10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2014 or

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from              to             .

Commission File Number 1-11921

E*TRADE Financial Corporation

(Exact Name of Registrant as Specified in its Charter)

Delaware	94-2844166
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

1271 Avenue of the Americas, 14^th Floor, New York, New York 10020

(Address of principal executive offices and Zip Code)

(646) 521-4300

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.    Yes x   No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer   x	Accelerated filer	¨
Non-accelerated filer ¨ (Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

As of July 31, 2014, there were 288,718,428 shares of common stock outstanding.

E*TRADE FINANCIAL CORPORATION

FORM 10-Q QUARTERLY REPORT

For the Quarter Ended June 30, 2014

TABLE OF CONTENTS

PART I	FINANCIAL INFORMATION
Item 1.	Consolidated Financial Statements (Unaudited)	39
	Consolidated Statement of Income (Loss)	39
	Consolidated Statement of Comprehensive Income (Loss)	40
	Consolidated Balance Sheet	41
	Consolidated Statement of Shareholders’ Equity	42
	Consolidated Statement of Cash Flows	43
	Notes to Consolidated Financial Statements (Unaudited)	45
	Note 1—Organization, Basis of Presentation and Summary of Significant Accounting Policies	45
	Note 2—Disposition	48
	Note 3—Operating Interest Income and Operating Interest Expense	49
	Note 4—Fair Value Disclosures	49
	Note 5—Offsetting of Assets and Liabilities	57
	Note 6—Available-for-Sale and Held-to-Maturity Securities	59
	Note 7—Loans Receivable, Net	63
	Note 8—Accounting for Derivative Instruments and Hedging Activities	71
	Note 9—Securities Sold Under Agreements to Repurchase and FHLB Advances and Other Borrowings	73
	Note 10—Accumulated Other Comprehensive Loss	74
	Note 11—Earnings (Loss) per Share	75
	Note 12—Regulatory Requirements	76
	Note 13—Commitments, Contingencies and Other Regulatory Matters	77
	Note 14—Segment Information	80
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1
	Overview	1
	Earnings Overview	4
	Segment Results Review	12
	Balance Sheet Overview	16
	Liquidity and Capital Resources	20
	Risk Management	24
	Concentrations of Credit Risk	26
	Summary of Critical Accounting Policies and Estimates	33
	Glossary of Terms	34
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	37
Item 4.	Controls and Procedures	82
PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	82
Item 1A.	Risk Factors	84
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	84
Item 3.	Defaults Upon Senior Securities	84
Item 4.	Mine Safety Disclosures	84
Item 5.	Other Information	84
Item 6.	Exhibits	85
Signatures		86

Unless otherwise indicated, references to "the Company," "we," "us," "our" and "E*TRADE" mean E*TRADE Financial Corporation and its subsidiaries.

i

E*TRADE, E*TRADE Financial, E*TRADE Bank, Equity Edge, OptionsLink and the Converging Arrows logo are registered trademarks of E*TRADE Financial Corporation in the United States and in other countries.

ii

FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, that involve risks and uncertainties. These statements relate to our future plans, objectives, expectations and intentions based on certain assumptions and include any statement that is not historical in nature. These statements may be identified by the use of words such as "assume," "expect," "believe," "may," "will," "should," "anticipate," "intend," "plan," "estimate," "continue" and similar expressions. We caution that actual results could differ materially from those discussed in these forward-looking statements. Important factors that could contribute to our actual results differing materially from any forward-looking statements include, but are not limited to, those discussed under Part 1. Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations of this Form 10-Q; and Part 1. Item 1A. Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2013, filed with the SEC, which are incorporated herein by reference. By their nature forward-looking statements are not guarantees of future performance or results and are subject to risks, uncertainties and assumptions that are difficult to predict or quantify. Actual future results may vary materially from expectations expressed or implied in this report or any of our prior communications. The forward-looking statements contained in this report reflect our expectations only as of the date of this report. You should not place undue reliance on forward-looking statements, as we do not undertake to update or revise forward-looking statements to reflect the impact of circumstances or events that arise after the date the forward-looking statements were made, except as required by law.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the consolidated financial statements and the related notes that appear elsewhere in this document and with the Annual Report on Form 10-K for the year ended December 31, 2013.

GLOSSARY OF TERMS

In analyzing and discussing our business, we utilize certain metrics, ratios and other terms that are defined in the Glossary of Terms, which is located at the end of Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

OVERVIEW

Strategy

Our business strategy is centered on two core objectives: accelerating the growth of our core brokerage business to improve market share, and strengthening our overall financial and franchise position.

Accelerate Growth of Core Brokerage Business

• Enhance digital and offline customer experience.

We are focused on maintaining our competitive position in trading, margin lending and cash management, while expanding our customer share of wallet in retirement, investing and savings. Through these offerings, we aim to continue acquiring new customers while deepening engagement with both new and existing ones.

• Capitalize on value of corporate services business.

This includes leveraging our industry-leading position to improve client acquisition, and bolstering awareness among plan participants of our full suite of offerings. This channel is a strategically important driver of brokerage account growth for us.

• Maximize value of deposits through the Company's bank.

Our brokerage business generates a significant amount of deposits, which we monetize through the bank by investing primarily in low-risk, agency mortgage-backed securities.

Strengthen Overall Financial and Franchise Position

• Manage down legacy investments and mitigate credit losses.

We continue to manage down the size and risks associated with our legacy loan portfolio, while mitigating credit losses where possible.

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• Execute on our capital plan.

The core components of our capital plan include bolstering our capital levels through earnings and de-risking and building out best-in-class enterprise risk management capabilities. A key goal of this plan is to distribute capital from the bank to the parent.

Key Factors Affecting Financial Performance

Our financial performance is affected by a number of factors outside of our control, including:

• customer demand for financial products and services;

• weakness or strength of the residential real estate and credit markets;

• performance, volume and volatility of the equity and capital markets;

• customer perception of the financial strength of our franchise;

• market demand and liquidity in the secondary market for mortgage loans and securities;

• market demand and liquidity in the wholesale borrowings market, including securities sold under agreements to repurchase;

• the level and volatility of interest rates;

• our ability to obtain regulatory approval to move capital from our bank to our parent company; and

• changes to the rules and regulations governing the financial services industry.

In addition to the items noted above, our success in the future will depend upon, among other things, our ability to:

• have continued success in the acquisition, growth and retention of brokerage customers;

• generate meaningful growth in our retirement, investing and savings customer products;

• enhance our risk management capabilities;

• reduce credit costs;

• achieve the capital ratios stated in our capital plan, with a particular focus on the Tier 1 leverage ratio at E*TRADE Bank;

• generate capital sufficient to meet our operating needs at both our bank and our parent company;

• assess and manage interest rate risk; and

• maintain disciplined expense control and improved operational efficiency.

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Management monitors a number of metrics in evaluating the Company’s performance. The most significant of these are shown in the table and discussed in the text below:

	Three Months Ended June 30,						Variance		Six Months Ended June 30,						Variance
	2014			2013			2014 vs. 2013		2014			2013			2014 vs. 2013
Customer Activity Metrics:
Daily average revenue trades ("DARTs")	155,194			149,670			4	%	176,224			149,122			18	%
Average commission per trade	$	10.72		$	11.10		(3	)%	$	10.68		$	11.20		(5	)%
Margin receivables (dollars in billions)	$	7.3		$	6.0		22	%	$	7.3		$	6.0		22	%
End of period brokerage accounts	3,102,966			2,962,731			5	%	3,102,966			2,962,731			5	%
Net new brokerage accounts	33,005			29,506			12	%	104,907			59,540			76	%
Annualized brokerage account attrition rate	8.6		%	8.4		%	*		8.0		%	8.5		%	*
Customer assets (dollars in billions)	$	280.9		$	220.1		28	%	$	280.9		$	220.1		28	%
Net new brokerage assets (dollars in billions)	$	1.0		$	1.7		(41	)%	$	5.1		$	4.8		6	%
Brokerage related cash (dollars in billions)	$	40.0		$	35.6		12	%	$	40.0		$	35.6		12	%
Company Financial Metrics:
Corporate cash (dollars in millions)	$	570		$	251		127	%	$	570		$	251		127	%
E*TRADE Financial Tier 1 leverage ratio	7.5		%	6.4		%	1.1	%	7.5		%	6.4		%	1.1	%
E*TRADE Financial Tier 1 common ratio	15.8		%	12.2		%	3.6	%	15.8		%	12.2		%	3.6	%
E*TRADE Bank Tier 1 leverage ratio	10.2		%	9.5		%	0.7	%	10.2		%	9.5		%	0.7	%
Special mention loan delinquencies (dollars in millions)	$	155		$	269		(42	)%	$	155		$	269		(42	)%
Allowance for loan losses (dollars in millions)	$	401		$	451		(11	)%	$	401		$	451		(11	)%
Enterprise net interest spread	2.55		%	2.35		%	0.20	%	2.51		%	2.33		%	0.18	%
Enterprise interest-earning assets (average dollars in billions)	$	41.4		$	40.2		3	%	$	41.8		$	40.5		3	%

* Percentage not meaningful.

Customer Activity Metrics

• DARTs are the predominant driver of commissions revenue from our customers.

• Average commission per trade is an indicator of changes in our customer mix, product mix and/or product pricing.

• Margin receivables represent credit extended to customers to finance their purchases of securities by borrowing against securities they own and are a key driver of net operating interest income.

• End of period brokerage accounts, net new brokerage accounts and brokerage account attrition rate are indicators of our ability to attract and retain brokerage customers. 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.

• Changes in customer assets are an indicator of the value of our relationship with the customer. An increase in customer assets generally indicates that the use of our products and services by existing and new customers is expanding. Changes in this metric are also driven by changes in the valuations of our customers’ underlying securities.

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• Net new brokerage assets are total inflows to all new and existing brokerage accounts less total outflows from all closed and existing brokerage accounts and are a general indicator of the use of our products and services by new and existing brokerage customers.

• Brokerage related cash is an indicator of the level of engagement with our brokerage customers and is a key driver of net operating interest income.

Company Financial Metrics

• Corporate cash is an indicator of the liquidity at the parent company. It is the primary source of capital above and beyond the capital deployed in our regulated subsidiaries. See Liquidity and Capital Resources for a reconciliation of this non-GAAP measure to the comparable GAAP measure.

• E*TRADE Financial Tier 1 leverage ratio is Tier 1 capital divided by average total assets for leverage capital purposes for the parent company. E*TRADE Financial Tier 1 common ratio is 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 for the holding company. The Tier 1 leverage and Tier 1 common ratios are non-GAAP measures as the parent company is not yet held to these regulatory capital requirements and are indications of E*TRADE Financial’s capital adequacy. See Liquidity and Capital Resources for a reconciliation of these non-GAAP measures to the comparable GAAP measures.

• E*TRADE Bank Tier 1 leverage ratio is Tier 1 capital divided by adjusted total assets for E*TRADE Bank and is an indication of E*TRADE Bank’s capital adequacy.

• Special mention loan delinquencies are loans 30-89 days past due and are an indicator of the expected trend for charge-offs in future periods as these loans have a greater propensity to migrate into nonaccrual status and ultimately charge-off.

• Allowance for loan losses is an estimate of probable losses inherent in the loan portfolio as of the balance sheet date and is typically equal to management’s forecast of loan losses in the twelve months following the balance sheet date as well as the forecasted losses, including economic concessions to borrowers, over the estimated remaining life of loans modified as troubled debt restructurings ("TDR").

• Enterprise interest-earning assets, in conjunction with our enterprise net interest spread, are indicators of our ability to generate net operating interest income.

Significant Events in the Second Quarter of 2014

Completed the Sale of TDRs

• On April 22, 2014, we completed the sale of one- to four-family loans modified as TDRs. The sale generated cash proceeds of $0.8 billion and we recognized a net gain of approximately $7 million on the sale.

$75 Million Dividend Issued from E*TRADE Bank to the Parent Company

• We received approval from our regulators for a $75 million dividend from E*TRADE Bank to the parent company, totaling $325 million in dividends over the last four quarters, continuing to reflect significant progress on our long-term capital plan.

Completed First Official Stress Test under Dodd-Frank Act

• We submitted our first official stress test prior to March 31, 2014 as required under the Dodd-Frank Act, and received feedback from the OCC on our submission in the second quarter of 2014. While the details of our results are not public, we can share the high level result that we remained well above the regulatory well-capitalized levels for all capital ratios across all scenarios and we were satisfied with the feedback around our stress testing process, approach and methodologies.

EARNINGS OVERVIEW

We generated net income of $69 million and $166 million, or $0.24 and $0.56 per diluted share, on total net revenue of $438 million and $913 million for the three and six months ended June 30, 2014, respectively. Net operating interest income increased11% to $270 million and $536 million for both the three and six months ended June 30, 2014, respectively, compared to the same periods in 2013, which were driven primarily by the size and mix of the balance sheet as well as increases in net

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interest spread. Commissions, fees and service charges and other revenue increased 3% to $161 million and 16% to $345 million for the three and six months ended June 30, 2014, respectively, compared to the same periods in 2013, which were driven primarily by increased order flow revenue for both periods, in addition to increased trading activity during the six months ended June 30, 2014.

Provision for loan losses decreased74% to $12 million and 82% to $16 million for the three and six months ended June 30, 2014, respectively, compared to the same periods in 2013.The decreases were driven primarily by improving economic conditions, as evidenced by the lower levels of delinquent loans in the one- to four-family and home equity loan portfolios, lower net charge-offs, home price improvement and loan portfolio run-off. Total operating expensesdecreased31% to $284 million and 19% to $574 million for the three and six months ended June 30, 2014, respectively, compared to the same periods in 2013. The decreases for the three and six months ended June 30, 2014 were driven primarily by $142 million in impairment of goodwill that was recognized in the second quarter of 2013 which increased operating expenses for the same periods in 2013.

The following sections describe in detail the changes in key operating factors and other changes and events that affected net revenue, provision for loan losses, operating expense, other income (expense) and income tax expense.

Revenue

The components of revenue and the resulting variances are as follows (dollars in millions):

	Three Months Ended June 30,					Variance					Six Months Ended June 30,					Variance
						2014 vs. 2013										2014 vs. 2013
	2014		2013			Amount			%		2014		2013			Amount			%
Net operating interest income	$	270	$	243		$	27		11	%	$	536	$	484		$	52		11	%
Commissions	105		106			(1		)	(1	)%	233		207			26			13	%
Fees and service charges	46		41			5			12	%	93		73			20			27	%
Principal transactions	—		21			(21		)	*		10		43			(33		)	(77	)%
Gains on loans and securities, net	7		21			(14		)	(67	)%	22		37			(15		)	(41	)%
Net impairment	—		(1		)	1			*		—		(2		)	2			*
Other revenues	10		9			1			11	%	19		18			1			6	%
Total non-interest income	168		197			(29		)	(15	)%	377		376			1			0	%
Total net revenue	$	438	$	440		$	(2	)	(0	)%	$	913	$	860		$	53		6	%

* Percentage not meaningful.

Net Operating Interest Income

Net operating interest incomeincreased11% to $270 million and $536 million for both the three and six months ended June 30, 2014, respectively, compared to the same periods in 2013. Net operating interest income is earned primarily through investing deposits and customer payables in enterprise interest-earning assets, which include: available-for-sale securities, held-to-maturity securities, margin receivables and real estate loans.

The following table presents enterprise average balance sheet data and enterprise income and expense data for our operations, as well as the related net interest spread, yields and rates and have been prepared on the basis required by the SEC’s Industry Guide 3, "Statistical Disclosure by Bank Holding Companies" (dollars in millions):

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	Three Months Ended June 30,
	2014						2013
	Average Balance		Operating Interest Inc./Exp.		Average Yield/Cost		Average Balance		Operating Interest Inc./Exp.		Average Yield/Cost
Enterprise interest-earning assets:
Loans(1)	$	7,416	$	77	4.18	%	$	9,811	$	102	4.17	%
Available-for-sale securities	12,742		72		2.28	%	12,399		67		2.16	%
Held-to-maturity securities	11,298		82		2.91	%	9,770		61		2.51	%
Margin receivables	7,330		65		3.56	%	5,675		54		3.81	%
Cash and equivalents	1,310		1		0.15	%	1,365		1		0.21	%
Segregated cash	799		1		0.10	%	468		—		0.10	%
Securities borrowed and other	500		21		16.43	%	678		13		7.95	%
Total enterprise interest-earning assets	41,395		319		3.08	%	40,166		298		2.97	%
Non-operating interest-earning and non-interest earning assets(2)	4,203						4,752
Total assets	$	45,598					$	44,918
Enterprise interest-bearing liabilities:
Deposits	$	25,239	2		0.03	%	$	25,598	3		0.05	%
Customer payables	6,250		3		0.16	%	5,293		2		0.14	%
Securities sold under agreements to repurchase	4,010		30		2.98	%	4,465		37		3.28	%
Federal Home Loan Bank ("FHLB") advances and other borrowings	1,285		17		5.24	%	1,287		17		5.26	%
Securities loaned and other	1,506		—		0.03	%	856		—		0.02	%
Total enterprise interest-bearing liabilities	38,290		52		0.53	%	37,499		59		0.62	%
Non-operating interest-bearing and non-interest bearing liabilities(3)	2,187						2,487
Total liabilities	40,477						39,986
Total shareholders’ equity	5,121						4,932
Total liabilities and shareholders’ equity	$	45,598					$	44,918
Excess of enterprise interest-earning assets over enterprise interest-bearing liabilities/Enterprise net interest income/Spread	$	3,105	$	267	2.55	%	$	2,667	$	239	2.35	%
Enterprise net interest margin (net yield on enterprise interest-earning assets)					2.58	%					2.38	%
Ratio of enterprise interest-earning assets to enterprise interest-bearing liabilities					108.11	%					107.11	%
Return on average:
Total assets					0.61	%					(0.48	)%
Total shareholders' equity					5.40	%					(4.40	)%
Average equity to average total assets					11.23	%					10.98	%

Reconciliation from enterprise net interest income to net operating interest income (dollars in millions):

	Three Months Ended June 30,
	2014		2013
Enterprise net interest income	$	267	$	239
Customer assets held by third parties(4)	3		4
Net operating interest income	$	270	$	243

(1) Nonaccrual loans are included in the average loan balances. Interest payments received on nonaccrual loans are recognized on a cash basis in operating interest income until it is doubtful that full payment will be collected, at which point payments are applied to principal.

(2) Non-operating interest-earning and non-interest earning assets consist of property and equipment, net, goodwill, other intangibles, net and other assets that do not generate operating interest income. Some of these assets generate corporate interest income.

(3) Non-operating interest-bearing and non-interest bearing liabilities consist of corporate debt and other liabilities that do not generate operating interest expense. Some of these liabilities generate corporate interest expense.

(4) Includes revenue earned on average customer assets of $14.1 billion and $11.2 billion for the three months ended June 30, 2014 and 2013, respectively, held by third parties outside the Company, including money market funds and sweep deposit accounts at unaffiliated financial institutions. Fees earned on the customer assets are based on the federal funds rate plus a negotiated spread or other contractual arrangement with the third party institutions.

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	Six Months Ended June 30,
	2014						2013
	Average Balance		Operating Interest Inc./Exp.		Average Yield/Cost		Average Balance		Operating Interest Inc./Exp.		Average Yield/Cost
Enterprise interest-earning assets:
Loans(1)	$	7,904	$	161	4.08	%	$	10,103	$	209	4.13	%
Available-for-sale securities	13,115		151		2.30	%	12,691		131		2.06	%
Held-to-maturity securities	10,927		159		2.91	%	9,636		119		2.48	%
Margin receivables	7,134		127		3.60	%	5,671		108		3.85	%
Cash and equivalents	1,229		1		0.15	%	1,478		2		0.21	%
Segregated cash	818		1		0.10	%	314		—		0.10	%
Securities borrowed and other	626		38		12.24	%	636		26		8.33	%
Total enterprise interest-earning assets	41,753		638		3.06	%	40,529		595		2.95	%
Non-operating interest-earning and non-interest earning assets(2)	4,235						4,923
Total assets	$	45,988					$	45,452
Enterprise interest-bearing liabilities:
Deposits	$	25,465	4		0.03	%	$	26,270	6		0.05	%
Customer payables	6,310		5		0.16	%	5,177		4		0.14	%
Securities sold under agreements to repurchase	4,232		65		3.06	%	4,459		74		3.29	%
Federal Home Loan Bank ("FHLB") advances and other borrowings	1,283		34		5.26	%	1,274		34		5.31	%
Securities loaned and other	1,367		—		0.04	%	803		—		0.01	%
Total enterprise interest-bearing liabilities	38,657		108		0.55	%	37,983		118		0.62	%
Non-operating interest-bearing and non-interest bearing liabilities(3)	2,292						2,544
Total liabilities	40,949						40,527
Total shareholders’ equity	5,039						4,925
Total liabilities and shareholders’ equity	$	45,988					$	45,452
Excess of enterprise interest-earning assets over enterprise interest-bearing liabilities/Enterprise net interest income/Spread	$	3,096	$	530	2.51	%	$	2,546	$	477	2.33	%
Enterprise net interest margin (net yield on enterprise interest-earning assets)					2.54	%					2.36	%
Ratio of enterprise interest-earning assets to enterprise interest-bearing liabilities					108.01	%					106.70	%
Return on average:
Total assets					0.72	%					(0.08	)%
Total shareholders' equity					6.58	%					(0.77	)%
Average equity to average total assets					10.96	%					10.84	%

Reconciliation from enterprise net interest income to net operating interest income (dollars in millions):

	Six Months Ended June 30,
	2014		2013
Enterprise net interest income	$	530	$	477
Customer assets held by third parties(4)	6		7
Net operating interest income	$	536	$	484

(1) Nonaccrual loans are included in the average loan balances. Interest payments received on nonaccrual loans are recognized on a cash basis in operating interest income until it is doubtful that full payment will be collected, at which point payments are applied to principal.

(2) Non-operating interest-earning and non-interest earning assets consist of property and equipment, net, goodwill, other intangibles, net and other assets that do not generate operating interest income. Some of these assets generate corporate interest income.

(3) Non-operating interest-bearing and non-interest bearing liabilities consist of corporate debt and other liabilities that do not generate operating interest expense. Some of these liabilities generate corporate interest expense.

(4) Includes revenue earned on average customer assets of $14.1 billion and $10.4 billion for the six months ended June 30, 2014 and 2013, respectively, held by third parties outside the Company, including money market funds and sweep deposit accounts at unaffiliated financial institutions. Fees earned on the customer assets are based on the federal funds rate plus a negotiated spread or other contractual arrangement with the third party institutions.

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The fluctuation in enterprise interest-earning assets is driven primarily by changes in enterprise interest-bearing liabilities, specifically deposits and customer payables. Average enterprise interest-earning assets increased 3% to $41.4 billion and $41.8 billion for both the three and six months ended June 30, 2014 compared to the same periods in 2013. The increases in average enterprise interest-earning assets were primarily a result of increases in average available-for-sale securities, held-to-maturity securities and margin receivables, which were partially offset by decreases in average loans compared to the same periods in 2013.

Average enterprise interest-bearing liabilities increased 2% to $38.3 billion and $38.7 billion for both the three and six months ended June 30, 2014 compared to the same periods in 2013. The increases in average enterprise interest-bearing liabilities were primarily due to increases in average customer payables and securities loaned and other, partially offset by decreases in average deposits and securities sold under agreements to repurchase.

As part of our strategy to strengthen our overall financial and franchise position, we have been focused on improving our capital ratios by reducing risk and deleveraging the balance sheet. Our deleveraging strategy included transferring customer deposits to third party institutions. At June 30, 2014, $14.3 billion of our customers' assets were held at third party institutions, including third party banks and money market funds. Approximately 70% of these off-balance sheet assets resulted from our deleveraging efforts. We estimate the impact of our deleveraging efforts on net operating interest income to be approximately 120 basis points based on the estimated current re-investment rates on these assets, less approximately 30 basis points of cost associated with holding these assets on our balance sheet, primarily, FDIC insurance premiums. While we may take some tactical actions in future periods, we consider our deleveraging initiatives to be complete.

Enterprise net interest spread increased by 20 basis points and 18 basis points to 2.55% and 2.51% for the three and six months ended June 30, 2014, respectively, compared to the same periods in 2013. Enterprise net interest spread is driven by changes in average balances and average interest rates earned or paid on those balances. During the three and six months ended June 30, 2014, the increases in enterprise net interest spread were driven primarily by the growth of available-for-sale and held-to-maturity securities, margin receivables and securities loaned coupled with higher yields on available-for-sale and held-to-maturity securities and securities borrowed balances. As well, we have experienced an increase in net interest spread driven by continued run-off of our more expensive legacy wholesale borrowings as they meet maturity and are not renewed. These increases were partially offset by the decrease in loans and lower rates earned on margin receivables. Enterprise net interest spread may further fluctuate based on the size and mix of the balance sheet, as well as the impact from the level of interest rates.

Commissions

Commissions revenue decreased 1% to $105 million and increased 13% to $233 million for the three and six months ended June 30, 2014, respectively, compared to the same periods in 2013. The main factors that affect commissions are DARTs, average commission per trade and the number of trading days.

DART volume increased 4% to 155,194 and 18% to 176,244 for the three and six months ended June 30, 2014, respectively, compared to the same periods in 2013. Option-related DARTs as a percentage of total DARTs represented 23% and 22% of trading volume for the three and six months ended June 30, 2014, respectively, compared to 24% for both the same periods in 2013.

Average commission per trade decreased 3% to $10.72 and 5% to $10.68 for the three and six months ended June 30, 2014, respectively, compared to the same periods in 2013. Average commission per trade is impacted by customer mix and the different commission rates on various trade types (e.g. equities, options, fixed income, stock plan, exchange-traded funds, mutual funds, forex and cross border). Accordingly, changes in the mix of trade types will impact average commission per trade.

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Fees and Service Charges

Fees and service charges increased12% to $46 million and 27% to $93 million for the three and six months ended June 30, 2014, respectively, compared to the same periods in 2013. The table below shows the components of fees and service charges and the resulting variances (dollars in millions):

	Three Months Ended June 30,				Variance					Six Months Ended June 30,				Variance
					2014 vs. 2013									2014 vs. 2013
	2014		2013		Amount			%		2014		2013		Amount			%
Order flow revenue	$	22	$	18	$	4		22	%	$	47	$	33	$	14		42	%
Mutual fund service fees	6		7		(1		)	(14	)%	11		11		—			0	%
Advisor management fees	6		3		3			100	%	11		6		5			83	%
Foreign exchange revenue	4		4		—			0	%	8		7		1			14	%
Reorganization fees	2		2		—			0	%	4		3		1			33	%
Other fees and service charges	6		7		(1		)	(14	)%	12		13		(1		)	(8	)%
Total fees and service charges	$	46	$	41	$	5		12	%	$	93	$	73	$	20		27	%

The increases in fees and services charges for the three and six months ended June 30, 2014, compared to the same periods in 2013, were driven primarily by increased order flow revenue as a result of increased trading volumes and as E*TRADE Securities began routing all of its order flow to third parties following the sale of G1 Execution Services, LLC which was completed on February 10, 2014. In addition, advisor management fees increased, driven by assets in managed accounts within our retirement, investing and savings products, which were $2.9 billion at June 30, 2014, compared to $1.8 billion at June 30, 2013.

Principal Transactions

Principal transactionsdecreased77% to $10 million for the six months ended June 30, 2014 compared to the same period in 2013. There was no principal transactions revenue for the three months ended June 30, 2014. Principal transactions were derived from our market making business in which we acted as a market-maker for our brokerage customers’ orders as well as orders from third party customers. On February 10, 2014, we completed the sale of the market making business to an affiliate of Susquehanna International Group, LLP and no longer generate principal transactions revenue.

Gains on Loans and Securities, Net

Gains on loans and securities, netdecreased67% to $7 million and 41% to $22 million for the three and six months endedJune 30, 2014, respectively, compared to the same periods in 2013.The table below shows the activity and resulting variances (dollars in millions):

	Three Months Ended June 30,					Variance					Six Months Ended June 30,					Variance
						2014 vs. 2013										2014 vs. 2013
	2014			2013		Amount			%		2014			2013		Amount			%
Gains on loans, net	$	7		$	—	$	7		*		$	7		$	—	$	7		*
Gains on available-for-sale securities, net	3			18		(15		)	(83	)%	22			34		(12		)	(35	)%
Hedge ineffectiveness	(3		)	3		(6		)	*		(7		)	3		(10		)	*
Gains on securities, net	—			21		(21		)	(100	)%	15			37		(22		)	(59	)%
Gains on loans and securities, net	$	7		$	21	$	(14	)	(67	)%	$	22		$	37	$	(15	)	(41	)%

* Percentage not meaningful.

During the second quarter of 2014, we recognized a gain of $7 million on the sale of one- to four-family loans modified as TDRs. Gains on loans and securities, net for the six months ended June 30, 2014 also included a $6 million gain recognized on the sale of our remaining $17 million in amortized cost of available-for-sale non-agency CMOs in the first quarter of 2014.

Provision for Loan Losses

Provision for loan losses decreased74% to $12 million and 82% to $16 million for the three and six months ended June 30, 2014, respectively, compared to the same periods in 2013.The decrease in provision for loan losses was driven

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primarily by improving economic conditions, as evidenced by the lower levels of delinquent loans in the one- to four-family and home equity loan portfolios, lower net charge-offs, home price improvement and loan portfolio run-off for the six months ended June 30, 2014. Provision for loan losses also included $11 million and $13 million of benefits recognized from settlements with a third party mortgage originator during the six months ended June 30, 2014 and 2013, respectively.

Operating Expense

The components of operating expense and the resulting variances are as follows (dollars in millions):

	Three Months Ended June 30,				Variance					Six Months Ended June 30,				Variance
					2014 vs. 2013									2014 vs. 2013
	2014		2013		Amount			%		2014		2013		Amount			%
Compensation and benefits	$	99	$	86	$	13		15	%	$	197	$	182	$	15		8	%
Advertising and market development	33		23		10			43	%	67		60		7			12	%
Clearing and servicing	23		31		(8		)	(26	)%	51		63		(12		)	(19	)%
FDIC insurance premiums	19		25		(6		)	(24	)%	43		54		(11		)	(20	)%
Professional services	28		19		9			47	%	52		36		16			44	%
Occupancy and equipment	19		18		1			6	%	37		36		1			3	%
Communications	18		19		(1		)	(5	)%	36		37		(1		)	(3	)%
Depreciation and amortization	20		23		(3		)	(13	)%	41		46		(5		)	(11	)%
Amortization of other intangibles	6		6		—			0	%	11		12		(1		)	(8	)%
Impairment of goodwill	—		142		(142		)	*		—		142		(142		)	*
Facility restructuring and other exit activities	1		10		(9		)	(90	)%	4		17		(13		)	(76	)%
Other operating expenses	18		12		6			50	%	35		24		11			46	%
Total operating expense	$	284	$	414	$	(130	)	(31	)%	$	574	$	709	$	(135	)	(19	)%

Compensation and Benefits

Compensation and benefits increased 15% to $99 million and 8% to $197 million for the three and six months ended June 30, 2014, respectively, compared to the same periods in 2013. The increase resulted primarily from increased salaries expense due to increased headcount when compared to the same periods in 2013.

Advertising and Market Development

Advertising and market development increased 43% to $33 million and 12% to $67 million for the three and six months ended June 30, 2014, respectively, compared to the same periods in 2013. These increases resulted primarily from the launch of Type E*, our new brand platform that was launched during the first half of 2014, in addition to lower advertising and market development expenses during the three and six months ended June 30, 2013 driven by expense reduction initiatives in the prior periods.

Clearing and Servicing

Clearing and servicing decreased 26% to $23 million and 19% to $51 million for the three and six months ended June 30, 2014, respectively, compared to the same periods in 2013. The decrease resulted primarily from lower servicing fees when compared to the same periods in 2013 as the loan portfolio continues to run-off. In addition, clearing fees decreased as a result of the sale of the market making business which was partially offset by costs associated with an increase in trading volumes, when compared to the same periods in 2013.

FDIC Insurance Premiums

FDIC insurance premiums decreased 24% to $19 million and 20% to $43 million for the three and six months ended June 30, 2014, respectively, compared to the same periods in 2013. The decrease for the three and six months ended June 30, 2014 was due to the sale of $0.8 billion of our one- to four-family loans modified as TDRs as well as continued improvement and quality of our balance sheet, improving capital ratios and overall risk profile when compared to the same periods in 2013. TDRs are considered underperforming assets and are assessed at a higher rate in the FDIC insurance calculation. We expect savings as a result of the sale as well as the continued improvement and quality of the balance sheet and capital ratios to continue in future periods.

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Professional Services

Professional services increased 47% to $28 million and 44% to $52 million for the three and six months ended June 30, 2014, respectively, compared to the same periods in 2013, primarily driven by professional services engagements focused on improving the customer experience and overall product offering and our continued enterprise risk management build-out.

Impairment of Goodwill

Impairment of goodwill was $142 million for the second quarter of 2013. This impairment represented the entire amount of goodwill associated with the market making business, which was sold in the first quarter of 2014. There were no similar charges during the six months ended June 30, 2014.

Facility Restructuring and Other Exit Activities

Facility restructuring and other exit activities were $1 million and $4 million for the three and six months ended June 30, 2014, respectively, compared to $10 million and $17 million for the same periods in 2013. The costs in 2014 were driven by severance costs incurred primarily related to our exit of the market making business and were partially offset by the $4 million gain on the sale of that business, which was completed on February 10, 2014. The costs in 2013 were driven primarily by severance costs incurred as part of the expense reduction initiatives in the prior periods.

Other Operating Expenses

Other operating expenses increased 50% to $18 million and 46% to $35 million for the three and six months ended June 30, 2014, respectively, compared to the same periods in 2013. The increases were driven primarily by a legal accrual reversal of $3 million in the second quarter of 2013 which offset the other operating expenses for the three and six months ended June 30, 2013.

Other Income (Expense)

Other income (expense) increased 11% to $30 million and 29% to $67 million for the three and six months ended June 30, 2014, respectively, compared to the same periods in 2013 as shown in the following table (dollars in millions):

	Three Months Ended June 30,						Variance					Six Months Ended June 30,						Variance
							2014 vs. 2013											2014 vs. 2013
	2014			2013			Amount			%		2014			2013			Amount			%
Corporate interest expense	$	(29	)	$	(28	)	$	(1	)	4	%	$	(57	)	$	(57	)	$	—		0	%
Losses on early extinguishment of debt	—			—			—			*		(12		)	—			(12		)	*
Equity in income (loss) of investments and other	(1		)	1			(2		)	*		2			5			(3		)	(60	)%
Total other income (expense)	$	(30	)	$	(27	)	$	(3	)	11	%	$	(67	)	$	(52	)	$	(15	)	29	%

* Percentage not meaningful.

Total other income (expense) primarily consisted of corporate interest expense of $29 million and $57 million for the three and six months ended June 30, 2014, respectively, compared to $28 million and $57 million for the same periods in 2013. In addition, during the six months ended June 30, 2014 we recognized $12 million of losses on early extinguishment of debt as a result of the early extinguishment of $100 million in repurchase agreements.

Income Tax Expense

Income tax expense was $43 million and$90 million for the three and six months ended June 30, 2014, respectively, compared to income tax expense of $7 million and $29 million for the same periods in 2013. The effective tax rate was 38% and 35% for the three and six months ended June 30, 2014, respectively, compared to (14)% and 301% for the same periods in 2013. Income tax expense for the six months ended June 30, 2014 included $5 million of benefit related to a recent change to the New York state tax code and its impact on state deferred taxes. Excluding the impact of the recent change to the New York state tax code, our effective tax rate for the six months ended June 30, 2014 would have been 37%, calculated in the following table (dollars in millions):

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	For the Six Months Ended June 30, 2014
	Pre-tax Income		Tax Expense (Benefit)			Tax Rate
Taxes and tax rate before the impact of the change in New York state tax code	$	256	$	95		37	%
Impact of the change in the New York State tax code			(5		)
Income taxes and tax rate as reported	$	256	$	90		35	%

At the end of June 2013, we decided to exit the market making business, and as a result recorded $142 million in goodwill impairment during the six months ended June 30, 2013. The $142 million goodwill impairment charge associated with the market making business was non-deductible for tax purposes. In addition, the overall state apportionment increased significantly as a result of the exit of the market making business and we expected our state taxable income to increase in future periods. We expected to utilize net operating losses in California; therefore we recognized a tax benefit of $26 million during the six months ended June 30, 2013, the majority of which consisted of releasing valuation allowances for net operating losses, research and development credits and revaluation of other deferred tax assets relating to California. Without the exit of the market making business, the effective tax rate for the three and six months ended June 30, 2013 would have been 35% and 36%, respectively, calculated in the following table (dollars in millions):

	For the Three Months Ended June 30, 2013								For the Six Months Ended June 30, 2013
	Pre-tax Income			Tax Expense (Benefit)			Tax Rate		Pre-tax Income			Tax Expense			Tax Rate
Taxes and tax rate before impact of exit of market making business	$	95		$	33		35	%	$	152		$	55		36	%
Impact of exit of market making business:
Goodwill impairment charge	(142		)	—					(142		)	—
State apportionment change	—			(26		)			—			(26		)
Income taxes and tax rate as reported	$	(47	)	$	7		(14	)%	$	10		$	29		301	%

Valuation Allowance

We are required to establish a valuation allowance for deferred tax assets and record a corresponding charge to income tax expense if it is determined, based on evaluation of available evidence at the time the determination is made, that it is more likely than not that some or all of the deferred tax assets will not be realized. If we were to conclude that a valuation allowance was required, the resulting loss could have a material adverse effect on our financial condition and results of operations. As of June 30, 2014, we did not establish a valuation allowance against our federal deferred tax assets as we believe that it is more likely than not that all of these assets will be realized. More than half of our existing federal deferred tax assets are not related to net operating losses and therefore, have no expiration date. We expect to utilize the majority of our existing federal deferred tax assets within the next five years.

SEGMENT RESULTS REVIEW

We report operating results in two segments: 1) trading and investing; and 2) balance sheet management. Trading and investing includes retail brokerage products and services; investor-focused banking products; and corporate services. Balance sheet management includes the management of asset allocation; loans previously originated by the Company or purchased from third parties; deposits and customer payables; and credit, liquidity and interest rate risk for the Company as described in the Risk Management section. Costs associated with certain functions that are centrally-managed are separately reported in a corporate/other category. For more information on our segments, see Note 14—Segment Information in Item 1. Consolidated Financial Statements (Unaudited).

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Trading and Investing

The following table summarizes trading and investing financial information and key customer activity metrics as of and for the three and six months ended June 30, 2014 and 2013 (dollars in millions, except for key metrics):

	Three Months Ended June 30,						Variance					Six Months Ended June 30,						Variance
							2014 vs. 2013											2014 vs. 2013
	2014			2013			Amount			%		2014			2013			Amount			%
Net operating interest income	$	151		$	133		$	18		14	%	$	294		$	267		$	27		10	%
Commissions	105			106			(1		)	(1	)%	233			207			26			13	%
Fees and service charges	45			40			5			13	%	92			72			20			28	%
Principal transactions	—			21			(21		)	*		10			43			(33		)	(77	)%
Other revenues	8			8			—			0	%	16			16			—			0	%
Total net revenue	309			308			1			0	%	645			605			40			7	%
Total operating expense	196			318			(122		)	(38	)%	391			517			(126		)	(24	)%
Trading and investing income	$	113		$	(10	)	$	123		*		$	254		$	88		$	166		189	%
Key Customer Activity Metrics:
DARTs	155,194			149,670			5,524			4	%	176,224			149,122			27,102			18	%
Average commission per trade	$	10.72		$	11.10		$	(0.38	)	(3	)%	$	10.68		$	11.20		$	(0.52	)	(5	)%
Margin receivables (dollars in billions)	$	7.3		$	6.0		$	1.3		22	%	$	7.3		$	6.0		$	1.3		22	%
End of period brokerage accounts	3,102,966			2,962,731			140,235			5	%	3,102,966			2,962,731			140,235			5	%
Net new brokerage accounts	33,005			29,506			3,499			12	%	104,907			59,540			45,367			76	%
Annualized brokerage account attrition rate	8.6		%	8.4		%	0.2		%	*		8.0		%	8.5		%	(0.5		)%	*
Customer assets (dollars in billions)	$	280.9		$	220.1		$	60.8		28	%	$	280.9		$	220.1		$	60.8		28	%
Net new brokerage assets (dollars in billions)	$	1.0		$	1.7		$	(0.7	)	(41	)%	$	5.1		$	4.8		$	0.3		6	%
Brokerage related cash (dollars in billions)	$	40.0		$	35.6		$	4.4		12	%	$	40.0		$	35.6		$	4.4		12	%

* Percentage not meaningful.

The trading and investing segment offers products and services to individual retail investors, generating revenue from these brokerage and banking relationships and from corporate services activities. This segment currently generates four main sources of revenue: net operating interest income; commissions; fees and service charges; and other revenues. Net operating interest income is generated primarily from margin receivables and from a deposit transfer pricing arrangement with the balance sheet management segment. The balance sheet management segment utilizes deposits and customer payables and compensates the trading and investing segment via a market-based transfer pricing arrangement. This compensation is reflected in segment results as operating interest income for the trading and investing segment and operating interest expense for the balance sheet management segment, and is eliminated in consolidation. Other revenues include results from providing software and services for managing equity compensation plans from corporate customers, as we ultimately service retail investors through these corporate relationships.

Trading and investing income increased to $113 million and $254 million for the three and six months ended June 30, 2014, respectively, compared to a loss of $10 million and income of $88 million, respectively, for the same periods in 2013. We continued to generate net new brokerage accounts, ending the second quarter of 2014 with 3.1 million accounts. Brokerage related cash, which is one of our most profitable sources of funding, increased by $4.4 billion to $40.0 billion when compared to the same period in 2013.

Trading and investing, net operating interest income increased 14% to $151 million and 10% to $294 million for the three and six months ended June 30, 2014, respectively, driven primarily by an increase in margin receivables when compared to the same periods in 2013.

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Trading and investing commissions revenue decreased 1% to $105 million and increased 13% to $233 million for the three and six months ended June 30, 2014, respectively, compared to the same periods in 2013. The decrease for the three months ended June 30, 2014 was primarily due to a decrease in the average commission per trade of 3% to $10.72, which was partially offset by an increase in DARTs of 4% to 155,194 compared to the same period in 2013. This increase for the six months ended June 30, 2014 was primarily due to an increase in DARTs of 18% to 176,224, partially offset by a decrease in average commission per trade of 5% to $10.68 compared to the same period in 2013.

Trading and investing fees and service charges increased 13% to $45 million and 28% to $92 million for the three and six months ended June 30, 2014, respectively, compared to the same periods in 2013. The increase in fees and services charges was driven primarily by increased order flow revenue as a result of increased trading volumes and as E*TRADE Securities began routing all of its order flow to third parties following the sale of G1 Execution Services, LLC which was completed on February 10, 2014. In addition, advisor management fees increased driven by assets in managed accounts within our retirement, investing and savings products, which were $2.9 billion at June 30, 2014, compared to $1.8 billion at June 30, 2013.

Trading and investing principal transactionsdecreased77% to $10 million for the six months ended June 30, 2014 compared to the same period in 2013. There was no principal transactions revenue for the three months ended June 30, 2014. Principal transactions were derived from our market making business in which we acted as a market-maker for our brokerage customers’ orders as well as orders from third party customers. On February 10, 2014, we completed the sale of the market making business to an affiliate of Susquehanna and no longer generate principal transactions revenue.

Trading and investing operating expense decreased 38% to $196 million and 24% to $391 million for the three and six months ended June 30, 2014 compared to the same periods in 2013. The decrease was driven by higher operating expenses in the prior periods as a result of $142 million in impairment of goodwill associated with the market making business, which was recognized in the second quarter of 2013.

As of June 30, 2014, we had approximately 3.1 million brokerage accounts, 1.2 million stock plan accounts and 0.4 million banking accounts. For the three months ended June 30, 2014 and 2013, our brokerage products contributed 79% and our banking products contributed 21% for both periods, of total trading and investing net revenue. For the six months ended June 30, 2014 and 2013, our brokerage products contributed 80% and 78%, respectively, and our banking products contributed 20% and 22%, respectively, of total trading and investing net revenue.

Balance Sheet Management

The following table summarizes balance sheet management financial information and key financial metrics as of and for the three and six months ended June 30, 2014 and 2013 (dollars in millions):

	Three Months Ended June 30,					Variance					Six Months Ended June 30,					Variance
						2014 vs. 2013										2014 vs. 2013
	2014		2013			Amount			%		2014		2013			Amount			%
Net operating interest income	$	119	$	110		$	9		8	%	$	242	$	217		$	25		12	%
Fees and service charges	1		1			—			0	%	1		1			—			0	%
Gains on loans and securities, net	7		21			(14		)	(67	)%	22		37			(15		)	(41	)%
Net impairment	—		(1		)	1			*		—		(2		)	2			*
Other revenues	2		1			1			100	%	3		2			1			50	%
Total net revenue	129		132			(3		)	(2	)%	268		255			13			5	%
Provision for loan losses	12		46			(34		)	(74	)%	16		89			(73		)	(82	)%
Total operating expense	36		42			(6		)	(14	)%	77		92			(15		)	(16	)%
Balance sheet management income	$	81	$	44		$	37		84	%	$	175	$	74		$	101		136	%
Key Financial Metrics:
Special mention loan delinquencies	$	155	$	269		$	(114	)	(42	)%	$	155	$	269		$	(114	)	(42	)%
Allowance for loan losses	$	401	$	451		$	(50	)	(11	)%	$	401	$	451		$	(50	)	(11	)%

* Percentage not meaningful.

The balance sheet management segment generates revenue from managing loans previously originated by the Company or purchased from third parties, as well as utilizing deposits and customer payables to generate additional net operating interest income. The balance sheet management segment utilizes deposits and customer payables from the trading and

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investing segment, wholesale borrowings and proceeds from loan pay-downs to invest in available-for-sale and held-to-maturity securities. Net operating interest income is generated from interest earned on available-for-sale and held-to-maturity securities and loans receivable, net of interest paid on wholesale borrowings and on a deposit transfer pricing arrangement with the trading and investing segment. The balance sheet management segment utilizes deposits and customer payables and compensates the trading and investing segment via a market-based transfer pricing arrangement. This compensation is reflected in segment results as operating interest income for the trading and investing segment and operating interest expense for the balance sheet management segment and is eliminated in consolidation.

The balance sheet management segment income increased 84% to $81 million and 136% to $175 million for the three and six months ended June 30, 2014, respectively, compared to the same periods in 2013. The increases in balance sheet management income were primarily due to decreases in provision for loan losses of 74% to $12 million and 82% to $16 million for the three and six months ended June 30, 2014, respectively, compared to the same periods in 2013.

The balance sheet management net operating interest income increased 8% to $119 million and 12% to $242 million for the three and six months ended June 30, 2014, respectively, compared to the same periods in 2013. The increases were driven by both the growth in average balances and increases in yields of available-for-sale and held-to-maturity securities partially offset by decreases in average loans during both the three and six months ended June 30, 2014 compared to the same periods in 2013.

Gains on loans and securities, net decreased 67% to $7 million and 41% to $22 million for the three and six months ended June 30, 2014, respectively, compared to the same periods in 2013. Gains on loans and securities, net for the three months ended June 30, 2014 included a $7 million gain on the sale of one- to four-family loans modified as TDRs. Additionally, the six months ended June 30, 2014 included a $6 million gain recognized on the sale of our remaining $17 million in amortized cost of available-for-sale non-agency CMOs in the first quarter of 2014.

Provision for loan losses decreased 74% to $12 million and 82% to $16 million for the three and six months ended June 30, 2014, respectively, compared to the same periods in 2013. The decreases in provision for loan losses were driven primarily by improving economic conditions, as evidenced by the lower levels of delinquent loans in the one- to four-family and home equity loan portfolios, lower net charge-offs, home price improvement and loan portfolio run-off.

Total balance sheet management operating expense decreased 14% to $36 million and 16% to $77 million for the three and six months ended June 30, 2014, respectively, compared to the same periods in 2013. The decrease in operating expense for the three and six months ended June 30, 2014 resulted primarily from lower FDIC insurance premiums and reduced servicing expenses due to lower loan balances when compared to the same period in 2013.

Corporate/Other

The following table summarizes corporate/other financial information for the three and six months ended June 30, 2014 and 2013 (dollars in millions):

	Three Months Ended June 30,						Variance					Six Months Ended June 30,						Variance
							2014 vs. 2013											2014 vs. 2013
	2014			2013			Amount			%		2014			2013			Amount			%
Total net revenue	$	—		$	—		$	—		*		$	—		$	—		$	—		*
Compensation and benefits	27			22			5			23	%	51			43			8			19	%
Professional services	12			10			2			20	%	24			18			6			33	%
Occupancy and equipment	4			2			2			100	%	7			3			4			133	%
Communications	1			1			—			0	%	1			1			—			0	%
Depreciation and amortization	4			4			—			0	%	9			8			1			13	%
Facility restructuring and other exit activities	1			10			(9		)	(90	)%	4			17			(13		)	(76	)%
Other operating expenses	3			5			(2		)	(40	)%	10			10			—			*
Total operating expense	52			54			(2		)	(4	)%	106			100			6			6	%
Operating loss	(52		)	(54		)	2			(4	)%	(106		)	(100		)	(6		)	6	%
Total other income (expense)	(30		)	(27		)	(3		)	11	%	(67		)	(52		)	(15		)	29	%
Corporate/other loss	$	(82	)	$	(81	)	$	(1	)	1	%	$	(173	)	$	(152	)	$	(21	)	14	%

* Percentage not meaningful.

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The corporate/other category includes costs that are centrally-managed, technology related costs incurred to support centrally-managed functions, restructuring and other exit activities, corporate debt and corporate investments.

The corporate/other loss before income taxes was $82 million and $173 million for the three and six months ended June 30, 2014, respectively, compared to $81 million and $152 million for the same periods in 2013.

The operating loss decreased 4% to $52 million and increased 6% to $106 million for the three and six months ended June 30, 2014, respectively, compared to the same periods in 2013. The decrease during the three months ended June 30, 2014 was primarily due to lower facility restructuring and other activities expense partially offset by increased compensation and benefits compared to the same period in 2013. The increase during the six months ended June 30, 2014 was primarily due to increased compensation and benefits, professional services and occupancy and equipment partially offset by lower facility restructuring and other exit activities. Facility restructuring and other exit activities for the three and six months ended June 30, 2014 were driven by severance costs incurred primarily related to our exit of the market making business. These costs were partially offset by the $4 million gain on the sale of that business, which was completed on February 10, 2014.

Total other income (expense) primarily consisted of corporate interest expense of $29 million and $57 million for the three and six months ended June 30, 2014, respectively, compared to $28 million and $57 million for the same periods in 2013. In addition, during the six months ended June 30, 2014 we recognized $12 million of losses on early extinguishment of debt as a result of the early extinguishment of $100 million in repurchase agreements.

BALANCE SHEET OVERVIEW

The following table sets forth the significant components of the consolidated balance sheet (dollars in millions):

					Variance
	June 30,		December 31,		2014 vs. 2013
	2014		2013		Amount			%
Assets:
Cash and equivalents	$	1,807	$	1,838	$	(31	)	(2	)%
Segregated cash	1,215		1,066		149			14	%
Securities(1)	24,193		23,773		420			2	%
Margin receivables	7,340		6,353		987			16	%
Loans receivable, net	6,656		8,123		(1,467		)	(18	)%
Investment in FHLB stock	56		61		(5		)	(8	)%
Other(2)	4,481		5,066		(585		)	(12	)%
Total assets	$	45,748	$	46,280	$	(532	)	(1	)%
Liabilities and shareholders’ equity:
Deposits	$	25,084	$	25,971	$	(887	)	(3	)%
Wholesale borrowings(3)	5,033		5,822		(789		)	(14	)%
Customer payables	6,626		6,310		316			5	%
Corporate debt	1,770		1,768		2			0	%
Other liabilities	2,047		1,553		494			32	%
Total liabilities	40,560		41,424		(864		)	(2	)%
Shareholders’ equity	5,188		4,856		332			7	%
Total liabilities and shareholders’ equity	$	45,748	$	46,280	$	(532	)	(1	)%

(1) Includes balance sheet line items available-for-sale and held-to-maturity securities.

(2) Includes balance sheet line items property and equipment, net, goodwill, other intangibles, net and other assets.

(3) Includes balance sheet line items securities sold under agreements to repurchase and FHLB advances and other borrowings.

Segregated Cash

Segregated cash increased by $149 million to $1.2 billion during the six months ended June 30, 2014. The level of cash required to be segregated under federal or other regulations, or segregated cash, is driven largely by customer cash and securities lending balances we hold as a liability in excess of the amount of margin receivables and securities borrowed balances we hold as an asset. The excess represents customer cash that we are required by our regulators to segregate for the exclusive benefit of our brokerage customers.

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Securities

Available-for-sale and held-to-maturity securities are summarized as follows (dollars in millions):

					Variance
	June 30,		December 31,		2014 vs. 2013
	2014		2013		Amount			%
Available-for-sale securities:
Debt securities:
Residential mortgage-backed securities:
Agency mortgage-backed securities and CMOs	$	11,461	$	12,236	$	(775	)	(6	)%
Non-agency CMOs	—		14		(14		)	(100	)%
Total residential mortgage-backed securities	11,461		12,250		(789		)	(6	)%
Other debt securities	1,356		1,342		14			1	%
Total debt securities	12,817		13,592		(775		)	(6	)%
Publicly traded equity securities(1)	20		—		20			*
Total available-for-sale securities	$	12,837	$	13,592	$	(755	)	(6	)%
Held-to-maturity securities:
Agency residential mortgage-backed securities and CMOs	$	9,084	$	8,359	$	725		9	%
Other debt securities	2,272		1,822		450			25	%
Total held-to-maturity securities	$	11,356	$	10,181	$	1,175		12	%
Total securities	$	24,193	$	23,773	$	420		2	%

* Percentage not meaningful.

(1) Publicly traded equity securities consisted of an investment in a mutual fund related to the Community Reinvestment Act.

Securities represented 53% and 51% of total assets at June 30, 2014 and December 31, 2013, respectively. The decrease in available-for-sale securities during the six months ended June 30, 2014 was primarily due to net sales and principal paydowns on agency mortgage-backed securities and CMOs. Additionally, we sold $17 million in amortized cost of available-for-sale non-agency CMOs during the first quarter of 2014 as part of our continued focus to reduce legacy risks. The increase in held-to-maturity securities was a result of the purchase of agency mortgage-backed securities and CMOs and agency debt securities, included in investment securities.

Loans Receivable, Net

Loans receivable, net are summarized as follows (dollars in millions):

							Variance
	June 30,			December 31,			2014 vs. 2013
	2014			2013			Amount			%
One- to four-family	$	3,345		$	4,475		$	(1,130	)	(25	)%
Home equity	3,153			3,454			(301		)	(9	)%
Consumer and other	527			602			(75		)	(12	)%
Unamortized premiums, net	32			45			(13		)	(29	)%
Allowance for loan losses	(401		)	(453		)	52			(11	)%
Total loans receivable, net	$	6,656		$	8,123		$	(1,467	)	(18	)%

Loans receivable, net decreased 18% to $6.7 billion at June 30, 2014 from $8.1 billion at December 31, 2013. This decline was primarily due to the sale of $0.8 billion of our one- to four-family loans modified as TDRs. These loans were transferred to held-for-sale at March 31, 2014 and sold on April 22, 2014. As a result of this transaction, we recorded a charge-off of $42 million related to these one- to four-family loans which drove the majority of the decrease in the allowance for loan losses during the six months endedJune 30, 2014. Additionally, we are continuing our strategy of reducing balance sheet risk by allowing the loan portfolio to pay down, which we plan to do for the foreseeable future.

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Other Assets

Other assets are summarized as follows (dollars in millions):

					Variance
	June 30,		December 31,		2014 vs. 2013
	2014		2013		Amount			%
Property and equipment, net	$	227	$	237	$	(10	)	(4	)%
Goodwill	1,792		1,792		—			—	%
Other intangibles	205		216		(11		)	(5	)%
Other assets:
Deferred tax assets, net	1,056		1,239		(183		)	(15	)%
Deposits paid for securities borrowed	420		536		(116		)	(22	)%
Held-for-sale assets	—		177		(177		)	(100	)%
Other	781		869		(88		)	(10	)%
Total other assets	$	4,481	$	5,066	$	(585	)	(12	)%

Total other assets decreased 12% to $4.5 billion due primarily to decreases in deferred tax assets, deposits paid for securities borrowed and due to the disposition of held-for-sale assets related to our market making business during the six months endedJune 30, 2014. At December 31, 2013, held-for-sale assets were reported in the other assets line item on the consolidated balance sheet, which consisted primarily of $105 million of trading securities and $21 million of other intangibles, net. We completed the sale of the market making business on February 10, 2014. See Note 2—Disposition in Item 1. Consolidated Financial Statements (Unaudited) for additional information on the market making business.

Deposits

Deposits are summarized as follows (dollars in millions):

					Variance
	June 30,		December 31,		2014 vs. 2013
	2014		2013		Amount			%
Sweep deposits	$	19,065	$	19,592	$	(527	)	(3	)%
Complete savings deposits	4,001		4,303		(302		)	(7	)%
Checking deposits	1,089		1,098		(9		)	(1	)%
Other money market and savings deposits	873		914		(41		)	(4	)%
Time deposits	56		64		(8		)	(13	)%
Total deposits	$	25,084	$	25,971	$	(887	)	(3	)%

Deposits represented 62% and 63% of total liabilities at June 30, 2014 and December 31, 2013, respectively. At June 30, 2014, 90% of our customer deposits were covered by FDIC insurance. Deposits provide the benefit of lower interest costs compared with wholesale funding alternatives.

The majority of the deposits balance, specifically sweep deposits, is included in brokerage related cash and reported as a customer activity metric of $40.0 billion and $39.7 billion at June 30, 2014 and December 31, 2013, respectively. The total brokerage related cash balance is summarized as follows (dollars in millions):

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							Variance
	June 30,			December 31,			2014 vs. 2013
	2014			2013			Amount			%
Deposits	$	25,084		$	25,971		$	(887	)	(3	)%
Less: bank related cash(1)	(6,019		)	(6,379		)	360			(6	)%
Customer payables	6,626			6,310			316			5	%
Customer assets held by third parties(2)	14,335			13,783			552			4	%
Total brokerage related cash(3)	$	40,026		$	39,685		$	341		1	%

(1) Bank related cash includes complete savings deposits, checking deposits, other money market and savings deposits and time deposits.

(2) Customer assets held by third parties are not reflected on our 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 the balance sheet with appropriate notification to the third parties.

(3) Increases in brokerage related cash generally indicate that the use of our products and services by existing and new brokerage customers is expanding.

As part of our strategy to strengthen our overall financial and franchise position we have been focused on improving our capital ratios by reducing risk and deleveraging the balance sheet. Our deleveraging strategy included transferring customer deposits to third party institutions. At June 30, 2014, our customers held $14.3 billion of assets at third party institutions, including third party banks and money market funds. Approximately 70% of these off-balance sheet assets resulted from our deleveraging efforts.  While we may take some tactical actions in future periods, we consider our deleveraging initiatives to be complete.

Customer assets held by third parties included $4.4 billion of customer sweep deposits at both June 30, 2014 and December 31, 2013 in the extended insurance sweep deposit account program ("ESDA") that we have in place for brokerage customers. At June 30, 2014, the ESDA program utilized E*TRADE Bank in combination with six additional third party program banks to allow certain customers the ability to insure at least $1,250,000 of the cash they hold in the ESDA. In addition, customer assets held by third parties at June 30, 2014 and December 31, 2013 included $9.9 billion and $9.4 billion, respectively, held in third party money market funds in which our customers can elect to participate.

Wholesale Borrowings

Wholesale borrowings, which consist of securities sold under agreements to repurchase and FHLB advances and other borrowings, are summarized as follows (dollars in millions):

					Variance
	June 30,		December 31,		2014 vs. 2013
	2014		2013		Amount			%
Securities sold under agreements to repurchase	$	3,742	$	4,543	$	(801	)	(18	)%
FHLB advances	$	860	$	851	$	9		1	%
Subordinated debentures	428		428		—			0	%
Other	3		—		3			*
Total FHLB advances and other borrowings	$	1,291	$	1,279	$	12		1	%
Total wholesale borrowings	$	5,033	$	5,822	$	(789	)	(14	)%

* Percentage not meaningful.

Wholesale borrowings represented 12% and 14% of total liabilities at June 30, 2014 and December 31, 2013, respectively. Securities sold under agreements to repurchase and FHLB advances are the primary wholesale funding sources of the Bank. During the six months ended June 30, 2014, total wholesale borrowings decreased by $789 million primarily due to the scheduled expiration of $600 million of securities sold under agreements to repurchase during the second quarter of 2014. We also terminated $100 millionof securities sold under agreements to repurchase during the first quarter of 2014, which resulted in a $12 million loss on early extinguishment of debt.

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Corporate Debt

Corporate debt by type is shown as follows (dollars in millions):

	Face Value		Discount			Net
June 30, 2014
Interest-bearing notes:
6 3/4% Notes, due 2016	$	435	$	(3	)	$	432
6% Notes, due 2017	505		(3		)	502
6 3/8% Notes, due 2019	800		(6		)	794
Total interest-bearing notes	1,740		(12		)	1,728
Non-interest-bearing debt:
0% Convertible debentures, due 2019	42		—			42
Total corporate debt	$	1,782	$	(12	)	$	1,770

	Face Value		Discount			Net
December 31, 2013
Interest-bearing notes:
6 3/4% Notes, due 2016	$	435	$	(4	)	$	431
6% Notes, due 2017	505		(4		)	501
6 3/8% Notes, due 2019	800		(6		)	794
Total interest-bearing notes	1,740		(14		)	1,726
Non-interest-bearing debt:
0% Convertible debentures, due 2019	42		—			42
Total corporate debt	$	1,782	$	(14	)	$	1,768

Other Liabilities

Other liabilities increased 32% to $2.0 billion due primarily to an increase in deposits received for securities loaned of $663 million to $1.7 billion at June 30, 2014.

Shareholders’ Equity

The activity in shareholders’ equity during the six months ended June 30, 2014 is summarized as follows (dollars in millions):

	Common Stock / Additional Paid-In Capital		Accumulated Deficit / Other Comprehensive Loss			Total
Beginning balance, December 31, 2013	$	7,331	$	(2,475	)	$	4,856
Net income	—		166			166
Net change from available-for-sale securities	—		149			149
Net change from cash flow hedging instruments	—		9			9
Other(1)	8		—			8
Ending balance, June 30, 2014	$	7,339	$	(2,151	)	$	5,188

(1) Other includes conversions of convertible debt, employee share-based compensation and changes in accumulated other comprehensive loss from foreign currency translation.

LIQUIDITY AND CAPITAL RESOURCES

We have established liquidity and capital policies to support the successful execution of our business strategies, while ensuring ongoing and sufficient liquidity through the business cycle. We believe liquidity is of critical importance to the Company and especially important within E*TRADE Bank. The objective of our policies is to ensure that we can meet our corporate and banking liquidity needs under both normal operating conditions and under periods of stress in the financial markets.

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Our corporate liquidity needs are primarily driven by the amount of principal and interest due on our corporate debt as well as any capital needs at E*TRADE Bank. Our banking liquidity needs are driven primarily by the level and volatility of our customer deposits. Management maintains a set of liquidity sources and monitors certain business trends and market metrics closely in an effort to ensure we have sufficient liquidity and to avoid dependence on other more expensive sources of funding.

Management believes the following sources of liquidity are of critical importance in maintaining ample funding for liquidity needs: Corporate cash, Bank cash, deposits and unused FHLB borrowing capacity. Management believes that within deposits, sweep deposits are of particular importance as they are the most stable source of liquidity for E*TRADE Bank when compared to non-sweep deposits. While in recent periods we have transferred customer sweep deposits to third party banks that participate in our ESDA program, we maintain the ability to bring the majority of these off-balance sheet deposits back to E*TRADE Bank with appropriate notification to the third party program banks. In addition, certain customer payables and sweep deposits were transferred to third party money market funds. At June 30, 2014, we had $4.4 billion and $9.9 billion of customer deposits at third party banks and third party money market funds, respectively. We continually assess our liquidity position with respect to our ESDA program with the third party banks, and maintain additional sources of liquidity outside of deposits through other programs that are available to us. Refer to Other Sources of Liquidity within this section for additional information on those programs.

Capital is generated primarily through the business operations of the trading and investing and balance sheet management segments, which are primarily contained within E*TRADE Bank; therefore, we believe a key indicator of the capital generated or used in our business operations is the level of regulatory capital in E*TRADE Bank. At June 30, 2014, E*TRADE Bank’s Tier 1 leverage ratio was 10.2%, an increase from 9.5% at December 31, 2013. We have been focused on improving the Tier 1 leverage ratio at E*TRADE Bank through continued earnings and deleveraging the balance sheet by a reduction in wholesale borrowings, retail deposits and customer payables. While we may take some tactical actions in future periods, we consider our deleveraging initiatives to be complete within E*TRADE Bank. We are now focused on continuing to generate capital through earnings.

We submitted an initial long-term capital plan to the OCC and Federal Reserve during the second quarter of 2012. The plan included: our five-year business strategy; forecasts of our business results and capital ratios; capital distribution plans in current and adverse operating conditions; and internally developed stress tests. During the third quarter of 2012, we received initial feedback from our regulators on this plan and we believe that key elements of this plan, specifically reducing risk, deleveraging the balance sheet and the development of an enterprise risk management function, are critical. We submitted an updated long-term capital plan to the OCC and Federal Reserve in February 2013, which included the key elements outlined in the initial plan as well as the progress made during 2012 on those key elements. We believe we have made important progress on our long-term capital plan, as evidenced by the $150 million in dividends that our regulators approved from E*TRADE Bank in the first half of 2014 and $175 million in dividends approved during 2013. We plan to request a similar dividend each quarter over the near term up to the level of E*TRADE Bank's net income from the previous quarter, while continuing an active and ongoing dialogue with our regulators to ensure our execution of the plan is consistent with their expectations.

Consolidated Cash and Equivalents

The consolidated cash and equivalents balance decreased by $31 million to $1.8 billion at June 30, 2014 when compared to December 31, 2013. The majority of this balance is cash held in regulated subsidiaries, primarily the Bank, outlined as follows (dollars in millions):

	June 30,		December 31,		June 30,
	2014		2013		2013
Corporate cash	$	570	$	415	$	251
Bank cash(1)	1,215		1,402		768
International brokerage and other cash	22		21		26
Total consolidated cash and equivalents	$	1,807	$	1,838	$	1,045

(1) Bank cash included $657 million, $507 million and $377 million of cash at June 30, 2014, December 31, 2013 and June 30, 2013, respectively, held by E*TRADE Clearing LLC and E*TRADE Securities LLC, which are broker-dealer subsidiaries of E*TRADE Bank.

Corporate cash is the primary source of liquidity at the parent company. We define corporate cash as 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. We believe corporate cash is a useful measure of the parent company’s liquidity as it is the primary source of capital above and beyond the capital deployed in our regulated subsidiaries. Corporate cash can fluctuate in any given quarter and is impacted primarily by tax settlements, approval and timing of subsidiary dividends, debt service costs and other overhead cost sharing arrangements. Corporate cash ended the second quarter of 2014 at $570 million, which included the $76 million cash proceeds from the sale of the market making business in the first quarter of 2014 and the $150 million in dividends from E*TRADE Bank to the parent company in the first half of 2014. We target corporate cash to be at least two times our

21

annual debt service, or approximately $220 million. From the level of corporate cash at June 30, 2014, we expect this balance to grow assuming we continue to receive regulatory approval for future dividends. At June 30, 2014 the parent company had $310 million in net deferred tax assets, which will ultimately become sources of corporate cash as the parent’s subsidiaries reimburse the parent for the use of its deferred tax assets. However, we would expect corporate cash to decrease from the current level if we begin to pay down corporate debt.

Liquidity Available from Subsidiaries

Liquidity available to us from our subsidiaries is limited by regulatory requirements. In addition, neither E*TRADE Bank nor its subsidiaries may pay dividends to the parent company without approval from its regulators. Loans by E*TRADE Bank to the parent company and its other non-bank subsidiaries are subject to various quantitative, arm’s length, collateralization and other requirements.

E*TRADE Bank is subject to capital requirements determined by its primary regulators. At June 30, 2014 and December 31, 2013, E*TRADE Bank had $2.2 billion and $1.9 billion, respectively, of capital in excess of the amount needed to meet the regulatory minimum Tier 1 leverage ratio required to be considered "well capitalized."

Our broker-dealer subsidiaries are subject to capital requirements determined by their respective regulators. At June 30, 2014 and December 31, 2013, all of our brokerage subsidiaries met their minimum net capital requirements. Our broker-dealer subsidiaries had excess net capital of $968 million at June 30, 2014, an increase of $95 million from $873 million at December 31, 2013. The excess net capital of the broker-dealer subsidiaries at June 30, 2014 included $593 million and $360 million of excess net capital at E*TRADE Clearing LLC and E*TRADE Securities LLC, respectively, which are subsidiaries of E*TRADE Bank and these amounts are also included in the excess capital of E*TRADE Bank.

Financial Regulatory Reform Legislation and Basel III Framework

The Dodd-Frank Act requires all companies, including savings and loan holding companies, that directly or indirectly control an insured depository institution to serve as a source of strength for the institution. The implementation of holding company capital requirements for Tier 1 leverage, Tier 1 risk-based capital and total risk-based capital ratios will impact us as the parent company was not previously subject to regulatory capital requirements. These requirements will become effective for us on January 1, 2015, subject to a phase-in period for certain requirements over several years, as further explained below. Additionally, we monitor our Tier 1 common ratio, which has no mandated minimum or "well capitalized" standard. The Tier 1 common ratio is defined as 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. We believe these capital ratios are an important measure of capital strength and accordingly we manage our capital against the current capital ratios that apply to bank holding companies in preparation for the application of these requirements.

The Tier 1 leverage, Tier 1 risk-based capital, total risk-based capital and Tier 1 common ratios are non-GAAP measures as the parent company is not yet held to the Tier 1 leverage, Tier 1 risk-based capital and total risk-based capital regulatory capital requirements and as the Tier 1 common ratio is not a regulatory capital ratio. The Tier 1 leverage, Tier 1 risk-based capital, total risk-based capital and Tier 1 common ratios are calculated as follows (dollars in millions):

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	June 30,			December 31,			June 30,
	2014			2013			2013
Shareholders’ equity	$	5,188		$	4,856		$	4,761
Deduct:
Losses in other comprehensive income on available-for-sale debt securities and cash flow hedges, net of tax	(300		)	(459		)	(445		)
Goodwill and other intangible assets, net of deferred tax liabilities	1,626			1,654			1,704
Disallowed servicing assets and deferred tax assets	1,097			1,185			1,253
Tier 1 common	2,765			2,476			2,249
Add:
Qualifying restricted core capital elements (TRUPs)(1)	433			433			433
Tier 1 capital	3,198			2,909			2,682
Add:
Allowable allowance for loan losses	221			228			235
Total capital	$	3,419		$	3,137		$	2,917
Total average assets	$	45,598		$	46,038		$	44,919
Deduct:
Goodwill and other intangible assets, net of deferred tax liabilities	1,626			1,654			1,704
Subtotal	43,972			44,384			43,215
Deduct:
Disallowed servicing assets and deferred tax assets	1,097			1,185			1,253
Average total assets for leverage capital purposes	$	42,875		$	43,199		$	41,962
Total risk-weighted assets(2)	$	17,510		$	17,992		$	18,502
Tier 1 leverage ratio (Tier 1 capital / Average total assets for leverage capital purposes)	7.5		%	6.7		%	6.4		%
Tier 1 capital / Total risk-weighted assets	18.3		%	16.2		%	14.5		%
Total capital / Total risk-weighted assets	19.5		%	17.4		%	15.8		%
Tier 1 common ratio (Tier 1 common / Total risk-weighted assets)	15.8		%	13.8		%	12.2		%

(1) The Company included 100% of its trust preferred securities ("TRUPs") in E*TRADE Financial's Tier 1 capital, as the final ruling issued in July 2013 by the regulatory agencies has the phase-out of TRUPs beginning in 2015 for the Company. If the TRUPs phase-out had been implemented, E*TRADE Financial's Tier 1 leverage ratio would have been 6.5% at June 30, 2014.

(2) 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.

At June 30, 2014, our Tier 1 leverage ratio was approximately 7.5% compared to the minimum ratio required to be "well capitalized" of 5%, the Tier 1 risk-based capital ratio was approximately 18.3% compared to the minimum ratio required to be "well capitalized" of 6%, and the total risk-based capital ratio was approximately 19.5% compared to the minimum ratio required to be "well capitalized" of 10%. Our Tier 1 common ratio was 15.8% at June 30, 2014.

In July 2013, the U.S. Federal banking agencies finalized a rule to implement Basel III in the U.S., a framework for the calculation and components of a banking organization’s regulatory capital and for calculating a banking organization’s risk-weighted assets. Among other things, the Basel III rule raises the minimum thresholds for required capital ratios and revises certain aspects of the definitions and elements of the capital that can be used to satisfy these required minimum ratios. While the rule became effective on January 1, 2014 for certain large banking organizations, most U.S. banking organizations, including the Company and E*TRADE Bank, have until January 1, 2015 to begin complying with this new framework, with the fully phased-in Basel III capital ratios becoming effective in 2019. We expect to be compliant with the Basel III framework, as it is phased in.

We believe the most relevant elements of the final rule to us relate to the risk-weighting of mortgage loans, which will remain unchanged from current rules, and margin receivables, which will qualify for 0% risk-weighting. We believe this change will have a favorable impact on our current capital ratios. In addition, the final rule gives the option for a one-time permanent

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election for the inclusion or exclusion in the calculation of Common Tier 1 capital of unrealized gains (losses) on all available-for-sale debt securities; we currently intend to elect to exclude unrealized gains (losses).

On October 24, 2013, U.S. Federal banking agencies issued an inter-agency notice of proposed rulemaking that would implement a quantitative liquidity coverage ratio ("LCR") that is generally consistent with, and in some respects stricter than, the international LCR standard established by the Basel Committee on Banking Supervision. The purpose of the LCR proposal is to require certain financial institutions to hold minimum amounts of high-quality, liquid assets against projected net cash outflows over a 30-day period of stressed conditions. While the LCR proposal does not apply to companies with less than $50 billion in assets, including the Company, we believe we would be compliant with the LCR standards set out in this proposal.

Stress Testing

On October 9, 2012, the U.S. Federal banking agencies, including the OCC and the Federal Reserve, issued final rules implementing provisions of the Dodd-Frank Act that require banking organizations with total consolidated assets of more than $10 billion but less than $50 billion to conduct annual company-run stress tests, report the results to their primary federal regulator and the Federal Reserve and publish a summary of the results. Under the rules, stress tests must be conducted using certain scenarios (baseline, adverse and severely adverse), which the OCC and Federal Reserve will publish by November 15 of each year.

Under the OCC stress test regulations, E*TRADE Bank is required to conduct stress-testing using the prescribed stress-testing methodologies. The final OCC regulations required E*TRADE Bank to conduct its first stress test using financial statement data as of September 30, 2013, and submit the results prior to March 31, 2014. The results of the first official test will not be public information for banking organizations with total consolidated assets of more than $10 billion but less than $50 billion. E*TRADE Bank, which is under $50 billion, submitted the results of its first stress test prior to March 31, 2014, as required. In the second quarter of 2014 we received feedback from the OCC on our stress test submission. While the details of our results are not public, we can share the high level result that we remained well above the regulatory well-capitalized levels for all capital ratios across all scenarios and we were satisfied with the feedback around our stress testing process, approach and methodologies. E*TRADE Bank will be required to publish summary results of its annual stress test between June 15 and June 30 each year, beginning with its second annual stress test in 2015.

Under the final Federal Reserve regulations, the Company will be required to conduct its first stress test using financial statement data as of September 30, 2016, and it will be required to report the results of its first stress test to the Federal Reserve on or before March 31, 2017, and to disclose a summary of its first stress test results between June 15 and June 30, 2017.

Other Sources of Liquidity

We also maintain uncommitted lines of credit with unaffiliated banks to finance margin lending, with available balances subject to approval when utilized. At June 30, 2014, there were no outstanding balances.

We rely on borrowed funds, from sources such as securities sold under agreements to repurchase and FHLB advances, to provide liquidity for E*TRADE Bank. Our ability to borrow these funds is dependent upon the continued availability of funding in the wholesale borrowings market. In addition, we can borrow from the Federal Reserve Bank’s discount window to meet short-term liquidity requirements, although it is not viewed as a primary source of funding. At June 30, 2014, E*TRADE Bank had approximately $2.8 billion and $0.8 billion in additional collateralized borrowing capacity with the FHLB and the Federal Reserve Bank, respectively. We also have the ability to generate liquidity in the form of additional deposits by raising the yield on our customer deposit account products.

Off-Balance Sheet Arrangements

We enter into various off-balance-sheet arrangements in the ordinary course of business, primarily to meet the needs of our customers and to reduce our own exposure to interest rate risk. These arrangements include firm commitments to extend credit and letters of credit. Additionally, we enter into guarantees and other similar arrangements as part of transactions in the ordinary course of business. For additional information on each of these arrangements, see Item 1. Consolidated Financial Statements (Unaudited).

RISK MANAGEMENT

As a financial services company, our business exposes us to certain risks. The identification, mitigation and management of existing and potential risks are key to effective enterprise risk management. There are certain risks that are inherent to our business (e.g. execution of transactions) whereas other risks will present themselves through the conduct of that business. We seek to monitor and manage our significant risk exposures through a set of board approved limits as well as Key Risk Indicators ("KRIs") or metrics. We have in place a governance framework that regularly reports metrics, major risks and

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exposures to senior management and the Board of Directors. During 2014, we have and will continue to enhance our risk management culture and capabilities.

We developed a Board-approved Risk Appetite Statement ("RAS") which was disseminated to employees and specifies the significant risks we are exposed to and our tolerance of those risks. As described in the RAS, our business exposes us to the following eight major categories of risk:

• Credit Risk—the risk of loss arising from the inability or failure of a borrower or counterparty to meet its credit obligations.

• Interest Rate Risk—the risk of loss of income or value of future income due to changes in interest rates arising from the Company’s balance sheet position. This includes convexity risk, which arises from optionality in the balance sheet, related to prepayments in mortgage assets.

• Liquidity Risk—the potential inability to meet contractual and contingent financial obligations either on- or off-balance sheet, as they come due.

• Market Risk—the risk that asset values or income streams will be adversely affected by changes in market prices.

• Operational Risk—the risk of loss due to failure of people, processes and systems, or damage to physical assets caused by unexpected events.

• Strategic Risk—sometimes called business risk, is the risk of loss of market size, market share or margin in any business.

• Reputational Risk—the potential that negative perceptions regarding our conduct or business practices will adversely affect valuation, profitability, operations or customer base or require costly litigation or other measures.

• Legal, Regulatory and Compliance Risk—the current and prospective risk to earnings or capital arising from violations of, or non-conformance with, laws, rules, regulations, prescribed practices, internal policies, and procedures, or ethical standards.

For additional information about our interest rate risk, see Item 3. Quantitative and Qualitative Disclosures about Market Risk. For additional information on liquidity risk, see Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources. Market risk, operational risk, strategic risk, reputational risk and legal, regulatory and compliance risk and the management of risk are more fully described in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2013. We are also subject to other risks that could impact our business, financial condition, results of operations or cash flows in future periods. See Item 1A. Risk Factors in the Annual Report on Form 10-K for the year ended December 31, 2013.

Credit Risk Management

Credit risk is the risk of loss arising from the inability or failure of a borrower or counterparty to meet its credit obligations. We are exposed to credit risk in the following areas:

• We hold credit risk exposure in our loan portfolio. We are not currently originating or purchasing loans for investment, and we are continuing our strategy of reducing balance sheet risk by allowing the loan portfolio to pay down.

• We extend margin loans to our brokerage customers which exposes us to the risk of credit losses in the event we cannot liquidate collateral during significant market movements.

• We engage in financial transactions with counterparties which expose us to credit losses in the event a counterparty cannot meet its obligations. These financial transactions include our invested cash, securities lending, repurchase and reverse repurchase agreements and derivatives contracts, as well as the settlement of trades.

Credit risk is monitored by our Credit Committee, whose objective is to evaluate current and expected credit performance of the Company’s loans, investments, borrowers and counterparties relative to market conditions and the probable impact on the Company’s financial performance. The Credit Committee establishes credit risk guidelines in accordance with the Company’s strategic objectives and existing policies. The Credit Committee reviews investment and lending activities involving credit risk to ensure consistency with those established guidelines. These reviews involve an analysis of portfolio balances, delinquencies, losses, recoveries, default management and collateral liquidation performance, as well as any credit

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risk mitigation efforts relating to the portfolios. In addition, the Credit Committee reviews and approves credit related counterparties engaged in financial transactions with the Company.

Loss Mitigation on the Loan Portfolio

We have a credit risk operations team that focuses on the mitigation of potential losses in the loan portfolio. Through a variety of strategies, including voluntary line closures, automatically freezing lines on all delinquent accounts, and freezing lines on loans with materially reduced home equity, we have reduced our exposure to open home equity lines from a high of over $7 billion in 2007 to $200 million at June 30, 2014.

We have an initiative to assess our servicing relationships and, where appropriate, consolidate loan servicing or transfer certain mortgage loans to servicers that specialize in managing troubled assets. We completed a servicer transfer of $246 million of mortgage loans as a result of this initiative during the first quarter of 2014. At June 30, 2014, there were $2.3 billion of our mortgage loans held at servicers that specialize in managing troubled assets. We believe this initiative has improved and will continue to improve the credit performance in future periods of the loans transferred compared to the expected credit performance of these same loans if they had not been transferred.

We have a loan modification program that focuses on the mitigation of potential losses in the loan portfolio. We consider modifications in which we make an economic concession to a borrower experiencing financial difficulty a TDR. During the six months ended June 30, 2014 and 2013, we modified $13 million and $59 million, respectively, of one- to four-family loans and $10 million of home equity loans for both periods, in which the modification was considered a TDR. In order to significantly reduce risk on the legacy loan portfolio, at the end of the first quarter in 2014, we decided to sell $0.8 billion of our one- to four-family loans modified as TDRs. These loans were sold on April 22, 2014.

We also process minor modifications on a number of loans through traditional collections actions taken in the normal course of servicing delinquent accounts. These actions typically result in an insignificant delay in the timing of payments; therefore, we do not consider such activities to be economic concessions to the borrowers. At June 30, 2014 and December 31, 2013, we had $29 million and $32 million of mortgage loans, respectively, in which the modification was not considered a TDR due to the insignificant delay in the timing of payments. Approximately 8% and 7% of these loans were classified as nonperforming at June 30, 2014 and December 31, 2013, respectively.

We continue to review the mortgage loan portfolio in order to identify loans to be repurchased by the originator. Our review is primarily focused on identifying loans with violations of transaction representations and warranties or material misrepresentation on the part of the seller. Any loans identified with these deficiencies are submitted to the original seller for repurchase. During the six months ended June 30, 2014 and 2013, we agreed to settlements with third-party mortgage originators specific to loans sold to us by those originators. One-time payments were agreed upon to satisfy in full all pending and future requests with those specific originators. We applied the full amount of payments of $11 million and $13 million for the six months ended June 30, 2014 and 2013, respectively, as recoveries to the allowance for loan losses, resulting in a corresponding reduction to net charge-offs as well as our provision for loan losses. Approximately $19 million of loans were repurchased by or settled with the original sellers during the six months ended June 30, 2014, for a total of $452 million of loans that were repurchased, including global settlements, since we actively started reviewing our purchased loan portfolio beginning in 2008. While we may continue to pursue loans to be repurchased by or settled with the original sellers, we consider this effort to be substantially complete.

CONCENTRATIONS OF CREDIT RISK

Loans

One- to four-family loans include interest-only loans for a five to ten year period, followed by an amortizing period ranging from 20 to 25 years. At June 30, 2014, 42% of our one- to four-family portfolio were not yet amortizing. However, during the trailing twelve months ended June 30, 2014, based on the unpaid principal balance before charge-offs, approximately 14% of these borrowers made voluntary annual principal payments of at least $2,500 and slightly over a third of those borrowers made voluntary annual principal payments of at least $10,000.

The home equity loan portfolio is primarily second lien loans on residential real estate properties, which have a higher level of credit risk than first lien mortgage loans. Approximately 15% of the home equity loan portfolio was in the first lien position and we held both the first and second lien positions in less than 1% of the home equity loan portfolio at June 30, 2014. The home equity loan portfolio consisted of approximately 20% of home equity installment loans and approximately 80% of home equity lines of credit at June 30, 2014.

Home equity installment loans are primarily fixed rate and fixed term, fully amortizing loans that do not offer the option of an interest-only payment. The majority of home equity lines of credit convert to amortizing loans at the end of the draw period, which typically ranges from five to ten years. Approximately 8% of this portfolio will require the borrowers to

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repay the loan in full at the end of the draw period, commonly referred to as "balloon loans." At June 30, 2014, 87% of the home equity line of credit portfolio had not converted from the interest-only draw period and had not begun amortizing. However, during the trailing twelve months ended June 30, 2014, approximately 40% of our borrowers made voluntary annual principal payments of at least $500 on their home equity lines of credit and slightly under half of those borrowers reduced their principal balance by at least $2,500.

The following table outlines when one- to four-family and home equity lines of credit convert to amortizing by percentage of the one- to four-family and home equity line of credit portfolios, respectively, at June 30, 2014:

Period of Conversion to Amortizing Loan	% of One- to Four-Family Portfolio	% of Home Equity Line of Credit Portfolio
Already amortizing	58%	13%
Through December 31, 2014	1%	5%
Year ending December 31, 2015	4%	27%
Year ending December 31, 2016	16%	42%
Year ending December 31, 2017	21%	13%

We track and review factors to predict and monitor credit risk in the mortgage loan portfolio on an ongoing basis. These factors include: loan type, estimated current loan-to-value ("LTV")/combined loan-to-value ("CLTV") ratios, delinquency history, documentation type, borrowers’ current credit scores, housing prices, loan vintage and geographic location of the property. In economic conditions in which housing prices generally appreciate, we believe that loan type, LTV/CLTV ratios, documentation type and credit scores are the key factors in determining future loan performance. In a housing market with declining home prices and less credit available for refinance, we believe the LTV/CLTV ratio becomes a more important factor in predicting and monitoring credit risk. Credit scores and LTV/CLTV are updated on at least a quarterly basis. For the consumer and other loan portfolio, we track and review delinquency status to predict and monitor credit risk on at least a quarterly basis.

The following tables show the distribution of the mortgage loan portfolios by credit risk factor (dollars in millions):

	One- to Four-Family						Home Equity
Current LTV/CLTV(1)	June 30, 2014			December 31, 2013			June 30, 2014			December 31, 2013
<=80%	$	1,823		$	1,912		$	1,164		$	1,142
80%-100%	919			1,365			837			866
100%-120%	378			711			632			736
>120%	225			487			520			710
Total mortgage loans receivable	$	3,345		$	4,475		$	3,153		$	3,454
Average estimated current LTV/CLTV (2)	81		%	90		%	94		%	98		%
Average LTV/CLTV at loan origination (3)	71		%	72		%	80		%	80		%

(1) Current CLTV calculations for home equity loans are based on the maximum available line for home equity lines of credit and outstanding principal balance for home equity installment loans. Current property values are updated on a quarterly basis using the most recent property value data available to us. For properties in which we did not have an updated valuation, we utilized home price indices to estimate the current property value.

(2) The average estimated current LTV/CLTV ratio reflects the outstanding balance at the balance sheet date and the maximum available line for home equity lines of credit, divided by the estimated current value of the underlying property.

(3) Average LTV/CLTV at loan origination calculations are based on LTV/CLTV at time of purchase for one- to four-family purchased loans and undrawn balances for home equity loans.

	One- to Four-Family				Home Equity
Documentation Type	June 30, 2014		December 31, 2013		June 30, 2014		December 31, 2013
Full documentation	$	1,476	$	1,847	$	1,616	$	1,769
Low/no documentation	1,869		2,628		1,537		1,685
Total mortgage loans receivable	$	3,345	$	4,475	$	3,153	$	3,454

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	One- to Four-Family				Home Equity
Current FICO (1)	June 30, 2014		December 31, 2013		June 30, 2014		December 31, 2013
>=720	$	1,924	$	2,252	$	1,679	$	1,811
719 - 700	317		436		313		343
699 - 680	263		366		261		293
679 - 660	215		296		215		245
659 - 620	262		404		286		310
<620	364		721		399		452
Total mortgage loans receivable	$	3,345	$	4,475	$	3,153	$	3,454

(1) FICO scores are updated on a quarterly basis; however, at June 30, 2014 and December 31, 2013, there were some loans for which the updated FICO scores were not available. The current FICO distribution at June 30, 2014 included the most recent FICO scores where available, otherwise the original FICO score was used, for approximately $76 million and $4 million of one- to four-family and home equity loans, respectively. The current FICO distribution at December 31, 2013 included original FICO scores for approximately $95 million and $10 million of one- to four-family and home equity loans, respectively.

	One- to Four-Family				Home Equity
Vintage Year	June 30, 2014		December 31, 2013		June 30, 2014		December 31, 2013
2003 and prior	$	120	$	146	$	127	$	151
2004	344		423		238		274
2005	683		869		855		933
2006	1,287		1,775		1,502		1,630
2007	910		1,260		424		458
2008	1		2		7		8
Total mortgage loans receivable	$	3,345	$	4,475	$	3,153	$	3,454
Average age of mortgage loans receivable (years)	8.2		7.7		8.4		7.9

	One- to Four-Family				Home Equity
Geographic Location	June 30, 2014		December 31, 2013		June 30, 2014		December 31, 2013
California	$	1,488	$	2,111	$	983	$	1,083
Florida	237		300		226		247
New York	229		301		241		259
Virginia	170		206		145		158
Other states	1,221		1,557		1,558		1,707
Total mortgage loans receivable	$	3,345	$	4,475	$	3,153	$	3,454

Approximately 38% and 40% of the Company’s mortgage loans receivable were concentrated in California at June 30, 2014 and December 31, 2013, respectively. No other state had concentrations of mortgage loans that represented 10% or more of the Company’s mortgage loans receivable at June 30, 2014 and December 31, 2013.

Allowance for Loan Losses

The allowance for loan losses is management’s estimate of probable losses inherent in the loan portfolio at the balance sheet date. The estimate of the allowance for loan losses is based on a variety of quantitative and qualitative factors, including the composition and quality of the portfolio; delinquency levels and trends; current and historical charge-off and loss experience; our historical loss mitigation experience; the condition of the real estate market and geographic concentrations within the loan portfolio; the interest rate climate; the overall availability of housing credit; and general economic conditions. The allowance for loan losses is typically equal to management’s forecast of loan losses in the twelve months following the balance sheet date as well as the forecasted losses, including economic concessions to borrowers, over the estimated remaining life of loans modified as TDRs. The general allowance for loan losses also included a qualitative component to account for a variety of factors that present additional uncertainty that may not be fully considered in the quantitative loss model but are factors we believe may impact the level of credit losses. The qualitative component was $74 million and $62 million at June 30, 2014 and December 31, 2013, respectively.

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The following table presents the allowance for loan losses by major loan category (dollars in millions):

	One- to Four-Family				Home Equity				Consumer and Other				Total
	Allowance		Allowance as a % of Loans Receivable(1)		Allowance		Allowance as a % of Loans Receivable(1)		Allowance		Allowance as a % of Loans Receivable(1)		Allowance		Allowance as a % of Loans Receivable(1)
June 30, 2014	$	44	1.3	%	$	337	10.6	%	$	20	3.8	%	$	401	5.7	%
December 31, 2013	$	102	2.3	%	$	326	9.4	%	$	25	4.1	%	$	453	5.3	%

(1) Allowance as a percentage of loans receivable is calculated based on the gross loans receivable for each respective category.

During the six months endedJune 30, 2014, the allowance for loan losses decreased $52 million from the level at December 31, 2013. This decline was primarily due to the sale of $0.8 billion of our one- to four-family loans modified as TDRs. These loans were transferred to held-for-sale at March 31, 2014 and sold on April 22, 2014. As a result of this transaction, we recorded a charge-off of $42 million related to these one- to four-family loans which had been previously recorded and drove the majority of the decrease in the allowance for loan losses during the six months endedJune 30, 2014.

The following table shows the trend of the ratio of the general allowance for loan losses, excluding the qualitative component, to loans that are 90+ days delinquent excluding loans modified as TDRs (dollars in millions):

	Total 90+ Days Delinquent Loans, Excluding Modified TDRs		General Allowance for Loan Losses Before Qualitative Component		Coverage Ratio
June 30, 2014	$	221	$	252	114	%
March 31, 2014	$	230	$	265	115	%
December 31, 2013	$	235	$	266	113	%
September 30, 2013	$	247	$	272	110	%
June 30, 2013	$	273	$	258	94	%

Troubled Debt Restructurings

TDRs include two categories of loans: (1) loan modifications completed under our programs that involve granting an economic concession to a borrower experiencing financial difficulty, and (2) loans for which we received bankruptcy notification. The following table shows total TDRs by category at June 30, 2014 and December 31, 2013 (dollars in millions):

	Loans Modified as TDRs(1)		Bankruptcy Loans		Total TDRs
June 30, 2014
One- to four-family	$	187	$	132	$	319
Home equity	177		49		226
Total	$	364	$	181	$	545
December 31, 2013
One- to four-family	$	1,036	$	136	$	1,172
Home equity	188		53		241
Total	$	1,224	$	189	$	1,413

(1) Includes loans modified as TDRs that also had received a bankruptcy notification of $40 million and $252 million at June 30, 2014 and December 31, 2013, respectively.

Total TDRs decreased $868 million during the six months endedJune 30, 2014 primarily due to the sale of $0.8 billion of our one- to four- family loans modified as TDRs. See the Allowance for Loan Losses section above for additional information on this transaction.

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The following table shows total TDRs by delinquency category at June 30, 2014 and December 31, 2013 (dollars in millions):

	TDRs Current		TDRs 30-89 Days Delinquent		TDRs 90-179 Days Delinquent		TDRs 180+ Days Delinquent		Total Recorded Investment in TDRs
June 30, 2014
One- to four-family	$	244	$	19	$	6	$	50	$	319
Home equity	184		15		8		19		226
Total	$	428	$	34	$	14	$	69	$	545
December 31, 2013
One- to four-family	$	901	$	102	$	44	$	125	$	1,172
Home equity	198		17		7		19		241
Total	$	1,099	$	119	$	51	$	144	$	1,413

TDRs on accrual status, which are current and have made six or more consecutive payments, were $258 million and $950 million at June 30, 2014 and December 31, 2013, respectively.

Troubled Debt Restructurings – Loan Modifications

We believe the distinction between loans modified as TDRs and total TDRs, which include bankruptcy loans, is important. Our loan modification programs focus on the mitigation of potential losses through making an economic concession to a borrower, whereas with loans for which we have received bankruptcy notification we have not taken any loss mitigation actions. The following table shows loans modified as TDRs by delinquency category at June 30, 2014 and December 31, 2013 (dollars in millions):

	Modifications Current		Modifications 30-89 Days Delinquent		Modifications 90-179 Days Delinquent		Modifications 180+ Days Delinquent		Total Recorded Investment in Modifications
June 30, 2014
One- to four-family	$	160	$	12	$	4	$	11	$	187
Home equity	151		12		5		9		177
Total	$	311	$	24	$	9	$	20	$	364
December 31, 2013
One- to four-family	$	817	$	92	$	39	$	88	$	1,036
Home equity	162		13		4		9		188
Total	$	979	$	105	$	43	$	97	$	1,224

The following table shows loans modified as TDRs and the specific valuation allowance by loan portfolio as well as the percentage of total expected losses at June 30, 2014 and December 31, 2013 (dollars in millions):

	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
June 30, 2014
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	%
December 31, 2013
One- to four-family	$	1,354	$	(318	)	$	1,036	$	(60	)	$	976	6	%	28	%
Home equity	338		(150		)	188		(64		)	124		34	%	63	%
Total	$	1,692	$	(468	)	$	1,224	$	(124	)	$	1,100	10	%	35	%

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The recorded investment in loans modified as TDRs includes the charge-offs related to certain loans that were written down to the estimated current value of the underlying property less estimated selling costs. These charge-offs were recorded on modified loans that were delinquent in excess of 180 days, in bankruptcy, or when certain characteristics of the loan, including CLTV, borrower’s credit and type of modification, cast substantial doubt on the borrower’s ability to repay the loan. Included in allowance for loan losses was a specific valuation allowance of $76 million and $124 million that was established for loans modified as TDRs at June 30, 2014 and December 31, 2013, respectively. The specific valuation allowance for these individually impaired loans represents the forecasted losses over the remaining life of the loan, including the economic concession to the borrower.

The total expected loss on loans modified as TDRs includes both the previously recorded charge-offs and the specific valuation allowance. Total expected losses on loans modified as TDRs increased from 35% at December 31, 2013 to 48% at June 30, 2014, primarily due to the sale of $0.8 billion of our one- to four-family loans modified as TDRs. See the Allowance for Loan Losses section above for additional information on this transaction.

Net Charge-offs

The following table provides an analysis of the allowance for loan losses and net charge-offs for the three and six months endedJune 30, 2014 and 2013 (dollars in millions):

	Charge-offs			Recoveries(1)		Net Charge-Offs			% of Average Loans (Annualized)
Three Months Ended June 30, 2014
One- to four-family	$	—		$	—	$	—		—	%
Home equity	(17		)	6		(11		)	1.37	%
Consumer and Other	(4		)	1		(3		)	1.31	%
Total	$	(21	)	$	7	$	(14	)	0.71	%
Three Months Ended June 30, 2013
One- to four-family	$	(11	)	$	2	$	(9	)	0.72	%
Home equity	(46		)	9		(37		)	3.78	%
Consumer and Other	(7		)	3		(4		)	1.99	%
Total	$	(64	)	$	14	$	(50	)	2.06	%
	Charge-offs			Recoveries(1)		Net Charge-Offs			% of Average Loans (Annualized)
Six Months Ended June 30, 2014
One- to four-family	$	(43	)	$	11	$	(32	)	1.68	%
Home equity	(41		)	11		(30		)	1.79	%
Consumer and Other	(9		)	3		(6		)	1.70	%
Total	$	(93	)	$	25	$	(68	)	1.73	%
Six Months Ended June 30, 2013
One- to four-family	$	(30	)	$	14	$	(16	)	0.60	%
Home equity	(103		)	17		(86		)	4.23	%
Consumer and Other	(24		)	7		(17		)	4.18	%
Total	$	(157	)	$	38	$	(119	)	2.35	%

(1) Recoveries include the impact of mortgage originator settlements.

Loan losses are recognized when, based on management's estimate, it is probable that a loss has been incurred. The charge-off policy for both one- to four-family and home equity loans is to assess the value of the property when the loan has been delinquent for 180 days or has received bankruptcy notification, regardless of whether or not the property is in foreclosure, and charge-off the amount of the loan balance in excess of the estimated current value of the underlying property less estimated selling costs. Modified loans considered TDRs are charged-off when they are identified as collateral dependent based on certain terms of the modification, which includes assigning a higher level of risk to loans in which the LTV or CLTV is greater than 110% or 125%, respectively, a borrower’s credit score is less than 600 and certain types of modifications, such

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as interest-only payments. Consumer loans are charged-off when the loan has been 120 days delinquent or when it is determined that collection is not probable.

Net charge-offs for the three and six months ended June 30, 2014 compared to the same periods in 2013 decreased by $36 million and $51 million, respectively. As discussed above, as a result of our sale of one- to four-family loans modified as TDRs, we recorded a charge-off of $42 million for these loans during the six months ended June 30, 2014. Additionally, net charge-offs for the six months ended June 30, 2014 and 2013 included $11 million and $13 million of benefit recorded from settlements with third party mortgage originators, respectively. The timing and magnitude of charge-offs are affected by many factors and we anticipate variability from quarter to quarter while continuing to see a downward trend over the long term.

Delinquent Loans

We believe the distinction between loans delinquent 90 to 179 days and loans delinquent 180 days and greater is important as loans delinquent 180 days and greater have been written down to their expected recovery value, whereas loans delinquent 90 to 179 days have not (unless they are in process of bankruptcy or are modifications that have substantial doubt as to the borrower’s ability to repay the loan). We believe loans delinquent 90 to 179 days are an important measure because these loans are expected to drive the vast majority of future charge-offs. Additional charge-offs on loans delinquent 180 days and greater are possible if home prices decline beyond current expectations, but we do not anticipate these charge-offs to be significant, particularly when compared to the expected charge-offs on loans delinquent 90 to 179 days. We expect the balances of one- to four-family loans delinquent 180 days and greater to decline over time; however, we expect the balances to remain at high levels in the near term due to the extensive amount of time it takes to foreclose on a property in the current real estate market. The following table shows the comparative data for loans delinquent 90 to 179 days (dollars in millions):

	June 30, 2014			December 31, 2013
One- to four-family	$	27		$	70
Home equity	32			36
Consumer and other loans	1			3
Total loans delinquent 90-179 days	$	60		$	109
Loans delinquent 90-179 days as a percentage of gross loans receivable	0.9		%	1.3		%

During the six months endedJune 30, 2014, loans delinquent 90 to 179 days decreased by $49 million to $60 million, driven primarily by the sale of $31 million of our one- to four-family loans modified as TDRs.

In addition, we monitor loans in which a borrower’s current credit history casts doubt on their ability to repay a loan. We classify loans as special mention when they are between 30 and 89 days past due. The following table shows the comparative data for special mention loans (dollars in millions):

	June 30, 2014			December 31, 2013
One- to four-family	$	88		$	190
Home equity	56			69
Consumer and other loans	11			12
Total special mention loans	$	155		$	271
Special mention loans receivable as a percentage of gross loans receivable	2.2		%	3.2		%

The trend in special mention loan balances is generally indicative of the expected trend for charge-offs in future periods, as these loans have a greater propensity to migrate into nonaccrual status and ultimately charge-off. One- to four-family loans are generally secured in a first lien position by real estate assets, reducing the potential loss when compared to an unsecured loan. Home equity loans are generally secured by real estate assets; however, the majority of these loans are secured in a second lien position, which substantially increases the potential loss when compared to a first lien position. The loss severity of our second lien home equity loans was approximately 94% at June 30, 2014.

During the six months endedJune 30, 2014, special mention loans decreased by $116 million to $155 million and are down 85% from their peak of $1.0 billion at December 31, 2008. This decrease was largely due to the sale of $64 million of our one- to four-family loans modified as TDRs. While the level of special mention loans can fluctuate significantly in any given period, we believe the continued decrease is an encouraging sign regarding the future credit performance of the mortgage loan portfolio.

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Nonperforming Assets

We classify loans as nonperforming when they are no longer accruing interest, which includes loans that are 90 days and greater past due, TDRs that are on nonaccrual status for all classes of loans and certain performing junior liens that have a delinquent senior lien. The following table shows the comparative data for nonperforming loans and assets (dollars in millions):

	June 30, 2014			December 31, 2013
One- to four-family	307			526
Home equity	185			164
Consumer and other	2			3
Total nonperforming loans receivable	494			693
Real estate owned and other repossessed assets, net	37			53
Total nonperforming assets, net	$	531		$	746
Nonperforming loans receivable as a percentage of gross loans receivable	7.0		%	8.1		%
One- to four-family allowance for loan losses as a percentage of one- to four-family nonperforming loans receivable	14.4		%	19.5		%
Home equity allowance for loan losses as a percentage of home equity nonperforming loans receivable	181.8		%	198.3		%
Consumer and other allowance for loan losses as a percentage of consumer and other nonperforming loans receivable	1,355.5		%	868.3		%
Total allowance for loan losses as a percentage of total nonperforming loans receivable	81.3		%	65.4		%

During the six months endedJune 30, 2014, nonperforming assets, net decreased $215 million to $531 million when compared to December 31, 2013. The decrease in the one- to four-family nonperforming loans receivable during the six months endedJune 30, 2014 was primarily due to the sale of $0.8 billion of our one- to four-family loans modified as TDRs, which included $377 million of nonperforming loans. The decrease in nonperforming loans receivable was partially offset by an increase in nonperforming TDRs that had been charged-off due to bankruptcy notification. In February 2014, the OCC issued clarifying guidance related to consumer debt discharged in Chapter 7 bankruptcy proceedings. As a result of the clarifying guidance, beginning the first quarter of 2014 these bankruptcy loans remain on nonaccrual status regardless of payment history. This change did not have a material impact on our statement of financial condition, results of operations or cash flows. Prior to this change, we had $238 million of bankruptcy loans as performing loans at December 31, 2013.

Securities

We focus primarily on security type and credit rating to monitor credit risk in our securities portfolios. We consider securities backed by the U.S. government or its agencies to have low credit risk as the long-term debt rating of the U.S. government is AA+ by Standard & Poor ("S&P") and AAA by Moody’s and Fitch at June 30, 2014. At June 30, 2014, the amortized cost of these securities accounted for over 99% of our total securities portfolio. We review the remaining debt securities that were not backed by the U.S. government or its agencies according to their credit ratings from S&P, Moody’s and Fitch. At June 30, 2014, all municipal bonds and corporate bonds were rated investment grade (defined as a rating equivalent to a Moody’s rating of "Baa3" or higher, or a S&P or Fitch rating of "BBB-" or higher).

Certain non-agency CMOs were other-than-temporarily impaired as a result of the deterioration in the expected credit performance of the underlying loans in those specific securities. During the six months endedJune 30, 2014, we sold our remaining $17 million in amortized cost of the available-for-sale non-agency CMOs as part of our continued focus to reduce legacy risks.

SUMMARY OF CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in conformity with GAAP. Note 1—Organization, Basis of Presentation and Summary of Significant Accounting Policies of Part II. Item 8. Financial Statements and Supplementary Data in the Company's Annual Report on Form 10-K for the year ended December 31, 2013 contains a summary of our significant accounting policies, many of which require the use of estimates and assumptions that affect the amounts reported in the consolidated financial statements and related notes for the periods presented. We believe that of our significant accounting policies, the following are critical because they are based on estimates and assumptions that require complex and subjective judgments by management: allowance for loan losses; valuation of goodwill and other intangible assets; estimates of effective tax rates, deferred taxes and valuation allowance; classification and valuation of certain investments; accounting for derivative instruments; and fair value

33

measurements. Changes in these estimates or assumptions could materially impact our financial condition and results of operations, and actual results could differ from our estimates. These policies are more fully described in Part II. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations—Summary of Critical Accounting Policies and Estimates in our Annual Report on Form 10-K for the year ended December 31, 2013.

GLOSSARY OF TERMS

Active accounts—Accounts with a balance of $25 or more or a trade in the last six months.

Active customers—Customers that have an account with a balance of $25 or more or a trade in the last six months.

Active trader—The customer group that includes those who execute 30 or more trades per quarter.

Adjusted total assets—E*TRADE Bank-only assets composed of total assets plus/(less) unrealized losses (gains) on available-for-sale securities, less disallowed deferred tax assets, goodwill and certain other intangible assets.

Agency—U.S. Government sponsored and federal agencies, such as Federal National Mortgage Association, Federal Home Loan Mortgage Corporation, Government National Mortgage Association, the Small Business Administration and the Federal Home Loan Bank.

ALCO—Asset Liability Committee.

AML—Anti-Money Laundering.

APIC—Additional paid-in capital.

Average commission per trade—Total trading and investing segment commissions revenue divided by total number of revenue trades.

Average equity to average total assets—Average total shareholders’ equity divided by average total assets.

Bank—ETB Holdings, Inc. ("ETBH"), the entity that is our bank holding company and parent to E*TRADE Bank.

Basis point—One one-hundredth of a percentage point.

BCBS—International Basel Committee on Banking Supervision.

BOLI—Bank-Owned Life Insurance.

Brokerage account attrition rate—Attriting brokerage accounts, which are gross new brokerage accounts less net new brokerage accounts, divided by total brokerage accounts at the previous period end.

Brokerage related cash—Customer sweep deposits, customer payables and money market balances, including those held by third parties.

CAMELS rating—A U.S. supervisory rating of a bank’s overall condition. The components of the rating consist of Capital adequacy, Asset quality, Management, Earnings, Liquidity and Sensitivity to market risk.

Cash flow hedge—A derivative instrument designated in a hedging relationship that mitigates exposure to variability in expected future cash flows attributable to a particular risk.

CFPB—Consumer Financial Protection Bureau.

CFTC—Commodity Futures Trading Commission.

Charge-off—The result of removing a loan or portion of a loan from an entity’s balance sheet because the loan is considered to be uncollectible.

CLTV—Combined loan-to-value.

CMOs—Collateralized mortgage obligations.

Consumer loans—Loans that are secured by real personal property, such as recreational vehicles.

Corporate cash—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.

Customer assets—Market value of all customer assets held by the Company including security holdings, deposits and customer payables, as well as customer assets held by third parties and vested unexercised options.

Daily average revenue trades ("DARTs")—Total revenue trades in a period divided by the number of trading days during that period.

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Derivative—A financial instrument or other contract, the price of which is directly dependent upon the value of one or more underlying securities, interest rates or any agreed upon pricing index. Derivatives cover a wide assortment of financial contracts, including forward contracts, options and swaps.

DIF—Depositors Insurance Fund.

Economic Value of Equity ("EVE")—The present value of expected cash inflows from existing assets, minus the present value of expected cash outflows from existing liabilities, plus the expected cash inflows and outflows from existing derivatives and forward commitments. This calculation is performed for E*TRADE Bank.

Enterprise interest-bearing liabilities—Liabilities such as customer deposits, repurchase agreements, FHLB advances and other borrowings, certain customer credit balances and securities loaned programs on which the Company pays interest; excludes customer money market balances held by third parties.

Enterprise interest-earning assets—Assets such as loans, available-for-sale securities, held-to-maturity securities, margin receivables, trading securities, securities borrowed balances and cash and investments required to be segregated under regulatory guidelines that earn interest for the Company.

Enterprise net interest income—The taxable equivalent basis net operating interest income excluding corporate interest income and corporate interest expense and interest earned on customer cash held by third parties.

Enterprise net interest margin—The enterprise net operating interest income divided by total enterprise interest-earning assets.

Enterprise net interest spread—The taxable equivalent rate earned on average enterprise interest-earning assets less the rate paid on average enterprise interest-bearing liabilities, excluding corporate interest-earning assets and liabilities and customer cash held by third parties.

ESDA—Extended insurance sweep deposit accounts.

Exchange-traded funds ("ETFs")—A fund that invests in a group of securities and trades like an individual stock on an exchange.

Fair value—The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Fair value hedge—A derivative instrument designated in a hedging relationship that mitigates exposure to changes in the fair value of a recognized asset or liability or a firm commitment.

Fannie Mae—Federal National Mortgage Association.

FASB—Financial Accounting Standards Board.

FDIC—Federal Deposit Insurance Corporation.

Federal Reserve—Board of Governors of the Federal Reserve System.

FHLB—Federal Home Loan Bank.

FICO—Fair Isaac Credit Organization.

FINRA—Financial Industry Regulatory Authority.

Fixed charge coverage ratio—Net income before taxes, depreciation and amortization and corporate interest expense divided by corporate interest expense. This ratio indicates the Company’s ability to satisfy fixed financing expenses.

Forex—A type of trade that involves buying one currency while simultaneously selling another. Currencies are traded in pairs consisting of a "base currency" and a "quote currency."

Freddie Mac—Federal Home Loan Mortgage Corporation.

Generally Accepted Accounting Principles ("GAAP")—Accounting principles generally accepted in the United States of America.

Ginnie Mae—Government National Mortgage Association.

Gross loans receivable—Includes unpaid principal balances and premiums (discounts).

Interest rate cap—An option contract that puts an upper limit on a floating exchange rate. The writer of the cap has to pay the holder of the cap the difference between the floating rate and the upper limit when that upper limit is breached. There is usually a premium paid by the buyer of such a contract.

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Interest rate floor—An option contract that puts a lower limit on a floating exchange rate. The writer of the floor has to pay the holder of the floor the difference between the floating rate and the lower limit when that lower limit is breached. There is usually a premium paid by the buyer of such a contract.

Interest rate swaps—Contracts that are entered into primarily as an asset/liability management strategy to reduce interest rate risk. Interest rate swap contracts are exchanges of interest rate payments, such as fixed-rate payments for floating-rate payments, based on notional principal amounts.

LCR—Liquidity Coverage Ratio.

LIBOR—London Interbank Offered Rate. LIBOR is the interest rate at which banks borrow funds from other banks in the London wholesale money market (or interbank market).

LTV—Loan-to-value.

NASDAQ—National Association of Securities Dealers Automated Quotations.

Net new customer asset flows—The total inflows to all new and existing customer accounts less total outflows from all closed and existing customer accounts, excluding the effects of market movements in the value of customer assets.

NFA—National Futures Association.

NOLs—Net operating losses.

Nonperforming assets—Assets that do not earn income, including those originally acquired to earn income (nonperforming loans) and those not intended to earn income (real estate owned). Loans are classified as nonperforming when they are no longer accruing interest, which includes loans that are 90 days and greater past due, TDRs that are on nonaccrual status for all classes of loans and certain junior liens that have a delinquent senior lien.

Notional amount—The specified dollar amount underlying a derivative on which the calculated payments are based.

NYSE—New York Stock Exchange.

OCC—Office of the Comptroller of the Currency.

Operating margin—Income before other income (expense), income tax expense and discontinued operations, if applicable.

Options—Contracts that grant the purchaser, for a premium payment, the right, but not the obligation, to either purchase or sell the associated financial instrument at a set price during a period or at a specified date in the future.

OTTI—Other-than-temporary impairment.

OTS—Office of Thrift Supervision.

PII—Personally Identifiable Information.

Real estate owned and other repossessed assets—Ownership or physical possession of real property by the Company, generally acquired as a result of foreclosure or repossession.

Recovery—Cash proceeds received on a loan that had been previously charged off.

Repurchase agreement—An agreement giving the seller of an asset the right or obligation to buy back the same or similar securities at a specified price on a given date. These agreements are generally collateralized by mortgage-backed or investment-grade securities.

Return on average total assets—Annualized net income divided by average assets.

Return on average total shareholders’ equity—Annualized net income divided by average shareholders’ equity.

Risk-weighted assets—Primarily computed by the assignment of specific risk-weightings assigned by the regulators to assets and off-balance sheet instruments for capital adequacy calculations.

S&P—Standard & Poor’s.

SEC—U.S. Securities and Exchange Commission.

Special mention loans—Loans where a borrower’s current credit history casts doubt on their ability to repay a loan. Loans are classified as special mention when loans are between 30 and 89 days past due.

Stock plan trades—Trades that originate from our corporate services business, which provides software and services to assist corporate customers in managing their equity compensation plans. The trades typically occur when an employee of a corporate customer exercises a stock option or sells restricted stock.

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Sweep deposit accounts—Accounts with the functionality to transfer brokerage cash balances to and from a FDIC insured account at the banking subsidiaries.

Taxable equivalent interest adjustment—The operating interest income earned on certain assets is completely or partially exempt from federal and/or state income tax. These tax-exempt instruments typically yield lower returns than a taxable investment. To provide more meaningful comparison of yields and margins for all interest-earning assets, the interest income earned on tax exempt assets is increased to make it fully equivalent to interest income on other taxable investments. This adjustment is done for the analytic purposes in the net enterprise interest income/spread calculation and is not made on the consolidated statement of income, as that is not permitted under GAAP.

Tier 1 capital—Adjusted equity capital used in the calculation of capital adequacy ratios. Tier 1 capital equals: total shareholders’ equity, plus/(less) unrealized losses (gains) on available-for-sale securities and cash flow hedges and qualifying restricted core capital elements, less disallowed servicing and deferred tax assets, goodwill and certain other intangible assets.

Troubled Debt Restructuring ("TDR")—A loan modification that involves granting an economic concession to a borrower who is experiencing financial difficulty, and loans that have been charged-off due to bankruptcy notification.

Wholesale borrowings—Borrowings that consist of securities sold under agreements to repurchase and FHLB advances and other borrowings.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The following discussion about market risk disclosure includes forward-looking statements. Actual results could differ materially from those projected in the forward-looking statements as a result of certain factors, including, but not limited to, those set forth in Item 1A. Risk Factors in the Annual Report on Form 10-K for the year ended December 31, 2013 and as updated in this report.

Interest Rate Risk

Our exposure to interest rate risk is related primarily to interest-earning assets and interest-bearing liabilities, all of which are held for non-trading purposes. The management of interest rate risk is essential to profitability. The primary objective of the management of interest rate risk is to control exposure to interest rates within the Board-approved limits, as outlined in the scenario analysis below, and with limited exposure to earnings volatility resulting from interest rate fluctuations. Our general strategies to manage interest rate risk include balancing variable-rate and fixed-rate assets and liabilities and utilizing derivatives in a way that reduces overall exposure to changes in interest rates. Exposure to interest rate risk requires management to make complex assumptions regarding maturities, market interest rates and customer behavior. Changes in interest rates, including the following, could impact interest income and expense:

• Interest-earning assets and interest-bearing liabilities may re-price at different times or by different amounts creating a mismatch.

• The yield curve may steepen, flatten or change shape affecting the spread between short- and long-term rates. Widening or narrowing spreads could impact net interest income.

• Market interest rates may influence prepayments resulting in maturity mismatches. In addition, prepayments could impact yields as premium and discounts amortize.

Exposure to interest rate risk is dependent upon the distribution and composition of interest-earning assets, interest-bearing liabilities and derivatives. The differing risk characteristics of each product are managed to mitigate our exposure to interest rate fluctuations. At June 30, 2014, 91% of our total assets were enterprise interest-earning assets.

At June 30, 2014, approximately 59% of total assets were residential real estate loans and available-for-sale and held-to-maturity mortgage-backed securities. The values of these assets are sensitive to changes in interest rates, as well as expected prepayment levels. As interest rates increase, fixed rate residential mortgages and mortgage-backed securities tend to exhibit lower prepayments. The inverse is true in a falling rate environment.

When real estate loans prepay, unamortized premiums and/or discounts are written off. Depending on the timing of the prepayment, these write-offs may impact anticipated yields. The ALCO reviews estimates of the impact of changing market rates on prepayments. This information is incorporated into our interest rate risk management strategy.

Our liability structure consists of two central sources of funding: deposits and wholesale borrowings. Cash provided to us through deposits is the primary source of funding. Key deposit products include sweep accounts, complete savings accounts and other money market and savings accounts. Wholesale borrowings include securities sold under agreements to repurchase and FHLB advances. Other sources of funding include customer payables, which is customer cash contained within our broker-dealers, and corporate debt issued by the parent company.

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Deposit accounts and customer payables tend to be less rate-sensitive than wholesale borrowings. Agreements to repurchase securities and the majority of FHLB advances re-price as agreements reset. Sweep accounts, complete savings accounts and other money market and savings accounts re-price at management’s discretion. Corporate debt has fixed rates.

Derivative Instruments

We use derivative instruments to help manage interest rate risk. Interest rate swaps involve the exchange of fixed-rate and variable-rate interest payments between two parties based on a contractual underlying notional amount, but do not involve the exchange of the underlying notional amounts. Option products are utilized primarily to decrease the market value changes resulting from the prepayment dynamics of the mortgage portfolio, as well as to protect against increases in funding costs. The types of options employed include Cap Options ("Caps"), Floor Options ("Floors"), "Payor Swaptions" and "Receiver Swaptions". Caps mitigate the market risk associated with increases in interest rates while Floors mitigate the risk associated with decreases in market interest rates. Similarly, Payor and Receiver Swaptions mitigate the market risk associated with the respective increases and decreases in interest rates. See derivative instruments discussion in Note 8—Accounting for Derivative Instruments and Hedging Activities in Item 1. Consolidated Financial Statements (Unaudited).

Scenario Analysis

Scenario analysis is an advanced approach to estimating interest rate risk exposure. Under the Economic Value of Equity ("EVE") approach, the present value of all existing interest-earning assets, interest-bearing liabilities, derivatives and forward commitments are estimated and then combined to produce an EVE figure. The approach values only the current balance sheet in which the most significant assumptions are the prepayment rates of the loan portfolio and mortgage-backed securities and the repricing of deposits. This approach does not incorporate assumptions related to business growth, or liquidation and re-investment of instruments. This approach provides an indicator of future earnings and capital levels because changes in EVE indicate the anticipated change in the value of future cash flows. The sensitivity of this value to changes in interest rates is then determined by applying alternative interest rate scenarios, which include, but are not limited to, instantaneous parallel shifts up 100, 200 and 300 basis points and down 100 basis points. The change in EVE amounts fluctuate based on the parallel shifts in interest rates primarily due to the change in timing of cash flows in the Company’s residential loan and mortgage-backed securities portfolios. Expected prepayment rates on residential mortgage loans and mortgage-backed securities increase as interest rates decline. In a rising interest rate environment, expected prepayment rates decrease.

The EVE method is used at the E*TRADE Bank level and not for the Company. The ALCO monitors E*TRADE Bank’s interest rate risk position. E*TRADE Bank had nearly 100% of enterprise interest-earning assets at both June 30, 2014 and December 31, 2013 and held 99% of enterprise interest-bearing liabilities at both June 30, 2014 and December 31, 2013. The sensitivity of EVE at June 30, 2014 and December 31, 2013 and the limits established by E*TRADE Bank’s Board of Directors are listed below (dollars in millions):

Parallel Change in Interest Rates (basis points)(1)	Change in EVE
	June 30, 2014					December 31, 2013
	Amount			Percentage(2)		Amount			Percentage(2)		Board Limit
+300	$	(546	)	(10.4	)%	$	(573	)	(12.2	)%	(25)%
+200	$	(309	)	(5.9	)%	$	(355	)	(7.6	)%	(15)%
+100	$	(110	)	(2.1	)%	$	(150	)	(3.2	)%	(7)%
-100	$	(41	)	(0.8	)%	$	(39	)	(0.8	)%	(7)%

(1) On June 30, 2014 and December 31, 2013, the yield for the three-month treasury bill was 0.04% and 0.07%, respectively. As a result, the requirements of the EVE model were temporarily modified, resulting in the removal of the minus 200 and 300 basis points scenarios for the periods ended June 30, 2014 and December 31, 2013.

(2) The percentage change represents the amount of change in EVE divided by the base EVE as calculated in the current interest rate environment.

We actively manage interest rate risk positions. As interest rates change, we will adjust our strategy and mix of assets, liabilities and derivatives to optimize our position. For example, a 100 basis points increase in rates may not result in a change in value as indicated above. The Company compares the parallel shift in interest rate changes in EVE to the established board limits in order to assess the Company’s interest rate risk on a monthly basis. In the event that the percentage change in EVE exceeds the board limits, E*TRADE Bank’s Chief Risk Officer, Chief Financial Officer and Treasurer must all be promptly notified in writing and decide upon a plan of remediation. In addition, E*TRADE Bank’s Board of Directors must be promptly notified of the exception and the planned resolution.

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PART I—FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

E*TRADE FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF INCOME (LOSS)

(In millions, except share data and per share amounts)

(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
Revenue:
Operating interest income	$	322		$	302		$	644		$	602
Operating interest expense	(52		)	(59		)	(108		)	(118		)
Net operating interest income	270			243			536			484
Commissions	105			106			233			207
Fees and service charges	46			41			93			73
Principal transactions	—			21			10			43
Gains on loans and securities, net	7			21			22			37
Other-than-temporary impairment ("OTTI")	—			—			—			(1		)
Less: noncredit portion of OTTI recognized into (out of) other comprehensive income (loss) (before tax)	—			(1		)	—			(1		)
Net impairment	—			(1		)	—			(2		)
Other revenues	10			9			19			18
Total non-interest income	168			197			377			376
Total net revenue	438			440			913			860
Provision for loan losses	12			46			16			89
Operating expense:
Compensation and benefits	99			86			197			182
Advertising and market development	33			23			67			60
Clearing and servicing	23			31			51			63
FDIC insurance premiums	19			25			43			54
Professional services	28			19			52			36
Occupancy and equipment	19			18			37			36
Communications	18			19			36			37
Depreciation and amortization	20			23			41			46
Amortization of other intangibles	6			6			11			12
Impairment of goodwill	—			142			—			142
Facility restructuring and other exit activities	1			10			4			17
Other operating expenses	18			12			35			24
Total operating expense	284			414			574			709
Income (loss) before other income (expense) and income tax expense	142			(20		)	323			62
Other income (expense):
Corporate interest expense	(29		)	(28		)	(57		)	(57		)
Losses on early extinguishment of debt	—			—			(12		)	—
Equity in income of investments and other	(1		)	1			2			5
Total other income (expense)	(30		)	(27		)	(67		)	(52		)
Income (loss) before income tax expense	112			(47		)	256			10
Income tax expense	43			7			90			29
Net income (loss)	$	69		$	(54	)	$	166		$	(19	)
Basic earnings (loss) per share	$	0.24		$	(0.19	)	$	0.57		$	(0.07	)
Diluted earnings (loss) per share	$	0.24		$	(0.19	)	$	0.56		$	(0.07	)
Shares used in computation of per share data:
Basic (in thousands)	288,705			286,903			288,380			286,765
Diluted (in thousands)	293,826			286,903			293,813			286,765

See accompanying notes to consolidated financial statements

39

E*TRADE FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)

(In millions)

(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
Net income (loss)	$	69		$	(54	)	$	166		$	(19	)
Other comprehensive income (loss)
Available-for-sale securities:
OTTI, net(1)	—			—			—			—
Noncredit portion of OTTI reclassification (into) out of other comprehensive income, net(2)	—			—			—			1
Unrealized gains (losses), net(3)	82			(215		)	163			(221		)
Reclassification into earnings, net(4)	(2		)	(11		)	(14		)	(21		)
Net change from available-for-sale securities	80			(226		)	149			(241		)
Cash flow hedging instruments:
Unrealized gains (losses), net(5)	(16		)	62			(32		)	68
Reclassification into earnings, net(6)	20			23			41			43
Net change from cash flow hedging instruments	4			85			9			111
Other comprehensive income (loss)	84			(141		)	158			(130		)
Comprehensive income (loss)	$	153		$	(195	)	$	324		$	(149	)

(1) Amounts are net of benefit from income taxes of $0 for both the three and six months ended June 30, 2014, compared to benefit from income taxes of less than $1 million for both the three and six months ended June 30, 2013.

(2) Amounts are net of benefit from income taxes of $0 for both the three and six months ended June 30, 2014, compared to benefit from income taxes of less than $1 million for both the three and six months ended June 30, 2013.

(3) Amounts are net of provision for income taxes of $49 million and $99 million for the three and six months ended June 30, 2014, respectively, compared to benefit from income taxes of $128 million and $132 million for the three and six months ended June 30, 2013, respectively.

(4) Amounts are net of provision for income taxes of $1 million and $8 million for the three and six months ended June 30, 2014, respectively, compared to provision for income taxes of $7 million and $13 million for the three and six months ended June 30, 2013, respectively.

(5) Amounts are net of benefit from income taxes of $12 million and $23 million for the three and six months ended June 30, 2014, respectively, compared to provision for income taxes of $31 million and $35 million for the three and six months ended June 30, 2013, respectively.

(6) Amounts are net of benefit from income taxes of $12 million and $26 million for the three and six months ended June 30, 2014, respectively, compared to benefit from income taxes of $11 million and $24 million for the three and six months ended June 30, 2013, respectively.

See accompanying notes to the consolidated financial statements

40

E*TRADE FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

(In millions, except share data)

(Unaudited)

	June 30,			December 31,
	2014			2013
ASSETS
Cash and equivalents	$	1,807		$	1,838
Cash required to be segregated under federal or other regulations	1,215			1,066
Available-for-sale securities	12,837			13,592
Held-to-maturity securities (fair value of $11,518 and $10,092 at June 30, 2014 and December 31, 2013, respectively)	11,356			10,181
Margin receivables	7,340			6,353
Loans receivable, net (net of allowance for loan losses of $401 and $453 at June 30, 2014 and December 31, 2013, respectively)	6,656			8,123
Investment in FHLB stock	56			61
Property and equipment, net	227			237
Goodwill	1,792			1,792
Other intangibles, net	205			216
Other assets	2,257			2,821
Total assets	$	45,748		$	46,280
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Deposits	$	25,084		$	25,971
Securities sold under agreements to repurchase	3,742			4,543
Customer payables	6,626			6,310
FHLB advances and other borrowings	1,291			1,279
Corporate debt	1,770			1,768
Other liabilities	2,047			1,553
Total liabilities	40,560			41,424
Commitments and contingencies (see Note 13)
Shareholders’ equity:
Common stock, $0.01 par value, shares authorized: 400,000,000 at June 30, 2014 and December 31, 2013; shares issued and outstanding: 288,687,146 and 287,357,001 at June 30, 2014 and December 31, 2013, respectively	3			3
Additional paid-in-capital ("APIC")	7,336			7,328
Accumulated deficit	(1,856		)	(2,022		)
Accumulated other comprehensive loss	(295		)	(453		)
Total shareholders’ equity	5,188			4,856
Total liabilities and shareholders’ equity	$	45,748		$	46,280

See accompanying notes to the consolidated financial statements

41

E*TRADE FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

(In millions)

(Unaudited)

				Additional Paid-in Capital			Accumulated Deficit			Accumulated Other Comprehensive Loss			Total Shareholders’ Equity
	Common Stock
	Shares	Amount
Balance, December 31, 2013	287	$	3	$	7,328		$	(2,022	)	$	(453	)	$	4,856
Net income	—	—		—			166			—			166
Other comprehensive income	—	—		—			—			158			158
Conversion of convertible debentures	—	—		1			—			—			1
Exercise of stock options and related tax effects	1	—		6			—			—			6
Issuance of restricted stock, net of forfeitures and retirements to pay taxes	1	—		(12		)	—			—			(12		)
Share-based compensation	—	—		13			—			—			13
Balance at June 30, 2014	289	$	3	$	7,336		$	(1,856	)	$	(295	)	$	5,188
				Additional Paid-in Capital			Accumulated Deficit			Accumulated Other Comprehensive Loss			Total Shareholders’ Equity
	Common Stock
	Shares	Amount
Balance, December 31, 2012	286	$	3	$	7,319		$	(2,108	)	$	(310	)	$	4,904
Net loss	—	—		—			(19		)	—			(19		)
Other comprehensive loss	—	—		—			—			(130		)	(130		)
Exercise of stock options and related tax effects	—	—		(5		)	—			—			(5		)
Issuance of restricted stock, net of forfeitures and retirements to pay taxes	1	—		(4		)	—			—			(4		)
Share-based compensation	—	—		15			—			—			15
Balance at June 30, 2013	287	$	3	$	7,325		$	(2,127	)	$	(440	)	$	4,761

See accompanying notes to the consolidated financial statements

42

E*TRADE FINANCIAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS (In millions) (Unaudited)
	Six Months Ended June 30,
	2014			2013
Cash flows from operating activities:
Net income (loss)	$	166		$	(19	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Provision for loan losses	16			89
Depreciation and amortization (including discount amortization and accretion)	159			215
Net impairment and gains on loans and securities, net	(22		)	(35		)
Impairment of goodwill	—			142
Equity in income of investments and other	(2		)	(5		)
Share-based compensation	13			15
Deferred taxes	86			26
Other	(1		)	1
Net effect of changes in assets and liabilities:
Increase in cash required to be segregated under federal or other regulations	(149		)	(478		)
Increase in margin receivables	(987		)	(166		)
Increase in customer payables	316			118
(Increase) decrease in other assets	(9		)	265
Increase in other liabilities	714			101
Net cash provided by operating activities	300			269
Cash flows from investing activities:
Purchases of available-for-sale securities	(651		)	(4,392		)
Proceeds from sales, maturities of and principal payments on available-for-sale securities	1,743			4,298
Purchases of held-to-maturity securities	(1,669		)	(1,532		)
Proceeds from maturities of and principal payments on held-to-maturity securities	477			1,136
Proceeds from sale of loans	802			—
Net decrease in loans receivable	642			841
Capital expenditures for property and equipment	(30		)	(23		)
Proceeds from sale of G1 Execution Services, Inc.	76			—
Cash transferred on sale of G1 Execution Services, Inc.	(9		)	—
Proceeds from sale of real estate owned and repossessed assets	20			40
Net cash flow from derivatives hedging assets	(6		)	3
Other	5			(10		)
Net cash provided by investing activities	1,400			361

43

E*TRADE FINANCIAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS—(Continued) (In millions) (Unaudited)
	Six Months Ended June 30,
	2014			2013
Cash flows from financing activities:
Net decrease in deposits	$	(887	)	$	(2,844	)
Net (decrease) increase in securities sold under agreements to repurchase	(801		)	144
Advances from FHLB	390			840
Payments on advances from FHLB	(390		)	(490		)
Net cash flow from derivatives hedging liabilities	(48		)	(4		)
Other	5			7
Net cash used in financing activities	(1,731		)	(2,347		)
Decrease in cash and equivalents	(31		)	(1,717		)
Cash and equivalents, beginning of period	1,838			2,762
Cash and equivalents, end of period	$	1,807		$	1,045
Supplemental disclosures:
Cash paid for interest	$	144		$	138
(Refund received) cash paid for income taxes	$	(2	)	$	2
Non-cash investing and financing activities:
Transfers of loans held-for-investment to loans held-for-sale	$	795		$	41
Transfers from loans to other real estate owned and repossessed assets	$	29		$	29
Transfers from other real estate owned and repossessed assets to loans	$	16		$	—
Conversion of convertible debentures to common stock	$	1		$	—
Reclassification of market making business assets and liabilities to business held-for-sale	$	—		$	79

See accompanying notes to the consolidated financial statements

44

E*TRADE FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1—ORGANIZATION, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization—E*TRADE Financial Corporation is a financial services company that provides brokerage and related products and services primarily to individual retail investors under the brand "E*TRADE Financial." The Company also provides investor-focused banking products, primarily sweep deposits and savings products, to retail investors.

On February 10, 2014, the Company completed the sale of its subsidiary G1 Execution Services, LLC, a registered broker-dealer and market maker, to an affiliate of Susquehanna International Group, LLP. The sale generated cash proceeds of $76 million.

Basis of Presentation—The consolidated financial statements include the accounts of the Company and its majority-owned subsidiaries as determined under the voting interest model. Entities in which the Company holds at least a 20% ownership interest or in which there are other indicators of significant influence are generally accounted for by the equity method. Entities in which the Company holds less than a 20% ownership interest and does not have the ability to exercise significant influence are generally carried at cost. However, investments in marketable equity securities where the Company does not have the ability to exercise significant influence over the entities are accounted for as available-for-sale securities. Intercompany accounts and transactions are eliminated in consolidation. The Company also evaluates its continuing involvement with certain entities to determine if the Company is required to consolidate the entities under the variable interest entity model. This evaluation is based on a qualitative assessment of whether the Company has both: 1) the power to direct matters that most significantly impact the activities of the variable interest entity; and 2) the obligation to absorb losses or the right to receive benefits of the variable interest entity that could potentially be significant to the variable interest entity.

Certain prior period items in these consolidated financial statements have been reclassified to conform to the current period presentation. These consolidated financial statements reflect all adjustments, which are all normal and recurring in nature, necessary to present fairly the financial position, results of operations and cash flows for the periods presented.

At the end of June 2013, the Company decided to exit its market making business, G1 Execution Services, LLC, and reclassified the assets and liabilities of the market making business to held-for-sale. The assets and liabilities of the market making business are presented in the other assets and other liabilities line items, respectively, at December 31, 2013 on the consolidated balance sheet. The sale of the market making business was completed on February 10, 2014. For additional information on the market making business, see Note 2—Disposition.

The Company reports corporate interest expense separately from operating interest expense. The Company believes reporting these items separately provides a clearer picture of the financial performance of the Company’s operations than would a presentation that combined these two items. Operating interest expense is generated from the operations of the Company. Corporate debt, which is the primary source of corporate interest expense, has been issued primarily in connection with recapitalization transactions and past acquisitions.

Similarly, the Company reports gains on sales of investments, net separately from gains on loans and securities, net. The Company believes reporting these two items separately provides a clearer picture of the financial performance of the Company's operations than would a presentation that combined these two items. Gains on loans and securities, net are the result of activities in the Company’s operations, namely its balance sheet management segment. Gains on sales of investments, net relate to investments of the Company at the corporate level and are not related to the ongoing business of the Company’s operating subsidiaries. Gains on sales of investments, net are reported in the equity in income of investments and other line item on the consolidated statement of income (loss).

These consolidated financial statements should be read in conjunction with the Annual Report on Form 10-K for the year ended December 31, 2013.

Use of Estimates—The consolidated financial statements were prepared in accordance with GAAP, which requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and related notes for the periods presented. Actual results could differ from management’s estimates. Certain significant accounting policies are critical because they are based on estimates and assumptions that require complex and subjective judgments by management. Changes in these estimates or assumptions could materially impact the Company’s financial condition and results of operations. Material estimates in which management believes changes could reasonably occur include: allowance for loan losses; valuation of goodwill and other intangible assets; estimates of effective tax rates, deferred taxes and valuation allowance; classification and valuation of certain investments; accounting for derivative instruments; and fair value measurements.

45

Financial Statement Descriptions and Related Accounting Policies

Available-for-Sale Securities—Available-for-sale securities consist primarily of debt securities and also include equity securities. Securities classified as available-for-sale are carried at fair value, with the unrealized gains and losses reflected as a component of accumulated other comprehensive loss, net of tax. Realized and unrealized gains or losses on available-for-sale debt and equity securities are computed using the specific identification method. Interest earned on available-for-sale debt and equity securities is included in operating interest income. Amortization or accretion of premiums and discounts on available-for-sale debt securities are also recognized in operating interest income using the effective interest method over the contractual life of the security. Realized gains and losses on available-for-sale debt and equity securities, other than OTTI, are included in the gains on loans and securities, net line item. Available-for-sale securities that have an unrealized loss (impaired securities) are evaluated for OTTI at each balance sheet date.

Margin Receivables—The fair value of securities that the Company received as collateral in connection with margin receivables and securities borrowing activities, where the Company is permitted to sell or re-pledge the securities, was approximately $10.3 billion and $9.1 billion at June 30, 2014 and December 31, 2013, respectively. Of this amount, $2.8 billion and $1.9 billion had been pledged or sold in connection with securities loans, bank borrowings and deposits with clearing organizations as of June 30, 2014 and December 31, 2013, respectively.

Nonperforming Loans—The Company classifies loans as nonperforming when they are no longer accruing interest, which includes loans that are 90 days and greater past due, TDRs that are on nonaccrual status for all classes of loans and certain junior liens that have a delinquent senior lien. Interest previously accrued, but not collected, is reversed against current income when a loan is placed on nonaccrual status. Interest payments received on nonperforming loans are recognized on a cash basis in operating interest income until it is doubtful that full payment will be collected, at which point payments are applied to principal. The recognition of deferred fees or costs on originated loans and premiums or discounts on purchased loans in operating interest income is discontinued for nonperforming loans. Nonperforming loans, excluding TDRs and certain junior liens that have a delinquent senior lien, return to accrual status when the loan becomes less than 90 days past due. Loans modified as TDRs return to accrual status after six consecutive payments have been made in accordance with the modified terms. All bankruptcy loans remain on nonaccrual status regardless of the payment history.

Loan losses are recognized when, based on management's estimates, it is probable that a loss has been incurred. The Company’s charge-off policy for both one- to four-family and home equity loans is to assess the value of the property when the loan has been delinquent for 180 days or it is in bankruptcy, regardless of whether or not the property is in foreclosure, and charge-off the amount of the loan balance in excess of the estimated current value of the underlying property less estimated selling costs. TDR loan modifications are charged-off when certain characteristics of the loan, including CLTV, borrower’s credit and type of modification, cast substantial doubt on the borrower’s ability to repay the loan. Closed-end consumer loans are charged-off when the loan has been delinquent for 120 days or when it is determined that collection is not probable.

Other-than-temporary Impairment (“OTTI”)—The Company considers OTTI for an available-for-sale or held-to-maturity debt security to have occurred if one of the following conditions are met: the Company intends to sell the impaired debt security; it is more likely than not that the Company will be required to sell the impaired debt security before recovery of the security’s amortized cost basis; or the Company does not expect to recover the entire amortized cost basis of the security. The Company’s evaluation of whether it intends to sell an impaired debt security considers whether management has decided to sell the security as of the balance sheet date. The Company’s evaluation of whether it is more likely than not that the Company will be required to sell an impaired debt security before recovery of the security’s amortized cost basis considers the likelihood of sales that involve legal, regulatory or operational requirements. For impaired debt securities that the Company does not intend to sell and it is not more likely than not that the Company will be required to sell before recovery of the security’s amortized cost basis, the Company uses both qualitative and quantitative valuation measures to evaluate whether the Company expects to recover the entire amortized cost basis of the security. The Company considers all available information relevant to the collectability of the security, including credit enhancements, security structure, vintage, credit ratings and other relevant collateral characteristics.

If the Company intends to sell an impaired debt security or if it is more likely than not that the Company will be required to sell the impaired debt security before recovery of the security’s amortized cost basis, the Company will recognize OTTI in earnings equal to the entire difference between the security’s amortized cost basis and the security’s fair value. If the Company does not intend to sell the impaired debt security and it is not more likely than not that the Company will be required to sell the impaired debt security before recovery of its amortized cost basis but the Company does not expect to recover the entire amortized cost basis of the security, the Company will separate OTTI into two components: 1) the amount related to credit loss, recognized in earnings; and 2) the noncredit portion of OTTI, recognized through other comprehensive income (loss).

The Company considers OTTI for an available-for-sale equity security to have occurred if the decline in the security’s fair value below its cost basis is deemed other than temporary based on evaluation of both qualitative and quantitative valuation measures. If the impairment of an available-for-sale equity security is determined to be other-than-temporary, the Company will

46

recognize OTTI in earnings equal to the entire difference between the security’s amortized cost basis and the security’s fair value. If the Company intends to sell an impaired equity security and the Company does not expect to recover the entire cost basis of the security prior to the sale, the Company will recognize OTTI in the period the decision to sell is made.

Real Estate Owned and Repossessed Assets—Real estate owned and repossessed assets are included in the other assets line item in the consolidated balance sheet. Real estate owned represents real estate acquired through foreclosure and also includes those properties acquired through a deed in lieu of foreclosure or similar legal agreement. Both real estate owned and the repossessed assets are carried at the lower of carrying value or fair value, less estimated selling costs.

New Accounting and Disclosure Guidance—Below is the new accounting and disclosure guidance that relates to activities in which the Company is engaged.

Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists

In July 2013, the FASB amended the presentation guidance on unrecognized tax benefits. The amended guidance requires an unrecognized tax benefit, or a portion of an unrecognized tax benefit, to be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except under certain circumstances. To the extent a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. The unrecognized tax benefit should also be presented in the financial statements as a liability if the tax law of the applicable jurisdiction does not require the Company to use, and the Company does not intend to use, the deferred tax asset to settle any additional income taxes. The amended presentation guidance became effective for annual and interim periods beginning on January 1, 2014 for the Company and was applied prospectively to unrecognized tax benefits existing at that date. The adoption of the amended presentation guidance did not have a material impact on the Company’s financial condition, results of operations or cash flows.

Accounting for Investments in Qualified Affordable Housing Projects

In January 2014, the FASB amended the accounting guidance for investments in qualified affordable housing projects. The amended accounting guidance permits reporting entities to make an accounting policy election to account for their investments in qualified affordable housing projects using the proportional amortization method if certain conditions are met. Under the proportional amortization method, the Company would amortize the initial cost of the investment in proportion to the tax credits and other tax benefits received and recognize the net investment performance in the consolidated statement of income (loss) as a component of income tax expense (benefit). The amended guidance will be effective for annual and interim periods beginning on January 1, 2015 for the Company and must be applied retrospectively. Early adoption is permitted. While the Company is currently evaluating the impact of the new accounting guidance, the adoption is not expected to have a material impact on the Company’s financial condition, results of operations or cash flows.

Reclassification of Residential Real Estate Collateralized Mortgage Loans upon Foreclosure

In January 2014, the FASB amended the accounting and disclosure guidance on reclassifications of residential real estate collateralized mortgage loans upon foreclosure. The amended guidance clarifies that an in substance repossession or foreclosure occurs, and a creditor is considered to have received physical possession of residential real estate property collateralizing a mortgage loan, upon either (1) the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure or (2) the borrower conveying all interest in the residential real estate property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement. The amended disclosure guidance requires interim and annual disclosure of both (1) the amount of foreclosed residential real estate property held by the creditor and (2) the recorded investment in mortgage loans collateralized by residential real estate property that are in the process of foreclosure. As early adoption was permitted, the Company early adopted the amended guidance as of January 1, 2014. The adoption of the amended accounting guidance did not have a material impact on the Company’s financial condition, results of operations or cash flows.

Presentation and Disclosure of Discontinued Operations

In April 2014, the FASB amended the presentation and disclosure guidance on disposal transactions. The amended guidance raises the threshold for a disposal to qualify as a discontinued operation and requires new disclosures of both discontinued operations and certain other disposals that do not meet the definition of a discontinued operation. The amended

47

guidance will be effective for all disposals or classifications as held for sale that occur in annual and interim periods beginning on or after December 15, 2014. Early adoption is permitted but only for disposals that have not been reported in financial statements previously issued. The adoption is not expected to have a material impact on the Company’s current financial condition, results of operations or cash flows; however, it may impact the reporting of future disposals if and when they occur.

Revenue Recognition on Contracts with Customers

In May 2014, the FASB amended the guidance on revenue recognition on contracts with customers. The new standard outlines a single comprehensive model for entities to apply in accounting for revenue arising from contracts with customers. The amended guidance will be effective for annual and interim periods beginning on January 1, 2017 for the Company and may be applied on either a full retrospective or modified retrospective basis. Early adoption is not permitted. While the Company is currently evaluating the impact of the new accounting guidance, the adoption is not expected to have a material impact on the Company’s financial condition, results of operations or cash flows.

Accounting and Disclosures for Repurchase Agreements

In June 2014, the FASB amended the accounting and disclosure guidance on repurchase agreements. The amended guidance requires entities to account for repurchase-to-maturity transactions as secured borrowings, eliminates accounting guidance on linked repurchase financing transactions, and expands the disclosure requirements related to transfers of financial assets accounted for as sales and as secured borrowings. The amended guidance will be effective for annual and interim periods beginning on January 1, 2015 for the Company and must be applied using a cumulative-effect approach as of the beginning of the period of adoption. Early adoption is not permitted. While the Company is currently evaluating the impact of the new accounting guidance, the adoption is not expected to have a material impact on the Company’s financial condition, results of operations or cash flows.

NOTE 2—DISPOSITION

On February 10, 2014, the Company completed the sale of its market making business, G1 Execution Services, LLC, to an affiliate of Susquehanna International Group, LLP for cash proceeds of $76 million. The sale resulted in a gain of $4 million which was recorded in the facility restructuring and other exit activities line item on the consolidated statement of income (loss). The table below summarizes the carrying amounts of the major classes of assets and liabilities of the market making business at December 31, 2013 (dollars in millions):

	December 31, 2013(1)
Assets:
Cash and equivalents	$	11
Trading securities	105
Property and equipment, net	2
Other intangibles, net	21
Other assets	38
Total assets	$	177
Liabilities:
Other liabilities	$	107
Total liabilities	$	107

⁽¹⁾Assets and liabilities as of December 31, 2013 were classified as held-for-sale and reflected in the other assets and other liabilities line items on the consolidated balance sheet respectively.

48

NOTE 3—OPERATING INTEREST INCOME AND OPERATING INTEREST EXPENSE

The following table shows the components of operating interest income and operating interest expense (dollars in millions):

	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
Operating interest income:
Loans	$	77		$	102		$	161		$	209
Available-for-sale securities	72			67			151			131
Held-to-maturity securities	82			61			159			119
Margin receivables	65			54			127			108
Securities borrowed and other	26			18			46			35
Total operating interest income	322			302			644			602
Operating interest expense:
Securities sold under agreements to repurchase	(30		)	(37		)	(65		)	(74		)
FHLB advances and other borrowings	(17		)	(17		)	(34		)	(34		)
Deposits	(2		)	(3		)	(4		)	(6		)
Customer payables and other	(3		)	(2		)	(5		)	(4		)
Total operating interest expense	(52		)	(59		)	(108		)	(118		)
Net operating interest income	$	270		$	243		$	536		$	484

NOTE 4—FAIR VALUE DISCLOSURES

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In determining fair value, the Company may use various valuation approaches, including market, income and/or cost approaches. The fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Fair value is a market-based measure considered from the perspective of a market participant. Accordingly, even when market assumptions are not readily available, the Company’s own assumptions reflect those that market participants would use in pricing the asset or liability at the measurement date. The fair value measurement accounting guidance describes the following three levels used to classify fair value measurements:

• Level 1—Unadjusted quoted prices in active markets for identical assets or liabilities that are accessible by the Company.

• Level 2—Quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.

• Level 3—Unobservable inputs that are significant to the fair value of the assets or liabilities.

The availability of observable inputs can vary and in certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to a fair value measurement requires judgment and consideration of factors specific to the asset or liability.

Recurring Fair Value Measurement Techniques

U.S. Treasury Securities and Agency Debentures

The fair value measurements of U.S. Treasury securities were classified as Level 1 of the fair value hierarchy as they were based on quoted market prices in active markets. The fair value measurements of agency debentures were classified as Level 2 of the fair value hierarchy as they were based on quoted market prices observable in the marketplace.

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Residential Mortgage-backed Securities

The Company’s residential mortgage-backed securities portfolio primarily comprised agency mortgage-backed securities and CMOs. Agency mortgage-backed securities and CMOs are guaranteed by U.S. government sponsored and federal agencies. The weighted average coupon rates for the available-for-sale residential mortgage-backed securities at June 30, 2014 are shown in the following table:

	Weighted Average Coupon Rate
Agency mortgage-backed securities	3.09	%
Agency CMOs	3.15	%

The fair value of agency mortgage-backed securities was determined using a market approach with quoted market prices, recent market transactions and spread data for similar instruments. The fair value of agency CMOs was determined using market and income approaches with the Company’s own trading activities for identical or similar instruments. Agency mortgage-backed securities and CMOs were categorized in Level 2 of the fair value hierarchy.

Other Debt Securities

The fair value measurements of agency debt securities were determined using market and income approaches along with the Company’s own trading activities for identical or similar instruments and were categorized in Level 2 of the fair value hierarchy.

The Company’s municipal bonds are revenue bonds issued by state and other local government agencies. The valuation of corporate bonds is impacted by the credit worthiness of the corporate issuer. All of the Company’s municipal bonds and corporate bonds were rated investment grade at June 30, 2014. These securities were valued using a market approach with pricing service valuations corroborated by recent market transactions for identical or similar bonds. Municipal bonds and corporate bonds were categorized in Level 2 of the fair value hierarchy.

Publicly Traded Equity Securities

The fair value measurements of the Company's publicly traded equity securities were classified as Level 1 of the fair value hierarchy as they were based on quoted market prices in active markets.

Derivative Instruments

Interest rate swap and option contracts were valued with an income approach using pricing models that are commonly used by the financial services industry. The market observable inputs used in the pricing models include the swap curve, the volatility surface, and prime or overnight indexed swap basis from a financial data provider. The Company does not consider these models to involve significant judgment on the part of management, and the Company corroborated the fair value measurements with counterparty valuations. The Company’s derivative instruments were categorized in Level 2 of the fair value hierarchy. The consideration of credit risk, the Company’s or the counterparty’s, did not result in an adjustment to the valuation of its derivative instruments in the periods presented.

Securities Owned and Securities Sold, Not Yet Purchased

Securities transactions entered into by broker-dealer subsidiaries were included in trading securities as held-for-sale assets within other assets and securities sold, not yet purchased as held-for-sale liabilities in the Company’s fair value disclosures at December 31, 2013. The Company’s definition of actively traded is based on average daily volume and other market trading statistics. The majority of the Company's securities owned and securities sold, not yet purchased were categorized in Level 1 of the fair value hierarchy. The fair value of these securities was determined using listed or quoted market prices. The Company did not hold any of these securities at June 30, 2014.

Nonrecurring Fair Value Measurement Techniques

Certain other assets are recorded at fair value on a nonrecurring basis: 1) one- to four-family and home equity loans in which the amount of the loan balance in excess of the estimated current value of the underlying property less estimated selling costs has been charged-off; and 2) real estate owned that is carried at the lower of the property’s carrying value or fair value less estimated selling costs.

The Company evaluates and reviews assets that have been subject to fair value measurement requirements on a quarterly basis in accordance with policies and procedures that were designed to be in compliance with guidance from the

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Company’s regulators. These policies and procedures govern the frequency of the review, the use of acceptable valuation methods, and the consideration of estimated selling costs.

Loans Receivable and Real Estate Owned

Loans that have been delinquent for 180 days or that are in bankruptcy and certain TDR loan modifications are charged-off based on the estimated current value of the underlying property less estimated selling costs. Property valuations for these one- to four-family and home equity loans are based on the most recent "as is" property valuation data available, which may include appraisals, broker price opinions, automated valuation models or updated values using home price indices. Subsequent to the recording of an initial fair value measurement, these loans continue to be measured at fair value on a nonrecurring basis, utilizing the estimated value of the underlying property less estimated selling costs. These property valuations are updated on a monthly, quarterly or semi-annual basis depending on the type of valuation initially used. If the value of the underlying property has declined, an additional charge-off is recorded. If the value of the underlying property has increased, previously charged-off amounts are not reversed. If the valuation data obtained is significantly different from the valuation previously received, the Company orders additional property valuation data to corroborate or update the valuation.

Property valuations for real estate owned are based on the lowest value of the most recent property valuation data available, which may include appraisals, listing prices or approved offer prices. Nonrecurring fair value measurements on one- to four-family and home equity loans and real estate owned were classified as Level 3 of the fair value hierarchy as the majority of the valuations included Level 3 inputs that were significant to the fair value.

The following table presents additional information about significant unobservable inputs used in the valuation of assets measured at fair value on a nonrecurring basis that were categorized in Level 3 of the fair value hierarchy at June 30, 2014:

	Unobservable Inputs	Average		Range
Loans receivable:
One- to four-family	Appraised value	$	367,500	$14,500-$1,300,000
Home equity	Appraised value	$	270,800	$7,000-$1,000,000
Real estate owned	Appraised value	$	308,100	$10,900-$1,500,000

Goodwill

At the end of the second quarter of 2013, the Company decided to exit the market making business, and as a result evaluated the total goodwill allocated to the market making reporting unit for impairment. The Company valued the market making business by using a combination of expected present value of future cash flows of the business, a form of the income approach, and prices of comparable businesses, a form of the market approach, with significant unobservable inputs. The Company valued the market making reporting unit using the expected sale structure of the market making business. As a result of the evaluation, it was determined that the entire carrying amount of goodwill allocated to the market making reporting unit was impaired, and the Company recognized $142 million impairment of goodwill during the year ended December 31, 2013.

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Recurring and Nonrecurring Fair Value Measurements

Assets and liabilities measured at fair value at June 30, 2014 and December 31, 2013 are summarized in the following tables (dollars in millions):

	Level 1		Level 2		Level 3		Total Fair Value
June 30, 2014:
Recurring fair value measurements:
Assets
Available-for-sale securities:
Debt securities:
Agency residential mortgage-backed securities and CMOs	$	—	$	11,461	$	—	$	11,461
Agency debentures	—		517		—		517
Agency debt securities	—		794		—		794
Municipal bonds	—		41		—		41
Corporate bonds	—		4		—		4
Total debt securities	—		12,817		—		12,817
Publicly traded equity securities	20		—		—		20
Total available-for-sale securities	20		12,817		—		12,837
Other assets:
Derivative assets(1)	—		52		—		52
Deposits with clearing organizations(2)	91		—		—		91
Total other assets measured at fair value on a recurring basis	91		52		—		143
Total assets measured at fair value on a recurring basis(3)	$	111	$	12,869	$	—	$	12,980
Liabilities
Derivative liabilities(1)	$	—	$	160	$	—	$	160
Total liabilities measured at fair value on a recurring basis(3)	$	—	$	160	$	—	$	160
Nonrecurring fair value measurements:
Loans receivable:
One- to four-family	$	—	$	—	$	35	$	35
Home equity	—		—		19		19
Total loans receivable	—		—		54		54
Real estate owned	—		—		32		32
Total assets measured at fair value on a nonrecurring basis(4)	$	—	$	—	$	86	$	86

(1) All derivative assets and liabilities were interest rate contracts at June 30, 2014. Information related to derivative instruments is detailed in Note 8—Accounting for Derivative Instruments and Hedging Activities.

(2) Represents U.S. Treasury securities held by a broker-dealer subsidiary.

(3) Assets and liabilities measured at fair value on a recurring basis represented 28% and less than 1% of the Company’s total assets and total liabilities, respectively, at June 30, 2014.

(4) Represents the fair value of assets prior to deducting estimated selling costs that were carried on the consolidated balance sheet at June 30, 2014, and for which a fair value measurement was recorded during the period.

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	Level 1		Level 2		Level 3(1)		Total Fair Value
December 31, 2013:
Recurring fair value measurements:
Assets
Available-for-sale securities:
Debt securities:
Residential mortgage-backed securities:
Agency mortgage-backed securities and CMOs	$	—	$	12,236	$	—	$	12,236
Non-agency CMOs	—		—		14		14
Total residential mortgage-backed securities	—		12,236		14		12,250
Agency debentures	—		466		—		466
Agency debt securities	—		831		—		831
Municipal bonds	—		40		—		40
Corporate bonds	—		5		—		5
Total debt securities	—		13,578		14		13,592
Total available-for-sale securities	—		13,578		14		13,592
Other assets:
Derivative assets(2)	—		107		—		107
Deposits with clearing organizations(3)	53		—		—		53
Held-for-sale assets—trading securities(4)	104		1		—		105
Total other assets measured at fair value on a recurring basis	157		108		—		265
Total assets measured at fair value on a recurring basis(5)	$	157	$	13,686	$	14	$	13,857
Liabilities
Derivative liabilities(2)	$	—	$	169	$	—	$	169
Held-for-sale liabilities—securities sold, not yet purchased(4)	94		1		—		95
Total liabilities measured at fair value on a recurring basis(5)	$	94	$	170	$	—	$	264
Nonrecurring fair value measurements:
Loans receivable:
One- to four-family	$	—	$	—	$	246	$	246
Home equity	—		—		46		46
Total loans receivable(6)	—		—		292		292
Real estate owned(6)	—		—		47		47
Total assets measured at fair value on a nonrecurring basis(7)	$	—	$	—	$	339	$	339

(1) Instruments measured at fair value on a recurring basis categorized as Level 3 represented less than 1% of the Company's total assets and none of its total liabilities at December 31, 2013.

(2) All derivative assets and liabilities were interest rate contracts at December 31, 2013. Information related to derivative instruments is detailed in Note 8—Accounting for Derivative Instruments and Hedging Activities.

(3) Represents U.S. Treasury securities held by a broker-dealer subsidiary.

(4) Assets and liabilities of the market making business were reclassified as held-for-sale and are presented in the other assets and other liabilities line items, respectively, on the consolidated balance sheet at December 31, 2013. Information related to the classification is detailed in Note 2—Disposition.

(5) Assets and liabilities measured at fair value on a recurring basis represented 30% and 1% of the Company’s total assets and total liabilities, respectively, at December 31, 2013.

(6) Represents the fair value of assets prior to deducting estimated selling costs that were carried on the consolidated balance sheet at December 31, 2013, and for which a fair value measurement was recorded during the period.

(7) Goodwill allocated to the market making reporting unit with a carrying amount of $142 million was written down to zero during the year ended December 31, 2013 and categorized in Level 3 of the fair value hierarchy.

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The following table presents the gains and losses associated with the assets measured at fair value on a nonrecurring basis during the three and six months ended June 30, 2014 and 2013 (dollars in millions):

	Three Months Ended June 30,				Six Months Ended June 30,
	2014		2013		2014			2013
One- to four-family	$	2	$	8	$	7		$	24
Home equity	8		17		20			36
Total losses on loans receivable measured at fair value	$	10	$	25	$	27		$	60
(Gains) losses on real estate owned measured at fair value	$	—	$	1	$	(1	)	$	2
Losses on goodwill measured at fair value	$	—	$	142	$	—		$	142

Transfers Between Levels 1 and 2

For assets and liabilities measured at fair value on a recurring basis, the Company’s transfers between levels of the fair value hierarchy are deemed to have occurred at the beginning of the reporting period on a quarterly basis. The Company had no material transfers between Level 1 and 2 during the three and six months ended June 30, 2014 and 2013.

Level 3 Rollforward for Recurring Fair Value Measurements

Level 3 assets include instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation. While the Company’s fair value estimates of Level 3 instruments utilized observable inputs where available, the valuation included significant management judgment in determining the relevance and reliability of market information considered.

The following tables present additional information about Level 3 assets measured at fair value on a recurring basis for the three and six months ended June 30, 2014 and 2013 (dollars in millions):

	Available-for-sale Securities
	Non-agency CMOs
	Three Months Ended June 30,					Six Months Ended June 30,
	2014		2013			2014			2013
Beginning of period	$	—	$	14		$	14		$	49
Gains (losses) recognized in earnings(1)	—		(1		)	6			(2		)
Net gains recognized in other comprehensive income(2)	—		1			3			3
Sales	—		—			(23		)	(35		)
Settlements	—		—			—			(1		)
End of period	$	—	$	14		$	—		$	14

(1) Gains and losses recognized in earnings are reported in the gains on loans and securities, net and net impairment line items on the consolidated statement of income (loss).

(2) Net gains recognized in other comprehensive income (loss) are reported in the net change from available-for-sale securities line item.

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Fair Value of Financial Instruments Not Carried at Fair Value

The following table summarizes the carrying values, fair values and fair value hierarchy level classification of financial instruments that are not carried at fair value on the consolidated balance sheet at June 30, 2014 and December 31, 2013 (dollars in millions):

	June 30, 2014
	Carrying Value		Level 1		Level 2		Level 3		Total Fair Value
Assets
Cash and equivalents	$	1,807	$	1,807	$	—	$	—	$	1,807
Cash required to be segregated under federal or other regulations	$	1,215	$	1,215	$	—	$	—	$	1,215
Held-to-maturity securities:
Agency mortgage-backed securities and CMOs	$	9,084	$	—	$	9,209	$	—	$	9,209
Agency debentures	163		—		166		—		166
Agency debt securities	2,109		—		2,143		—		2,143
Total held-to-maturity securities	$	11,356	$	—	$	11,518	$	—	$	11,518
Margin receivables	$	7,340	$	—	$	7,340	$	—	$	7,340
Loans receivable, net:
One- to four-family	$	3,316	$	—	$	—	$	2,932	$	2,932
Home equity	2,829		—		—		2,600		2,600
Consumer and other	511		—		—		521		521
Total loans receivable, net(1)	$	6,656	$	—	$	—	$	6,053	$	6,053
Investment in FHLB stock	$	56	$	—	$	—	$	56	$	56
Deposits paid for securities borrowed	$	420	$	—	$	420	$	—	$	420
Liabilities
Deposits	$	25,084	$	—	$	25,084	$	—	$	25,084
Securities sold under agreements to repurchase	$	3,742	$	—	$	3,754	$	—	$	3,754
Customer payables	$	6,626	$	—	$	6,626	$	—	$	6,626
FHLB advances and other borrowings	$	1,291	$	—	$	926	$	249	$	1,175
Corporate debt	$	1,770	$	—	$	1,950	$	—	$	1,950
Deposits received for securities loaned	$	1,713	$	—	$	1,713	$	—	$	1,713

(1) The carrying value of loans receivable, net includes the allowance for loan losses of $401 million and loans that are valued at fair value on a nonrecurring basis at June 30, 2014.

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	December 31, 2013
	Carrying Value		Level 1		Level 2		Level 3		Total Fair Value
Assets
Cash and equivalents	$	1,838	$	1,838	$	—	$	—	$	1,838
Cash required to be segregated under federal or other regulations	$	1,066	$	1,066	$	—	$	—	$	1,066
Held-to-maturity securities:
Agency mortgage-backed securities and CMOs	$	8,359	$	—	$	8,293	$	—	$	8,293
Agency debentures	164		—		168		—		168
Agency debt securities	1,658		—		1,631		—		1,631
Total held-to-maturity securities	$	10,181	$	—	$	10,092	$	—	$	10,092
Margin receivables	$	6,353	$	—	$	6,353	$	—	$	6,353
Loans receivable, net:
One- to four-family	$	4,392	$	—	$	—	$	3,790	$	3,790
Home equity	3,148		—		—		2,822		2,822
Consumer and other	583		—		—		596		596
Total loans receivable, net(1)	$	8,123	$	—	$	—	$	7,208	$	7,208
Investment in FHLB stock	$	61	$	—	$	—	$	61	$	61
Deposits paid for securities borrowed	$	536	$	—	$	536	$	—	$	536
Liabilities
Deposits	$	25,971	$	—	$	25,971	$	—	$	25,971
Securities sold under agreements to repurchase	$	4,543	$	—	$	4,571	$	—	$	4,571
Customer payables	$	6,310	$	—	$	6,310	$	—	$	6,310
FHLB advances and other borrowings	$	1,279	$	—	$	924	$	225	$	1,149
Corporate debt	$	1,768	$	—	$	1,951	$	—	$	1,951
Deposits received for securities loaned	$	1,050	$	—	$	1,050	$	—	$	1,050

(1) The carrying value of loans receivable, net includes the allowance for loan losses of $453 million and loans that are valued at fair value on a nonrecurring basis at December 31, 2013.

The fair value measurement techniques for financial instruments not carried at fair value on the consolidated balance sheet at June 30, 2014 and December 31, 2013 are summarized as follows:

Cash and equivalents, cash required to be segregated under federal or other regulations, margin receivables, deposits paid for securities borrowed, customer payables and deposits received for securities loaned—Fair value is estimated to be carrying value.

Held-to-maturity securities—The held-to-maturity securities portfolio included agency mortgage-backed securities and CMOs, agency debentures, and agency debt securities. The fair value of agency mortgage-backed securities is determined using market and income approaches with quoted market prices, recent market transactions and spread data for similar instruments. The fair value of agency CMOs and agency debt securities is determined using market and income approaches with the Company’s own trading activities for identical or similar instruments. The fair value of agency debentures is based on quoted market prices that were derived from assumptions observable in the marketplace.

Loans receivable, net—Fair value is estimated using a discounted cash flow model. Loans are differentiated based on their individual portfolio characteristics, such as product classification, loan category, pricing features and remaining maturity. Assumptions for expected losses, prepayments and discount rates are adjusted to reflect the individual characteristics of the loans, such as credit risk, coupon, term, and payment characteristics, as well as the secondary market conditions for these types of loans. There was limited or no observable market data for the home equity and one- to four-family loan portfolios, which indicates that the market for these types of loans is considered to be inactive. Given the limited market data, these fair value measurements cannot be determined with precision and changes in the underlying assumptions used, including discount rates, could significantly affect the results of current or future fair value estimates. In addition, the amount that would be realized in a forced liquidation, an actual sale or immediate settlement could be significantly lower than both the carrying value and the estimated fair value of the portfolio.

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Investment in FHLB stock—FHLB stock is carried at cost, which is considered to be a reasonable estimate of fair value.

Deposits—Fair value is the amount payable on demand at the reporting date for sweep deposits, complete savings deposits, other money market and savings deposits and checking deposits. For certificates of deposit and brokered certificates of deposit, fair value is estimated by discounting future cash flows using discount factors derived from current observable rates implied for other similar instruments with similar remaining maturities.

Securities sold under agreements to repurchase—Fair value is determined by discounting future cash flows using discount factors derived from current observable rates implied for other similar instruments with similar remaining maturities.

FHLB advances and other borrowings—Fair value for FHLB advances is estimated by discounting future cash flows using discount factors derived from current observable rates implied for similar instruments with similar remaining maturities. For subordinated debentures, fair value is estimated by discounting future cash flows at the rate implied by dealer pricing quotes. For overnight and other short-term borrowings, fair value approximates carrying value.

Corporate debt—Fair value is estimated using dealer pricing quotes. The fair value of the non-interest-bearing convertible debentures is directly correlated to the intrinsic value of the Company’s underlying stock. As the price of the Company’s stock increases relative to the conversion price, the fair value of the convertible debentures increases.

NOTE 5—OFFSETTING ASSETS AND LIABILITIES

For financial statement purposes, the Company does not offset derivative instruments, repurchase agreements or securities borrowing and securities lending transactions. The Company’s derivative instruments, repurchase agreements and securities borrowing and securities lending transactions are generally transacted under master agreements that are widely used by counterparties and that may allow for net settlements of payments in the normal course, as well as offsetting of all contracts with a given counterparty in the event of bankruptcy or default of one of the two parties to the transaction. The following table presents information about these transactions to enable the users of the Company’s financial statements to evaluate the potential effect of rights of setoff between these recognized assets and recognized liabilities at June 30, 2014 and December 31, 2013 (dollars in millions):

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										Gross Amounts Not Offset in the Consolidated Balance Sheet
				Gross Amounts of Recognized Assets and Liabilities		Gross Amounts Offset in the Consolidated Balance Sheet		Net Amounts Presented in the Consolidated Balance Sheet		Financial Instruments			Collateral Received or Pledged (Including Cash)			Net Amount
June 30, 2014
	Assets:
		Deposits paid for securities borrowed (1)(5)		$	420	$	—	$	420	$	(264	)	$	(147	)	$	9
		Derivative assets (1)(3)		51		—		51		(37		)	(5		)	9
			Total	$	471	$	—	$	471	$	(301	)	$	(152	)	$	18
	Liabilities:
		Repurchase agreements (4)		$	3,742	$	—	$	3,742	$	—		$	(3,742	)	$	—
		Deposits received for securities loaned (2)(6)		1,713		—		1,713		(264		)	(1,346		)	103
		Derivative liabilities (2)(3)		144		—		144		(36		)	(108		)	—
			Total	$	5,599	$	—	$	5,599	$	(300	)	$	(5,196	)	$	103
December 31, 2013
	Assets:
		Deposits paid for securities borrowed (1)(5)		$	536	$	—	$	536	$	(247	)	$	(282	)	$	7
		Derivative assets (1)(3)		92		—		92		(48		)	(12		)	32
			Total	$	628	$	—	$	628	$	(295	)	$	(294	)	$	39
	Liabilities:
		Repurchase agreements (4)		$	4,543	$	—	$	4,543	$	—		$	(4,537	)	$	6
		Deposits received for securities loaned (2)(6)		1,050		—		1,050		(247		)	(740		)	63
		Derivative liabilities (2)(3)		168		—		168		(48		)	(120		)	—
			Total	$	5,761	$	—	$	5,761	$	(295	)	$	(5,397	)	$	69

(1) Net amounts presented in the consolidated balance sheet are reflected in the other assets line item.

(2) Net amounts presented in the consolidated balance sheet are reflected in the other liabilities line item.

(3) Excludes net accrued interest payable of $17 million and $19 million at June 30, 2014 and December 31, 2013, respectively.

(4) The Company pledges available-for-sale and held-to-maturity securities as collateral for amounts due on repurchase agreements and derivative liabilities. The collateral pledged included available-for-sale securities at fair value and held-to-maturity securities at amortized cost for both June 30, 2014 and December 31, 2013.

(5) Included in the gross amounts of deposits paid for securities borrowed was $256 million and $415 million at June 30, 2014 and December 31, 2013, respectively, transacted through a program with a clearing organization, which guarantees the return of cash to the Company. For presentation purposes, these amounts presented are based on the original counterparties to the Company’s master securities loan agreements.

(6) Included in the gross amounts of deposits received for securities loaned was $1.1 billion and $682 million at June 30, 2014 and December 31, 2013, respectively, transacted through a program with a clearing organization, which guarantees the return of securities to the Company. For presentation purposes, these amounts presented are based on the original counterparties to the Company’s master securities loan agreements.

Effective June 10, 2013, certain types of derivatives that the Company trades are subject to the Dodd-Frank Act clearing mandate and as a result, are subject to derivatives clearing agreements ("cleared derivatives contracts"). These cleared derivatives contracts enable clearing by a derivatives clearing organization through a clearing member. Under the contracts, the clearing member typically has a one-way right to offset all contracts in the event of the Company’s default or bankruptcy. As such, the cleared derivatives contracts are not bilateral master netting agreements and do not allow for offsetting. At June 30, 2014 and December 31, 2013, the Company had $1 million and $15 million, respectively, in derivative assets of cleared derivatives contracts and $16 million and $1 million, respectively, in derivative liabilities of cleared derivatives contracts.

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NOTE 6—AVAILABLE-FOR-SALE AND HELD-TO-MATURITY SECURITIES

The amortized cost and fair value of available-for-sale and held-to-maturity securities at June 30, 2014 and December 31, 2013 are shown in the following tables (dollars in millions):

	Amortized Cost		Gross Unrealized / Unrecognized Gains		Gross Unrealized / Unrecognized Losses			Fair Value
June 30, 2014:
Available-for-sale securities:
Debt securities:
Agency residential mortgage-backed securities and CMOs	$	11,505	$	116	$	(160	)	$	11,461
Agency debentures	523		12		(18		)	517
Agency debt securities	771		25		(2		)	794
Municipal bonds	41		1		(1		)	41
Corporate bonds	5		—		(1		)	4
Total debt securities	12,845		154		(182		)	12,817
Publicly traded equity securities(1)	20		—		—			20
Total available-for-sale securities	$	12,865	$	154	$	(182	)	$	12,837
Held-to-maturity securities:
Agency residential mortgage-backed securities and CMOs	$	9,084	$	185	$	(60	)	$	9,209
Agency debentures	163		3		—			166
Agency debt securities	2,109		46		(12		)	2,143
Total held-to-maturity securities	$	11,356	$	234	$	(72	)	$	11,518
December 31, 2013:
Available-for-sale securities:
Debt securities:
Residential mortgage-backed securities:
Agency mortgage-backed securities and CMOs	$	12,505	$	66	$	(335	)	$	12,236
Non-agency CMOs	17		2		(5		)	14
Total residential mortgage-backed securities	12,522		68		(340		)	12,250
Agency debentures	520		—		(54		)	466
Agency debt securities	832		8		(9		)	831
Municipal bonds	42		—		(2		)	40
Corporate bonds	6		—		(1		)	5
Total debt securities	13,922		76		(406		)	13,592
Total available-for-sale securities	$	13,922	$	76	$	(406	)	$	13,592
Held-to-maturity securities:
Agency residential mortgage-backed securities and CMOs	$	8,359	$	99	$	(165	)	$	8,293
Agency debentures	164		4		—			168
Agency debt securities	1,658		13		(40		)	1,631
Total held-to-maturity securities	$	10,181	$	116	$	(205	)	$	10,092

(1) Publicly traded equity securities consisted of an investment in a mutual fund related to the Community Reinvestment Act.

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Contractual Maturities

The contractual maturities of all available-for-sale and held-to-maturity debt securities at June 30, 2014 are shown below (dollars in millions):

	Amortized Cost		Fair Value
Available-for-sale debt securities:
Due within one year	$	2	$	2
Due within one to five years	14		14
Due within five to ten years	994		1,003
Due after ten years	11,835		11,798
Total available-for-sale debt securities	$	12,845	$	12,817
Held-to-maturity debt securities:
Due within one to five years	$	969	$	1,005
Due within five to ten years	2,605		2,686
Due after ten years	7,782		7,827
Total held-to-maturity debt securities	$	11,356	$	11,518

The Company pledged $2.1 billion at both June 30, 2014 and December 31, 2013, of available-for-sale securities and $2.5 billion and $3.4 billion at June 30, 2014 and December 31, 2013, respectively, of held-to-maturity securities as collateral for repurchase agreements, derivatives and other purposes.

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Investments with Unrealized or Unrecognized Losses

The following tables show the fair value and unrealized or unrecognized losses on available-for-sale and held-to-maturity securities, aggregated by investment category, and the length of time that individual securities have been in a continuous unrealized or unrecognized loss position at June 30, 2014 and December 31, 2013 (dollars in millions):

	Less than 12 Months					12 Months or More					Total
	Fair Value		Unrealized / Unrecognized Losses			Fair Value		Unrealized / Unrecognized Losses			Fair Value		Unrealized / Unrecognized Losses
June 30, 2014:
Available-for-sale securities:
Debt securities:
Agency residential mortgage-backed securities and CMOs	$	305	$	(1	)	$	5,034	$	(159	)	$	5,339	$	(160	)
Agency debentures	—		—			339		(18		)	339		(18		)
Agency debt securities	—		—			169		(2		)	169		(2		)
Municipal bonds	—		—			18		(1		)	18		(1		)
Corporate bonds	—		—			4		(1		)	4		(1		)
Publicly traded equity securities	20		—			—		—			20		—
Total temporarily impaired available-for-sale securities	$	325	$	(1	)	$	5,564	$	(181	)	$	5,889	$	(182	)
Held-to-maturity securities:
Agency residential mortgage-backed securities and CMOs	$	165	$	(1	)	$	2,703	$	(59	)	$	2,868	$	(60	)
Agency debt securities	—		—			785		(12		)	785		(12		)
Total temporarily impaired held-to-maturity securities	$	165	$	(1	)	$	3,488	$	(71	)	$	3,653	$	(72	)
December 31, 2013:
Available-for-sale securities:
Debt securities:
Agency mortgage-backed securities and CMOs	$	6,422	$	(268	)	$	1,266	$	(67	)	$	7,688	$	(335	)
Non-agency CMOs	—		—			11		(5		)	11		(5		)
Agency debentures	466		(54		)	—		—			466		(54		)
Agency debt securities	384		(9		)	—		—			384		(9		)
Municipal bonds	27		(2		)	—		—			27		(2		)
Corporate bonds	—		—			5		(1		)	5		(1		)
Total temporarily impaired available-for-sale securities	$	7,299	$	(333	)	$	1,282	$	(73	)	$	8,581	$	(406	)
Held-to-maturity securities:
Agency residential mortgage-backed securities and CMOs	$	3,607	$	(121	)	$	891	$	(44	)	$	4,498	$	(165	)
Agency debt securities	1,153		(40		)	—		—			1,153		(40		)
Total temporarily impaired held-to-maturity securities	$	4,760	$	(161	)	$	891	$	(44	)	$	5,651	$	(205	)

The Company does not believe that any individual unrealized loss in the available-for-sale or unrecognized loss in the held-to-maturity portfolio as of June 30, 2014 represents a credit loss. The credit loss component is the difference between the security’s amortized cost basis and the present value of its expected future cash flows, and is recognized in earnings. The noncredit loss component is the difference between the present value of its expected future cash flows and the fair value and is recognized through other comprehensive income (loss). The Company assessed whether it intends to sell, or whether it is more

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likely than not that the Company will be required to sell a security before recovery of its amortized cost basis. For debt securities that are considered other-than-temporarily impaired and that the Company does not intend to sell as of the balance sheet date and will not be required to sell prior to recovery of its amortized cost basis, the Company determines the amount of the impairment that is related to credit and the amount due to all other factors.

The majority of the unrealized or unrecognized losses on mortgage-backed securities are attributable to changes in interest rates and a re-pricing of risk in the market. Agency mortgage-backed securities and CMOs, agency debentures and agency debt securities are guaranteed by U.S. government sponsored and federal agencies. Municipal bonds and corporate bonds are evaluated by reviewing the credit-worthiness of the issuer and general market conditions. The Company does not intend to sell the debt securities in an unrealized or unrecognized loss position as of the balance sheet date and it is not more likely than not that the Company will be required to sell the debt securities before the anticipated recovery of its remaining amortized cost of the debt securities in an unrealized or unrecognized loss position at June 30, 2014.

The following table presents a roll forward for the three and six months ended June 30, 2014 and 2013 of the credit loss component on debt securities held by the Company that had a noncredit loss recognized in other comprehensive income (loss) and had a credit loss recognized in earnings (dollars in millions):

	Three Months Ended June 30,				Six Months Ended June 30,
	2014		2013		2014			2013
Credit loss balance, beginning of period	$	152	$	165	$	166		$	187
Additions:
Subsequent credit impairment	—		—		—			1
Debt securities sold	—		—		(14		)	(23		)
Credit loss balance, end of period (1)	$	152	$	165	$	152		$	165

(1) The credit loss balance at June 30, 2014 and 2013 included $123 million and $114 million, respectively, of credit losses associated with debt securities that have been factored to zero, but the Company still holds legal title to these securities until maturity or until they are sold.

Gains on Loans and Securities, Net

The detailed components of the gains on loans and securities, net line item on the consolidated statement of income (loss) for the three and six months ended June 30, 2014 and 2013 are as follows (dollars in millions):

	Three Months Ended June 30,					Six Months Ended June 30,
	2014			2013		2014			2013
Gains on loans, net	$	7		$	—	$	7		$	—
Gains on securities, net:
Gains on available-for-sale securities	3			18		22			42
Losses on available-for-sale securities	—			—		—			(8		)
Hedge ineffectiveness	(3		)	3		(7		)	3
Gains on securities, net	—			21		15			37
Gains on loans and securities, net	$	7		$	21	$	22		$	37

During the second quarter of 2014, the Company recognized a pre-tax gain of $7 million on the sale of $0.8 billion of one- to four-family loans modified as TDRs. During the six months ended June 30, 2014, the Company sold $17 million in amortized cost of its available-for-sale non-agency CMOs for proceeds of approximately $23 million, which resulted in a pre-tax gain of $6 million. Similarly, during the six months ended June 30, 2013, the Company sold $231 million in amortized cost of its available-for-sale non-agency CMOs for proceeds of approximately $227 million, which resulted in a pre-tax net loss of $4 million.

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NOTE 7—LOANS RECEIVABLE, NET

Loans receivable, net at June 30, 2014 and December 31, 2013 are summarized as follows (dollars in millions):

	June 30, 2014			December 31, 2013
One- to four-family	$	3,345		$	4,475
Home equity	3,153			3,454
Consumer and other	527			602
Total loans receivable	7,025			8,531
Unamortized premiums, net	32			45
Allowance for loan losses	(401		)	(453		)
Total loans receivable, net	$	6,656		$	8,123

During the six months endedJune 30, 2014, the Company sold $0.8 billion of one- to four-family loans modified as TDRs.

At June 30, 2014, the Company pledged $5.9 billion and $0.5 billion of loans as collateral to the FHLB and Federal Reserve Bank, respectively. At December 31, 2013, the Company pledged $6.8 billion and $0.6 billion of loans as collateral to the FHLB and Federal Reserve Bank, respectively. Additionally, the Company’s entire loans receivable portfolio was serviced by other companies at June 30, 2014 and December 31, 2013.

The following table represents the breakdown of the total recorded investment in loans receivable and allowance for loan losses by loans that have been collectively evaluated for impairment and those that have been individually evaluated for impairment at June 30, 2014 and December 31, 2013 (dollars in millions):

	Recorded Investment				Allowance for Loan Losses
	June 30, 2014		December 31, 2013		June 30, 2014		December 31, 2013
Loans collectively evaluated for impairment	$	6,512	$	7,163	$	325	$	329
Loans individually evaluated for impairment (TDRs)	545		1,413		76		124
Total	$	7,057	$	8,576	$	401	$	453

Credit Quality and Concentrations of Credit Risk

The Company tracks and reviews factors to predict and monitor credit risk in its mortgage loan portfolio on an ongoing basis. These factors include: loan type, estimated current LTV/CLTV ratios, delinquency history, documentation type, borrowers’ current credit scores, housing prices, loan vintage and geographic location of the property. In economic conditions in which housing prices generally appreciate, the Company believes that loan type, LTV/CLTV ratios, documentation type and credit scores are the key factors in determining future loan performance. In a housing market with declining home prices and less credit available for refinance, the Company believes the LTV/CLTV ratio becomes a more important factor in predicting and monitoring credit risk. The factors are updated on at least a quarterly basis. The Company tracks and reviews delinquency status to predict and monitor credit risk in the consumer and other loan portfolio on at least a quarterly basis.

Credit Quality

The following tables show the distribution of the Company’s mortgage loan portfolios by credit quality indicator at June 30, 2014 and December 31, 2013 (dollars in millions):

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	One- to Four-Family						Home Equity
Current LTV/CLTV(1)	June 30, 2014			December 31, 2013			June 30, 2014			December 31, 2013
<=80%	$	1,823		$	1,912		$	1,164		$	1,142
80%-100%	919			1,365			837			866
100%-120%	378			711			632			736
>120%	225			487			520			710
Total mortgage loans receivable	$	3,345		$	4,475		$	3,153		$	3,454
Average estimated current LTV/CLTV (2)	81		%	90		%	94		%	98		%
Average LTV/CLTV at loan origination (3)	71		%	72		%	80		%	80		%

(1) Current CLTV calculations for home equity loans are based on the maximum available line for home equity lines of credit and outstanding principal balance for home equity installment loans. Current property values are updated on a quarterly basis using the most recent property value data available to the Company. For properties in which the Company did not have an updated valuation, home price indices were utilized to estimate the current property value.

(2) The average estimated current LTV/CLTV ratio reflects the outstanding balance at the balance sheet date and the maximum available line for home equity lines of credit, divided by the estimated current value of the underlying property.

(3) Average LTV/CLTV at loan origination calculations are based on LTV/CLTV at time of purchase for one- to four-family purchased loans and undrawn balances for home equity loans.

	One- to Four-Family				Home Equity
Documentation Type	June 30, 2014		December 31, 2013		June 30, 2014		December 31, 2013
Full documentation	$	1,476	$	1,847	$	1,616	$	1,769
Low/no documentation	1,869		2,628		1,537		1,685
Total mortgage loans receivable	$	3,345	$	4,475	$	3,153	$	3,454

	One- to Four-Family				Home Equity
Current FICO (1)	June 30, 2014		December 31, 2013		June 30, 2014		December 31, 2013
>=720	$	1,924	$	2,252	$	1,679	$	1,811
719 - 700	317		436		313		343
699 - 680	263		366		261		293
679 - 660	215		296		215		245
659 - 620	262		404		286		310
<620	364		721		399		452
Total mortgage loans receivable	$	3,345	$	4,475	$	3,153	$	3,454

(1) FICO scores are updated on a quarterly basis; however, at June 30, 2014 and December 31, 2013, there were some loans for which the updated FICO scores were not available. The current FICO distribution at June 30, 2014 included the most recent FICO scores where available, otherwise the original FICO score was used, for approximately $76 million and $4 million of one- to four-family and home equity loans, respectively. The current FICO distribution at December 31, 2013 included original FICO scores for approximately $95 million and $10 million of one- to four-family and home equity loans, respectively.

Concentrations of Credit Risk

One- to four-family loans include interest-only loans for a five to ten year period, followed by an amortizing period ranging from 20 to 25 years. At June 30, 2014, 42% of the Company's one- to four-family portfolio were not yet amortizing. However, during the trailing twelve months ended June 30, 2014, based on the unpaid principal balance before charge-offs, approximately 14% of these borrowers made voluntary annual principal payments of at least $2,500 and slightly over a third of those borrowers made voluntary annual principal payments of at least $10,000.

The home equity loan portfolio is primarily second lien loans on residential real estate properties, which have a higher level of credit risk than first lien mortgage loans. Approximately 15% of the home equity portfolio was in the first lien position and the Company holds both the first and second lien positions in less than 1% of the home equity loan portfolio at June 30, 2014. The home equity loan portfolio consists of approximately 20% of home equity installment loans and approximately 80% of home equity lines of credit at June 30, 2014.

Home equity installment loans are primarily fixed rate and fixed term, fully amortizing loans that do not offer the option of an interest-only payment. The majority of home equity lines of credit convert to amortizing loans at the end of the draw period, which typically ranges from five to ten years. Approximately 8% of this portfolio will require the borrowers to

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repay the loan in full at the end of the draw period. At June 30, 2014, 87% of the home equity line of credit portfolio had not converted from the interest-only draw period and had not begun amortizing. However, during the trailing twelve months ended June 30, 2014, approximately 40% of the Company's borrowers made voluntary annual principal payments of at least $500 on their home equity lines of credit and slightly under half of those borrowers reduced their principal balance by at least $2,500.

The following table outlines when one- to four-family and home equity lines of credit convert to amortizing by percentage of the one- to four-family portfolio and home equity line of credit portfolios, respectively, at June 30, 2014:

Period of Conversion to Amortizing Loan	% of One- to Four-Family Portfolio	% of Home Equity Line of  Credit Portfolio
Already amortizing	58%	13%
Through December 31, 2014	1%	5%
Year ending December 31, 2015	4%	27%
Year ending December 31, 2016	16%	42%
Year ending December 31, 2017	21%	13%

Approximately 38% and 40% of the Company’s mortgage loans receivable were concentrated in California at June 30, 2014 and December 31, 2013, respectively. No other state had concentrations of mortgage loans that represented 10% or more of the Company’s mortgage loans receivable at June 30, 2014 and December 31, 2013.

Delinquent Loans

The following table shows total loans receivable by delinquency category at June 30, 2014 and December 31, 2013 (dollars in millions):

	Current		30-89 Days Delinquent		90-179 Days Delinquent		180+ Days Delinquent		Total
June 30, 2014
One- to four-family	$	3,085	$	88	$	27	$	145	$	3,345
Home equity	3,020		56		32		45		3,153
Consumer and other	515		11		1		—		527
Total loans receivable	$	6,620	$	155	$	60	$	190	$	7,025
December 31, 2013
One- to four-family	$	3,988	$	190	$	70	$	227	$	4,475
Home equity	3,309		69		36		40		3,454
Consumer and other	587		12		3		—		602
Total loans receivable	$	7,884	$	271	$	109	$	267	$	8,531

Nonperforming Loans

The Company classifies loans as nonperforming when they are no longer accruing interest. Nonaccrual loans include loans that are 90 days and greater past due, TDRs that are on nonaccrual status for all classes of loans and certain junior liens that have a delinquent senior lien. The following table shows the comparative data for nonaccrual loans (dollars in millions):

	June 30, 2014	December 31, 2013
One- to four-family	307	526
Home equity	185	164
Consumer and other	2	3
Total nonperforming loans receivable	494	693

Nonperforming loans decreased $199 million to $494 million at June 30, 2014 when compared to December 31, 2013. The decrease in the one- to four-family nonperforming loans receivable during the six months endedJune 30, 2014 was primarily due to the sale of one- to four-family loans modified as TDRs, which included $377 million of nonperforming loans. The decrease in nonperforming loans receivable was partially offset by the increase in nonperforming TDRs that had been charged-off due to bankruptcy notification. In February 2014, the OCC issued clarifying guidance related to consumer debt discharged in Chapter 7 bankruptcy proceedings. As a result of the clarifying guidance, beginning the first quarter of 2014 these bankruptcy loans remain on nonaccrual status regardless of payment history. This change did not have a material impact on the

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statement of financial condition, results of operations or cash flows. Prior to this change, the Company had $238 million of bankruptcy loans as performing loans at December 31, 2013.

Real Estate Owned and Loans with Formal Foreclosure Proceedings in Process

At June 30, 2014 and December 31, 2013, the Company held $35 million and $50 million, respectively, of real estate owned that were acquired through foreclosure and through a deed in lieu of foreclosure or similar legal agreement. The Company also held $126 millionand $199 million of loans for which formal foreclosure proceedings were in process at June 30, 2014 and December 31, 2013, respectively.

Allowance for Loan Losses

The following table provides a roll forward by loan portfolio of the allowance for loan losses for the three and six months endedJune 30, 2014 and 2013 (dollars in millions):

	Three Months Ended June 30, 2014
	One- to Four-Family			Home Equity			Consumer and Other			Total
Allowance for loan losses, beginning of period	$	52		$	327		$	24		$	403
Provision for loan losses	(8		)	21			(1		)	12
Charge-offs	—			(17		)	(4		)	(21		)
Recoveries	—			6			1			7
Charge-offs, net	—			(11		)	(3		)	(14		)
Allowance for loan losses, end of period	$	44		$	337		$	20		$	401
	Three Months Ended June 30, 2013
	One- to Four-Family			Home Equity			Consumer and Other			Total
Allowance for loan losses, beginning of period	$	161		$	263		$	31		$	455
Provision for loan losses	(8		)	53			1			46
Charge-offs	(11		)	(46		)	(7		)	(64		)
Recoveries	2			9			3			14
Charge-offs, net	(9		)	(37		)	(4		)	(50		)
Allowance for loan losses, end of period	$	144		$	279		$	28		$	451
	Six Months Ended June 30, 2014
	One- to Four-Family			Home Equity			Consumer and Other			Total
Allowance for loan losses, beginning of period	$	102		$	326		$	25		$	453
Provision for loan losses	(26		)	41			1			16
Charge-offs	(43		)	(41		)	(9		)	(93		)
Recoveries	11			11			3			25
Charge-offs, net	(32		)	(30		)	(6		)	(68		)
Allowance for loan losses, end of period	$	44		$	337		$	20		$	401

	Six Months Ended June 30, 2013
	One- to Four-Family			Home Equity			Consumer and Other			Total
Allowance for loan losses, beginning of period	$	184		$	257		$	40		$	481
Provision for loan losses	(24		)	108			5			89
Charge-offs	(30		)	(103		)	(24		)	(157		)
Recoveries	14			17			7			38
Charge-offs, net	(16		)	(86		)	(17		)	(119		)
Allowance for loan losses, end of period	$	144		$	279		$	28		$	451

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The general allowance for loan losses also included a qualitative component to account for a variety of factors that are not directly considered in the quantitative loss model but are factors the Company believes may impact the level of credit losses. The qualitative component was $74 million and $62 million at June 30, 2014 and December 31, 2013, respectively.

Total allowance for loan losses decreased during the six months ended June 30, 2014 primarily due to the sale of one- to four-family loans modified as TDRs. As a result of this sale, the Company recorded a charge-off related to one- to four-family loans of $42 million which drove the majority of the decrease in the allowance for loan losses.

During the six months ended June 30, 2014 and 2013, the Company agreed to settlements with two third party mortgage originators specific to loans sold to the Company by those originators. One-time payments were agreed upon to satisfy in full all pending and future repurchase requests with those specific originators. The Company applied the full amount of payments of $11 million and $13 million for the six months ended June 30, 2014 and 2013, respectively, as recoveries to the allowance for loan losses, resulting in a corresponding reduction to net charge-offs as well as provision for loan losses.

Impaired Loans—Troubled Debt Restructurings

TDRs include two categories of loans: (1) loan modifications completed under the Company’s programs that involve granting an economic concession to a borrower experiencing financial difficulty, and (2) loans that have been charged off based on the estimated current value of the underlying property less estimated selling costs due to bankruptcy notification. Upon being classified as a TDR, such loan is categorized as an impaired loan and is considered impaired until maturity regardless of whether the borrower performs under the terms of the loan. Impairment on TDRs is measured on an individual basis.

The unpaid principal balance in one- to four-family TDRs was$0.3 billion and $1.2 billion at June 30, 2014 and December 31, 2013, respectively. For home equity loans, the recorded investment in TDRs represents the unpaid principal balance.

The following table shows a summary of the Company’s recorded investment in TDRs that were on accrual and nonaccrual status, in addition to the recorded investment of TDRs at June 30, 2014 and December 31, 2013 (dollars in millions):

			Nonaccrual TDRs
	Accrual  TDRs(1)		Current(2)		30-89 Days Delinquent		90+ Days Delinquent		Recorded Investment in TDRs
June 30, 2014
One- to four-family	$	129	$	115	$	19	$	56	$	319
Home equity	129		55		15		27		226
Total	$	258	$	170	$	34	$	83	$	545
December 31, 2013
One- to four-family	$	774	$	127	$	102	$	169	$	1,172
Home equity	176		22		17		26		241
Total	$	950	$	149	$	119	$	195	$	1,413

(1) Represents loans modified as TDRs that are current and have made six or more consecutive payments.

(2) Represents loans modified as TDRs that are current but have not yet made six consecutive payments, bankruptcy loans and certain junior lien TDRs that have a delinquent senior lien.

The decrease in the one- to four-family TDRs was primarily due to the sale of $0.8 billion of one- to four-family loans modified as TDRs.

The following table shows the average recorded investment and interest income recognized both on a cash and accrual basis for the Company’s TDRs during the three and six months endedJune 30, 2014 and 2013 (dollars in millions):

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	Average Recorded Investment				Interest Income Recognized
	Three Months Ended June 30,				Three Months Ended June 30,
	2014		2013		2014		2013
One- to four-family	$	520	$	1,211	$	3	$	9
Home equity	229		266		5		5
Total	$	749	$	1,477	$	8	$	14
	Average Recorded Investment				Interest Income Recognized
	Six Months Ended June 30,				Six Months Ended June 30,
	2014		2013		2014		2013
One- to four-family	$	797	$	1,216	$	11	$	17
Home equity	233		272		9		10
Total	$	1,030	$	1,488	$	20	$	27

Included in the allowance for loan losses was a specific valuation allowance of $76 million and $124 million that was established for TDRs at June 30, 2014 and December 31, 2013, respectively. The specific allowance for these individually impaired loans represents the forecasted losses over the estimated remaining life of the loan, including the economic concession to the borrower. The following table shows detailed information related to the Company’s TDRs at June 30, 2014 and December 31, 2013 (dollars in millions):

	June 30, 2014						December 31, 2013
	Recorded Investment in TDRs		Specific Valuation Allowance		Net Investment in TDRs		Recorded Investment in TDRs		Specific Valuation Allowance		Net Investment in TDRs
With a recorded allowance:
One- to four-family	$	94	$	14	$	80	$	403	$	60	$	343
Home equity	$	126	$	62	$	64	$	140	$	64	$	76
Without a recorded allowance:(1)
One- to four-family	$	225	$	—	$	225	$	769	$	—	$	769
Home equity	$	100	$	—	$	100	$	101	$	—	$	101
Total:
One- to four-family	$	319	$	14	$	305	$	1,172	$	60	$	1,112
Home equity	$	226	$	62	$	164	$	241	$	64	$	177

(1) Represents loans where the discounted cash flow analysis or collateral value is equal to or exceeds the recorded investment in the loan.

Troubled Debt Restructurings — Loan Modifications

The Company has loan modification programs that focus on the mitigation of potential losses in the one- to four-family and home equity mortgage loan portfolio. The Company currently does not have an active loan modification program for consumer and other loans. The various types of economic concessions that may be granted typically consist of interest rate reductions, maturity date extensions, principal forgiveness or a combination of these concessions. Trial modifications are classified immediately as TDRs and continue to be reported as delinquent until the successful completion of the trial period, which is typically 90 days. The loan then becomes a permanent modification reported as current but remains on nonaccrual status until six consecutive payments have been made.

The vast majority of the Company’s loans modified as TDRs include an interest rate reduction in combination with another type of concession. The Company prioritizes the interest rate reduction modifications in combination with the following modification categories: principal forgiven, principal deferred and re-age/extension/capitalization of accrued interest. Each class is mutually exclusive in that if a modification had an interest rate reduction with principal forgiven and an extension, the modification would only be presented in the principal forgiven column in the table below. The following tables provide the number of loans, post-modification balances immediately after being modified by major class, and the financial impact of modifications during the three and six months endedJune 30, 2014 and 2013 (dollars in millions):

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	Three Months Ended June 30, 2014
		Interest Rate Reduction
	Number of Loans	Principal Forgiven		Principal Deferred		Re-age/ Extension/ Interest Capitalization		Other with Interest Rate Reduction		Other		Total
One- to four-family	4	$	—	$	—	$	1	$	—	$	—	$	1
Home equity	68	—		—		1		1		3		5
Total	72	$	—	$	—	$	2	$	1	$	3	$	6
	Three Months Ended June 30, 2013
		Interest Rate Reduction
	Number of Loans	Principal Forgiven		Principal Deferred		Re-age/ Extension/ Interest Capitalization		Other with Interest Rate Reduction		Other		Total
One- to four-family	83	$	4	$	2	$	22	$	1	$	3	$	32
Home equity	85	—		—		2		3		3		8
Total	168	$	4	$	2	$	24	$	4	$	6	$	40
	Six Months Ended June 30, 2014
		Interest Rate Reduction
	Number of Loans	Principal Forgiven		Principal Deferred		Re-age/Extension/ Interest Capitalization		Other with Interest Rate Reduction		Other		Total
One- to four-family	37	$	1	$	—	$	5	$	2	$	4	$	12
Home equity	114	—		—		3		2		4		9
Total	151	$	1	$	—	$	8	$	4	$	8	$	21

	Six Months Ended June 30, 2013
		Interest Rate Reduction
	Number of Loans	Principal Forgiven		Principal Deferred		Re-age/ Extension/ Interest Capitalization		Other with Interest Rate Reduction		Other		Total
One- to four-family	176	$	12	$	4	$	42	$	2	$	8	$	68
Home equity	151	—		—		3		6		4		13
Total	327	$	12	$	4	$	45	$	8	$	12	$	81

	Three Months Ended June 30,
	2014						2013
	Financial Impact						Financial Impact
	Principal Forgiven		Pre-Modification Weighted Average Interest Rate		Post-Modification Weighted Average Interest Rate		Principal Forgiven		Pre-Modification Weighted Average Interest Rate		Post-Modification Weighted Average Interest Rate
One- to four-family	$	—	4.1	%	2.9	%	$	1	5.3	%	2.3	%
Home equity	—		6.3	%	2.7	%	—		4.2	%	1.8	%
Total	$	—					$	1
	Six Months Ended June 30,
	2014						2013
	Financial Impact						Financial Impact
	Principal Forgiven		Pre-Modification Weighted Average Interest Rate		Post-Modification Weighted Average Interest Rate		Principal Forgiven		Pre-Modification Weighted Average Interest Rate		Post-Modification Weighted Average Interest Rate
One- to four-family	$	—	4.8	%	2.7	%	$	4	5.3	%	2.3	%
Home equity	—		5.3	%	2.4	%	—		4.3	%	1.6	%
Total	$	—					$	4

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The Company considers modifications that become 30 days past due to have experienced a payment default. The following table shows the recorded investment in modifications that experienced a payment default within 12 months after the modification for the three and six months endedJune 30, 2014 and 2013 (dollars in millions):

	Three Months Ended June 30,
	2014			2013
	Number of Loans	Recorded Investment		Number of Loans	Recorded Investment
One- to four-family(1)	3	$	1	22	$	10
Home equity(2)	13	1		13	—
Total	16	$	2	35	$	10
	Six Months Ended June 30,
	2014			2013
	Number of Loans	Recorded Investment		Number of Loans	Recorded Investment
One- to four-family(1)	21	$	8	75	$	29
Home equity(2)	21	1		36	1
Total	42	$	9	111	$	30

(1) For both the three and six months endedJune 30, 2014, $1 million of the recorded investment in one- to four-family loans that had a payment default in the trailing 12 months was classified as current, compared to $2 million and $9 million for the three and six months ended June 30, 2013, respectively.

(2) For both the three and six months endedJune 30, 2014, less than $1 million of the recorded investment in home equity loans that had a payment default in the trailing 12 months was classified as current, compared to less than $1 million for both the three and six months ended June 30, 2013, respectively.

The delinquency status is the primary measure the Company uses to evaluate the performance of loans modified as TDRs. The following table shows the loans modified as TDRs by delinquency category at June 30, 2014 and December 31, 2013 (dollars in millions):

	Modifications Current		Modifications 30-89 Days Delinquent		Modifications 90-179 Days Delinquent		Modifications 180+ Days Delinquent		Recorded Investment in Modifications
June 30, 2014
One- to four-family	$	160	$	12	$	4	$	11	$	187
Home equity	151		12		5		9		177
Total	$	311	$	24	$	9	$	20	$	364
December 31, 2013
One- to four-family	$	817	$	92	$	39	$	88	$	1,036
Home equity	162		13		4		9		188
Total	$	979	$	105	$	43	$	97	$	1,224

The decrease in the one- to four-family TDRs was primarily due to the sale of $0.8 billion of our one- to four-family loans modified as TDRs during the six months endedJune 30, 2014.

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NOTE 8—ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

The Company enters into derivative transactions primarily to protect against interest rate risk on the value of certain assets, liabilities and future cash flows. Cash flow hedges, which include a combination of interest rate swaps and purchased options, including caps and floors, are used primarily to reduce the variability of future cash flows associated with existing variable-rate assets and liabilities and forecasted issuances of liabilities. Fair value hedges, which include interest rate swaps, are used to offset exposure to changes in value of certain fixed-rate assets and liabilities. Each derivative is recorded on the consolidated balance sheet at fair value as a freestanding asset or liability. The following table summarizes the fair value amounts of derivatives designated as hedging instruments reported in the consolidated balance sheet at June 30, 2014 and December 31, 2013 (dollars in millions):

			Fair Value
	Notional		Asset(1)		Liability(2)			Net(3)
June 30, 2014
Interest rate contracts:
Cash flow hedges:
Pay-fixed rate swaps	$	2,025	$	7	$	(144	)	$	(137	)
Purchased options	1,075		19		—			19
Total cash flow hedges	3,100		26		(144		)	(118		)
Fair value hedges:
Pay-fixed rate swaps	1,292		26		(16		)	10
Total derivatives designated as hedging instruments(4)	$	4,392	$	52	$	(160	)	$	(108	)
December 31, 2013
Interest rate contracts:
Cash flow hedges:
Pay-fixed rate swaps	$	2,480	$	19	$	(168	)	$	(149	)
Purchased options	825		8		—			8
Total cash flow hedges	3,305		27		(168		)	(141		)
Fair value hedges:
Pay-fixed rate swaps	1,614		80		(1		)	79
Total derivatives designated as hedging instruments(4)	$	4,919	$	107	$	(169	)	$	(62	)

(1) Reflected in the other assets line item on the consolidated balance sheet.

(2) Reflected in the other liabilities line item on the consolidated balance sheet.

(3) Represents derivative assets net of derivative liabilities for disclosure purposes only.

(4) All derivatives were designated as hedging instruments at June 30, 2014 and December 31, 2013.

Cash Flow Hedges

The effective portion of changes in fair value of the derivative instruments that hedge cash flows is reported as a component of accumulated other comprehensive loss, net of tax in the consolidated balance sheet, for both active and discontinued hedges. Amounts are included in net operating interest income as a yield adjustment in the same period the hedged forecasted transaction affects earnings. The ineffective portion of changes in fair value of the derivative instrument, which is equal to the excess of the cumulative change in the fair value of the actual derivative over the cumulative change in the fair value of a hypothetical derivative which is created to match the exact terms of the underlying instruments being hedged, is reported in the gains on loans and securities, net line item in the consolidated statement of income (loss).

If it becomes probable that a hedged forecasted transaction will not occur, amounts included in accumulated other comprehensive loss related to the specific hedging instruments would be immediately reclassified into the gains on loans and securities, net line item in the consolidated statement of income (loss). If hedge accounting is discontinued because a derivative instrument is sold, terminated or otherwise de-designated, amounts included in accumulated other comprehensive loss related to the specific hedging instrument continue to be reported in accumulated other comprehensive loss until the forecasted transaction affects earnings.

The future issuances of liabilities, including repurchase agreements, are largely dependent on the market demand and liquidity in the wholesale borrowings market. At June 30, 2014, the Company believes the forecasted issuance of all debt in cash flow hedge relationships is probable. However, unexpected changes in market conditions in future periods could impact

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the ability to issue this debt. The Company believes the forecasted issuance of debt in the form of repurchase agreements is most susceptible to an unexpected change in market conditions.

The following table summarizes the effect of interest rate contracts designated and qualifying as hedging instruments in cash flow hedges on accumulated other comprehensive loss and on the consolidated statement of income (loss) for the three and six months ended June 30, 2014 and 2013 (dollars in millions):

	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
Gains (losses) on derivatives recognized in OCI (effective portion), net of tax	$	(16	)	$	62		$	(32	)	$	68
Losses reclassified from AOCI into earnings (effective portion), net of tax	$	(20	)	$	(23	)	$	(41	)	$	(43	)
Cash flow hedge ineffectiveness gains (losses)(1)	$	—		$	1		$	—		$	1

(1) The cash flow hedge ineffectiveness is reflected in the gains on loans and securities, net line item on the consolidated statement of income (loss).

During the upcoming twelve months, the Company expects to include a pre-tax amount of approximately $121 million of net unrealized losses that are currently reflected in accumulated other comprehensive loss in net operating interest income as a yield adjustment in the same periods in which the related hedged items affect earnings. The maximum length of time over which transactions are hedged is 8 years.

The following table shows the balance in accumulated other comprehensive loss attributable to active and discontinued cash flow hedges at June 30, 2014 and December 31, 2013 (dollars in millions):

	June 30,   2014			December 31,   2013
Accumulated other comprehensive loss balance (net of tax) related to:
Discontinued cash flow hedges	$	(184	)	$	(201	)
Active cash flow hedges	(105		)	(97		)
Total cash flow hedges	$	(289	)	$	(298	)

The following table shows the balance in accumulated other comprehensive loss attributable to cash flow hedges by type of hedged item at June 30, 2014 and December 31, 2013 (dollars in millions):

	June 30,   2014			December 31,   2013
Repurchase agreements	$	(373	)	$	(379	)
FHLB advances	(93		)	(99		)
Total balance of cash flow hedges, before tax	(466		)	(478		)
Tax benefit	177			180
Total balance of cash flow hedges, net of tax	$	(289	)	$	(298	)

Fair Value Hedges

Fair value hedges are accounted for by recording the fair value of the derivative instrument and the fair value of the asset or liability being hedged on the consolidated balance sheet. Changes in the fair value of both the derivatives and the underlying assets or liabilities are recognized in the gains on loans and securities, net line item in the consolidated statement of income (loss). To the extent that the hedge is ineffective, the changes in the fair values will not offset and the difference, or hedge ineffectiveness, is reflected in the gains on loans and securities, net line item in the consolidated statement of income (loss).

Hedge accounting is discontinued for fair value hedges if a derivative instrument is sold, terminated or otherwise de-designated. If fair value hedge accounting is discontinued, the previously hedged item is no longer adjusted for changes in fair value through the consolidated statement of income (loss) and the cumulative net gain or loss on the hedged asset or liability at the time of de-designation is amortized to interest income or interest expense using the effective interest method over the expected remaining life of the hedged item. Changes in the fair value of the derivative instruments after de-designation of fair value hedge accounting are recorded in the gains on loans and securities, net line item in the consolidated statement of income (loss).

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The following table summarizes the effect of interest rate contracts designated and qualifying as hedging instruments in fair value hedges and related hedged items on the consolidated statement of income (loss) for the three and six months ended June 30, 2014 and 2013 (dollars in millions):

	Three Months Ended June 30,
	2014								2013
	Hedging Instrument			Hedged Item		Hedge Ineffectiveness(1)			Hedging Instrument		Hedged Item			Hedge Ineffectiveness(1)
Agency debentures	$	(26	)	$	23	$	(3	)	$	29	$	(27	)	$	2
Agency mortgage-backed securities	(6		)	6		—			28		(28		)	—
Total gains (losses) included in earnings	$	(32	)	$	29	$	(3	)	$	57	$	(55	)	$	2
	Six Months Ended June 30,
	2014								2013
	Hedging Instrument			Hedged Item		Hedge Ineffectiveness(1)			Hedging Instrument		Hedged Item			Hedge Ineffectiveness(1)
Agency debentures	$	(57	)	$	50	$	(7	)	$	45	$	(43	)	$	2
Agency mortgage-backed securities	(17		)	17		—			28		(28		)	—
Total gains (losses) included in earnings	$	(74	)	$	67	$	(7	)	$	73	$	(71	)	$	2

(1) Reflected in the gains on loans and securities, net line item on the consolidated statement of income (loss).

NOTE 9—SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE AND FHLB ADVANCES AND OTHER BORROWINGS

Securities sold under agreements to repurchase, FHLB advances and other borrowings at June 30, 2014 and December 31, 2013 are shown in the following table (dollars in millions):

			FHLB Advances and Other Borrowings
	Repurchase Agreements(1)		FHLB Advances			Other		Total			Weighted Average Interest Rate
Due within one year	$	3,092	$	270		$	1	$	3,363		0.34%
Due between one and two years	250		—			2		252			0.52%
Due between two and three years	400		250			—		650			0.85%
Due between three and four years	—		400			—		400			0.40%
Thereafter	—		—			428		428			2.91%
Subtotal	3,742		920			431		5,093			0.64%
Fair value hedge adjustments	—		24			—		24
Deferred costs	—		(84		)	—		(84		)
Total other borrowings at June 30, 2014	$	3,742	$	860		$	431	$	5,033		0.64%
Total other borrowings at December 31, 2013	$	4,543	$	851		$	428	$	5,822		0.72%

(1) The maximum amount at any month end for repurchase agreements was $4.9 billion and $4.6 billion for six months endedJune 30, 2014 and the year ended December 31, 2013, respectively.

Securities Sold Under Agreements to Repurchase

During the six months endedJune 30, 2014, the decrease in securities sold under agreements to repurchase was primarily due to the scheduled expiration of $600 million. In addition, the Company paid down in advance of maturity $100 million of its fixed-rate repurchase agreements for which losses on early extinguishment of debt of $12 million were recorded in the consolidated statement of income (loss).

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NOTE 10—ACCUMULATED OTHER COMPREHENSIVE LOSS

The following tables present after-tax changes in each component of accumulated other comprehensive loss for the three and six months ended June 30, 2014 and 2013 (dollars in millions):

	Available-for-sale Securities			Cash Flow  Hedging Instruments			Foreign  Currency Translation		Total
Beginning balance, March 31, 2014	$	(91	)	$	(293	)	$	5	$	(379	)
Other comprehensive income (loss) before reclassifications	82			(16		)	—		66
Amounts reclassified from accumulated other comprehensive loss	(2		)	20			—		18
Net change	80			4			—		84
Ending balance, June 30, 2014	$	(11	)	$	(289	)	$	5	$	(295	)

	Available-for-sale Securities			Cash Flow Hedging Instruments			Foreign Currency Translation		Total
Beginning balance, March 31, 2013	$	122		$	(426	)	$	5	$	(299	)
Other comprehensive income (loss) before reclassifications	(215		)	62			—		(153		)
Amounts reclassified from accumulated other comprehensive loss	(11		)	23			—		12
Net change	(226		)	85			—		(141		)
Ending balance, June 30, 2013	$	(104	)	$	(341	)	$	5	$	(440	)

	Available-for-sale Securities			Cash Flow  Hedging Instruments			Foreign  Currency Translation		Total
Beginning balance, December 31, 2013	$	(160	)	$	(298	)	$	5	$	(453	)
Other comprehensive income (loss) before reclassifications	163			(32		)	—		131
Amounts reclassified from accumulated other comprehensive loss	(14		)	41			—		27
Net change	149			9			—		158
Ending balance, June 30, 2014	$	(11	)	$	(289	)	$	5	$	(295	)

	Available-for-sale Securities			Cash Flow Hedging Instruments			Foreign Currency Translation		Total
Beginning balance, December 31, 2012	$	137		$	(452	)	$	5	$	(310	)
Other comprehensive income (loss) before reclassifications	(220		)	68			—		(152		)
Amounts reclassified from accumulated other comprehensive loss	(21		)	43			—		22
Net change	(241		)	111			—		(130		)
Ending balance, June 30, 2013	$	(104	)	$	(341	)	$	5	$	(440	)

The following table presents the income statement line items impacted by reclassifications out of accumulated other comprehensive loss for the three and six months ended June 30, 2014 and 2013 (dollars in millions):

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Accumulated Other Comprehensive Loss Components	Amount Reclassified from Accumulated Other Comprehensive Loss												Affected Line Items in the Consolidated Statement of Income
	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
Available-for-sale securities:
	$	3		$	18		$	22		$	34		Gains on loans and securities, net
	(1		)	(7		)	(8		)	(13		)	Tax expense
	$	2		$	11		$	14		$	21		Reclassification into earnings, net
Cash flow hedging instruments:
	$	—		$	3		$	—		$	5		Operating interest income
	(32		)	(37		)	(67		)	(72		)	Operating interest expense
	(32		)	(34		)	(67		)	(67		)	Reclassification into earnings, before tax
	12			11			26			24			Tax expense
	$	(20	)	$	(23	)	$	(41	)	$	(43	)	Reclassification into earnings, net

NOTE 11—EARNINGS (LOSS) PER SHARE

The following table presents a reconciliation of basic and diluted earnings (loss) per share (in millions, except share data and per share amounts):

	Three Months Ended June 30,					Six Months Ended June 30,
	2014		2013			2014		2013
Basic:
Net income (loss)	$	69	$	(54	)	$	166	$	(19	)
Basic weighted-average shares outstanding (in thousands)	288,705		286,903			288,380		286,765
Basic earnings (loss) per share	$	0.24	$	(0.19	)	$	0.57	$	(0.07	)
Diluted:
Net income (loss)	$	69	$	(54	)	$	166	$	(19	)
Basic weighted-average shares outstanding (in thousands)	288,705		286,903			288,380		286,765
Effect of dilutive securities:
Weighted-average convertible debentures (in thousands)	4,068		—			4,073		—
Weighted-average options and restricted stock issued to employees (in thousands)	1,053		—			1,360		—
Diluted weighted-average shares outstanding (in thousands)	293,826		286,903			293,813		286,765
Diluted earnings (loss) per share	$	0.24	$	(0.19	)	$	0.56	$	(0.07	)

The Company excluded the following shares form the calculations of diluted earnings (loss) per share as the effect would have been anti-dilutive (shares in millions):

	Three Months Ended June 30,		Six Months Ended June 30,
	2014	2013	2014	2013
Weighted-average shares excluded as a result of the Company’s net loss:
Convertible debentures	N/A	4.1	N/A	4.1
Stock options and restricted stock awards and units	N/A	0.7	N/A	1.0
Other stock options and restricted stock awards and units	0.5	2.0	0.6	1.9
Total	0.5	6.8	0.6	7.0

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NOTE 12—REGULATORY REQUIREMENTS

Registered Broker-Dealers

The Company’s largest U.S. broker-dealer subsidiaries are subject to the Uniform Net Capital Rule (the "Rule") under the Securities Exchange Act of 1934 administered by the SEC and FINRA, which requires the maintenance of minimum net capital. The minimum net capital requirements can be met under either the Aggregate Indebtedness method or the Alternative method. Under the Aggregate Indebtedness method, a broker-dealer is required to maintain minimum net capital of the greater of 6 ²/3% of its aggregate indebtedness, as defined, or a minimum dollar amount. Under the Alternative method, a broker-dealer is required to maintain net capital equal to the greater of $250,000 or 2% of aggregate debit balances arising from customer transactions. The method used depends on the individual U.S. broker-dealer subsidiary. The Company’s other broker-dealers, including its international broker-dealer subsidiaries located in Europe and Asia, are subject to capital requirements determined by their respective regulators.

At June 30, 2014 and December 31, 2013, all of the Company’s broker-dealer subsidiaries met minimum net capital requirements. The tables below summarize the minimum excess capital requirements for the Company’s broker-dealer subsidiaries at June 30, 2014 and December 31, 2013 (dollars in millions):

	Required Net Capital		Net Capital		Excess Net Capital
June 30, 2014:
E*TRADE Clearing LLC(1)	$	158	$	751	$	593
E*TRADE Securities LLC(1)	—		360		360
Other broker-dealers	1		16		15
Total	$	159	$	1,127	$	968
December 31, 2013:
E*TRADE Clearing LLC(1)	$	144	$	715	$	571
E*TRADE Securities LLC(1)	—		261		261
G1 Execution Services, LLC(2)	1		22		21
Other broker-dealers	2		22		20
Total	$	147	$	1,020	$	873

(1) Elected to use the Alternative method to compute net capital. The net capital requirement was $250,000 for E*TRADE Securities LLC for both periods presented.

(2) Elected to use the Aggregate Indebtedness method to compute net capital. G1 Execution Services, LLC is the Company's market maker and was held-for-sale at December 31, 2013. The sale of G1 Execution Services, LLC was completed on February 10, 2014.

Banking

E*TRADE Bank is subject to various regulatory capital requirements administered by federal banking agencies. Failure to meet minimum capital requirements can trigger certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on E*TRADE Bank’s financial condition and results of operations. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, E*TRADE Bank must meet specific capital guidelines that involve quantitative measures of E*TRADE Bank’s assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. In addition, E*TRADE Bank may not pay dividends to the parent company without approval from its regulators and any loans by E*TRADE Bank to the parent company and its other non-bank subsidiaries are subject to various quantitative, arm’s length, collateralization and other requirements. E*TRADE Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.

Quantitative measures established by regulation to ensure capital adequacy require E*TRADE Bank to meet minimum total capital, Tier 1 capital and Tier 1 leverage ratios. As shown in the table below, at both June 30, 2014 and December 31, 2013, E*TRADE Bank was categorized as "well capitalized" under the regulatory framework for prompt corrective action. However, events beyond management's control, such as deterioration in credit markets, could adversely affect future earnings and E*TRADE Bank's ability to meet future capital requirements and ability to pay dividends to the parent company. E*TRADE Bank’s actual and required capital amounts and ratios at June 30, 2014 and December 31, 2013 are presented in the table below (dollars in millions):

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	Actual				Minimum Required to be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio		Amount		Ratio		Excess Capital
June 30, 2014:
Total capital	$	4,545	25.97	%	$	1,750	10.00	%	$	2,795
Tier 1 capital	$	4,324	24.70	%	$	1,050	6.00	%	$	3,274
Tier 1 leverage	$	4,324	10.15	%	$	2,130	5.00	%	$	2,194
December 31, 2013:
Total capital	$	4,331	24.25	%	$	1,786	10.00	%	$	2,545
Tier 1 capital	$	4,105	22.98	%	$	1,072	6.00	%	$	3,033
Tier 1 leverage	$	4,105	9.51	%	$	2,158	5.00	%	$	1,947

NOTE 13—COMMITMENTS, CONTINGENCIES AND OTHER REGULATORY MATTERS

Legal Matters

Litigation Matters

On October 27, 2000, Ajaxo, Inc. ("Ajaxo") filed a complaint in the Superior Court for the State of California, County of Santa Clara. Ajaxo sought damages and certain non-monetary relief for the Company’s alleged breach of a non-disclosure agreement with Ajaxo pertaining to certain wireless technology that Ajaxo offered the Company as well as damages and other relief against the Company for their alleged misappropriation of Ajaxo’s trade secrets. Following a jury trial, a judgment was entered in 2003 in favor of Ajaxo against the Company for $1 million for breach of the Ajaxo non-disclosure agreement. Although the jury found in favor of Ajaxo on its claim against the Company for misappropriation of trade secrets, the trial court subsequently denied Ajaxo’s requests for additional damages and relief. On December 21, 2005, the California Court of Appeal affirmed the above-described award against the Company for breach of the nondisclosure agreement but remanded the case to the trial court for the limited purpose of determining what, if any, additional damages Ajaxo may be entitled to as a result of the jury’s previous finding in favor of Ajaxo on its claim against the Company for misappropriation of trade secrets. Although the Company paid Ajaxo the full amount due on the above-described judgment, the case was remanded back to the trial court, and on May 30, 2008, a jury returned a verdict in favor of the Company denying all claims raised and demands for damages against the Company. Following the trial court’s entry of judgment in favor of the Company on September 5, 2008, Ajaxo filed post-trial motions for vacating this entry of judgment and requesting a new trial. The trial court denied these motions. On December 2, 2008, Ajaxo filed a notice of appeal with the Court of Appeal of the State of California for the Sixth District. On August 30, 2010, the Court of Appeal affirmed the trial court’s verdict in part and reversed the verdict in part, remanding the case. The Company petitioned the Supreme Court of California for review of the Court of Appeal decision. On December 16, 2010, the California Supreme Court denied the Company’s petition for review and remanded for further proceedings to the trial court. The testimonial phase of the third trial in this matter concluded on June 12, 2012. By order dated May 28, 2014, the Court determined to conduct a second phase of this bench trial to allow Ajaxo to attempt to prove entitlement to additional royalties. Phase two of the trial is scheduled to commence December 8, 2014. The Company will continue to defend itself vigorously.

On May 16, 2011, Droplets Inc., the holder of two patents pertaining to user interface servers, filed a complaint in the U.S. District Court for the Eastern District of Texas against E*TRADE Financial Corporation, E*TRADE Securities LLC, E*TRADE Bank and multiple other unaffiliated financial services firms. Plaintiff contends that the defendants engaged in patent infringement under federal law. Plaintiff seeks unspecified damages and an injunction against future infringements, plus royalties, costs, interest and attorneys’ fees. On September 30, 2011, the Company and several co-defendants filed a motion to transfer the case to the Southern District of New York. Venue discovery occurred throughout December 2011. On January 1, 2012, a new judge was assigned to the case. On March 28, 2012, a change of venue was granted and the case was transferred to the United States District Court for the Southern District of New York. The Company filed its answer and counterclaim on June 13, 2012 and plaintiff moved to dismiss the counterclaim. The Company filed a motion for summary judgment. Plaintiffs sought to change venue back to the Eastern District of Texas on the theory that this case is one of several matters that should be consolidated in a single multi-district litigation. On December 12, 2012, the Multidistrict Litigation Panel denied the transfer of this action to Texas. By opinion dated April 4, 2013, the Court denied defendants’ motion for summary judgment and plaintiff’s motion to dismiss the counterclaims. The Court issued its order on claim construction on October 22, 2013, and by order dated January 28, 2014, the Court adopted the defendants' proposed claims construction. On March 25, 2014, the Court granted plaintiff leave to amend its complaint to add a newly-issued patent, but stayed all litigation pertaining to that patent until a covered business method review could be heard by the Patent and Trademark Appeals Board. The defendants filed petitions for

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covered business method patent reviews with the Patent and Trademark Appeals Board on May 12, 2014. Motions for summary judgment will be briefed in the U.S. District Court through August 2014. The Company will continue to defend itself vigorously in this matter, both in the District Court and at the U.S. Patent and Trademark Office.

Several cases have been filed nationwide involving the April 2007 leveraged buyout ("LBO") of the Tribune Company ("Tribune") by Sam Zell, and the subsequent bankruptcy of Tribune. In William Niese et al. v. A.G. Edwards et al., in Superior Court of Delaware, New Castle County, former Tribune employees and retirees claimed that Tribune was actually insolvent at the time of the LBO and that the LBO constituted a fraudulent transaction that depleted the plaintiffs’ retirement plans, rendering them worthless. E*TRADE Clearing LLC, along with numerous other financial institutions, is a named defendant in this case. One of the defendants removed the action to federal district court in Delaware on July 1, 2011. In Deutsche Bank Trust Company Americas et al. v. Adaly Opportunity Fund et al., filed in the Supreme Court of New York, New York County on June 3, 2011, the Trustees of certain notes issued by Tribune allege wrongdoing in connection with the LBO. In particular the Trustees claim that the LBO constituted a constructive fraudulent transfer under various state laws. G1 Execution Services, LLC (formerly known as E*TRADE Capital Markets, LLC), along with numerous other financial institutions, is a named defendant in this case. In Deutsche Bank et al. v. Ohlson et al., filed in the U.S. District Court for the Northern District of Illinois, noteholders of Tribune asserted claims of constructive fraud and G1 Execution Services, LLC is a named defendant in this case. Under the agreement governing the sale of G1 Execution Services, LLC to Susquehanna, the Company remains responsible for any resulting actions taken against G1 Execution Services, LLC as a result of such investigation. In EGI-TRB LLC et al. v. ABN-AMRO et al., filed in the Circuit Court of Cook County Illinois, creditors of Tribune assert fraudulent conveyance claims against multiple shareholder defendants and E*TRADE Clearing LLC is a named defendant in this case. These cases have been consolidated into a multi-district litigation. The Company’s time to answer or otherwise respond to the complaints has been stayed pending further orders of the Court. On September 18, 2013, the Court entered the Fifth Amended Complaint. On September 23, 2013, the Court granted the defendants’ motion to dismiss the individual creditors’ complaint. The individual creditors filed a notice of appeal. The steering committees for plaintiffs and defendants have submitted a joint plan for the next phase of litigation. The next phase of the action will involve individual motions to dismiss. On April 22, 2014, the Court issued its protocols for dismissal motions for those defendants who were "mere conduits" who facilitated the transactions at issue. The motion to dismiss Count I of the Fifth Amended Complaint for failure to state a cause of action was fully briefed on July 2, 2014. The Company will defend itself vigorously in these matters.

On April 30, 2013, a putative class action was filed by John Scranton, on behalf of himself and a class of persons similarly situated, against E*TRADE Financial Corporation and E*TRADE Securities LLC in the Superior Court of California, County of Santa Clara, pursuant to the California procedures for a private Attorney General action. The Complaint alleged that the Company misrepresented through its website that it would always automatically exercise options that were in-the-money by $0.01 or more on expiration date. Plaintiffs allege violations of the California Unfair Competition Law, the California Consumer Remedies Act, fraud, misrepresentation, negligent misrepresentation and breach of fiduciary duty. The case has been deemed complex within the meaning of the California Rules of Court, and a case management conference was held on September 13, 2013. The Company’s demurrer and motion to strike the complaint were granted by order dated December 20, 2013. The Court granted leave to amend the complaint. A second amended complaint was filed on January 31, 2014. On March 11, 2014, the Company moved to strike and for a demurrer to the second amended complaint. A hearing on these motions is now scheduled for August 29, 2014. The Company will continue to defend itself vigorously in this matter.

On April 18, 2014, a putative class action was filed by the City of Providence, Rhode Island against forty-one high frequency trading firms, stock exchanges, market-makers, and other broker-dealers, including the Company, in the U.S. District Court for the Southern District of New York. The Complaint alleges that the high frequency trading firms, certain broker-dealers managing dark pools, and the exchanges manipulated the U.S. Securities markets, and that numerous market-makers and broker-dealers participated in that manipulation by doing business with the high frequency traders. As to the Company, the Complaint alleges violation of Sections 10(b) and 20(a) of the Exchange Act. On May 2, 2014, a similar putative class action was filed by American European Insurance Company against forty-two high frequency trading firms, stock exchanges, market-makers, and other broker-dealers, including the Company, in the U.S. District Court for the Southern District of New York. The action filed by American European Insurance Company made allegations substantially similar to the allegations in the City of Providence complaint. On June 13, 2014, a putative class action was filed by James J. Flynn and Dominic Morelli against twenty-six firms including the Company in the United States District Court for the Southern District of New York. The Flynn Complaint made allegations substantially similar to the allegations in the City of Providence Complaint. While there can be no assurances, the Company's legal counsel believes the claims against it have no merit, and that the Company will ultimately prevail. The Company will defend itself vigorously in these matters.

In addition to the matters described above, the Company is subject to various legal proceedings and claims that arise in the normal course of business. In each pending matter, the Company contests liability or the amount of claimed damages. In view of the inherent difficulty of predicting the outcome of such matters, particularly in cases where claimants seek substantial or indeterminate damages, or where investigation or discovery have yet to be completed, the Company is unable to reasonably estimate a range of possible losses on its remaining outstanding legal proceedings; however, the Company believes any losses

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would not be reasonably likely to have a material adverse effect on the consolidated financial condition or results of operations of the Company.

An unfavorable outcome in any matter could have a material adverse effect on the Company’s business, financial condition, results of operations or cash flows. In addition, even if the ultimate outcomes are resolved in the Company’s favor, the defense of such litigation could entail considerable cost or the diversion of the efforts of management, either of which could have a material adverse effect on the Company’s business, financial condition, results of operations or cash flows.

Regulatory Matters

The securities, futures, foreign currency and banking industries are subject to extensive regulation under federal, state and applicable international laws. From time to time, the Company has been threatened with or named as a defendant in lawsuits, arbitrations and administrative claims involving securities, banking and other matters. The Company is also subject to periodic regulatory audits and inspections. Compliance and trading problems that are reported to regulators, such as the SEC, FINRA, CFTC, NFA or OCC by dissatisfied customers or others are investigated by such regulators, and may, if pursued, result in formal claims being filed against the Company by customers or disciplinary action being taken against the Company or its employees by regulators. Any such claims or disciplinary actions that are decided against the Company could have a material impact on the financial results of the Company or any of its subsidiaries.

During 2012, the Company completed a review of order handling practices and pricing for order flow between E*TRADE Securities LLC and G1 Execution Services, LLC. The Company has implemented changes to its practices and procedures that were recommended during the review. Banking regulators and federal securities regulators were regularly updated during the course of the review and may initiate investigations into the Company’s historical practices which could subject it to monetary penalties and cease-and-desist orders, which could also prompt claims by customers of E*TRADE Securities LLC. Any of these actions could materially and adversely affect the Company’s broker-dealer businesses. On July 11, 2013, FINRA notified E*TRADE Securities LLC and G1 Execution Services, LLC that it is conducting an examination of both firms’ routing practices. The Company is cooperating fully with FINRA in this examination, as under the agreement governing the sale of G1 Execution Services, LLC to Susquehanna, it remains responsible for any resulting actions taken against G1 Execution Services, LLC as a result of such investigation.

Insurance

The Company maintains insurance coverage that management believes is reasonable and prudent. The principal insurance coverage it maintains covers commercial general liability; property damage; hardware/software damage; cyber liability; directors and officers; employment practices liability; certain criminal acts against the Company; and errors and omissions. The Company believes that such insurance coverage is adequate for the purpose of its business. The Company’s ability to maintain this level of insurance coverage in the future, however, is subject to the availability of affordable insurance in the marketplace.

Estimated Liabilities

For all legal matters, an estimated liability is established in accordance with the loss contingencies accounting guidance. Once established, the estimated liability is adjusted based on available information when an event occurs requiring an adjustment.

Commitments

In the normal course of business, the Company makes various commitments to extend credit and incur contingent liabilities that are not reflected in the consolidated balance sheet. Significant changes in the economy or interest rates may influence the impact that these commitments and contingencies have on the Company in the future.

Other Investments

The Company has investments in small business investment companies, community development financial institutions, affordable housing tax credit partnerships and other limited partnerships. The Company had $16 million in unfunded commitments with respect to these investments at June 30, 2014.

Unused Lines of Credit and Certificates of Deposit

At June 30, 2014, the Company had approximately $41 million of certificates of deposit scheduled to mature in less than one year and $200 million of unfunded commitments to extend credit.

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Guarantees

In prior periods when the Company sold loans, the Company provided guarantees to investors purchasing mortgage loans, which are considered standard representations and warranties within the mortgage industry. The primary guarantees are that: the mortgage and the mortgage note have been duly executed and each is the legal, valid and binding obligation of the Company, enforceable in accordance with its terms; the mortgage has been duly acknowledged and recorded and is valid; and the mortgage and the mortgage note are not subject to any right of rescission, set-off, counterclaim or defense, including, without limitation, the defense of usury, and no such right of rescission, set-off, counterclaim or defense has been asserted with respect thereto. The Company is responsible for the guarantees on loans sold. If these claims prove to be untrue, the investor can require the Company to repurchase the loan and return all loan purchase and servicing release premiums. Management does not believe the potential liability exposure will have a material impact on the Company’s results of operations, cash flows or financial condition due to the nature of the standard representations and warranties, which have resulted in a minimal amount of loan repurchases.

Prior to 2008, ETBH raised capital through the formation of trusts, which sold trust preferred securities in the capital markets. The capital securities must be redeemed in whole at the due date, which is generally 30 years after issuance. Each trust issued trust preferred securities at par, with a liquidation amount of $1,000 per capital security. The trusts used the proceeds from the sale of issuances to purchase subordinated debentures issued by ETBH.

During the 30-year period prior to the redemption of the trust preferred securities, ETBH guarantees the accrued and unpaid distributions on these securities, as well as the redemption price of the securities and certain costs that may be incurred in liquidating, terminating or dissolving the trusts (all of which would otherwise be payable by the trusts). At June 30, 2014, management estimated that the maximum potential liability under this arrangement, including the current carrying value of the trusts, was equal to approximately $436 million or the total face value of these securities plus dividends, which may be unpaid at the termination of the trust arrangement.

NOTE 14—SEGMENT INFORMATION

The Company reports its operating results in two segments, based on the manner in which its chief operating decision maker evaluates financial performance and makes resource allocation decisions: 1) trading and investing; and 2) balance sheet management. Trading and investing includes retail brokerage products and services; investor-focused banking products; and corporate services. Balance sheet management includes the management of asset allocation; loans previously originated by the Company or purchased from third parties; deposits and customer payables; and credit, liquidity and interest rate risk. The balance sheet management segment utilizes deposits and customer payables and compensates the trading and investing segment via a market-based transfer pricing arrangement, which is eliminated in consolidation.

The Company does not allocate costs associated with certain functions that are centrally-managed to its operating segments. These costs are separately reported in a corporate/other category, along with technology related costs incurred to support centrally-managed functions; restructuring and other exit activities; and corporate debt and corporate investments.

The Company evaluates the performance of its segments based on the segment’s income (loss) before income taxes. Financial information for the Company’s reportable segments is presented in the following tables (dollars in millions):

	Three Months Ended June 30, 2014
	Trading and Investing		Balance Sheet Management		Corporate/ Other			Total
Net operating interest income	$	151	$	119	$	—		$	270
Total non-interest income	158		10		—			168
Total net revenue	309		129		—			438
Provision for loan losses	—		12		—			12
Total operating expense	196		36		52			284
Income (loss) before other income (expense) and income taxes	113		81		(52		)	142
Total other income (expense)	—		—		(30		)	(30		)
Income (loss) before income taxes	$	113	$	81	$	(82	)	$	112
Income tax expense								43
Net income								$	69

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	Three Months Ended June 30, 2013
	Trading and Investing			Balance Sheet Management		Corporate/ Other			Total
Net operating interest income	$	133		$	110	$	—		$	243
Total non-interest income	175			22		—			197
Total net revenue	308			132		—			440
Provision for loan losses	—			46		—			46
Total operating expense	318			42		54			414
Income (loss) before other income (expense) and income taxes	(10		)	44		(54		)	(20		)
Total other income (expense)	—			—		(27		)	(27		)
Income (loss) before income taxes	$	(10	)	$	44	$	(81	)	(47		)
Income tax expense									7
Net loss									$	(54	)

	Six Months Ended June 30, 2014
	Trading and Investing		Balance Sheet Management		Corporate/ Other			Total
Net operating interest income	$	294	$	242	$	—		$	536
Total non-interest income	351		26		—			377
Total net revenue	645		268		—			913
Provision for loan losses	—		16		—			16
Total operating expense	391		77		106			574
Income (loss) before other income (expense) and income taxes	254		175		(106		)	323
Total other income (expense)	—		—		(67		)	(67		)
Income (loss) before income taxes	$	254	$	175	$	(173	)	256
Income tax expense								90
Net income								$	166

	Six Months Ended June 30, 2013
	Trading and Investing		Balance Sheet Management		Corporate/ Other			Total
Net operating interest income	$	267	$	217	$	—		$	484
Total non-interest income	338		38		—			376
Total net revenue	605		255		—			860
Provision for loan losses	—		89		—			89
Total operating expense	517		92		100			709
Income (loss) before other income (expense) and income taxes	88		74		(100		)	62
Total other income (expense)	—		—		(52		)	(52		)
Income (loss) before income taxes	$	88	$	74	$	(152	)	10
Income tax expense								29
Net loss								$	(19	)

Segment Assets

	Trading and Investing		Balance Sheet Management		Corporate/ Other		Total
As of June 30, 2014	$	11,776	$	33,186	$	786	$	45,748
As of December 31, 2013	$	10,820	$	34,784	$	676	$	46,280

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ITEM 4.    CONTROLS AND PROCEDURES

(a) Based on an evaluation under the supervision and with the participation of our management, our Chief Executive Officer and our Chief Financial Officer have concluded that the Company's disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 ("Exchange Act"), were effective as of the end of the period covered by this report to provide reasonable assurance that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms and (ii) accumulated and communicated to the Company’s management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

(b) There were no changes in the Company’s internal control over financial reporting during the quarter ended June 30, 2014, identified in connection with management's evaluation required by paragraph (d) of Exchange Act Rules 13a-15 and 15d-15, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II—OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS

On October 27, 2000, Ajaxo, Inc. ("Ajaxo") filed a complaint in the Superior Court for the State of California, County of Santa Clara. Ajaxo sought damages and certain non-monetary relief for the Company’s alleged breach of a non-disclosure agreement with Ajaxo pertaining to certain wireless technology that Ajaxo offered the Company as well as damages and other relief against the Company for their alleged misappropriation of Ajaxo’s trade secrets. Following a jury trial, a judgment was entered in 2003 in favor of Ajaxo against the Company for $1 million for breach of the Ajaxo non-disclosure agreement. Although the jury found in favor of Ajaxo on its claim against the Company for misappropriation of trade secrets, the trial court subsequently denied Ajaxo’s requests for additional damages and relief. On December 21, 2005, the California Court of Appeal affirmed the above-described award against the Company for breach of the nondisclosure agreement but remanded the case to the trial court for the limited purpose of determining what, if any, additional damages Ajaxo may be entitled to as a result of the jury’s previous finding in favor of Ajaxo on its claim against the Company for misappropriation of trade secrets. Although the Company paid Ajaxo the full amount due on the above-described judgment, the case was remanded back to the trial court, and on May 30, 2008, a jury returned a verdict in favor of the Company denying all claims raised and demands for damages against the Company. Following the trial court’s entry of judgment in favor of the Company on September 5, 2008, Ajaxo filed post-trial motions for vacating this entry of judgment and requesting a new trial. The trial court denied these motions. On December 2, 2008, Ajaxo filed a notice of appeal with the Court of Appeal of the State of California for the Sixth District. On August 30, 2010, the Court of Appeal affirmed the trial court’s verdict in part and reversed the verdict in part, remanding the case. The Company petitioned the Supreme Court of California for review of the Court of Appeal decision. On December 16, 2010, the California Supreme Court denied the Company’s petition for review and remanded for further proceedings to the trial court. The testimonial phase of the third trial in this matter concluded on June 12, 2012. By order dated May 28, 2014, the Court determined to conduct a second phase of this bench trial to allow Ajaxo to attempt to prove entitlement to additional royalties. Phase two of the trial is scheduled to commence December 8, 2014. The Company will continue to defend itself vigorously.

On May 16, 2011, Droplets Inc., the holder of two patents pertaining to user interface servers, filed a complaint in the U.S. District Court for the Eastern District of Texas against E*TRADE Financial Corporation, E*TRADE Securities LLC, E*TRADE Bank and multiple other unaffiliated financial services firms. Plaintiff contends that the defendants engaged in patent infringement under federal law. Plaintiff seeks unspecified damages and an injunction against future infringements, plus royalties, costs, interest and attorneys’ fees. On September 30, 2011, the Company and several co-defendants filed a motion to transfer the case to the Southern District of New York. Venue discovery occurred throughout December 2011. On January 1, 2012, a new judge was assigned to the case. On March 28, 2012, a change of venue was granted and the case was transferred to the United States District Court for the Southern District of New York. The Company filed its answer and counterclaim on June 13, 2012 and plaintiff moved to dismiss the counterclaim. The Company filed a motion for summary judgment. Plaintiffs sought to change venue back to the Eastern District of Texas on the theory that this case is one of several matters that should be consolidated in a single multi-district litigation. On December 12, 2012, the Multidistrict Litigation Panel denied the transfer of this action to Texas. By opinion dated April 4, 2013, the Court denied defendants’ motion for summary judgment and plaintiff’s motion to dismiss the counterclaims. The Court issued its order on claim construction on October 22, 2013, and by order dated January 28, 2014, the Court adopted the defendants' proposed claims construction. On March 25, 2014, the Court granted

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plaintiff leave to amend its complaint to add a newly-issued patent, but stayed all litigation pertaining to that patent until a covered business method review could be heard by the Patent and Trademark Appeals Board. The defendants filed petitions for covered business method patent reviews with the Patent and Trademark Appeals Board on May 12, 2014. Motions for summary judgment will be briefed in the U.S. District Court through August 2014. The Company will continue to defend itself vigorously in this matter, both in the District Court and at the U.S. Patent and Trademark Office.

Several cases have been filed nationwide involving the April 2007 leveraged buyout ("LBO") of the Tribune Company ("Tribune") by Sam Zell, and the subsequent bankruptcy of Tribune. In William Niese et al. v. A.G. Edwards et al., in Superior Court of Delaware, New Castle County, former Tribune employees and retirees claimed that Tribune was actually insolvent at the time of the LBO and that the LBO constituted a fraudulent transaction that depleted the plaintiffs’ retirement plans, rendering them worthless. E*TRADE Clearing LLC, along with numerous other financial institutions, is a named defendant in this case. One of the defendants removed the action to federal district court in Delaware on July 1, 2011. In Deutsche Bank Trust Company Americas et al. v. Adaly Opportunity Fund et al., filed in the Supreme Court of New York, New York County on June 3, 2011, the Trustees of certain notes issued by Tribune allege wrongdoing in connection with the LBO. In particular the Trustees claim that the LBO constituted a constructive fraudulent transfer under various state laws. G1 Execution Services, LLC (formerly known as E*TRADE Capital Markets, LLC), along with numerous other financial institutions, is a named defendant in this case. In Deutsche Bank et al. v. Ohlson et al., filed in the U.S. District Court for the Northern District of Illinois, noteholders of Tribune asserted claims of constructive fraud and G1 Execution Services, LLC is a named defendant in this case. Under the agreement governing the sale of G1 Execution Services, LLC to Susquehanna, the Company remains responsible for any resulting actions taken against G1 Execution Services, LLC as a result of such investigation. In EGI-TRB LLC et al. v. ABN-AMRO et al., filed in the Circuit Court of Cook County Illinois, creditors of Tribune assert fraudulent conveyance claims against multiple shareholder defendants and E*TRADE Clearing LLC is a named defendant in this case. These cases have been consolidated into a multi-district litigation. The Company’s time to answer or otherwise respond to the complaints has been stayed pending further orders of the Court. On September 18, 2013, the Court entered the Fifth Amended Complaint. On September 23, 2013, the Court granted the defendants’ motion to dismiss the individual creditors’ complaint. The individual creditors filed a notice of appeal. The steering committees for plaintiffs and defendants have submitted a joint plan for the next phase of litigation. The next phase of the action will involve individual motions to dismiss. On April 22, 2014, the Court issued its protocols for dismissal motions for those defendants who were "mere conduits" who facilitated the transactions at issue. The motion to dismiss Count I of the Fifth Amended Complaint for failure to state a cause of action was fully briefed on July 2, 2014. The Company will defend itself vigorously in these matters.

During 2012, the Company completed a review of order handling practices and pricing for order flow between E*TRADE Securities LLC and G1 Execution Services, LLC. The Company has implemented changes to its practices and procedures that were recommended during the review. Banking regulators and federal securities regulators were regularly updated during the course of the review and may initiate investigations into the Company’s historical practices which could subject it to monetary penalties and cease-and-desist orders, which could also prompt claims by customers of E*TRADE Securities LLC. Any of these actions could materially and adversely affect the Company’s broker-dealer businesses. On July 11, 2013, FINRA notified E*TRADE Securities LLC and G1 Execution Services, LLC that it is conducting an examination of both firms’ routing practices. The Company is cooperating fully with FINRA in this examination, as under the agreement governing the sale of G1 Execution Services, LLC to Susquehanna, it remains responsible for any resulting actions taken against G1 Execution Services, LLC as a result of such investigation.

On April 30, 2013, a putative class action was filed by John Scranton, on behalf of himself and a class of persons similarly situated, against E*TRADE Financial Corporation and E*TRADE Securities LLC in the Superior Court of California, County of Santa Clara, pursuant to the California procedures for a private Attorney General action. The Complaint alleged that the Company misrepresented through its website that it would always automatically exercise options that were in-the-money by $0.01 or more on expiration date. Plaintiffs allege violations of the California Unfair Competition Law, the California Consumer Remedies Act, fraud, misrepresentation, negligent misrepresentation and breach of fiduciary duty. The case has been deemed complex within the meaning of the California Rules of Court, and a case management conference was held on September 13, 2013. The Company’s demurrer and motion to strike the complaint were granted by order dated December 20, 2013. The Court granted leave to amend the complaint. A second amended complaint was filed on January 31, 2014. On March 11, 2014, the Company moved to strike and for a demurrer to the second amended complaint. A hearing on these motions is now scheduled for August 29, 2014. The Company will continue to defend itself vigorously in this matter.

On April 18, 2014, a putative class action was filed by the City of Providence, Rhode Island against forty-one high frequency trading firms, stock exchanges, market-makers, and other broker-dealers, including the Company, in the U.S. District Court for the Southern District of New York. The Complaint alleges that the high frequency trading firms, certain broker-dealers managing dark pools, and the exchanges manipulated the U.S. Securities markets, and that numerous market-makers and broker-dealers participated in that manipulation by doing business with the high frequency traders. As to the Company, the Complaint alleges violation of Sections 10(b) and 20(a) of the Exchange Act. On May 2, 2014, a similar putative class action was filed by American European Insurance Company against forty-two high frequency trading firms, stock exchanges, market-

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makers, and other broker-dealers, including the Company, in the U.S. District Court for the Southern District of New York. The action filed by American European Insurance Company made allegations substantially similar to the allegations in the City of Providence complaint. On June 13, 2014, a putative class action was filed by James J. Flynn and Dominic Morelli against twenty-six firms including the Company in the United States District Court for the Southern District of New York. The Flynn Complaint made allegations substantially similar to the allegations in the City of Providence Complaint. While there can be no assurances, the Company's legal counsel believes the claims against it have no merit, and that the Company will ultimately prevail. The Company will defend itself vigorously in these matters.

In addition to the matters described above, the Company is subject to various legal proceedings and claims that arise in the normal course of business. In each pending matter, the Company contests liability or the amount of claimed damages. In view of the inherent difficulty of predicting the outcome of such matters, particularly in cases where claimants seek substantial or indeterminate damages, or where investigation or discovery have yet to be completed, the Company is unable to reasonably estimate a range of possible losses on its remaining outstanding legal proceedings; however, the Company believes any losses would not be reasonably likely to have a material adverse effect on the consolidated financial condition or results of operations of the Company.

An unfavorable outcome in any matter could have a material adverse effect on the Company’s business, financial condition, results of operations or cash flows. In addition, even if the ultimate outcomes are resolved in the Company’s favor, the defense of such litigation could entail considerable cost or the diversion of the efforts of management, either of which could have a material adverse effect on the Company’s business, financial condition, results of operations or cash flows.

The Company maintains insurance coverage that management believes is reasonable and prudent. The principal insurance coverage it maintains covers commercial general liability; property damage; hardware/software damage; cyber liability; directors and officers; employment practices liability; certain criminal acts against the Company; and errors and omissions. The Company believes that such insurance coverage is adequate for the purpose of its business. The Company’s ability to maintain this level of insurance coverage in the future, however, is subject to the availability of affordable insurance in the marketplace.

ITEM 1A.    RISK FACTORS

There have been no material changes in the Company's risk factors from those disclosed in its Annual Report on Form 10-K for the year ended December 31, 2013.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

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ITEM 6. EXHIBITS

Exhibit Number	Description
3.2	Amended and Restated Bylaws of the Registrant (incorporated by reference to Exhibit 3.1 of the Company's Current Report on Form 8-K filed on July 1, 2014)
*31.1	Certification—Section 302 of the Sarbanes-Oxley Act of 2002
*31.2	Certification—Section 302 of the Sarbanes-Oxley Act of 2002
*32.1	Certification—Section 906 of the Sarbanes-Oxley Act of 2002
*101.INS	XBRL Instance Document
*101.SCH	XBRL Taxonomy Extension Schema Document
*101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
*101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
*101.LAB	XBRL Taxonomy Extension Label Linkbase Document
*101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

* Filed herein.

85

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated: August 5, 2014

E*TRADE Financial Corporation (Registrant)
By	/s/    PAUL T. IDZIK
	Paul T. Idzik
	Chief Executive Officer
	(Principal Executive Officer)
By	/s/    MATTHEW J. AUDETTE
	Matthew J. Audette
	Chief Financial Officer
	(Principal Financial and Accounting Officer)

86

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO RULE 13a-14(a)/15d-14(a), AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Paul T. Idzik, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of E*TRADE Financial Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: August 5, 2014

E*TRADE Financial Corporation (Registrant)
By	/s/    PAUL T. IDZIK
	Paul T. Idzik Chief Executive Officer (Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO RULE 13a-14(a)/15d-14(a), AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Matthew J. Audette, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of E*TRADE Financial Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: August 5, 2014

E*TRADE Financial Corporation (Registrant)
By	/s/    MATTHEW J. AUDETTE
	Matthew J. Audette Chief Financial Officer (Principal Financial and Accounting Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

The certification set forth below is being submitted in connection with this Quarterly Report on Form 10-Q of E*TRADE Financial Corporation (the “Quarterly Report”) for the purpose of complying with Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Section 1350 of Chapter 63 of Title 18 of the United States Code.

Paul T. Idzik, the Chief Executive Officer and Matthew J. Audette, the Chief Financial Officer of E*TRADE Financial Corporation, each certifies that, to the best of their knowledge:

1. the Quarterly Report fully complies with the requirements of Section 13(a) or 15(d) of the Exchange Act; and

2. the information contained in the Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of E*TRADE Financial Corporation.

Dated: August 5, 2014

/s/    PAUL T. IDZIK        

Paul T. Idzik

Chief Executive Officer

(Principal Executive Officer)

/s/    MATTHEW J. AUDETTE        

Matthew J. Audette

Chief Financial Officer

(Principal Financial and Accounting Officer)

XML

Fair Value Disclosures (Details - Inputs) (USD $)	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013	Dec. 31, 2013
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Impairment of goodwill	$ 0	$ 142,000,000	$ 0	$ 142,000,000	$ 142,000,000
Agency mortgage-backed securities [Member] | Weighted Average [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Coupon Rate	3.09%		3.09%
Agency CMOs [Member] | Weighted Average [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Coupon Rate	3.15%		3.15%
Loans Receivable [Member] | One- To Four-Family [Member] | Weighted Average [Member] | Level 3 [Member] | Fair Value, Measurements, Nonrecurring [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Appraised Value	367,500		367,500
Loans Receivable [Member] | One- To Four-Family [Member] | Maximum [Member] | Level 3 [Member] | Fair Value, Measurements, Nonrecurring [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Appraised Value	1,300,000		1,300,000
Loans Receivable [Member] | One- To Four-Family [Member] | Minimum [Member] | Level 3 [Member] | Fair Value, Measurements, Nonrecurring [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Appraised Value	14,500		14,500
Loans Receivable [Member] | Home Equity [Member] | Weighted Average [Member] | Level 3 [Member] | Fair Value, Measurements, Nonrecurring [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Appraised Value	270,800		270,800
Loans Receivable [Member] | Home Equity [Member] | Maximum [Member] | Level 3 [Member] | Fair Value, Measurements, Nonrecurring [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Appraised Value	1,000,000		1,000,000
Loans Receivable [Member] | Home Equity [Member] | Minimum [Member] | Level 3 [Member] | Fair Value, Measurements, Nonrecurring [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Appraised Value	7,000		7,000
Real Estate Owned [Member] | Weighted Average [Member] | Level 3 [Member] | Fair Value, Measurements, Nonrecurring [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Appraised Value	308,100		308,100
Real Estate Owned [Member] | Maximum [Member] | Level 3 [Member] | Fair Value, Measurements, Nonrecurring [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Appraised Value	1,500,000		1,500,000
Real Estate Owned [Member] | Minimum [Member] | Level 3 [Member] | Fair Value, Measurements, Nonrecurring [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Appraised Value	$ 10,900		$ 10,900

XML

Loans Receivable, Net (Details - TDRs Accrual and Nonaccrual) (USD $)	3 Months Ended	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2014	Dec. 31, 2013
Financing Receivable, Impaired [Line Items]
Accrual TDRs	$ 258,000,000	$ 258,000,000	$ 950,000,000
Nonaccrual TDRs, Current	170,000,000	170,000,000	149,000,000
Nonaccrual TDRs, 30-89 Days Delinquent	34,000,000	34,000,000	119,000,000
Nonaccrual TDRs, 90+ Days Delinquent	83,000,000	83,000,000	195,000,000
Recorded Investment in TDRs	545,000,000	545,000,000	1,413,000,000
Proceeds from sale of loans	800,000,000	802,000,000
One- To Four-Family [Member]
Financing Receivable, Impaired [Line Items]
Accrual TDRs	129,000,000	129,000,000	774,000,000
Nonaccrual TDRs, Current	115,000,000	115,000,000	127,000,000
Nonaccrual TDRs, 30-89 Days Delinquent	19,000,000	19,000,000	102,000,000
Nonaccrual TDRs, 90+ Days Delinquent	56,000,000	56,000,000	169,000,000
Recorded Investment in TDRs	319,000,000	319,000,000	1,172,000,000
TDR unpaid principal balance	300,000,000	300,000,000	1,200,000,000
Home Equity [Member]
Financing Receivable, Impaired [Line Items]
Accrual TDRs	129,000,000	129,000,000	176,000,000
Nonaccrual TDRs, Current	55,000,000	55,000,000	22,000,000
Nonaccrual TDRs, 30-89 Days Delinquent	15,000,000	15,000,000	17,000,000
Nonaccrual TDRs, 90+ Days Delinquent	27,000,000	27,000,000	26,000,000
Recorded Investment in TDRs	$ 226,000,000	$ 226,000,000	$ 241,000,000

XML

Held-to-maturity Securities (Details - OTTI) (USD $) In Millions, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Schedule of Held-to-maturity Securities [Line Items]
Held-to-maturity securities, less than twelve months, fair value	$ 165	$ 4,760
Held-to-maturity securities, twelve months or longer, fair value	3,488	891
Held-to-maturity securities, fair value	3,653	5,651
Held-to-maturity securities, less than twelve months, aggregate losses	(1)	(161)
Held-to-maturity securities, twelve months or longer, aggregate losses	(71)	(44)
Held-to-maturity securities, aggregate losses	(72)	(205)
Agency residential mortgage-backed securities and CMOs [Member]
Schedule of Held-to-maturity Securities [Line Items]
Held-to-maturity securities, less than twelve months, fair value	165	3,607
Held-to-maturity securities, twelve months or longer, fair value	2,703	891
Held-to-maturity securities, fair value	2,868	4,498
Held-to-maturity securities, less than twelve months, aggregate losses	(1)	(121)
Held-to-maturity securities, twelve months or longer, aggregate losses	(59)	(44)
Held-to-maturity securities, aggregate losses	(60)	(165)
Agency Debt Securities [Member]
Schedule of Held-to-maturity Securities [Line Items]
Held-to-maturity securities, less than twelve months, fair value	0	1,153
Held-to-maturity securities, twelve months or longer, fair value	785
Held-to-maturity securities, fair value	785	1,153
Held-to-maturity securities, less than twelve months, aggregate losses	0	(40)
Held-to-maturity securities, twelve months or longer, aggregate losses	(12)
Held-to-maturity securities, aggregate losses	$ (12)	$ (40)

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Segment Information (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013	Dec. 31, 2013
Segment Reporting Information [Line Items]
Number of Operating Segments			2
Net operating interest income	$ 270	$ 243	$ 536	$ 484
Total non-interest income	168	197	377	376
Total net revenue	438	440	913	860
Provision for loan losses	12	46	16	89
Total operating expense	284	414	574	709
Income (loss) before other income (expense) and income taxes	142	(20)	323	62
Total other income (expense)	(30)	(27)	(67)	(52)
Income (loss) before income taxes	112	(47)	256	10
Income tax expense	43	7	90	29
Net income (loss)	69	(54)	166	(19)
Total assets	45,748		45,748		46,280
Corporate/Other
Segment Reporting Information [Line Items]
Net operating interest income	0	0	0	0
Total non-interest income	0	0	0	0
Total net revenue	0	0	0	0
Total operating expense	52	54	106	100
Income (loss) before other income (expense) and income taxes	(52)	(54)	(106)	(100)
Total other income (expense)	(30)	(27)	(67)	(52)
Income (loss) before income taxes	(82)	(81)	(173)	(152)
Total assets	786		786		676
Trading And Investing | Operating Segments [Member]
Segment Reporting Information [Line Items]
Net operating interest income	151	133	294	267
Total non-interest income	158	175	351	338
Total net revenue	309	308	645	605
Total operating expense	196	318	391	517
Income (loss) before other income (expense) and income taxes	113	(10)	254	88
Income (loss) before income taxes	113	(10)	254	88
Total assets	11,776		11,776		10,820
Balance Sheet Management | Operating Segments [Member]
Segment Reporting Information [Line Items]
Net operating interest income	119	110	242	217
Total non-interest income	10	22	26	38
Total net revenue	129	132	268	255
Provision for loan losses	12	46	16	89
Total operating expense	36	42	77	92
Income (loss) before other income (expense) and income taxes	81	44	175	74
Income (loss) before income taxes	81	44	175	74
Total assets	$ 33,186		$ 33,186		$ 34,784

XML

Loans Receivable, Net (Details - TDRs Average Investment and Income) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Financing Receivable, Impaired [Line Items]
TDRs, Average Recorded Investment	$ 749	$ 1,477	$ 1,030	$ 1,488
TDRs, Interest Income Recognized	8	14	20	27
One- To Four-Family [Member]
Financing Receivable, Impaired [Line Items]
TDRs, Average Recorded Investment	520	1,211	797	1,216
TDRs, Interest Income Recognized	3	9	11	17
Home Equity [Member]
Financing Receivable, Impaired [Line Items]
TDRs, Average Recorded Investment	229	266	233	272
TDRs, Interest Income Recognized	$ 5	$ 5	$ 9	$ 10

XML

Available-for-Sale and Held-to-Maturity Securities (Details - Maturity) (USD $)	Jun. 30, 2014	Dec. 31, 2013
Available-for-Sale Securities, Debt Maturities [Abstract]
Available-for-sale securities, due within next twelve months, amortized cost	$ 2,000,000
Available-for-sale securities, due within one to five years, amortized cost	14,000,000
Available-for-sale securities, due within five to ten years, amortized cost	994,000,000
Available-for-sale securities, due after ten years, amortized cost	11,835,000,000
Available-for-sale securities, amortized cost	12,845,000,000
Available-for-sale securities, due within next twelve months, fair value	2,000,000
Available-for-sale securities, due within one to five years, fair value	14,000,000
Available-for-sale securities, due within five to ten years, fair value	1,003,000,000
Available-for-sale securities, due after ten years, fair value	11,798,000,000
Available-for-sale securities, fair value	12,817,000,000
Held-to-Maturity Securities, Debt Maturities [Abstract]
Held-to-maturity securities, due within one to five years, net carrying amount	969,000,000
Held-to-maturity securities, due within five to ten years, net carrying amount	2,605,000,000
Held-to-maturity securities, due after ten years, net carrying amount	7,782,000,000
Held-to-maturity securities, amortized cost	11,356,000,000	10,181,000,000
Held-to-maturity securities, due within one to five years, fair value	1,005,000,000
Held-to-maturity securities, due within five to ten years, fair value	2,686,000,000
Held-to-maturity securities, due after ten years, fair value	7,827,000,000
Held-to-maturity securities, fair value	11,518,000,000	10,092,000,000
Available-for-Sale Securities Pledged As Collateral (Textuals) [Abstract]
Available-for-sale securities pledged to creditors with the right to sell or repledge	2,100,000,000	2,100,000,000
Held-to-Maturity Securities Pledged As Collateral (Textuals) [Abstract]
Held-to-maturity securities pledged to creditors with the right to sell or repledge	$ 2,500,000,000	$ 3,400,000,000

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Earnings (Loss) Per Share (Tables)

6 Months Ended

Jun. 30, 2014

Earnings Per Share [Abstract]

Schedule of Earnings Per Share Reconciliation

The following table presents a reconciliation of basic and diluted earnings (loss) per share (in millions, except share data and per share amounts):

	Three Months Ended June 30,					Six Months Ended June 30,
	2014		2013			2014		2013
Basic:
Net income (loss)	$	69	$	(54	)	$	166	$	(19	)
Basic weighted-average shares outstanding (in thousands)	288,705		286,903			288,380		286,765
Basic earnings (loss) per share	$	0.24	$	(0.19	)	$	0.57	$	(0.07	)
Diluted:
Net income (loss)	$	69	$	(54	)	$	166	$	(19	)
Basic weighted-average shares outstanding (in thousands)	288,705		286,903			288,380		286,765
Effect of dilutive securities:
Weighted-average convertible debentures (in thousands)	4,068		—			4,073		—
Weighted-average options and restricted stock issued to employees (in thousands)	1,053		—			1,360		—
Diluted weighted-average shares outstanding (in thousands)	293,826		286,903			293,813		286,765
Diluted earnings (loss) per share	$	0.24	$	(0.19	)	$	0.56	$	(0.07	)

Schedule of Antidilutive Securities Excluded from Computation of Earnings (Loss) Per Share

The Company excluded the following shares form the calculations of diluted earnings (loss) per share as the effect would have been anti-dilutive (shares in millions):

	Three Months Ended June 30,		Six Months Ended June 30,
	2014	2013	2014	2013
Weighted-average shares excluded as a result of the Company’s net loss:
Convertible debentures	N/A	4.1	N/A	4.1
Stock options and restricted stock awards and units	N/A	0.7	N/A	1.0
Other stock options and restricted stock awards and units	0.5	2.0	0.6	1.9
Total	0.5	6.8	0.6	7.0

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Loans Receivable, Net (Details - Modifications Types and Financial Impact) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014 loan	Jun. 30, 2013 loan	Jun. 30, 2014 loan	Jun. 30, 2013 loan
Financing Receivable, Modifications [Line Items]
Financing Receivable, Modifications, Number of Contracts	72	168	151	327
Troubled Debt Restructurings - Modifications, Nature and Extent of Transaction, Interest Rate Reduction and Principal Forgiven	$ 0	$ 4	$ 1	$ 12
Troubled Debt Restructurings - Modifications, Nature and Extent of Transaction, Interest Rate Reduction and Principal Deferred	0	2	0	4
Troubled Debt Restructurings - Modifications, Nature and Extent of Transaction, Interest Rate Reduction and Re-age, Extension, and Interest Capitalization	2	24	8	45
Troubled Debt Restructurings - Modifications, Nature and Extent of Transaction, Interest Rate Reduction and Other Concession	1	4	4	8
Troubled Debt Restructurings - Modifications, Nature and Extent of Transaction, Other Concessions	3	6	8	12
Troubled Debt Restructurings - Modifications, Total	6	40	21	81
Financial Impact, Troubled Debt Restructurings - Modifications, Principal Forgiven	0	1	0	4
One- To Four-Family [Member]
Financing Receivable, Modifications [Line Items]
Financing Receivable, Modifications, Number of Contracts	4	83	37	176
Troubled Debt Restructurings - Modifications, Nature and Extent of Transaction, Interest Rate Reduction and Principal Forgiven	0	4	1	12
Troubled Debt Restructurings - Modifications, Nature and Extent of Transaction, Interest Rate Reduction and Principal Deferred	0	2	0	4
Troubled Debt Restructurings - Modifications, Nature and Extent of Transaction, Interest Rate Reduction and Re-age, Extension, and Interest Capitalization	1	22	5	42
Troubled Debt Restructurings - Modifications, Nature and Extent of Transaction, Interest Rate Reduction and Other Concession	0	1	2	2
Troubled Debt Restructurings - Modifications, Nature and Extent of Transaction, Other Concessions	0	3	4	8
Troubled Debt Restructurings - Modifications, Total	1	32	12	68
Financial Impact, Troubled Debt Restructurings - Modifications, Principal Forgiven	0	1	0	4
Financial Impact, Troubled Debt Restructurings - Modifications, Pre-Modification Weighted Average Interest Rate	4.10%	5.30%	4.80%	5.30%
Financial Impact, Troubled Debt Restructurings - Modifications, Post-Modification Weighted Average Interest Rate	2.90%	2.30%	2.70%	2.30%
Home Equity [Member]
Financing Receivable, Modifications [Line Items]
Financing Receivable, Modifications, Number of Contracts	68	85	114	151
Troubled Debt Restructurings - Modifications, Nature and Extent of Transaction, Interest Rate Reduction and Principal Forgiven	0	0	0	0
Troubled Debt Restructurings - Modifications, Nature and Extent of Transaction, Interest Rate Reduction and Principal Deferred	0	0	0	0
Troubled Debt Restructurings - Modifications, Nature and Extent of Transaction, Interest Rate Reduction and Re-age, Extension, and Interest Capitalization	1	2	3	3
Troubled Debt Restructurings - Modifications, Nature and Extent of Transaction, Interest Rate Reduction and Other Concession	1	3	2	6
Troubled Debt Restructurings - Modifications, Nature and Extent of Transaction, Other Concessions	3	3	4	4
Troubled Debt Restructurings - Modifications, Total	5	8	9	13
Financial Impact, Troubled Debt Restructurings - Modifications, Principal Forgiven	$ 0	$ 0	$ 0	$ 0
Financial Impact, Troubled Debt Restructurings - Modifications, Pre-Modification Weighted Average Interest Rate	6.30%	4.20%	5.30%	4.30%
Financial Impact, Troubled Debt Restructurings - Modifications, Post-Modification Weighted Average Interest Rate	2.70%	1.80%	2.40%	1.60%

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Operating Interest Income and Operating Interest Expense (Tables)

6 Months Ended

Jun. 30, 2014

Operating Interest Income and Operating Interest Expense Disclosure [Abstract]

Schedule Of Components Of Interest Income And Expense Operating Excluding Corporate

The following table shows the components of operating interest income and operating interest expense (dollars in millions):

	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
Operating interest income:
Loans	$	77		$	102		$	161		$	209
Available-for-sale securities	72			67			151			131
Held-to-maturity securities	82			61			159			119
Margin receivables	65			54			127			108
Securities borrowed and other	26			18			46			35
Total operating interest income	322			302			644			602
Operating interest expense:
Securities sold under agreements to repurchase	(30		)	(37		)	(65		)	(74		)
FHLB advances and other borrowings	(17		)	(17		)	(34		)	(34		)
Deposits	(2		)	(3		)	(4		)	(6		)
Customer payables and other	(3		)	(2		)	(5		)	(4		)
Total operating interest expense	(52		)	(59		)	(108		)	(118		)
Net operating interest income	$	270		$	243		$	536		$	484

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Loans Receivable, Net (Details) (USD $)	3 Months Ended	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2014	Mar. 31, 2014	Dec. 31, 2013	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2012
Loans Receivable, Net [Abstract]
One- to four-family	$ 3,345,000,000	$ 3,345,000,000		$ 4,475,000,000
Home equity	3,153,000,000	3,153,000,000		3,454,000,000
Consumer and other	527,000,000	527,000,000		602,000,000
Total loans receivable	7,025,000,000	7,025,000,000		8,531,000,000
Unamortized premiums, net	32,000,000	32,000,000		45,000,000
Allowance for loan losses	(401,000,000)	(401,000,000)	(403,000,000)	(453,000,000)	(451,000,000)	(455,000,000)	(481,000,000)
Total loans receivable, net	6,656,000,000	6,656,000,000		8,123,000,000
Proceeds from sale of loans	800,000,000	802,000,000
Loans Pledged Federal Home Loan Bank	5,900,000,000	5,900,000,000		6,800,000,000
Loans Pledged Federal Reserve Bank	500,000,000	500,000,000		600,000,000
Loans Evaluated For Impairment Methodology [Abstract]
Loans collectively evaluated for impairment, carrying value	6,512,000,000	6,512,000,000		7,163,000,000
Loans individually evaluated for impairment (TDRs), carrying value	545,000,000	545,000,000		1,413,000,000
Total recorded investment in loans receivable	7,057,000,000	7,057,000,000		8,576,000,000
Loans collectively evaluated for impairment, allowance for loan losses	325,000,000	325,000,000		329,000,000
Loans individually evaluated for impairment (TDRs), allowance for loan losses	76,000,000	76,000,000		124,000,000
Allowance for loan losses	$ 401,000,000	$ 401,000,000	$ 403,000,000	$ 453,000,000	$ 451,000,000	$ 455,000,000	$ 481,000,000

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Fair Value Disclosures (Details - FV of Financial Instruments) (USD $) In Millions, unless otherwise specified	Jun. 30, 2014	Mar. 31, 2014	Dec. 31, 2013	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2012
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Cash and equivalents	$ 1,807		$ 1,838	$ 1,045		$ 2,762
Cash required to be segregated under federal or other regulations	1,215		1,066
Total held-to-maturity securities	11,356		10,181
Margin Receivables	7,340		6,353
Total loans receivable, net	6,656		8,123
Investment in FHLB stock	56		61
Deposits paid for securities borrowed	420		536
Deposits	25,084		25,971
Securities sold under agreements to repurchase	3,742		4,543
Customer Payables	6,626		6,310
FHLB advances and other borrowings	1,291		1,279
Corporate debt	1,770		1,768
Deposits received for securities loaned	1,713		1,050
Allowance for loan losses	401	403	453	451	455	481
One- To Four-Family [Member]
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Allowance for loan losses	44	52	102	144	161	184
Home Equity [Member]
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Allowance for loan losses	337	327	326	279	263	257
Consumer And Other [Member]
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Allowance for loan losses	20	24	25	28	31	40
Agency residential mortgage-backed securities and CMOs [Member]
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Total held-to-maturity securities	9,084		8,359
Agency Debentures [Member]
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Total held-to-maturity securities	163		164
Agency Debt Securities [Member]
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Total held-to-maturity securities	2,109		1,658
Carrying Value [Member]
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Cash and equivalents	1,807		1,838
Cash required to be segregated under federal or other regulations	1,215		1,066
Total held-to-maturity securities	11,356		10,181
Margin Receivables	7,340		6,353
Total loans receivable, net	6,656		8,123
Investment in FHLB stock	56		61
Deposits paid for securities borrowed	420		536
Deposits	25,084		25,971
Securities sold under agreements to repurchase	3,742		4,543
Customer Payables	6,626		6,310
FHLB advances and other borrowings	1,291		1,279
Corporate debt	1,770		1,768
Deposits received for securities loaned	1,713		1,050
Carrying Value [Member] | One- To Four-Family [Member]
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Total loans receivable, net	3,316		4,392
Carrying Value [Member] | Home Equity [Member]
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Total loans receivable, net	2,829		3,148
Carrying Value [Member] | Consumer And Other [Member]
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Total loans receivable, net	511		583
Carrying Value [Member] | Agency residential mortgage-backed securities and CMOs [Member]
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Total held-to-maturity securities	9,084		8,359
Carrying Value [Member] | Agency Debentures [Member]
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Total held-to-maturity securities	163		164
Carrying Value [Member] | Agency Debt Securities [Member]
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Total held-to-maturity securities	2,109		1,658
Fair Value [Member]
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Cash and equivalents	1,807		1,838
Cash required to be segregated under federal or other regulations	1,215		1,066
Total held-to-maturity securities	11,518		10,092
Margin Receivables	7,340		6,353
Total loans receivable, net	6,053		7,208
Investment in FHLB stock	56		61
Deposits paid for securities borrowed	420		536
Deposits	25,084		25,971
Securities sold under agreements to repurchase	3,754		4,571
Customer Payables	6,626		6,310
FHLB advances and other borrowings	1,175		1,149
Corporate debt	1,950		1,951
Deposits received for securities loaned	1,713		1,050
Fair Value [Member] | One- To Four-Family [Member]
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Total loans receivable, net	2,932		3,790
Fair Value [Member] | Home Equity [Member]
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Total loans receivable, net	2,600		2,822
Fair Value [Member] | Consumer And Other [Member]
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Total loans receivable, net	521		596
Fair Value [Member] | Agency residential mortgage-backed securities and CMOs [Member]
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Total held-to-maturity securities	9,209		8,293
Fair Value [Member] | Agency Debentures [Member]
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Total held-to-maturity securities	166		168
Fair Value [Member] | Agency Debt Securities [Member]
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Total held-to-maturity securities	2,143		1,631
Fair Value [Member] | Level 1 [Member]
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Cash and equivalents	1,807		1,838
Cash required to be segregated under federal or other regulations	1,215		1,066
Fair Value [Member] | Level 2 [Member]
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Total held-to-maturity securities	11,518		10,092
Margin Receivables	7,340		6,353
Deposits paid for securities borrowed	420		536
Deposits	25,084		25,971
Securities sold under agreements to repurchase	3,754		4,571
Customer Payables	6,626		6,310
FHLB advances and other borrowings	926		924
Corporate debt	1,950		1,951
Deposits received for securities loaned	1,713		1,050
Fair Value [Member] | Level 2 [Member] | Agency residential mortgage-backed securities and CMOs [Member]
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Total held-to-maturity securities	9,209		8,293
Fair Value [Member] | Level 2 [Member] | Agency Debentures [Member]
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Total held-to-maturity securities	166		168
Fair Value [Member] | Level 2 [Member] | Agency Debt Securities [Member]
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Total held-to-maturity securities	2,143		1,631
Fair Value [Member] | Level 3 [Member]
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Total loans receivable, net	6,053		7,208
Investment in FHLB stock	56		61
FHLB advances and other borrowings	249		225
Fair Value [Member] | Level 3 [Member] | One- To Four-Family [Member]
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Total loans receivable, net	2,932		3,790
Fair Value [Member] | Level 3 [Member] | Home Equity [Member]
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Total loans receivable, net	2,600		2,822
Fair Value [Member] | Level 3 [Member] | Consumer And Other [Member]
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Total loans receivable, net	$ 521		$ 596

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Disposition (Details) (USD $)	0 Months Ended	6 Months Ended
	Feb. 10, 2014	Jun. 30, 2014	Dec. 31, 2013
Discontinued Operations and Disposal Groups [Abstract]
Proceeds from sale of G1 Execution Services, Inc.	$ 76,000,000	$ 76,000,000
Gain on Disposition of Business	4,000,000
Assets:
Cash and equivalents			11,000,000
Trading securities		0	105,000,000
Property and equipment, net			2,000,000
Other intangibles, net			21,000,000
Other assets			38,000,000
Total assets			177,000,000
Liabilities:
Other liabilities			107,000,000
Total liabilities			$ 107,000,000

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Loans Receivable, Net (Details - Aging) (USD $) In Millions, unless otherwise specified	6 Months Ended
	Jun. 30, 2014	Dec. 31, 2013
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans receivable, Current	$ 6,620	$ 7,884
Loans receivable, 30 to 89 days delinquent	155	271
Loans receivable, 90 to 179 days delinquent	60	109
Loans receivable, 180+ days delinquent	190	267
One- to four-family	3,345	4,475
Home equity	3,153	3,454
Consumer and other	527	602
Total loans receivable	7,025	8,531
Financing Receivable Recorded Investment Nonaccrual Status	494	693
Financing Receivable Recorded Investment Nonaccrual Status, Decrease	199
Loans Sold, Mortgages, Nonaccrual Status	377
Bankruptcy Loans, Performing, Recorded Investment, All		238
Threshold, Period Past Due, Nonaccrual Financing Receivable	90 days
Other Real Estate, Foreclosed Assets, and Repossessed Assets [Abstract]
Real Estate Acquired Through Foreclosure	35	50
Mortgage Loans in Process of Foreclosure, Amount	126	199
One- To Four-Family [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans receivable, Current	3,085	3,988
Loans receivable, 30 to 89 days delinquent	88	190
Loans receivable, 90 to 179 days delinquent	27	70
Loans receivable, 180+ days delinquent	145	227
Financing Receivable Recorded Investment Nonaccrual Status	307	526
Home Equity [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans receivable, Current	3,020	3,309
Loans receivable, 30 to 89 days delinquent	56	69
Loans receivable, 90 to 179 days delinquent	32	36
Loans receivable, 180+ days delinquent	45	40
Financing Receivable Recorded Investment Nonaccrual Status	185	164
Consumer And Other [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans receivable, Current	515	587
Loans receivable, 30 to 89 days delinquent	11	12
Loans receivable, 90 to 179 days delinquent	1	3
Loans receivable, 180+ days delinquent	0	0
Financing Receivable Recorded Investment Nonaccrual Status	$ 2	$ 3

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Earnings (Loss) Per Share (Details) (USD $) In Millions, except Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Basic:
Net income (loss)	$ 69	$ (54)	$ 166	$ (19)
Basic weighted-average shares outstanding (in thousands)	288,705,000	286,903,000	288,380,000	286,765,000
Basic earnings (loss) per share (in dollars per share)	$ 0.24	$ (0.19)	$ 0.57	$ (0.07)
Diluted:
Net income (loss)	$ 69	$ (54)	$ 166	$ (19)
Basic weighted-average shares outstanding (in thousands)	288,705,000	286,903,000	288,380,000	286,765,000
Effect of dilutive securities:
Weighted-average convertible debentures (in thousands)	4,068,000	0	4,073,000	0
Weighted-average options and restricted stock issued to employees (in thousands)	1,053,000	0	1,360,000	0
Diluted weighted-average shares outstanding (in thousands)	293,826,000	286,903,000	293,813,000	286,765,000
Diluted earnings (loss) per share (in dollars per share)	$ 0.24	$ (0.19)	$ 0.56	$ (0.07)
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	500,000	6,800,000	600,000	7,000,000
Convertible Debt Securities [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount		4,100,000		4,100,000
Stock Compensation Plan [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	500,000		600,000
Stock Compensation Plan Net Loss [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount		700,000		1,000,000
Stock Compensation Plan Other [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount		2,000,000		1,900,000

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Accounting for Derivative Instruments and Hedging Activities (Details - Cash Flow Hedge) (USD $) In Millions, unless otherwise specified	3 Months Ended				6 Months Ended
	Jun. 30, 2014		Jun. 30, 2013		Jun. 30, 2014		Jun. 30, 2013		Dec. 31, 2013
Impact On Accumulated Other Comprehensive Gain Loss Net Of Tax And Consolidated Statement Of Income [Abstract]
Gains (losses) on derivatives recognized in OCI (effective portion), net of tax	$ (16)	[1]	$ 62	[1]	$ (32)	[1]	$ 68	[1]
Cash Flow Hedging [Member]
Impact On Accumulated Other Comprehensive Gain Loss Net Of Tax And Consolidated Statement Of Income [Abstract]
Gains (losses) on derivatives recognized in OCI (effective portion), net of tax	(16)		62		(32)		68
Losses reclassified from AOCI into earnings (effective portion), net of tax	(20)		(23)		(41)		(43)
Cash flow hedge ineffectiveness gains (losses)	0		1		0		1
Interest Rate Cash Flow Hedge Gain (Loss) to be Reclassified During Next 12 Months, Net	(121)				(121)
Maximum Length of Time Hedged in Interest Rate Cash Flow Hedge					8 years
Accumulated other comprehensive loss balance (net of tax) related to:
Accumulated other comprehensive loss, cash flow hedging instruments (net of tax)	(289)				(289)				(298)
Impact by Cash Flow Hedge Type on Accumulated Other Comprehensive Income [Abstract]
Accumulated Other Comprehensive Loss, before Tax	(466)				(466)				(478)
Tax benefit	177				177				180
Accumulated other comprehensive loss, cash flow hedging instruments (net of tax)	(289)				(289)				(298)
Cash Flow Hedging [Member] | Repurchase agreements
Impact by Cash Flow Hedge Type on Accumulated Other Comprehensive Income [Abstract]
Accumulated Other Comprehensive Loss, before Tax	(373)				(373)				(379)
Cash Flow Hedging [Member] | FHLB advances
Impact by Cash Flow Hedge Type on Accumulated Other Comprehensive Income [Abstract]
Accumulated Other Comprehensive Loss, before Tax	(93)				(93)				(99)
Cash Flow Hedging [Member] | Discontinued Hedges
Accumulated other comprehensive loss balance (net of tax) related to:
Accumulated other comprehensive loss, cash flow hedging instruments (net of tax)	(184)				(184)				(201)
Impact by Cash Flow Hedge Type on Accumulated Other Comprehensive Income [Abstract]
Accumulated other comprehensive loss, cash flow hedging instruments (net of tax)	(184)				(184)				(201)
Cash Flow Hedging [Member] | Active hedges
Accumulated other comprehensive loss balance (net of tax) related to:
Accumulated other comprehensive loss, cash flow hedging instruments (net of tax)	(105)				(105)				(97)
Impact by Cash Flow Hedge Type on Accumulated Other Comprehensive Income [Abstract]
Accumulated other comprehensive loss, cash flow hedging instruments (net of tax)	$ (105)				$ (105)				$ (97)

[1] Amounts are net of benefit from income taxes of $12 million and $23 million for the three and six months ended June 30, 2014, respectively, compared to provision for income taxes of $31 million and $35 million for the three and six months ended June 30, 2013, respectively.

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Available-for-Sale Securities (Details - OTTI) (USD $) In Millions, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale securities, less than twelve months, fair value	$ 325	$ 7,299
Available-for-sale securities, twelve months or longer, fair value	5,564	1,282
Available-for-sale securities, fair value	5,889	8,581
Available-for-sale securities, less than twelve months, aggregate losses	(1)	(333)
Available-for-sale securities, twelve months or longer, aggregate losses	(181)	(73)
Available-for-sale securities, aggregate losses	(182)	(406)
Agency residential mortgage-backed securities and CMOs [Member]
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale securities, less than twelve months, fair value	305	6,422
Available-for-sale securities, twelve months or longer, fair value	5,034	1,266
Available-for-sale securities, fair value	5,339	7,688
Available-for-sale securities, less than twelve months, aggregate losses	(1)	(268)
Available-for-sale securities, twelve months or longer, aggregate losses	(159)	(67)
Available-for-sale securities, aggregate losses	(160)	(335)
Non-agency CMOs [Member]
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale securities, twelve months or longer, fair value		11
Available-for-sale securities, fair value		11
Available-for-sale securities, twelve months or longer, aggregate losses		(5)
Available-for-sale securities, aggregate losses		(5)
Agency Debentures [Member]
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale securities, less than twelve months, fair value	0	466
Available-for-sale securities, twelve months or longer, fair value	339
Available-for-sale securities, fair value	339	466
Available-for-sale securities, less than twelve months, aggregate losses	0	(54)
Available-for-sale securities, twelve months or longer, aggregate losses	(18)
Available-for-sale securities, aggregate losses	(18)	(54)
Agency Debt Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale securities, less than twelve months, fair value	0	384
Available-for-sale securities, twelve months or longer, fair value	169
Available-for-sale securities, fair value	169	384
Available-for-sale securities, less than twelve months, aggregate losses	0	(9)
Available-for-sale securities, twelve months or longer, aggregate losses	(2)
Available-for-sale securities, aggregate losses	(2)	(9)
Municipal Bonds [Member]
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale securities, less than twelve months, fair value		27
Available-for-sale securities, twelve months or longer, fair value	18
Available-for-sale securities, fair value	18	27
Available-for-sale securities, less than twelve months, aggregate losses		(2)
Available-for-sale securities, twelve months or longer, aggregate losses	(1)
Available-for-sale securities, aggregate losses	(1)	(2)
Corporate Bonds [Member]
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale securities, twelve months or longer, fair value	4	5
Available-for-sale securities, fair value	4	5
Available-for-sale securities, twelve months or longer, aggregate losses	(1)	(1)
Available-for-sale securities, aggregate losses	(1)	(1)
Equity Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale securities, less than twelve months, fair value	20
Available-for-sale securities, fair value	$ 20

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Organization, Basis of Presentation and Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2014

Organization, Consolidation and Presentation of Financial Statements [Abstract]

ORGANIZATION, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization—E*TRADE Financial Corporation is a financial services company that provides brokerage and related products and services primarily to individual retail investors under the brand "E*TRADE Financial." The Company also provides investor-focused banking products, primarily sweep deposits and savings products, to retail investors.

On February 10, 2014, the Company completed the sale of its subsidiary G1 Execution Services, LLC, a registered broker-dealer and market maker, to an affiliate of Susquehanna International Group, LLP. The sale generated cash proceeds of $76 million.

Basis of Presentation—The consolidated financial statements include the accounts of the Company and its majority-owned subsidiaries as determined under the voting interest model. Entities in which the Company holds at least a 20% ownership interest or in which there are other indicators of significant influence are generally accounted for by the equity method. Entities in which the Company holds less than a 20% ownership interest and does not have the ability to exercise significant influence are generally carried at cost. However, investments in marketable equity securities where the Company does not have the ability to exercise significant influence over the entities are accounted for as available-for-sale securities. Intercompany accounts and transactions are eliminated in consolidation. The Company also evaluates its continuing involvement with certain entities to determine if the Company is required to consolidate the entities under the variable interest entity model. This evaluation is based on a qualitative assessment of whether the Company has both: 1) the power to direct matters that most significantly impact the activities of the variable interest entity; and 2) the obligation to absorb losses or the right to receive benefits of the variable interest entity that could potentially be significant to the variable interest entity.

Certain prior period items in these consolidated financial statements have been reclassified to conform to the current period presentation. These consolidated financial statements reflect all adjustments, which are all normal and recurring in nature, necessary to present fairly the financial position, results of operations and cash flows for the periods presented.

At the end of June 2013, the Company decided to exit its market making business, G1 Execution Services, LLC, and reclassified the assets and liabilities of the market making business to held-for-sale. The assets and liabilities of the market making business are presented in the other assets and other liabilities line items, respectively, at December 31, 2013 on the consolidated balance sheet. The sale of the market making business was completed on February 10, 2014. For additional information on the market making business, see Note 2—Disposition.

The Company reports corporate interest expense separately from operating interest expense. The Company believes reporting these items separately provides a clearer picture of the financial performance of the Company’s operations than would a presentation that combined these two items. Operating interest expense is generated from the operations of the Company. Corporate debt, which is the primary source of corporate interest expense, has been issued primarily in connection with recapitalization transactions and past acquisitions.

Similarly, the Company reports gains on sales of investments, net separately from gains on loans and securities, net. The Company believes reporting these two items separately provides a clearer picture of the financial performance of the Company's operations than would a presentation that combined these two items. Gains on loans and securities, net are the result of activities in the Company’s operations, namely its balance sheet management segment. Gains on sales of investments, net relate to investments of the Company at the corporate level and are not related to the ongoing business of the Company’s operating subsidiaries. Gains on sales of investments, net are reported in the equity in income of investments and other line item on the consolidated statement of income (loss).

These consolidated financial statements should be read in conjunction with the Annual Report on Form 10-K for the year ended December 31, 2013.

Use of Estimates—The consolidated financial statements were prepared in accordance with GAAP, which requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and related notes for the periods presented. Actual results could differ from management’s estimates. Certain significant accounting policies are critical because they are based on estimates and assumptions that require complex and subjective judgments by management. Changes in these estimates or assumptions could materially impact the Company’s financial condition and results of operations. Material estimates in which management believes changes could reasonably occur include: allowance for loan losses; valuation of goodwill and other intangible assets; estimates of effective tax rates, deferred taxes and valuation allowance; classification and valuation of certain investments; accounting for derivative instruments; and fair value measurements.

Financial Statement Descriptions and Related Accounting Policies

Available-for-Sale Securities—Available-for-sale securities consist primarily of debt securities and also include equity securities. Securities classified as available-for-sale are carried at fair value, with the unrealized gains and losses reflected as a component of accumulated other comprehensive loss, net of tax. Realized and unrealized gains or losses on available-for-sale debt and equity securities are computed using the specific identification method. Interest earned on available-for-sale debt and equity securities is included in operating interest income. Amortization or accretion of premiums and discounts on available-for-sale debt securities are also recognized in operating interest income using the effective interest method over the contractual life of the security. Realized gains and losses on available-for-sale debt and equity securities, other than OTTI, are included in the gains on loans and securities, net line item. Available-for-sale securities that have an unrealized loss (impaired securities) are evaluated for OTTI at each balance sheet date.

Margin Receivables—The fair value of securities that the Company received as collateral in connection with margin receivables and securities borrowing activities, where the Company is permitted to sell or re-pledge the securities, was approximately $10.3 billion and $9.1 billion at June 30, 2014 and December 31, 2013, respectively. Of this amount, $2.8 billion and $1.9 billion had been pledged or sold in connection with securities loans, bank borrowings and deposits with clearing organizations as of June 30, 2014 and December 31, 2013, respectively.

Nonperforming Loans—The Company classifies loans as nonperforming when they are no longer accruing interest, which includes loans that are 90 days and greater past due, TDRs that are on nonaccrual status for all classes of loans and certain junior liens that have a delinquent senior lien. Interest previously accrued, but not collected, is reversed against current income when a loan is placed on nonaccrual status. Interest payments received on nonperforming loans are recognized on a cash basis in operating interest income until it is doubtful that full payment will be collected, at which point payments are applied to principal. The recognition of deferred fees or costs on originated loans and premiums or discounts on purchased loans in operating interest income is discontinued for nonperforming loans. Nonperforming loans, excluding TDRs and certain junior liens that have a delinquent senior lien, return to accrual status when the loan becomes less than 90 days past due. Loans modified as TDRs return to accrual status after six consecutive payments have been made in accordance with the modified terms. All bankruptcy loans remain on nonaccrual status regardless of the payment history.

Loan losses are recognized when, based on management's estimates, it is probable that a loss has been incurred. The Company’s charge-off policy for both one- to four-family and home equity loans is to assess the value of the property when the loan has been delinquent for 180 days or it is in bankruptcy, regardless of whether or not the property is in foreclosure, and charge-off the amount of the loan balance in excess of the estimated current value of the underlying property less estimated selling costs. TDR loan modifications are charged-off when certain characteristics of the loan, including CLTV, borrower’s credit and type of modification, cast substantial doubt on the borrower’s ability to repay the loan. Closed-end consumer loans are charged-off when the loan has been delinquent for 120 days or when it is determined that collection is not probable.

Other-than-temporary Impairment (“OTTI”)—The Company considers OTTI for an available-for-sale or held-to-maturity debt security to have occurred if one of the following conditions are met: the Company intends to sell the impaired debt security; it is more likely than not that the Company will be required to sell the impaired debt security before recovery of the security’s amortized cost basis; or the Company does not expect to recover the entire amortized cost basis of the security. The Company’s evaluation of whether it intends to sell an impaired debt security considers whether management has decided to sell the security as of the balance sheet date. The Company’s evaluation of whether it is more likely than not that the Company will be required to sell an impaired debt security before recovery of the security’s amortized cost basis considers the likelihood of sales that involve legal, regulatory or operational requirements. For impaired debt securities that the Company does not intend to sell and it is not more likely than not that the Company will be required to sell before recovery of the security’s amortized cost basis, the Company uses both qualitative and quantitative valuation measures to evaluate whether the Company expects to recover the entire amortized cost basis of the security. The Company considers all available information relevant to the collectability of the security, including credit enhancements, security structure, vintage, credit ratings and other relevant collateral characteristics.

If the Company intends to sell an impaired debt security or if it is more likely than not that the Company will be required to sell the impaired debt security before recovery of the security’s amortized cost basis, the Company will recognize OTTI in earnings equal to the entire difference between the security’s amortized cost basis and the security’s fair value. If the Company does not intend to sell the impaired debt security and it is not more likely than not that the Company will be required to sell the impaired debt security before recovery of its amortized cost basis but the Company does not expect to recover the entire amortized cost basis of the security, the Company will separate OTTI into two components: 1) the amount related to credit loss, recognized in earnings; and 2) the noncredit portion of OTTI, recognized through other comprehensive income (loss).

The Company considers OTTI for an available-for-sale equity security to have occurred if the decline in the security’s fair value below its cost basis is deemed other than temporary based on evaluation of both qualitative and quantitative valuation measures. If the impairment of an available-for-sale equity security is determined to be other-than-temporary, the Company will recognize OTTI in earnings equal to the entire difference between the security’s amortized cost basis and the security’s fair value. If the Company intends to sell an impaired equity security and the Company does not expect to recover the entire cost basis of the security prior to the sale, the Company will recognize OTTI in the period the decision to sell is made.

Real Estate Owned and Repossessed Assets—Real estate owned and repossessed assets are included in the other assets line item in the consolidated balance sheet. Real estate owned represents real estate acquired through foreclosure and also includes those properties acquired through a deed in lieu of foreclosure or similar legal agreement. Both real estate owned and the repossessed assets are carried at the lower of carrying value or fair value, less estimated selling costs.

New Accounting and Disclosure Guidance—Below is the new accounting and disclosure guidance that relates to activities in which the Company is engaged.

Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists

In July 2013, the FASB amended the presentation guidance on unrecognized tax benefits. The amended guidance requires an unrecognized tax benefit, or a portion of an unrecognized tax benefit, to be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except under certain circumstances. To the extent a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. The unrecognized tax benefit should also be presented in the financial statements as a liability if the tax law of the applicable jurisdiction does not require the Company to use, and the Company does not intend to use, the deferred tax asset to settle any additional income taxes. The amended presentation guidance became effective for annual and interim periods beginning on January 1, 2014 for the Company and was applied prospectively to unrecognized tax benefits existing at that date. The adoption of the amended presentation guidance did not have a material impact on the Company’s financial condition, results of operations or cash flows.

Accounting for Investments in Qualified Affordable Housing Projects

In January 2014, the FASB amended the accounting guidance for investments in qualified affordable housing projects. The amended accounting guidance permits reporting entities to make an accounting policy election to account for their investments in qualified affordable housing projects using the proportional amortization method if certain conditions are met. Under the proportional amortization method, the Company would amortize the initial cost of the investment in proportion to the tax credits and other tax benefits received and recognize the net investment performance in the consolidated statement of income (loss) as a component of income tax expense (benefit). The amended guidance will be effective for annual and interim periods beginning on January 1, 2015 for the Company and must be applied retrospectively. Early adoption is permitted. While the Company is currently evaluating the impact of the new accounting guidance, the adoption is not expected to have a material impact on the Company’s financial condition, results of operations or cash flows.

Reclassification of Residential Real Estate Collateralized Mortgage Loans upon Foreclosure

In January 2014, the FASB amended the accounting and disclosure guidance on reclassifications of residential real estate collateralized mortgage loans upon foreclosure. The amended guidance clarifies that an in substance repossession or foreclosure occurs, and a creditor is considered to have received physical possession of residential real estate property collateralizing a mortgage loan, upon either (1) the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure or (2) the borrower conveying all interest in the residential real estate property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement. The amended disclosure guidance requires interim and annual disclosure of both (1) the amount of foreclosed residential real estate property held by the creditor and (2) the recorded investment in mortgage loans collateralized by residential real estate property that are in the process of foreclosure. As early adoption was permitted, the Company early adopted the amended guidance as of January 1, 2014. The adoption of the amended accounting guidance did not have a material impact on the Company’s financial condition, results of operations or cash flows.

Presentation and Disclosure of Discontinued Operations

In April 2014, the FASB amended the presentation and disclosure guidance on disposal transactions. The amended guidance raises the threshold for a disposal to qualify as a discontinued operation and requires new disclosures of both discontinued operations and certain other disposals that do not meet the definition of a discontinued operation. The amended guidance will be effective for all disposals or classifications as held for sale that occur in annual and interim periods beginning on or after December 15, 2014. Early adoption is permitted but only for disposals that have not been reported in financial statements previously issued. The adoption is not expected to have a material impact on the Company’s current financial condition, results of operations or cash flows; however, it may impact the reporting of future disposals if and when they occur.

Revenue Recognition on Contracts with Customers

In May 2014, the FASB amended the guidance on revenue recognition on contracts with customers. The new standard outlines a single comprehensive model for entities to apply in accounting for revenue arising from contracts with customers. The amended guidance will be effective for annual and interim periods beginning on January 1, 2017 for the Company and may be applied on either a full retrospective or modified retrospective basis. Early adoption is not permitted. While the Company is currently evaluating the impact of the new accounting guidance, the adoption is not expected to have a material impact on the Company’s financial condition, results of operations or cash flows.

Accounting and Disclosures for Repurchase Agreements

In June 2014, the FASB amended the accounting and disclosure guidance on repurchase agreements. The amended guidance requires entities to account for repurchase-to-maturity transactions as secured borrowings, eliminates accounting guidance on linked repurchase financing transactions, and expands the disclosure requirements related to transfers of financial assets accounted for as sales and as secured borrowings. The amended guidance will be effective for annual and interim periods beginning on January 1, 2015 for the Company and must be applied using a cumulative-effect approach as of the beginning of the period of adoption. Early adoption is not permitted. While the Company is currently evaluating the impact of the new accounting guidance, the adoption is not expected to have a material impact on the Company’s financial condition, results of operations or cash flows.

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Accounting for Derivative Instruments and Hedging Activities (Details - Fair Value Hedge) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Derivative Instruments, Gain (Loss) [Line Items]
Fair Value Hedge, Hedging Instrument	$ (32)	$ 57	$ (74)	$ 73
Fair Value Hedge, Hedged Item	29	(55)	67	(71)
Fair Value Hedge, Hedge Ineffectiveness	(3)	2	(7)	2
Agency Debentures [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Fair Value Hedge, Hedging Instrument	(26)	29	(57)	45
Fair Value Hedge, Hedged Item	23	(27)	50	(43)
Fair Value Hedge, Hedge Ineffectiveness	(3)	2	(7)	2
Agency mortgage-backed securities [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Fair Value Hedge, Hedging Instrument	(6)	28	(17)	28
Fair Value Hedge, Hedged Item	6	(28)	17	(28)
Fair Value Hedge, Hedge Ineffectiveness	$ 0	$ 0	$ 0	$ 0

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Offsetting Assets and Liabilities (Details) (USD $) In Millions, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Offsetting Assets [Abstract]
Securities Borrowed, Gross	$ 420	$ 536
Securities Borrowed, Liability	0	0
Securities Borrowed	420	536
Securities Borrowed, Financial Instruments, Not Offset	(264)	(247)
Securities Borrowed, Collateral Received	(147)	(282)
Securities Borrowed, Amount Offset Against Collateral	9	7
Derivative Asset, Fair Value, Gross Asset	51	92
Derivative Asset, Fair Value, Gross Liability	0	0
Derivative Asset	51	92
Derivative Asset, Financial Instruments, Not Offset	(37)	(48)
Derivative Asset, Collateral Received	(5)	(12)
Derivative Asset, Fair Value, Amount Offset Against Collateral	9	32
Derivative Asset, Securities Borrowed, Gross	471	628
Derivative Asset, Securities Borrowed, Liability	0	0
Derivative Asset, Securities Borrowed	471	628
Derivative Asset, Securities Borrowed, Financial Instruments Not Offset	(301)	(295)
Derivative Asset, Securities Borrowed, Collateral Received	(152)	(294)
Derivative Asset, Securities Borrowed Net	18	39
Offsetting Liabilities [Abstract]
Securities Sold under Agreements to Repurchase, Gross	3,742	4,543
Securities Sold under Agreements to Repurchase, Asset	0	0
Securities sold under agreements to repurchase	3,742	4,543
Securities Sold under Agreements to Repurchase, Financial Instruments Not Offset	0	0
Securities Sold under Agreements to Repurchase, Collateral Pledged	(3,742)	(4,537)
Securities Sold under Agreements to Repurchase, Amount Offset Against Collateral	0	6
Securities Loaned, Gross	1,713	1,050
Securities Loaned, Asset	0	0
Securities Loaned	1,713	1,050
Securities Loaned, Financial Instruments, Not Offset	(264)	(247)
Securities Loaned, Collateral Pledged	(1,346)	(740)
Securities Loaned, Amount Offset Against Collateral	103	63
Derivative Liability, Fair Value, Gross Liability	144	168
Derivative Liability, Fair Value, Gross Asset	0	0
Derivative Liability	144	168
Derivative Liability, Financial Instruments, Not Offset	(36)	(48)
Derivative Liability, Collateral Pledged	(108)	(120)
Derivative Liability, Fair Value, Amount Offset Against Collateral	0	0
Derivative Liability, Securities Sold under Agreements to Resell, Securities Loaned, Gross	5,599	5,761
Derivative Liability, Securities Sold under Agreements to Resell, Securities Loaned, Asset	0	0
Derivative Liability, Securities Sold under Agreements to Resell, Securities Loaned	5,599	5,761
Derivative Liability, Securities Sold under Agreements to Resell, Securities Loaned, Financial Instruments Not Offset	(300)	(295)
Derivative Liability, Securities Sold under Agreements to Resell, Securities Loaned, Collateral Pledged	(5,196)	(5,397)
Derivative Liability, Securities Sold under Agreements to Resell, Securities Loaned, Amount Offset Against Collateral	103	69
Offsetting Footnotes [Abstract]
Interest Payable Excluded From Gross Amounts of Derivatives	17	19
Securities Borrowed, Transacted Through Clearing Company	256	415
Securities Loaned, Transacted Through Clearing Company	1,100	682
Derivative Asset, Not Subject to Master Netting Arrangement	1	15
Derivative Liability, Not Subject to Master Netting Arrangement	$ 16	$ 1

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Loans Receivable, Net (Tables)

6 Months Ended

Jun. 30, 2014

Loans and Leases Receivable Disclosure [Abstract]

Total Loans Receivable, Net [Table Text Block]

The following table represents the breakdown of the total recorded investment in loans receivable and allowance for loan losses by loans that have been collectively evaluated for impairment and those that have been individually evaluated for impairment at June 30, 2014 and December 31, 2013 (dollars in millions):

	Recorded Investment				Allowance for Loan Losses
	June 30, 2014		December 31, 2013		June 30, 2014		December 31, 2013
Loans collectively evaluated for impairment	$	6,512	$	7,163	$	325	$	329
Loans individually evaluated for impairment (TDRs)	545		1,413		76		124
Total	$	7,057	$	8,576	$	401	$	453

Loans receivable, net at June 30, 2014 and December 31, 2013 are summarized as follows (dollars in millions):

	June 30, 2014			December 31, 2013
One- to four-family	$	3,345		$	4,475
Home equity	3,153			3,454
Consumer and other	527			602
Total loans receivable	7,025			8,531
Unamortized premiums, net	32			45
Allowance for loan losses	(401		)	(453		)
Total loans receivable, net	$	6,656		$	8,123

Credit Quality Indicators for Loan Portfolio

The following tables show the distribution of the Company’s mortgage loan portfolios by credit quality indicator at June 30, 2014 and December 31, 2013 (dollars in millions):

	One- to Four-Family						Home Equity
Current LTV/CLTV(1)	June 30, 2014			December 31, 2013			June 30, 2014			December 31, 2013
<=80%	$	1,823		$	1,912		$	1,164		$	1,142
80%-100%	919			1,365			837			866
100%-120%	378			711			632			736
>120%	225			487			520			710
Total mortgage loans receivable	$	3,345		$	4,475		$	3,153		$	3,454
Average estimated current LTV/CLTV (2)	81		%	90		%	94		%	98		%
Average LTV/CLTV at loan origination (3)	71		%	72		%	80		%	80		%

(1) Current CLTV calculations for home equity loans are based on the maximum available line for home equity lines of credit and outstanding principal balance for home equity installment loans. Current property values are updated on a quarterly basis using the most recent property value data available to the Company. For properties in which the Company did not have an updated valuation, home price indices were utilized to estimate the current property value.

(2) The average estimated current LTV/CLTV ratio reflects the outstanding balance at the balance sheet date and the maximum available line for home equity lines of credit, divided by the estimated current value of the underlying property.

(3) Average LTV/CLTV at loan origination calculations are based on LTV/CLTV at time of purchase for one- to four-family purchased loans and undrawn balances for home equity loans.

	One- to Four-Family				Home Equity
Documentation Type	June 30, 2014		December 31, 2013		June 30, 2014		December 31, 2013
Full documentation	$	1,476	$	1,847	$	1,616	$	1,769
Low/no documentation	1,869		2,628		1,537		1,685
Total mortgage loans receivable	$	3,345	$	4,475	$	3,153	$	3,454

	One- to Four-Family				Home Equity
Current FICO (1)	June 30, 2014		December 31, 2013		June 30, 2014		December 31, 2013
>=720	$	1,924	$	2,252	$	1,679	$	1,811
719 - 700	317		436		313		343
699 - 680	263		366		261		293
679 - 660	215		296		215		245
659 - 620	262		404		286		310
<620	364		721		399		452
Total mortgage loans receivable	$	3,345	$	4,475	$	3,153	$	3,454

(1) FICO scores are updated on a quarterly basis; however, at June 30, 2014 and December 31, 2013, there were some loans for which the updated FICO scores were not available. The current FICO distribution at June 30, 2014 included the most recent FICO scores where available, otherwise the original FICO score was used, for approximately $76 million and $4 million of one- to four-family and home equity loans, respectively. The current FICO distribution at December 31, 2013 included original FICO scores for approximately $95 million and $10 million of one- to four-family and home equity loans, respectively.

Concentration of Credit Risk

The following table outlines when one- to four-family and home equity lines of credit convert to amortizing by percentage of the one- to four-family portfolio and home equity line of credit portfolios, respectively, at June 30, 2014:

Period of Conversion to Amortizing Loan	% of One- to Four-Family Portfolio	% of Home Equity Line of  Credit Portfolio
Already amortizing	58%	13%
Through December 31, 2014	1%	5%
Year ending December 31, 2015	4%	27%
Year ending December 31, 2016	16%	42%
Year ending December 31, 2017	21%	13%

Loans Delinquency

The following table shows total loans receivable by delinquency category at June 30, 2014 and December 31, 2013 (dollars in millions):

	Current		30-89 Days Delinquent		90-179 Days Delinquent		180+ Days Delinquent		Total
June 30, 2014
One- to four-family	$	3,085	$	88	$	27	$	145	$	3,345
Home equity	3,020		56		32		45		3,153
Consumer and other	515		11		1		—		527
Total loans receivable	$	6,620	$	155	$	60	$	190	$	7,025
December 31, 2013
One- to four-family	$	3,988	$	190	$	70	$	227	$	4,475
Home equity	3,309		69		36		40		3,454
Consumer and other	587		12		3		—		602
Total loans receivable	$	7,884	$	271	$	109	$	267	$	8,531

The following table shows the comparative data for nonaccrual loans (dollars in millions):

	June 30, 2014	December 31, 2013
One- to four-family	307	526
Home equity	185	164
Consumer and other	2	3
Total nonperforming loans receivable	494	693

Allowance for Loan Losses Rollforward

The following table provides a roll forward by loan portfolio of the allowance for loan losses for the three and six months endedJune 30, 2014 and 2013 (dollars in millions):

	Three Months Ended June 30, 2014
	One- to Four-Family			Home Equity			Consumer and Other			Total
Allowance for loan losses, beginning of period	$	52		$	327		$	24		$	403
Provision for loan losses	(8		)	21			(1		)	12
Charge-offs	—			(17		)	(4		)	(21		)
Recoveries	—			6			1			7
Charge-offs, net	—			(11		)	(3		)	(14		)
Allowance for loan losses, end of period	$	44		$	337		$	20		$	401
	Three Months Ended June 30, 2013
	One- to Four-Family			Home Equity			Consumer and Other			Total
Allowance for loan losses, beginning of period	$	161		$	263		$	31		$	455
Provision for loan losses	(8		)	53			1			46
Charge-offs	(11		)	(46		)	(7		)	(64		)
Recoveries	2			9			3			14
Charge-offs, net	(9		)	(37		)	(4		)	(50		)
Allowance for loan losses, end of period	$	144		$	279		$	28		$	451
	Six Months Ended June 30, 2014
	One- to Four-Family			Home Equity			Consumer and Other			Total
Allowance for loan losses, beginning of period	$	102		$	326		$	25		$	453
Provision for loan losses	(26		)	41			1			16
Charge-offs	(43		)	(41		)	(9		)	(93		)
Recoveries	11			11			3			25
Charge-offs, net	(32		)	(30		)	(6		)	(68		)
Allowance for loan losses, end of period	$	44		$	337		$	20		$	401

	Six Months Ended June 30, 2013
	One- to Four-Family			Home Equity			Consumer and Other			Total
Allowance for loan losses, beginning of period	$	184		$	257		$	40		$	481
Provision for loan losses	(24		)	108			5			89
Charge-offs	(30		)	(103		)	(24		)	(157		)
Recoveries	14			17			7			38
Charge-offs, net	(16		)	(86		)	(17		)	(119		)
Allowance for loan losses, end of period	$	144		$	279		$	28		$	451

Impaired Financing Receivables

The following table shows a summary of the Company’s recorded investment in TDRs that were on accrual and nonaccrual status, in addition to the recorded investment of TDRs at June 30, 2014 and December 31, 2013 (dollars in millions):

			Nonaccrual TDRs
	Accrual  TDRs(1)		Current(2)		30-89 Days Delinquent		90+ Days Delinquent		Recorded Investment in TDRs
June 30, 2014
One- to four-family	$	129	$	115	$	19	$	56	$	319
Home equity	129		55		15		27		226
Total	$	258	$	170	$	34	$	83	$	545
December 31, 2013
One- to four-family	$	774	$	127	$	102	$	169	$	1,172
Home equity	176		22		17		26		241
Total	$	950	$	149	$	119	$	195	$	1,413

(1) Represents loans modified as TDRs that are current and have made six or more consecutive payments.

(2) Represents loans modified as TDRs that are current but have not yet made six consecutive payments, bankruptcy loans and certain junior lien TDRs that have a delinquent senior lien.

The following table shows the average recorded investment and interest income recognized both on a cash and accrual basis for the Company’s TDRs during the three and six months endedJune 30, 2014 and 2013 (dollars in millions):

	Average Recorded Investment				Interest Income Recognized
	Three Months Ended June 30,				Three Months Ended June 30,
	2014		2013		2014		2013
One- to four-family	$	520	$	1,211	$	3	$	9
Home equity	229		266		5		5
Total	$	749	$	1,477	$	8	$	14
	Average Recorded Investment				Interest Income Recognized
	Six Months Ended June 30,				Six Months Ended June 30,
	2014		2013		2014		2013
One- to four-family	$	797	$	1,216	$	11	$	17
Home equity	233		272		9		10
Total	$	1,030	$	1,488	$	20	$	27

The following table shows detailed information related to the Company’s TDRs at June 30, 2014 and December 31, 2013 (dollars in millions):

	June 30, 2014						December 31, 2013
	Recorded Investment in TDRs		Specific Valuation Allowance		Net Investment in TDRs		Recorded Investment in TDRs		Specific Valuation Allowance		Net Investment in TDRs
With a recorded allowance:
One- to four-family	$	94	$	14	$	80	$	403	$	60	$	343
Home equity	$	126	$	62	$	64	$	140	$	64	$	76
Without a recorded allowance:(1)
One- to four-family	$	225	$	—	$	225	$	769	$	—	$	769
Home equity	$	100	$	—	$	100	$	101	$	—	$	101
Total:
One- to four-family	$	319	$	14	$	305	$	1,172	$	60	$	1,112
Home equity	$	226	$	62	$	164	$	241	$	64	$	177

(1) Represents loans where the discounted cash flow analysis or collateral value is equal to or exceeds the recorded investment in the loan.

Troubled Debt Restructurings - Modifications

The following table shows the recorded investment in modifications that experienced a payment default within 12 months after the modification for the three and six months endedJune 30, 2014 and 2013 (dollars in millions):

	Three Months Ended June 30,
	2014			2013
	Number of Loans	Recorded Investment		Number of Loans	Recorded Investment
One- to four-family(1)	3	$	1	22	$	10
Home equity(2)	13	1		13	—
Total	16	$	2	35	$	10
	Six Months Ended June 30,
	2014			2013
	Number of Loans	Recorded Investment		Number of Loans	Recorded Investment
One- to four-family(1)	21	$	8	75	$	29
Home equity(2)	21	1		36	1
Total	42	$	9	111	$	30

(1) For both the three and six months endedJune 30, 2014, $1 million of the recorded investment in one- to four-family loans that had a payment default in the trailing 12 months was classified as current, compared to $2 million and $9 million for the three and six months ended June 30, 2013, respectively.

(2) For both the three and six months endedJune 30, 2014, less than $1 million of the recorded investment in home equity loans that had a payment default in the trailing 12 months was classified as current, compared to less than $1 million for both the three and six months ended June 30, 2013, respectively.

The following tables provide the number of loans, post-modification balances immediately after being modified by major class, and the financial impact of modifications during the three and six months endedJune 30, 2014 and 2013 (dollars in millions):

	Three Months Ended June 30, 2014
		Interest Rate Reduction
	Number of Loans	Principal Forgiven		Principal Deferred		Re-age/ Extension/ Interest Capitalization		Other with Interest Rate Reduction		Other		Total
One- to four-family	4	$	—	$	—	$	1	$	—	$	—	$	1
Home equity	68	—		—		1		1		3		5
Total	72	$	—	$	—	$	2	$	1	$	3	$	6
	Three Months Ended June 30, 2013
		Interest Rate Reduction
	Number of Loans	Principal Forgiven		Principal Deferred		Re-age/ Extension/ Interest Capitalization		Other with Interest Rate Reduction		Other		Total
One- to four-family	83	$	4	$	2	$	22	$	1	$	3	$	32
Home equity	85	—		—		2		3		3		8
Total	168	$	4	$	2	$	24	$	4	$	6	$	40
	Six Months Ended June 30, 2014
		Interest Rate Reduction
	Number of Loans	Principal Forgiven		Principal Deferred		Re-age/Extension/ Interest Capitalization		Other with Interest Rate Reduction		Other		Total
One- to four-family	37	$	1	$	—	$	5	$	2	$	4	$	12
Home equity	114	—		—		3		2		4		9
Total	151	$	1	$	—	$	8	$	4	$	8	$	21

	Six Months Ended June 30, 2013
		Interest Rate Reduction
	Number of Loans	Principal Forgiven		Principal Deferred		Re-age/ Extension/ Interest Capitalization		Other with Interest Rate Reduction		Other		Total
One- to four-family	176	$	12	$	4	$	42	$	2	$	8	$	68
Home equity	151	—		—		3		6		4		13
Total	327	$	12	$	4	$	45	$	8	$	12	$	81

	Three Months Ended June 30,
	2014						2013
	Financial Impact						Financial Impact
	Principal Forgiven		Pre-Modification Weighted Average Interest Rate		Post-Modification Weighted Average Interest Rate		Principal Forgiven		Pre-Modification Weighted Average Interest Rate		Post-Modification Weighted Average Interest Rate
One- to four-family	$	—	4.1	%	2.9	%	$	1	5.3	%	2.3	%
Home equity	—		6.3	%	2.7	%	—		4.2	%	1.8	%
Total	$	—					$	1
	Six Months Ended June 30,
	2014						2013
	Financial Impact						Financial Impact
	Principal Forgiven		Pre-Modification Weighted Average Interest Rate		Post-Modification Weighted Average Interest Rate		Principal Forgiven		Pre-Modification Weighted Average Interest Rate		Post-Modification Weighted Average Interest Rate
One- to four-family	$	—	4.8	%	2.7	%	$	4	5.3	%	2.3	%
Home equity	—		5.3	%	2.4	%	—		4.3	%	1.6	%
Total	$	—					$	4

The following table shows the loans modified as TDRs by delinquency category at June 30, 2014 and December 31, 2013 (dollars in millions):

	Modifications Current		Modifications 30-89 Days Delinquent		Modifications 90-179 Days Delinquent		Modifications 180+ Days Delinquent		Recorded Investment in Modifications
June 30, 2014
One- to four-family	$	160	$	12	$	4	$	11	$	187
Home equity	151		12		5		9		177
Total	$	311	$	24	$	9	$	20	$	364
December 31, 2013
One- to four-family	$	817	$	92	$	39	$	88	$	1,036
Home equity	162		13		4		9		188
Total	$	979	$	105	$	43	$	97	$	1,224

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Available-for-Sale and Held-to-Maturity Securities (Tables)

6 Months Ended

Jun. 30, 2014

Investments, Debt and Equity Securities [Abstract]

Investments Securities

The amortized cost and fair value of available-for-sale and held-to-maturity securities at June 30, 2014 and December 31, 2013 are shown in the following tables (dollars in millions):

	Amortized Cost		Gross Unrealized / Unrecognized Gains		Gross Unrealized / Unrecognized Losses			Fair Value
June 30, 2014:
Available-for-sale securities:
Debt securities:
Agency residential mortgage-backed securities and CMOs	$	11,505	$	116	$	(160	)	$	11,461
Agency debentures	523		12		(18		)	517
Agency debt securities	771		25		(2		)	794
Municipal bonds	41		1		(1		)	41
Corporate bonds	5		—		(1		)	4
Total debt securities	12,845		154		(182		)	12,817
Publicly traded equity securities(1)	20		—		—			20
Total available-for-sale securities	$	12,865	$	154	$	(182	)	$	12,837
Held-to-maturity securities:
Agency residential mortgage-backed securities and CMOs	$	9,084	$	185	$	(60	)	$	9,209
Agency debentures	163		3		—			166
Agency debt securities	2,109		46		(12		)	2,143
Total held-to-maturity securities	$	11,356	$	234	$	(72	)	$	11,518
December 31, 2013:
Available-for-sale securities:
Debt securities:
Residential mortgage-backed securities:
Agency mortgage-backed securities and CMOs	$	12,505	$	66	$	(335	)	$	12,236
Non-agency CMOs	17		2		(5		)	14
Total residential mortgage-backed securities	12,522		68		(340		)	12,250
Agency debentures	520		—		(54		)	466
Agency debt securities	832		8		(9		)	831
Municipal bonds	42		—		(2		)	40
Corporate bonds	6		—		(1		)	5
Total debt securities	13,922		76		(406		)	13,592
Total available-for-sale securities	$	13,922	$	76	$	(406	)	$	13,592
Held-to-maturity securities:
Agency residential mortgage-backed securities and CMOs	$	8,359	$	99	$	(165	)	$	8,293
Agency debentures	164		4		—			168
Agency debt securities	1,658		13		(40		)	1,631
Total held-to-maturity securities	$	10,181	$	116	$	(205	)	$	10,092

(1) Publicly traded equity securities consisted of an investment in a mutual fund related to the Community Reinvestment Act.

Investments Classified by Contractual Maturity Date

The contractual maturities of all available-for-sale and held-to-maturity debt securities at June 30, 2014 are shown below (dollars in millions):

	Amortized Cost		Fair Value
Available-for-sale debt securities:
Due within one year	$	2	$	2
Due within one to five years	14		14
Due within five to ten years	994		1,003
Due after ten years	11,835		11,798
Total available-for-sale debt securities	$	12,845	$	12,817
Held-to-maturity debt securities:
Due within one to five years	$	969	$	1,005
Due within five to ten years	2,605		2,686
Due after ten years	7,782		7,827
Total held-to-maturity debt securities	$	11,356	$	11,518

Schedule of Unrealized Loss on Investments

The following tables show the fair value and unrealized or unrecognized losses on available-for-sale and held-to-maturity securities, aggregated by investment category, and the length of time that individual securities have been in a continuous unrealized or unrecognized loss position at June 30, 2014 and December 31, 2013 (dollars in millions):

	Less than 12 Months					12 Months or More					Total
	Fair Value		Unrealized / Unrecognized Losses			Fair Value		Unrealized / Unrecognized Losses			Fair Value		Unrealized / Unrecognized Losses
June 30, 2014:
Available-for-sale securities:
Debt securities:
Agency residential mortgage-backed securities and CMOs	$	305	$	(1	)	$	5,034	$	(159	)	$	5,339	$	(160	)
Agency debentures	—		—			339		(18		)	339		(18		)
Agency debt securities	—		—			169		(2		)	169		(2		)
Municipal bonds	—		—			18		(1		)	18		(1		)
Corporate bonds	—		—			4		(1		)	4		(1		)
Publicly traded equity securities	20		—			—		—			20		—
Total temporarily impaired available-for-sale securities	$	325	$	(1	)	$	5,564	$	(181	)	$	5,889	$	(182	)
Held-to-maturity securities:
Agency residential mortgage-backed securities and CMOs	$	165	$	(1	)	$	2,703	$	(59	)	$	2,868	$	(60	)
Agency debt securities	—		—			785		(12		)	785		(12		)
Total temporarily impaired held-to-maturity securities	$	165	$	(1	)	$	3,488	$	(71	)	$	3,653	$	(72	)
December 31, 2013:
Available-for-sale securities:
Debt securities:
Agency mortgage-backed securities and CMOs	$	6,422	$	(268	)	$	1,266	$	(67	)	$	7,688	$	(335	)
Non-agency CMOs	—		—			11		(5		)	11		(5		)
Agency debentures	466		(54		)	—		—			466		(54		)
Agency debt securities	384		(9		)	—		—			384		(9		)
Municipal bonds	27		(2		)	—		—			27		(2		)
Corporate bonds	—		—			5		(1		)	5		(1		)
Total temporarily impaired available-for-sale securities	$	7,299	$	(333	)	$	1,282	$	(73	)	$	8,581	$	(406	)
Held-to-maturity securities:
Agency residential mortgage-backed securities and CMOs	$	3,607	$	(121	)	$	891	$	(44	)	$	4,498	$	(165	)
Agency debt securities	1,153		(40		)	—		—			1,153		(40		)
Total temporarily impaired held-to-maturity securities	$	4,760	$	(161	)	$	891	$	(44	)	$	5,651	$	(205	)

Other than Temporary Impairment, Credit Losses Recognized in Earnings

The following table presents a roll forward for the three and six months ended June 30, 2014 and 2013 of the credit loss component on debt securities held by the Company that had a noncredit loss recognized in other comprehensive income (loss) and had a credit loss recognized in earnings (dollars in millions):

	Three Months Ended June 30,				Six Months Ended June 30,
	2014		2013		2014			2013
Credit loss balance, beginning of period	$	152	$	165	$	166		$	187
Additions:
Subsequent credit impairment	—		—		—			1
Debt securities sold	—		—		(14		)	(23		)
Credit loss balance, end of period (1)	$	152	$	165	$	152		$	165

(1) The credit loss balance at June 30, 2014 and 2013 included $123 million and $114 million, respectively, of credit losses associated with debt securities that have been factored to zero, but the Company still holds legal title to these securities until maturity or until they are sold.

Gains on Loans and Investments

The detailed components of the gains on loans and securities, net line item on the consolidated statement of income (loss) for the three and six months ended June 30, 2014 and 2013 are as follows (dollars in millions):

	Three Months Ended June 30,					Six Months Ended June 30,
	2014			2013		2014			2013
Gains on loans, net	$	7		$	—	$	7		$	—
Gains on securities, net:
Gains on available-for-sale securities	3			18		22			42
Losses on available-for-sale securities	—			—		—			(8		)
Hedge ineffectiveness	(3		)	3		(7		)	3
Gains on securities, net	—			21		15			37
Gains on loans and securities, net	$	7		$	21	$	22		$	37

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Loans Receivable, Net (Details - TDRs Specific Valuation Allowance) (USD $) In Millions, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Impaired Financing Receivable With And With No Related Allowance [Line Items]
Recorded Investment in TDRs	$ 545	$ 1,413
Financing Receivable, Allowance for Credit Losses, Individually Evaluated for Impairment	76	124
One- To Four-Family [Member]
Impaired Financing Receivable With And With No Related Allowance [Line Items]
Impaired Financing Receivable, With Related Allowance, Recorded Investment	94	403
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	225	769
Recorded Investment in TDRs	319	1,172
Impaired Financing Receivable, Related Allowance	14	60
Impaired Financing Receivable, with Related Allowance, Net Investment	80	343
Impaired Financing Receivable, with No Related Allowance, Net Investment	225	769
Impaired Financing Receivables, Net Investment, Total	305	1,112
Home Equity [Member]
Impaired Financing Receivable With And With No Related Allowance [Line Items]
Impaired Financing Receivable, With Related Allowance, Recorded Investment	126	140
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	100	101
Recorded Investment in TDRs	226	241
Impaired Financing Receivable, Related Allowance	62	64
Impaired Financing Receivable, with Related Allowance, Net Investment	64	76
Impaired Financing Receivable, with No Related Allowance, Net Investment	100	101
Impaired Financing Receivables, Net Investment, Total	$ 164	$ 177

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Available-for-Sale Securities (Details) (USD $) In Millions, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale securities, amortized cost	$ 12,865	$ 13,922
Available-for-sale securities, gross unrealized gains	154	76
Available-for-sale securities, gross unrealized losses	(182)	(406)
Available-for-sale securities, fair value	12,837	13,592
Debt Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale securities, amortized cost	12,845	13,922
Available-for-sale securities, gross unrealized gains	154	76
Available-for-sale securities, gross unrealized losses	(182)	(406)
Available-for-sale securities, fair value	12,817	13,592
Residential Mortgage Backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale securities, amortized cost		12,522
Available-for-sale securities, gross unrealized gains		68
Available-for-sale securities, gross unrealized losses		(340)
Available-for-sale securities, fair value		12,250
Non-agency CMOs [Member]
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale securities, amortized cost		17
Available-for-sale securities, gross unrealized gains		2
Available-for-sale securities, gross unrealized losses		(5)
Available-for-sale securities, fair value		14
Agency residential mortgage-backed securities and CMOs [Member]
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale securities, amortized cost	11,505	12,505
Available-for-sale securities, gross unrealized gains	116	66
Available-for-sale securities, gross unrealized losses	(160)	(335)
Available-for-sale securities, fair value	11,461	12,236
Agency Debentures [Member]
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale securities, amortized cost	523	520
Available-for-sale securities, gross unrealized gains	12
Available-for-sale securities, gross unrealized losses	(18)	(54)
Available-for-sale securities, fair value	517	466
Agency Debt Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale securities, amortized cost	771	832
Available-for-sale securities, gross unrealized gains	25	8
Available-for-sale securities, gross unrealized losses	(2)	(9)
Available-for-sale securities, fair value	794	831
Municipal Bonds [Member]
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale securities, amortized cost	41	42
Available-for-sale securities, gross unrealized gains	1
Available-for-sale securities, gross unrealized losses	(1)	(2)
Available-for-sale securities, fair value	41	40
Corporate Bonds [Member]
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale securities, amortized cost	5	6
Available-for-sale securities, gross unrealized losses	(1)	(1)
Available-for-sale securities, fair value	4	5
Equity Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale securities, amortized cost	20
Available-for-sale securities, gross unrealized gains	0
Available-for-sale securities, gross unrealized losses	0
Available-for-sale securities, fair value	$ 20

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Accounting for Derivative Instruments and Hedging Activities (Tables)

6 Months Ended

Jun. 30, 2014

Derivative Instruments and Hedging Activities Disclosures [Line Items]

Schedule of Fair Value Amounts of Derivatives Designated as Hedging Instruments

The following table summarizes the fair value amounts of derivatives designated as hedging instruments reported in the consolidated balance sheet at June 30, 2014 and December 31, 2013 (dollars in millions):

			Fair Value
	Notional		Asset(1)		Liability(2)			Net(3)
June 30, 2014
Interest rate contracts:
Cash flow hedges:
Pay-fixed rate swaps	$	2,025	$	7	$	(144	)	$	(137	)
Purchased options	1,075		19		—			19
Total cash flow hedges	3,100		26		(144		)	(118		)
Fair value hedges:
Pay-fixed rate swaps	1,292		26		(16		)	10
Total derivatives designated as hedging instruments(4)	$	4,392	$	52	$	(160	)	$	(108	)
December 31, 2013
Interest rate contracts:
Cash flow hedges:
Pay-fixed rate swaps	$	2,480	$	19	$	(168	)	$	(149	)
Purchased options	825		8		—			8
Total cash flow hedges	3,305		27		(168		)	(141		)
Fair value hedges:
Pay-fixed rate swaps	1,614		80		(1		)	79
Total derivatives designated as hedging instruments(4)	$	4,919	$	107	$	(169	)	$	(62	)

(1) Reflected in the other assets line item on the consolidated balance sheet.

(2) Reflected in the other liabilities line item on the consolidated balance sheet.

(3) Represents derivative assets net of derivative liabilities for disclosure purposes only.

(4) All derivatives were designated as hedging instruments at June 30, 2014 and December 31, 2013.

Cash Flow Hedging [Member]

Derivative Instruments and Hedging Activities Disclosures [Line Items]

Schedule of Cash Flow Hedges Included in Accumulated Other Comprehensive Income (Loss)

The following table summarizes the effect of interest rate contracts designated and qualifying as hedging instruments in cash flow hedges on accumulated other comprehensive loss and on the consolidated statement of income (loss) for the three and six months ended June 30, 2014 and 2013 (dollars in millions):

	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
Gains (losses) on derivatives recognized in OCI (effective portion), net of tax	$	(16	)	$	62		$	(32	)	$	68
Losses reclassified from AOCI into earnings (effective portion), net of tax	$	(20	)	$	(23	)	$	(41	)	$	(43	)
Cash flow hedge ineffectiveness gains (losses)(1)	$	—		$	1		$	—		$	1

(1) The cash flow hedge ineffectiveness is reflected in the gains on loans and securities, net line item on the consolidated statement of income (loss).

The following table shows the balance in accumulated other comprehensive loss attributable to cash flow hedges by type of hedged item at June 30, 2014 and December 31, 2013 (dollars in millions):

	June 30,   2014			December 31,   2013
Repurchase agreements	$	(373	)	$	(379	)
FHLB advances	(93		)	(99		)
Total balance of cash flow hedges, before tax	(466		)	(478		)
Tax benefit	177			180
Total balance of cash flow hedges, net of tax	$	(289	)	$	(298	)

The following table shows the balance in accumulated other comprehensive loss attributable to active and discontinued cash flow hedges at June 30, 2014 and December 31, 2013 (dollars in millions):

	June 30,   2014			December 31,   2013
Accumulated other comprehensive loss balance (net of tax) related to:
Discontinued cash flow hedges	$	(184	)	$	(201	)
Active cash flow hedges	(105		)	(97		)
Total cash flow hedges	$	(289	)	$	(298	)

Fair Value Hedging [Member]

Derivative Instruments and Hedging Activities Disclosures [Line Items]

Schedule of Effect of Derivatives designated as Fair Value Hedges and Related Hedged Items

The following table summarizes the effect of interest rate contracts designated and qualifying as hedging instruments in fair value hedges and related hedged items on the consolidated statement of income (loss) for the three and six months ended June 30, 2014 and 2013 (dollars in millions):

	Three Months Ended June 30,
	2014								2013
	Hedging Instrument			Hedged Item		Hedge Ineffectiveness(1)			Hedging Instrument		Hedged Item			Hedge Ineffectiveness(1)
Agency debentures	$	(26	)	$	23	$	(3	)	$	29	$	(27	)	$	2
Agency mortgage-backed securities	(6		)	6		—			28		(28		)	—
Total gains (losses) included in earnings	$	(32	)	$	29	$	(3	)	$	57	$	(55	)	$	2
	Six Months Ended June 30,
	2014								2013
	Hedging Instrument			Hedged Item		Hedge Ineffectiveness(1)			Hedging Instrument		Hedged Item			Hedge Ineffectiveness(1)
Agency debentures	$	(57	)	$	50	$	(7	)	$	45	$	(43	)	$	2
Agency mortgage-backed securities	(17		)	17		—			28		(28		)	—
Total gains (losses) included in earnings	$	(74	)	$	67	$	(7	)	$	73	$	(71	)	$	2

(1) Reflected in the gains on loans and securities, net line item on the consolidated statement of income (loss).

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Securities Sold Under Agreements to Repurchase and FHLB Advances and Other Borrowings (Tables)

6 Months Ended

Jun. 30, 2014

Securities Sold Under Agreements To Repurchase and FHLB Advances and Other Borrowings Disclosure [Abstract]

Schedule Of Maturities Summary Of Other Borrowings

Securities sold under agreements to repurchase, FHLB advances and other borrowings at June 30, 2014 and December 31, 2013 are shown in the following table (dollars in millions):

			FHLB Advances and Other Borrowings
	Repurchase Agreements(1)		FHLB Advances			Other		Total			Weighted Average Interest Rate
Due within one year	$	3,092	$	270		$	1	$	3,363		0.34%
Due between one and two years	250		—			2		252			0.52%
Due between two and three years	400		250			—		650			0.85%
Due between three and four years	—		400			—		400			0.40%
Thereafter	—		—			428		428			2.91%
Subtotal	3,742		920			431		5,093			0.64%
Fair value hedge adjustments	—		24			—		24
Deferred costs	—		(84		)	—		(84		)
Total other borrowings at June 30, 2014	$	3,742	$	860		$	431	$	5,033		0.64%
Total other borrowings at December 31, 2013	$	4,543	$	851		$	428	$	5,822		0.72%

(1) The maximum amount at any month end for repurchase agreements was $4.9 billion and $4.6 billion for six months endedJune 30, 2014 and the year ended December 31, 2013, respectively.

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CONSOLIDATED STATEMENT OF CASH FLOWS (USD $) In Millions, unless otherwise specified	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013
Cash flows from operating activities:
Net income (loss)	$ 166	$ (19)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Provision for loan losses	16	89
Depreciation and amortization (including discount amortization and accretion)	159	215
Net impairment and gains on loans and securities, net	(22)	(35)
Impairment of goodwill	0	142
Equity in income of investments and other	(2)	(5)
Share-based compensation	13	15
Deferred taxes	86	26
Other	(1)	1
Net effect of changes in assets and liabilities:
Increase in cash required to be segregated under federal or other regulations	(149)	(478)
Increase in margin receivables	(987)	(166)
Increase in customer payables	316	118
(Increase) decrease in other assets	(9)	265
Increase in other liabilities	714	101
Net cash provided by operating activities	300	269
Cash flows from investing activities:
Purchases of available-for-sale securities	(651)	(4,392)
Proceeds from sales, maturities of and principal payments on available-for-sale securities	1,743	4,298
Purchases of held-to-maturity securities	(1,669)	(1,532)
Proceeds from maturities of and principal payments on held-to-maturity securities	477	1,136
Proceeds from sale of loans	802
Net decrease in loans receivable	642	841
Capital expenditures for property and equipment	(30)	(23)
Proceeds from sale of G1 Execution Services, Inc.	76
Cash transferred on sale of G1 Execution Services, Inc.	(9)
Proceeds from sale of real estate owned and repossessed assets	20	40
Net cash flow from derivatives hedging assets	(6)	3
Other	5	(10)
Net cash provided by investing activities	1,400	361
Cash flows from financing activities:
Net decrease in deposits	(887)	(2,844)
Net (decrease) increase in securities sold under agreements to repurchase	(801)	144
Advances from FHLB	390	840
Payments on advances from FHLB	(390)	(490)
Net cash flow from derivatives hedging liabilities	(48)	(4)
Other	5	7
Net cash used in financing activities	(1,731)	(2,347)
Decrease in cash and equivalents	(31)	(1,717)
Cash and equivalents, beginning of period	1,838	2,762
Cash and equivalents, end of period	1,807	1,045
Supplemental Disclosures [Abstract]
Cash paid for interest	144	138
(Refund received) cash paid for income taxes	(2)	2
Non-cash investing and financing activities:
Transfers of loans held-for-investment to loans held-for-sale	795	41
Transfers from loans to other real estate owned and repossessed assets	29	29
Transfers from other real estate owned and repossessed assets to loans	16
Conversion of convertible debentures to common stock	1
Reclassification of market making business assets and liabilities to business held-for-sale		$ 79

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Accumulated Other Comprehensive Loss (Tables)

6 Months Ended

Jun. 30, 2014

Equity [Abstract]

Schedule of Accumulated Other Comprehensive Loss

The following tables present after-tax changes in each component of accumulated other comprehensive loss for the three and six months ended June 30, 2014 and 2013 (dollars in millions):

	Available-for-sale Securities			Cash Flow  Hedging Instruments			Foreign  Currency Translation		Total
Beginning balance, March 31, 2014	$	(91	)	$	(293	)	$	5	$	(379	)
Other comprehensive income (loss) before reclassifications	82			(16		)	—		66
Amounts reclassified from accumulated other comprehensive loss	(2		)	20			—		18
Net change	80			4			—		84
Ending balance, June 30, 2014	$	(11	)	$	(289	)	$	5	$	(295	)

	Available-for-sale Securities			Cash Flow Hedging Instruments			Foreign Currency Translation		Total
Beginning balance, March 31, 2013	$	122		$	(426	)	$	5	$	(299	)
Other comprehensive income (loss) before reclassifications	(215		)	62			—		(153		)
Amounts reclassified from accumulated other comprehensive loss	(11		)	23			—		12
Net change	(226		)	85			—		(141		)
Ending balance, June 30, 2013	$	(104	)	$	(341	)	$	5	$	(440	)

	Available-for-sale Securities			Cash Flow  Hedging Instruments			Foreign  Currency Translation		Total
Beginning balance, December 31, 2013	$	(160	)	$	(298	)	$	5	$	(453	)
Other comprehensive income (loss) before reclassifications	163			(32		)	—		131
Amounts reclassified from accumulated other comprehensive loss	(14		)	41			—		27
Net change	149			9			—		158
Ending balance, June 30, 2014	$	(11	)	$	(289	)	$	5	$	(295	)

	Available-for-sale Securities			Cash Flow Hedging Instruments			Foreign Currency Translation		Total
Beginning balance, December 31, 2012	$	137		$	(452	)	$	5	$	(310	)
Other comprehensive income (loss) before reclassifications	(220		)	68			—		(152		)
Amounts reclassified from accumulated other comprehensive loss	(21		)	43			—		22
Net change	(241		)	111			—		(130		)
Ending balance, June 30, 2013	$	(104	)	$	(341	)	$	5	$	(440	)

Reclassification out of Accumulated Other Comprehensive Loss

The following table presents the income statement line items impacted by reclassifications out of accumulated other comprehensive loss for the three and six months ended June 30, 2014 and 2013 (dollars in millions):

Accumulated Other Comprehensive Loss Components	Amount Reclassified from Accumulated Other Comprehensive Loss												Affected Line Items in the Consolidated Statement of Income
	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
Available-for-sale securities:
	$	3		$	18		$	22		$	34		Gains on loans and securities, net
	(1		)	(7		)	(8		)	(13		)	Tax expense
	$	2		$	11		$	14		$	21		Reclassification into earnings, net
Cash flow hedging instruments:
	$	—		$	3		$	—		$	5		Operating interest income
	(32		)	(37		)	(67		)	(72		)	Operating interest expense
	(32		)	(34		)	(67		)	(67		)	Reclassification into earnings, before tax
	12			11			26			24			Tax expense
	$	(20	)	$	(23	)	$	(41	)	$	(43	)	Reclassification into earnings, net

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Fair Value Disclosures (Details - Recurring and Nonrecurring) (USD $)	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013	Dec. 31, 2013	Dec. 31, 2012
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Available-for-sale securities	$ 12,837,000,000		$ 12,837,000,000		$ 13,592,000,000
Held-for-sale assets - trading securities	0		0		105,000,000
Held-for-sale liabilities - securities sold, not yet purchased	0		0
Assets measured at fair value on recurring basis percentage of total assets	28.00%		28.00%		30.00%
Liabilities measured at fair value on recurring basis percentage of total liabilities					1.00%
Liabilities measured at fair value level 3 recurring percentage of total liabilities					0.00%
Gains Losses On Nonrecurring Fair Value Measurements [Abstract]
Losses on goodwill measured at fair value	0	142,000,000	0	142,000,000	142,000,000
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis (Textuals) [Abstract]
Held-for-sale assets - trading securities	0		0		105,000,000
Held-for-sale liabilities - securities sold, not yet purchased	0		0
Goodwill allocated to the market making reporting unit					0	142,000,000
Fair Value, Transfers Between Level 1 and Level 2, Description and Policy (Textuals) [Abstract]
Fair value, assets, Level 1 to Level 2 transfers, amount	0	0	0	0
Fair value, assets, Level 2 to Level 1 transfers, amount	0	0	0	0
Fair value, liabilities, Level 1 to Level 2 transfers, amount	0	0	0	0
Fair value, liabilities, Level 2 to Level 1 transfers, amount	0	0	0	0
Less than [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Liabilities measured at fair value on recurring basis percentage of total liabilities	1.00%		1.00%
Assets measured at fair value level 3 recurring percentage of total assets					1.00%
Fair Value, Measurements, Recurring [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Available-for-sale securities	12,837,000,000		12,837,000,000		13,592,000,000
Derivative assets	52,000,000		52,000,000		107,000,000
Deposits with clearing organizations	91,000,000		91,000,000		53,000,000
Held-for-sale assets - trading securities					105,000,000
Total other assets measured at fair value on a recurring basis	143,000,000		143,000,000		265,000,000
Total assets measured at fair value on a recurring basis	12,980,000,000		12,980,000,000		13,857,000,000
Derivative liabilities	160,000,000		160,000,000		169,000,000
Held-for-sale liabilities - securities sold, not yet purchased					95,000,000
Total liabilities measured at fair value on a recurring basis	160,000,000		160,000,000		264,000,000
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis (Textuals) [Abstract]
Held-for-sale assets - trading securities					105,000,000
Held-for-sale liabilities - securities sold, not yet purchased					95,000,000
Fair Value, Measurements, Nonrecurring [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total loans receivable	54,000,000		54,000,000		292,000,000
REO	32,000,000		32,000,000		47,000,000
Total Assets Measured at Fair Value On A Nonrecurring Basis	86,000,000		86,000,000		339,000,000
Level 1 [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Available-for-sale securities	20,000,000		20,000,000
Deposits with clearing organizations	91,000,000		91,000,000		53,000,000
Held-for-sale assets - trading securities					104,000,000
Total other assets measured at fair value on a recurring basis	91,000,000		91,000,000		157,000,000
Total assets measured at fair value on a recurring basis	111,000,000		111,000,000		157,000,000
Held-for-sale liabilities - securities sold, not yet purchased					94,000,000
Total liabilities measured at fair value on a recurring basis					94,000,000
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis (Textuals) [Abstract]
Held-for-sale assets - trading securities					104,000,000
Held-for-sale liabilities - securities sold, not yet purchased					94,000,000
Level 2 [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Available-for-sale securities	12,817,000,000		12,817,000,000		13,578,000,000
Derivative assets	52,000,000		52,000,000		107,000,000
Held-for-sale assets - trading securities					1,000,000
Total other assets measured at fair value on a recurring basis	52,000,000		52,000,000		108,000,000
Total assets measured at fair value on a recurring basis	12,869,000,000		12,869,000,000		13,686,000,000
Derivative liabilities	160,000,000		160,000,000		169,000,000
Held-for-sale liabilities - securities sold, not yet purchased					1,000,000
Total liabilities measured at fair value on a recurring basis	160,000,000		160,000,000		170,000,000
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis (Textuals) [Abstract]
Held-for-sale assets - trading securities					1,000,000
Held-for-sale liabilities - securities sold, not yet purchased					1,000,000
Level 3 [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Available-for-sale securities					14,000,000
Total assets measured at fair value on a recurring basis					14,000,000
Level 3 [Member] | Fair Value, Measurements, Nonrecurring [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total loans receivable	54,000,000		54,000,000		292,000,000
REO	32,000,000		32,000,000		47,000,000
Total Assets Measured at Fair Value On A Nonrecurring Basis	86,000,000		86,000,000		339,000,000
Loans Receivable [Member]
Gains Losses On Nonrecurring Fair Value Measurements [Abstract]
(Gains) losses measured at fair value	10,000,000	25,000,000	27,000,000	60,000,000
Real Estate Owned [Member]
Gains Losses On Nonrecurring Fair Value Measurements [Abstract]
(Gains) losses measured at fair value	0	1,000,000	(1,000,000)	2,000,000
One- To Four-Family [Member] | Loans Receivable [Member]
Gains Losses On Nonrecurring Fair Value Measurements [Abstract]
(Gains) losses measured at fair value	2,000,000	8,000,000	7,000,000	24,000,000
One- To Four-Family [Member] | Loans Receivable [Member] | Fair Value, Measurements, Nonrecurring [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total loans receivable	35,000,000		35,000,000		246,000,000
One- To Four-Family [Member] | Loans Receivable [Member] | Level 3 [Member] | Fair Value, Measurements, Nonrecurring [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total loans receivable	35,000,000		35,000,000		246,000,000
Home Equity [Member] | Loans Receivable [Member]
Gains Losses On Nonrecurring Fair Value Measurements [Abstract]
(Gains) losses measured at fair value	8,000,000	17,000,000	20,000,000	36,000,000
Home Equity [Member] | Loans Receivable [Member] | Fair Value, Measurements, Nonrecurring [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total loans receivable	19,000,000		19,000,000		46,000,000
Home Equity [Member] | Loans Receivable [Member] | Level 3 [Member] | Fair Value, Measurements, Nonrecurring [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total loans receivable	19,000,000		19,000,000		46,000,000
Debt Securities [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Available-for-sale securities	12,817,000,000		12,817,000,000		13,592,000,000
Debt Securities [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Available-for-sale securities	12,817,000,000		12,817,000,000		13,592,000,000
Debt Securities [Member] | Level 2 [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Available-for-sale securities	12,817,000,000		12,817,000,000		13,578,000,000
Residential Mortgage Backed Securities [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Available-for-sale securities					12,250,000,000
Residential Mortgage Backed Securities [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Available-for-sale securities					12,250,000,000
Residential Mortgage Backed Securities [Member] | Level 2 [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Available-for-sale securities					12,236,000,000
Residential Mortgage Backed Securities [Member] | Level 3 [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Available-for-sale securities					14,000,000
Agency residential mortgage-backed securities and CMOs [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Available-for-sale securities	11,461,000,000		11,461,000,000		12,236,000,000
Agency residential mortgage-backed securities and CMOs [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Available-for-sale securities	11,461,000,000		11,461,000,000		12,236,000,000
Agency residential mortgage-backed securities and CMOs [Member] | Level 2 [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Available-for-sale securities	11,461,000,000		11,461,000,000		12,236,000,000
Non-agency CMOs [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Available-for-sale securities					14,000,000
Non-agency CMOs [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Available-for-sale securities					14,000,000
Non-agency CMOs [Member] | Level 3 [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Available-for-sale securities					14,000,000
Agency Debentures [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Available-for-sale securities	517,000,000		517,000,000		466,000,000
Agency Debentures [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Available-for-sale securities	517,000,000		517,000,000		466,000,000
Agency Debentures [Member] | Level 2 [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Available-for-sale securities	517,000,000		517,000,000		466,000,000
Agency Debt Securities [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Available-for-sale securities	794,000,000		794,000,000		831,000,000
Agency Debt Securities [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Available-for-sale securities	794,000,000		794,000,000		831,000,000
Agency Debt Securities [Member] | Level 2 [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Available-for-sale securities	794,000,000		794,000,000		831,000,000
Municipal Bonds [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Available-for-sale securities	41,000,000		41,000,000		40,000,000
Municipal Bonds [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Available-for-sale securities	41,000,000		41,000,000		40,000,000
Municipal Bonds [Member] | Level 2 [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Available-for-sale securities	41,000,000		41,000,000		40,000,000
Corporate Bonds [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Available-for-sale securities	4,000,000		4,000,000		5,000,000
Corporate Bonds [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Available-for-sale securities	4,000,000		4,000,000		5,000,000
Corporate Bonds [Member] | Level 2 [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Available-for-sale securities	4,000,000		4,000,000		5,000,000
Equity Securities [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Available-for-sale securities	20,000,000		20,000,000
Equity Securities [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Available-for-sale securities	20,000,000		20,000,000
Equity Securities [Member] | Level 1 [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Available-for-sale securities	$ 20,000,000		$ 20,000,000

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Loans Receivable, Net (Details - Allowance) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014 Orignator	Jun. 30, 2013	Jun. 30, 2014 Orignator	Jun. 30, 2013	Dec. 31, 2013
Financing Receivables, Allowance for Credit Losses [Line Items]
Allowance for loan losses, beginning of period	$ 403	$ 455	$ 453	$ 481
Provision for loan losses	12	46	16	89
Charge-offs	(21)	(64)	(93)	(157)
Recoveries	7	14	25	38
Charge-offs, net	(14)	(50)	(68)	(119)
Allowance for loan losses, end of period	401	451	401	451
Charge-Offs, Loans Transferred to Held-For-Sale and Subsequently Sold			42
Allowance For Credit Losses, Qualitative Component	74		74		62
Third Party Mortgage Originators Repurchase Settlement, Count	2		2
Repurchase Settlements			11	13
One- To Four-Family [Member]
Financing Receivables, Allowance for Credit Losses [Line Items]
Allowance for loan losses, beginning of period	52	161	102	184
Provision for loan losses	(8)	(8)	(26)	(24)
Charge-offs	0	(11)	(43)	(30)
Recoveries	0	2	11	14
Charge-offs, net	0	(9)	(32)	(16)
Allowance for loan losses, end of period	44	144	44	144
Home Equity [Member]
Financing Receivables, Allowance for Credit Losses [Line Items]
Allowance for loan losses, beginning of period	327	263	326	257
Provision for loan losses	21	53	41	108
Charge-offs	(17)	(46)	(41)	(103)
Recoveries	6	9	11	17
Charge-offs, net	(11)	(37)	(30)	(86)
Allowance for loan losses, end of period	337	279	337	279
Consumer And Other [Member]
Financing Receivables, Allowance for Credit Losses [Line Items]
Allowance for loan losses, beginning of period	24	31	25	40
Provision for loan losses	(1)	1	1	5
Charge-offs	(4)	(7)	(9)	(24)
Recoveries	1	3	3	7
Charge-offs, net	(3)	(4)	(6)	(17)
Allowance for loan losses, end of period	$ 20	$ 28	$ 20	$ 28

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CONSOLIDATED STATEMENT OF INCOME (LOSS) (USD $) In Millions, except Share data in Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Revenue:
Operating interest income	$ 322	$ 302	$ 644	$ 602
Operating interest expense	(52)	(59)	(108)	(118)
Net operating interest income	270	243	536	484
Commissions	105	106	233	207
Fees and service charges	46	41	93	73
Principal transactions	0	21	10	43
Gains on loans and securities, net	7	21	22	37
Other-than-temporary impairment (OTTI)	0	0	0	(1)
Less: noncredit portion of OTTI recognized into (out of) other comprehensive income (loss) (before tax)	0	(1)	0	(1)
Net impairment	0	(1)	0	(2)
Other revenues	10	9	19	18
Total non-interest income	168	197	377	376
Total net revenue	438	440	913	860
Provision for loan losses	12	46	16	89
Operating expense:
Compensation and benefits	99	86	197	182
Advertising and market development	33	23	67	60
Clearing and servicing	23	31	51	63
FDIC insurance premiums	19	25	43	54
Professional services	28	19	52	36
Occupancy and equipment	19	18	37	36
Communications	18	19	36	37
Depreciation and amortization	20	23	41	46
Amortization of other intangibles	6	6	11	12
Impairment of goodwill	0	142	0	142
Facility restructuring and other exit activities	1	10	4	17
Other operating expenses	18	12	35	24
Total operating expense	284	414	574	709
Income (loss) before other income (expense) and income tax expense	142	(20)	323	62
Other income (expense):
Corporate interest expense	(29)	(28)	(57)	(57)
Losses on early extinguishment of debt	0	0	(12)	0
Equity in income of investments and other	(1)	1	2	5
Total other income (expense)	(30)	(27)	(67)	(52)
Income (loss) before income tax expense	112	(47)	256	10
Income tax expense	43	7	90	29
Net income (loss)	$ 69	$ (54)	$ 166	$ (19)
Basic earnings (loss) per share (in dollars per share)	$ 0.24	$ (0.19)	$ 0.57	$ (0.07)
Diluted earnings (loss) per share (in dollars per share)	$ 0.24	$ (0.19)	$ 0.56	$ (0.07)
Shares used in computation of per share data:
Basic (in thousands)	288,705	286,903	288,380	286,765
Diluted (in thousands)	293,826	286,903	293,813	286,765

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Held-to-Maturity Securities (Details) (USD $) In Millions, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Schedule of Held-to-maturity Securities [Line Items]
Held-to-maturity securities, amortized cost	$ 11,356	$ 10,181
Held-to-maturity securities, gross unrecognized gains	234	116
Held-to-maturity securities, gross unrecognized losses	(72)	(205)
Held-to-maturity securities, fair value	11,518	10,092
Agency residential mortgage-backed securities and CMOs [Member]
Schedule of Held-to-maturity Securities [Line Items]
Held-to-maturity securities, amortized cost	9,084	8,359
Held-to-maturity securities, gross unrecognized gains	185	99
Held-to-maturity securities, gross unrecognized losses	(60)	(165)
Held-to-maturity securities, fair value	9,209	8,293
Agency Debentures [Member]
Schedule of Held-to-maturity Securities [Line Items]
Held-to-maturity securities, amortized cost	163	164
Held-to-maturity securities, gross unrecognized gains	3	4
Held-to-maturity securities, fair value	166	168
Agency Debt Securities [Member]
Schedule of Held-to-maturity Securities [Line Items]
Held-to-maturity securities, amortized cost	2,109	1,658
Held-to-maturity securities, gross unrecognized gains	46	13
Held-to-maturity securities, gross unrecognized losses	(12)	(40)
Held-to-maturity securities, fair value	$ 2,143	$ 1,631

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CONSOLIDATED BALANCE SHEET (Parentheticals) (USD $) In Millions, except Share data, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
ASSETS
Held-to-maturity Securities, Fair Value	$ 11,518	$ 10,092
Allowance for loan losses	$ 401	$ 453
Shareholders’ equity:
Common stock par value	$ 0.01	$ 0.01
Common stock shares authorized (in shares)	400,000,000	400,000,000
Common stock shares issued (in shares)	288,687,146	287,357,001
Common stock shares outstanding (in shares)	288,687,146	287,357,001

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Loans Receivable, Net (Details - Modifications) (USD $) In Millions, unless otherwise specified	3 Months Ended	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2014	Dec. 31, 2013
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructurings - Modifications, Current	$ 311	$ 311	$ 979
Troubled Debt Restructurings - Modifications, 30-89 Days Delinquent	24	24	105
Troubled Debt Restructurings - Modifications, 90-179 Days Delinquent	9	9	43
Troubled Debt Restructurings - Modifications, 180+ Days Delinquent	20	20	97
Total Recorded Investment in Troubled Debt Restructurings - Modifications	364	364	1,224
Proceeds from sale of loans	800	802
One- To Four-Family [Member]
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructurings - Modifications, Current	160	160	817
Troubled Debt Restructurings - Modifications, 30-89 Days Delinquent	12	12	92
Troubled Debt Restructurings - Modifications, 90-179 Days Delinquent	4	4	39
Troubled Debt Restructurings - Modifications, 180+ Days Delinquent	11	11	88
Total Recorded Investment in Troubled Debt Restructurings - Modifications	187	187	1,036
Home Equity [Member]
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructurings - Modifications, Current	151	151	162
Troubled Debt Restructurings - Modifications, 30-89 Days Delinquent	12	12	13
Troubled Debt Restructurings - Modifications, 90-179 Days Delinquent	5	5	4
Troubled Debt Restructurings - Modifications, 180+ Days Delinquent	9	9	9
Total Recorded Investment in Troubled Debt Restructurings - Modifications	$ 177	$ 177	$ 188

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Segment Information (Tables)

6 Months Ended

Jun. 30, 2014

Segment Reporting [Abstract]

Schedule of Segment Reporting Information, by Segment

Financial information for the Company’s reportable segments is presented in the following tables (dollars in millions):

	Three Months Ended June 30, 2014
	Trading and Investing		Balance Sheet Management		Corporate/ Other			Total
Net operating interest income	$	151	$	119	$	—		$	270
Total non-interest income	158		10		—			168
Total net revenue	309		129		—			438
Provision for loan losses	—		12		—			12
Total operating expense	196		36		52			284
Income (loss) before other income (expense) and income taxes	113		81		(52		)	142
Total other income (expense)	—		—		(30		)	(30		)
Income (loss) before income taxes	$	113	$	81	$	(82	)	$	112
Income tax expense								43
Net income								$	69

	Three Months Ended June 30, 2013
	Trading and Investing			Balance Sheet Management		Corporate/ Other			Total
Net operating interest income	$	133		$	110	$	—		$	243
Total non-interest income	175			22		—			197
Total net revenue	308			132		—			440
Provision for loan losses	—			46		—			46
Total operating expense	318			42		54			414
Income (loss) before other income (expense) and income taxes	(10		)	44		(54		)	(20		)
Total other income (expense)	—			—		(27		)	(27		)
Income (loss) before income taxes	$	(10	)	$	44	$	(81	)	(47		)
Income tax expense									7
Net loss									$	(54	)

	Six Months Ended June 30, 2014
	Trading and Investing		Balance Sheet Management		Corporate/ Other			Total
Net operating interest income	$	294	$	242	$	—		$	536
Total non-interest income	351		26		—			377
Total net revenue	645		268		—			913
Provision for loan losses	—		16		—			16
Total operating expense	391		77		106			574
Income (loss) before other income (expense) and income taxes	254		175		(106		)	323
Total other income (expense)	—		—		(67		)	(67		)
Income (loss) before income taxes	$	254	$	175	$	(173	)	256
Income tax expense								90
Net income								$	166

	Six Months Ended June 30, 2013
	Trading and Investing		Balance Sheet Management		Corporate/ Other			Total
Net operating interest income	$	267	$	217	$	—		$	484
Total non-interest income	338		38		—			376
Total net revenue	605		255		—			860
Provision for loan losses	—		89		—			89
Total operating expense	517		92		100			709
Income (loss) before other income (expense) and income taxes	88		74		(100		)	62
Total other income (expense)	—		—		(52		)	(52		)
Income (loss) before income taxes	$	88	$	74	$	(152	)	10
Income tax expense								29
Net loss								$	(19	)

Reconciliation of Assets from Segment to Consolidated

Segment Assets

	Trading and Investing		Balance Sheet Management		Corporate/ Other		Total
As of June 30, 2014	$	11,776	$	33,186	$	786	$	45,748
As of December 31, 2013	$	10,820	$	34,784	$	676	$	46,280

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Accumulated Other Comprehensive Loss (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning balance,	$ (379)	$ (299)	$ (453)	$ (310)
Other comprehensive income (loss), before reclassifications	66	(153)	131	(152)
Amounts reclassified from accumulated other comprehensive loss	18	12	27	22
Net change	84	(141)	158	(130)
Ending balance,	(295)	(440)	(295)	(440)
Available-for-sale Securities [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning balance,	(91)	122	(160)	137
Other comprehensive income (loss), before reclassifications	82	(215)	163	(220)
Amounts reclassified from accumulated other comprehensive loss	(2)	(11)	(14)	(21)
Net change	80	(226)	149	(241)
Ending balance,	(11)	(104)	(11)	(104)
Cash Flow Hedging Instruments [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning balance,	(293)	(426)	(298)	(452)
Other comprehensive income (loss), before reclassifications	(16)	62	(32)	68
Amounts reclassified from accumulated other comprehensive loss	20	23	41	43
Net change	4	85	9	111
Ending balance,	(289)	(341)	(289)	(341)
Foreign Currency Translation [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning balance,	5	5	5	5
Other comprehensive income (loss), before reclassifications	0	0	0	0
Amounts reclassified from accumulated other comprehensive loss	0	0	0	0
Net change	0	0	0	0
Ending balance,	$ 5	$ 5	$ 5	$ 5

XML

Segment Information

6 Months Ended

Jun. 30, 2014

Segment Reporting [Abstract]

SEGMENT INFORMATION

SEGMENT INFORMATION

The Company reports its operating results in two segments, based on the manner in which its chief operating decision maker evaluates financial performance and makes resource allocation decisions: 1) trading and investing; and 2) balance sheet management. Trading and investing includes retail brokerage products and services; investor-focused banking products; and corporate services. Balance sheet management includes the management of asset allocation; loans previously originated by the Company or purchased from third parties; deposits and customer payables; and credit, liquidity and interest rate risk. The balance sheet management segment utilizes deposits and customer payables and compensates the trading and investing segment via a market-based transfer pricing arrangement, which is eliminated in consolidation.

The Company does not allocate costs associated with certain functions that are centrally-managed to its operating segments. These costs are separately reported in a corporate/other category, along with technology related costs incurred to support centrally-managed functions; restructuring and other exit activities; and corporate debt and corporate investments.

The Company evaluates the performance of its segments based on the segment’s income (loss) before income taxes. Financial information for the Company’s reportable segments is presented in the following tables (dollars in millions):

	Three Months Ended June 30, 2014
	Trading and Investing		Balance Sheet Management		Corporate/ Other			Total
Net operating interest income	$	151	$	119	$	—		$	270
Total non-interest income	158		10		—			168
Total net revenue	309		129		—			438
Provision for loan losses	—		12		—			12
Total operating expense	196		36		52			284
Income (loss) before other income (expense) and income taxes	113		81		(52		)	142
Total other income (expense)	—		—		(30		)	(30		)
Income (loss) before income taxes	$	113	$	81	$	(82	)	$	112
Income tax expense								43
Net income								$	69

	Three Months Ended June 30, 2013
	Trading and Investing			Balance Sheet Management		Corporate/ Other			Total
Net operating interest income	$	133		$	110	$	—		$	243
Total non-interest income	175			22		—			197
Total net revenue	308			132		—			440
Provision for loan losses	—			46		—			46
Total operating expense	318			42		54			414
Income (loss) before other income (expense) and income taxes	(10		)	44		(54		)	(20		)
Total other income (expense)	—			—		(27		)	(27		)
Income (loss) before income taxes	$	(10	)	$	44	$	(81	)	(47		)
Income tax expense									7
Net loss									$	(54	)

	Six Months Ended June 30, 2014
	Trading and Investing		Balance Sheet Management		Corporate/ Other			Total
Net operating interest income	$	294	$	242	$	—		$	536
Total non-interest income	351		26		—			377
Total net revenue	645		268		—			913
Provision for loan losses	—		16		—			16
Total operating expense	391		77		106			574
Income (loss) before other income (expense) and income taxes	254		175		(106		)	323
Total other income (expense)	—		—		(67		)	(67		)
Income (loss) before income taxes	$	254	$	175	$	(173	)	256
Income tax expense								90
Net income								$	166

	Six Months Ended June 30, 2013
	Trading and Investing		Balance Sheet Management		Corporate/ Other			Total
Net operating interest income	$	267	$	217	$	—		$	484
Total non-interest income	338		38		—			376
Total net revenue	605		255		—			860
Provision for loan losses	—		89		—			89
Total operating expense	517		92		100			709
Income (loss) before other income (expense) and income taxes	88		74		(100		)	62
Total other income (expense)	—		—		(52		)	(52		)
Income (loss) before income taxes	$	88	$	74	$	(152	)	10
Income tax expense								29
Net loss								$	(19	)

Segment Assets

	Trading and Investing		Balance Sheet Management		Corporate/ Other		Total
As of June 30, 2014	$	11,776	$	33,186	$	786	$	45,748
As of December 31, 2013	$	10,820	$	34,784	$	676	$	46,280

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Organization, Basis of Presentation and Summary of Significant Accounting Policies (Details) (USD $)	0 Months Ended	6 Months Ended
	Feb. 10, 2014	Jun. 30, 2014	Dec. 31, 2013
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Proceeds from sale of G1 Execution Services, Inc.	$ 76,000,000	$ 76,000,000
Basis Of Presentation Detail [Abstract]
Equity Method Investment Ownership Percentage Low End		20.00%
Cost Method Investment Ownership Percentage High End		20.00%
Receivables [Abstract]
Margin Receivables Securities Pledged as Collateral		10,300,000,000	9,100,000,000
Margin Receivables Securities Pledged To Clearing Organizations		$ 2,800,000,000	$ 1,900,000,000
Nonperforming Loans [Abstract]
Period past due real estate secured loans place on nonaccrual status and classified as nonperforming		90 days
Period nonperforming loans return to accrual status, less than		90 days
Number of consecutive payments for modified loans to be performing		6
Delinquent period real estate secured loans are charged off		180 days
Delinquent period consumer loans are charged off		120 days

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Disposition (Tables)

6 Months Ended

Jun. 30, 2014

Discontinued Operations and Disposal Groups [Abstract]

Schedule of Disposal Groups, Including Discontinued Operations, Income Statement, Balance Sheet and Additional Disclosures

The table below summarizes the carrying amounts of the major classes of assets and liabilities of the market making business at December 31, 2013 (dollars in millions):

	December 31, 2013(1)
Assets:
Cash and equivalents	$	11
Trading securities	105
Property and equipment, net	2
Other intangibles, net	21
Other assets	38
Total assets	$	177
Liabilities:
Other liabilities	$	107
Total liabilities	$	107

⁽¹⁾Assets and liabilities as of December 31, 2013 were classified as held-for-sale and reflected in the other assets and other liabilities line items on the consolidated balance sheet respectively.

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Regulatory Requirements (Details) (USD $)	Jun. 30, 2014	Dec. 31, 2013
Minimum Net Capital Required [Abstract]
Minimum percentage of net capital required for broker dealer subsidiary aggregate indebtedness	6.67%
Alternative net capital requirement	$ 250,000
Minimum percentage of aggregate debit balances	2.00%
Broker Dealer Subsidiaries Net Capital [Line Items]
Required Net Capital	159,000,000	147,000,000
Net Capital	1,127,000,000	1,020,000,000
Excess Net Capital	968,000,000	873,000,000
E TRADE Bank [Member]
Total capital
Total capital	4,545,000,000	4,331,000,000
Capital required to be well capitalized	1,750,000,000	1,786,000,000
Excess capital to be well capitalized	2,795,000,000	2,545,000,000
Total capital to risk weighted assets (percent)	25.97%	24.25%
Total capital required to be well capitalized to risk weighted assets (percent)	10.00%	10.00%
Tier I capital
Tier 1 risk based capital	4,324,000,000	4,105,000,000
Tier 1 risk based capital required to be well capitalized	1,050,000,000	1,072,000,000
Excess Tier 1 risk based capital to well capitalized	3,274,000,000	3,033,000,000
Tier 1 risk based capital to risk weighted assets (percent)	24.70%	22.98%
Tier 1 risk based capital required to be well capitalized to risk weighted assets (percent)	6.00%	6.00%
Tier I leverage
Tier 1 leverage capital	4,324,000,000	4,105,000,000
Tier 1 leverage capital required to be well capitalized	2,130,000,000	2,158,000,000
Excess Tier 1 leverage capital to well capitalized	2,194,000,000	1,947,000,000
Tier 1 leverage capital to adjusted assets (percent)	10.15%	9.51%
Tier 1 leverage capital required to be well capitalized to adjusted assets (percent)	5.00%	5.00%
E TRADE Clearing [Member]
Broker Dealer Subsidiaries Net Capital [Line Items]
Required Net Capital	158,000,000	144,000,000
Net Capital	751,000,000	715,000,000
Excess Net Capital	593,000,000	571,000,000
E TRADE Securities [Member]
Broker Dealer Subsidiaries Net Capital [Line Items]
Required Net Capital	250,000	250,000
Net Capital	360,000,000	261,000,000
Excess Net Capital	360,000,000	261,000,000
G1 Execution Services [Member]
Broker Dealer Subsidiaries Net Capital [Line Items]
Required Net Capital		1,000,000
Net Capital		22,000,000
Excess Net Capital		21,000,000
Other Broker Dealers [Member]
Broker Dealer Subsidiaries Net Capital [Line Items]
Required Net Capital	1,000,000	2,000,000
Net Capital	16,000,000	22,000,000
Excess Net Capital	$ 15,000,000	$ 20,000,000

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CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (USD $) Share data in Millions, unless otherwise specified	Total	Common Stock	Additional Paid-in Capital	Accumulated Deficit	Accumulated Other Comprehensive Loss
Balance, at Dec. 31, 2012	$ 4,904,000,000	$ 3,000,000	$ 7,319,000,000	$ (2,108,000,000)	$ (310,000,000)
Balance, (in shares) at Dec. 31, 2012		286
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income (loss)	(19,000,000)			(19,000,000)
Other comprehensive income (loss)	(130,000,000)				(130,000,000)
Exercise of stock options and related tax effects	(5,000,000)	0	(5,000,000)
Exercise of stock options and related tax effects, shares		0
Issuance of restricted stock, net of forfeitures and retirements to pay taxes	(4,000,000)	0	(4,000,000)
Issuance of restricted stock, net of forfeitures and retirements to pay taxes, shares		1
Share-based compensation	15,000,000		15,000,000
Balance, at Jun. 30, 2013	4,761,000,000	3,000,000	7,325,000,000	(2,127,000,000)	(440,000,000)
Balance, (in shares) at Jun. 30, 2013		287
Balance, at Dec. 31, 2013	4,856,000,000	3,000,000	7,328,000,000	(2,022,000,000)	(453,000,000)
Balance, (in shares) at Dec. 31, 2013		287
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income (loss)	166,000,000			166,000,000
Other comprehensive income (loss)	158,000,000				158,000,000
Conversion of convertible debentures	1,000,000	0	1,000,000
Exercise of stock options and related tax effects	6,000,000	0	6,000,000
Exercise of stock options and related tax effects, shares		1
Issuance of restricted stock, net of forfeitures and retirements to pay taxes	(12,000,000)	0	(12,000,000)
Issuance of restricted stock, net of forfeitures and retirements to pay taxes, shares		1
Share-based compensation	13,000,000		13,000,000
Balance, at Jun. 30, 2014	$ 5,188,000,000	$ 3,000,000	$ 7,336,000,000	$ (1,856,000,000)	$ (295,000,000)
Balance, (in shares) at Jun. 30, 2014		289

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CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS) (USD $) In Millions, unless otherwise specified	3 Months Ended				6 Months Ended
	Jun. 30, 2014		Jun. 30, 2013		Jun. 30, 2014		Jun. 30, 2013
Statement of Comprehensive Income [Abstract]
Net income (loss)	$ 69		$ (54)		$ 166		$ (19)
Available-for-sale securities:
OTTI, net(1)	0	[1]	0	[1]	0	[1]	0	[1]
Noncredit portion of OTTI reclassification (into) out of other comprehensive income, net(2)	0	[2]	0	[2]	0	[2]	1	[2]
Unrealized gains (losses), net(3)	82	[3]	(215)	[3]	163	[3]	(221)	[3]
Reclassification into earnings, net(4)	(2)	[4]	(11)	[4]	(14)	[4]	(21)	[4]
Net change from available-for-sale securities	80		(226)		149		(241)
Cash flow hedging instruments:
Unrealized gains (losses), net(5)	(16)	[5]	62	[5]	(32)	[5]	68	[5]
Reclassification into earnings, net(6)	20	[6]	23	[6]	41	[6]	43	[6]
Net change from cash flow hedging instruments	4		85		9		111
Other comprehensive income (loss)	84		(141)		158		(130)
Comprehensive income (loss)	$ 153		$ (195)		$ 324		$ (149)

[1] (1)Amounts are net of benefit from income taxes of $0 for both the three and six months ended June 30, 2014, compared to benefit from income taxes of less than $1 million for both the three and six months ended June 30, 2013.

[2] Amounts are net of benefit from income taxes of $0 for both the three and six months ended June 30, 2014, compared to benefit from income taxes of less than $1 million for both the three and six months ended June 30, 2013.

[3] Amounts are net of provision for income taxes of $49 million and $99 million for the three and six months ended June 30, 2014, respectively, compared to benefit from income taxes of $128 million and $132 million for the three and six months ended June 30, 2013, respectively.

[4] Amounts are net of provision for income taxes of $1 million and $8 million for the three and six months ended June 30, 2014, respectively, compared to provision for income taxes of $7 million and $13 million for the three and six months ended June 30, 2013, respectively.

[5] Amounts are net of benefit from income taxes of $12 million and $23 million for the three and six months ended June 30, 2014, respectively, compared to provision for income taxes of $31 million and $35 million for the three and six months ended June 30, 2013, respectively.

[6] Amounts are net of benefit from income taxes of $12 million and $26 million for the three and six months ended June 30, 2014, respectively, compared to benefit from income taxes of $11 million and $24 million for the three and six months ended June 30, 2013, respectively.

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Securities Sold Under Agreements to Repurchase and FHLB Advances and Other Borrowings

6 Months Ended

Jun. 30, 2014

Securities Sold Under Agreements To Repurchase and FHLB Advances and Other Borrowings Disclosure [Abstract]

SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE AND FHLB ADVANCES AND OTHER BORROWINGS

SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE AND FHLB ADVANCES AND OTHER BORROWINGS

Securities sold under agreements to repurchase, FHLB advances and other borrowings at June 30, 2014 and December 31, 2013 are shown in the following table (dollars in millions):

			FHLB Advances and Other Borrowings
	Repurchase Agreements(1)		FHLB Advances			Other		Total			Weighted Average Interest Rate
Due within one year	$	3,092	$	270		$	1	$	3,363		0.34%
Due between one and two years	250		—			2		252			0.52%
Due between two and three years	400		250			—		650			0.85%
Due between three and four years	—		400			—		400			0.40%
Thereafter	—		—			428		428			2.91%
Subtotal	3,742		920			431		5,093			0.64%
Fair value hedge adjustments	—		24			—		24
Deferred costs	—		(84		)	—		(84		)
Total other borrowings at June 30, 2014	$	3,742	$	860		$	431	$	5,033		0.64%
Total other borrowings at December 31, 2013	$	4,543	$	851		$	428	$	5,822		0.72%

(1) The maximum amount at any month end for repurchase agreements was $4.9 billion and $4.6 billion for six months endedJune 30, 2014 and the year ended December 31, 2013, respectively.

Securities Sold Under Agreements to Repurchase

During the six months endedJune 30, 2014, the decrease in securities sold under agreements to repurchase was primarily due to the scheduled expiration of $600 million. In addition, the Company paid down in advance of maturity $100 million of its fixed-rate repurchase agreements for which losses on early extinguishment of debt of $12 million were recorded in the consolidated statement of income (loss).

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Document and Entity Information	6 Months Ended
	Jun. 30, 2014	Jul. 31, 2014
Document And Entity Information [Abstract]
Document Type	10-Q
Document Period End Date	Jun. 30, 2014
Amendment Flag	false
Entity Registrant Name	E TRADE FINANCIAL CORP
Entity Central Index Key	0001015780
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Well-known Seasoned Issuer	Yes
Common stock shares outstanding		288,718,428
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q2

XML

Accumulated Other Comprehensive Loss

6 Months Ended

Jun. 30, 2014

Equity [Abstract]

Accumulated Other Comprehensive Loss

The following tables present after-tax changes in each component of accumulated other comprehensive loss for the three and six months ended June 30, 2014 and 2013 (dollars in millions):

	Available-for-sale Securities			Cash Flow  Hedging Instruments			Foreign  Currency Translation		Total
Beginning balance, March 31, 2014	$	(91	)	$	(293	)	$	5	$	(379	)
Other comprehensive income (loss) before reclassifications	82			(16		)	—		66
Amounts reclassified from accumulated other comprehensive loss	(2		)	20			—		18
Net change	80			4			—		84
Ending balance, June 30, 2014	$	(11	)	$	(289	)	$	5	$	(295	)

	Available-for-sale Securities			Cash Flow Hedging Instruments			Foreign Currency Translation		Total
Beginning balance, March 31, 2013	$	122		$	(426	)	$	5	$	(299	)
Other comprehensive income (loss) before reclassifications	(215		)	62			—		(153		)
Amounts reclassified from accumulated other comprehensive loss	(11		)	23			—		12
Net change	(226		)	85			—		(141		)
Ending balance, June 30, 2013	$	(104	)	$	(341	)	$	5	$	(440	)

	Available-for-sale Securities			Cash Flow  Hedging Instruments			Foreign  Currency Translation		Total
Beginning balance, December 31, 2013	$	(160	)	$	(298	)	$	5	$	(453	)
Other comprehensive income (loss) before reclassifications	163			(32		)	—		131
Amounts reclassified from accumulated other comprehensive loss	(14		)	41			—		27
Net change	149			9			—		158
Ending balance, June 30, 2014	$	(11	)	$	(289	)	$	5	$	(295	)

	Available-for-sale Securities			Cash Flow Hedging Instruments			Foreign Currency Translation		Total
Beginning balance, December 31, 2012	$	137		$	(452	)	$	5	$	(310	)
Other comprehensive income (loss) before reclassifications	(220		)	68			—		(152		)
Amounts reclassified from accumulated other comprehensive loss	(21		)	43			—		22
Net change	(241		)	111			—		(130		)
Ending balance, June 30, 2013	$	(104	)	$	(341	)	$	5	$	(440	)

The following table presents the income statement line items impacted by reclassifications out of accumulated other comprehensive loss for the three and six months ended June 30, 2014 and 2013 (dollars in millions):

Accumulated Other Comprehensive Loss Components	Amount Reclassified from Accumulated Other Comprehensive Loss												Affected Line Items in the Consolidated Statement of Income
	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
Available-for-sale securities:
	$	3		$	18		$	22		$	34		Gains on loans and securities, net
	(1		)	(7		)	(8		)	(13		)	Tax expense
	$	2		$	11		$	14		$	21		Reclassification into earnings, net
Cash flow hedging instruments:
	$	—		$	3		$	—		$	5		Operating interest income
	(32		)	(37		)	(67		)	(72		)	Operating interest expense
	(32		)	(34		)	(67		)	(67		)	Reclassification into earnings, before tax
	12			11			26			24			Tax expense
	$	(20	)	$	(23	)	$	(41	)	$	(43	)	Reclassification into earnings, net

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CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (PARENTHETICAL) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Statement of Comprehensive Income [Abstract]
Income tax of OTTI, net (less than)	$ 0	$ 1,000,000	$ 0	$ 1,000,000
Income tax of noncredit portion of OTTI reclassification out of (into) other comprehensive income, net (less than)	0	1,000,000	0	1,000,000
Other Comprehensive Income (Loss), Unrealized Holding Gain (Loss) on Securities Arising During Period, Tax	49,000,000	(128,000,000)	99,000,000	(132,000,000)
Other Comprehensive Income (Loss), Reclassification Adjustment for Sale of Securities Included in Net Income, Tax	1,000,000	7,000,000	8,000,000	13,000,000
Other Comprehensive Income (Loss), Unrealized Gain (Loss) on Derivatives Arising During Period, Tax	(12,000,000)	31,000,000	(23,000,000)	35,000,000
Other Comprehensive Income (Loss), Reclassification Adjustment on Derivatives Included in Net Income, Tax	$ (12,000,000)	$ (11,000,000)	$ (26,000,000)	$ (24,000,000)

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Fair Value Disclosures

6 Months Ended

Jun. 30, 2014

Fair Value Disclosures [Abstract]

FAIR VALUE DISCLOSURES

FAIR VALUE DISCLOSURES

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In determining fair value, the Company may use various valuation approaches, including market, income and/or cost approaches. The fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Fair value is a market-based measure considered from the perspective of a market participant. Accordingly, even when market assumptions are not readily available, the Company’s own assumptions reflect those that market participants would use in pricing the asset or liability at the measurement date. The fair value measurement accounting guidance describes the following three levels used to classify fair value measurements:

• Level 1—Unadjusted quoted prices in active markets for identical assets or liabilities that are accessible by the Company.

• Level 2—Quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.

• Level 3—Unobservable inputs that are significant to the fair value of the assets or liabilities.

The availability of observable inputs can vary and in certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to a fair value measurement requires judgment and consideration of factors specific to the asset or liability.

Recurring Fair Value Measurement Techniques

U.S. Treasury Securities and Agency Debentures

The fair value measurements of U.S. Treasury securities were classified as Level 1 of the fair value hierarchy as they were based on quoted market prices in active markets. The fair value measurements of agency debentures were classified as Level 2 of the fair value hierarchy as they were based on quoted market prices observable in the marketplace.

Residential Mortgage-backed Securities

The Company’s residential mortgage-backed securities portfolio primarily comprised agency mortgage-backed securities and CMOs. Agency mortgage-backed securities and CMOs are guaranteed by U.S. government sponsored and federal agencies. The weighted average coupon rates for the available-for-sale residential mortgage-backed securities at June 30, 2014 are shown in the following table:

	Weighted Average Coupon Rate
Agency mortgage-backed securities	3.09	%
Agency CMOs	3.15	%

The fair value of agency mortgage-backed securities was determined using a market approach with quoted market prices, recent market transactions and spread data for similar instruments. The fair value of agency CMOs was determined using market and income approaches with the Company’s own trading activities for identical or similar instruments. Agency mortgage-backed securities and CMOs were categorized in Level 2 of the fair value hierarchy.

Other Debt Securities

The fair value measurements of agency debt securities were determined using market and income approaches along with the Company’s own trading activities for identical or similar instruments and were categorized in Level 2 of the fair value hierarchy.

The Company’s municipal bonds are revenue bonds issued by state and other local government agencies. The valuation of corporate bonds is impacted by the credit worthiness of the corporate issuer. All of the Company’s municipal bonds and corporate bonds were rated investment grade at June 30, 2014. These securities were valued using a market approach with pricing service valuations corroborated by recent market transactions for identical or similar bonds. Municipal bonds and corporate bonds were categorized in Level 2 of the fair value hierarchy.

Publicly Traded Equity Securities

The fair value measurements of the Company's publicly traded equity securities were classified as Level 1 of the fair value hierarchy as they were based on quoted market prices in active markets.

Derivative Instruments

Interest rate swap and option contracts were valued with an income approach using pricing models that are commonly used by the financial services industry. The market observable inputs used in the pricing models include the swap curve, the volatility surface, and prime or overnight indexed swap basis from a financial data provider. The Company does not consider these models to involve significant judgment on the part of management, and the Company corroborated the fair value measurements with counterparty valuations. The Company’s derivative instruments were categorized in Level 2 of the fair value hierarchy. The consideration of credit risk, the Company’s or the counterparty’s, did not result in an adjustment to the valuation of its derivative instruments in the periods presented.

Securities Owned and Securities Sold, Not Yet Purchased

Securities transactions entered into by broker-dealer subsidiaries were included in trading securities as held-for-sale assets within other assets and securities sold, not yet purchased as held-for-sale liabilities in the Company’s fair value disclosures at December 31, 2013. The Company’s definition of actively traded is based on average daily volume and other market trading statistics. The majority of the Company's securities owned and securities sold, not yet purchased were categorized in Level 1 of the fair value hierarchy. The fair value of these securities was determined using listed or quoted market prices. The Company did not hold any of these securities at June 30, 2014.

Nonrecurring Fair Value Measurement Techniques

Certain other assets are recorded at fair value on a nonrecurring basis: 1) one- to four-family and home equity loans in which the amount of the loan balance in excess of the estimated current value of the underlying property less estimated selling costs has been charged-off; and 2) real estate owned that is carried at the lower of the property’s carrying value or fair value less estimated selling costs.

The Company evaluates and reviews assets that have been subject to fair value measurement requirements on a quarterly basis in accordance with policies and procedures that were designed to be in compliance with guidance from the Company’s regulators. These policies and procedures govern the frequency of the review, the use of acceptable valuation methods, and the consideration of estimated selling costs.

Loans Receivable and Real Estate Owned

Loans that have been delinquent for 180 days or that are in bankruptcy and certain TDR loan modifications are charged-off based on the estimated current value of the underlying property less estimated selling costs. Property valuations for these one- to four-family and home equity loans are based on the most recent "as is" property valuation data available, which may include appraisals, broker price opinions, automated valuation models or updated values using home price indices. Subsequent to the recording of an initial fair value measurement, these loans continue to be measured at fair value on a nonrecurring basis, utilizing the estimated value of the underlying property less estimated selling costs. These property valuations are updated on a monthly, quarterly or semi-annual basis depending on the type of valuation initially used. If the value of the underlying property has declined, an additional charge-off is recorded. If the value of the underlying property has increased, previously charged-off amounts are not reversed. If the valuation data obtained is significantly different from the valuation previously received, the Company orders additional property valuation data to corroborate or update the valuation.

Property valuations for real estate owned are based on the lowest value of the most recent property valuation data available, which may include appraisals, listing prices or approved offer prices. Nonrecurring fair value measurements on one- to four-family and home equity loans and real estate owned were classified as Level 3 of the fair value hierarchy as the majority of the valuations included Level 3 inputs that were significant to the fair value.

The following table presents additional information about significant unobservable inputs used in the valuation of assets measured at fair value on a nonrecurring basis that were categorized in Level 3 of the fair value hierarchy at June 30, 2014:

	Unobservable Inputs	Average		Range
Loans receivable:
One- to four-family	Appraised value	$	367,500	$14,500-$1,300,000
Home equity	Appraised value	$	270,800	$7,000-$1,000,000
Real estate owned	Appraised value	$	308,100	$10,900-$1,500,000

Goodwill

At the end of the second quarter of 2013, the Company decided to exit the market making business, and as a result evaluated the total goodwill allocated to the market making reporting unit for impairment. The Company valued the market making business by using a combination of expected present value of future cash flows of the business, a form of the income approach, and prices of comparable businesses, a form of the market approach, with significant unobservable inputs. The Company valued the market making reporting unit using the expected sale structure of the market making business. As a result of the evaluation, it was determined that the entire carrying amount of goodwill allocated to the market making reporting unit was impaired, and the Company recognized $142 million impairment of goodwill during the year ended December 31, 2013.

Recurring and Nonrecurring Fair Value Measurements

Assets and liabilities measured at fair value at June 30, 2014 and December 31, 2013 are summarized in the following tables (dollars in millions):

	Level 1		Level 2		Level 3		Total Fair Value
June 30, 2014:
Recurring fair value measurements:
Assets
Available-for-sale securities:
Debt securities:
Agency residential mortgage-backed securities and CMOs	$	—	$	11,461	$	—	$	11,461
Agency debentures	—		517		—		517
Agency debt securities	—		794		—		794
Municipal bonds	—		41		—		41
Corporate bonds	—		4		—		4
Total debt securities	—		12,817		—		12,817
Publicly traded equity securities	20		—		—		20
Total available-for-sale securities	20		12,817		—		12,837
Other assets:
Derivative assets(1)	—		52		—		52
Deposits with clearing organizations(2)	91		—		—		91
Total other assets measured at fair value on a recurring basis	91		52		—		143
Total assets measured at fair value on a recurring basis(3)	$	111	$	12,869	$	—	$	12,980
Liabilities
Derivative liabilities(1)	$	—	$	160	$	—	$	160
Total liabilities measured at fair value on a recurring basis(3)	$	—	$	160	$	—	$	160
Nonrecurring fair value measurements:
Loans receivable:
One- to four-family	$	—	$	—	$	35	$	35
Home equity	—		—		19		19
Total loans receivable	—		—		54		54
Real estate owned	—		—		32		32
Total assets measured at fair value on a nonrecurring basis(4)	$	—	$	—	$	86	$	86

(1) All derivative assets and liabilities were interest rate contracts at June 30, 2014. Information related to derivative instruments is detailed in Note 8—Accounting for Derivative Instruments and Hedging Activities.

(2) Represents U.S. Treasury securities held by a broker-dealer subsidiary.

(3) Assets and liabilities measured at fair value on a recurring basis represented 28% and less than 1% of the Company’s total assets and total liabilities, respectively, at June 30, 2014.

(4) Represents the fair value of assets prior to deducting estimated selling costs that were carried on the consolidated balance sheet at June 30, 2014, and for which a fair value measurement was recorded during the period.

	Level 1		Level 2		Level 3(1)		Total Fair Value
December 31, 2013:
Recurring fair value measurements:
Assets
Available-for-sale securities:
Debt securities:
Residential mortgage-backed securities:
Agency mortgage-backed securities and CMOs	$	—	$	12,236	$	—	$	12,236
Non-agency CMOs	—		—		14		14
Total residential mortgage-backed securities	—		12,236		14		12,250
Agency debentures	—		466		—		466
Agency debt securities	—		831		—		831
Municipal bonds	—		40		—		40
Corporate bonds	—		5		—		5
Total debt securities	—		13,578		14		13,592
Total available-for-sale securities	—		13,578		14		13,592
Other assets:
Derivative assets(2)	—		107		—		107
Deposits with clearing organizations(3)	53		—		—		53
Held-for-sale assets—trading securities(4)	104		1		—		105
Total other assets measured at fair value on a recurring basis	157		108		—		265
Total assets measured at fair value on a recurring basis(5)	$	157	$	13,686	$	14	$	13,857
Liabilities
Derivative liabilities(2)	$	—	$	169	$	—	$	169
Held-for-sale liabilities—securities sold, not yet purchased(4)	94		1		—		95
Total liabilities measured at fair value on a recurring basis(5)	$	94	$	170	$	—	$	264
Nonrecurring fair value measurements:
Loans receivable:
One- to four-family	$	—	$	—	$	246	$	246
Home equity	—		—		46		46
Total loans receivable(6)	—		—		292		292
Real estate owned(6)	—		—		47		47
Total assets measured at fair value on a nonrecurring basis(7)	$	—	$	—	$	339	$	339

(1) Instruments measured at fair value on a recurring basis categorized as Level 3 represented less than 1% of the Company's total assets and none of its total liabilities at December 31, 2013.

(2) All derivative assets and liabilities were interest rate contracts at December 31, 2013. Information related to derivative instruments is detailed in Note 8—Accounting for Derivative Instruments and Hedging Activities.

(3) Represents U.S. Treasury securities held by a broker-dealer subsidiary.

(4) Assets and liabilities of the market making business were reclassified as held-for-sale and are presented in the other assets and other liabilities line items, respectively, on the consolidated balance sheet at December 31, 2013. Information related to the classification is detailed in Note 2—Disposition.

(5) Assets and liabilities measured at fair value on a recurring basis represented 30% and 1% of the Company’s total assets and total liabilities, respectively, at December 31, 2013.

(6) Represents the fair value of assets prior to deducting estimated selling costs that were carried on the consolidated balance sheet at December 31, 2013, and for which a fair value measurement was recorded during the period.

(7) Goodwill allocated to the market making reporting unit with a carrying amount of $142 million was written down to zero during the year ended December 31, 2013 and categorized in Level 3 of the fair value hierarchy.

The following table presents the gains and losses associated with the assets measured at fair value on a nonrecurring basis during the three and six months ended June 30, 2014 and 2013 (dollars in millions):

	Three Months Ended June 30,				Six Months Ended June 30,
	2014		2013		2014			2013
One- to four-family	$	2	$	8	$	7		$	24
Home equity	8		17		20			36
Total losses on loans receivable measured at fair value	$	10	$	25	$	27		$	60
(Gains) losses on real estate owned measured at fair value	$	—	$	1	$	(1	)	$	2
Losses on goodwill measured at fair value	$	—	$	142	$	—		$	142

Transfers Between Levels 1 and 2

For assets and liabilities measured at fair value on a recurring basis, the Company’s transfers between levels of the fair value hierarchy are deemed to have occurred at the beginning of the reporting period on a quarterly basis. The Company had no material transfers between Level 1 and 2 during the three and six months ended June 30, 2014 and 2013.

Level 3 Rollforward for Recurring Fair Value Measurements

Level 3 assets include instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation. While the Company’s fair value estimates of Level 3 instruments utilized observable inputs where available, the valuation included significant management judgment in determining the relevance and reliability of market information considered.

The following tables present additional information about Level 3 assets measured at fair value on a recurring basis for the three and six months ended June 30, 2014 and 2013 (dollars in millions):

	Available-for-sale Securities
	Non-agency CMOs
	Three Months Ended June 30,					Six Months Ended June 30,
	2014		2013			2014			2013
Beginning of period	$	—	$	14		$	14		$	49
Gains (losses) recognized in earnings(1)	—		(1		)	6			(2		)
Net gains recognized in other comprehensive income(2)	—		1			3			3
Sales	—		—			(23		)	(35		)
Settlements	—		—			—			(1		)
End of period	$	—	$	14		$	—		$	14

(1) Gains and losses recognized in earnings are reported in the gains on loans and securities, net and net impairment line items on the consolidated statement of income (loss).

(2) Net gains recognized in other comprehensive income (loss) are reported in the net change from available-for-sale securities line item.

Fair Value of Financial Instruments Not Carried at Fair Value

The following table summarizes the carrying values, fair values and fair value hierarchy level classification of financial instruments that are not carried at fair value on the consolidated balance sheet at June 30, 2014 and December 31, 2013 (dollars in millions):

	June 30, 2014
	Carrying Value		Level 1		Level 2		Level 3		Total Fair Value
Assets
Cash and equivalents	$	1,807	$	1,807	$	—	$	—	$	1,807
Cash required to be segregated under federal or other regulations	$	1,215	$	1,215	$	—	$	—	$	1,215
Held-to-maturity securities:
Agency mortgage-backed securities and CMOs	$	9,084	$	—	$	9,209	$	—	$	9,209
Agency debentures	163		—		166		—		166
Agency debt securities	2,109		—		2,143		—		2,143
Total held-to-maturity securities	$	11,356	$	—	$	11,518	$	—	$	11,518
Margin receivables	$	7,340	$	—	$	7,340	$	—	$	7,340
Loans receivable, net:
One- to four-family	$	3,316	$	—	$	—	$	2,932	$	2,932
Home equity	2,829		—		—		2,600		2,600
Consumer and other	511		—		—		521		521
Total loans receivable, net(1)	$	6,656	$	—	$	—	$	6,053	$	6,053
Investment in FHLB stock	$	56	$	—	$	—	$	56	$	56
Deposits paid for securities borrowed	$	420	$	—	$	420	$	—	$	420
Liabilities
Deposits	$	25,084	$	—	$	25,084	$	—	$	25,084
Securities sold under agreements to repurchase	$	3,742	$	—	$	3,754	$	—	$	3,754
Customer payables	$	6,626	$	—	$	6,626	$	—	$	6,626
FHLB advances and other borrowings	$	1,291	$	—	$	926	$	249	$	1,175
Corporate debt	$	1,770	$	—	$	1,950	$	—	$	1,950
Deposits received for securities loaned	$	1,713	$	—	$	1,713	$	—	$	1,713

(1) The carrying value of loans receivable, net includes the allowance for loan losses of $401 million and loans that are valued at fair value on a nonrecurring basis at June 30, 2014.

	December 31, 2013
	Carrying Value		Level 1		Level 2		Level 3		Total Fair Value
Assets
Cash and equivalents	$	1,838	$	1,838	$	—	$	—	$	1,838
Cash required to be segregated under federal or other regulations	$	1,066	$	1,066	$	—	$	—	$	1,066
Held-to-maturity securities:
Agency mortgage-backed securities and CMOs	$	8,359	$	—	$	8,293	$	—	$	8,293
Agency debentures	164		—		168		—		168
Agency debt securities	1,658		—		1,631		—		1,631
Total held-to-maturity securities	$	10,181	$	—	$	10,092	$	—	$	10,092
Margin receivables	$	6,353	$	—	$	6,353	$	—	$	6,353
Loans receivable, net:
One- to four-family	$	4,392	$	—	$	—	$	3,790	$	3,790
Home equity	3,148		—		—		2,822		2,822
Consumer and other	583		—		—		596		596
Total loans receivable, net(1)	$	8,123	$	—	$	—	$	7,208	$	7,208
Investment in FHLB stock	$	61	$	—	$	—	$	61	$	61
Deposits paid for securities borrowed	$	536	$	—	$	536	$	—	$	536
Liabilities
Deposits	$	25,971	$	—	$	25,971	$	—	$	25,971
Securities sold under agreements to repurchase	$	4,543	$	—	$	4,571	$	—	$	4,571
Customer payables	$	6,310	$	—	$	6,310	$	—	$	6,310
FHLB advances and other borrowings	$	1,279	$	—	$	924	$	225	$	1,149
Corporate debt	$	1,768	$	—	$	1,951	$	—	$	1,951
Deposits received for securities loaned	$	1,050	$	—	$	1,050	$	—	$	1,050

(1) The carrying value of loans receivable, net includes the allowance for loan losses of $453 million and loans that are valued at fair value on a nonrecurring basis at December 31, 2013.

The fair value measurement techniques for financial instruments not carried at fair value on the consolidated balance sheet at June 30, 2014 and December 31, 2013 are summarized as follows:

Cash and equivalents, cash required to be segregated under federal or other regulations, margin receivables, deposits paid for securities borrowed, customer payables and deposits received for securities loaned—Fair value is estimated to be carrying value.

Held-to-maturity securities—The held-to-maturity securities portfolio included agency mortgage-backed securities and CMOs, agency debentures, and agency debt securities. The fair value of agency mortgage-backed securities is determined using market and income approaches with quoted market prices, recent market transactions and spread data for similar instruments. The fair value of agency CMOs and agency debt securities is determined using market and income approaches with the Company’s own trading activities for identical or similar instruments. The fair value of agency debentures is based on quoted market prices that were derived from assumptions observable in the marketplace.

Loans receivable, net—Fair value is estimated using a discounted cash flow model. Loans are differentiated based on their individual portfolio characteristics, such as product classification, loan category, pricing features and remaining maturity. Assumptions for expected losses, prepayments and discount rates are adjusted to reflect the individual characteristics of the loans, such as credit risk, coupon, term, and payment characteristics, as well as the secondary market conditions for these types of loans. There was limited or no observable market data for the home equity and one- to four-family loan portfolios, which indicates that the market for these types of loans is considered to be inactive. Given the limited market data, these fair value measurements cannot be determined with precision and changes in the underlying assumptions used, including discount rates, could significantly affect the results of current or future fair value estimates. In addition, the amount that would be realized in a forced liquidation, an actual sale or immediate settlement could be significantly lower than both the carrying value and the estimated fair value of the portfolio.

Investment in FHLB stock—FHLB stock is carried at cost, which is considered to be a reasonable estimate of fair value.

Deposits—Fair value is the amount payable on demand at the reporting date for sweep deposits, complete savings deposits, other money market and savings deposits and checking deposits. For certificates of deposit and brokered certificates of deposit, fair value is estimated by discounting future cash flows using discount factors derived from current observable rates implied for other similar instruments with similar remaining maturities.

Securities sold under agreements to repurchase—Fair value is determined by discounting future cash flows using discount factors derived from current observable rates implied for other similar instruments with similar remaining maturities.

FHLB advances and other borrowings—Fair value for FHLB advances is estimated by discounting future cash flows using discount factors derived from current observable rates implied for similar instruments with similar remaining maturities. For subordinated debentures, fair value is estimated by discounting future cash flows at the rate implied by dealer pricing quotes. For overnight and other short-term borrowings, fair value approximates carrying value.

Corporate debt—Fair value is estimated using dealer pricing quotes. The fair value of the non-interest-bearing convertible debentures is directly correlated to the intrinsic value of the Company’s underlying stock. As the price of the Company’s stock increases relative to the conversion price, the fair value of the convertible debentures increases.

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Operating Interest Income and Operating Interest Expense

6 Months Ended

Jun. 30, 2014

Operating Interest Income and Operating Interest Expense Disclosure [Abstract]

OPERATING INTEREST INCOME AND OPERATING INTEREST EXPENSE

OPERATING INTEREST INCOME AND OPERATING INTEREST EXPENSE

The following table shows the components of operating interest income and operating interest expense (dollars in millions):

	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
Operating interest income:
Loans	$	77		$	102		$	161		$	209
Available-for-sale securities	72			67			151			131
Held-to-maturity securities	82			61			159			119
Margin receivables	65			54			127			108
Securities borrowed and other	26			18			46			35
Total operating interest income	322			302			644			602
Operating interest expense:
Securities sold under agreements to repurchase	(30		)	(37		)	(65		)	(74		)
FHLB advances and other borrowings	(17		)	(17		)	(34		)	(34		)
Deposits	(2		)	(3		)	(4		)	(6		)
Customer payables and other	(3		)	(2		)	(5		)	(4		)
Total operating interest expense	(52		)	(59		)	(108		)	(118		)
Net operating interest income	$	270		$	243		$	536		$	484

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Organization, Basis of Presentation and Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2014

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Organization

Organization—E*TRADE Financial Corporation is a financial services company that provides brokerage and related products and services primarily to individual retail investors under the brand "E*TRADE Financial." The Company also provides investor-focused banking products, primarily sweep deposits and savings products, to retail investors.

On February 10, 2014, the Company completed the sale of its subsidiary G1 Execution Services, LLC, a registered broker-dealer and market maker, to an affiliate of Susquehanna International Group, LLP. The sale generated cash proceeds of $76 million.

Basis of Presentation

Basis of Presentation—The consolidated financial statements include the accounts of the Company and its majority-owned subsidiaries as determined under the voting interest model. Entities in which the Company holds at least a 20% ownership interest or in which there are other indicators of significant influence are generally accounted for by the equity method. Entities in which the Company holds less than a 20% ownership interest and does not have the ability to exercise significant influence are generally carried at cost. However, investments in marketable equity securities where the Company does not have the ability to exercise significant influence over the entities are accounted for as available-for-sale securities. Intercompany accounts and transactions are eliminated in consolidation. The Company also evaluates its continuing involvement with certain entities to determine if the Company is required to consolidate the entities under the variable interest entity model. This evaluation is based on a qualitative assessment of whether the Company has both: 1) the power to direct matters that most significantly impact the activities of the variable interest entity; and 2) the obligation to absorb losses or the right to receive benefits of the variable interest entity that could potentially be significant to the variable interest entity.

Certain prior period items in these consolidated financial statements have been reclassified to conform to the current period presentation. These consolidated financial statements reflect all adjustments, which are all normal and recurring in nature, necessary to present fairly the financial position, results of operations and cash flows for the periods presented.

At the end of June 2013, the Company decided to exit its market making business, G1 Execution Services, LLC, and reclassified the assets and liabilities of the market making business to held-for-sale. The assets and liabilities of the market making business are presented in the other assets and other liabilities line items, respectively, at December 31, 2013 on the consolidated balance sheet. The sale of the market making business was completed on February 10, 2014. For additional information on the market making business, see Note 2—Disposition.

The Company reports corporate interest expense separately from operating interest expense. The Company believes reporting these items separately provides a clearer picture of the financial performance of the Company’s operations than would a presentation that combined these two items. Operating interest expense is generated from the operations of the Company. Corporate debt, which is the primary source of corporate interest expense, has been issued primarily in connection with recapitalization transactions and past acquisitions.

Similarly, the Company reports gains on sales of investments, net separately from gains on loans and securities, net. The Company believes reporting these two items separately provides a clearer picture of the financial performance of the Company's operations than would a presentation that combined these two items. Gains on loans and securities, net are the result of activities in the Company’s operations, namely its balance sheet management segment. Gains on sales of investments, net relate to investments of the Company at the corporate level and are not related to the ongoing business of the Company’s operating subsidiaries. Gains on sales of investments, net are reported in the equity in income of investments and other line item on the consolidated statement of income (loss).

Use of Estimates

Use of Estimates—The consolidated financial statements were prepared in accordance with GAAP, which requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and related notes for the periods presented. Actual results could differ from management’s estimates. Certain significant accounting policies are critical because they are based on estimates and assumptions that require complex and subjective judgments by management. Changes in these estimates or assumptions could materially impact the Company’s financial condition and results of operations. Material estimates in which management believes changes could reasonably occur include: allowance for loan losses; valuation of goodwill and other intangible assets; estimates of effective tax rates, deferred taxes and valuation allowance; classification and valuation of certain investments; accounting for derivative instruments; and fair value measurements.

Margin receivables (policy)

Margin Receivables—The fair value of securities that the Company received as collateral in connection with margin receivables and securities borrowing activities, where the Company is permitted to sell or re-pledge the securities, was approximately $10.3 billion and $9.1 billion at June 30, 2014 and December 31, 2013, respectively. Of this amount, $2.8 billion and $1.9 billion had been pledged or sold in connection with securities loans, bank borrowings and deposits with clearing organizations as of June 30, 2014 and December 31, 2013, respectively.

Nonperforming loans (policy)

Nonperforming Loans—The Company classifies loans as nonperforming when they are no longer accruing interest, which includes loans that are 90 days and greater past due, TDRs that are on nonaccrual status for all classes of loans and certain junior liens that have a delinquent senior lien. Interest previously accrued, but not collected, is reversed against current income when a loan is placed on nonaccrual status. Interest payments received on nonperforming loans are recognized on a cash basis in operating interest income until it is doubtful that full payment will be collected, at which point payments are applied to principal. The recognition of deferred fees or costs on originated loans and premiums or discounts on purchased loans in operating interest income is discontinued for nonperforming loans. Nonperforming loans, excluding TDRs and certain junior liens that have a delinquent senior lien, return to accrual status when the loan becomes less than 90 days past due. Loans modified as TDRs return to accrual status after six consecutive payments have been made in accordance with the modified terms. All bankruptcy loans remain on nonaccrual status regardless of the payment history.

Loan losses are recognized when, based on management's estimates, it is probable that a loss has been incurred. The Company’s charge-off policy for both one- to four-family and home equity loans is to assess the value of the property when the loan has been delinquent for 180 days or it is in bankruptcy, regardless of whether or not the property is in foreclosure, and charge-off the amount of the loan balance in excess of the estimated current value of the underlying property less estimated selling costs. TDR loan modifications are charged-off when certain characteristics of the loan, including CLTV, borrower’s credit and type of modification, cast substantial doubt on the borrower’s ability to repay the loan. Closed-end consumer loans are charged-off when the loan has been delinquent for 120 days or when it is determined that collection is not probable.

Real estate owned and repossessed assets (policy)

Real Estate Owned and Repossessed Assets—Real estate owned and repossessed assets are included in the other assets line item in the consolidated balance sheet. Real estate owned represents real estate acquired through foreclosure and also includes those properties acquired through a deed in lieu of foreclosure or similar legal agreement. Both real estate owned and the repossessed assets are carried at the lower of carrying value or fair value, less estimated selling costs.

New accounting and disclosure guidance (policy)

New Accounting and Disclosure Guidance—Below is the new accounting and disclosure guidance that relates to activities in which the Company is engaged.

Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists

In July 2013, the FASB amended the presentation guidance on unrecognized tax benefits. The amended guidance requires an unrecognized tax benefit, or a portion of an unrecognized tax benefit, to be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except under certain circumstances. To the extent a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. The unrecognized tax benefit should also be presented in the financial statements as a liability if the tax law of the applicable jurisdiction does not require the Company to use, and the Company does not intend to use, the deferred tax asset to settle any additional income taxes. The amended presentation guidance became effective for annual and interim periods beginning on January 1, 2014 for the Company and was applied prospectively to unrecognized tax benefits existing at that date. The adoption of the amended presentation guidance did not have a material impact on the Company’s financial condition, results of operations or cash flows.

Accounting for Investments in Qualified Affordable Housing Projects

In January 2014, the FASB amended the accounting guidance for investments in qualified affordable housing projects. The amended accounting guidance permits reporting entities to make an accounting policy election to account for their investments in qualified affordable housing projects using the proportional amortization method if certain conditions are met. Under the proportional amortization method, the Company would amortize the initial cost of the investment in proportion to the tax credits and other tax benefits received and recognize the net investment performance in the consolidated statement of income (loss) as a component of income tax expense (benefit). The amended guidance will be effective for annual and interim periods beginning on January 1, 2015 for the Company and must be applied retrospectively. Early adoption is permitted. While the Company is currently evaluating the impact of the new accounting guidance, the adoption is not expected to have a material impact on the Company’s financial condition, results of operations or cash flows.

Reclassification of Residential Real Estate Collateralized Mortgage Loans upon Foreclosure

In January 2014, the FASB amended the accounting and disclosure guidance on reclassifications of residential real estate collateralized mortgage loans upon foreclosure. The amended guidance clarifies that an in substance repossession or foreclosure occurs, and a creditor is considered to have received physical possession of residential real estate property collateralizing a mortgage loan, upon either (1) the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure or (2) the borrower conveying all interest in the residential real estate property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement. The amended disclosure guidance requires interim and annual disclosure of both (1) the amount of foreclosed residential real estate property held by the creditor and (2) the recorded investment in mortgage loans collateralized by residential real estate property that are in the process of foreclosure. As early adoption was permitted, the Company early adopted the amended guidance as of January 1, 2014. The adoption of the amended accounting guidance did not have a material impact on the Company’s financial condition, results of operations or cash flows.

Presentation and Disclosure of Discontinued Operations

In April 2014, the FASB amended the presentation and disclosure guidance on disposal transactions. The amended guidance raises the threshold for a disposal to qualify as a discontinued operation and requires new disclosures of both discontinued operations and certain other disposals that do not meet the definition of a discontinued operation. The amended guidance will be effective for all disposals or classifications as held for sale that occur in annual and interim periods beginning on or after December 15, 2014. Early adoption is permitted but only for disposals that have not been reported in financial statements previously issued. The adoption is not expected to have a material impact on the Company’s current financial condition, results of operations or cash flows; however, it may impact the reporting of future disposals if and when they occur.

Revenue Recognition on Contracts with Customers

In May 2014, the FASB amended the guidance on revenue recognition on contracts with customers. The new standard outlines a single comprehensive model for entities to apply in accounting for revenue arising from contracts with customers. The amended guidance will be effective for annual and interim periods beginning on January 1, 2017 for the Company and may be applied on either a full retrospective or modified retrospective basis. Early adoption is not permitted. While the Company is currently evaluating the impact of the new accounting guidance, the adoption is not expected to have a material impact on the Company’s financial condition, results of operations or cash flows.

Accounting and Disclosures for Repurchase Agreements

In June 2014, the FASB amended the accounting and disclosure guidance on repurchase agreements. The amended guidance requires entities to account for repurchase-to-maturity transactions as secured borrowings, eliminates accounting guidance on linked repurchase financing transactions, and expands the disclosure requirements related to transfers of financial assets accounted for as sales and as secured borrowings. The amended guidance will be effective for annual and interim periods beginning on January 1, 2015 for the Company and must be applied using a cumulative-effect approach as of the beginning of the period of adoption. Early adoption is not permitted. While the Company is currently evaluating the impact of the new accounting guidance, the adoption is not expected to have a material impact on the Company’s financial condition, results of operations or cash flows.

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Earnings (Loss) Per Share

6 Months Ended

Jun. 30, 2014

Earnings Per Share [Abstract]

EARNINGS (LOSS) PER SHARE

EARNINGS (LOSS) PER SHARE

The following table presents a reconciliation of basic and diluted earnings (loss) per share (in millions, except share data and per share amounts):

	Three Months Ended June 30,					Six Months Ended June 30,
	2014		2013			2014		2013
Basic:
Net income (loss)	$	69	$	(54	)	$	166	$	(19	)
Basic weighted-average shares outstanding (in thousands)	288,705		286,903			288,380		286,765
Basic earnings (loss) per share	$	0.24	$	(0.19	)	$	0.57	$	(0.07	)
Diluted:
Net income (loss)	$	69	$	(54	)	$	166	$	(19	)
Basic weighted-average shares outstanding (in thousands)	288,705		286,903			288,380		286,765
Effect of dilutive securities:
Weighted-average convertible debentures (in thousands)	4,068		—			4,073		—
Weighted-average options and restricted stock issued to employees (in thousands)	1,053		—			1,360		—
Diluted weighted-average shares outstanding (in thousands)	293,826		286,903			293,813		286,765
Diluted earnings (loss) per share	$	0.24	$	(0.19	)	$	0.56	$	(0.07	)

The Company excluded the following shares form the calculations of diluted earnings (loss) per share as the effect would have been anti-dilutive (shares in millions):

	Three Months Ended June 30,		Six Months Ended June 30,
	2014	2013	2014	2013
Weighted-average shares excluded as a result of the Company’s net loss:
Convertible debentures	N/A	4.1	N/A	4.1
Stock options and restricted stock awards and units	N/A	0.7	N/A	1.0
Other stock options and restricted stock awards and units	0.5	2.0	0.6	1.9
Total	0.5	6.8	0.6	7.0

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Loans Receivable, Net

6 Months Ended

Jun. 30, 2014

Loans and Leases Receivable Disclosure [Abstract]

LOANS RECEIVABLE, NET

LOANS RECEIVABLE, NET

Loans receivable, net at June 30, 2014 and December 31, 2013 are summarized as follows (dollars in millions):

	June 30, 2014			December 31, 2013
One- to four-family	$	3,345		$	4,475
Home equity	3,153			3,454
Consumer and other	527			602
Total loans receivable	7,025			8,531
Unamortized premiums, net	32			45
Allowance for loan losses	(401		)	(453		)
Total loans receivable, net	$	6,656		$	8,123

During the six months endedJune 30, 2014, the Company sold $0.8 billion of one- to four-family loans modified as TDRs.

At June 30, 2014, the Company pledged $5.9 billion and $0.5 billion of loans as collateral to the FHLB and Federal Reserve Bank, respectively. At December 31, 2013, the Company pledged $6.8 billion and $0.6 billion of loans as collateral to the FHLB and Federal Reserve Bank, respectively. Additionally, the Company’s entire loans receivable portfolio was serviced by other companies at June 30, 2014 and December 31, 2013.

The following table represents the breakdown of the total recorded investment in loans receivable and allowance for loan losses by loans that have been collectively evaluated for impairment and those that have been individually evaluated for impairment at June 30, 2014 and December 31, 2013 (dollars in millions):

	Recorded Investment				Allowance for Loan Losses
	June 30, 2014		December 31, 2013		June 30, 2014		December 31, 2013
Loans collectively evaluated for impairment	$	6,512	$	7,163	$	325	$	329
Loans individually evaluated for impairment (TDRs)	545		1,413		76		124
Total	$	7,057	$	8,576	$	401	$	453

Credit Quality and Concentrations of Credit Risk

The Company tracks and reviews factors to predict and monitor credit risk in its mortgage loan portfolio on an ongoing basis. These factors include: loan type, estimated current LTV/CLTV ratios, delinquency history, documentation type, borrowers’ current credit scores, housing prices, loan vintage and geographic location of the property. In economic conditions in which housing prices generally appreciate, the Company believes that loan type, LTV/CLTV ratios, documentation type and credit scores are the key factors in determining future loan performance. In a housing market with declining home prices and less credit available for refinance, the Company believes the LTV/CLTV ratio becomes a more important factor in predicting and monitoring credit risk. The factors are updated on at least a quarterly basis. The Company tracks and reviews delinquency status to predict and monitor credit risk in the consumer and other loan portfolio on at least a quarterly basis.

Credit Quality

The following tables show the distribution of the Company’s mortgage loan portfolios by credit quality indicator at June 30, 2014 and December 31, 2013 (dollars in millions):

	One- to Four-Family						Home Equity
Current LTV/CLTV(1)	June 30, 2014			December 31, 2013			June 30, 2014			December 31, 2013
<=80%	$	1,823		$	1,912		$	1,164		$	1,142
80%-100%	919			1,365			837			866
100%-120%	378			711			632			736
>120%	225			487			520			710
Total mortgage loans receivable	$	3,345		$	4,475		$	3,153		$	3,454
Average estimated current LTV/CLTV (2)	81		%	90		%	94		%	98		%
Average LTV/CLTV at loan origination (3)	71		%	72		%	80		%	80		%

(1) Current CLTV calculations for home equity loans are based on the maximum available line for home equity lines of credit and outstanding principal balance for home equity installment loans. Current property values are updated on a quarterly basis using the most recent property value data available to the Company. For properties in which the Company did not have an updated valuation, home price indices were utilized to estimate the current property value.

(2) The average estimated current LTV/CLTV ratio reflects the outstanding balance at the balance sheet date and the maximum available line for home equity lines of credit, divided by the estimated current value of the underlying property.

(3) Average LTV/CLTV at loan origination calculations are based on LTV/CLTV at time of purchase for one- to four-family purchased loans and undrawn balances for home equity loans.

	One- to Four-Family				Home Equity
Documentation Type	June 30, 2014		December 31, 2013		June 30, 2014		December 31, 2013
Full documentation	$	1,476	$	1,847	$	1,616	$	1,769
Low/no documentation	1,869		2,628		1,537		1,685
Total mortgage loans receivable	$	3,345	$	4,475	$	3,153	$	3,454

	One- to Four-Family				Home Equity
Current FICO (1)	June 30, 2014		December 31, 2013		June 30, 2014		December 31, 2013
>=720	$	1,924	$	2,252	$	1,679	$	1,811
719 - 700	317		436		313		343
699 - 680	263		366		261		293
679 - 660	215		296		215		245
659 - 620	262		404		286		310
<620	364		721		399		452
Total mortgage loans receivable	$	3,345	$	4,475	$	3,153	$	3,454

(1) FICO scores are updated on a quarterly basis; however, at June 30, 2014 and December 31, 2013, there were some loans for which the updated FICO scores were not available. The current FICO distribution at June 30, 2014 included the most recent FICO scores where available, otherwise the original FICO score was used, for approximately $76 million and $4 million of one- to four-family and home equity loans, respectively. The current FICO distribution at December 31, 2013 included original FICO scores for approximately $95 million and $10 million of one- to four-family and home equity loans, respectively.

Concentrations of Credit Risk

One- to four-family loans include interest-only loans for a five to ten year period, followed by an amortizing period ranging from 20 to 25 years. At June 30, 2014, 42% of the Company's one- to four-family portfolio were not yet amortizing. However, during the trailing twelve months ended June 30, 2014, based on the unpaid principal balance before charge-offs, approximately 14% of these borrowers made voluntary annual principal payments of at least $2,500 and slightly over a third of those borrowers made voluntary annual principal payments of at least $10,000.

The home equity loan portfolio is primarily second lien loans on residential real estate properties, which have a higher level of credit risk than first lien mortgage loans. Approximately 15% of the home equity portfolio was in the first lien position and the Company holds both the first and second lien positions in less than 1% of the home equity loan portfolio at June 30, 2014. The home equity loan portfolio consists of approximately 20% of home equity installment loans and approximately 80% of home equity lines of credit at June 30, 2014.

Home equity installment loans are primarily fixed rate and fixed term, fully amortizing loans that do not offer the option of an interest-only payment. The majority of home equity lines of credit convert to amortizing loans at the end of the draw period, which typically ranges from five to ten years. Approximately 8% of this portfolio will require the borrowers to repay the loan in full at the end of the draw period. At June 30, 2014, 87% of the home equity line of credit portfolio had not converted from the interest-only draw period and had not begun amortizing. However, during the trailing twelve months ended June 30, 2014, approximately 40% of the Company's borrowers made voluntary annual principal payments of at least $500 on their home equity lines of credit and slightly under half of those borrowers reduced their principal balance by at least $2,500.

The following table outlines when one- to four-family and home equity lines of credit convert to amortizing by percentage of the one- to four-family portfolio and home equity line of credit portfolios, respectively, at June 30, 2014:

Period of Conversion to Amortizing Loan	% of One- to Four-Family Portfolio	% of Home Equity Line of  Credit Portfolio
Already amortizing	58%	13%
Through December 31, 2014	1%	5%
Year ending December 31, 2015	4%	27%
Year ending December 31, 2016	16%	42%
Year ending December 31, 2017	21%	13%

Approximately 38% and 40% of the Company’s mortgage loans receivable were concentrated in California at June 30, 2014 and December 31, 2013, respectively. No other state had concentrations of mortgage loans that represented 10% or more of the Company’s mortgage loans receivable at June 30, 2014 and December 31, 2013.

Delinquent Loans

The following table shows total loans receivable by delinquency category at June 30, 2014 and December 31, 2013 (dollars in millions):

	Current		30-89 Days Delinquent		90-179 Days Delinquent		180+ Days Delinquent		Total
June 30, 2014
One- to four-family	$	3,085	$	88	$	27	$	145	$	3,345
Home equity	3,020		56		32		45		3,153
Consumer and other	515		11		1		—		527
Total loans receivable	$	6,620	$	155	$	60	$	190	$	7,025
December 31, 2013
One- to four-family	$	3,988	$	190	$	70	$	227	$	4,475
Home equity	3,309		69		36		40		3,454
Consumer and other	587		12		3		—		602
Total loans receivable	$	7,884	$	271	$	109	$	267	$	8,531

Nonperforming Loans

The Company classifies loans as nonperforming when they are no longer accruing interest. Nonaccrual loans include loans that are 90 days and greater past due, TDRs that are on nonaccrual status for all classes of loans and certain junior liens that have a delinquent senior lien. The following table shows the comparative data for nonaccrual loans (dollars in millions):

	June 30, 2014	December 31, 2013
One- to four-family	307	526
Home equity	185	164
Consumer and other	2	3
Total nonperforming loans receivable	494	693

Nonperforming loans decreased $199 million to $494 million at June 30, 2014 when compared to December 31, 2013. The decrease in the one- to four-family nonperforming loans receivable during the six months endedJune 30, 2014 was primarily due to the sale of one- to four-family loans modified as TDRs, which included $377 million of nonperforming loans. The decrease in nonperforming loans receivable was partially offset by the increase in nonperforming TDRs that had been charged-off due to bankruptcy notification. In February 2014, the OCC issued clarifying guidance related to consumer debt discharged in Chapter 7 bankruptcy proceedings. As a result of the clarifying guidance, beginning the first quarter of 2014 these bankruptcy loans remain on nonaccrual status regardless of payment history. This change did not have a material impact on the statement of financial condition, results of operations or cash flows. Prior to this change, the Company had $238 million of bankruptcy loans as performing loans at December 31, 2013.

Real Estate Owned and Loans with Formal Foreclosure Proceedings in Process

At June 30, 2014 and December 31, 2013, the Company held $35 million and $50 million, respectively, of real estate owned that were acquired through foreclosure and through a deed in lieu of foreclosure or similar legal agreement. The Company also held $126 millionand $199 million of loans for which formal foreclosure proceedings were in process at June 30, 2014 and December 31, 2013, respectively.

Allowance for Loan Losses

The following table provides a roll forward by loan portfolio of the allowance for loan losses for the three and six months endedJune 30, 2014 and 2013 (dollars in millions):

	Three Months Ended June 30, 2014
	One- to Four-Family			Home Equity			Consumer and Other			Total
Allowance for loan losses, beginning of period	$	52		$	327		$	24		$	403
Provision for loan losses	(8		)	21			(1		)	12
Charge-offs	—			(17		)	(4		)	(21		)
Recoveries	—			6			1			7
Charge-offs, net	—			(11		)	(3		)	(14		)
Allowance for loan losses, end of period	$	44		$	337		$	20		$	401
	Three Months Ended June 30, 2013
	One- to Four-Family			Home Equity			Consumer and Other			Total
Allowance for loan losses, beginning of period	$	161		$	263		$	31		$	455
Provision for loan losses	(8		)	53			1			46
Charge-offs	(11		)	(46		)	(7		)	(64		)
Recoveries	2			9			3			14
Charge-offs, net	(9		)	(37		)	(4		)	(50		)
Allowance for loan losses, end of period	$	144		$	279		$	28		$	451
	Six Months Ended June 30, 2014
	One- to Four-Family			Home Equity			Consumer and Other			Total
Allowance for loan losses, beginning of period	$	102		$	326		$	25		$	453
Provision for loan losses	(26		)	41			1			16
Charge-offs	(43		)	(41		)	(9		)	(93		)
Recoveries	11			11			3			25
Charge-offs, net	(32		)	(30		)	(6		)	(68		)
Allowance for loan losses, end of period	$	44		$	337		$	20		$	401

	Six Months Ended June 30, 2013
	One- to Four-Family			Home Equity			Consumer and Other			Total
Allowance for loan losses, beginning of period	$	184		$	257		$	40		$	481
Provision for loan losses	(24		)	108			5			89
Charge-offs	(30		)	(103		)	(24		)	(157		)
Recoveries	14			17			7			38
Charge-offs, net	(16		)	(86		)	(17		)	(119		)
Allowance for loan losses, end of period	$	144		$	279		$	28		$	451

The general allowance for loan losses also included a qualitative component to account for a variety of factors that are not directly considered in the quantitative loss model but are factors the Company believes may impact the level of credit losses. The qualitative component was $74 million and $62 million at June 30, 2014 and December 31, 2013, respectively.

Total allowance for loan losses decreased during the six months ended June 30, 2014 primarily due to the sale of one- to four-family loans modified as TDRs. As a result of this sale, the Company recorded a charge-off related to one- to four-family loans of $42 million which drove the majority of the decrease in the allowance for loan losses.

During the six months ended June 30, 2014 and 2013, the Company agreed to settlements with two third party mortgage originators specific to loans sold to the Company by those originators. One-time payments were agreed upon to satisfy in full all pending and future repurchase requests with those specific originators. The Company applied the full amount of payments of $11 million and $13 million for the six months ended June 30, 2014 and 2013, respectively, as recoveries to the allowance for loan losses, resulting in a corresponding reduction to net charge-offs as well as provision for loan losses.

Impaired Loans—Troubled Debt Restructurings

TDRs include two categories of loans: (1) loan modifications completed under the Company’s programs that involve granting an economic concession to a borrower experiencing financial difficulty, and (2) loans that have been charged off based on the estimated current value of the underlying property less estimated selling costs due to bankruptcy notification. Upon being classified as a TDR, such loan is categorized as an impaired loan and is considered impaired until maturity regardless of whether the borrower performs under the terms of the loan. Impairment on TDRs is measured on an individual basis.

The unpaid principal balance in one- to four-family TDRs was$0.3 billion and $1.2 billion at June 30, 2014 and December 31, 2013, respectively. For home equity loans, the recorded investment in TDRs represents the unpaid principal balance.

The following table shows a summary of the Company’s recorded investment in TDRs that were on accrual and nonaccrual status, in addition to the recorded investment of TDRs at June 30, 2014 and December 31, 2013 (dollars in millions):

			Nonaccrual TDRs
	Accrual  TDRs(1)		Current(2)		30-89 Days Delinquent		90+ Days Delinquent		Recorded Investment in TDRs
June 30, 2014
One- to four-family	$	129	$	115	$	19	$	56	$	319
Home equity	129		55		15		27		226
Total	$	258	$	170	$	34	$	83	$	545
December 31, 2013
One- to four-family	$	774	$	127	$	102	$	169	$	1,172
Home equity	176		22		17		26		241
Total	$	950	$	149	$	119	$	195	$	1,413

(1) Represents loans modified as TDRs that are current and have made six or more consecutive payments.

(2) Represents loans modified as TDRs that are current but have not yet made six consecutive payments, bankruptcy loans and certain junior lien TDRs that have a delinquent senior lien.

The decrease in the one- to four-family TDRs was primarily due to the sale of $0.8 billion of one- to four-family loans modified as TDRs.

The following table shows the average recorded investment and interest income recognized both on a cash and accrual basis for the Company’s TDRs during the three and six months endedJune 30, 2014 and 2013 (dollars in millions):

	Average Recorded Investment				Interest Income Recognized
	Three Months Ended June 30,				Three Months Ended June 30,
	2014		2013		2014		2013
One- to four-family	$	520	$	1,211	$	3	$	9
Home equity	229		266		5		5
Total	$	749	$	1,477	$	8	$	14
	Average Recorded Investment				Interest Income Recognized
	Six Months Ended June 30,				Six Months Ended June 30,
	2014		2013		2014		2013
One- to four-family	$	797	$	1,216	$	11	$	17
Home equity	233		272		9		10
Total	$	1,030	$	1,488	$	20	$	27

Included in the allowance for loan losses was a specific valuation allowance of $76 million and $124 million that was established for TDRs at June 30, 2014 and December 31, 2013, respectively. The specific allowance for these individually impaired loans represents the forecasted losses over the estimated remaining life of the loan, including the economic concession to the borrower. The following table shows detailed information related to the Company’s TDRs at June 30, 2014 and December 31, 2013 (dollars in millions):

	June 30, 2014						December 31, 2013
	Recorded Investment in TDRs		Specific Valuation Allowance		Net Investment in TDRs		Recorded Investment in TDRs		Specific Valuation Allowance		Net Investment in TDRs
With a recorded allowance:
One- to four-family	$	94	$	14	$	80	$	403	$	60	$	343
Home equity	$	126	$	62	$	64	$	140	$	64	$	76
Without a recorded allowance:(1)
One- to four-family	$	225	$	—	$	225	$	769	$	—	$	769
Home equity	$	100	$	—	$	100	$	101	$	—	$	101
Total:
One- to four-family	$	319	$	14	$	305	$	1,172	$	60	$	1,112
Home equity	$	226	$	62	$	164	$	241	$	64	$	177

(1) Represents loans where the discounted cash flow analysis or collateral value is equal to or exceeds the recorded investment in the loan.

Troubled Debt Restructurings — Loan Modifications

The Company has loan modification programs that focus on the mitigation of potential losses in the one- to four-family and home equity mortgage loan portfolio. The Company currently does not have an active loan modification program for consumer and other loans. The various types of economic concessions that may be granted typically consist of interest rate reductions, maturity date extensions, principal forgiveness or a combination of these concessions. Trial modifications are classified immediately as TDRs and continue to be reported as delinquent until the successful completion of the trial period, which is typically 90 days. The loan then becomes a permanent modification reported as current but remains on nonaccrual status until six consecutive payments have been made.

The vast majority of the Company’s loans modified as TDRs include an interest rate reduction in combination with another type of concession. The Company prioritizes the interest rate reduction modifications in combination with the following modification categories: principal forgiven, principal deferred and re-age/extension/capitalization of accrued interest. Each class is mutually exclusive in that if a modification had an interest rate reduction with principal forgiven and an extension, the modification would only be presented in the principal forgiven column in the table below. The following tables provide the number of loans, post-modification balances immediately after being modified by major class, and the financial impact of modifications during the three and six months endedJune 30, 2014 and 2013 (dollars in millions):

	Three Months Ended June 30, 2014
		Interest Rate Reduction
	Number of Loans	Principal Forgiven		Principal Deferred		Re-age/ Extension/ Interest Capitalization		Other with Interest Rate Reduction		Other		Total
One- to four-family	4	$	—	$	—	$	1	$	—	$	—	$	1
Home equity	68	—		—		1		1		3		5
Total	72	$	—	$	—	$	2	$	1	$	3	$	6
	Three Months Ended June 30, 2013
		Interest Rate Reduction
	Number of Loans	Principal Forgiven		Principal Deferred		Re-age/ Extension/ Interest Capitalization		Other with Interest Rate Reduction		Other		Total
One- to four-family	83	$	4	$	2	$	22	$	1	$	3	$	32
Home equity	85	—		—		2		3		3		8
Total	168	$	4	$	2	$	24	$	4	$	6	$	40
	Six Months Ended June 30, 2014
		Interest Rate Reduction
	Number of Loans	Principal Forgiven		Principal Deferred		Re-age/Extension/ Interest Capitalization		Other with Interest Rate Reduction		Other		Total
One- to four-family	37	$	1	$	—	$	5	$	2	$	4	$	12
Home equity	114	—		—		3		2		4		9
Total	151	$	1	$	—	$	8	$	4	$	8	$	21

	Six Months Ended June 30, 2013
		Interest Rate Reduction
	Number of Loans	Principal Forgiven		Principal Deferred		Re-age/ Extension/ Interest Capitalization		Other with Interest Rate Reduction		Other		Total
One- to four-family	176	$	12	$	4	$	42	$	2	$	8	$	68
Home equity	151	—		—		3		6		4		13
Total	327	$	12	$	4	$	45	$	8	$	12	$	81

	Three Months Ended June 30,
	2014						2013
	Financial Impact						Financial Impact
	Principal Forgiven		Pre-Modification Weighted Average Interest Rate		Post-Modification Weighted Average Interest Rate		Principal Forgiven		Pre-Modification Weighted Average Interest Rate		Post-Modification Weighted Average Interest Rate
One- to four-family	$	—	4.1	%	2.9	%	$	1	5.3	%	2.3	%
Home equity	—		6.3	%	2.7	%	—		4.2	%	1.8	%
Total	$	—					$	1
	Six Months Ended June 30,
	2014						2013
	Financial Impact						Financial Impact
	Principal Forgiven		Pre-Modification Weighted Average Interest Rate		Post-Modification Weighted Average Interest Rate		Principal Forgiven		Pre-Modification Weighted Average Interest Rate		Post-Modification Weighted Average Interest Rate
One- to four-family	$	—	4.8	%	2.7	%	$	4	5.3	%	2.3	%
Home equity	—		5.3	%	2.4	%	—		4.3	%	1.6	%
Total	$	—					$	4

The Company considers modifications that become 30 days past due to have experienced a payment default. The following table shows the recorded investment in modifications that experienced a payment default within 12 months after the modification for the three and six months endedJune 30, 2014 and 2013 (dollars in millions):

	Three Months Ended June 30,
	2014			2013
	Number of Loans	Recorded Investment		Number of Loans	Recorded Investment
One- to four-family(1)	3	$	1	22	$	10
Home equity(2)	13	1		13	—
Total	16	$	2	35	$	10
	Six Months Ended June 30,
	2014			2013
	Number of Loans	Recorded Investment		Number of Loans	Recorded Investment
One- to four-family(1)	21	$	8	75	$	29
Home equity(2)	21	1		36	1
Total	42	$	9	111	$	30

(1) For both the three and six months endedJune 30, 2014, $1 million of the recorded investment in one- to four-family loans that had a payment default in the trailing 12 months was classified as current, compared to $2 million and $9 million for the three and six months ended June 30, 2013, respectively.

(2) For both the three and six months endedJune 30, 2014, less than $1 million of the recorded investment in home equity loans that had a payment default in the trailing 12 months was classified as current, compared to less than $1 million for both the three and six months ended June 30, 2013, respectively.

The delinquency status is the primary measure the Company uses to evaluate the performance of loans modified as TDRs. The following table shows the loans modified as TDRs by delinquency category at June 30, 2014 and December 31, 2013 (dollars in millions):

	Modifications Current		Modifications 30-89 Days Delinquent		Modifications 90-179 Days Delinquent		Modifications 180+ Days Delinquent		Recorded Investment in Modifications
June 30, 2014
One- to four-family	$	160	$	12	$	4	$	11	$	187
Home equity	151		12		5		9		177
Total	$	311	$	24	$	9	$	20	$	364
December 31, 2013
One- to four-family	$	817	$	92	$	39	$	88	$	1,036
Home equity	162		13		4		9		188
Total	$	979	$	105	$	43	$	97	$	1,224

The decrease in the one- to four-family TDRs was primarily due to the sale of $0.8 billion of our one- to four-family loans modified as TDRs during the six months endedJune 30, 2014.

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Accounting for Derivative Instruments and Hedging Activities (Details - Fair Value of Derivatives) (Designated as Hedging Instrument [Member], USD $) In Millions, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Derivatives, Fair Value [Line Items]
Derivative, Notional Amount	$ 4,392	$ 4,919
Derivative Asset	52	107
Derivative Liability	(160)	(169)
Derivative Asset (Liability), Net	(108)	(62)
Cash Flow Hedging [Member]
Derivatives, Fair Value [Line Items]
Derivative, Notional Amount	3,100	3,305
Derivative Asset	26	27
Derivative Liability	(144)	(168)
Derivative Asset (Liability), Net	(118)	(141)
Cash Flow Hedging [Member] | Pay Fixed Rate Swaps [Member]
Derivatives, Fair Value [Line Items]
Derivative, Notional Amount	2,025	2,480
Derivative Asset	7	19
Derivative Liability	(144)	(168)
Derivative Asset (Liability), Net	(137)	(149)
Cash Flow Hedging [Member] | Purchased Options [Member]
Derivatives, Fair Value [Line Items]
Derivative, Notional Amount	1,075	825
Derivative Asset	19	8
Derivative Liability	0	0
Derivative Asset (Liability), Net	19	8
Fair Value Hedging [Member] | Pay Fixed Rate Swaps [Member]
Derivatives, Fair Value [Line Items]
Derivative, Notional Amount	1,292	1,614
Derivative Asset	26	80
Derivative Liability	(16)	(1)
Derivative Asset (Liability), Net	$ 10	$ 79

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Offsetting Assets and Liabilities

6 Months Ended

Jun. 30, 2014

Offsetting Assets and Liabilities [Abstract]

Offsetting Assets and Liabilities [Text Block]

OFFSETTING ASSETS AND LIABILITIES

For financial statement purposes, the Company does not offset derivative instruments, repurchase agreements or securities borrowing and securities lending transactions. The Company’s derivative instruments, repurchase agreements and securities borrowing and securities lending transactions are generally transacted under master agreements that are widely used by counterparties and that may allow for net settlements of payments in the normal course, as well as offsetting of all contracts with a given counterparty in the event of bankruptcy or default of one of the two parties to the transaction. The following table presents information about these transactions to enable the users of the Company’s financial statements to evaluate the potential effect of rights of setoff between these recognized assets and recognized liabilities at June 30, 2014 and December 31, 2013 (dollars in millions):

										Gross Amounts Not Offset in the Consolidated Balance Sheet
				Gross Amounts of Recognized Assets and Liabilities		Gross Amounts Offset in the Consolidated Balance Sheet		Net Amounts Presented in the Consolidated Balance Sheet		Financial Instruments			Collateral Received or Pledged (Including Cash)			Net Amount
June 30, 2014
	Assets:
		Deposits paid for securities borrowed (1)(5)		$	420	$	—	$	420	$	(264	)	$	(147	)	$	9
		Derivative assets (1)(3)		51		—		51		(37		)	(5		)	9
			Total	$	471	$	—	$	471	$	(301	)	$	(152	)	$	18
	Liabilities:
		Repurchase agreements (4)		$	3,742	$	—	$	3,742	$	—		$	(3,742	)	$	—
		Deposits received for securities loaned (2)(6)		1,713		—		1,713		(264		)	(1,346		)	103
		Derivative liabilities (2)(3)		144		—		144		(36		)	(108		)	—
			Total	$	5,599	$	—	$	5,599	$	(300	)	$	(5,196	)	$	103
December 31, 2013
	Assets:
		Deposits paid for securities borrowed (1)(5)		$	536	$	—	$	536	$	(247	)	$	(282	)	$	7
		Derivative assets (1)(3)		92		—		92		(48		)	(12		)	32
			Total	$	628	$	—	$	628	$	(295	)	$	(294	)	$	39
	Liabilities:
		Repurchase agreements (4)		$	4,543	$	—	$	4,543	$	—		$	(4,537	)	$	6
		Deposits received for securities loaned (2)(6)		1,050		—		1,050		(247		)	(740		)	63
		Derivative liabilities (2)(3)		168		—		168		(48		)	(120		)	—
			Total	$	5,761	$	—	$	5,761	$	(295	)	$	(5,397	)	$	69

(1) Net amounts presented in the consolidated balance sheet are reflected in the other assets line item.

(2) Net amounts presented in the consolidated balance sheet are reflected in the other liabilities line item.

(3) Excludes net accrued interest payable of $17 million and $19 million at June 30, 2014 and December 31, 2013, respectively.

(4) The Company pledges available-for-sale and held-to-maturity securities as collateral for amounts due on repurchase agreements and derivative liabilities. The collateral pledged included available-for-sale securities at fair value and held-to-maturity securities at amortized cost for both June 30, 2014 and December 31, 2013.

(5) Included in the gross amounts of deposits paid for securities borrowed was $256 million and $415 million at June 30, 2014 and December 31, 2013, respectively, transacted through a program with a clearing organization, which guarantees the return of cash to the Company. For presentation purposes, these amounts presented are based on the original counterparties to the Company’s master securities loan agreements.

(6) Included in the gross amounts of deposits received for securities loaned was $1.1 billion and $682 million at June 30, 2014 and December 31, 2013, respectively, transacted through a program with a clearing organization, which guarantees the return of securities to the Company. For presentation purposes, these amounts presented are based on the original counterparties to the Company’s master securities loan agreements.

Effective June 10, 2013, certain types of derivatives that the Company trades are subject to the Dodd-Frank Act clearing mandate and as a result, are subject to derivatives clearing agreements ("cleared derivatives contracts"). These cleared derivatives contracts enable clearing by a derivatives clearing organization through a clearing member. Under the contracts, the clearing member typically has a one-way right to offset all contracts in the event of the Company’s default or bankruptcy. As such, the cleared derivatives contracts are not bilateral master netting agreements and do not allow for offsetting. At June 30, 2014 and December 31, 2013, the Company had $1 million and $15 million, respectively, in derivative assets of cleared derivatives contracts and $16 million and $1 million, respectively, in derivative liabilities of cleared derivatives contracts.

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Available-for-Sale and Held-to-Maturity Securities

6 Months Ended

Jun. 30, 2014

Investments, Debt and Equity Securities [Abstract]

AVAILABLE-FOR-SALE AND HELD-TO-MATURITY SECURITIES

AVAILABLE-FOR-SALE AND HELD-TO-MATURITY SECURITIES

The amortized cost and fair value of available-for-sale and held-to-maturity securities at June 30, 2014 and December 31, 2013 are shown in the following tables (dollars in millions):

	Amortized Cost		Gross Unrealized / Unrecognized Gains		Gross Unrealized / Unrecognized Losses			Fair Value
June 30, 2014:
Available-for-sale securities:
Debt securities:
Agency residential mortgage-backed securities and CMOs	$	11,505	$	116	$	(160	)	$	11,461
Agency debentures	523		12		(18		)	517
Agency debt securities	771		25		(2		)	794
Municipal bonds	41		1		(1		)	41
Corporate bonds	5		—		(1		)	4
Total debt securities	12,845		154		(182		)	12,817
Publicly traded equity securities(1)	20		—		—			20
Total available-for-sale securities	$	12,865	$	154	$	(182	)	$	12,837
Held-to-maturity securities:
Agency residential mortgage-backed securities and CMOs	$	9,084	$	185	$	(60	)	$	9,209
Agency debentures	163		3		—			166
Agency debt securities	2,109		46		(12		)	2,143
Total held-to-maturity securities	$	11,356	$	234	$	(72	)	$	11,518
December 31, 2013:
Available-for-sale securities:
Debt securities:
Residential mortgage-backed securities:
Agency mortgage-backed securities and CMOs	$	12,505	$	66	$	(335	)	$	12,236
Non-agency CMOs	17		2		(5		)	14
Total residential mortgage-backed securities	12,522		68		(340		)	12,250
Agency debentures	520		—		(54		)	466
Agency debt securities	832		8		(9		)	831
Municipal bonds	42		—		(2		)	40
Corporate bonds	6		—		(1		)	5
Total debt securities	13,922		76		(406		)	13,592
Total available-for-sale securities	$	13,922	$	76	$	(406	)	$	13,592
Held-to-maturity securities:
Agency residential mortgage-backed securities and CMOs	$	8,359	$	99	$	(165	)	$	8,293
Agency debentures	164		4		—			168
Agency debt securities	1,658		13		(40		)	1,631
Total held-to-maturity securities	$	10,181	$	116	$	(205	)	$	10,092

(1) Publicly traded equity securities consisted of an investment in a mutual fund related to the Community Reinvestment Act.

Contractual Maturities

The contractual maturities of all available-for-sale and held-to-maturity debt securities at June 30, 2014 are shown below (dollars in millions):

	Amortized Cost		Fair Value
Available-for-sale debt securities:
Due within one year	$	2	$	2
Due within one to five years	14		14
Due within five to ten years	994		1,003
Due after ten years	11,835		11,798
Total available-for-sale debt securities	$	12,845	$	12,817
Held-to-maturity debt securities:
Due within one to five years	$	969	$	1,005
Due within five to ten years	2,605		2,686
Due after ten years	7,782		7,827
Total held-to-maturity debt securities	$	11,356	$	11,518

The Company pledged $2.1 billion at both June 30, 2014 and December 31, 2013, of available-for-sale securities and $2.5 billion and $3.4 billion at June 30, 2014 and December 31, 2013, respectively, of held-to-maturity securities as collateral for repurchase agreements, derivatives and other purposes.

Investments with Unrealized or Unrecognized Losses

The following tables show the fair value and unrealized or unrecognized losses on available-for-sale and held-to-maturity securities, aggregated by investment category, and the length of time that individual securities have been in a continuous unrealized or unrecognized loss position at June 30, 2014 and December 31, 2013 (dollars in millions):

	Less than 12 Months					12 Months or More					Total
	Fair Value		Unrealized / Unrecognized Losses			Fair Value		Unrealized / Unrecognized Losses			Fair Value		Unrealized / Unrecognized Losses
June 30, 2014:
Available-for-sale securities:
Debt securities:
Agency residential mortgage-backed securities and CMOs	$	305	$	(1	)	$	5,034	$	(159	)	$	5,339	$	(160	)
Agency debentures	—		—			339		(18		)	339		(18		)
Agency debt securities	—		—			169		(2		)	169		(2		)
Municipal bonds	—		—			18		(1		)	18		(1		)
Corporate bonds	—		—			4		(1		)	4		(1		)
Publicly traded equity securities	20		—			—		—			20		—
Total temporarily impaired available-for-sale securities	$	325	$	(1	)	$	5,564	$	(181	)	$	5,889	$	(182	)
Held-to-maturity securities:
Agency residential mortgage-backed securities and CMOs	$	165	$	(1	)	$	2,703	$	(59	)	$	2,868	$	(60	)
Agency debt securities	—		—			785		(12		)	785		(12		)
Total temporarily impaired held-to-maturity securities	$	165	$	(1	)	$	3,488	$	(71	)	$	3,653	$	(72	)
December 31, 2013:
Available-for-sale securities:
Debt securities:
Agency mortgage-backed securities and CMOs	$	6,422	$	(268	)	$	1,266	$	(67	)	$	7,688	$	(335	)
Non-agency CMOs	—		—			11		(5		)	11		(5		)
Agency debentures	466		(54		)	—		—			466		(54		)
Agency debt securities	384		(9		)	—		—			384		(9		)
Municipal bonds	27		(2		)	—		—			27		(2		)
Corporate bonds	—		—			5		(1		)	5		(1		)
Total temporarily impaired available-for-sale securities	$	7,299	$	(333	)	$	1,282	$	(73	)	$	8,581	$	(406	)
Held-to-maturity securities:
Agency residential mortgage-backed securities and CMOs	$	3,607	$	(121	)	$	891	$	(44	)	$	4,498	$	(165	)
Agency debt securities	1,153		(40		)	—		—			1,153		(40		)
Total temporarily impaired held-to-maturity securities	$	4,760	$	(161	)	$	891	$	(44	)	$	5,651	$	(205	)

The Company does not believe that any individual unrealized loss in the available-for-sale or unrecognized loss in the held-to-maturity portfolio as of June 30, 2014 represents a credit loss. The credit loss component is the difference between the security’s amortized cost basis and the present value of its expected future cash flows, and is recognized in earnings. The noncredit loss component is the difference between the present value of its expected future cash flows and the fair value and is recognized through other comprehensive income (loss). The Company assessed whether it intends to sell, or whether it is more likely than not that the Company will be required to sell a security before recovery of its amortized cost basis. For debt securities that are considered other-than-temporarily impaired and that the Company does not intend to sell as of the balance sheet date and will not be required to sell prior to recovery of its amortized cost basis, the Company determines the amount of the impairment that is related to credit and the amount due to all other factors.

The majority of the unrealized or unrecognized losses on mortgage-backed securities are attributable to changes in interest rates and a re-pricing of risk in the market. Agency mortgage-backed securities and CMOs, agency debentures and agency debt securities are guaranteed by U.S. government sponsored and federal agencies. Municipal bonds and corporate bonds are evaluated by reviewing the credit-worthiness of the issuer and general market conditions. The Company does not intend to sell the debt securities in an unrealized or unrecognized loss position as of the balance sheet date and it is not more likely than not that the Company will be required to sell the debt securities before the anticipated recovery of its remaining amortized cost of the debt securities in an unrealized or unrecognized loss position at June 30, 2014.

The following table presents a roll forward for the three and six months ended June 30, 2014 and 2013 of the credit loss component on debt securities held by the Company that had a noncredit loss recognized in other comprehensive income (loss) and had a credit loss recognized in earnings (dollars in millions):

	Three Months Ended June 30,				Six Months Ended June 30,
	2014		2013		2014			2013
Credit loss balance, beginning of period	$	152	$	165	$	166		$	187
Additions:
Subsequent credit impairment	—		—		—			1
Debt securities sold	—		—		(14		)	(23		)
Credit loss balance, end of period (1)	$	152	$	165	$	152		$	165

(1) The credit loss balance at June 30, 2014 and 2013 included $123 million and $114 million, respectively, of credit losses associated with debt securities that have been factored to zero, but the Company still holds legal title to these securities until maturity or until they are sold.

Gains on Loans and Securities, Net

The detailed components of the gains on loans and securities, net line item on the consolidated statement of income (loss) for the three and six months ended June 30, 2014 and 2013 are as follows (dollars in millions):

	Three Months Ended June 30,					Six Months Ended June 30,
	2014			2013		2014			2013
Gains on loans, net	$	7		$	—	$	7		$	—
Gains on securities, net:
Gains on available-for-sale securities	3			18		22			42
Losses on available-for-sale securities	—			—		—			(8		)
Hedge ineffectiveness	(3		)	3		(7		)	3
Gains on securities, net	—			21		15			37
Gains on loans and securities, net	$	7		$	21	$	22		$	37

During the second quarter of 2014, the Company recognized a pre-tax gain of $7 million on the sale of $0.8 billion of one- to four-family loans modified as TDRs. During the six months ended June 30, 2014, the Company sold $17 million in amortized cost of its available-for-sale non-agency CMOs for proceeds of approximately $23 million, which resulted in a pre-tax gain of $6 million. Similarly, during the six months ended June 30, 2013, the Company sold $231 million in amortized cost of its available-for-sale non-agency CMOs for proceeds of approximately $227 million, which resulted in a pre-tax net loss of $4 million.

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Accounting for Derivative Instruments and Hedging Activities

6 Months Ended

Jun. 30, 2014

Derivative Instruments and Hedging Activities Disclosure [Abstract]

ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

The Company enters into derivative transactions primarily to protect against interest rate risk on the value of certain assets, liabilities and future cash flows. Cash flow hedges, which include a combination of interest rate swaps and purchased options, including caps and floors, are used primarily to reduce the variability of future cash flows associated with existing variable-rate assets and liabilities and forecasted issuances of liabilities. Fair value hedges, which include interest rate swaps, are used to offset exposure to changes in value of certain fixed-rate assets and liabilities. Each derivative is recorded on the consolidated balance sheet at fair value as a freestanding asset or liability. The following table summarizes the fair value amounts of derivatives designated as hedging instruments reported in the consolidated balance sheet at June 30, 2014 and December 31, 2013 (dollars in millions):

			Fair Value
	Notional		Asset(1)		Liability(2)			Net(3)
June 30, 2014
Interest rate contracts:
Cash flow hedges:
Pay-fixed rate swaps	$	2,025	$	7	$	(144	)	$	(137	)
Purchased options	1,075		19		—			19
Total cash flow hedges	3,100		26		(144		)	(118		)
Fair value hedges:
Pay-fixed rate swaps	1,292		26		(16		)	10
Total derivatives designated as hedging instruments(4)	$	4,392	$	52	$	(160	)	$	(108	)
December 31, 2013
Interest rate contracts:
Cash flow hedges:
Pay-fixed rate swaps	$	2,480	$	19	$	(168	)	$	(149	)
Purchased options	825		8		—			8
Total cash flow hedges	3,305		27		(168		)	(141		)
Fair value hedges:
Pay-fixed rate swaps	1,614		80		(1		)	79
Total derivatives designated as hedging instruments(4)	$	4,919	$	107	$	(169	)	$	(62	)

(1) Reflected in the other assets line item on the consolidated balance sheet.

(2) Reflected in the other liabilities line item on the consolidated balance sheet.

(3) Represents derivative assets net of derivative liabilities for disclosure purposes only.

(4) All derivatives were designated as hedging instruments at June 30, 2014 and December 31, 2013.

Cash Flow Hedges

The effective portion of changes in fair value of the derivative instruments that hedge cash flows is reported as a component of accumulated other comprehensive loss, net of tax in the consolidated balance sheet, for both active and discontinued hedges. Amounts are included in net operating interest income as a yield adjustment in the same period the hedged forecasted transaction affects earnings. The ineffective portion of changes in fair value of the derivative instrument, which is equal to the excess of the cumulative change in the fair value of the actual derivative over the cumulative change in the fair value of a hypothetical derivative which is created to match the exact terms of the underlying instruments being hedged, is reported in the gains on loans and securities, net line item in the consolidated statement of income (loss).

If it becomes probable that a hedged forecasted transaction will not occur, amounts included in accumulated other comprehensive loss related to the specific hedging instruments would be immediately reclassified into the gains on loans and securities, net line item in the consolidated statement of income (loss). If hedge accounting is discontinued because a derivative instrument is sold, terminated or otherwise de-designated, amounts included in accumulated other comprehensive loss related to the specific hedging instrument continue to be reported in accumulated other comprehensive loss until the forecasted transaction affects earnings.

The future issuances of liabilities, including repurchase agreements, are largely dependent on the market demand and liquidity in the wholesale borrowings market. At June 30, 2014, the Company believes the forecasted issuance of all debt in cash flow hedge relationships is probable. However, unexpected changes in market conditions in future periods could impact the ability to issue this debt. The Company believes the forecasted issuance of debt in the form of repurchase agreements is most susceptible to an unexpected change in market conditions.

The following table summarizes the effect of interest rate contracts designated and qualifying as hedging instruments in cash flow hedges on accumulated other comprehensive loss and on the consolidated statement of income (loss) for the three and six months ended June 30, 2014 and 2013 (dollars in millions):

	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
Gains (losses) on derivatives recognized in OCI (effective portion), net of tax	$	(16	)	$	62		$	(32	)	$	68
Losses reclassified from AOCI into earnings (effective portion), net of tax	$	(20	)	$	(23	)	$	(41	)	$	(43	)
Cash flow hedge ineffectiveness gains (losses)(1)	$	—		$	1		$	—		$	1

(1) The cash flow hedge ineffectiveness is reflected in the gains on loans and securities, net line item on the consolidated statement of income (loss).

During the upcoming twelve months, the Company expects to include a pre-tax amount of approximately $121 million of net unrealized losses that are currently reflected in accumulated other comprehensive loss in net operating interest income as a yield adjustment in the same periods in which the related hedged items affect earnings. The maximum length of time over which transactions are hedged is 8 years.

The following table shows the balance in accumulated other comprehensive loss attributable to active and discontinued cash flow hedges at June 30, 2014 and December 31, 2013 (dollars in millions):

	June 30,   2014			December 31,   2013
Accumulated other comprehensive loss balance (net of tax) related to:
Discontinued cash flow hedges	$	(184	)	$	(201	)
Active cash flow hedges	(105		)	(97		)
Total cash flow hedges	$	(289	)	$	(298	)

The following table shows the balance in accumulated other comprehensive loss attributable to cash flow hedges by type of hedged item at June 30, 2014 and December 31, 2013 (dollars in millions):

	June 30,   2014			December 31,   2013
Repurchase agreements	$	(373	)	$	(379	)
FHLB advances	(93		)	(99		)
Total balance of cash flow hedges, before tax	(466		)	(478		)
Tax benefit	177			180
Total balance of cash flow hedges, net of tax	$	(289	)	$	(298	)

Fair Value Hedges

Fair value hedges are accounted for by recording the fair value of the derivative instrument and the fair value of the asset or liability being hedged on the consolidated balance sheet. Changes in the fair value of both the derivatives and the underlying assets or liabilities are recognized in the gains on loans and securities, net line item in the consolidated statement of income (loss). To the extent that the hedge is ineffective, the changes in the fair values will not offset and the difference, or hedge ineffectiveness, is reflected in the gains on loans and securities, net line item in the consolidated statement of income (loss).

Hedge accounting is discontinued for fair value hedges if a derivative instrument is sold, terminated or otherwise de-designated. If fair value hedge accounting is discontinued, the previously hedged item is no longer adjusted for changes in fair value through the consolidated statement of income (loss) and the cumulative net gain or loss on the hedged asset or liability at the time of de-designation is amortized to interest income or interest expense using the effective interest method over the expected remaining life of the hedged item. Changes in the fair value of the derivative instruments after de-designation of fair value hedge accounting are recorded in the gains on loans and securities, net line item in the consolidated statement of income (loss).

The following table summarizes the effect of interest rate contracts designated and qualifying as hedging instruments in fair value hedges and related hedged items on the consolidated statement of income (loss) for the three and six months ended June 30, 2014 and 2013 (dollars in millions):

	Three Months Ended June 30,
	2014								2013
	Hedging Instrument			Hedged Item		Hedge Ineffectiveness(1)			Hedging Instrument		Hedged Item			Hedge Ineffectiveness(1)
Agency debentures	$	(26	)	$	23	$	(3	)	$	29	$	(27	)	$	2
Agency mortgage-backed securities	(6		)	6		—			28		(28		)	—
Total gains (losses) included in earnings	$	(32	)	$	29	$	(3	)	$	57	$	(55	)	$	2
	Six Months Ended June 30,
	2014								2013
	Hedging Instrument			Hedged Item		Hedge Ineffectiveness(1)			Hedging Instrument		Hedged Item			Hedge Ineffectiveness(1)
Agency debentures	$	(57	)	$	50	$	(7	)	$	45	$	(43	)	$	2
Agency mortgage-backed securities	(17		)	17		—			28		(28		)	—
Total gains (losses) included in earnings	$	(74	)	$	67	$	(7	)	$	73	$	(71	)	$	2

(1) Reflected in the gains on loans and securities, net line item on the consolidated statement of income (loss).

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Securities Sold Under Agreements To Repurchase And FHLB Advances And Other Borrowings (Details - Textuals) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Extinguishment of Debt [Line Items]
Losses on early extinguishment of debt	$ 0	$ 0	$ 12	$ 0
Securities Sold under Agreements to Repurchase [Member]
Extinguishment of Debt [Line Items]
Expiration of Debt, Amount			600
Extinguishment of debt, amount			100
Losses on early extinguishment of debt			$ 12

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Accumulated Other Comprehensive Loss Accumulated Other Comprehensive Loss (Details - Reclassification) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Gains on loans and securities, net	$ 7	$ 21	$ 22	$ 37
Operating interest income	322	302	644	602
Operating interest expense	(52)	(59)	(108)	(118)
Income (loss) before income tax expense	112	(47)	256	10
Income tax expense	(43)	(7)	(90)	(29)
Net income (loss)	69	(54)	166	(19)
Available-for-sale Securities [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Gains on loans and securities, net	3	18	22	34
Income tax expense	(1)	(7)	(8)	(13)
Net income (loss)	2	11	14	21
Cash Flow Hedging Instruments [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Operating interest income	0	3	0	5
Operating interest expense	(32)	(37)	(67)	(72)
Income (loss) before income tax expense	(32)	(34)	(67)	(67)
Income tax expense	12	11	26	24
Net income (loss)	$ (20)	$ (23)	$ (41)	$ (43)

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Securities Sold Under Agreements to Repurchase and FHLB Advances and Other Borrowings (Details) (USD $)	Jun. 30, 2014	Dec. 31, 2013
Debt, Fiscal Year Maturity [Line Items]
Debt, Maturities, Repayments of Principal in Next Rolling Twelve Months, Weighted Average Interest Rate	0.34%
Debt, Maturities, Repayments of Principal in Rolling Year Two, Weighted Average Interest Rate	0.52%
Debt, Maturities, Repayments of Principal in Rolling Year Three, Weighted Average Interest Rate	0.85%
Debt, Maturities, Repayments of Principal in Rolling Year Four, Weighted Average Interest Rate	0.40%
Debt, Maturities, Repayments of Principal after Rolling Year Five, Weighted Average Interest Rate	2.91%
Debt, Prior to Adjustments, Weighted Average Interest Rate	0.64%
Debt, Weighted Average Interest Rate	0.64%	0.72%
Repurchase Agreements [Member]
Debt, Fiscal Year Maturity [Line Items]
Debt, Maturities, Repayments of Principal in Next Rolling Twelve Months	$ 3,092,000,000
Debt, Maturities, Repayments of Principal in Rolling Year Two	250,000,000
Debt, Maturities, Repayments of Principal in Rolling Year Three	400,000,000
Debt, Maturities, Repayments of Principal in Rolling Year Four	0
Debt, Maturities, Repayments of Principal after Rolling Year Five	0
Debt, Prior to Adjustments	3,742,000,000
Debt, Fair Value Hedge Adjustments	0
Deferred Costs	0
Debt	3,742,000,000	4,543,000,000
Securities Sold Under Agreements To Repurchase Maximum Month end Outstanding Amount	4,900,000,000	4,600,000,000
Federal Home Loan Bank Advances [Member]
Debt, Fiscal Year Maturity [Line Items]
Debt, Maturities, Repayments of Principal in Next Rolling Twelve Months	270,000,000
Debt, Maturities, Repayments of Principal in Rolling Year Two	0
Debt, Maturities, Repayments of Principal in Rolling Year Three	250,000,000
Debt, Maturities, Repayments of Principal in Rolling Year Four	400,000,000
Debt, Maturities, Repayments of Principal after Rolling Year Five	0
Debt, Prior to Adjustments	920,000,000
Debt, Fair Value Hedge Adjustments	24,000,000
Deferred Costs	(84,000,000)
Debt	860,000,000	851,000,000
Miscellaneous Other Borrowings [Member]
Debt, Fiscal Year Maturity [Line Items]
Debt, Maturities, Repayments of Principal in Next Rolling Twelve Months	1,000,000
Debt, Maturities, Repayments of Principal in Rolling Year Two	2,000,000
Debt, Maturities, Repayments of Principal in Rolling Year Three	0
Debt, Maturities, Repayments of Principal in Rolling Year Four	0
Debt, Maturities, Repayments of Principal after Rolling Year Five	428,000,000
Debt, Prior to Adjustments	431,000,000
Debt, Fair Value Hedge Adjustments	0
Deferred Costs	0
Debt	431,000,000	428,000,000
Total Securities Sold Under Agreements to Repurchase and FHLB Advances and Other Borrowings [Member]
Debt, Fiscal Year Maturity [Line Items]
Debt, Maturities, Repayments of Principal in Next Rolling Twelve Months	3,363,000,000
Debt, Maturities, Repayments of Principal in Rolling Year Two	252,000,000
Debt, Maturities, Repayments of Principal in Rolling Year Three	650,000,000
Debt, Maturities, Repayments of Principal in Rolling Year Four	400,000,000
Debt, Maturities, Repayments of Principal after Rolling Year Five	428,000,000
Debt, Prior to Adjustments	5,093,000,000
Debt, Fair Value Hedge Adjustments	24,000,000
Deferred Costs	(84,000,000)
Debt	$ 5,033,000,000	$ 5,822,000,000

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Regulatory Requirements (Tables)

6 Months Ended

Jun. 30, 2014

Regulatory Capital Requirements [Abstract]

Schedule Of Subsidiary Compliance With Regulatory Capital Requirements

The tables below summarize the minimum excess capital requirements for the Company’s broker-dealer subsidiaries at June 30, 2014 and December 31, 2013 (dollars in millions):

	Required Net Capital		Net Capital		Excess Net Capital
June 30, 2014:
E*TRADE Clearing LLC(1)	$	158	$	751	$	593
E*TRADE Securities LLC(1)	—		360		360
Other broker-dealers	1		16		15
Total	$	159	$	1,127	$	968
December 31, 2013:
E*TRADE Clearing LLC(1)	$	144	$	715	$	571
E*TRADE Securities LLC(1)	—		261		261
G1 Execution Services, LLC(2)	1		22		21
Other broker-dealers	2		22		20
Total	$	147	$	1,020	$	873

(1) Elected to use the Alternative method to compute net capital. The net capital requirement was $250,000 for E*TRADE Securities LLC for both periods presented.

(2) Elected to use the Aggregate Indebtedness method to compute net capital. G1 Execution Services, LLC is the Company's market maker and was held-for-sale at December 31, 2013. The sale of G1 Execution Services, LLC was completed on February 10, 2014.

Schedule of Compliance with Regulatory Capital Requirements under Banking Regulations

E*TRADE Bank’s actual and required capital amounts and ratios at June 30, 2014 and December 31, 2013 are presented in the table below (dollars in millions):

	Actual				Minimum Required to be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio		Amount		Ratio		Excess Capital
June 30, 2014:
Total capital	$	4,545	25.97	%	$	1,750	10.00	%	$	2,795
Tier 1 capital	$	4,324	24.70	%	$	1,050	6.00	%	$	3,274
Tier 1 leverage	$	4,324	10.15	%	$	2,130	5.00	%	$	2,194
December 31, 2013:
Total capital	$	4,331	24.25	%	$	1,786	10.00	%	$	2,545
Tier 1 capital	$	4,105	22.98	%	$	1,072	6.00	%	$	3,033
Tier 1 leverage	$	4,105	9.51	%	$	2,158	5.00	%	$	1,947

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Loans Receivable, Net (Details - Credit Quality) (USD $)	6 Months Ended	12 Months Ended
	Jun. 30, 2014	Dec. 31, 2013
Credit Quality Indicators [Line Items]
Greater Than 10% of Loans, States Other than California, Count	0	0
CALIFORNIA | One- To Four-Family and Home Equity Benchmark [Member] | Financing Receivables, State, Risk [Member]
Credit Quality Indicators [Line Items]
Concentration Risk, Percentage	38.00%	40.00%
One- To Four-Family [Member]
Credit Quality Indicators [Line Items]
Total mortgage loans receivable	$ 3,345,000,000	$ 4,475,000,000
Average estimated current LTV/CLTV	81.00%	90.00%
Average LTV/CLTV at loan origination	71.00%	72.00%
One- To Four-Family [Member] | Minimum [Member]
Credit Quality Indicators [Line Items]
Loans, Interest-Only Period	5 years
Loans, Amortization Period	20 years
One- To Four-Family [Member] | Maximum [Member]
Credit Quality Indicators [Line Items]
Loans, Interest-Only Period	10 years
Loans, Amortization Period	25 years
One- To Four-Family [Member] | One- To Four-Family Benchmark [Member] | Interest Only Not Yet Amortizing Risk [Member]
Credit Quality Indicators [Line Items]
Concentration Risk, Percentage	42.00%
One- To Four-Family [Member] | One- To Four-Family Benchmark [Member] | Interest only, Already Amortizing
Credit Quality Indicators [Line Items]
Concentration Risk, Percentage	58.00%
One- To Four-Family [Member] | One- To Four-Family Benchmark [Member] | Interest Only Conversion to Amortizing Loans, Through December 31, 2014
Credit Quality Indicators [Line Items]
Concentration Risk, Percentage	1.00%
One- To Four-Family [Member] | One- To Four-Family Benchmark [Member] | Interest Only Conversion to Amortizing Loans, Year ending December 31, 2015
Credit Quality Indicators [Line Items]
Concentration Risk, Percentage	4.00%
One- To Four-Family [Member] | One- To Four-Family Benchmark [Member] | Interest Only Conversion to Amortizing Loans, Year Ending December 31, 2016
Credit Quality Indicators [Line Items]
Concentration Risk, Percentage	16.00%
One- To Four-Family [Member] | One- To Four-Family Benchmark [Member] | Interest Only Conversion to Amortizing Loans, Year ending December 31, 2017
Credit Quality Indicators [Line Items]
Concentration Risk, Percentage	21.00%
One- To Four-Family [Member] | Interest Only Not Yet Amortizing [Member] | Interest Only Not Yet Amortizing Borrowers Paying Minimum 2500 Risk [Member]
Credit Quality Indicators [Line Items]
Concentration Risk, Percentage	14.00%
Voluntary Annual Principal Payment Threshold	2,500
One- To Four-Family [Member] | Interest Only Not Yet Amortizing Borrowers Paying Minimum 2500 [Member] | Interest Only Not Yet Amortizing Borrowers Paying Minimum 10000 Risk [Member]
Credit Quality Indicators [Line Items]
Concentration Risk, Credit Risk, Loan Products	slightly over a third
Voluntary Annual Principal Payment Threshold	10,000
One- To Four-Family [Member] | Current Loan To Value Or Combined Loan To Value Ratio Less Then 80 Percent [Member]
Credit Quality Indicators [Line Items]
Total mortgage loans receivable	1,823,000,000	1,912,000,000
One- To Four-Family [Member] | Current Loan To Value Or Combined Loan To Value Ratio Between 80 And 100 Percent [Member]
Credit Quality Indicators [Line Items]
Total mortgage loans receivable	919,000,000	1,365,000,000
One- To Four-Family [Member] | Current Loan To Value Or Combined Loan To Value Ratio Between 100 And 120 Percent [Member]
Credit Quality Indicators [Line Items]
Total mortgage loans receivable	378,000,000	711,000,000
One- To Four-Family [Member] | Current Loan To Value Or Combined Loan To Value Ratio Greater Then 120 Percent [Member]
Credit Quality Indicators [Line Items]
Total mortgage loans receivable	225,000,000	487,000,000
One- To Four-Family [Member] | Full Documentation [Member]
Credit Quality Indicators [Line Items]
Total mortgage loans receivable	1,476,000,000	1,847,000,000
One- To Four-Family [Member] | Low Or No Documentation [Member]
Credit Quality Indicators [Line Items]
Total mortgage loans receivable	1,869,000,000	2,628,000,000
One- To Four-Family [Member] | Greater Than 720 [Member]
Credit Quality Indicators [Line Items]
Total mortgage loans receivable	1,924,000,000	2,252,000,000
One- To Four-Family [Member] | Between 719 And 700 [Member]
Credit Quality Indicators [Line Items]
Total mortgage loans receivable	317,000,000	436,000,000
One- To Four-Family [Member] | Between 699 And 680 [Member]
Credit Quality Indicators [Line Items]
Total mortgage loans receivable	263,000,000	366,000,000
One- To Four-Family [Member] | Between 679 And 660 [Member]
Credit Quality Indicators [Line Items]
Total mortgage loans receivable	215,000,000	296,000,000
One- To Four-Family [Member] | Between 659 And 620 [Member]
Credit Quality Indicators [Line Items]
Total mortgage loans receivable	262,000,000	404,000,000
One- To Four-Family [Member] | Less Than 620 [Member]
Credit Quality Indicators [Line Items]
Total mortgage loans receivable	364,000,000	721,000,000
One- To Four-Family [Member] | Current FICO Score Not Available [Member]
Credit Quality Indicators [Line Items]
Total mortgage loans receivable	76,000,000	95,000,000
Home Equity [Member]
Credit Quality Indicators [Line Items]
Total mortgage loans receivable	3,153,000,000	3,454,000,000
Average estimated current LTV/CLTV	94.00%	98.00%
Average LTV/CLTV at loan origination	80.00%	80.00%
Home Equity [Member] | Minimum [Member]
Credit Quality Indicators [Line Items]
Loans, Draw Period	5 years
Home Equity [Member] | Maximum [Member]
Credit Quality Indicators [Line Items]
Loans, Draw Period	10 years
Home Equity [Member] | Interest Only Not Yet Amortizing [Member] | Interest Only Not Yet Amortizing Borrowers Paying Minimum 500 Risk [Member]
Credit Quality Indicators [Line Items]
Concentration Risk, Percentage	40.00%
Voluntary Annual Principal Payment Threshold	500
Home Equity [Member] | Home Equity Line of Credit Benchmark [Member] | Interest Only Not Yet Amortizing Risk [Member]
Credit Quality Indicators [Line Items]
Concentration Risk, Percentage	87.00%
Home Equity [Member] | Home Equity Line of Credit Benchmark [Member] | Interest only, Already Amortizing
Credit Quality Indicators [Line Items]
Concentration Risk, Percentage	13.00%
Home Equity [Member] | Home Equity Line of Credit Benchmark [Member] | Interest Only Conversion to Amortizing Loans, Through December 31, 2014
Credit Quality Indicators [Line Items]
Concentration Risk, Percentage	5.00%
Home Equity [Member] | Home Equity Line of Credit Benchmark [Member] | Interest Only Conversion to Amortizing Loans, Year ending December 31, 2015
Credit Quality Indicators [Line Items]
Concentration Risk, Percentage	27.00%
Home Equity [Member] | Home Equity Line of Credit Benchmark [Member] | Interest Only Conversion to Amortizing Loans, Year Ending December 31, 2016
Credit Quality Indicators [Line Items]
Concentration Risk, Percentage	42.00%
Home Equity [Member] | Home Equity Line of Credit Benchmark [Member] | Interest Only Conversion to Amortizing Loans, Year ending December 31, 2017
Credit Quality Indicators [Line Items]
Concentration Risk, Percentage	13.00%
Home Equity [Member] | Home Equity Line of Credit Benchmark [Member] | Balloon Loan, Percentage [Member]
Credit Quality Indicators [Line Items]
Concentration Risk, Percentage	8.00%
Home Equity [Member] | Interest Only Not Yet Amortizing Borrowers Paying Minimum 500 [Member] | Interest Only Not Yet Amortizing Borrowers Paying Minimum 2500 Risk [Member]
Credit Quality Indicators [Line Items]
Concentration Risk, Credit Risk, Loan Products	slightly under half
Voluntary Annual Principal Payment Threshold	2,500
Home Equity [Member] | Home Equity Benchmark [Member] | Financing Receivables in First Lien Position, Percentage [Member]
Credit Quality Indicators [Line Items]
Concentration Risk, Percentage	15.00%
Home Equity [Member] | Home Equity Benchmark [Member] | Financing Receivables in the First and Second Lien Position, Percent [Member]
Credit Quality Indicators [Line Items]
Concentration Risk, Percentage	1.00%
Home Equity [Member] | Home Equity Benchmark [Member] | Home Equity Installment Loans, Percentage [Member]
Credit Quality Indicators [Line Items]
Concentration Risk, Percentage	20.00%
Home Equity [Member] | Home Equity Benchmark [Member] | Home Equity Line of Credit, Percentage [Member]
Credit Quality Indicators [Line Items]
Concentration Risk, Percentage	80.00%
Home Equity [Member] | Current Loan To Value Or Combined Loan To Value Ratio Less Then 80 Percent [Member]
Credit Quality Indicators [Line Items]
Total mortgage loans receivable	1,164,000,000	1,142,000,000
Home Equity [Member] | Current Loan To Value Or Combined Loan To Value Ratio Between 80 And 100 Percent [Member]
Credit Quality Indicators [Line Items]
Total mortgage loans receivable	837,000,000	866,000,000
Home Equity [Member] | Current Loan To Value Or Combined Loan To Value Ratio Between 100 And 120 Percent [Member]
Credit Quality Indicators [Line Items]
Total mortgage loans receivable	632,000,000	736,000,000
Home Equity [Member] | Current Loan To Value Or Combined Loan To Value Ratio Greater Then 120 Percent [Member]
Credit Quality Indicators [Line Items]
Total mortgage loans receivable	520,000,000	710,000,000
Home Equity [Member] | Full Documentation [Member]
Credit Quality Indicators [Line Items]
Total mortgage loans receivable	1,616,000,000	1,769,000,000
Home Equity [Member] | Low Or No Documentation [Member]
Credit Quality Indicators [Line Items]
Total mortgage loans receivable	1,537,000,000	1,685,000,000
Home Equity [Member] | Greater Than 720 [Member]
Credit Quality Indicators [Line Items]
Total mortgage loans receivable	1,679,000,000	1,811,000,000
Home Equity [Member] | Between 719 And 700 [Member]
Credit Quality Indicators [Line Items]
Total mortgage loans receivable	313,000,000	343,000,000
Home Equity [Member] | Between 699 And 680 [Member]
Credit Quality Indicators [Line Items]
Total mortgage loans receivable	261,000,000	293,000,000
Home Equity [Member] | Between 679 And 660 [Member]
Credit Quality Indicators [Line Items]
Total mortgage loans receivable	215,000,000	245,000,000
Home Equity [Member] | Between 659 And 620 [Member]
Credit Quality Indicators [Line Items]
Total mortgage loans receivable	286,000,000	310,000,000
Home Equity [Member] | Less Than 620 [Member]
Credit Quality Indicators [Line Items]
Total mortgage loans receivable	399,000,000	452,000,000
Home Equity [Member] | Current FICO Score Not Available [Member]
Credit Quality Indicators [Line Items]
Total mortgage loans receivable	$ 4,000,000	$ 10,000,000

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Commitments, Contingencies and Other Regulatory Matters

6 Months Ended

Jun. 30, 2014

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS, CONTINGENCIES AND OTHER REGULATORY MATTERS

COMMITMENTS, CONTINGENCIES AND OTHER REGULATORY MATTERS

Legal Matters

Litigation Matters

On October 27, 2000, Ajaxo, Inc. ("Ajaxo") filed a complaint in the Superior Court for the State of California, County of Santa Clara. Ajaxo sought damages and certain non-monetary relief for the Company’s alleged breach of a non-disclosure agreement with Ajaxo pertaining to certain wireless technology that Ajaxo offered the Company as well as damages and other relief against the Company for their alleged misappropriation of Ajaxo’s trade secrets. Following a jury trial, a judgment was entered in 2003 in favor of Ajaxo against the Company for $1 million for breach of the Ajaxo non-disclosure agreement. Although the jury found in favor of Ajaxo on its claim against the Company for misappropriation of trade secrets, the trial court subsequently denied Ajaxo’s requests for additional damages and relief. On December 21, 2005, the California Court of Appeal affirmed the above-described award against the Company for breach of the nondisclosure agreement but remanded the case to the trial court for the limited purpose of determining what, if any, additional damages Ajaxo may be entitled to as a result of the jury’s previous finding in favor of Ajaxo on its claim against the Company for misappropriation of trade secrets. Although the Company paid Ajaxo the full amount due on the above-described judgment, the case was remanded back to the trial court, and on May 30, 2008, a jury returned a verdict in favor of the Company denying all claims raised and demands for damages against the Company. Following the trial court’s entry of judgment in favor of the Company on September 5, 2008, Ajaxo filed post-trial motions for vacating this entry of judgment and requesting a new trial. The trial court denied these motions. On December 2, 2008, Ajaxo filed a notice of appeal with the Court of Appeal of the State of California for the Sixth District. On August 30, 2010, the Court of Appeal affirmed the trial court’s verdict in part and reversed the verdict in part, remanding the case. The Company petitioned the Supreme Court of California for review of the Court of Appeal decision. On December 16, 2010, the California Supreme Court denied the Company’s petition for review and remanded for further proceedings to the trial court. The testimonial phase of the third trial in this matter concluded on June 12, 2012. By order dated May 28, 2014, the Court determined to conduct a second phase of this bench trial to allow Ajaxo to attempt to prove entitlement to additional royalties. Phase two of the trial is scheduled to commence December 8, 2014. The Company will continue to defend itself vigorously.

On May 16, 2011, Droplets Inc., the holder of two patents pertaining to user interface servers, filed a complaint in the U.S. District Court for the Eastern District of Texas against E*TRADE Financial Corporation, E*TRADE Securities LLC, E*TRADE Bank and multiple other unaffiliated financial services firms. Plaintiff contends that the defendants engaged in patent infringement under federal law. Plaintiff seeks unspecified damages and an injunction against future infringements, plus royalties, costs, interest and attorneys’ fees. On September 30, 2011, the Company and several co-defendants filed a motion to transfer the case to the Southern District of New York. Venue discovery occurred throughout December 2011. On January 1, 2012, a new judge was assigned to the case. On March 28, 2012, a change of venue was granted and the case was transferred to the United States District Court for the Southern District of New York. The Company filed its answer and counterclaim on June 13, 2012 and plaintiff moved to dismiss the counterclaim. The Company filed a motion for summary judgment. Plaintiffs sought to change venue back to the Eastern District of Texas on the theory that this case is one of several matters that should be consolidated in a single multi-district litigation. On December 12, 2012, the Multidistrict Litigation Panel denied the transfer of this action to Texas. By opinion dated April 4, 2013, the Court denied defendants’ motion for summary judgment and plaintiff’s motion to dismiss the counterclaims. The Court issued its order on claim construction on October 22, 2013, and by order dated January 28, 2014, the Court adopted the defendants' proposed claims construction. On March 25, 2014, the Court granted plaintiff leave to amend its complaint to add a newly-issued patent, but stayed all litigation pertaining to that patent until a covered business method review could be heard by the Patent and Trademark Appeals Board. The defendants filed petitions for covered business method patent reviews with the Patent and Trademark Appeals Board on May 12, 2014. Motions for summary judgment will be briefed in the U.S. District Court through August 2014. The Company will continue to defend itself vigorously in this matter, both in the District Court and at the U.S. Patent and Trademark Office.

Several cases have been filed nationwide involving the April 2007 leveraged buyout ("LBO") of the Tribune Company ("Tribune") by Sam Zell, and the subsequent bankruptcy of Tribune. In William Niese et al. v. A.G. Edwards et al., in Superior Court of Delaware, New Castle County, former Tribune employees and retirees claimed that Tribune was actually insolvent at the time of the LBO and that the LBO constituted a fraudulent transaction that depleted the plaintiffs’ retirement plans, rendering them worthless. E*TRADE Clearing LLC, along with numerous other financial institutions, is a named defendant in this case. One of the defendants removed the action to federal district court in Delaware on July 1, 2011. In Deutsche Bank Trust Company Americas et al. v. Adaly Opportunity Fund et al., filed in the Supreme Court of New York, New York County on June 3, 2011, the Trustees of certain notes issued by Tribune allege wrongdoing in connection with the LBO. In particular the Trustees claim that the LBO constituted a constructive fraudulent transfer under various state laws. G1 Execution Services, LLC (formerly known as E*TRADE Capital Markets, LLC), along with numerous other financial institutions, is a named defendant in this case. In Deutsche Bank et al. v. Ohlson et al., filed in the U.S. District Court for the Northern District of Illinois, noteholders of Tribune asserted claims of constructive fraud and G1 Execution Services, LLC is a named defendant in this case. Under the agreement governing the sale of G1 Execution Services, LLC to Susquehanna, the Company remains responsible for any resulting actions taken against G1 Execution Services, LLC as a result of such investigation. In EGI-TRB LLC et al. v. ABN-AMRO et al., filed in the Circuit Court of Cook County Illinois, creditors of Tribune assert fraudulent conveyance claims against multiple shareholder defendants and E*TRADE Clearing LLC is a named defendant in this case. These cases have been consolidated into a multi-district litigation. The Company’s time to answer or otherwise respond to the complaints has been stayed pending further orders of the Court. On September 18, 2013, the Court entered the Fifth Amended Complaint. On September 23, 2013, the Court granted the defendants’ motion to dismiss the individual creditors’ complaint. The individual creditors filed a notice of appeal. The steering committees for plaintiffs and defendants have submitted a joint plan for the next phase of litigation. The next phase of the action will involve individual motions to dismiss. On April 22, 2014, the Court issued its protocols for dismissal motions for those defendants who were "mere conduits" who facilitated the transactions at issue. The motion to dismiss Count I of the Fifth Amended Complaint for failure to state a cause of action was fully briefed on July 2, 2014. The Company will defend itself vigorously in these matters.

On April 30, 2013, a putative class action was filed by John Scranton, on behalf of himself and a class of persons similarly situated, against E*TRADE Financial Corporation and E*TRADE Securities LLC in the Superior Court of California, County of Santa Clara, pursuant to the California procedures for a private Attorney General action. The Complaint alleged that the Company misrepresented through its website that it would always automatically exercise options that were in-the-money by $0.01 or more on expiration date. Plaintiffs allege violations of the California Unfair Competition Law, the California Consumer Remedies Act, fraud, misrepresentation, negligent misrepresentation and breach of fiduciary duty. The case has been deemed complex within the meaning of the California Rules of Court, and a case management conference was held on September 13, 2013. The Company’s demurrer and motion to strike the complaint were granted by order dated December 20, 2013. The Court granted leave to amend the complaint. A second amended complaint was filed on January 31, 2014. On March 11, 2014, the Company moved to strike and for a demurrer to the second amended complaint. A hearing on these motions is now scheduled for August 29, 2014. The Company will continue to defend itself vigorously in this matter.

On April 18, 2014, a putative class action was filed by the City of Providence, Rhode Island against forty-one high frequency trading firms, stock exchanges, market-makers, and other broker-dealers, including the Company, in the U.S. District Court for the Southern District of New York. The Complaint alleges that the high frequency trading firms, certain broker-dealers managing dark pools, and the exchanges manipulated the U.S. Securities markets, and that numerous market-makers and broker-dealers participated in that manipulation by doing business with the high frequency traders. As to the Company, the Complaint alleges violation of Sections 10(b) and 20(a) of the Exchange Act. On May 2, 2014, a similar putative class action was filed by American European Insurance Company against forty-two high frequency trading firms, stock exchanges, market-makers, and other broker-dealers, including the Company, in the U.S. District Court for the Southern District of New York. The action filed by American European Insurance Company made allegations substantially similar to the allegations in the City of Providence complaint. On June 13, 2014, a putative class action was filed by James J. Flynn and Dominic Morelli against twenty-six firms including the Company in the United States District Court for the Southern District of New York. The Flynn Complaint made allegations substantially similar to the allegations in the City of Providence Complaint. While there can be no assurances, the Company's legal counsel believes the claims against it have no merit, and that the Company will ultimately prevail. The Company will defend itself vigorously in these matters.

In addition to the matters described above, the Company is subject to various legal proceedings and claims that arise in the normal course of business. In each pending matter, the Company contests liability or the amount of claimed damages. In view of the inherent difficulty of predicting the outcome of such matters, particularly in cases where claimants seek substantial or indeterminate damages, or where investigation or discovery have yet to be completed, the Company is unable to reasonably estimate a range of possible losses on its remaining outstanding legal proceedings; however, the Company believes any losses would not be reasonably likely to have a material adverse effect on the consolidated financial condition or results of operations of the Company.

An unfavorable outcome in any matter could have a material adverse effect on the Company’s business, financial condition, results of operations or cash flows. In addition, even if the ultimate outcomes are resolved in the Company’s favor, the defense of such litigation could entail considerable cost or the diversion of the efforts of management, either of which could have a material adverse effect on the Company’s business, financial condition, results of operations or cash flows.

Regulatory Matters

The securities, futures, foreign currency and banking industries are subject to extensive regulation under federal, state and applicable international laws. From time to time, the Company has been threatened with or named as a defendant in lawsuits, arbitrations and administrative claims involving securities, banking and other matters. The Company is also subject to periodic regulatory audits and inspections. Compliance and trading problems that are reported to regulators, such as the SEC, FINRA, CFTC, NFA or OCC by dissatisfied customers or others are investigated by such regulators, and may, if pursued, result in formal claims being filed against the Company by customers or disciplinary action being taken against the Company or its employees by regulators. Any such claims or disciplinary actions that are decided against the Company could have a material impact on the financial results of the Company or any of its subsidiaries.

During 2012, the Company completed a review of order handling practices and pricing for order flow between E*TRADE Securities LLC and G1 Execution Services, LLC. The Company has implemented changes to its practices and procedures that were recommended during the review. Banking regulators and federal securities regulators were regularly updated during the course of the review and may initiate investigations into the Company’s historical practices which could subject it to monetary penalties and cease-and-desist orders, which could also prompt claims by customers of E*TRADE Securities LLC. Any of these actions could materially and adversely affect the Company’s broker-dealer businesses. On July 11, 2013, FINRA notified E*TRADE Securities LLC and G1 Execution Services, LLC that it is conducting an examination of both firms’ routing practices. The Company is cooperating fully with FINRA in this examination, as under the agreement governing the sale of G1 Execution Services, LLC to Susquehanna, it remains responsible for any resulting actions taken against G1 Execution Services, LLC as a result of such investigation.

Insurance

The Company maintains insurance coverage that management believes is reasonable and prudent. The principal insurance coverage it maintains covers commercial general liability; property damage; hardware/software damage; cyber liability; directors and officers; employment practices liability; certain criminal acts against the Company; and errors and omissions. The Company believes that such insurance coverage is adequate for the purpose of its business. The Company’s ability to maintain this level of insurance coverage in the future, however, is subject to the availability of affordable insurance in the marketplace.

Estimated Liabilities

For all legal matters, an estimated liability is established in accordance with the loss contingencies accounting guidance. Once established, the estimated liability is adjusted based on available information when an event occurs requiring an adjustment.

Commitments

In the normal course of business, the Company makes various commitments to extend credit and incur contingent liabilities that are not reflected in the consolidated balance sheet. Significant changes in the economy or interest rates may influence the impact that these commitments and contingencies have on the Company in the future.

Other Investments

The Company has investments in small business investment companies, community development financial institutions, affordable housing tax credit partnerships and other limited partnerships. The Company had $16 million in unfunded commitments with respect to these investments at June 30, 2014.

Unused Lines of Credit and Certificates of Deposit

At June 30, 2014, the Company had approximately $41 million of certificates of deposit scheduled to mature in less than one year and $200 million of unfunded commitments to extend credit.

Guarantees

In prior periods when the Company sold loans, the Company provided guarantees to investors purchasing mortgage loans, which are considered standard representations and warranties within the mortgage industry. The primary guarantees are that: the mortgage and the mortgage note have been duly executed and each is the legal, valid and binding obligation of the Company, enforceable in accordance with its terms; the mortgage has been duly acknowledged and recorded and is valid; and the mortgage and the mortgage note are not subject to any right of rescission, set-off, counterclaim or defense, including, without limitation, the defense of usury, and no such right of rescission, set-off, counterclaim or defense has been asserted with respect thereto. The Company is responsible for the guarantees on loans sold. If these claims prove to be untrue, the investor can require the Company to repurchase the loan and return all loan purchase and servicing release premiums. Management does not believe the potential liability exposure will have a material impact on the Company’s results of operations, cash flows or financial condition due to the nature of the standard representations and warranties, which have resulted in a minimal amount of loan repurchases.

Prior to 2008, ETBH raised capital through the formation of trusts, which sold trust preferred securities in the capital markets. The capital securities must be redeemed in whole at the due date, which is generally 30 years after issuance. Each trust issued trust preferred securities at par, with a liquidation amount of $1,000 per capital security. The trusts used the proceeds from the sale of issuances to purchase subordinated debentures issued by ETBH.

During the 30-year period prior to the redemption of the trust preferred securities, ETBH guarantees the accrued and unpaid distributions on these securities, as well as the redemption price of the securities and certain costs that may be incurred in liquidating, terminating or dissolving the trusts (all of which would otherwise be payable by the trusts). At June 30, 2014, management estimated that the maximum potential liability under this arrangement, including the current carrying value of the trusts, was equal to approximately $436 million or the total face value of these securities plus dividends, which may be unpaid at the termination of the trust arrangement.

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Fair Value Disclosures (Tables)

6 Months Ended

Jun. 30, 2014

Fair Value Disclosures [Abstract]

Fair Value Inputs, Assets, Quantitative Information

The weighted average coupon rates for the available-for-sale residential mortgage-backed securities at June 30, 2014 are shown in the following table:

	Weighted Average Coupon Rate
Agency mortgage-backed securities	3.09	%
Agency CMOs	3.15	%

The following table presents additional information about significant unobservable inputs used in the valuation of assets measured at fair value on a nonrecurring basis that were categorized in Level 3 of the fair value hierarchy at June 30, 2014:

	Unobservable Inputs	Average		Range
Loans receivable:
One- to four-family	Appraised value	$	367,500	$14,500-$1,300,000
Home equity	Appraised value	$	270,800	$7,000-$1,000,000
Real estate owned	Appraised value	$	308,100	$10,900-$1,500,000

Fair Value Measurements, Recurring and Nonrecurring

Assets and liabilities measured at fair value at June 30, 2014 and December 31, 2013 are summarized in the following tables (dollars in millions):

	Level 1		Level 2		Level 3		Total Fair Value
June 30, 2014:
Recurring fair value measurements:
Assets
Available-for-sale securities:
Debt securities:
Agency residential mortgage-backed securities and CMOs	$	—	$	11,461	$	—	$	11,461
Agency debentures	—		517		—		517
Agency debt securities	—		794		—		794
Municipal bonds	—		41		—		41
Corporate bonds	—		4		—		4
Total debt securities	—		12,817		—		12,817
Publicly traded equity securities	20		—		—		20
Total available-for-sale securities	20		12,817		—		12,837
Other assets:
Derivative assets(1)	—		52		—		52
Deposits with clearing organizations(2)	91		—		—		91
Total other assets measured at fair value on a recurring basis	91		52		—		143
Total assets measured at fair value on a recurring basis(3)	$	111	$	12,869	$	—	$	12,980
Liabilities
Derivative liabilities(1)	$	—	$	160	$	—	$	160
Total liabilities measured at fair value on a recurring basis(3)	$	—	$	160	$	—	$	160
Nonrecurring fair value measurements:
Loans receivable:
One- to four-family	$	—	$	—	$	35	$	35
Home equity	—		—		19		19
Total loans receivable	—		—		54		54
Real estate owned	—		—		32		32
Total assets measured at fair value on a nonrecurring basis(4)	$	—	$	—	$	86	$	86

(1) All derivative assets and liabilities were interest rate contracts at June 30, 2014. Information related to derivative instruments is detailed in Note 8—Accounting for Derivative Instruments and Hedging Activities.

(2) Represents U.S. Treasury securities held by a broker-dealer subsidiary.

(3) Assets and liabilities measured at fair value on a recurring basis represented 28% and less than 1% of the Company’s total assets and total liabilities, respectively, at June 30, 2014.

(4) Represents the fair value of assets prior to deducting estimated selling costs that were carried on the consolidated balance sheet at June 30, 2014, and for which a fair value measurement was recorded during the period.

	Level 1		Level 2		Level 3(1)		Total Fair Value
December 31, 2013:
Recurring fair value measurements:
Assets
Available-for-sale securities:
Debt securities:
Residential mortgage-backed securities:
Agency mortgage-backed securities and CMOs	$	—	$	12,236	$	—	$	12,236
Non-agency CMOs	—		—		14		14
Total residential mortgage-backed securities	—		12,236		14		12,250
Agency debentures	—		466		—		466
Agency debt securities	—		831		—		831
Municipal bonds	—		40		—		40
Corporate bonds	—		5		—		5
Total debt securities	—		13,578		14		13,592
Total available-for-sale securities	—		13,578		14		13,592
Other assets:
Derivative assets(2)	—		107		—		107
Deposits with clearing organizations(3)	53		—		—		53
Held-for-sale assets—trading securities(4)	104		1		—		105
Total other assets measured at fair value on a recurring basis	157		108		—		265
Total assets measured at fair value on a recurring basis(5)	$	157	$	13,686	$	14	$	13,857
Liabilities
Derivative liabilities(2)	$	—	$	169	$	—	$	169
Held-for-sale liabilities—securities sold, not yet purchased(4)	94		1		—		95
Total liabilities measured at fair value on a recurring basis(5)	$	94	$	170	$	—	$	264
Nonrecurring fair value measurements:
Loans receivable:
One- to four-family	$	—	$	—	$	246	$	246
Home equity	—		—		46		46
Total loans receivable(6)	—		—		292		292
Real estate owned(6)	—		—		47		47
Total assets measured at fair value on a nonrecurring basis(7)	$	—	$	—	$	339	$	339

(1) Instruments measured at fair value on a recurring basis categorized as Level 3 represented less than 1% of the Company's total assets and none of its total liabilities at December 31, 2013.

(2) All derivative assets and liabilities were interest rate contracts at December 31, 2013. Information related to derivative instruments is detailed in Note 8—Accounting for Derivative Instruments and Hedging Activities.

(3) Represents U.S. Treasury securities held by a broker-dealer subsidiary.

(4) Assets and liabilities of the market making business were reclassified as held-for-sale and are presented in the other assets and other liabilities line items, respectively, on the consolidated balance sheet at December 31, 2013. Information related to the classification is detailed in Note 2—Disposition.

(5) Assets and liabilities measured at fair value on a recurring basis represented 30% and 1% of the Company’s total assets and total liabilities, respectively, at December 31, 2013.

(6) Represents the fair value of assets prior to deducting estimated selling costs that were carried on the consolidated balance sheet at December 31, 2013, and for which a fair value measurement was recorded during the period.

(7) Goodwill allocated to the market making reporting unit with a carrying amount of $142 million was written down to zero during the year ended December 31, 2013 and categorized in Level 3 of the fair value hierarchy.

Gains and Losses, Fair Value Measurements, Nonrecurring

The following table presents the gains and losses associated with the assets measured at fair value on a nonrecurring basis during the three and six months ended June 30, 2014 and 2013 (dollars in millions):

	Three Months Ended June 30,				Six Months Ended June 30,
	2014		2013		2014			2013
One- to four-family	$	2	$	8	$	7		$	24
Home equity	8		17		20			36
Total losses on loans receivable measured at fair value	$	10	$	25	$	27		$	60
(Gains) losses on real estate owned measured at fair value	$	—	$	1	$	(1	)	$	2
Losses on goodwill measured at fair value	$	—	$	142	$	—		$	142

Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation

The following tables present additional information about Level 3 assets measured at fair value on a recurring basis for the three and six months ended June 30, 2014 and 2013 (dollars in millions):

	Available-for-sale Securities
	Non-agency CMOs
	Three Months Ended June 30,					Six Months Ended June 30,
	2014		2013			2014			2013
Beginning of period	$	—	$	14		$	14		$	49
Gains (losses) recognized in earnings(1)	—		(1		)	6			(2		)
Net gains recognized in other comprehensive income(2)	—		1			3			3
Sales	—		—			(23		)	(35		)
Settlements	—		—			—			(1		)
End of period	$	—	$	14		$	—		$	14

(1) Gains and losses recognized in earnings are reported in the gains on loans and securities, net and net impairment line items on the consolidated statement of income (loss).

(2) Net gains recognized in other comprehensive income (loss) are reported in the net change from available-for-sale securities line item.

Fair Value, by Balance Sheet Grouping

The following table summarizes the carrying values, fair values and fair value hierarchy level classification of financial instruments that are not carried at fair value on the consolidated balance sheet at June 30, 2014 and December 31, 2013 (dollars in millions):

	June 30, 2014
	Carrying Value		Level 1		Level 2		Level 3		Total Fair Value
Assets
Cash and equivalents	$	1,807	$	1,807	$	—	$	—	$	1,807
Cash required to be segregated under federal or other regulations	$	1,215	$	1,215	$	—	$	—	$	1,215
Held-to-maturity securities:
Agency mortgage-backed securities and CMOs	$	9,084	$	—	$	9,209	$	—	$	9,209
Agency debentures	163		—		166		—		166
Agency debt securities	2,109		—		2,143		—		2,143
Total held-to-maturity securities	$	11,356	$	—	$	11,518	$	—	$	11,518
Margin receivables	$	7,340	$	—	$	7,340	$	—	$	7,340
Loans receivable, net:
One- to four-family	$	3,316	$	—	$	—	$	2,932	$	2,932
Home equity	2,829		—		—		2,600		2,600
Consumer and other	511		—		—		521		521
Total loans receivable, net(1)	$	6,656	$	—	$	—	$	6,053	$	6,053
Investment in FHLB stock	$	56	$	—	$	—	$	56	$	56
Deposits paid for securities borrowed	$	420	$	—	$	420	$	—	$	420
Liabilities
Deposits	$	25,084	$	—	$	25,084	$	—	$	25,084
Securities sold under agreements to repurchase	$	3,742	$	—	$	3,754	$	—	$	3,754
Customer payables	$	6,626	$	—	$	6,626	$	—	$	6,626
FHLB advances and other borrowings	$	1,291	$	—	$	926	$	249	$	1,175
Corporate debt	$	1,770	$	—	$	1,950	$	—	$	1,950
Deposits received for securities loaned	$	1,713	$	—	$	1,713	$	—	$	1,713

(1) The carrying value of loans receivable, net includes the allowance for loan losses of $401 million and loans that are valued at fair value on a nonrecurring basis at June 30, 2014.

	December 31, 2013
	Carrying Value		Level 1		Level 2		Level 3		Total Fair Value
Assets
Cash and equivalents	$	1,838	$	1,838	$	—	$	—	$	1,838
Cash required to be segregated under federal or other regulations	$	1,066	$	1,066	$	—	$	—	$	1,066
Held-to-maturity securities:
Agency mortgage-backed securities and CMOs	$	8,359	$	—	$	8,293	$	—	$	8,293
Agency debentures	164		—		168		—		168
Agency debt securities	1,658		—		1,631		—		1,631
Total held-to-maturity securities	$	10,181	$	—	$	10,092	$	—	$	10,092
Margin receivables	$	6,353	$	—	$	6,353	$	—	$	6,353
Loans receivable, net:
One- to four-family	$	4,392	$	—	$	—	$	3,790	$	3,790
Home equity	3,148		—		—		2,822		2,822
Consumer and other	583		—		—		596		596
Total loans receivable, net(1)	$	8,123	$	—	$	—	$	7,208	$	7,208
Investment in FHLB stock	$	61	$	—	$	—	$	61	$	61
Deposits paid for securities borrowed	$	536	$	—	$	536	$	—	$	536
Liabilities
Deposits	$	25,971	$	—	$	25,971	$	—	$	25,971
Securities sold under agreements to repurchase	$	4,543	$	—	$	4,571	$	—	$	4,571
Customer payables	$	6,310	$	—	$	6,310	$	—	$	6,310
FHLB advances and other borrowings	$	1,279	$	—	$	924	$	225	$	1,149
Corporate debt	$	1,768	$	—	$	1,951	$	—	$	1,951
Deposits received for securities loaned	$	1,050	$	—	$	1,050	$	—	$	1,050

(1) The carrying value of loans receivable, net includes the allowance for loan losses of $453 million and loans that are valued at fair value on a nonrecurring basis at December 31, 2013.

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Available-for-Sale and Held-to-Maturity Securities (Details - Other) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Other Than Temporary Impairment, Credit Losses Recognized In Earnings [Roll Forward]
Credit loss balance, beginning of period	$ 152	$ 165	$ 166	$ 187
Subsequent credit impairment		0		1
Securities sold	0	0	(14)	(23)
Credit loss balance, end of period	152	165	152	165
Other Than Temporary Impairment Credit Losses On Securities WrittenOff (Textuals) [Abstract]
Other Than Temporary Impairment Credit Losses Recognized In Earnings Securities Factored To Zero	123	114	123	114
Components of Gains on Loans and Securities Net [Abstract]
Gains on loans, net	7	0	7	0
Gains on securities, net:
Gains on available-for-sale securities	3	18	22	42
Losses on available-for-sale securities	0	0	0	(8)
Hedge ineffectiveness	(3)	3	(7)	3
Gains on securities, net	0	21	15	37
Gains on loans and securities, net	7	21	22	37
Gains on loans, net	7	0	7	0
Proceeds from sale of loans	800		802
Non-agency CMOs [Member]
Gains on securities, net:
Available For Sale Securities Sold, Amortized Cost			17	231
Available-for-sale Securities, Gross Realized Gains (Losses), Sale Proceeds			23	227
Available-for-sale Securities, Gross Realized Gain (Loss)			$ 6	$ (4)

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Fair Value Disclosures (Details - Level 3) (Available-for-sale Securities [Member], Non-agency CMOs [Member], USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Available-for-sale Securities [Member] | Non-agency CMOs [Member]
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Balance, beginning of period	$ 0	$ 14	$ 14	$ 49
Gains (losses) recognized in earnings	0	(1)	6	(2)
Net gains recognized in other comprehensive income	0	1	3	3
Sales	0	0	(23)	(35)
Settlements	0	0	0	(1)
Balance, end of period	$ 0	$ 14	$ 0	$ 14

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CONSOLIDATED BALANCE SHEET (USD $) In Millions, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
ASSETS
Cash and equivalents	$ 1,807	$ 1,838
Cash required to be segregated under federal or other regulations	1,215	1,066
Available-for-sale securities	12,837	13,592
Held-to-maturity securities (fair value of $11,518 and $10,092 at June 30, 2014 and December 31, 2013, respectively)	11,356	10,181
Margin receivables	7,340	6,353
Loans receivable, net (net of allowance for loan losses of $401 and $453 at June 30, 2014 and December 31, 2013, respectively)	6,656	8,123
Investment in FHLB stock	56	61
Property and equipment, net	227	237
Goodwill	1,792	1,792
Other intangibles, net	205	216
Other assets	2,257	2,821
Total assets	45,748	46,280
Liabilities:
Deposits	25,084	25,971
Securities sold under agreements to repurchase	3,742	4,543
Customer payables	6,626	6,310
FHLB advances and other borrowings	1,291	1,279
Corporate debt	1,770	1,768
Other liabilities	2,047	1,553
Total liabilities	40,560	41,424
Commitments and contingencies (see Note 13)
Shareholders’ equity:
Common stock, $0.01 par value, shares authorized: 400,000,000 at June 30, 2014 and December 31, 2013; shares issued and outstanding: 288,687,146 and 287,357,001 at June 30, 2014 and December 31, 2013, respectively	3	3
Additional paid-in-capital (APIC)	7,336	7,328
Accumulated deficit	(1,856)	(2,022)
Accumulated other comprehensive loss	(295)	(453)
Total shareholders’ equity	5,188	4,856
Total liabilities and shareholders’ equity	$ 45,748	$ 46,280

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Disposition

6 Months Ended

Jun. 30, 2014

Discontinued Operations and Disposal Groups [Abstract]

DISPOSITION

On February 10, 2014, the Company completed the sale of its market making business, G1 Execution Services, LLC, to an affiliate of Susquehanna International Group, LLP for cash proceeds of $76 million. The sale resulted in a gain of $4 million which was recorded in the facility restructuring and other exit activities line item on the consolidated statement of income (loss). The table below summarizes the carrying amounts of the major classes of assets and liabilities of the market making business at December 31, 2013 (dollars in millions):

	December 31, 2013(1)
Assets:
Cash and equivalents	$	11
Trading securities	105
Property and equipment, net	2
Other intangibles, net	21
Other assets	38
Total assets	$	177
Liabilities:
Other liabilities	$	107
Total liabilities	$	107

⁽¹⁾Assets and liabilities as of December 31, 2013 were classified as held-for-sale and reflected in the other assets and other liabilities line items on the consolidated balance sheet respectively.

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Loans Receivable, Net (Details - Modifications Subsequent Defaults) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014 loan	Jun. 30, 2013 loan	Jun. 30, 2014 loan	Jun. 30, 2013 loan
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructurings - Modifications, Payment Defaults, Number of Loans	16	35	42	111
Troubled Debt Restructurings - Modifications, Payment Defaults, Recorded Investment	$ 2	$ 10	$ 9	$ 30
One- To Four-Family [Member]
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructurings - Modifications, Payment Defaults, Number of Loans	3	22	21	75
Troubled Debt Restructurings - Modifications, Payment Defaults, Recorded Investment	1	10	8	29
Troubled Debt Restructurings - Modifications that Subsequently Defaulted That Were Classified As Current Year End	1	2	1	9
Home Equity [Member]
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructurings - Modifications, Payment Defaults, Number of Loans	13	13	21	36
Troubled Debt Restructurings - Modifications, Payment Defaults, Recorded Investment	1	0	1	1
Home Equity [Member] | Less than [Member]
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructurings - Modifications that Subsequently Defaulted That Were Classified As Current Year End	$ 1	$ 1	$ 1	$ 1

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Commitments, Contingencies and Other Regulatory Matters (Details) (USD $) In Millions, except Per Share data, unless otherwise specified	6 Months Ended		12 Months Ended	0 Months Ended		0 Months Ended
	Jun. 30, 2014	Jun. 30, 2014 Unfunded Commitments to Extend Credit [Member]	Dec. 31, 2003 Axajo Complaint [Member]	May 16, 2011 Droplets Inc Complaint [Member]	Apr. 30, 2013 John Scranton Complaint [Member]	Apr. 18, 2014 Providence, Rhode Island Complaint [Member]	May 02, 2014 American European Insurance Company Complaint [Member]	Jun. 13, 2014 James Flynn And Dominic Morelli Complaint [Member]
Loss Contingencies [Line Items]
Loss Contingency, Damages Awarded, Value			$ 1
Loss Contingency, Patents Allegedly Infringed, Number				2
Alleged Minimum Amount Company Would Exercise Options At Expiration					$ 0.01
Loss Contingency, Number of Defendants						41	42	26
Commitments to fund partnerships	16
Time deposit maturities, year one	41
Supply Commitment [Line Items]
Unfunded Commitments To Extend Credit		200
Trust preferred securities contractual time period	30 years
Liquidation amount per trust preferred security	1,000
Estimated maximum potential liability trust preferred securities	$ 436

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Offsetting Assets and Liabilities (Tables)

6 Months Ended

Jun. 30, 2014

Offsetting Assets and Liabilities [Abstract]

Offsetting Assets and Liabilities [Table Text Block]

The following table presents information about these transactions to enable the users of the Company’s financial statements to evaluate the potential effect of rights of setoff between these recognized assets and recognized liabilities at June 30, 2014 and December 31, 2013 (dollars in millions):

										Gross Amounts Not Offset in the Consolidated Balance Sheet
				Gross Amounts of Recognized Assets and Liabilities		Gross Amounts Offset in the Consolidated Balance Sheet		Net Amounts Presented in the Consolidated Balance Sheet		Financial Instruments			Collateral Received or Pledged (Including Cash)			Net Amount
June 30, 2014
	Assets:
		Deposits paid for securities borrowed (1)(5)		$	420	$	—	$	420	$	(264	)	$	(147	)	$	9
		Derivative assets (1)(3)		51		—		51		(37		)	(5		)	9
			Total	$	471	$	—	$	471	$	(301	)	$	(152	)	$	18
	Liabilities:
		Repurchase agreements (4)		$	3,742	$	—	$	3,742	$	—		$	(3,742	)	$	—
		Deposits received for securities loaned (2)(6)		1,713		—		1,713		(264		)	(1,346		)	103
		Derivative liabilities (2)(3)		144		—		144		(36		)	(108		)	—
			Total	$	5,599	$	—	$	5,599	$	(300	)	$	(5,196	)	$	103
December 31, 2013
	Assets:
		Deposits paid for securities borrowed (1)(5)		$	536	$	—	$	536	$	(247	)	$	(282	)	$	7
		Derivative assets (1)(3)		92		—		92		(48		)	(12		)	32
			Total	$	628	$	—	$	628	$	(295	)	$	(294	)	$	39
	Liabilities:
		Repurchase agreements (4)		$	4,543	$	—	$	4,543	$	—		$	(4,537	)	$	6
		Deposits received for securities loaned (2)(6)		1,050		—		1,050		(247		)	(740		)	63
		Derivative liabilities (2)(3)		168		—		168		(48		)	(120		)	—
			Total	$	5,761	$	—	$	5,761	$	(295	)	$	(5,397	)	$	69

(1) Net amounts presented in the consolidated balance sheet are reflected in the other assets line item.

(2) Net amounts presented in the consolidated balance sheet are reflected in the other liabilities line item.

(3) Excludes net accrued interest payable of $17 million and $19 million at June 30, 2014 and December 31, 2013, respectively.

(4) The Company pledges available-for-sale and held-to-maturity securities as collateral for amounts due on repurchase agreements and derivative liabilities. The collateral pledged included available-for-sale securities at fair value and held-to-maturity securities at amortized cost for both June 30, 2014 and December 31, 2013.

(5) Included in the gross amounts of deposits paid for securities borrowed was $256 million and $415 million at June 30, 2014 and December 31, 2013, respectively, transacted through a program with a clearing organization, which guarantees the return of cash to the Company. For presentation purposes, these amounts presented are based on the original counterparties to the Company’s master securities loan agreements.

(6) Included in the gross amounts of deposits received for securities loaned was $1.1 billion and $682 million at June 30, 2014 and December 31, 2013, respectively, transacted through a program with a clearing organization, which guarantees the return of securities to the Company. For presentation purposes, these amounts presented are based on the original counterparties to the Company’s master securities loan agreements.

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Operating Interest Income and Operating Interest Expense (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Operating interest income:
Loans	$ 77	$ 102	$ 161	$ 209
Available-for-sale securities	72	67	151	131
Held-to-maturity securities	82	61	159	119
Margin receivables	65	54	127	108
Securities borrowed and other	26	18	46	35
Total operating interest income	322	302	644	602
Operating interest expense:
Securities sold under agreements to repurchase	(30)	(37)	(65)	(74)
FHLB advances and other borrowings	(17)	(17)	(34)	(34)
Deposits	(2)	(3)	(4)	(6)
Customer payables and other	(3)	(2)	(5)	(4)
Total operating interest expense	(52)	(59)	(108)	(118)
Net operating interest income	$ 270	$ 243	$ 536	$ 484

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Regulatory Requirements

6 Months Ended

Jun. 30, 2014

Regulatory Capital Requirements [Abstract]

REGULATORY REQUIREMENTS

REGULATORY REQUIREMENTS

Registered Broker-Dealers

The Company’s largest U.S. broker-dealer subsidiaries are subject to the Uniform Net Capital Rule (the "Rule") under the Securities Exchange Act of 1934 administered by the SEC and FINRA, which requires the maintenance of minimum net capital. The minimum net capital requirements can be met under either the Aggregate Indebtedness method or the Alternative method. Under the Aggregate Indebtedness method, a broker-dealer is required to maintain minimum net capital of the greater of 6 ²/3% of its aggregate indebtedness, as defined, or a minimum dollar amount. Under the Alternative method, a broker-dealer is required to maintain net capital equal to the greater of $250,000 or 2% of aggregate debit balances arising from customer transactions. The method used depends on the individual U.S. broker-dealer subsidiary. The Company’s other broker-dealers, including its international broker-dealer subsidiaries located in Europe and Asia, are subject to capital requirements determined by their respective regulators.

At June 30, 2014 and December 31, 2013, all of the Company’s broker-dealer subsidiaries met minimum net capital requirements. The tables below summarize the minimum excess capital requirements for the Company’s broker-dealer subsidiaries at June 30, 2014 and December 31, 2013 (dollars in millions):

	Required Net Capital		Net Capital		Excess Net Capital
June 30, 2014:
E*TRADE Clearing LLC(1)	$	158	$	751	$	593
E*TRADE Securities LLC(1)	—		360		360
Other broker-dealers	1		16		15
Total	$	159	$	1,127	$	968
December 31, 2013:
E*TRADE Clearing LLC(1)	$	144	$	715	$	571
E*TRADE Securities LLC(1)	—		261		261
G1 Execution Services, LLC(2)	1		22		21
Other broker-dealers	2		22		20
Total	$	147	$	1,020	$	873

(1) Elected to use the Alternative method to compute net capital. The net capital requirement was $250,000 for E*TRADE Securities LLC for both periods presented.

(2) Elected to use the Aggregate Indebtedness method to compute net capital. G1 Execution Services, LLC is the Company's market maker and was held-for-sale at December 31, 2013. The sale of G1 Execution Services, LLC was completed on February 10, 2014.

Banking

E*TRADE Bank is subject to various regulatory capital requirements administered by federal banking agencies. Failure to meet minimum capital requirements can trigger certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on E*TRADE Bank’s financial condition and results of operations. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, E*TRADE Bank must meet specific capital guidelines that involve quantitative measures of E*TRADE Bank’s assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. In addition, E*TRADE Bank may not pay dividends to the parent company without approval from its regulators and any loans by E*TRADE Bank to the parent company and its other non-bank subsidiaries are subject to various quantitative, arm’s length, collateralization and other requirements. E*TRADE Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.

Quantitative measures established by regulation to ensure capital adequacy require E*TRADE Bank to meet minimum total capital, Tier 1 capital and Tier 1 leverage ratios. As shown in the table below, at both June 30, 2014 and December 31, 2013, E*TRADE Bank was categorized as "well capitalized" under the regulatory framework for prompt corrective action. However, events beyond management's control, such as deterioration in credit markets, could adversely affect future earnings and E*TRADE Bank's ability to meet future capital requirements and ability to pay dividends to the parent company. E*TRADE Bank’s actual and required capital amounts and ratios at June 30, 2014 and December 31, 2013 are presented in the table below (dollars in millions):

	Actual				Minimum Required to be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio		Amount		Ratio		Excess Capital
June 30, 2014:
Total capital	$	4,545	25.97	%	$	1,750	10.00	%	$	2,795
Tier 1 capital	$	4,324	24.70	%	$	1,050	6.00	%	$	3,274
Tier 1 leverage	$	4,324	10.15	%	$	2,130	5.00	%	$	2,194
December 31, 2013:
Total capital	$	4,331	24.25	%	$	1,786	10.00	%	$	2,545
Tier 1 capital	$	4,105	22.98	%	$	1,072	6.00	%	$	3,033
Tier 1 leverage	$	4,105	9.51	%	$	2,158	5.00	%	$	1,947