E*TRADE Financial Corporation (NASDAQ: ETFC):
First Quarter Results
- Net income of $247 million; net income
available to common shareholders of $235 million
- Diluted earnings per common share of
$0.88
- Total net revenue of $708 million
- Operating margin of 47 percent;
adjusted operating margin of 44 percent(1)
- Average interest-earning assets of
$59.8 billion; net interest margin of 297 basis points
- Daily Average Revenue Trades (DARTs) of
309,000, a Company record(2), including derivative DARTs of 98,000,
a Company record(2)
- Customer margin balances of $10.5
billion, a Company record(2)
- Net new brokerage accounts of
60,000
- Net new brokerage assets of $5.3
billion, a Company record(2); end of period total customer assets
of $392.8 billion
- Managed products of $5.6 billion
- Repurchased 2.7 million shares at an
average price of $52.12, bringing total utilization under the
Company's $1 billion program to $502 million
E*TRADE Financial Corporation (NASDAQ: ETFC) today announced
results for its first quarter ended March 31, 2018, reporting
net income of $247 million, or diluted earnings per common share of
$0.88 and total net revenue of $708 million. Operating margin for
the quarter was 47 percent and adjusted operating margin was 44
percent(1).
“This was yet another quarter defined by meaningful progress in
the business and excellent financial results, as we produced the
strongest quarterly revenues and adjusted operating margin in
Company history.” said Karl Roessner, Chief Executive Officer.
“Amid volatility’s return to the market, our customers fully
engaged, setting records across trading, margin balances, net asset
flows, and net buying, and our teams and systems ably managed the
significant increase in activity. Meanwhile, we remained steadfast
in our drive to innovate—rolling out a series of enhancements to
our trading tools, corporate services platform, and retail site.
With our continued strong results, and the team’s determination to
win, we raise the bar on our own performance, and remain focused on
delivering an exceptional experience for our customers and driving
value for our shareholders.”
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) 753 4387 while
international participants should dial +1 (212) 231 2937. 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 brokerage and banking products and services to
retail customers. Securities products and services are offered by
E*TRADE Securities LLC (Member FINRA/SIPC). Commodity futures and
options on futures products and services are offered by E*TRADE
Futures LLC (Member NFA). Managed Account Solutions are offered
through E*TRADE Capital Management, LLC, a Registered Investment
Adviser. Bank products and services are offered by E*TRADE Bank,
and RIA custody solutions are offered by E*TRADE Savings Bank, both
of which are national federal savings banks (Members
FDIC). More information is available at www.etrade.com.
ETFC-E
Important Notices
E*TRADE Financial, E*TRADE, the E*TRADE logo, and OptionsHouse
are trademarks or registered trademarks of E*TRADE Financial
Corporation.
Forward-Looking Statements
The statements contained in this press release that are forward
looking, including statements regarding the Company's ability to
improve its financial performance, deliver quality services to
customers, and drive value for shareholders, are “forward-looking
statements” within the meaning of the federal securities laws, 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: risks related to the proposed transaction with Capital
One Financial Corporation, including that the closing of the
transaction may not occur or may be delayed and that the actual
aggregate consideration paid in connection with the proposed
transaction with Capital One Financial Corporation is still subject
to final determination; macro trends of the economy in general;
market volatility and its impact on trading volumes; fluctuations
in interest rates; the ability to attract and retain customers and
develop new products and services; increased competition; potential
system disruptions and security breaches; increased restrictions
resulting from financial regulatory reform or changes in the
policies of our regulators; adverse developments in litigation or
regulatory matters; the timing and duration of, and the amount of
shares repurchased and amount of cash expended in connection with,
the share repurchase program; and the other factors set forth in
our annual, quarterly, and current reports on Form 10-K, Form 10-Q,
and Form 8-K previously filed 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, except
as required by law.
© 2018 E*TRADE Financial Corporation. All rights reserved.
E*TRADE FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statement of Income (In millions, except
share data and per share amounts) (Unaudited)
Three Months Ended March 31,
December 31, March 31, 2018 2017
2017 Revenue: Interest income $ 468 $ 439 $ 341 Interest
expense (23 ) (20 ) (22 ) Net interest income(3) 445 419
319 Commissions 137 109 127 Fees and service charges
105 93 86 Gains on securities and other, net(3) 10 5 10 Other
revenue 11 11 11 Total non-interest income 263
218 234 Total net revenue 708 637
553 Provision (benefit) for loan losses (21 ) (26 )
(14 ) Non-interest expense: Compensation and benefits 152 138 136
Advertising and market development 60 43 43 Clearing and servicing
36 30 32 Professional services 22 28 22 Occupancy and equipment 30
32 27 Communications 31 31 25 Depreciation and amortization 22 22
20 FDIC insurance premiums 9 7 8 Amortization of other intangibles
10 9 9 Restructuring and acquisition-related activities — 3 4 Other
non-interest expenses 23 21 16 Total
non-interest expense 395 364 342 Income before
income tax expense 334 299 225 Income tax expense 87 170
80 Net income $ 247 $ 129 $ 145 Preferred stock
dividends 12 — 13 Net income available to
common shareholders $ 235 $ 129 $ 132
Basic earnings per common share $ 0.88 $ 0.48 $ 0.48 Diluted
earnings per common share $ 0.88 $ 0.48 $ 0.48 Shares used in
computation of per common share data: Basic (in thousands) 266,558
269,111 274,876 Diluted (in thousands) 267,699 270,347 276,277
E*TRADE FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheet (In millions, except share
data) (Unaudited)
March 31, December 31, March 31,
2018 2017 2017 ASSETS Cash and
equivalents $ 498 $ 931 $ 998
Cash required to be segregated under
federal or otherregulations
472 872 1,876 Available-for-sale securities 24,835 20,679 17,769
Held-to-maturity securities 20,657 23,839 19,191 Margin receivables
10,515 9,071 6,906 Loans receivable, net 2,506 2,654 3,288
Receivables from brokers, dealers and
clearingorganizations
735 1,178 1,410 Property and equipment, net 251 253 239 Goodwill
2,370 2,370 2,370 Other intangibles, net 275 284 312 Other
assets(3) 1,073 1,234 1,520 Total assets $
64,187 $ 63,365 $ 55,879
LIABILITIES
AND SHAREHOLDERS' EQUITY Liabilities: Deposits $ 42,902
$ 42,742 $ 37,384 Customer payables 8,947 9,449 8,926 Payables to
brokers, dealers and clearing organizations 2,892 1,542 1,288 Other
borrowings 910 910 409 Corporate debt 992 991 991 Other liabilities
655 800 437 Total liabilities 57,298
56,434 49,435
Shareholders' equity:
Preferred stock, $0.01 par value; shares
authorized:1,000,000; shares issued and outstanding at March
31,2018: 403,000
689 689 394
Common stock, $0.01 par value; shares
authorized:400,000,000; shares issued and outstanding at March
31,2018: 264,792,847
3 3 3 Additional paid-in-capital 6,434 6,582 6,919 Accumulated
deficit (61 ) (317 ) (774 ) Accumulated other comprehensive loss
(176 ) (26 ) (98 ) Total shareholders' equity 6,889 6,931
6,444 Total liabilities and shareholders' equity $
64,187 $ 63,365 $ 55,879
Key
Performance Metrics(4)
Corporate
Qtrended3/31/18
Qtrended12/31/17
Qtr ended3/31/18 vs.
12/31/17
Qtrended3/31/17
Qtr ended3/31/18 vs.
3/31/17
Operating margin %(1) 47 % 47 % —% 41% 6% Adjusted operating
margin %(1) 44 % 43 % 1% 38% 6% Employees 3,768 3,607 4%
3,629 4% Consultants and other 136 107 27% 114 19%
Total headcount 3,904 3,714 5% 3,743 4% Common equity book
value per share(5) $ 23.41 $ 23.39 —% $ 22.00 6% Tangible common
equity book value per share(5) $ 15.03 $ 14.96 —% $ 14.36 5%
Cash and equivalents ($MM) $ 498 $ 931 (47)% $ 998 (50)% Corporate
cash ($MM)(6) $ 439 $ 541 (19)% $ 417 5% Net interest margin
(basis points) 297 292 5 263 34 Interest-earning assets, average
($MM) $ 59,837 $ 57,357 4% $ 48,654 23%
Customer
Activity
Qtrended3/31/18
Qtrended12/31/17
Qtr ended3/31/18 vs.
12/31/17
Qtrended3/31/17
Qtr ended3/31/18 vs.
3/31/17
Trading days 61.0 62.5 N.M. 62.0 N.M. DARTs 309,469
235,941 31% 207,221 49% Derivative DARTs 97,658 69,448 41% 59,078
65% Derivative DARTs % 32 % 29 % 3% 29% 3% Total trades (MM)
18.9 14.7 29% 12.8 48% Average commission per trade $ 7.27 $ 7.41
(2)% $ 9.87 (26)%
Key Performance
Metrics(4)
Customer
Activity
Qtr ended3/31/18
Qtr ended12/31/17
Qtr
ended3/31/18vs.12/31/17
Qtr ended3/31/17
Qtr
ended3/31/18vs.3/31/17
Gross new brokerage accounts 161,042 133,031 21% 137,854 17%
Gross new stock plan accounts 93,690 65,004 44% 57,919 62% Gross
new banking accounts 1,179 924 28% 880 34% Closed accounts (160,041
) (140,920 ) 14% (136,666 ) 17% Net new accounts 95,870 58,039 65%
59,987 60% Net new brokerage accounts 59,685 46,195 29%
58,215 3% Net new stock plan accounts 39,953 17,130 133% 5,478 N.M.
Net new banking accounts (3,768 ) (5,286 ) 29% (3,706 ) (2)% Net
new accounts 95,870 58,039 65% 59,987 60% End of period
brokerage accounts 3,694,594 3,634,909 2% 3,521,218 5% End of
period stock plan accounts 1,532,329 1,492,376 3% 1,461,538 5% End
of period banking accounts 295,081 298,849 (1)%
312,967 (6)% End of period total accounts 5,522,004
5,426,134 2% 5,295,723 4%
Annualized net new brokerage accountgrowth
rate
6.6 % 5.1 % 1.5% 6.7 % (0.1)% Customer margin balances(7)
($B) $ 10.5 $ 9.1 15% $ 7.3 44%
Customer
Assets($B)
Security holdings $ 296.0 $ 287.3 3% $ 243.8 21% Sweep deposits
38.0 37.7 1% 32.0 19% Customer cash held by third parties(8) 5.0
5.7 (12)% 12.6 (60)% Customer payables (cash) 8.9 9.5
(6)% 8.9 —% Brokerage customer assets 347.9 340.2
2% 297.3 17% Unexercised stock plan holdings (vested)
39.9 38.1 5% 33.0 21% Savings, checking and other banking assets
5.0 5.0 —% 5.4 (7)% Total customer assets $
392.8 $ 383.3 2% $ 335.7 17% Net new
brokerage assets(9) $ 5.3 $ 3.2 66% $ 4.2 26% Net new banking
assets(9) — — —% 0.1 (100)% Net new customer
assets $ 5.3 $ 3.2 66% $ 4.3 23%
Annualized net new brokerage asset
growthrate
6.3 % 3.9 % 2.4% 6.1 % 0.2% Brokerage related cash $ 51.9 $
52.9 (2)% $ 53.5 (3)% Other cash and deposits 5.0 5.0
—% 5.4 (7)% Total customer cash and deposits $ 56.9 $ 57.9
(2)% $ 58.9 (3)% Managed products $ 5.6 $ 5.4 4% $ 4.3 30%
Stock plan customer holdings (unvested) $ 95.3 $ 93.9 1% $ 82.7 15%
Customer net (buy) / sell activity $ (6.9 ) $ (2.3 ) N.M. $
(1.6 ) N.M.
Key Performance Metrics(4)
Loans
Qtr ended3/31/18
Qtr ended12/31/17
Qtr
ended3/31/18vs.12/31/17
Qtr ended3/31/17
Qtr
ended3/31/18vs.3/31/17
Loans receivable
($MM)
One- to four-family $ 1,327 $ 1,417 $ (90 ) $ 1,785 $ (458 ) Home
equity 991 1,051 (60 ) 1,275 (284 ) Consumer and other 188
186 2 228 (40 ) Loans receivable, net $ 2,506
$ 2,654 $ (148 ) $ 3,288 $ (782 ) Loan
servicing expense $ 5 6 (1 ) 6 (1 )
Loan performance
detail ($MM)
Current $ 2,335 $ 2,479 $ (144 ) $ 3,190 $ (855 ) 30-89 days
delinquent 93 98 (5 ) 131 (38 ) 90-179 days delinquent 33 37 (4 )
46 (13 ) 180+ days delinquent 103 114 (11 ) 134
(31 ) Total delinquent loans 229 249 (20 ) 311
(82 ) Gross loans receivable(10) $ 2,564 $ 2,728
$ (164 ) $ 3,501 $ (937 )
Activity
in Allowance for Loan Losses ($MM)
Three Months Ended March 31, 2018
One- to Four-Family
Home Equity
Consumerand Other
Total Allowance for loan losses, ending 12/31/17 $ 24 $ 46 $
4 $ 74 Provision (benefit) for loan losses (5 ) (16 ) — (21 )
(Charge-offs) recoveries, net 1 5 (1 ) 5
Allowance for loan losses, ending 3/31/18 $ 20 $ 35 $
3 $ 58
Three Months Ended December 31,
2017
One- to Four-Family
Home Equity
Consumerand Other
Total Allowance for loan losses, ending 9/30/17 $ 21 $ 69 $
4 $ 94 Provision (benefit) for loan losses 1 (28 ) 1 (26 )
(Charge-offs) recoveries, net 2 5 (1 ) 6
Allowance for loan losses, ending 12/31/17 $ 24 $ 46
$ 4 $ 74
Three Months Ended March 31,
2017
One- to Four-Family
Home Equity
Consumerand Other
Total Allowance for loan losses, ending 12/31/16 $ 45 $ 171
$ 5 $ 221 Provision (benefit) for loan losses — (15 ) 1 (14 )
(Charge-offs) recoveries, net 1 6 (1 ) 6
Allowance for loan losses, ending 3/31/17 $ 46 $ 162
$ 5 $ 213
Capital
Qtr ended3/31/18
Qtr ended12/31/17
Qtr ended3/31/18 vs.
12/31/17
Qtr ended3/31/17
Qtr ended3/31/18 vs.
3/31/17
E*TRADE
Financial
Tier 1 leverage ratio(11) 7.3% 7.4% (0.1)% 7.2% 0.1% Common Equity
Tier 1 capital ratio(11) 35.0% 33.9% 1.1% 33.0% 2.0% Tier 1
risk-based capital ratio(11) 41.4% 39.5% 1.9% 35.4% 6.0% Total
risk-based capital ratio(11) 45.7% 43.8% 1.9% 40.7% 5.0%
E*TRADE
Bank
Tier 1 leverage ratio(12) 7.6% 7.6% —% 8.1% (0.5)% Common Equity
Tier 1 capital ratio(12) 37.4% 35.7% 1.7% 35.0% 2.4% Tier 1
risk-based capital ratio(12) 37.4% 35.7% 1.7% 35.0% 2.4% Total
risk-based capital ratio(12) 38.0% 36.4% 1.6% 36.3% 1.7%
Average Balance Sheet Data ($MM)
Three
Months Ended March 31, 2018 December
31, 2017 Average Interest
Average Average Interest
Average Balance Inc./Exp. Yield/Cost
Balance Inc./Exp. Yield/Cost Cash and
equivalents $ 803 $ 3 1.42% $ 911 $ 3 1.12%
Cash required to be segregated under
federal orother regulations
795 3 1.62% 957 3 1.32% Investment securities(a) 45,194 290 2.57%
42,976 270 2.51% Margin receivables 9,466 103 4.41% 8,724 92 4.22%
Loans 2,629 33 5.07% 2,821 36 5.15% Broker-related receivables and
other 950 4 1.55% 968 1 0.45% Subtotal interest-earning
assets 59,837 436 2.92% 57,357 405 2.82% Other interest revenue(b)
— 32 — 34 Total interest-earning assets 59,837 468 3.14%
57,357 439 3.06% Total non-interest earning assets 4,787
4,686 Total assets $ 64,624 $ 62,043 Deposits $
43,178 $ 2 0.02% $ 42,039 $ 1 0.01% Customer payables 9,556 1 0.06%
9,334 1 0.06% Broker-related payables and other 1,566 1 0.20% 1,300
— 0.00% Other borrowings 932 7 3.12% 658 6 3.47% Corporate debt 991
9 3.62% 991 9 3.64% Subtotal interest-bearing liabilities
56,223 20 0.14% 54,322 17 0.13% Other interest expense(c) —
3 — 3 Total interest-bearing liabilities 56,223 23 0.17% 54,322 20
0.15% Total non-interest-bearing liabilities 1,329 1,051
Total liabilities 57,552 55,373 Total shareholders' equity 7,072
6,670 Total liabilities and shareholders' equity $ 64,624
$ 62,043
Excess interest earning assets over
interestbearing liabilities/ net interest income/ net
interestmargin
$ 3,614 $ 445 2.97% $ 3,035 $ 419 2.92% (a)
For the three months ended March 31, 2018, includes a $3
million net loss related to fair value hedging adjustments,
previously referred to as hedge ineffectiveness. Hedge
ineffectiveness for the prior periods continues to be reflected
within the gains on securities and other, net line item. (b)
Represents interest income on securities loaned. (c) Represents
interest expense on securities borrowed.
Three
Months Ended March 31, 2017 Average
Interest Average Balance
Inc./Exp. Yield/Cost Cash and equivalents $ 1,345 $ 2
0.64% Cash required to be segregated under federal or other
regulations 1,684 3 0.71% Investment securities 34,117 205 2.41%
Margin receivables 6,781 66 3.93% Loans 3,608 43 4.77%
Broker-related receivables and other 1,119 — 0.12% Subtotal
interest-earning assets 48,654 319 2.63% Other interest revenue(a)
— 22 Total interest-earning assets 48,654 341 2.81% Total
non-interest-earning assets 5,252 Total assets $ 53,906
Deposits $ 34,869 $ 1 0.01% Customer payables 8,686 1 0.06%
Broker-related payables and other 1,160 — 0.00% Other borrowings
492 5 3.85% Corporate debt 994 14 5.39% Subtotal interest-bearing
liabilities 46,201 21 0.18% Other interest expense(b) — 1 Total
interest-bearing liabilities 46,201 22 0.19% Total
non-interest-bearing liabilities 1,402 Total liabilities 47,603
Total shareholders' equity 6,303 Total liabilities and
shareholders' equity $ 53,906
Excess interest earning assets over
interest bearing liabilities/ net interestincome/ net interest
margin
$ 2,453 $ 319 2.63% (a) Represents interest
revenue on securities loaned. (b) Represents interest expense on
securities borrowed.
Fees and Service
Charges ($MM)
Three Months Ended March 31, 2018
December 31, 2017 March 31, 2017 Order flow revenue $
47 $ 37 $ 31 Money market funds and sweep deposits revenue(a) 17 21
22 Mutual fund service fees 11 10 9 Advisor management fees 11 10 8
Foreign exchange revenue 8 6 8 Reorganization fees 3 3 3 Other fees
and service charges 8 6 5 Total fees and service
charges $ 105 $ 93 $ 86 (a)
Includes revenue earned on average customer cash held by third
parties based on the federal funds rate or LIBOR plus a negotiated
spread or other contractual arrangements with the third party
institutions.
Explanation of Non-GAAP Measures
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 this non-GAAP information internally to evaluate operating
performance and in formulating the budget for future periods.
Management believes that the non-GAAP measures discussed below are
appropriate for evaluating the operating and liquidity performance
of the Company.
Adjusted Operating Margin
Adjusted operating margin is calculated by dividing adjusted
income before income taxes by net revenue. Adjusted income before
income taxes excludes the provision (benefit) for loan losses.
Management believes that excluding the provision (benefit) for loan
losses from operating margin provides a useful measure of the
Company's ongoing operating performance because management excludes
it when evaluating operating margin 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, not including bank and
brokerage 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 (6) for a reconciliation of this non-GAAP measure to
the comparable GAAP measure.
Tangible Common Equity Book Value per Share
Tangible common equity book value per share represents common
shareholders’ equity, which excludes preferred stock, less goodwill
and other intangible assets (net of related deferred tax
liabilities) divided by common stock outstanding. The Company
believes that tangible common equity book value per share is a
measure of the Company’s capital strength. See endnote (5) for a
reconciliation of this non-GAAP measure to the comparable GAAP
measure.
It is important to note that these non-GAAP measures may involve
judgment by management and should be considered in addition to, not
as substitutes for, or superior to, measures 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 Financial Condition
and Results of Operations” 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) Operating margin is the percentage of net revenue that
results in income before income taxes. The percentage is calculated
by dividing income before income taxes by total net revenue. The
following table provides a reconciliation of GAAP operating margin
percentage to non-GAAP adjusted operating margin percentage
(dollars in millions):
Q1 2018 Q4 2017 Q1 2017
Amount
OperatingMargin %
Amount
OperatingMargin %
Amount
OperatingMargin %
Income before income tax expense
andoperating margin
$ 334 47% $ 299 47% $ 225 41% Provision (benefit) for loan losses
(21 ) (26 ) (14 )
Adjusted income before income taxexpense
and adjusted operating margin
$ 313 44% $ 273 43% $ 211 38%
(2) Records based on the period during which metric has been
reported by the Company. Net new brokerage assets of $5.3 billion
in Q1 2018 is a record for the Company when compared to organic net
asset growth from prior quarters, excluding one-time inflows
related to past acquisitions. See endnote (9) for additional
information on net new brokerage assets.
(3) Beginning in the first quarter of 2018, the Company updated
the presentation of its consolidated financial statements as
follows:
- On the consolidated balance sheet,
reclassified deferred tax assets, net to other assets. Prior
periods have been reclassified to conform to current period
presentation. Deferred tax assets were $218 million, $251 million
and $653 million at March 31, 2018, December 31, 2017 and March 31,
2017, respectively.
- On the consolidated statement of
income, fair value hedging adjustments, previously referred to as
hedge ineffectiveness, are included within net interest income
beginning in the first quarter of 2018. Prior period amounts have
not been reclassified to conform to current period presentation and
continue to be reflected within gains on securities and other, net
for the comparative periods. Fair value hedging adjustments were
expenses of $3 million, $9 million and $1 million for the three
months ended March 31, 2018, December 31, 2017 and March 31, 2017,
respectively.
(4) Amounts and percentages may not recalculate due to rounding.
For percentage based metrics, the variance represents the current
period less the prior period.
(5) The following table provides a reconciliation of GAAP common
equity book value and common equity book value per share to
non-GAAP tangible common equity book value and tangible common
equity book value per share at period end (dollars in millions,
except per share amounts):
Q1 2018 Q4 2017 Q1 2017
Amount
PerShare
Amount
PerShare
Amount
PerShare
Common equity book value $ 6,200 $ 23.41 $ 6,242 $ 23.39 $ 6,050 $
22.00 Less: Goodwill and other intangibles, net (2,645 ) (2,654 )
(2,682 )
Add: Deferred tax liabilities related
togoodwill and other intangibles, net
426 404 580 Tangible
common equity book value $ 3,981 $ 15.03 $ 3,992 $
14.96 $ 3,948 $ 14.36
(6) The following table provides a reconciliation of GAAP
consolidated cash and equivalents to non-GAAP corporate cash at
period end (dollars in millions):
Q1 2018 Q4 2017 Q1 2017
Consolidated cash and equivalents $ 498 $ 931 $ 998 Less: Cash at
regulated subsidiaries(a) (59 ) (390 ) (581 ) Corporate cash $ 439
$ 541 $ 417 (a) Reported net of
corporate cash on deposit at E*TRADE Bank that is eliminated in
consolidation.
(7) Customer margin balances include the following (dollars in
billions):
Q1 2018 Q4 2017 Q1 2017
Margin receivables held on balance sheet $ 10.5 $ 9.1 $ 6.9
Customer margin balances held by a third party clearing firm — —
0.4 Total customer margin balances(a) $ 10.5 $ 9.1 $ 7.3
(a) Represents margin receivables held on the balance sheet
and customer margin balances held by a third party clearing firm.
The balances held by a third party were transferred to E*TRADE
Securities during the three months ended September 30, 2017 in
connection with the OptionsHouse integration.
(8) Customer cash held by third parties is held outside E*TRADE
Financial and includes money market funds and sweep deposit
accounts at unaffiliated financial institutions and customer cash
held by a third party clearing firm. Customer cash held by third
parties is not reflected in the Company’s consolidated balance
sheet and is not immediately available for liquidity purposes. The
following table provides details of customer cash held by third
parties (dollars in billions):
Q1 2018 Q4 2017 Q1 2017
Sweep deposits at unaffiliated financial institutions $ 3.4 $ 4.7 $
10.6 Customer cash held by a third party clearing firm(a) — — 1.7
Money market funds and other 1.6 1.0 0.3 Total customer cash held
by third parties $ 5.0 $ 5.7 $ 12.6 (a) During the three months
ended September 30, 2017, customer cash held by a third party
clearing firm was transferred to E*TRADE Securities in connection
with the integration of OptionsHouse.
(9) Net new brokerage assets are total inflows to all new and
existing brokerage customer accounts less total outflows from all
closed and existing brokerage customer accounts, excluding the
effects of market movements in the value of brokerage customer
assets. Net new banking assets are total inflows to all new and
existing banking customer accounts less total outflows from all
closed and existing banking 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) Includes unpaid principal balances and premiums
(discounts).
(11) E*TRADE Financial’s capital ratios are calculated as
follows and are preliminary for the current period (dollars in
millions):
Q1 2018 Q4 2017 Q1 2017
E*TRADE Financial shareholders' equity $ 6,889 $ 6,931 $ 6,444
DEDUCT: Preferred stock (689 ) (689 ) (394 )
E*TRADE Financial Common Equity Tier 1
capital before regulatoryadjustments
$ 6,200 $ 6,242 $ 6,050 ADD:
(Gains) losses in other comprehensive
income on available-for-sale debtsecurities, net of tax
176 26 98 DEDUCT: Goodwill and other intangible assets, net of
deferred tax liabilities (2,219 ) (2,191 ) (2,058 ) Disallowed
deferred tax assets (353 ) (304 ) (638 ) E*TRADE Financial Common
Equity Tier 1 capital $ 3,804 $ 3,773 $ 3,452
ADD: Preferred stock 689 689 394 DEDUCT: Disallowed deferred tax
assets — (76 ) (136 ) E*TRADE Financial Tier 1 capital $
4,493 $ 4,386 $ 3,710 ADD: Allowable allowance
for loan losses 58 74 135
Non-qualifying capital instruments subject
to phase-out (trust preferredsecurities)
414 414 414 E*TRADE Financial total capital $
4,965 $ 4,874 $ 4,259 E*TRADE Financial
average assets for leverage capital purposes $ 64,486 $ 62,095 $
54,032 DEDUCT: Goodwill and other intangible assets, net of
deferred tax liabilities (2,219 ) (2,191 ) (2,058 ) Disallowed
deferred tax assets (353 ) (380 ) (774 ) E*TRADE Financial adjusted
average assets for leverage capital purposes $ 61,914 $
59,524 $ 51,200 E*TRADE Financial total
risk-weighted assets(a) $ 10,856 $ 11,115 $ 10,466
E*TRADE Financial Tier 1 leverage ratio
(Tier 1 capital / Adjusted averageassets for leverage capital
purposes)
7.3 % 7.4 % 7.2 % E*TRADE Financial Common Equity Tier 1 capital /
Total risk-weighted assets 35.0 % 33.9 % 33.0 % E*TRADE Financial
Tier 1 capital / Total risk-weighted assets 41.4 % 39.5 % 35.4 %
E*TRADE Financial total capital / Total risk-weighted assets 45.7 %
43.8 % 40.7 % (a) 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.
(12) E*TRADE Bank’s capital ratios are calculated as follows and
are preliminary for the current period (dollars in millions):
Q1 2018 Q4 2017 Q1 2017
E*TRADE Bank shareholder's equity $ 3,721 $ 3,703 $ 3,291 ADD:
(Gains) losses in other comprehensive
income on available-for-sale debtsecurities, net of tax
176 26 98 DEDUCT: Goodwill and other intangible assets, net of
deferred tax liabilities (38 ) (38 ) (38 ) Disallowed deferred tax
assets (66 ) (71 ) (100 ) E*TRADE Bank Common Equity Tier 1 capital
/ Tier 1 capital $ 3,793 $ 3,620 $ 3,251 ADD:
Allowable allowance for loan losses 58 74 118
E*TRADE Bank total capital $ 3,851 $ 3,694 $ 3,369
E*TRADE Bank average assets for leverage capital
purposes $ 50,063 $ 47,992 $ 40,501 DEDUCT: Goodwill and other
intangible assets, net of deferred tax liabilities (38 ) (38 ) (38
) Disallowed deferred tax assets (66 ) (71 ) (100 ) E*TRADE Bank
adjusted average assets for leverage capital purposes $ 49,959
$ 47,883 $ 40,363 E*TRADE Bank total
risk-weighted assets(a) $ 10,133 $ 10,147 $ 9,280
E*TRADE Bank Tier 1 leverage ratio (Tier 1
capital / Adjusted average assetsfor leverage capital purposes)
7.6 % 7.6 % 8.1 % E*TRADE Bank Common Equity Tier 1 capital / Total
risk-weighted assets 37.4 % 35.7 % 35.0 % E*TRADE Bank Tier 1
capital / Total risk-weighted assets 37.4 % 35.7 % 35.0 % E*TRADE
Bank total capital / Total risk-weighted assets 38.0 % 36.4 % 36.3
% (a) 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.
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version on businesswire.com: https://www.businesswire.com/news/home/20180419006365/en/
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