to four-family $ 225 $ (46 ) $ 179 $ (12
) $ 167 7 % 25 % Home equity 301 (128 ) 173
(56 ) 117 32 % 61 % Total $ 526 $ (174 ) $ 352 $ (68
) $ 284 19 % 46 %
As of March 31, 2015
Recorded Investment in
Modifications before charge-offs
Charge-offs
Recorded Investment in
Modifications
Specific Valuation
Allowance
Net Investment in
Modifications
Specific Valuation
Allowance as a % of Modifications
Total Expected
Losses(22)
(Dollars in millions) One- to four-family $ 225 $ (45 ) $ 180 $ (11
) $ 169 6 % 24 % Home equity 312 (132 ) 180
(62 ) 118 35 % 62 % Total $ 537 $ (177 ) $ 360 $ (73
) $ 287 20 % 46 %
As of June 30, 2014
Recorded Investment in
Modifications before charge-offs
Charge-offs
Recorded Investment in
Modifications
Specific Valuation
Allowance
Net Investment in
Modifications
Specific Valuation
Allowance as a % of Modifications
Total Expected
Losses(22)
(Dollars in millions) One- to four-family $ 232 $ (45 ) $ 187 $ (14
) $ 173 7 % 25 % Home equity 322 (145 ) 177
(62 ) 115 35 % 64 % Total $ 554 $ (190 ) $ 364 $ (76
) $ 288 21 % 48 %
Average Enterprise Balance Sheet
Data
Three Months Ended June 30, 2015 Average
Operating Interest
Average Balance
Inc./Exp.
Yield/Cost Enterprise interest-earning assets: (In
millions) Loans(23) $ 5,864 $ 57 3.89 % Available-for-sale
securities 13,587 66 1.93 % Held-to-maturity securities 12,366 86
2.78 % Margin receivables 8,118 70 3.44 % Cash and equivalents
1,409 - 0.20 % Segregated cash 379 - 0.15 % Securities borrowed and
other 608 31 20.41 % Total enterprise
interest-earning assets $ 42,331 310 2.93 %
Enterprise
interest-bearing liabilities: Deposits $ 26,285 $ 1 0.01 %
Customer payables 6,576 1 0.08 % Securities sold under agreements
to repurchase(24) 3,642 25 2.77 % FHLB advances and other
borrowings(24) 1,306 16 4.65 % Securities loaned and other
1,828 - 0.10 % Total enterprise interest-bearing liabilities
$ 39,637 43 0.43 %
Enterprise net interest
income/spread(11) $ 267 2.50 %
Three
Months Ended March 31, 2015 Average
Operating Interest
Average Balance Inc./Exp. Yield/Cost
Enterprise interest-earning assets: (In millions) Loans(23)
$ 6,204 $ 62 4.00 % Available-for-sale securities 12,341 66 2.15 %
Held-to-maturity securities 12,279 88 2.86 % Margin receivables
7,888 68 3.49 % Cash and equivalents 1,408 1 0.18 % Segregated cash
309 - 0.08 % Securities borrowed and other 657 31
19.13 % Total enterprise interest-earning assets $ 41,086
316 3.09 %
Enterprise interest-bearing liabilities: Deposits
$ 25,051 $ 2 0.03 % Customer payables 6,388 1 0.08 % Securities
sold under agreements to repurchase(24) 3,729 26 2.77 % FHLB
advances and other borrowings(24) 1,301 15 4.65 % Securities loaned
and other 1,759 1 0.13 % Total enterprise
interest-bearing liabilities $ 38,228 45 0.47 %
Enterprise net interest income/spread(11) $ 271 2.62
%
Three Months Ended June 30, 2014
Average
Operating Interest
Average Balance Inc./Exp. Yield/Cost
Enterprise interest-earning assets: (In millions) Loans(23)
$ 7,416 $ 77 4.18 % Available-for-sale securities 12,742 72 2.28 %
Held-to-maturity securities 11,298 82 2.91 % Margin receivables
7,330 65 3.56 % Cash and equivalents 1,310 1 0.15 % Segregated cash
799 1 0.10 % Securities borrowed and other 500 21
16.43 % Total enterprise interest-earning assets $ 41,395
319 3.08 %
Enterprise interest-bearing liabilities: Deposits
$ 25,239 $ 2 0.03 % Customer payables 6,250 3 0.16 % Securities
sold under agreements to repurchase(24) 4,010 30 2.98 % FHLB
advances and other borrowings(24) 1,285 17 5.24 % Securities loaned
and other 1,506 - 0.03 % Total enterprise
interest-bearing liabilities $ 38,290 52 0.53 %
Enterprise net interest income/spread(11) $ 267 2.55
%
Explanation of Non-GAAP Measures and Certain Metrics
Management believes that net income and EPS excluding the income
tax benefit resulting from the effective settlement of uncertain
tax positions related to the Company’s 2007, 2009, and 2010 federal
tax returns and loss on the early extinguishment of corporate debt,
corporate cash, tangible book value per share, EBITDA, interest
coverage, E*TRADE Bank Tier 1 common ratio and E*TRADE Financial
capital ratios calculated prior to Basel III becoming effective for
the Company on January 1, 2015 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 the
Company’s current performance, prospects and valuation. Management
uses non-GAAP information internally to evaluate operating
performance and in formulating the budget for future periods.
Net Income and EPS Excluding Income Tax Benefit and Loss on
Early Extinguishment of Corporate Debt
Management believes that excluding the income tax benefit
resulting from the effective settlement of uncertain tax positions
related to the IRS examination of the Company’s 2007, 2009, and
2010 federal tax returns and loss on the early extinguishment of
corporate debt from net income and EPS provides useful additional
measures of the Company’s ongoing operating performance because the
charge is not directly related to our performance. See endnote (1)
for a reconciliation of this non-GAAP measure to the comparable
GAAP measure.
Corporate Cash
Corporate cash represents cash held at the parent company as
well as cash held in certain subsidiaries that can distribute cash
to the parent company without any regulatory approval or
notification. 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
regulated subsidiaries. See endnote (3) for a reconciliation of
this non-GAAP measure to the comparable GAAP measure.
Tangible Book Value per Share
Tangible book value per share represents shareholders’ equity
less goodwill (net of related deferred tax liability) and other
intangible assets divided by common stock outstanding. The Company
believes that tangible book value per share is a measure of the
Company’s capital strength. See endnote (10) for a reconciliation
of this non-GAAP measure to the comparable GAAP measure.
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 the
Company’s performance by excluding certain non-cash charges and
expenses that are not directly related to the performance of the
business. See the table entitled “Key Performance Metrics” for a
reconciliation of this non-GAAP measure to the comparable GAAP
measure.
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 the Company’s ability to
continue to meet interest obligations and liquidity needs. See
endnote (12) for a calculation of this non-GAAP measure on a GAAP
basis.
E*TRADE Bank Tier 1 Common Ratio and E*TRADE Financial
Capital Ratios
Prior to Basel III becoming effective for the Company on January
1, 2015, E*TRADE Financial capital ratios, including Tier 1
leverage, Tier 1 risk-based capital and total risk-based capital
ratios, were based on the Federal Reserve regulatory minimum
well-capitalized threshold. E*TRADE Bank’s and E*TRADE Financial’s
Tier 1 common ratios were defined as the Tier 1 capital less
elements of Tier 1 capital that are not in the form of common
equity, such as trust preferred securities, divided by total
risk-weighted assets. Management believes these capital ratios are
an important measure of E*TRADE Bank’s and the Company’s capital
strength. See endnotes (5) and (6) for reconciliations of these
non-GAAP measures to the comparable GAAP measures.
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 substitutes for, or superior to,
net income, 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 the Company’s 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) The following table provides a reconciliation of net income
and EPS after adjusting for the income tax benefit associated with
the effective settlement of uncertain tax positions related to our
2007, 2009, and 2010 federal tax returns and the charge related to
early extinguishment of corporate debt to GAAP net income and EPS
(dollars in millions, except for per share amounts):
Q2 2015 Q1 2015
Amount Diluted EPS Amount
Diluted EPS Net income $ 292 $ 0.99 $ 40 $ 0.14 Add
back impact of corporate debt reduction and refinance: Loss on
early extinguishment of corporate debt - - 73 0.25 Income tax
related to loss on early extinguishment of corporate debt -
- (28 ) (0.10 ) Net of tax - -
45 0.15 Deduct income tax benefit related to effectively settled
IRS examination (220 ) (0.74 ) -
- Adjusted net income $ 72 $ 0.25 $ 85
$ 0.29
(2) Net new brokerage accounts and end of period brokerage
accounts include the closure of 3,484 accounts related to the
escheatment of unclaimed property and 3,325 related to the shutdown
of the Company’s global trading platform.
(3) The following table provides a reconciliation of corporate
cash to GAAP consolidated cash and equivalents at period end
(dollars in millions):
Q2 2015 Q1 2015
Q2 2014 Corporate cash $ 406 $ 258 $ 570 Bank
cash 1,330 606 1,215 E*TRADE Securities cash(a) 111 $ 134 N/A
International brokerage and other cash 25 27
22 Total consolidated cash and equivalents $ 1,872
$ 1,025 $ 1,807 (a) Prior to the
E*TRADE Securities move out from under E*TRADE Bank in February
2015, E*TRADE Securities' cash was included in the "Bank cash" line
item.
(4) Beginning in the first quarter of 2015, the Company
reclassified the revenue earned on customer assets held by third
parties from operating interest income to fees and service charges.
Prior periods have been reclassified to conform to the current
period presentation.
(5) E*TRADE Bank’s Tier 1 leverage, Tier 1 risk-based capital,
total risk-based capital and Common Equity Tier 1 ratios are
preliminary for the current period. Prior to Basel III becoming
effective for E*TRADE Bank on January 1, 2015, E*TRADE Bank’s Tier
1 common ratio was a non-GAAP measure that management believes is
an important measure of capital strength. Common Equity Tier 1
capital under Basel III replaced Tier 1 common capital. E*TRADE
Bank’s capital ratios are calculated as follows (dollars in
millions):
Q2 2015 Q1 2015
Q2 2014 E*TRADE Bank shareholder's equity(a) $ 4,146
$ 4,165 $ 5,974 DEDUCT: Losses in OCI on AFS debt securities
and cash flow hedges, net of tax (258 ) (216 ) (300 ) Goodwill
& other intangible assets, net of deferred tax liabilities 38
38 1,500 Disallowed deferred tax assets 82
66 450 E*TRADE Bank Tier 1
capital/Common Equity Tier 1 capital(b) 4,284
4,277 4,324 ADD: Allowable
allowance for loan losses 123 130
221 E*TRADE Bank total capital $ 4,407
$ 4,407 $ 4,545 E*TRADE
Bank average/total assets(a)(c) $ 44,021 $ 43,622 $ 44,517 DEDUCT:
Disallowed deferred tax assets 82 66 450 Goodwill & other
intangible assets, net of deferred tax liabilities 38 38 1,500
Other - - (26 )
E*TRADE Bank adjusted average/total assets for leverage capital
purposes $ 43,901 $ 43,518 $ 42,593
E*TRADE Bank total risk-weighted assets(a)(d) $ 9,444
$ 10,095 $ 17,502
E*TRADE Bank Tier 1 leverage ratio (Tier 1
capital / Adjusted total assets forleverage capital purposes)
9.8 % 9.8 % 10.2 % E*TRADE Bank Tier 1 capital / Total
risk-weighted assets 45.4 % 42.4 % 24.7 % E*TRADE Bank total
capital / Total risk-weighted assets 46.7 % 43.7 % 26.0 % E*TRADE
Bank Common Equity Tier 1 capital / Total risk-weighted assets 45.4
% 42.4 % 24.7 % (a) Amounts presented for
E*TRADE Bank exclude E*TRADE Securities as of February 1, 2015. We
recently received regulatory approval to move both E*TRADE Clearing
and E*TRADE Securities out from under E*TRADE Bank. E*TRADE
Securities was moved from under E*TRADE Bank effective February 1,
2015 and E*TRADE Clearing was moved from under E*TRADE Bank as of
July 1, 2015. (b) Common Equity Tier 1 capital under Basel III
replaced Tier 1 common capital. (c) As of June 30, 2015 and March
31, 2015, E*TRADE Bank’s Tier 1 Leverage ratio was calculated using
average total assets. Prior to Basel III becoming effective for
E*TRADE Bank, E*TRADE Bank’s Tier 1 Leverage ratio was calculated
using end of period total assets. (d) Under the regulatory
guidelines for risk-based capital, on-balance sheet assets and
credit equivalent amounts of derivatives and off-balance sheet
items are assigned to one of several broad risk categories
according to the obligor or, if relevant, the guarantor or the
nature of any collateral. The aggregate dollar amount in each risk
category is then multiplied by the risk weight associated with that
category. The resulting weighted values from each of the risk
categories are aggregated for determining total risk-weighted
assets.
(6) E*TRADE Financial’s Tier 1 leverage, Tier 1 risk-based
capital, total risk-based capital and Common Equity Tier 1 ratios
are preliminary for the current period. Prior to Basel III becoming
effective for E*TRADE Financial on January 1, 2015, E*TRADE
Financial’s capital ratios were non-GAAP measures and based on the
Federal Reserve’s well-capitalized requirements as management
believes these ratios are an important measure of the Company's
capital strength and managed capital against ratios then applicable
to bank holding companies in preparation for the application of
these requirements. Common Equity Tier 1 capital under Basel III
replaced Tier 1 common capital. E*TRADE Financial’s capital ratios
are calculated as follows (dollars in millions):
Q2 2015 Q1 2015
Q2 2014 E*TRADE Financial shareholders' equity $ 5,714
$ 5,453 $ 5,188 DEDUCT: Losses in OCI on AFS debt
securities and cash flow hedges, net of tax (259 ) (216 ) (300 )
Goodwill & other intangible assets, net of deferred tax
liabilities 1,441 1,451 1,626 Disallowed deferred tax assets 827
645 1,097 Other(a) (108 ) (108 )
- E*TRADE Financial Common Equity Tier 1 capital(b)
3,813 3,681 2,765
ADD: Qualifying restricted core capital elements (TRUPs)(a)
- - 433 E*TRADE
Financial Tier 1 capital 3,813 3,681
3,198 ADD: Allowable allowance for loan
losses 136 140 221 Non-qualifying capital instruments subject to
phase-out (TRUPs)(a) 325 325
- E*TRADE Financial total capital $ 4,274
$ 4,146 $ 3,419 E*TRADE
Financial average total assets $ 47,133 $ 45,931 $ 45,598 DEDUCT:
Goodwill & other intangible assets, net of deferred tax
liabilities 1,441 1,451 1,626 Disallowed deferred tax assets 827
645 1,097 Other(a) (108 ) (108 )
- E*TRADE Financial adjusted average total assets for
leverage capital purposes $ 44,973 $ 43,943
$ 42,875 E*TRADE Financial total risk-weighted
assets(c) $ 10,103 $ 10,523 $ 17,510
E*TRADE Financial Tier 1 leverage ratio
(Tier 1 capital / Adjusted average totalassets for leverage capital
purposes)
8.5 % 8.4 % 7.5 % E*TRADE Financial Tier 1 capital / Total
risk-weighted assets 37.7 % 35.0 % 18.3 % E*TRADE Financial total
capital / Total risk-weighted assets 42.3 % 39.4 % 19.5 % E*TRADE
Financial Common Equity Tier 1 capital / Total risk-weighted assets
37.7 % 35.0 % 15.8 % (a) As a result of
applying the transition provisions under Basel III, the Company
included 25% of the TRUPs in the calculation of E*TRADE Financial’s
Tier 1 capital and 75% of the TRUPs in the calculation of E*TRADE
Financial’s total capital. Prior to Basel III becoming effective
for E*TRADE Financial, the Company included 100% of the TRUPs in
E*TRADE Financial’s Tier 1 capital due to the regulatory agencies’
delay in the implementation of the TRUPs phase-out until January 1,
2015. (b) Common Equity Tier 1 capital under Basel III replaced
Tier 1 common capital. (c) Under the regulatory guidelines for
risk-based capital, on-balance sheet assets and credit equivalent
amounts of derivatives and off-balance sheet items are assigned to
one of several broad risk categories according to the obligor or,
if relevant, the guarantor or the nature of any collateral. The
aggregate dollar amount in each risk category is then multiplied by
the risk weight associated with that category. The resulting
weighted values from each of the risk categories are aggregated for
determining total risk-weighted assets.
(7) Reflects elimination of transactions between Trading and
Investing and Balance Sheet Management segments, which includes
deposit and intercompany transfer pricing arrangements.
(8) Amounts and percentages may not calculate due to
rounding.
(9) Operating margin is the percentage of net revenue that
results in income before other income (expense) and income taxes.
The percentage is calculated by dividing income before other income
(expense) and income taxes by total net revenue.
(10) The following tables provide a reconciliation of GAAP book
value and book value per share to non-GAAP tangible book value and
tangible book value per share at period end (dollars in millions,
except per share amounts):
Q2 2015 Q1 2015
Q2 2014 Book value $ 5,714 $ 5,453 $ 5,188
Less: Goodwill and other intangibles, net (1,976 ) (1,981 ) (1,997
) Less: Deferred tax liability related to goodwill 414
407 371 Tangible
book value $ 4,152 $ 3,879 $ 3,562
Q2 2015 Q1 2015
Q2 2014 Book value per share $ 19.69 $ 18.81 $ 17.97 Less:
Goodwill and other intangibles, net per share (6.81 ) (6.83 ) (6.92
) Less: Deferred tax liability related to goodwill per share
1.43 1.40 1.29
Tangible book value per share $ 14.31 $ 13.38
$ 12.34
(11) 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 assets held by third parties.
(12) Interest coverage represents the ratio of the Company’s
EBITDA to its corporate interest expense. The interest coverage
ratio calculated based on the Company’s net income to its corporate
interest expense was 19.5, 1.9, and 2.4 for the three months ended
June 30, 2015, March 31, 2015, and June 30, 2014, respectively.
(13) E*TRADE Bank net income is calculated as follows (dollars
in millions):
Q2 2015 Q1 2015
Q2 2014 Total net revenue $ 219 $ 296 $ 426
Provision for loan losses 3 5 12 Total operating expenses 82 138
254 Other income (expense) (2 ) (1 )
(1 ) Income before income taxes 132 152 159 Income tax
expense 18 60 53 Net
income $ 114 $ 92 $ 106
(14) The brokerage account attrition rate is calculated by
dividing attriting brokerage accounts, which are gross new
brokerage accounts less net new brokerage accounts, by total
brokerage accounts at the previous period end. This rate is
presented on an annualized basis.
(15) Customer assets held by third parties are held outside
E*TRADE Financial and include money market funds and sweep deposit
accounts at unaffiliated financial institutions. Customer assets
held by third parties are not reflected in the Company’s
consolidated balance sheet and are not immediately available for
liquidity purposes. However, we maintain the ability to bring the
majority of these customer assets back on-balance sheet with
appropriate notification to the third party financial institutions
and customer consent, as appropriate. The following table provides
details of customer assets held by third parties (dollars in
billions):
Q2 2015 Q1 2015
Q2 2014 Money market fund $ 7.7 $ 7.6 $ 6.3
Sweep deposits at unaffiliated financial institutions 3.3
3.6 4.5 Subtotal 11.0
11.2 10.8 Municipal funds and other 3.6
3.7 3.5 Total customer assets held by
third parties $ 14.6 $ 14.9 $ 14.3
(16) 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.
(17) Delinquent loans include charge-offs for loans that are in
bankruptcy or are 180 days past due which have been written down to
their expected recovery value. The following table shows the total
amount of charge-offs on loans that are still held by the Company
at the end of the periods presented (dollars in millions):
Q2 2015 Q1 2015
Q2 2014 One- to four-family $ 122 $ 123 $ 137
Home equity 243 250 274 Total
charge-offs $ 365 $ 373 $ 411
(18) Includes unpaid principal balances and premiums
(discounts).
(19) The TDR loan performance detail is a subset of the
Company’s total loan performance. TDRs include loan modifications
performed under the Company’s modification programs. Beginning in
Q412, loans that had been charged-off due to bankruptcy
notification were also considered TDRs.
(20) Beginning on January 1, 2015, regulatory capital for
E*TRADE Bank and E*TRADE Financial was calculated under the Basel
III Standardized Approach, subject to transition provisions.
(21) Modifications are a subset of TDRs, and represent loan
modifications performed under the Company’s modification programs.
They do not include loans that have been charged-off due to the
Company receiving notification of bankruptcy if the loan has not
been modified previously by the Company. The following table shows
the reconciliation of total TDRs that had a modification and those
which the Company received a notification of bankruptcy (dollars in
millions):
Q2 2015 Q1 2015
Q2 2014 Modified loans $ 352 $ 360 $ 364
Bankruptcy loans 168 174 181
Total TDRs $ 520 $ 534 $ 545
(22) The total expected losses on modifications includes both
the previously recorded charge-offs and the specific valuation
allowance.
(23) Includes loans held-for-sale and excludes loans to
customers on margin.
(24) Scheduled balances for FHLB advances and securities sold
under agreements to repurchase are shown below (dollars in
millions):
Date Balance 12/31/2015
$ 4,205 12/31/2016 $ 3,510 12/31/2017 $ 2,655
12/31/2018 $ 1,940 12/31/2019 $ 1,445 12/31/2020 $ 1,150 12/31/2021
$ 1,050 12/31/2022 $ -
View source
version on businesswire.com: http://www.businesswire.com/news/home/20150723006262/en/
E*TRADE Media
RelationsThayer Fox,
646-521-4418thayer.fox@etrade.comorE*TRADE
Investor RelationsBrett Goodman,
646-521-4406brett.goodman@etrade.com
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