E*TRADE FINANCIAL Corporation Announces First Quarter Results and Progress of 2008...

E*TRADE FINANCIAL Corporation Announces First Quarter Results and Progress of 2008 Turnaround Plan

First Quarter Results

-- Total Net Revenue of $316 million, including $234 million in
Provision for Loan Losses

-- Net Loss of $91.2 million, or $0.20 per share

-- Total Customer Cash and Deposits of $35 billion

-- Total Customer Assets of $168 billion

-- Total Daily Average Revenue Trades (DARTs) of 191,000

2008 Turnaround Plan Progress

Customer Metrics

-- Opened 305,000 gross new accounts, up 10 percent quarter over
quarter

-- Produced 62,000 net new accounts, up from 7,000 in the prior
quarter

-- Ended the quarter with a record 4.8 million total customer
accounts

-- Increased customer cash and deposit balances for the fourth
consecutive month

-- Stabilized customer asset flows and generated net inflows of
$300 million

Financial Progress

-- Increased excess Bank risk-based capital (excess to the
regulatory minimum well-capitalized threshold) to
approximately $695 million, up $260 million quarter over
quarter

-- Improved Bank tier-1 and risk-based capital ratios to 6.8
percent and 12.4 percent, respectively

-- Ended the quarter with $10.7 billion in excess FHLB borrowing
capacity

-- Completed $69 million in non-core asset sales

-- Reduced holding company debt by $60 million, including $25
million in debt-for-equity swaps
NEW YORK--(Business Wire)--
E*TRADE FINANCIAL Corporation (NASDAQ: ETFC) today announced
results for its first quarter ended March 31, 2008, reporting a net
loss of $91.2 million, or $0.20 per share, compared to a net loss of
$1.7 billion, or $3.98 per share, in the prior quarter and net income
of $169.4 million, or $0.39 per share a year ago.

The first quarter results included various noteworthy items
related to actions taken in conjunction with the execution of the
Company's Turnaround Plan and credit market-related losses. The
combination of these items on a net basis negatively impacted the
first quarter by approximately $35 million, or $0.05 per share, as
described below:

-- Provision expense of $234 million included an additional $9
million associated with a change in the timing of foreclosure
and bankruptcy-related charge-offs

-- Loss on loans and securities, net, of $9 million included $27
million of impairments on AAA-rated and AA-rated
collateralized mortgage obligations

-- Compensation and benefits of $129 million included $12 million
in severance related expenses

-- Facility restructuring and other exit activities were $10.5
million

-- Other expense of $17.5 million included a $24 million gain on
the sale of corporate aviation-related assets

First quarter customer engagement trends showed further
improvement over the prior quarter, demonstrating progress of the
Company's Turnaround Plan. "While we entered January with some
disruption to our customer base due to last year's challenges, we
exited the quarter with increased stability and the beginnings of a
return to growth," said Donald H. Layton, Chairman and Chief Executive
Officer, E*TRADE FINANCIAL Corporation. "The growth in new customer
relationships, even during a difficult environment, speaks to the
continued strength and appeal of the E*TRADE brand."

-- Net new customers increased 60,000 in the quarter, the largest
increase since the fourth quarter of 2005.

-- Total customer accounts grew 62,000 quarter over quarter to a
record 4.8 million.

-- Total Daily Average Revenue Trades declined 11 percent quarter
over quarter, but increased 12 percent over the year ago
period, reflecting market conditions as well as the residual
impact of the fourth-quarter disruption.

-- Total customer assets declined 11 percent quarter over
quarter, along with weakness in the overall market; however,
the Company did generate net new customer assets of $300
million - marking a return to growth.

Although the credit environment remained challenging in the first
quarter, long-term loan performance trends remained within the range
of management's previous expectations. "I am pleased to report that
our home equity portfolio - which is the largest source of potential
losses - is performing broadly in line with expectations. We are
therefore affirming our three-year cumulative loss forecast of $1
billion to $1.5 billion," continued Mr. Layton. "Although the
performance of our one- to four-family portfolio is somewhat outside
of our anticipated range, the expected losses in dollar terms are
comparatively low given our position in the underlying collateral."

The primary performance trends for each loan portfolio included:

Home Equity

-- Total delinquent loans increased $41 million, 65 percent below
the increase in the prior quarter. In addition, special
mention loans (30-89 days delinquent) declined $14 million
quarter over quarter, and have shown an absolute decline in
two of the last three months.

-- Net charge-offs totaled $149.4 million, including $21.7
million related to the change in charge-off policy associated
with a change in the timing of foreclosure and
bankruptcy-related charge-offs.

One- to Four-Family

-- Total delinquent loans increased $177 million quarter over
quarter to $655 million.

-- Net charge-offs totaled $14.6 million, including $8.3 million
related to the change in charge-off policy associated with a
change in the timing of foreclosure and bankruptcy-related
charge-offs.

Consumer

-- Total delinquent loans decreased $2 million quarter over
quarter to $30 million. In addition, special mention loans and
non-performing loans each declined by $1 million.

-- Net charge-offs totaled $12 million.

Total allowance for loan losses increased to $566 million, as
provision exceeded charge-offs by $58 million during the quarter. The
Company increased its allowance for loan losses in all three
categories of its loan portfolio.

The Company continued to make significant progress during the
quarter to reduce risk and strengthen its balance sheet - efforts
consistent with its previously announced plan. The plan to reduce risk
includes shrinking the Bank balance sheet (down $3.5 billion in the
quarter); reducing wholesale funding sources, including stock loan,
(down $5 billion in the quarter); and lowering exposure to undrawn
home equity lines (down $700 million in the quarter). The Company is
taking action that will reduce undrawn home equity lines by an
additional approximately $1.2 billion by the end of April.

The plan to strengthen the balance sheet consists of the following
two components: increasing excess capital levels at the Bank and
reducing holding company debt. In the first quarter, excess risk-based
Bank capital increased from $435 million last quarter to approximately
$695 million at quarter end. Consistent with its previously stated
plan, the Company continues to expect excess capital at the Bank to
approach $1 billion by the end of 2008. Management also expects to
reduce holding company debt by at least $700 million this year through
a combination of debt-for-equity exchanges and the conversion of its
mandatory convertible notes in November. In addition, planned non-core
asset sales, which are currently being implemented, are estimated to
generate proceeds of over $500 million in 2008.

Management has also revised its view of the economic and market
outlook since the fourth quarter earnings call in January, and assumes
the now-consensus view that the U.S. has entered into a modest
recession. As a result, the Company is announcing that it will
undertake additional restructuring activities this year to further
reduce operating expenses.

"We are clearly facing a cyclical downturn in the economy and
markets, and because we will be a simpler company after the
disposition of certain non-core assets, we need to reduce our overall
expense base," stated Mr. Layton. "Our revised expense reduction
program is designed to lower annual run-rate compensation-related
expenses by 10 percent, approximately $50 million per year. We expect
the majority of the plan to be implemented by the end of the second
quarter."

Historical monthly metrics from January 2003 to March 2008 can be
found on the E*TRADE FINANCIAL Investor Relations site at
https://investor.etrade.com.

The Company will host a conference call to discuss its first
quarter results beginning at 5:00 p.m. (EST) today. The 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 42066498. A live audio webcast of this
conference call will also be accessible at
https://investor.etrade.com.

About E*TRADE FINANCIAL

The E*TRADE FINANCIAL family of companies provides financial
services including trading, investing, banking and lending for retail
and institutional customers. Securities products and services are
offered by E*TRADE Securities LLC (Member FINRA/SIPC). Bank and
lending products and services are offered by E*TRADE Bank, a Federal
savings bank, Member FDIC, or its subsidiaries.

Important Notice

E*TRADE FINANCIAL, E*TRADE and the E*TRADE logo are trademarks or
registered trademarks of E*TRADE FINANCIAL Corporation. 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. The uncertainties and
risks include, but are not limited to, changes in market activity,
anticipated increases in the rate of new customer acquisition, the
conversion of new visitors to the site to customers, the activity of
customers and assets held at the institution, seasonality, macro
trends of the economy in general and the residential real estate
market, instability in the consumer credit markets and credit trends,
rising mortgage interest rates, tighter mortgage lending guidelines
across the industry, increased mortgage loan delinquency and default
rates, portfolio growth, portfolio seasoning and resolution through
collections, sales or charge-offs, the development and enhancement of
products and services, competitive pressures (including price
competition), system failures, economic and political conditions,
changes in consumer behavior and the introduction of competing
products having technological and/or other advantages. Further
information about these risks and uncertainties can be found in the
information included in the annual reports previously filed by E*TRADE
FINANCIAL Corporation with the SEC on Form 10-K (including information
under the caption "Risk Factors") and quarterly reports on Form 10-Q.

(C) 2008 E*TRADE FINANCIAL Corporation. All rights reserved.

Financial Statements

E*TRADE FINANCIAL CORPORATION AND SUBSIDIARIES

-0-
*T
Consolidated Statement of Income (Loss)
(In thousands, except per share amounts)
(Unaudited)

Three Months Ended
----------------------------------
March 31, December 31, March 31,
2008 2007 2007
---------- ------------ ----------
Revenue:
Operating interest income $ 710,737 $ 882,308 $ 829,795
Operating interest expense (377,966) (496,035) (439,209)
---------- ------------ ----------
Net operating interest income 332,771 386,273 390,586
Provision for loan losses (233,871) (402,311) (21,186)
---------- ------------ ----------
Net operating interest income
(expense) after provision for
loan losses 98,900 (16,038) 369,400
---------- ------------ ----------
Commission 129,764 176,946 158,993
Fees and service charges 62,612 68,329 59,498
Principal transactions 20,495 24,490 30,082
Gain (loss) on loans and
securities, net (9,145) (2,275,682) 17,375
Other revenue 13,610 14,009 9,650
---------- ------------ ----------
Total non-interest income
(expense) 217,336 (1,991,908) 275,598
---------- ------------ ----------
Total net revenue 316,236 (2,007,946) 644,998
---------- ------------ ----------
Expense excluding interest:
Compensation and benefits 128,777 105,068 123,782
Clearing and servicing 48,579 65,931 67,252
Advertising and market development 60,472 41,535 45,592
Communications 27,439 28,024 26,156
Professional services 24,347 35,530 24,985
Depreciation and amortization 22,071 23,708 19,383
Occupancy and equipment 22,003 23,942 23,579
Amortization of other intangibles 10,910 9,532 10,268
Impairment of goodwill - 101,208 -
Facility restructuring and other
exit activities 10,492 28,122 733
Other 17,523 56,644 32,675
---------- ------------ ----------
Total expense excluding interest 372,613 519,244 374,405
---------- ------------ ----------
Income (loss) before other income
(expense) and income taxes (56,377) (2,527,190) 270,593
Other income (expense):
Corporate interest income 2,426 2,031 1,705
Corporate interest expense (95,241) (59,460) (37,791)
Gain (loss) on sales of
investments, net 502 (1,025) 19,756
Loss on early extinguishment of
debt (2,851) (13) -
Equity in income of investments
and venture funds 4,699 1,151 8,095
---------- ------------ ----------
Total other income (expense) (90,465) (57,316) (8,235)
---------- ------------ ----------
Income (loss) before income taxes (146,842) (2,584,506) 262,358
Income tax expense (benefit) (55,649) (872,661) 92,948
---------- ------------ ----------
Net income (loss) $ (91,193) $(1,711,845) $ 169,410
========== ============ ==========

Basic earnings (loss) per share $ (0.20) $ (3.98) $ 0.40
Diluted earnings (loss) per share $ (0.20) $ (3.98) $ 0.39
Shares used in computation of per
share data:
Basic 460,857 429,670 423,786
Diluted (1) 460,857 429,670 437,535
*T

E*TRADE FINANCIAL CORPORATION AND SUBSIDIARIES

-0-
*T
Consolidated Balance Sheet
(In thousands, except share amounts)
(Unaudited)

March 31, December 31,
2008 2007
------------ ------------
ASSETS
Cash and equivalents $ 3,061,987 $ 1,778,244
Cash and investments required to be
segregated under Federal or other
regulations 427,918 334,831
Trading securities 422,941 130,018
Available-for-sale mortgage-backed and
investment securities 8,402,077 11,255,048
Loans held-for-sale 19,327 100,539
Margin receivables 6,655,659 7,179,175
Loans receivable, net 28,424,838 30,038,843
Investment in Federal Home Loan Bank stock 241,392 338,585
Property and equipment, net 324,940 355,433
Goodwill 1,950,682 1,933,368
Other intangibles, net 419,105 430,007
Other assets 2,846,084 2,971,846
------------ ------------
Total assets $53,196,950 $56,845,937
============ ============

LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits $27,467,227 $25,884,755
Securities sold under agreements to
repurchase 7,109,716 8,932,693
Customer payables 5,413,283 5,514,675
Other borrowings 5,242,921 7,446,504
Corporate debt 3,156,699 3,022,698
Accounts payable, accrued and other
liabilities 2,091,765 3,215,547
------------ ------------
Total liabilities 50,481,611 54,016,872
------------ ------------

Shareholders' equity:

Common stock, $0.01 par value, shares
authorized: 600,000,000; shares issued and
outstanding: 468,335,796 at March 31, 2008
and 460,897,875 at December 31, 2007 4,683 4,609
Additional paid-in-capital 3,507,223 3,463,220
Accumulated deficit (425,170) (247,368)
Accumulated other comprehensive loss (371,397) (391,396)
------------ ------------
Total shareholders' equity 2,715,339 2,829,065
------------ ------------
Total liabilities and shareholders' equity $53,196,950 $56,845,937
============ ============
*T

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*T
SEGMENT REPORTING
Three Months Ended March 31, 2008
-----------------------------------------------------
Retail Institutional Eliminations(2) Total
---------- ------------- --------------- ------------
Revenue: (In thousands)
Operating
interest
income $ 427,323 $ 590,856 $ (307,442) $ 710,737
Operating
interest
expense (214,336) (471,072) 307,442 (377,966)
---------- ------------- --------------- ------------
Net operating
interest
income 212,987 119,784 - 332,771
Provision for
loan losses - (233,871) - (233,871)
---------- ------------- --------------- ------------
Net operating
interest
income
(expense)
after
provision
for loan
losses 212,987 (114,087) - 98,900
---------- ------------- --------------- ------------
Commission 128,388 1,376 - 129,764
Fees and
service
charges 59,213 5,324 (1,925) 62,612
Principal
transactions - 20,495 - 20,495
Gain (loss) on
loans and
securities,
net 1,069 (10,214) - (9,145)
Other revenue 9,683 3,943 (16) 13,610
---------- ------------- --------------- ------------
Total non-
interest
income 198,353 20,924 (1,941) 217,336
---------- ------------- --------------- ------------
Total net
revenue 411,340 (93,163) (1,941) 316,236
---------- ------------- --------------- ------------
Expense
excluding
interest:
Compensation
and benefits 88,865 39,912 - 128,777
Clearing and
servicing 20,149 30,371 (1,941) 48,579
Advertising
and market
development 60,445 27 - 60,472
Communications 25,201 2,238 - 27,439
Professional
services 15,398 8,949 - 24,347
Depreciation
and
amortization 17,222 4,849 - 22,071
Occupancy and
equipment 20,713 1,290 - 22,003
Amortization
of other
intangibles 8,777 2,133 - 10,910
Facility
restructuring
and other
exit
activities 108 10,384 - 10,492
Other 28,968 (11,445) - 17,523
---------- ------------- --------------- ------------
Total expense
excluding
interest 285,846 88,708 (1,941) 372,613
---------- ------------- --------------- ------------
Segment income
(loss) $ 125,494 $ (181,871) $ - $ (56,377)
========== ============= =============== ============

Three Months Ended December 31, 2007
-----------------------------------------------------
Retail Institutional Eliminations(2) Total
---------- ------------- --------------- ------------
Revenue: (In thousands)
Operating
interest
income $ 511,671 $ 723,092 $ (352,455) $ 882,308
Operating
interest
expense (261,845) (586,645) 352,455 (496,035)
---------- ------------- --------------- ------------
Net operating
interest
income 249,826 136,447 - 386,273
Provision for
loan losses - (402,311) - (402,311)
---------- ------------- --------------- ------------
Net operating
interest
income
(expense)
after
provision
for loan
losses 249,826 (265,864) - (16,038)
---------- ------------- --------------- ------------
Commission 152,449 24,497 - 176,946
Fees and
service
charges 66,680 4,160 (2,511) 68,329
Principal
transactions - 24,490 - 24,490
Loss on loans
and
securities,
net (2,801) (2,272,881) - (2,275,682)
Other revenue 9,977 4,136 (104) 14,009
---------- ------------- --------------- ------------
Total non-
interest
income
(expense) 226,305 (2,215,598) (2,615) (1,991,908)
---------- ------------- --------------- ------------
Total net
revenue 476,131 (2,481,462) (2,615) (2,007,946)
---------- ------------- --------------- ------------
Expense
excluding
interest:
Compensation
and benefits 74,757 30,311 - 105,068
Clearing and
servicing 23,706 44,840 (2,615) 65,931
Advertising
and market
development 41,490 45 - 41,535
Communications 24,549 3,475 - 28,024
Professional
services 23,524 12,006 - 35,530
Depreciation
and
amortization 17,895 5,813 - 23,708
Occupancy and
equipment 22,794 1,148 - 23,942
Amortization
of other
intangibles 9,372 160 - 9,532
Impairment of
goodwill - 101,208 - 101,208
Facility
restructuring
and other
exit
activities 10,462 17,660 - 28,122
Other 38,170 18,474 - 56,644
---------- ------------- --------------- ------------
Total expense
excluding
interest 286,719 235,140 (2,615) 519,244
---------- ------------- --------------- ------------
Segment income
(loss) $ 189,412 $ (2,716,602) $ - $(2,527,190)
========== ============= =============== ============

Three Months Ended March 31, 2007
-----------------------------------------------------
Retail Institutional Eliminations(2) Total
---------- ------------- --------------- ------------
Revenue: (In thousands)
Operating
interest
income $ 457,764 $ 671,243 $ (299,212) $ 829,795
Operating
interest
expense (230,283) (508,138) 299,212 (439,209)
---------- ------------- --------------- ------------
Net operating
interest
income 227,481 163,105 - 390,586
Provision for
loan losses - (21,186) - (21,186)
---------- ------------- --------------- ------------
Net operating
interest
income after
provision
for loan
losses 227,481 141,919 - 369,400
---------- ------------- --------------- ------------
Commission 123,305 35,688 - 158,993
Fees and
service
charges 54,203 7,475 (2,180) 59,498
Principal
transactions - 30,082 - 30,082
Gain on loans
and
securities,
net 4,911 12,464 - 17,375
Other revenue 9,751 41 (142) 9,650
---------- ------------- --------------- ------------
Total non-
interest
income 192,170 85,750 (2,322) 275,598
---------- ------------- --------------- ------------
Total net
revenue 419,651 227,669 (2,322) 644,998
---------- ------------- --------------- ------------
Expense
excluding
interest:
Compensation
and benefits 80,296 43,486 - 123,782
Clearing and
servicing 20,761 48,813 (2,322) 67,252
Advertising
and market
development 43,924 1,668 - 45,592
Communications 22,795 3,361 - 26,156
Professional
services 15,099 9,886 - 24,985
Depreciation
and
amortization 14,809 4,574 - 19,383
Occupancy and
equipment 20,572 3,007 - 23,579
Amortization
of other
intangibles 9,619 649 - 10,268
Facility
restructuring
and other
exit
activities 1,017 (284) - 733
Other 19,301 13,374 - 32,675
---------- ------------- --------------- ------------
Total expense
excluding
interest 248,193 128,534 (2,322) 374,405
---------- ------------- --------------- ------------
Segment income $ 171,458 $ 99,135 $ - $ 270,593
========== ============= =============== ============
*T

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*T
KEY PERFORMANCE METRICS(3)
Qtr
ended Qtr ended
3/31/08 3/31/08
Corporate Qtr ended Qtr ended vs. Qtr ended vs.
Metrics 3/31/08 12/31/07 12/31/07 3/31/07 3/31/07
-------------- -------------------------------------------------------

Operating
margin %(4)
--------------
Consolidated N.M. N.M. N.M. 42% N.M.
Retail 31% 40% (9)% 41% (10)%
Institutional N.M. N.M. N.M. 44% N.M.

Employees 3,565 3,757 (5)% 4,217 (15)%
Consultants
and other 302 305 (1)% 266 14%
----------- ----------- ------------
Total
headcount 3,867 4,062 (5)% 4,483 (14)%

Revenue per
headcount $ 81,778 N.M. N.M. $ 143,876 (43)%

Revenue per
compensation
and benefits
dollar $ 2.46 $ (19.11) (113)% $ 5.21 (53)%

Book value per
share $ 5.80 $ 6.14 (6)% $ 10.19 (43)%
Tangible book
value per
share $ 0.57 $ 0.84 (32)% $ 4.22 (86)%

Free cash
($MM) $ 1,061.1 $ 860.8 23% $ 464.7 128%

Enterprise net
interest
spread (basis
points)(5) 250 255 (2)% 274 (9)%
Enterprise
interest-
earning
assets,
average ($MM) $ 49,911 $ 57,378 (13)% $ 52,871 (6)%

Earnings
before
interest,
taxes,
depreciation
& amortization
("EBITDA")
($MM)
--------------
Net income
(loss) from
continuing
operations $ (91.2) $ (1,711.8) (95)% $ 169.4 (154)%
Tax expense
(benefit) (55.6) (872.7) (94)% 92.9 (160)%
Depreciation &
amortization 33.0 33.2 (1)% 29.7 11%
Corporate
interest
expense 95.2 59.5 60% 37.8 152%
----------- ----------- ------------
EBITDA $ (18.6) $ (2,491.8) (99)% $ 329.8 (106)%

Interest
coverage (0.2) (41.9) (100)% 8.7 (102)%

Retail Metrics
--------------

Trading days 61.0 63.0 N.M. 61.0 N.M.

DARTs
--------------
US 155,706 179,298 (13)% 141,238 10%
International 35,018 34,768 1% 28,798 22%
----------- ----------- ------------
Total DARTs 190,724 214,066 (11)% 170,036 12%

Total trades
(MM) 11.6 13.5 (14)% 10.4 12%

Average
commission
per trade $ 11.04 $ 11.30 (2)% $ 11.89 (7)%

End of period
margin debt
($B) $ 6.70 $ 7.26 (8)% $ 7.03 (5)%
Average margin
debt($B) $ 6.99 $ 7.79 (10)% $ 6.91 1%

Gross new
investing/
trading
accounts 185,169 186,750 (1)% 170,672 8%
Gross new
deposit/
lending
accounts 119,844 90,863 32% 179,547 (33)%
Closed
accounts (243,205) (270,578) (10)% (231,345) 5%
----------- ----------- ------------
Net new
accounts 61,808 7,035 779% 118,874 (48)%

End of period
investing/
trading
accounts 3,633,666 3,632,218 0% 3,613,762 1%
End of period
deposit/
lending
accounts 1,144,572 1,084,212 6% 932,782 23%
----------- ----------- ------------
End of period
total
accounts 4,778,238 4,716,430 1% 4,546,544 5%

Account
Segmentation
Detail
--------------
Retail
accounts
within target
segment(6) 969,308 992,399 (2)% 912,057 6%
Other retail
accounts(7) 2,780,316 2,669,271 4% 2,583,257 8%
Corporate
Services
accounts 1,028,614 1,054,760 (2)% 1,051,230 (2)%
----------- ----------- ------------
End of period
total
accounts 4,778,238 4,716,430 1% 4,546,544 5%

Net new
customers 60,383 4,592 N.M. 37,100 N.M.
End of period
total
customers 3,620,657 3,560,274 2% 3,477,068 4%

End of period
assets per
customer $ 46,508 $ 53,361 (13)% $ 57,659 (19)%
Consolidated
net revenue
per customer $ 87 N.M. N.M. $ 186 (53)%
Consolidated
segment
income per
customer $ (16) N.M. N.M. $ 78 (121)%
Products per
customer 2.1 2.1 0% 2.1 0%

Customer
Assets ($B)
--------------
Security
holdings $ 109.0 $ 124.3 (12)% $ 133.5 (18)%
Customer
payables
(cash) 5.4 5.5 (2)% 6.3 (14)%
Customer cash
balances held
by third
parties 3.3 3.3 0% 3.9 (15)%
Unexercised
Corporate
Services
customer
options
(vested) 24.5 32.1 (24)% 31.0 (21)%
----------- ----------- ------------
Customer
assets in
investing/
trading
accounts 142.2 165.2 (14)% 174.7 (19)%
----------- ----------- ------------
Sweep deposit
accounts 10.0 10.1 (1)% 10.8 (7)%
Transaction
accounts 12.5 10.5 19% 10.3 21%
CDs 3.7 4.2 (12)% 4.7 (21)%
----------- ----------- ------------
Customer
assets in
deposit
accounts 26.2 24.8 6% 25.8 2%
----------- ----------- ------------
Total customer
assets $ 168.4 $ 190.0 (11)% $ 200.5 (16)%
----------- ----------- ------------

Net new
customer
assets
($B)(8) $ 0.3 $ (16.5) N.M. $ 2.9 N.M.

Total customer
cash and
deposits ($B) $ 34.9 $ 33.6 4% $ 36.0 (3)%

Unexercised
Corporate
Services
client
options
(unvested)
($B) $ 20.2 $ 27.5 (27)% $ 20.5 (1) %

Institutional
Metrics
--------------

Market Making
--------------
Equity shares
traded (MM) 33,503 37,781 (11)% 47,425 (29)%
Average
revenue
capture per
1,000 equity
shares $ 0.566 $ 0.586 (3)% $ 0.576 (2)%
% of Bulletin
Board equity
shares to
total equity
shares 87.8% 85.8% 2% 89.7% (2)%

Capital Ratios
--------------
Tier 1 Capital
Ratio(9) 6.78% 6.22% 0.56% 6.24% 0.54%
Risk Weighted
Capital
Ratio(9) 12.36% 11.37% 0.99% 10.48% 1.88%

Loans
receivable
($MM)
--------------
Average loans
receivable $ 29,890 $ 31,841 (6)% $ 27,837 7%
Ending loans
receivable,
net $ 28,425 $ 30,039 (5)% $ 29,672 (4)%

One- to Four-
Family
--------------

Loan
performance
detail ($MM)
--------------
Current $ 14,033 $ 15,083 (7)% $ 13,178 6%
30-89 days
delinquent
(special
mention
loans) 363 297 22% 201 81%
90+ days
delinquent
(non-
performing
loans) 292 181 61% 47 521%
----------- ----------- ------------
Total
delinquent
loans 655 478 37% 248 164%
----------- ----------- ------------
Gross loans
receiv-
able(10) $ 14,688 $ 15,561 (6)% $ 13,426 9%
----------- ----------- ------------

Credit Quality
and Reserve
Metrics
--------------
Special
mention loans
(30-89 days
delinquent)
as a % of
gross loans
receivable 2.47% 1.91% 0.56% 1.50% 0.97%
Nonperforming
loans (90+
days
delinquent)
as a % of
gross loans
receivable 1.99% 1.17% 0.82% 0.35% 1.64%
Total
delinquent
loans (30+
days
delinquent)
as a % of
gross loans
receivable 4.46% 3.07% 1.39% 1.85% 2.61%
Allowance for
loan losses
as a % of
gross loans
receivable 0.28% 0.12% 0.16% 0.02% 0.26%
Allowance for
loan losses
as a % of
nonperforming
loans 14.17% 10.39% 3.78% 7.04% 7.13%
Net charge-
offs as a %
of average
loans
receivable
(annualized) 0.38% 0.10% 0.28% 0.02% 0.36%
Provision as a
% of average
loans
receivable
(annualized) 0.98% 0.33% 0.65% (0.13)% 1.11%

Home Equity
--------------

Loan
performance
detail ($MM)
--------------
Current $ 11,029 $ 11,603 (5)% $ 12,849 (14)%
30-89 days
delinquent
(special
mention
loans) 277 291 (5)% 141 96%
90+ days
delinquent
(non-
performing
loans) 285 230 24% 63 352%
----------- ----------- ------------
Total
delinquent
loans 562 521 8% 204 175%
----------- ----------- ------------
Gross loans
receiv-
able(10) $ 11,591 $ 12,124 (4)% $ 13,053 (11)%
----------- ----------- ------------

Credit Quality
and Reserve
Metrics
--------------
Special
mention loans
(30-89 days
delinquent)
as a % of
gross loans
receivable 2.39% 2.41% (0.02)% 1.08% 1.31%
Nonperforming
loans (90+
days
delinquent)
as a % of
gross loans
receivable 2.46% 1.89% 0.57% 0.48% 1.98%
Total
delinquent
loans (30+
days
delinquent)
as a % of
gross loans
receivable 4.85% 4.30% 0.55% 1.57% 3.28%
Allowance for
loan losses
as a % of
gross loans
receivable 4.23% 3.79% 0.44% 0.31% 3.92%
Allowance for
loan losses
as a % of
nonperforming
loans 172.18% 200.05% (27.87)% 64.61% 107.57%
Net charge-
offs as a %
of average
loans
receivable
(annualized) 5.02% 2.94% 2.08% 0.37% 4.65%
Provision as a
% of average
loans
receivable
(annualized) 6.09% 12.11% (6.02)% 0.67% 5.42%

Consumer and
Other
--------------

Loan
performance
detail ($MM)
--------------
Current $ 2,682 $ 2,830 (5)% $ 3,242 (17)%
30-89 days
delinquent
(special
mention
loans) 23 24 (4)% 13 77%
90+ days
delinquent
(non-
performing
loans) 7 8 (13)% 6 17%
----------- ----------- ------------
Total
delinquent
loans 30 32 (6)% 19 58%
----------- ----------- ------------
Gross loans
receiv-
able(10) $ 2,712 $ 2,862 (5)% $ 3,261 (17)%
----------- ----------- ------------

Credit Quality
and Reserve
Metrics
--------------
Special
mention loans
(30-89 days
delinquent)
as a % of
gross loans
receivable 0.84% 0.83% 0.01% 0.39% 0.45%
Nonperforming
loans (90+
days
delinquent)
as a % of
gross loans
receivable 0.26% 0.27% (0.01)% 0.18% 0.08%
Total
delinquent
loans (30+
days
delinquent)
as a % of
gross loans
receivable 1.11% 1.10% 0.01% 0.57% 0.54%
Allowance for
loan losses
as a % of
gross loans
receivable 1.24% 1.05% 0.19% 0.73% 0.51%
Allowance for
loan losses
as a % of
nonperforming
loans 471.56% 396.71% 74.85% 400.72% 70.84%
Net charge-
offs as a %
of average
loans
receivable
(annualized) 1.74% 1.11% 0.63% 1.03% 0.71%
Provision as a
% of average
loans
receivable
(annualized) 2.24% 1.87% 0.37% 0.51% 1.73%

Total Loans
Receivable
--------------

Loan
performance
detail ($MM)
--------------
Current $ 27,744 $ 29,516 (6)% $ 29,269 (5)%
30-89 days
delinquent
(special
mention
loans) 663 612 8% 355 87%
90+ days
delinquent
(non-
performing
loans) 584 419 39% 116 403%
----------- ----------- ------------
Total
delinquent
loans 1,247 1,031 21% 471 165%
----------- ----------- ------------
Total gross
loans
receiv-
able(10) $ 28,991 $ 30,547 (5)% $ 29,740 (3)%
----------- ----------- ------------

Credit Quality
and Reserve
Metrics
--------------
Special
mention loans
(30-89 days
delinquent)
as a % of
gross loans
receivable 2.29% 2.00% 0.29% 1.19% 1.10%
Nonperforming
loans (90+
days
delinquent)
as a % of
gross loans
receivable 2.02% 1.37% 0.65% 0.39% 1.63%
Total
delinquent
loans (30+
days
delinquent)
as a % of
gross loans
receivable 4.30% 3.37% 0.93% 1.58% 2.72%
Allowance for
loan losses
as a % of
gross loans
receivable 1.95% 1.66% 0.29% 0.23% 1.72%
Allowance for
loan losses
as a % of
nonperforming
loans 96.84% 121.44% (24.60)% 58.68% 38.16%
Net charge-
offs as a %
of average
loans
receivable
(annualized) 2.36% 1.30% 1.06% 0.30% 2.06%
Provision as a
% of average
loans
receivable
(annualized) 3.13% 5.05% (1.92)% 0.30% 2.83%
*T

-0-
*T
ACTIVITY IN ALLOWANCE FOR LOAN LOSSES

Three Months Ended March 31, 2008
-----------------------------------------
One- to Consumer
Four- Home and
Family Equity Other Total
--------- ---------- --------- ----------
(In thousands)
Allowance for loan losses,
ending 12/31/07 $ 18,831 $ 459,167 $ 30,166 $ 508,164
Provision for loan losses 37,175 181,030 15,666 233,871
Charge-offs, net(11) (14,603) (149,366) (12,158) (176,127)
--------- ---------- --------- ----------
Allowance for loan losses,
ending 3/31/08 $ 41,403 $ 490,831 $ 33,674 $ 565,908
========= ========== ========= ==========

Three Months Ended December 31, 2007
-----------------------------------------
One- to Consumer
Four- Home and
Family Equity Other Total
-------------------- --------------------
(In thousands)
Allowance for loan losses,
ending 9/30/07 $ 9,363 $ 175,088 $ 24,587 $ 209,038
Provision for loan losses 13,473 375,132 13,706 402,311
Charge-offs, net (4,005) (91,053) (8,127) (103,185)
--------- ---------- --------- ----------
Allowance for loan losses,
ending 12/31/07 $ 18,831 $ 459,167 $ 30,166 $ 508,164
========= ========== ========= ==========

Three Months Ended March 31, 2007
-----------------------------------------
One- to Consumer
Four- Home and
Family Equity Other Total
--------- ---------- --------- ----------
(In thousands)
Allowance for loan losses,
ending 12/31/06 $ 7,760 $ 31,671 $ 28,197 $ 67,628
Provision for loan losses (3,800) 20,688 4,298 21,186
Charge-offs, net (674) (11,519) (8,632) (20,825)
--------- ---------- --------- ----------
Allowance for loan losses,
ending 3/31/07 $ 3,286 $ 40,840 $ 23,863 $ 67,989
========= ========== ========= ==========
*T

AVERAGE ENTERPRISE BALANCE SHEET DATA

-0-
*T

Three Months Ended
March 31, 2008
----------------------------------
Operating
Average Interest Average
Balance Inc./Exp. Yield/Cost
----------- ---------- ------------
Enterprise interest-earning (In thousands)
assets:
Loans, net(12) $29,925,013 $ 451,574 6.04%
Margin receivables 6,936,549 94,913 5.50%
Mortgage-backed and related
available-for-sale securities 9,281,381 110,072 4.74%
Available-for-sale investment
securities 176,360 2,902 6.58%
Trading securities 572,817 10,708 7.48%
Cash and cash equivalents(13) 2,210,282 20,798 3.78%
Stock borrow and other 808,330 15,712 7.78%
---------- ---------
Total enterprise interest-
earning assets $49,910,732 706,679 5.67%
=========== ---------
Enterprise interest-bearing
liabilities:
Retail deposits $25,383,594 171,535 2.72%
Brokered certificates of deposit 1,229,811 15,169 4.96%
Customer payables 5,261,612 14,635 1.12%
Repurchase agreements and other
borrowings 7,980,130 94,934 4.71%
FHLB advances 5,974,084 70,802 4.69%
Stock loan and other 1,679,887 10,656 2.51%
---------- ---------
Total enterprise interest-
bearing liabilities $47,509,118 377,731 3.17%
=========== ---------
Enterprise net interest
income/spread(5) $ 328,948 2.50%
==========

Three Months Ended
December 31, 2007
--------------------------------
Operating
Average Interest Average
Balance Inc./Exp. Yield/Cost
---------- --------- ----------
Enterprise interest-earning assets: (In thousands)
Loans, net(12) $31,911,892 $ 508,925 6.38%
Margin receivables 7,702,385 129,488 6.67%
Mortgage-backed and related
available-for-sale securities 11,820,948 150,820 5.10%
Available-for-sale investment
securities 3,281,803 54,461 6.64%
Trading securities 91,437 2,012 8.80%
Cash and cash equivalents(13) 1,482,170 16,344 4.37%
Stock borrow and other 1,086,982 18,354 6.75%
---------- ---------
Total enterprise interest-
earning assets $57,377,617 880,404 6.13%
========== ---------
Enterprise interest-bearing
liabilities:
Retail deposits $26,759,763 202,717 3.01%
Brokered certificates of deposit 738,659 9,369 5.03%
Customer payables 6,298,654 20,812 1.31%
Repurchase agreements and other
borrowings 10,776,229 143,089 5.20%
FHLB advances 8,433,904 107,259 4.98%
Stock loan and other 1,601,877 12,304 3.05%
---------- ---------
Total enterprise interest-
bearing liabilities $54,609,086 495,550 3.58%
=========== ---------
Enterprise net interest
income/spread(5) $ 384,854 2.55%
==========
*T

-0-
*T
Three Months Ended
March 31, 2007
------------------------------------
Operating
Average Interest Average
Balance Inc./Exp. Yield/Cost
------------ ------------ ----------
Enterprise interest-earning (In thousands)
assets:
Loans, net(12) $28,093,409 $ 451,399 6.43%
Margin receivables 6,787,828 123,986 7.41%
Mortgage-backed and related
available-for-sale securities 12,040,109 157,967 5.25%
Available-for-sale investment
securities 3,651,560 59,860 6.56%
Trading securities 119,779 3,269 10.92%
Cash and cash equivalents(13) 1,358,120 15,930 4.76%
Stock borrow and other 820,679 13,687 6.67%
------------ ------------
Total enterprise interest-
earning assets $52,871,484 826,098 6.27%
============ ------------
Enterprise interest-bearing
liabilities:
Retail deposits $24,696,611 177,329 2.91%
Brokered certificates of deposit 466,559 5,659 4.92%
Customer payables 6,380,411 20,479 1.30%
Repurchase agreements and other
borrowings 12,137,872 159,031 5.24%
FHLB advances 4,996,389 62,852 5.03%
Stock loan and other 1,349,305 12,515 3.76%
------------ ------------
Total enterprise interest-
bearing liabilities $50,027,147 437,865 3.53%
============ ------------
Enterprise net interest
income/spread(5) $ 388,233 2.74%
============

Reconciliation from Enterprise Net Interest Income to Net Operating
Interest Income
Three Months Ended
March 31, December 31, March 31,
2008 2007 2007
------------ ------------ ----------
(In thousands)
Enterprise net interest income $ 328,948 $ 384,854 $388,233
Taxable equivalent interest
adjustment(14) (3,698) (7,537) (7,320)
Customer cash held by third
parties and other(15) 7,521 8,956 9,673
------------ ------------ ----------
Net operating interest income $ 332,771 $ 386,273 $390,586
============ ============ ==========
*T

-0-
*T
SUPPLEMENTAL PORTFOLIO DISCLOSURE

Mortgage Loan Portfolio(16)(17)
-------------------------------

One-to Four-Family Mortgage Loan Distribution
Unpaid principal balances at March 31, 2008 ($MM)

FICO
-------------------------------------------------------
LTV >=720 719-700 699-680 679-660 659-620 <620 Total
------------- ------ -------- -------- -------- -------- ---- -------
<70% $4,386 $ 778 $ 561 $ 356 $ 216 $ 4 $ 6,301
70%-80% 5,228 1,137 890 487 230 5 7,977
80%-90% 88 30 28 23 12 - 181
>90% 84 29 29 18 19 1 180
------ -------- -------- -------- -------- ---- -------
Total $9,786 $ 1,974 $ 1,508 $ 884 $ 477 $10 $14,639
====== ======== ======== ======== ======== ==== =======

One- to Four-Family 30+ Days Delinquent Loan Distribution
Unpaid principal balances at March 31, 2008 ($MM)

FICO
-------------------------------------------------------
LTV >=720 719-700 699-680 679-660 659-620 <620 Total
------------- ------ -------- -------- -------- -------- ---- -------
<70% $ 63 $ 31 $ 23 $ 29 $ 18 $ 2 $ 166
70%-80% 175 83 85 55 40 1 439
80%-90% 9 5 4 5 3 - 26
>90% 8 3 4 4 5 - 24
------ -------- -------- -------- -------- ---- -------
Total $ 255 $ 122 $ 116 $ 93 $ 66 $ 3 $ 655
====== ======== ======== ======== ======== ==== =======

Home Equity Loan Distribution
Unpaid principal balances at March 31, 2008 ($MM)

FICO
-------------------------------------------------------
CLTV >=720 719-700 699-680 679-660 659-620 <620 Total
------------- ------ -------- -------- -------- -------- ---- -------
<70% $2,438 $ 404 $ 332 $ 146 $ 112 $11 $ 3,443
70%-80% 1,158 334 282 113 101 2 1,990
80%-90% 1,963 687 648 276 204 1 3,779
>90% 1,141 404 336 183 110 - 2,174
------ -------- -------- -------- -------- ---- -------
Total $6,700 $ 1,829 $ 1,598 $ 718 $ 527 $14 $11,386
====== ======== ======== ======== ======== ==== =======

Home Equity 30+ Days Delinquent Loan Distribution
Unpaid principal balances at March 31, 2008 ($MM)

FICO
-------------------------------------------------------
CLTV >=720 719-700 699-680 679-660 659-620 <620 Total
------------- ------ -------- -------- -------- -------- ---- -------
<70% $ 14 $ 6 $ 9 $ 4 $ 6 $ - $ 39
70%-80% 20 12 14 6 10 - 62
80%-90% 81 47 56 31 33 - 248
>90% 81 48 39 29 16 - 213
------ -------- -------- -------- -------- ---- -------
Total $ 196 $ 113 $ 118 $ 70 $ 65 $ - $ 562
====== ======== ======== ======== ======== ==== =======
*T

-0-
*T
Investment Securities Porfolio
--------------------------------

Book value at March 31, 2008 ($MM)
Below
Investment Non-
AAA AA A BBB Grade Rated Total
------ ---- --- --- ----------------- ------
Agency mortgage-backed
securities and
collateralized mortgage
obligations $7,553 $ - $ - $ - $ - $ - $7,553
Private label
collateralized mortgage
obligations 1,004 126 - - - - 1,130
Corporate bonds,
municipal bonds and
preferred stock 311 397 15 - - - 723
------ ---- --- --- ---------- ------ ------
Total $8,868 $523 $15 $ - $ - $ - $9,406
====== ==== === === ========== ====== ======
*T

SUPPLEMENTAL INFORMATION

Explanation of Non-GAAP Measures and Certain Metrics

Management believes that free cash, EBITDA, interest coverage,
enterprise net interest income and enterprise interest-earning assets
are appropriate measures for evaluating the operating and liquidity
performance of the Company. We believe that the elimination of certain
items from the related GAAP measures 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.

Free Cash

Free cash represents cash held at the Company and its non-Bank and
non-Brokerage subsidiaries, less discretionary reserves, plus excess
capital at Bank and Brokerage after application of regulatory capital
requirements and the Company's own regulatory capital guidelines. The
Company believes that free cash is a useful measure of the Company's
liquidity as it excludes cash reflected on the balance sheet that may
not be freely available to the Company.

EBITDA

EBITDA represents net income from continuing operations before
corporate interest expense, taxes and depreciation and amortization.
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.

Enterprise Net Interest Income

Enterprise net interest income is taxable equivalent basis net
operating interest income excluding corporate interest income and
corporate interest expense, stock conduit interest income and 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 required to be segregated under
regulatory guidelines that earn 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,
consolidated statements of cash flows, or other measures of financial
performance prepared in accordance with GAAP. For complete information
on the items excluded from 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 we expect to file with the SEC with respect to
the financial periods discussed herein.

ENDNOTES

(1) Because the Company reported a net loss for the first quarter
of 2008 and the fourth quarter of 2007, 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 Retail and
Institutional segments, which includes deposit and customer payable
transfer pricing, servicing and order flow rebates.

(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 our income (loss) before other
income (expense) and income taxes by our total net revenue.

(5) 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, stock conduit and
customer cash held by third parties.

(6) Target segment accounts are accounts held by customers with
over $50,000 in assets and/or generating 30 or more trades per
quarter.

(7) Other retail accounts are accounts that (a) were opened less
than 90 days prior to the end of the relevant quarter; (b) only
include a lending relationship; or (c) that otherwise do not meet the
definition of a target segment account.

(8) Net new client assets are total inflows to all new and
existing client accounts less total outflows from all closed and
existing client and closed accounts.

(9) Q108 estimate.

(10) Includes unpaid principal balances and premiums (discounts).

(11) The Q1 2008 results included $30.0 million in charge-offs
associated with a change in the timing of foreclosure and
bankruptcy-related charge-offs. Of the total, $8.3 million related to
one- to four-family and $21.7 million related to home equity loans.

(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 $3.3
billion, $3.8 billion and $3.9 billion for the quarters ended March
31, 2008, December 31, 2007 and March 31, 2007, respectively, held by
parties outside E*TRADE FINANCIAL, including third party money market
funds and sweep deposit accounts at unaffiliated financial
institutions. Other consists of net operating interest income earned
on average stock conduit assets of $0.01 million, $0.4 million and
$2.7 million for the quarters ended March 31, 2008, December 31, 2007
and March 31, 2007, respectively.

(16) Includes unpaid principal balances.

(17) LTV/CLTV data is based on LTV/CLTV ratios at the time of loan
origination, and has not been updated to reflect changes in property
values since that time. FICO score is based on FICO scores at the time
of loan origination, and has not been updated to reflect changes in
credit scores since that time.

E*TRADE FINANCIAL Media Relations Contact
Pam Erickson, 617-296-6080
pam.erickson@etrade.com
or
E*TRADE FINANCIAL Investor Relations Contact
Adam Townsend, 703-236-8719
adam.townsend@etrade.com

Copyright Business Wire 2008