8-K

UNITED STATESSECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): July 22, 2008


E*TRADE Financial Corporation
(Exact name of Registrant as Specified in its Charter)

Delaware	1-11921	94-2844166
(State or other jurisdiction of incorporation)	(Commission File Number)	(I.R.S. Employer Identification Number)

135 East 57^th Street, New York, New York 10022

(Address of Principal Executive Offices and Zip Code)

(646) 521-4300
(Registrant’s Telephone Number, including Area Code)

Not Applicable
(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

⃞ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

⃞ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

⃞ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

⃞ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

ITEM 2.02. RESULTS OF OPERATIONS AND FINANCIAL CONDITION

On July 22, 2008, the Company announced its second quarter earnings for fiscal year 2008. A copy of the Company’s press release is attached hereto as Exhibit 99.1 and incorporated by reference herein.

The information furnished shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or incorporated by reference into any filing thereunder or under the Securities Act of 1933 unless expressly set forth by specific reference in such filing.

ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS

(d)	Exhibits
	99.1    Earnings Press Release, dated July 22, 2008

SIGNATURE

Pursuant to the requirements 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:	July 22, 2008
		E*TRADE FINANCIAL CORPORATION
		By:	/s/ Russell S. Elmer
			Russell S. Elmer
			General Counsel

EX-99.1

Exhibit 99.1

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

Second Quarter Results

• Total Net Revenue of $532 million
• $319 million in Provision for Loan Losses
• Net Loss of $94.6 million, or $0.19 per share

2008 Turnaround Plan Progress

Customer Metrics

• Total Customer Cash and Deposits of $33.7 billion
• Total Daily Average Revenue Trades (DARTs) of 172,000
• Opened 232,000 gross new accounts and produced 30,000 net new accounts
• Net new customer asset flows of $900 million ($1.8 billion excluding the sale of Retirement Advisors of America)

Financial Progress

• Reduced holding company debt by $95.8 million in the quarter via debt-for-equity exchanges. Year-to-date debt reduction of $155.8 million, including $120.8 million in debt-for-equity exchanges
• Signed definitive agreements for non-core asset sales of over $660 million, with estimated pretax gains in excess of $400 million, to be realized upon closing
• Ended the quarter with excess Bank risk-based capital (excess to the regulatory well-capitalized threshold) of approximately $620 million
• Achieved goal of $50 million in annual run-rate expense reductions

NEW YORK--(BUSINESS WIRE)--E*TRADE FINANCIAL Corporation (NASDAQ: ETFC) today announced results for its second quarter ended June 30, 2008, reporting a net loss of $94.6 million, or $0.19 per share, compared to a net loss of $91.2 million, or $0.20 per share, in the prior quarter and net income of $159.1 million, or $0.37 per share a year ago.

• Total Retail Customers increased 22,000 from the prior quarter, up 90,000 from the previous year.
• Total Accounts increased 30,000 for the quarter and 196,000 from the previous year.
• Target segment accounts increased 14,000 versus the prior quarter, up 4,000 from the previous year.
• Total DARTs declined 5 percent quarter over quarter, but increased 7 percent over the year ago period.

“Our retail franchise is performing well and delivering strong, competitive customer results despite a challenging macroeconomic environment,” said Donald H. Layton, Chairman and Chief Executive Officer, E*TRADE FINANCIAL Corporation. “In the quarter we had positive asset flows, attracted new customers and increased our most profitable target segment accounts amid considerable market turbulence. This is truly a testament to the strength and appeal of the E*TRADE franchise.”

The Company continued to make progress during the second quarter reducing risk and strengthening its balance sheet, reducing total assets by $1.4 billion. In addition, undrawn home equity lines have been reduced from over $7 billion last year to approximately $3.7 billion as of the end of June.

During the second quarter, the economy, financial markets and housing markets all experienced very negative trends, generally performing worse than expected or predicted. The Company was moderately impacted by these events. “While losses in our credit portfolio are somewhat higher than expected, they are still manageable in accordance with our previously-announced Turnaround Plan and our capital base remains strong, as may be seen by the continuing substantial level of excess risk based capital in our bank subsidiary,” said Mr. Layton.

Loan delinquency growth, despite the difficult environment, continued to moderate. “While economic conditions are still challenging, we consider loan delinquency trends to be encouraging,” continued Mr. Layton. Total delinquencies increased by 9 percent or $111 million during the quarter, representing the slowest increase in four quarters. Home equity loan delinquencies increased by 4 percent or $25 million during the quarter, down from an increase of 8 percent in the prior quarter.

Provision for loan losses increased by $85 million quarter over quarter, driven primarily by an increase in home equity-related charge-offs. Total allowance for loan losses increased to $636 million, as provision exceeded charge-offs by $70 million during the quarter. The Company increased its allowance for loan losses across all three categories of its loan portfolio.

As previously disclosed, the Company has a long-standing investment in preferred equity of Fannie Mae and Freddie Mac. As of June 30, 2008, these positions had a market value of $330 million. Subsequent to the close of the second quarter, these securities experienced record price declines and volatility. Based upon concerns about continuing market instability and potential government-led plans that could materially further impact the value of the securities, the majority of them were liquidated during July with a resulting pre-tax loss of $83 million, which is net of hedges and will be reflected in the Company’s third quarter results. As of Monday, July 21, 2008, the remaining position, approximately $150 million, had a third-quarter-to-date market-value loss of approximately $40 million. The Company’s strong bias is to continue to reduce this remaining exposure, as ownership of such securities is no longer in line with the Company’s strategic objectives.

At the end of the second quarter, excess risk-based Bank capital totaled approximately $620 million. The Company expects to have such excess capital at the Bank of approximately $700 - $800 million by year-end.

In accordance with the Turnaround Plan, previously announced non-core asset sales are expected to generate over $700 million in net proceeds, including $660 million expected to close in the third quarter, surpassing management’s previously stated goal of $500 million. This includes the sale of the Company’s equity stake in IL&FS Investsmart as well as the sale of E*TRADE Canada. Proceeds from these transactions will strengthen the Company’s cash position, and may also be down streamed to the Bank as additional regulatory capital or used opportunistically to reduce existing corporate debt.

The Company continued to effect debt-for-equity exchanges, extinguishing $96 million in debt in the second quarter and $121 million since the beginning of the year. These exchanges represent $9 million in annualized coupon savings and continue to serve as a shareholder friendly way to reduce the overhang of debt at the holding company.

“While the current economic environment may impede our expectations to return to profitability from continuing operations this year, we are executing well on our Turnaround Plan and continue to make progress toward returning to profitability,” stated Mr. Layton.

The Company's second quarter and six month results include a $24.1 million non-cash tax benefit in discontinued operations relating to the expected sale of its Canadian operations, resulting from the difference between the tax and financial reporting bases of the Company's Canadian operations. Generally accepted accounting principles call for the recognition of the tax effects of basis differences once a commitment is in place to sell a subsidiary and the subsidiary’s results are presented as a “discontinued operation.” The second quarter tax benefit is intended to equalize the tax and reporting bases in the Company’s Canadian operations as of June 30, 2008.

Historical monthly metrics from June 2004 to June 2008 can be found on the E*TRADE FINANCIAL Investor Relations site at https://investor.etrade.com.

The Company will host a conference call to discuss the results beginning at 5:00 p.m. (EDT) today. This conference call will be available to domestic participants by dialing 800-683-1525 and 973-872-3197 or 404-665-9585 for international participants. The conference ID number is 54304105. A live audio webcast and replay of this conference call will also be accessible at https://investor.etrade.com.

About E*TRADE FINANCIAL

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

Important Notice

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

© 2008 E*TRADE FINANCIAL Corporation. All rights reserved.

Financial Statements

E*TRADE FINANCIAL CORPORATION AND SUBSIDIARIES

Consolidated Statement of Income (Loss)
(In thousands, except per share amounts)
(Unaudited)
		Three Months Ended						Six Months Ended
		June 30,						June 30,
			2008			2007			2008			2007
Revenue:
	Operating interest income	$	626,074		$	894,451		$	1,325,665		$	1,715,385
	Operating interest expense		(283,310	)		(486,719	)		(656,530	)		(922,157	)
	Net operating interest income		342,764			407,732			669,135			793,228
	Commission		122,235			162,682			244,490			314,486
	Fees and service charges		50,962			59,379			105,903			113,434
	Principal transactions		18,392			27,377			38,882			57,009
	Gain (loss) on loans and securities, net		(15,707	)		636			(24,274	)		12,234
	Other revenue		13,691			11,050			27,295			20,648
	Total non-interest income		189,573			261,124			392,296			517,811
	Total net revenue		532,337			668,856			1,061,431			1,311,039
Provision for loan losses			319,121			30,045			552,992			51,231
Operating expenses:
	Compensation and benefits		96,082			110,652			219,210			225,384
	Clearing and servicing		46,122			70,093			91,007			133,640
	Advertising and market development		42,737			32,897			100,185			74,941
	Communications		24,500			23,655			49,594			47,674
	Professional services		25,749			22,589			49,394			45,651
	Depreciation and amortization		20,385			19,566			42,038			38,427
	Occupancy and equipment		21,698			20,791			42,196			42,226
	Amortization of other intangibles		9,135			10,187			20,045			20,455
	Facility restructuring and other exit activities		12,433			(2,114	)		22,999			(1,922	)
	Other		19,702			71,506			36,208			102,110
	Total operating expenses		318,543			379,822			672,876			728,586
Income (loss) before other income (expense), income    taxes and discontinued operations			(105,327	)		258,989			(164,437	)		531,222
Other income (expense):
	Corporate interest income		1,806			1,001			4,232			2,706
	Corporate interest expense		(90,249	)		(37,866	)		(185,490	)		(75,657	)
	Gain on sales of investments, net		18			17,267			520			37,023
	Gain on early extinguishment of debt		12,935			31			10,084			31
	Equity in income (loss) of investments and venture funds		(1,594	)		(840	)		3,105			7,255
	Total other income (expense)		(77,084	)		(20,407	)		(167,549	)		(28,642	)
Income (loss) before income taxes and discontinued operations			(182,411	)		238,582			(331,986	)		502,580
Income tax expense (benefit)			(62,968	)		80,894			(119,616	)		174,398
Net income (loss) from continuing operations			(119,443	)		157,688			(212,370	)		328,182
Income from discontinued operations, net of tax			24,884			1,441			26,618			357
Net income (loss)		$	(94,559	)	$	159,129		$	(185,752	)	$	328,539
Basic earnings (loss) per share from continuing operations		$	(0.24	)	$	0.37		$	(0.45	)	$	0.78
Basic earnings per share from discontinued operations			0.05			0.01			0.06			0.00
Basic net earnings (loss) per share		$	(0.19	)	$	0.38		$	(0.39	)	$	0.78
Diluted earnings (loss) per share from continuing operations		$	(0.24	)	$	0.36		$	(0.45	)	$	0.75
Diluted earnings per share from discontinued operations			0.05			0.01			0.06			0.00
Diluted net earnings (loss) per share		$	(0.19	)	$	0.37		$	(0.39	)	$	0.75
Shares used in computation of per share data:
	Basic		492,712			423,308			476,784			423,546
	Diluted(1)		492,712			435,775			476,784			436,708

E*TRADE FINANCIAL CORPORATION AND SUBSIDIARIES

Consolidated Statement of Income (Loss)
(In thousands, except per share amounts)
(Unaudited)
			Three Months Ended
			June 30,			March 31,			June 30,
				2008			2008			2007
Revenue:
	Operating interest income		$	626,074		$	699,591		$	894,451
	Operating interest expense			(283,310	)		(373,220	)		(486,719	)
		Net operating interest income		342,764			326,371			407,732
	Commission			122,235			122,255			162,682
	Fees and service charges			50,962			54,941			59,379
	Principal transactions			18,392			20,490			27,377
	Gain (loss) on loans and securities, net			(15,707	)		(8,567	)		636
	Other revenue			13,691			13,604			11,050
		Total non-interest income		189,573			202,723			261,124
		Total net revenue		532,337			529,094			668,856
Provision for loan losses				319,121			233,871			30,045
Operating expenses:
	Compensation and benefits			96,082			123,128			110,652
	Clearing and servicing			46,122			44,885			70,093
	Advertising and market development			42,737			57,448			32,897
	Communications			24,500			25,094			23,655
	Professional services			25,749			23,645			22,589
	Depreciation and amortization			20,385			21,653			19,566
	Occupancy and equipment			21,698			20,498			20,791
	Amortization of other intangibles			9,135			10,910			10,187
	Facility restructuring and other exit activities			12,433			10,566			(2,114	)
	Other			19,702			16,506			71,506
		Total operating expenses		318,543			354,333			379,822
Income (loss) before other income (expense), income taxes and    discontinued operations				(105,327	)		(59,110	)		258,989
Other income (expense):
	Corporate interest income			1,806			2,426			1,001
	Corporate interest expense			(90,249	)		(95,241	)		(37,866	)
	Gain on sales of investments, net			18			502			17,267
	Gain (loss) on early extinguishment of debt			12,935			(2,851	)		31
	Equity in income (loss) of investments and venture funds			(1,594	)		4,699			(840	)
		Total other income (expense)		(77,084	)		(90,465	)		(20,407	)
Income (loss) before income taxes and discontinued operations				(182,411	)		(149,575	)		238,582
Income tax expense (benefit)				(62,968	)		(56,648	)		80,894
Net income (loss) from continuing operations				(119,443	)		(92,927	)		157,688
Income from discontinued operations, net of tax				24,884			1,734			1,441
Net income (loss)			$	(94,559	)	$	(91,193	)	$	159,129
Basic earnings (loss) per share from continuing operations			$	(0.24	)	$	(0.20	)	$	0.37
Basic earnings per share from discontinued operations				0.05			0.00			0.01
Basic net earnings (loss) per share			$	(0.19	)	$	(0.20	)	$	0.38
Diluted earnings (loss) per share from continuing operations			$	(0.24	)	$	(0.20	)	$	0.36
Diluted earnings per share from discontinued operations				0.05			0.00			0.01
Diluted net earnings (loss) per share			$	(0.19	)	$	(0.20	)	$	0.37
Shares used in computation of per share data:
		Basic		492,712			460,857			423,308
		Diluted(1)		492,712			460,857			435,775

E*TRADE FINANCIAL CORPORATION AND SUBSIDIARIES

Consolidated Balance Sheet
(In thousands, except share amounts)
(Unaudited)
	June 30,			December 31,
		2008			2007
ASSETS
Cash and equivalents	$	2,819,260		$	1,778,244
Cash and investments required to be segregated under Federal or other regulations		368,566			334,831
Trading securities		386,888			130,018
Available-for-sale mortgage-backed and investment securities		8,521,315			11,255,048
Margin receivables		7,370,072			7,179,175
Loans, net		26,962,281			30,139,382
Investment in Federal Home Loan Bank stock		223,392			338,585
Property and equipment, net		326,340			355,433
Goodwill		1,938,325			1,933,368
Other intangibles, net		401,819			430,007
Other assets		2,492,103			2,971,846
Total assets	$	51,810,361		$	56,845,937
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits	$	27,039,413		$	25,884,755
Securities sold under agreements to repurchase		6,953,766			8,932,693
Customer payables		5,404,125			5,514,675
Other borrowings		4,847,541			7,446,504
Corporate debt		3,033,936			3,022,698
Accounts payable, accrued and other liabilities		1,894,234			3,215,547
Total liabilities		49,173,015			54,016,872
Shareholders' equity:
Common stock, $0.01 par value, shares authorized: 1,200,000,000;
shares issued and outstanding: 536,958,825 at June 30, 2008 and
460,897,875 at December 31, 2007		5,370			4,609
Additional paid-in-capital		3,598,490			3,463,220
Accumulated deficit		(519,729	)		(247,368	)
Accumulated other comprehensive loss		(446,785	)		(391,396	)
Total shareholders' equity		2,637,346			2,829,065
Total liabilities and shareholders' equity	$	51,810,361		$	56,845,937

SEGMENT REPORTING
			Three Months Ended June 30, 2008
			Retail			Institutional			Eliminations(2)			Total
Revenue:			(In thousands)
	Operating interest income		$	404,078		$	531,841		$	(309,845	)	$	626,074
	Operating interest expense			(183,385	)		(409,770	)		309,845			(283,310	)
		Net operating interest income		220,693			122,071			-			342,764
	Commission			122,124			111			-			122,235
	Fees and service charges			50,989			2,451			(2,478	)		50,962
	Principal transactions			-			18,392			-			18,392
	Gain (loss) on loans and securities, net			18			(15,725	)		-			(15,707	)
	Other revenue			10,284			3,420			(13	)		13,691
		Total non-interest income		183,415			8,649			(2,491	)		189,573
		Total net revenue		404,108			130,720			(2,491	)		532,337
Provision for loan losses				-			319,121			-			319,121
Operating expenses:
	Compensation and benefits			74,503			21,579			-			96,082
	Clearing and servicing			19,966			28,647			(2,491	)		46,122
	Advertising and market development			42,748			(11	)		-			42,737
	Communications			23,264			1,236			-			24,500
	Professional services			15,423			10,326			-			25,749
	Depreciation and amortization			16,430			3,955			-			20,385
	Occupancy and equipment			20,492			1,206			-			21,698
	Amortization of other intangibles			8,743			392			-			9,135
	Facility restructuring and other exit activities			5,725			6,708			-			12,433
	Other			6,438			13,264			-			19,702
		Total operating expenses		233,732			87,302			(2,491	)		318,543
Segment income (loss)			$	170,376		$	(275,703	)	$	-		$	(105,327	)
			Three Months Ended March 31, 2008
			Retail			Institutional			Eliminations(2)			Total
Revenue:			(In thousands)
	Operating interest income		$	416,421		$	590,384		$	(307,214	)	$	699,591
	Operating interest expense			(209,378	)		(471,056	)		307,214			(373,220	)
		Net operating interest income		207,043			119,328			-			326,371
	Commission			121,669			586			-			122,255
	Fees and service charges			52,802			4,064			(1,925	)		54,941
	Principal transactions			-			20,490			-			20,490
	Loss on loans and securities, net			(2	)		(8,565	)		-			(8,567	)
	Other revenue			9,677			3,943			(16	)		13,604
		Total non-interest income		184,146			20,518			(1,941	)		202,723
		Total net revenue		391,189			139,846			(1,941	)		529,094
Provision for loan losses				-			233,871			-			233,871
Operating expenses:
	Compensation and benefits			84,089			39,039			-			123,128
	Clearing and servicing			16,604			30,222			(1,941	)		44,885
	Advertising and market development			57,436			12			-			57,448
	Communications			23,529			1,565			-			25,094
	Professional services			14,790			8,855			-			23,645
	Depreciation and amortization			16,874			4,779			-			21,653
	Occupancy and equipment			19,415			1,083			-			20,498
	Amortization of other intangibles			8,777			2,133			-			10,910
	Facility restructuring and other exit activities			182			10,384			-			10,566
	Other			26,394			(9,888	)		-			16,506
		Total operating expenses		268,090			88,184			(1,941	)		354,333
Segment income (loss)			$	123,099		$	(182,209	)	$	-		$	(59,110	)
			Three Months Ended June 30, 2007
			Retail			Institutional			Eliminations(2)			Total
Revenue:			(In thousands)
	Operating interest income		$	487,648		$	741,305		$	(334,502	)	$	894,451
	Operating interest expense			(243,111	)		(578,110	)		334,502			(486,719	)
		Net operating interest income		244,537			163,195			-			407,732
	Commission			122,133			40,549			-			162,682
	Fees and service charges			53,263			8,572			(2,456	)		59,379
	Principal transactions			-			27,377			-			27,377
	Gain on loans and securities, net			102			534			-			636
	Other revenue			11,142			52			(144	)		11,050
		Total non-interest income		186,640			77,084			(2,600	)		261,124
		Total net revenue		431,177			240,279			(2,600	)		668,856
Provision for loan losses				-			30,045			-			30,045
Operating expenses:
	Compensation and benefits			72,088			38,564			-			110,652
	Clearing and servicing			19,372			53,321			(2,600	)		70,093
	Advertising and market development			31,353			1,544			-			32,897
	Communications			20,920			2,735			-			23,655
	Professional services			14,577			8,012			-			22,589
	Depreciation and amortization			14,791			4,775			-			19,566
	Occupancy and equipment			17,924			2,867			-			20,791
	Amortization of other intangibles			9,536			651			-			10,187
	Facility restructuring and other exit activities			(1,456	)		(658	)		-			(2,114	)
	Other			29,656			41,850			-			71,506
		Total operating expenses		228,761			153,661			(2,600	)		379,822
Segment income			$	202,416		$	56,573		$	-		$	258,989

KEY PERFORMANCE METRICS(3)
Corporate Metrics	Qtr ended 6/30/08	Qtr ended 3/31/08	Qtr ended 6/30/08 vs. 3/31/08	Qtr ended 6/30/07	Qtr ended 6/30/08 vs. 6/30/07
Operating margin %(4)
Consolidated	N.M.	N.M.	N.M.	39 %	N.M.
Retail	42 %	31 %	11 %	47 %	(5)%
Institutional	N.M.	N.M.	N.M.	24 %	N.M.
Employees	3,453	3,565	(3)%	4,027	(14)%
Consultants and other	243	302	(20)%	240	1 %
Total headcount	3,696	3,867	(4)%	4,267	(13)%
Revenue per headcount	$ 144,031	$ 136,823	5 %	$ 156,751	(8)%
Revenue per compensation and benefits dollar	$ 5.54	$ 4.30	29 %	$ 6.04	(8)%
Book value per share	$ 4.91	$ 5.80	(15)%	$ 10.19	(52)%
Tangible book value per share	$ 0.42	$ 0.57	(26)%	$ 4.17	(90)%
Free cash ($MM)	$ 923.4	$ 1,061.1	(13)%	$ 431.7	114 %
Enterprise net interest spread (basis points)(5)	272	250	9 %	271	0 %
Enterprise interest-earning assets, average ($MM)	$ 47,616	$ 48,895	(3)%	$ 56,780	(16)%
Earnings before interest, taxes, depreciation & amortization ("EBITDA") ($MM)
Net income (loss) from continuing operations	$ (119.4)	$ (92.9)	29 %	$ 157.7	(176)%
Tax expense (benefit)	(63.0)	(56.6)	11 %	80.9	(178)%
Depreciation & amortization	29.5	32.6	(10)%	29.8	(1)%
Corporate interest expense	90.2	95.2	(5)%	37.9	138 %
EBITDA	$ (62.7)	$ (21.7)	189 %	$ 306.3	(120)%
Interest coverage	(0.7)	(0.2)	250 %	8.1	(109)%
Discontinued operations ($MM)
Lending loss, net of tax	$ (4.6)	$ (1.0)	N.M.	$ (2.8)	N.M.
Canada income, net of tax	5.4	2.7	N.M.	4.2	N.M.
Canada - benefit of excess tax basis over book basis	24.1	-	N.M.	-	N.M.
Income from discontinued operations, net of tax	$ 24.9	$ 1.7	N.M.	$ 1.4	N.M.
Bank earnings before taxes and before credit losses ($MM) (6)	$ 203.9	$ 182.7	12 %	$ 209.6	(3)%
Retail Metrics
Trading days	64.0	61.0	N.M.	63.0	N.M.
DARTs
US	151,102	155,706	(3)%	141,606	7 %
International	21,212	24,849	(15)%	19,020	12 %
DARTs from continuing operations	172,314	180,555	(5)%	160,626	7 %
DARTs from discontinued operations	-	10,169	(100)%	8,496	(100)%
Total DARTs	172,314	190,724	(10)%	169,122	2 %
Total trades from continuing operations (MM)	11.0	11.0	0 %	10.1	9 %
Total trades from discontinued operations (MM)	-	0.6	(100)%	0.6	(100)%
Total trades (MM)	11.0	11.6	(5)%	10.7	3 %
Average commission per trade from continuing operations	$ 11.07	$ 11.05	0 %	$ 12.07	(8)%
Average commission per trade from discontinued operations	-	10.83	(100)%	11.30	(100)%
Total average commission per trade	$ 11.07	$ 11.04	0 %	$ 12.03	(8)%
End of period margin debt from continuing operations ($B)	$ 7.15	$ 6.46	11 %	$ 7.27	(2)%
End of period margin debt from discontinued operations ($B)	-	0.24	(100)%	0.25	(100)%
Total end of period margin debt ($B)	$ 7.15	$ 6.70	7 %	$ 7.52	(5)%
Average margin debt from continuing operations ($B)	$ 6.86	$ 6.73	2 %	$ 6.89	0 %
Average margin debt from discontinued operations ($B)	-	0.26	(100)%	0.24	(100)%
Total average margin debt ($B)	$ 6.86	$ 6.99	(2)%	$ 7.13	(4)%
Gross new investing/trading accounts	175,472	175,402	0 %	187,670	(6)%
Gross new deposit/lending accounts	56,211	119,294	(53)%	103,307	(46)%
Closed accounts	(201,794)	(216,488)	(7)%	(193,589)	4 %
Net new accounts from continuing operations	29,889	78,208	(62)%	97,388	(69)%
Net new accounts from discontinued operations	-	(16,400)	(100)%	3,288	(100)%
Net new accounts	29,889	61,808	(52)%	100,676	(70)%
End of period investing/trading accounts	3,519,378	3,506,506	0 %	3,534,252	0 %
End of period deposit/lending accounts	875,959	858,942	2 %	664,960	32 %
End of period accounts from continuing operations	4,395,337	4,365,448	1 %	4,199,212	5 %
End of period accounts from discontinued operations	-	412,790	(100)%	448,008	(100)%
End of period total accounts	4,395,337	4,778,238	(8)%	4,647,220	(5)%
Account Segmentation Detail
Retail accounts within target segment(7)	935,730	922,139	1 %	931,472	0 %
Other retail accounts(8)	2,440,794	2,414,695	1 %	2,208,768	11 %
Corporate Services accounts	1,018,813	1,028,614	(1)%	1,058,972	(4)%
End of period accounts from continuing operations	4,395,337	4,365,448	1 %	4,199,212	5 %
End of period accounts from discontinued operations	-	412,790	(100)%	448,008	(100)%
End of period total accounts	4,395,337	4,778,238	(8)%	4,647,220	(5)%
Net new customers from continuing operations	21,597	43,223	N.M.	39,252	N.M.
Net new customers from discontinued operations and other (9)	(536,954)	17,160	N.M.	11,941	N.M.
Total net new customers(9)	(515,357)	60,383	N.M.	51,193	N.M.
End of period total customers (9)	3,105,300	3,620,657	(14)%	3,528,261	(12)%
End of period assets per customer	$ 52,172	$ 46,508	12 %	$ 60,323	(14)%
Consolidated net revenue per customer	$ 171	$ 146	17 %	$ 190	(10)%
Consolidated segment income (loss) per customer	$ (34)	$ (16)	113 %	$ 73	(147)%
Products per customer(10)	2.4	2.1	14 %	2.1	14 %
Customer Assets ($B)
Security holdings	$ 105.9	$ 105.4	0 %	$ 136.4	(22)%
Customer payables (cash)(11)	4.4	4.4	0 %	5.6	(21)%
Customer cash balances held by third parties	3.2	3.3	(3)%	4.1	(22)%
Unexercised Corporate Services customer options (vested)	22.4	24.5	(9)%	34.7	(35)%
Customer assets in investing/trading accounts	135.9	137.6	(1)%	180.8	(25)%
Sweep deposit accounts	9.8	10.0	(2)%	11.0	(11)%
Transaction accounts	13.0	12.5	4 %	11.7	11 %
CDs	3.3	3.7	(11)%	4.6	(28)%
Customer assets in deposit accounts	26.1	26.2	0 %	27.3	(4)%
Customer assets from continuing operations	162.0	163.8	(1)%	208.1	(22)%
Customer assets from discontinued operations	-	4.6	(100)%	4.7	(100)%
Total customer assets	$ 162.0	$ 168.4	(4)%	$ 212.8	(24)%
Net new customer assets from continuing operations ($B)(12)	$ 1.8	$ 0.3	N.M.	$ 1.5	N.M.
Net new customer assets from discontinued operations and other ($B)(12)	(0.9)	0.0	N.M.	0.1	N.M.
Total net new customer assets ($B)(12)	$ 0.9	$ 0.3	N.M.	$ 1.6	N.M.
Total customer cash and deposits from continuing operations ($B)	$ 33.7	$ 33.9	(1)%	$ 37.0	(9)%
Total customer cash and deposits from discontinued operations ($B)	-	1.0	(100)%	0.9	(100)%
Total customer cash and deposits ($B)	$ 33.7	$ 34.9	(3)%	$ 37.9	(11)%
Unexercised Corporate Services client options (unvested) ($B)	$ 21.5	$ 20.2	6 %	$ 24.8	(13)%
Institutional Metrics
Market Making
Equity shares traded (MM)	36,999	33,503	10 %	59,988	(38)%
Average revenue capture per 1,000 equity shares	$ 0.466	$ 0.566	(18)%	$ 0.433	8 %
% of Bulletin Board equity shares to total equity shares	88.2%	87.8%	0 %	91.3%	(3)%
Capital Ratios
Tier 1 Capital Ratio(13)	6.68 %	6.78 %	(0.10)%	6.15 %	0.53 %
Risk Weighted Capital Ratio(13)	12.16 %	12.36 %	(0.20)%	10.58 %	1.58 %
Excess E*TRADE Bank risk-based capital ($MM)(13)	$ 620.1	$ 695.3	(11)%	$ 199.0	212 %
Loans receivable ($MM)
Average loans receivable	$ 28,211	$ 29,890	(6)%	$ 30,802	(8)%
Ending loans receivable, net	$ 26,960	$ 28,425	(5)%	$ 31,484	(14)%
One- to Four-Family
Loan performance detail ($MM)
Current	$ 13,231	$ 14,033	(6)%	$ 15,471	(14)%
30-89 days delinquent	368	363	1 %	203	81 %
90-179 days delinquent	192	151	27 %	38	405 %
180+ days delinquent (net of $26M, $8M and $0 in charge-offs for Q208, Q108 and Q207, respectively)	180	141	28 %	28	543 %
Total delinquent loans	740	655	13 %	269	175 %
Gross loans receivable(14)	$ 13,971	$ 14,688	(5)%	$ 15,740	(11)%
Credit Quality and Reserve Metrics
Special mention loans (30-89 days delinquent) as a % of gross loans receivable	2.63%	2.47%	0.16 %	1.29%	1.34 %
Nonperforming loans (90+ days delinquent) as a % of gross loans receivable	2.66%	1.99%	0.67 %	0.42%	2.24 %
Total delinquent loans (30+ days delinquent) as a % of gross loans receivable	5.30%	4.46%	0.84 %	1.71%	3.59 %
Allowance for loan losses as a % of gross loans receivable	0.37%	0.28%	0.09 %	0.02%	0.35 %
Allowance for loan losses as a % of nonperforming loans	14.03%	14.17%	(0.14)%	5.43%	8.60 %
Net charge-offs as a % of average loans receivable (annualized)	0.91%	0.38%	0.53 %	0.00%	0.91 %
Provision as a % of average loans receivable (annualized)	1.21%	0.98%	0.23 %	0.01%	1.20 %
Home Equity
Loan performance detail ($MM)
Current	$ 10,454	$ 11,029	(5)%	$ 12,391	(16)%
30-89 days delinquent	282	277	2 %	181	56 %
90-179 days delinquent	250	222	13 %	70	257 %
180+ days delinquent (net of $15M, $9M and $0 in charge-offs for Q208, Q108 and Q207, respectively)	55	63	(13)%	28	96 %
Total delinquent loans	587	562	4 %	279	110 %
Gross loans receivable(14)	$ 11,041	$ 11,591	(5)%	$ 12,670	(13)%
Credit Quality and Reserve Metrics
Special mention loans (30-89 days delinquent) as a % of gross loans receivable	2.56%	2.39%	0.17 %	1.42%	1.14 %
Nonperforming loans (90+ days delinquent) as a % of gross loans receivable	2.76%	2.46%	0.30 %	0.77%	1.99 %
Total delinquent loans (30+ days delinquent) as a % of gross loans receivable	5.32%	4.85%	0.47 %	2.20%	3.12 %
Allowance for loan losses as a % of gross loans receivable	4.95%	4.23%	0.72 %	0.40%	4.55 %
Allowance for loan losses as a % of nonperforming loans	179.32%	172.18%	7.14 %	51.11%	128.21 %
Net charge-offs as a % of average loans receivable (annualized)	7.18%	5.02%	2.16 %	0.49%	6.69 %
Provision as a % of average loans receivable (annualized)	9.14%	6.09%	3.05 %	0.78%	8.36 %
Consumer and Other
Loan performance detail ($MM)
Current	$ 2,553	$ 2,682	(5)%	$ 3,134	(19)%
30-89 days delinquent	23	23	0 %	12	92 %
90-179 days delinquent	7	6	17 %	3	133 %
180+ days delinquent	1	1	0 %	-	N.M.
Total delinquent loans	31	30	3 %	15	107 %
Gross loans receivable(14)	$ 2,584	$ 2,712	(5)%	$ 3,149	(18)%
Credit Quality and Reserve Metrics
Special mention loans (30-89 days delinquent) as a % of gross loans receivable	0.88%	0.84%	0.04 %	0.39%	0.49 %
Nonperforming loans (90+ days delinquent) as a % of gross loans receivable	0.30%	0.26%	0.04 %	0.11%	0.19 %
Total delinquent loans (30+ days delinquent) as a % of gross loans receivable	1.18%	1.11%	0.07 %	0.50%	0.68 %
Allowance for loan losses as a % of gross loans receivable	1.45%	1.24%	0.21 %	0.70%	0.75 %
Allowance for loan losses as a % of nonperforming loans	482.78%	471.56%	11.22 %	630.11%	(147.33)%
Net charge-offs as a % of average loans receivable (annualized)	2.01%	1.74%	0.27 %	0.83%	1.18 %
Provision as a % of average loans receivable (annualized)	2.57%	2.24%	0.33 %	0.61%	1.96 %
Total Loans Receivable
Loan performance detail ($MM)
Current	$ 26,238	$ 27,744	(5)%	$ 30,996	(15)%
30-89 days delinquent	673	663	2 %	396	70 %
90-179 days delinquent	449	379	18 %	111	305 %
180+ days delinquent	236	205	15 %	56	321 %
Total delinquent loans	1,358	1,247	9 %	563	141 %
Total gross loans receivable(14)	$ 27,596	$ 28,991	(5)%	$ 31,559	(13)%
Credit Quality and Reserve Metrics
Special mention loans (30-89 days delinquent) as a % of gross loans receivable	2.44%	2.29%	0.15 %	1.25%	1.19 %
Nonperforming loans (90+ days delinquent) as a % of gross loans receivable	2.48%	2.02%	0.46 %	0.53%	1.95 %
Total delinquent loans (30+ days delinquent) as a % of gross loans receivable	4.92%	4.30%	0.62 %	1.78%	3.14 %
Allowance for loan losses as a % of gross loans receivable	2.30%	1.95%	0.35 %	0.24%	2.06 %
Allowance for loan losses as a % of nonperforming loans	92.95%	96.84%	(3.89)%	45.34%	47.61 %
Net charge-offs as a % of average loans receivable (annualized)	3.53%	2.36%	1.17 %	0.29%	3.24 %
Provision as a % of average loans receivable (annualized)	4.52%	3.13%	1.39 %	0.39%	4.13 %

ACTIVITY IN ALLOWANCE FOR LOAN LOSSES
	Three Months Ended June 30, 2008
	One- to Four- Family	Home Equity	Consumer and Other	Total
	(In thousands)
Allowance for loan losses, ending 3/31/08	$ 41,403	$ 490,831	$ 33,674	$ 565,908
Provision for loan losses	42,917	259,185	17,019	319,121
Charge-offs, net	(32,171)	(203,678)	(13,297)	(249,146)
Allowance for loan losses, ending 6/30/08	$ 52,149	$ 546,338	$ 37,396	$ 635,883
	Three Months Ended March 31, 2008
	One- to Four- Family	Home Equity	Consumer and Other	Total
	(In thousands)
Allowance for loan losses, ending 12/31/07	$ 18,831	$ 459,167	$ 30,166	$ 508,164
Provision for loan losses	37,175	181,030	15,666	233,871
Charge-offs, net(15)	(14,603)	(149,366)	(12,158)	(176,127)
Allowance for loan losses, ending 3/31/08	$ 41,403	$ 490,831	$ 33,674	$ 565,908
	Three Months Ended June 30, 2007
	One- to Four- Family	Home Equity	Consumer and Other	Total
	(In thousands)
Allowance for loan losses, ending 3/31/07	$ 3,286	$ 40,840	$ 23,863	$ 67,989
Provision for loan losses	322	24,832	4,891	30,045
Charge-offs, net	(54)	(15,582)	(6,694)	(22,330)
Allowance for loan losses, ending 6/30/07	$ 3,554	$ 50,090	$ 22,060	$ 75,704

AVERAGE ENTERPRISE BALANCE SHEET DATA
	Three Months Ended
	June 30, 2008						March 31, 2008
	Average		Operating Interest		Average		Average		Operating Interest		Average
	Balance		Inc./Exp.		Yield/Cost		Balance		Inc./Exp.		Yield/Cost
Enterprise interest-earning assets:	(In thousands)						(In thousands)
Loans, net(16)	$	28,225,411	$	402,103	5.70	%	$	29,925,013	$	451,574	6.04	%
Margin receivables		6,809,407		75,382	4.45	%		6,683,969		90,937	5.47	%
Mortgage-backed and related available-for-sale securities		8,643,520		98,587	4.56	%		9,281,381		110,072	4.74	%
Available-for-sale investment securities		132,572		2,148	6.48	%		169,848		2,835	6.67	%
Trading securities		528,495		9,151	6.93	%		572,817		10,708	7.48	%
Cash and cash equivalents(17)		2,367,936		17,777	3.02	%		1,468,776		13,833	3.79	%
Stock borrow and other		908,847		16,527	7.31	%		793,450		15,640	7.93	%
Total enterprise interest-earning assets	$	47,616,188		621,675	5.23	%	$	48,895,254		695,599	5.70	%
Enterprise interest-bearing liabilities:
Retail deposits	$	26,077,330		137,527	2.12	%	$	25,383,594		171,535	2.72	%
Brokered certificates of deposit		1,132,630		14,184	5.04	%		1,229,811		15,169	4.96	%
Customer payables		4,561,706		7,949	0.70	%		4,348,906		9,910	0.92	%
Repurchase agreements and other borrowings		7,474,092		68,630	3.63	%		7,980,130		94,934	4.71	%
FHLB advances		4,629,974		51,609	4.41	%		5,974,084		70,802	4.69	%
Stock loan and other		1,143,405		3,254	1.14	%		1,679,887		10,640	2.55	%
Total enterprise interest-bearing liabilities	$	45,019,137		283,153	2.51	%	$	46,596,412		372,990	3.20	%
Enterprise net interest income/spread(5)			$	338,522	2.72	%			$	322,609	2.50	%

	Three Months Ended
	June 30, 2007
	Average Balance			Operating Interest Inc./Exp.			Average Yield/Cost
Enterprise interest-earning assets:	(In thousands)
Loans, net(16)	$	31,037,971		$	497,517			6.41	%
Margin receivables		6,772,898			123,317			7.30	%
Mortgage-backed and related available-for-sale securities		13,027,383			172,501			5.30	%
Available-for-sale investment securities		4,200,636			68,616			6.53	%
Trading securities		114,135			3,174			11.12	%
Cash and cash equivalents(17)		643,415			8,375			5.22	%
Stock borrow and other		983,382			18,411			7.51	%
Total enterprise interest-earning assets	$	56,779,820			891,911			6.28	%
Enterprise interest-bearing liabilities:
Retail deposits	$	26,778,743			200,081			3.00	%
Brokered certificates of deposit		424,645			5,220			4.93	%
Customer payables		6,004,238			17,890			1.19	%
Repurchase agreements and other borrowings		13,558,998			175,337			5.12	%
FHLB advances		6,151,086			78,800			5.07	%
Stock loan and other		1,194,006			8,381			2.82	%
Total enterprise interest-bearing liabilities	$	54,111,716			485,709			3.57	%
Enterprise net interest income/spread(5)				$	406,202			2.71	%
Reconciliation from Enterprise Net Interest Income to Net Operating Interest Income
	Three Months Ended
	June 30, 2008			March 31, 2008			June 30, 2007
	(In thousands)
Enterprise net interest income	$	338,522		$	322,609		$	406,202
Taxable equivalent interest adjustment(18)		(3,205	)		(3,698	)		(7,487	)
Customer cash held by third parties and other(19)		7,447			7,460			9,017
Net operating interest income	$	342,764		$	326,371		$	407,732

SUPPLEMENTAL PORTFOLIO DISCLOSURE
MORTGAGE LOAN PORTFOLIO(20)
	One- to Four-Family Mortgage Loan Distribution
	Unpaid principal balances at June 30, 2008 ($MM)
		FICO
	LTV	>=720	719-700	699-680	679-660	659-620	<620	Total
	<70%	$ 4,146	$ 736	$ 540	$ 339	$ 208	$ 3	$ 5,972
	70%-80%	4,969	1,099	852	469	216	5	7,610
	80%-90%	85	29	28	23	12	-	177
	>90%	80	29	28	16	18	-	171
	Total	$ 9,280	$ 1,893	$ 1,448	$ 847	$ 454	$ 8	$ 13,930
	One- to Four-Family 30+ Days Delinquent Loan Distribution
	June 30, 2008 ($MM)
		FICO
	LTV	>=720	719-700	699-680	679-660	659-620	<620	Total
	<70%	$ 92	$ 42	$ 40	$ 36	$ 23	$ 1	$ 234
	70%-80%	195	93	82	46	37	1	454
	80%-90%	11	5	6	7	2	-	31
	>90%	6	3	3	4	5	-	21
	Total	$ 304	$ 143	$ 131	$ 93	$ 67	$ 2	$ 740
	Home Equity Loan Distribution
	Unpaid principal balances at June 30, 2008 ($MM)
		FICO
	CLTV	>=720	719-700	699-680	679-660	659-620	<620	Total
	<70%	$ 2,311	$ 387	$ 317	$ 140	$ 107	$ 11	$ 3,273
	70%-80%	1,123	321	271	108	95	2	1,920
	80%-90%	1,908	665	624	257	187	1	3,642
	>90%	1,063	374	312	167	101	-	2,017
	Total	$ 6,405	$ 1,747	$ 1,524	$ 672	$ 490	$ 14	$ 10,852
	Home Equity 30+ Days Delinquent Loan Distribution
	June 30, 2008 ($MM)
		FICO
	CLTV	>=720	719-700	699-680	679-660	659-620	<620	Total
	<70%	$ 17	$ 8	$ 10	$ 4	$ 5	$ 1	$ 45
	70%-80%	22	13	15	9	11	-	70
	80%-90%	88	52	60	30	31	-	261
	>90%	80	45	41	28	17	-	211
	Total	$ 207	$ 118	$ 126	$ 71	$ 64	$ 1	$ 587

INVESTMENT SECURITIES PORTFOLIO
	Book value at June 30, 2008 ($MM)
		AAA		AA		A		BBB		Below Investment Grade and Non-Rated		Total
	Mortgage-backed securities backed by U.S.  Government sponsored and Federal agencies	$	7,877	$	-	$	-	$	-	$	-	$	7,877
	Collateralized mortgage obligations and other		993		62		-		6		-		1,061
	Municipal bonds, corporate bonds, preferred stock  and FHLB stock		276		412		14		-		-		702
	Total	$	9,146	$	474	$	14	$	6	$	-	$	9,640

SUPPLEMENTAL INFORMATION

Explanation of Non-GAAP Measures and Certain Metrics

Management believes that free cash, EBITDA, interest coverage, enterprise net interest income and enterprise interest-earning assets are appropriate measures for evaluating the operating and liquidity performance of the Company. We believe that the elimination of certain items from the related GAAP measures is helpful to investors and analysts who may wish to use some or all of this information to analyze our current performance, prospects and valuation. Management uses non-GAAP information internally to evaluate our operating performance and in formulating our budget for future periods.

Discontinued Operations and Reporting Changes

During the period ended June 30, 2008, the Company re-classified the Consolidated Statement of Income (Loss) to reflect the Canadian brokerage business and lending business as discontinued operations. Additionally, the Company re-defined “Total net revenue” by separately stating “Provision for loan losses” as its own line item and reclassified SFAS 133 hedge ineffectiveness from “Other operating expenses” to the “Gain (loss) on loans and securities, net” line item. The Company has re-presented the income statement for the past two years on its Investor Relations website.

Free Cash

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

EBITDA

EBITDA represents net income from continuing operations before corporate interest expense, taxes and depreciation and amortization. Management believes that EBITDA provides a useful additional measure of our performance by excluding certain non-cash charges and expenses that are not directly related to the performance of our business.

Interest Coverage

Interest coverage represents EBITDA divided by corporate interest expense. Management believes that by excluding the charges and expenses that are excluded from EBITDA, interest coverage provides a useful additional measure of our ability to continue to meet our interest obligations and our liquidity.

Bank Earnings Before Taxes and Before Credit Losses

Bank earnings before taxes and before credit losses represents the pre-tax earnings of E*TRADE Bank Holding Company ("ETBH" or “Bank”) before discontinued operations, gain (loss) on securities, net and provision for loan losses. This metric shows the amount of earnings that the Bank, after accruing for the interest expense on its trust preferred securities, generates each quarter prior to credit related losses, primarily provision and gain (loss) on securities. Management believes this non-GAAP measure is useful to investors and analysts as it is an indicator of the level of credit related losses the Bank can absorb without causing a decline in E*TRADE Bank’s excess risk based capital.

Enterprise Net Interest Income

Enterprise net interest income is taxable equivalent basis net operating interest income excluding corporate interest income and corporate interest expense, stock conduit interest income and expense and interest earned on customer cash held by third parties. Management believes this non-GAAP measure is useful to investors and analysts as it is a measure of the net operating interest income generated by our core operations.

Enterprise Interest-Earning Assets

Enterprise interest-earning assets consists of the primary interest-earning assets of the Company and includes: loans receivable, mortgage-backed and available-for-sale securities, margin receivables, stock borrow balances, and cash required to be segregated under regulatory guidelines that earn interest for the Company. Management believes that this non-GAAP measure is useful to investors and analysts as it is a measure of the primary assets from which the Company generates net operating interest income.

It is important to note these metrics and other non-GAAP measures may involve judgment by management and should be considered in addition to, not as a substitute for, or superior to, net income, consolidated statements of cash flows, or other measures of financial performance prepared in accordance with GAAP. For complete information on the items excluded from these non-GAAP measures, please see our financial statements and “Management’s Discussion and Analysis of Results of Operations and Financial Condition” that will be included in the periodic report we expect to file with the SEC with respect to the financial periods discussed herein.

ENDNOTES

(1) Because the Company reported a net loss for the first and second quarters of 2008, the calculation of diluted net loss per share does not include common stock equivalents as they are anti-dilutive and would result in a reduction of net loss per share.

(2) Reflects elimination of transactions between Retail and Institutional segments, which includes deposit and customer payable transfer pricing, servicing and order flow rebates.

(3) Amounts and percentages may not calculate due to rounding.

(4) Operating margin is the percentage of net revenue that results in income (loss) before other income (expense), income taxes and discontinued operations. The percentage is calculated by dividing income (loss) before other income (expense), income taxes and discontinued operations by total net revenue.

(5) Enterprise net interest spread is the taxable equivalent rate earned on average enterprise interest-earning assets less the rate paid on average enterprise interest-bearing liabilities, excluding corporate interest-earning assets and liabilities, stock conduit and customer cash held by third parties.

(6) Bank earnings before taxes and before credit losses represents the pre-tax earnings of E*TRADE Bank Holding Company ("ETBH" or “Bank”) before discontinued operations, gain (loss) on securities, net and provision for loan losses. This metric shows the amount of earnings that the Bank, after accruing for the interest expense on its trust preferred securities, generates each quarter prior to credit related losses, primarily provision and gain (loss) on securities. Management believes this non-GAAP measure is useful to investors and analysts as it is an indicator of the level of credit related losses the Bank can absorb without causing a decline in E*TRADE Bank’s excess risk based capital (a). Below is a reconciliation of Bank earnings before taxes and before credit losses from Income (loss) before income taxes and discontinued operations:

	Q2 2008			Q1 2008			Q2 2007
Income (loss) before income taxes and discontinued operations	$	(182,411	)	$	(149,575	)	$	238,582
Add back:
Non-bank (income) loss before tax and discontinued operations(b)		51,736			90,285			(53,177	)
Provision for loan losses		319,121			233,871			30,045
(Gain) loss on securities, net(c)		15,422			8,069			(5,870	)
Bank earnings before taxes and before credit losses	$	203,868		$	182,650		$	209,580

^(a) Excess risk based capital is the excess capital that E*TRADE Bank has compared to the regulatory minimum well-capitalized threshold.

^(b) Non-bank income (loss) represents all of the Company’s subsidiaries including Corporate and Brokerage, but excluding the Bank.

^(c) (Gain) loss on securities, net is included in the Gain (loss) on loans and securities, net line item on the consolidated statement of income (loss).

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

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

(9) Net new customers from discontinued operations and other consists of customers related to our discontinued operations and the impact of an improvement in our customer identification methodology implemented during the second quarter of 2008. End of period total customers declined during Q208 as a result of these two items.

(10) Products per customer increased in Q208 due to the impact of customers related to our discontinued operations and an improvement in our customer identification methodology implemented during the second quarter of 2008.

(11) Excludes customer payables (cash) from discontinued operations.

(12) Net new customer assets are total inflows to all new and existing customer accounts less total outflows from all closed and existing customer accounts. In Q208, net new customer assets from discontinued operations and other consists of the asset outflow related to the sale of Retirement Advisors of America.

(13) Q208 estimate.

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

(15) The Q108 results included $30.0 million in charge-offs associated with a change in the timing of foreclosure and bankruptcy-related charge-offs. Of the total, $8.3 million related to one- to four-family and $21.7 million related to home equity loans.

(16) Excludes loans to customers on margin.

(17) Includes segregated cash balances.

(18) Gross-up for tax-exempt securities.

(19) Includes interest earned on average customer assets of $3.4 billion, $3.3 billion and $4.0 billion for the quarters ended June 30, 2008, March 31, 2008 and June 30, 2007, respectively, held by parties outside E*TRADE FINANCIAL, including third party money market funds and sweep deposit accounts at unaffiliated financial institutions. Other consists of net operating interest income earned on average stock conduit assets of $0.01 million and $2.2 million for the quarters ended March 31, 2008 and June 30, 2007, respectively. There were no stock conduit assets for the quarter ended June 30, 2008.

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

CONTACT:
E*TRADE FINANCIAL Media Relations Contact
Pam Erickson, 617-296-6080
pam.erickson@etrade.com
or
E*TRADE FINANCIAL Investor Relations Contact
Robert Simmons, 646-521-4406
robert.simmons@etrade.com