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 24, 2013



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 No.)

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)

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 24, 2013, the Company announced its second quarter earnings for fiscal year 2013. 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 24, 2013

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 hereunto duly authorized.

Dated:	July 24, 2013
		E*TRADE FINANCIAL CORPORATION
		By:	/s/ Karl A. Roessner
			Karl A. Roessner
			Corporate Secretary

EX-99.1

Exhibit 99.1

E*TRADE Financial Corporation Announces Second Quarter 2013 Results

Company to exit market making business

NEW YORK--(BUSINESS WIRE)--July 24, 2013--E*TRADE Financial Corporation (NASDAQ: ETFC):

Second Quarter Results

• Net loss of $54 million, or $0.19 loss per share on total net revenue of $440 million
• Total operating expenses of $414 million, including goodwill impairment of $142 million and restructuring charges of $10 million
• Excluding impact of the decision to exit the market making business, net income of $60 million⁽¹⁾, or $0.21 per share⁽¹⁾
• Provision for loan losses of $46 million
• Daily Average Revenue Trades (DARTs) of 150,000
• Net new brokerage accounts of 30,000
• Net new brokerage assets of $1.7 billion; end of period customer assets of $220 billion

E*TRADE Financial Corporation (NASDAQ: ETFC) today announced results for its second quarter ended June 30, 2013, reporting a net loss of $54 million, or $0.19 loss per share, including $142 million of goodwill impairment, and $10 million of restructuring charges. Excluding the goodwill impairment, the Company recorded net income of $60 million⁽¹⁾, or $0.21 earnings per share⁽¹⁾. This compares with net income of $35 million, or $0.12 per share in the prior quarter, and net income of $40 million, or $0.14 per share in the second quarter of 2012. Total net revenue of $440 million for the second quarter of 2013, compared favorably with $420 million in the prior quarter, and was down from $452 million in the second quarter of 2012.

During the second quarter, the Company decided to exit its market making business. As a result, the Company classified the market making unit as held-for-sale during the quarter and impaired the entire amount of the associated goodwill, resulting in a $142 million impairment charge, before tax. This goodwill impairment is a non-cash charge and has no impact on the Company’s tangible equity or regulatory capital position. The non-deductible nature of this charge and the impact of other state deferred tax items due to the decision to exit the market making business resulted in a consolidated effective tax rate of -14 percent for the quarter. Excluding this impact, the Company’s effective tax rate was 37 percent.

“The second quarter was reflective of how well-geared the E*TRADE model is for improvements in the operating environment, as our normalized income demonstrated marked growth from prior periods. Our customers remained engaged, and we continued to grow assets and accounts, while delivering record account retention,” said Paul Idzik, Chief Executive Officer. “I am pleased with the team’s solid performance, as we sharpened our focus on delivering an exceptional customer experience, while identifying opportunities for efficiency. Additionally, our decision to exit the market making business underscores Management’s intensifying focus on our core customer franchise and the desire to concentrate our efforts on areas that directly support the core of the Company. As we go forward, I am exceedingly confident in our prospects for our customers, our business, and our shareholders.”

E*TRADE reported DARTs of 150,000 during the quarter, an increase of one percent from the prior quarter and an increase of eight percent versus the same quarter a year ago.

At quarter end, the Company reported 4.6 million customer accounts, which included 3.0 million brokerage accounts. Net new brokerage accounts were 30,000 during the quarter compared with 30,000 in the prior quarter and 46,000 in the second quarter of 2012. Brokerage account attrition for the quarter matched a record low for the Company at 8.4 percent annualized.

The Company ended the quarter with $220 billion in total customer assets, compared with $219 billion at the end of the first quarter and $193 billion from the year-ago period.

During the quarter, customers added $1.7 billion in net new brokerage assets. Brokerage related cash increased by $0.9 billion to $35.6 billion during the period, while customers were net buyers of approximately $0.3 billion of securities. Margin receivables averaged $5.7 billion in the quarter, flat sequentially and up two percent year over year, ending the quarter at $6.0 billion.

Net operating interest income for the second quarter was $243 million, up from $241 million in the prior quarter and down from $279 million a year ago. Second quarter results reflected a net interest spread of 2.35 percent on average interest-earning assets of $40.2 billion, compared with a net interest spread of 2.30 percent on average interest-earning assets of $40.9 billion in the prior quarter.

Commissions, fees and service charges, principal transactions, and other revenue in the second quarter were $177 million, compared with $164 million in the prior quarter and $154 million in the second quarter of 2012. Average commission per trade for the quarter was $11.10, compared to $11.30 in the prior quarter, and $10.68 in the second quarter of 2012.

Total net revenue in the quarter also included $20 million of net gains on loans and securities, net of impairment, compared with $15 million in the prior quarter, and $19 million in the second quarter of 2012.

Total operating expenses for the quarter were $414 million, including $142 million of goodwill impairment and $10 million of restructuring charges. Excluding the second quarter’s goodwill impairment, as well as restructuring and severance charges from the second and first quarters, core operating expenses declined $21 million sequentially, from $283 million⁽²⁾ to $262 million⁽²⁾. As of the end of the quarter, the Company’s cost reduction program had been substantially completed, reducing annual run-rate expenses by approximately $95 million, net, comprising $110 million in targeted reductions, offset by a larger than anticipated investment in enterprise risk management of $15 million.

Total assets ended the quarter at $45.0 billion, up slightly from the prior quarter, while average assets declined sequentially by $0.7 billion, as the quarter’s deleveraging actions were offset by customer activity. The Company noted that its period end wholesale borrowings were temporarily increased by approximately $0.5 billion, to support increased customer activity during the last week of the quarter. This temporary increase was reversed during the first week of the third quarter.

The Company’s loan portfolio ended the quarter at $9.6 billion, contracting approximately $0.5 billion from the prior quarter. Second quarter provision for loan losses of $46 million was up from $43 million in the prior quarter, which included a $13 million benefit from a settlement with a third party mortgage originator.

Net charge-offs in the quarter were $50 million, a decrease of $18 million from the prior quarter. The allowance for loan losses ended the quarter at $451 million, down $4 million from the previous quarter.

For the Company’s entire loan portfolio, special mention delinquencies decreased 14 percent sequentially, and total at-risk delinquencies decreased 17 percent versus the first quarter. As compared to the year-ago period, special mention delinquencies declined 23 percent and total at-risk delinquencies declined 28 percent.

As of June 30, 2013, the Company reported consolidated Tier 1 leverage and total risk-based ratios⁽³⁾ of 6.4 percent and 15.8 percent, respectively; increasing from 6.0 percent and 14.8 percent in the prior period. The Company’s consolidated Tier 1 common ratio⁽⁴⁾ ended the quarter at 12.2 percent, improving from 11.2 percent in the prior period. E*TRADE Bank ended the quarter with Tier 1 leverage and total risk-based capital ratios⁽⁵⁾ of 9.5 percent and 22.9 percent, rising from 9.3 percent and 21.9 percent, respectively, at the end of the prior period.

Historical metrics and financials can be found on the E*TRADE Financial corporate website at about.etrade.com.

The Company will host a conference call to discuss the results beginning at 5:00 p.m. EDT today. This conference call will be available to domestic participants by dialing 800-404-5245 while international participants should dial +1 303-223-4399. A live audio webcast and replay of this conference call will also be available at about.etrade.com.

About E*TRADE Financial

The E*TRADE Financial family of companies provides financial services including online brokerage and related banking products and services to retail investors. Specific business segments include Trading and Investing and Balance Sheet Management. Securities products and services are offered by E*TRADE Securities LLC (Member FINRA/SIPC). Bank products and services are offered by E*TRADE Bank, a Federal savings bank, Member FDIC, or its subsidiaries and affiliates. More information is available at www.etrade.com. ETFC-E

Important Notices

E*TRADE Financial, E*TRADE and the E*TRADE logo are trademarks or registered trademarks of E*TRADE Financial Corporation.

Forward-Looking Statements: The statements contained in this news release that are forward looking, including statements regarding our ability to drive an exceptional customer experience, to grow assets and accounts, and to deliver results for our customers, our business and our shareholders 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, our potential inability to reduce our balance sheet and costs, potential changes in market activity, anticipated changes in the rate of new customer acquisition and in rate of net acquisition of brokerage accounts and assets, macro trends of the economy in general and the residential real estate market, instability in the consumer credit markets and credit trends, increased mortgage loan delinquency and default rates, portfolio growth, portfolio seasoning and resolution through collections, sales or charge-offs, the uncertainty surrounding the foreclosure process, and the potential negative regulatory consequences resulting from the implementation of financial regulatory reform as well as from actions by or potentially more restrictive policies or interpretations of the Federal Reserve and the Office of the Comptroller of the Currency or other regulators. Further information about these risks and uncertainties can be found in the annual, quarterly, and current reports on Form 10-K, Form 10-Q, and Form 8-K previously filed by E*TRADE Financial Corporation with the Securities and Exchange Commission (including information in these reports under the caption “Risk Factors”). Any forward-looking statement included in this release speaks only as of the date of this communication; the Company disclaims any obligation to update any information.

© 2013 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,
				2013			2012			2013			2012
Revenue:
	Operating interest income		$	301,830		$	354,520		$	601,890		$	716,781
	Operating interest expense			(59,289	)		(75,415	)		(118,020	)		(152,824	)
		Net operating interest income		242,541			279,105			483,870			563,957
	Commissions			106,361			93,313			207,093			200,744
	Fees and service charges			40,367			29,063			72,877			61,061
	Principal transactions			21,176			21,239			42,922			45,385
	Gains on loans and securities, net			21,061			24,685			36,741			59,591
	Net impairment			(580	)		(5,269	)		(1,745	)		(8,801	)
	Other revenues			9,005			10,272			18,038			19,868
		Total non-interest income		197,390			173,303			375,926			377,848
		Total net revenue		439,931			452,408			859,796			941,805
Provision for loan losses				46,149			67,261			88,799			139,208
Operating expense:
	Compensation and benefits			86,021			85,549			181,672			177,827
	Advertising and market development			23,284			36,567			59,868			84,155
	Clearing and servicing			31,062			32,837			62,706			67,392
	FDIC insurance premiums			25,054			27,195			54,345			55,557
	Professional services			18,634			19,934			35,936			40,269
	Occupancy and equipment			18,153			18,244			35,669			36,098
	Communications			18,618			18,358			37,132			37,478
	Depreciation and amortization			22,797			23,104			45,845			45,343
	Amortization of other intangibles			6,067			6,295			12,134			12,591
	Impairment of goodwill			142,423			-			142,423			-
	Facility restructuring and other exit activities			9,892			1,589			17,461			1,165
	Other operating expenses			11,922			11,783			24,271			29,819
		Total operating expense		413,927			281,455			709,462			587,694
Income (loss) before other income (expense) and income tax expense				(20,145	)		103,692			61,535			214,903
Other income (expense):
	Corporate interest income			11			20			24			34
	Corporate interest expense			(28,613	)		(45,285	)		(57,233	)		(90,410	)
	Equity in income of investments and other			966			2,113			5,260			2,007
		Total other income (expense)		(27,636	)		(43,152	)		(51,949	)		(88,369	)
Income (loss) before income tax expense				(47,781	)		60,540			9,586			126,534
Income tax expense				6,622			21,030			28,865			24,433
Net income (loss)			$	(54,403	)	$	39,510		$	(19,279	)	$	102,101
Basic earnings (loss) per share			$	(0.19	)	$	0.14		$	(0.07	)	$	0.36
Diluted earnings (loss) per share			$	(0.19	)	$	0.14		$	(0.07	)	$	0.35
Shares used in computation of per share data:
		Basic		286,903			285,645			286,765			285,561
		Diluted		286,903			290,044			286,765			290,184

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,
				2013			2013			2012
Revenue:
	Operating interest income		$	301,830		$	300,060		$	354,520
	Operating interest expense			(59,289	)		(58,731	)		(75,415	)
		Net operating interest income		242,541			241,329			279,105
	Commissions			106,361			100,732			93,313
	Fees and service charges			40,367			32,510			29,063
	Principal transactions			21,176			21,746			21,239
	Gains on loans and securities, net			21,061			15,680			24,685
	Net impairment			(580	)		(1,165	)		(5,269	)
	Other revenues			9,005			9,033			10,272
		Total non-interest income		197,390			178,536			173,303
		Total net revenue		439,931			419,865			452,408
Provision for loan losses				46,149			42,650			67,261
Operating expense:
	Compensation and benefits			86,021			95,651			85,549
	Advertising and market development			23,284			36,584			36,567
	Clearing and servicing			31,062			31,644			32,837
	FDIC insurance premiums			25,054			29,291			27,195
	Professional services			18,634			17,302			19,934
	Occupancy and equipment			18,153			17,516			18,244
	Communications			18,618			18,514			18,358
	Depreciation and amortization			22,797			23,048			23,104
	Amortization of other intangibles			6,067			6,067			6,295
	Impairment of goodwill			142,423			-			-
	Facility restructuring and other exit activities			9,892			7,569			1,589
	Other operating expenses			11,922			12,349			11,783
		Total operating expense		413,927			295,535			281,455
Income (loss) before other income (expense) and income tax expense				(20,145	)		81,680			103,692
Other income (expense):
	Corporate interest income			11			13			20
	Corporate interest expense			(28,613	)		(28,620	)		(45,285	)
	Equity in income of investments and other			966			4,294			2,113
		Total other income (expense)		(27,636	)		(24,313	)		(43,152	)
Income (loss) before income tax expense				(47,781	)		57,367			60,540
Income tax expense				6,622			22,243			21,030
Net income (loss)			$	(54,403	)	$	35,124		$	39,510
Basic earnings (loss) per share			$	(0.19	)	$	0.12		$	0.14
Diluted earnings (loss) per share			$	(0.19	)	$	0.12		$	0.14
Shares used in computation of per share data:
		Basic		286,903			286,626			285,645
		Diluted		286,903			291,696			290,044

E*TRADE FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheet
(In thousands, except share data)
(Unaudited)
			June 30,			March 31,			December 31,
				2013			2013			2012
ASSETS
Cash and equivalents			$	1,045,252		$	1,507,722		$	2,761,494
Cash required to be segregated under federal or other regulations				855,352			318,817			376,898
Trading securities				-			100,538			101,270
Available-for-sale securities				13,060,921			12,676,378			13,443,020
Held-to-maturity securities				9,900,743			9,856,513			9,539,948
Margin receivables				5,970,042			5,748,626			5,804,041
Loans receivable, net				9,105,916			9,585,286			10,098,723
Investment in FHLB stock				77,150			61,400			67,400
Property and equipment, net				261,939			278,266			288,170
Goodwill				1,791,809			1,934,232			1,934,232
Other intangibles, net				227,327			254,555			260,622
Other assets				2,710,074			2,643,981			2,710,921
		Total assets	$	45,006,525		$	44,966,314		$	47,386,739
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits			$	25,548,527		$	25,877,748		$	28,392,552
Securities sold under agreements to repurchase				4,598,487			4,459,421			4,454,661
Customer payables				5,082,970			5,084,337			4,964,922
FHLB advances and other borrowings				1,627,658			1,265,489			1,260,916
Corporate debt				1,766,827			1,765,905			1,764,982
Other liabilities				1,621,428			1,561,587			1,644,236
		Total liabilities		40,245,897			40,014,487			42,482,269
Shareholders' equity:
Common stock, $0.01 par value, shares authorized: 400,000,000 at
	June 30, 2013, March 31, 2013 and December 31, 2012, shares issued
	and outstanding: 286,900,541 at June 30, 2013, 286,776,149 at
	March 31, 2013, and 286,114,334 at December 31, 2012			2,869			2,868			2,861
Additional paid-in-capital				7,324,425			7,320,491			7,319,257
Accumulated deficit				(2,126,999	)		(2,072,596	)		(2,107,720	)
Accumulated other comprehensive loss				(439,667	)		(298,936	)		(309,928	)
		Total shareholders' equity		4,760,628			4,951,827			4,904,470
		Total liabilities and shareholders' equity	$	45,006,525		$	44,966,314		$	47,386,739

Segment Reporting
	Three Months Ended June 30, 2013
	Trading and Investing			Balance Sheet Management			Corporate/ Other			Eliminations(6)			Total
	(In thousands)
Revenue:
Operating interest income	$	138,419		$	231,054		$	-		$	(67,643	)	$	301,830
Operating interest expense		(5,183	)		(121,749	)		-			67,643			(59,289	)
Net operating interest income		133,236			109,305			-			-			242,541
Commissions		106,361			-			-			-			106,361
Fees and service charges		39,822			545			-			-			40,367
Principal transactions		21,176			-			-			-			21,176
Gains (losses) on loans and securities, net		-			21,062			(1	)		-			21,061
Net impairment		-			(580	)		-			-			(580	)
Other revenues		7,997			1,008			-			-			9,005
Total non-interest income		175,356			22,035			(1	)		-			197,390
Total net revenue		308,592			131,340			(1	)		-			439,931
Provision for loan losses		-			46,149			-			-			46,149
Operating expense:
Compensation and benefits		59,978			3,442			22,601			-			86,021
Advertising and market development		23,284			-			-			-			23,284
Clearing and servicing		18,555			12,507			-			-			31,062
FDIC insurance premiums		-			25,054			-			-			25,054
Professional services		7,965			526			10,143			-			18,634
Occupancy and equipment		16,035			441			1,677			-			18,153
Communications		17,856			336			426			-			18,618
Depreciation and amortization		18,554			134			4,109			-			22,797
Amortization of other intangibles		6,067			-			-			-			6,067
Impairment of goodwill		142,423			-			-			-			142,423
Facility restructuring and other exit activities		-			-			9,892			-			9,892
Other operating expenses		8,060			(1,026	)		4,888			-			11,922
Total operating expense		318,777			41,414			53,736			-			413,927
Segment income (loss) before other income (expense)		(10,185	)		43,777			(53,737	)		-			(20,145	)
Other income (expense):
Corporate interest income		-			-			11			-			11
Corporate interest expense		-			-			(28,613	)		-			(28,613	)
Equity in income of investments and other		-			-			966			-			966
Total other income (expense)		-			-			(27,636	)		-			(27,636	)
Segment income (loss)	$	(10,185	)	$	43,777		$	(81,373	)	$	-		$	(47,781	)
	Three Months Ended March 31, 2013
	Trading and Investing			Balance Sheet Management			Corporate/ Other			Eliminations(6)			Total
	(In thousands)
Revenue:
Operating interest income	$	139,232		$	230,102		$	-		$	(69,274	)	$	300,060
Operating interest expense		(5,117	)		(122,888	)		-			69,274			(58,731	)
Net operating interest income		134,115			107,214			-			-			241,329
Commissions		100,732			-			-			-			100,732
Fees and service charges		32,056			454			-			-			32,510
Principal transactions		21,746			-			-			-			21,746
Gains on loans and securities, net		-			15,680			-			-			15,680
Net impairment		-			(1,165	)		-			-			(1,165	)
Other revenues		8,031			1,002			-			-			9,033
Total non-interest income		162,565			15,971			-			-			178,536
Total net revenue		296,680			123,185			-			-			419,865
Provision for loan losses		-			42,650			-			-			42,650
Operating expense:
Compensation and benefits		71,443			3,713			20,495			-			95,651
Advertising and market development		36,584			-			-			-			36,584
Clearing and servicing		19,008			12,636			-			-			31,644
FDIC insurance premiums		-			29,291			-			-			29,291
Professional services		8,378			547			8,377			-			17,302
Occupancy and equipment		15,970			459			1,087			-			17,516
Communications		17,783			356			375			-			18,514
Depreciation and amortization		18,881			161			4,006			-			23,048
Amortization of other intangibles		6,067			-			-			-			6,067
Facility restructuring and other exit activities		-			-			7,569			-			7,569
Other operating expenses		4,126			2,924			5,299			-			12,349
Total operating expense		198,240			50,087			47,208			-			295,535
Segment income (loss) before other income (expense)		98,440			30,448			(47,208	)		-			81,680
Other income (expense):
Corporate interest income		-			-			13			-			13
Corporate interest expense		-			-			(28,620	)		-			(28,620	)
Equity in income of investments and other		-			-			4,294			-			4,294
Total other income (expense)		-			-			(24,313	)		-			(24,313	)
Segment income (loss)	$	98,440		$	30,448		$	(71,521	)	$	-		$	57,367
	Three Months Ended June 30, 2012
	Trading and Investing			Balance Sheet Management			Corporate/ Other			Eliminations(6)			Total
	(In thousands)
Revenue:
Operating interest income	$	174,368		$	284,682		$	3		$	(104,533	)	$	354,520
Operating interest expense		(9,165	)		(170,783	)		-			104,533			(75,415	)
Net operating interest income		165,203			113,899			3			-			279,105
Commissions		93,313			-			-			-			93,313
Fees and service charges		28,395			668			-			-			29,063
Principal transactions		21,239			-			-			-			21,239
Gains (losses) on loans and securities, net		(114	)		24,799			-			-			24,685
Net impairment		-			(5,269	)		-			-			(5,269	)
Other revenues		8,887			1,385			-			-			10,272
Total non-interest income		151,720			21,583			-			-			173,303
Total net revenue		316,923			135,482			3			-			452,408
Provision for loan losses		-			67,261			-			-			67,261
Operating expense:
Compensation and benefits		64,973			4,156			16,420			-			85,549
Advertising and market development		36,529			38			-			-			36,567
Clearing and servicing		16,327			16,510			-			-			32,837
FDIC insurance premiums		-			27,195			-			-			27,195
Professional services		10,632			1,307			7,995			-			19,934
Occupancy and equipment		16,502			452			1,290			-			18,244
Communications		17,570			356			432			-			18,358
Depreciation and amortization		18,984			159			3,961			-			23,104
Amortization of other intangibles		6,295			-			-			-			6,295
Facility restructuring and other exit activities		-			-			1,589			-			1,589
Other operating expenses		297			6,435			5,051			-			11,783
Total operating expense		188,109			56,608			36,738			-			281,455
Segment income (loss) before other income (expense)		128,814			11,613			(36,735	)		-			103,692
Other income (expense):
Corporate interest income		-			-			20			-			20
Corporate interest expense		-			-			(45,285	)		-			(45,285	)
Equity in income of investments and other		-			-			2,113			-			2,113
Total other income (expense)		-			-			(43,152	)		-			(43,152	)
Segment income (loss)	$	128,814		$	11,613		$	(79,887	)	$	-		$	60,540

Key Performance Metrics(7)
Corporate Metrics	Qtr ended 6/30/13		Qtr ended 3/31/13		Qtr ended 6/30/13 vs. 3/31/13	Qtr ended 6/30/12		Qtr ended 6/30/13 vs. 6/30/12
Operating margin %(8)
Consolidated	N.M.			19 %	N.M.		23 %	N.M.
Trading and Investing	N.M.			33 %	N.M.		41 %	N.M.
Balance Sheet Management		33 %		25 %	8 %		9 %	24 %
Employees		2,871		2,858	0 %		3,104	(8)%
Consultants and other		78		79	(1)%		110	(29)%
Total headcount		2,949		2,937	0 %		3,214	(8)%
Book value per share		16.59	$	17.27	(4)%	$	17.78	(7)%
Tangible book value per share(9)		10.66	$	10.70	0 %	$	11.08	(4)%
Corporate cash ($MM)	$	250.9	$	351.6	(29)%	$	436.5	(43)%
Enterprise net interest spread (basis points)(10)		235		230	2 %		244	(4)%
Enterprise interest-earning assets, average ($MM)	$	40,166	$	40,896	(2)%	$	44,770	(10)%
Earnings before interest, taxes, depreciation & amortization ("EBITDA") ($MM)
Net Income (loss)	$	(54.4)	$	35.1	N.M.	$	39.5	N.M.
Income tax expense		6.6		22.3	N.M.		21.0	N.M.
Depreciation & amortization		28.9		29.1	(1)%		29.4	(2)%
Corporate interest expense		28.6		28.6	0 %		45.3	(37)%
EBITDA		9.7		115.1	N.M.		135.2	N.M.
Impairment of goodwill		142.4		-	N.M.		-	N.M.
Adjusted EBITDA	$	152.1	$	115.1	32 %	$	135.2	13 %
Interest coverage(11)		0.3		4.0	N.M.		3.0	N.M.
Adjusted interest coverage(11)		5.3		4.0	N.M.		3.0	N.M.
Bank earnings before taxes and before credit losses ($MM)(12)	$	162.4	$	128.9	26 %	$	153.9	6 %
Trading and Investing Metrics
Trading days		64.0		60.0	N.M.		63.0	N.M.
DARTs		149,670		148,538	1 %		138,653	8 %
Total trades (MM)		9.6		8.9	8 %		8.7	10 %
Average commission per trade	$	11.10	$	11.30	(2)%	$	10.68	4 %
End of period margin receivables ($B)	$	6.0	$	5.7	5 %	$	5.8	3 %
Average margin receivables ($B)	$	5.7	$	5.7	0 %	$	5.6	2 %
Gross new brokerage accounts		90,963		91,735	(1)%		104,659	(13)%
Gross new stock plan accounts		56,015		56,836	(1)%		52,173	7 %
Gross new banking accounts		2,541		2,723	(7)%		4,328	(41)%
Closed accounts		(110,369)		(108,367)	N.M.		(102,587)	N.M.
Net new accounts		39,150		42,927	N.M.		58,573	N.M.
Net new brokerage accounts		29,506		30,034	N.M.		45,599	N.M.
Net new stock plan accounts		18,040		20,173	N.M.		22,899	N.M.
Net new banking accounts		(8,396)		(7,280)	N.M.		(9,925)	N.M.
Net new accounts		39,150		42,927	N.M.		58,573	N.M.
End of period brokerage accounts		2,962,731		2,933,225	1 %		2,874,605	3 %
End of period stock plan accounts		1,185,807		1,167,767	2 %		1,104,302	7 %
End of period banking accounts		413,596		421,992	(2)%		446,148	(7)%
End of period total accounts		4,562,134		4,522,984	1 %		4,425,055	3 %
Annualized brokerage account attrition rate(13)		8.4%		8.5%	N.M.		8.4%	N.M.
Customer Assets ($B)
Security holdings	$	150.8	$	149.4	1 %	$	134.9	12 %
Customer payables (cash)		5.1		5.1	0 %		5.1	0 %
Customer cash balances held by third parties(14)		11.5		10.7	7 %		3.6	219 %
Unexercised stock plan customer options (vested)		27.2		27.6	(1)%		21.0	30 %
Customer assets in brokerage and stock plan accounts		194.6		192.8	1 %		164.6	18 %
Sweep deposits		19.0		18.9	1 %		20.5	(7)%
Savings, transaction and other		6.5		7.0	(7)%		7.4	(12)%
Customer assets in banking accounts		25.5		25.9	(2)%		27.9	(9)%
Total customer assets	$	220.1	$	218.7	1 %	$	192.5	14 %
Net new brokerage assets ($B)(15)	$	1.7	$	3.1	N.M.	$	2.2	N.M.
Net new banking assets ($B)(15)		(0.4)		(0.2)	N.M.		(0.5)	N.M.
Net new customer assets ($B)(15)	$	1.3	$	2.9	N.M.	$	1.7	N.M.
Brokerage related cash ($B)	$	35.6	$	34.7	3 %	$	29.2	22 %
Other customer cash and deposits ($B)		6.5		7.0	(7)%		7.4	(12)%
Total customer cash and deposits ($B)	$	42.1	$	41.7	1 %	$	36.6	15 %
Unexercised stock plan customer options (unvested) ($B)	$	52.1	$	51.5	1 %	$	43.5	20 %
Customer net (purchase) / sell activity ($B)	$	(0.3)	$	(1.2)	N.M.	$	(3.9)	N.M.
Market Making
Equity shares traded (MM)		103,003		118,895	(13)%		101,415	2 %
Average revenue capture per 1,000 equity shares	$	0.202	$	0.179	13 %	$	0.206	(2)%
% of Bulletin Board equity shares to total equity shares		94.0%		93.7%	0 %		93.6%	0 %
Balance Sheet Management Metrics
Loans receivable ($MM)
Average loans receivable	$	9,766	$	10,397	(6)%	$	12,310	(21)%
Ending loans receivable, net	$	9,106	$	9,585	(5)%	$	11,226	(19)%
Loan performance detail (all loans, including TDRs) ($MM)
One- to Four-Family
Current	$	4,495	$	4,657	(3)%	$	5,329	(16)%
30-89 days delinquent		187		220	(15)%		227	(18)%
90-179 days delinquent		76		100	(24)%		119	(36)%
Total 30-179 days delinquent		263		320	(18)%		346	(24)%
180+ days delinquent (net of $127M, $131M and $181M in charge-offs for Q213, Q113 and Q212, respectively)		262		262	0 %		338	(22)%
Total delinquent loans(16)		525		582	(10)%		684	(23)%
Gross loans receivable(17)	$	5,020	$	5,239	(4)%	$	6,013	(17)%
Home Equity
Current	$	3,689	$	3,883	(5)%	$	4,543	(19)%
30-89 days delinquent		70		76	(8)%		104	(33)%
90-179 days delinquent		42		52	(19)%		71	(41)%
Total 30-179 days delinquent		112		128	(13)%		175	(36)%
180+ days delinquent (net of $22M, $22M and $25M in charge-offs for Q213, Q113 and Q212, respectively)		41		42	(2)%		43	(5)%
Total delinquent loans(16)		153		170	(10)%		218	(30)%
Gross loans receivable(17)	$	3,842	$	4,053	(5)%	$	4,761	(19)%
Consumer and Other
Current	$	681	$	730	(7)%	$	957	(29)%
30-89 days delinquent		12		16	(25)%		18	(33)%
90-179 days delinquent		2		2	0 %		3	(33)%
Total 30-179 days delinquent		14		18	(22)%		21	(33)%
180+ days delinquent		-		-	N.M.		-	N.M.
Total delinquent loans		14		18	(22)%		21	(33)%
Gross loans receivable(17)	$	695	$	748	(7)%	$	978	(29)%
Total Loans Receivable
Current	$	8,865	$	9,270	(4)%	$	10,829	(18)%
30-89 days delinquent		269		312	(14)%		349	(23)%
90-179 days delinquent		120		154	(22)%		193	(38)%
Total 30-179 days delinquent		389		466	(17)%		542	(28)%
180+ days delinquent		303		304	0 %		381	(20)%
Total delinquent loans(16)		692		770	(10)%		923	(25)%
Total gross loans receivable(17)	$	9,557	$	10,040	(5)%	$	11,752	(19)%
TDR performance detail ($MM)(18)
One- to Four-Family TDRs
Current	$	917	$	916	0 %	$	843	9 %
30-89 days delinquent		108		116	(7)%		89	21 %
90-179 days delinquent		46		60	(23)%		46	0 %
Total 30-179 days delinquent		154		176	(13)%		135	14 %
180+ days delinquent (net of $76M, $70M and $49M in charge-offs for Q213, Q113 and Q212, respectively)		139		125	11 %		79	76 %
Total delinquent TDRs		293		301	(3)%		214	37 %
TDRs	$	1,210	$	1,217	(1)%	$	1,057	14 %
Home Equity TDRs
Current	$	216	$	228	(5)%	$	242	(11)%
30-89 days delinquent		13		17	(24)%		20	(35)%
90-179 days delinquent		9		10	(10)%		11	(18)%
Total 30-179 days delinquent		22		27	(19)%		31	(29)%
180+ days delinquent (net of $14M, $12M and $3M in charge-offs for Q213, Q113 and Q212, respectively)		21		20	5 %		5	320 %
Total delinquent TDRs		43		47	(9)%		36	19 %
TDRs	$	259	$	275	(6)%	$	278	(7)%
Total TDRs
Current	$	1,133	$	1,144	(1)%	$	1,085	4 %
30-89 days delinquent		121		133	(9)%		109	11 %
90-179 days delinquent		55		70	(21)%		57	(4)%
Total 30-179 days delinquent		176		203	(13)%		166	6 %
180+ days delinquent		160		145	10 %		84	90 %
Total delinquent TDRs		336		348	(3)%		250	34 %
TDRs	$	1,469	$	1,492	(2)%	$	1,335	10 %
Capital Metrics
E*TRADE Bank
Tier 1 leverage ratio(5)		9.5 %		9.3 %	0.2 %		7.9 %	1.6 %
Tier 1 risk-based capital ratio(5)		21.6 %		20.7 %	0.9 %		16.7 %	4.9 %
Total risk-based capital ratio(5)		22.9 %		21.9 %	1.0 %		18.0 %	4.9 %
Tier 1 common ratio(19)		21.6 %		20.7 %	0.9 %		16.7 %	4.9 %
E*TRADE Bank excess Tier 1 capital ($MM)(20)	$	1,879.0	$	1,752.3	7 %	$	1,303.8	44 %
E*TRADE Bank excess Tier 1 risk-based capital ($MM)(20)	$	2,868.6	$	2,703.1	6 %	$	2,263.2	27 %
E*TRADE Bank excess risk-based capital ($MM)(20)	$	2,366.7	$	2,199.5	8 %	$	1,686.2	40 %
E*TRADE Financial
Tier 1 leverage ratio(3)		6.4 %		6.0 %	0.4 %		5.7 %	0.7 %
Tier 1 risk-based capital ratio(3)		14.5 %		13.6 %	0.9 %		12.2 %	2.3 %
Total risk-based capital ratio(3)		15.8 %		14.8 %	1.0 %		13.4 %	2.4 %
Tier 1 common ratio(4)		12.2 %		11.2 %	1.0 %		10.2 %	2.0 %

Activity in Allowance for Loan Losses
	Three Months Ended June 30, 2013
	One- to Four- Family			Home Equity			Consumer and Other			Total
	(In thousands)
Allowance for loan losses, ending 3/31/13	$	161,035		$	263,126		$	30,871		$	455,032
Provision for loan losses		(8,212	)		53,290			1,071			46,149
Charge-offs, net		(9,254	)		(37,379	)		(3,602	)		(50,235	)
Allowance for loan losses, ending 6/30/13	$	143,569		$	279,037		$	28,340		$	450,946
	Three Months Ended March 31, 2013
	One- to Four- Family			Home Equity			Consumer and Other			Total
	(In thousands)
Allowance for loan losses, ending 12/31/12	$	183,937		$	257,333		$	39,481		$	480,751
Provision for loan losses		(16,616	)		55,248			4,018			42,650
Charge-offs, net		(6,286	)		(49,455	)		(12,628	)		(68,369	)
Allowance for loan losses, ending 3/31/13	$	161,035		$	263,126		$	30,871		$	455,032
	Three Months Ended June 30, 2012
	One- to Four- Family			Home Equity			Consumer and Other			Total
	(In thousands)
Allowance for loan losses, ending 3/31/12	$	239,602		$	291,015		$	48,558		$	579,175
Provision for loan losses		247			65,050			1,964			67,261
Charge-offs, net		(23,915	)		(89,182	)		(7,583	)		(120,680	)
Allowance for loan losses, ending 6/30/12	$	215,934		$	266,883		$	42,939		$	525,756

Specific Valuation Allowance Activity(21)
	As of June 30, 2013
	Recorded Investment in Modifications before charge- offs		Charge-offs			Recorded Investment in Modifications		Specific Valuation Allowance			Net Investment in Modifications		Specific Valuation Allowance as a % of Modifications		Total Expected Losses(22)
	(Dollars in thousands)
One- to four-family	$	1,386,364	$	(323,727	)	$	1,062,637	$	(76,945	)	$	985,692	7	%	29	%
Home equity		359,447		(153,666	)		205,781		(65,147	)		140,634	32	%	61	%
Total	$	1,745,811	$	(477,393	)	$	1,268,418	$	(142,092	)	$	1,126,326	11	%	35	%
	As of March 31, 2013
	Recorded Investment in Modifications before charge- offs		Charge-offs			Recorded Investment in Modifications		Specific Valuation Allowance			Net Investment in Modifications		Specific Valuation Allowance as a % of Modifications		Total Expected Losses(22)
	(Dollars in thousands)
One- to four-family	$	1,391,076	$	(321,150	)	$	1,069,926	$	(81,685	)	$	988,241	8	%	29	%
Home equity		370,818		(155,959	)		214,859		(66,421	)		148,438	31	%	60	%
Total	$	1,761,894	$	(477,109	)	$	1,284,785	$	(148,106	)	$	1,136,679	12	%	35	%
	As of June 30, 2012
	Recorded Investment in Modifications before charge- offs		Charge-offs			Recorded Investment in Modifications		Specific Valuation Allowance			Net Investment in Modifications		Specific Valuation Allowance as a % of Modifications		Total Expected Losses(22)
	(Dollars in thousands)
One- to four-family	$	1,356,888	$	(299,307	)	$	1,057,581	$	(94,474	)	$	963,107	9	%	29	%
Home equity		435,484		(158,072	)		277,412		(98,293	)		179,119	35	%	59	%
Total	$	1,792,372	$	(457,379	)	$	1,334,993	$	(192,767	)	$	1,142,226	14	%	36	%

Average Enterprise Balance Sheet Data
	Three Months Ended
	June 30, 2013
	Average			Operating Interest			Average
	Balance			Inc./Exp.			Yield/Cost
Enterprise interest-earning assets:	(In thousands)
Loans(23)	$	9,810,788		$	102,188			4.17	%
Available-for-sale securities		12,399,516			66,808			2.16	%
Held-to-maturity securities		9,769,854			61,264			2.51	%
Margin receivables		5,674,983			53,939			3.81	%
Cash and equivalents		1,364,796			718			0.21	%
Segregated cash		467,944			118			0.10	%
Securities borrowed and other		678,591			13,456			7.95	%
Total enterprise interest-earning assets	$	40,166,472			298,491			2.97	%
Enterprise interest-bearing liabilities:
Deposits	$	25,598,389			3,221			0.05	%
Customer payables		5,292,674			1,842			0.14	%
Securities sold under agreements to repurchase		4,464,506			37,010			3.28	%
FHLB advances and other borrowings		1,287,348			17,101			5.26	%
Securities loaned and other		856,421			34			0.02	%
Total enterprise interest-bearing liabilities	$	37,499,338			59,208			0.62	%
Enterprise net interest income/spread(10)				$	239,283			2.35	%
	Three Months Ended
	March 31, 2013
	Average			Operating Interest			Average
	Balance			Inc./Exp.			Yield/Cost
Enterprise interest-earning assets:	(In thousands)
Loans(23)	$	10,398,062		$	106,669			4.10	%
Available-for-sale securities		12,986,978			64,215			1.98	%
Held-to-maturity securities		9,500,372			58,069			2.44	%
Margin receivables		5,666,703			54,447			3.90	%
Cash and equivalents		1,593,420			835			0.21	%
Segregated cash		158,231			42			0.11	%
Securities borrowed and other		592,422			12,791			8.76	%
Total enterprise interest-earning assets	$	40,896,188			297,068			2.91	%
Enterprise interest-bearing liabilities:
Deposits	$	26,950,074			3,153			0.05	%
Customer payables		5,058,999			1,841			0.15	%
Securities sold under agreements to repurchase		4,453,599			36,703			3.30	%
FHLB advances and other borrowings		1,261,094			16,930			5.37	%
Securities loaned and other		748,988			14			0.01	%
Total enterprise interest-bearing liabilities	$	38,472,754			58,641			0.61	%
Enterprise net interest income/spread(10)				$	238,427			2.30	%
	Three Months Ended
	June 30, 2012
	Average			Operating Interest			Average
	Balance			Inc./Exp.			Yield/Cost
Enterprise interest-earning assets:	(In thousands)
Loans(23)	$	12,324,567		$	124,994			4.06	%
Available-for-sale securities		16,336,062			98,625			2.41	%
Held-to-maturity securities		8,108,507			60,245			2.97	%
Margin receivables		5,633,453			55,418			3.96	%
Cash and equivalents		1,115,736			527			0.19	%
Segregated cash		741,845			105			0.06	%
Securities borrowed and other		509,370			12,687			10.02	%
Total enterprise interest-earning assets	$	44,769,540			352,601			3.15	%
Enterprise interest-bearing liabilities:
Deposits	$	28,583,333			6,611			0.09	%
Customer payables		5,303,434			2,849			0.22	%
Securities sold under agreements to repurchase		4,802,784			40,473			3.33	%
FHLB advances and other borrowings		2,733,258			25,404			3.68	%
Securities loaned and other		702,216			32			0.02	%
Total enterprise interest-bearing liabilities	$	42,125,025			75,369			0.71	%
Enterprise net interest income/spread(10)				$	277,232			2.44	%
Reconciliation from Enterprise Net Interest Income to Net Operating Interest Income
	Three Months Ended
	June 30,			March 31,			June 30,
		2013			2013			2012
	(In thousands)
Enterprise net interest income	$	239,283		$	238,427		$	277,232
Taxable equivalent interest adjustment(24)		(254	)		(210	)		(300	)
Earnings on customer cash held by third parties and other(25)		3,512			3,112			2,173
Net operating interest income	$	242,541		$	241,329		$	279,105

Explanation of Non-GAAP Measures and Certain Metrics

Management believes that tangible book value per share, corporate cash, EBITDA, adjusted EBITDA, interest coverage, adjusted interest coverage, Bank earnings before taxes and before credit losses, E*TRADE Bank Tier 1 common ratio and E*TRADE Financial ratios are appropriate measures for evaluating the operating and liquidity performance of the Company. Management believes that adjusting GAAP measures by excluding or including certain items is helpful to investors and analysts who may wish to use some or all of this information to analyze the Company’s current performance, prospects and valuation. Management uses non-GAAP information internally to evaluate operating performance and in formulating the budget for future periods.

Tangible Book Value per Share

Tangible book value per share represents shareholders’ equity less goodwill (net of related deferred tax liability) and other intangible assets divided by common stock outstanding. The Company believes that tangible book value per share is a measure of the Company’s capital strength. See endnote (9) for a reconciliation of this non-GAAP measure to the comparable GAAP measure.

Corporate Cash

Corporate cash represents cash held at the parent company as well as cash held in certain subsidiaries that can distribute cash to the parent company without any regulatory approval. The Company believes that corporate cash is a useful measure of the parent company’s liquidity as it is the primary source of capital above and beyond the capital deployed in regulated subsidiaries. See the Company’s financial statements and “Management’s Discussion and Analysis of Results of Operations and Financial Condition” that will be included in the periodic report the Company expects to file with the SEC with respect to the financial periods discussed herein for a reconciliation of this non-GAAP measure to the comparable GAAP measure.

EBITDA

EBITDA represents net income (loss) before taxes, depreciation and amortization and corporate interest expense. Management believes that EBITDA provides a useful additional measure of the Company’s performance by excluding certain non-cash charges and expenses that are not directly related to the performance of the business.

Adjusted EBITDA

Adjusted EBITDA represents net income (loss) before taxes, depreciation and amortization, corporate interest expense and impairment of goodwill. Management believes that adjusted EBITDA provides a useful additional measure of the Company’s performance by excluding certain non-cash charges and expenses, including impairment of goodwill, that are not directly related to the performance of the 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 the Company’s ability to continue to meet interest obligations and liquidity needs. See endnote (11) for a reconciliation of this non-GAAP measure to the comparable GAAP measure.

Adjusted Interest Coverage

Adjusted interest coverage represents adjusted EBITDA divided by corporate interest expense. Management believes that by excluding the charges and expenses, including impairment of goodwill, that are excluded from adjusted EBITDA, adjusted interest coverage provides a useful additional measure of the Company’s ability to continue to meet interest obligations and liquidity needs. See endnote (11) for a reconciliation of this non-GAAP measure to the comparable GAAP measure.

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’s holding company, ETB Holdings, Inc. (“Bank”) before provision for loan losses, gains on loans and securities, net, net impairment and losses on early extinguishment of wholesale borrowings. 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 losses 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. See endnote (12) for a reconciliation of this non-GAAP measure to the comparable GAAP measure.

E*TRADE Bank Tier 1 Common Ratio and E*TRADE Financial Ratios

E*TRADE Financial ratios, including Tier 1 leverage, Tier 1 risk-based capital and total risk-based capital ratios, are based on the Federal Reserve regulatory minimum well-capitalized threshold. E*TRADE Bank’s and E*TRADE Financial’s Tier 1 common ratios are defined as the Tier 1 capital less elements of Tier 1 capital that are not in the form of common equity, such as trust preferred securities, divided by total risk-weighted assets. Management believes these ratios are an important measure of E*TRADE Bank’s and the Company’s capital strength. See endnotes (3), (4) and (19) for reconciliations of these non-GAAP measures to the comparable GAAP measures.

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

ENDNOTES

(1) The following table provides reconciliation for the calculation of the impairment of goodwill and income tax impact related to the Company’s decision to exit the market making business on diluted EPS (dollars in thousands, except per share amounts):

	Q2 2013
	Amount			Diluted EPS
Income before impairment of goodwill and income taxes	$	94,642		$	0.33
Impairment of goodwill		(142,423	)		(0.50	)
Loss before income taxes		(47,781	)		(0.17	)
Income taxes related to decision to exit the market making business		28,185			0.10
Income taxes excluding impact of decision to exit the market making business		(34,807	)		(0.12	)
Total income taxes		(6,622	)		(0.02	)
Net loss	$	(54,403	)	$	(0.19	)
Income before impairment of goodwill and income taxes	$	94,642		$	0.33
Income taxes excluding impact of decision to exit the market making business		(34,807	)		(0.12	)
Adjusted net income excluding impact of decision to exit the market making business	$	59,835		$	0.21

(2) The following table provides reconciliation for the operation expense, excluding one-time items related to impairment of goodwill and restructuring and severance costs (dollars in thousands):

	Q2 2013		Q1 2013
Total operating expense	$	413,927	$	295,535
Add back:
Impairment of goodwill		142,423		-
Facility restructuring and severance expense		9,892		12,114
Adjusted total operating expense	$	261,612	$	283,421

(3) The Tier 1 leverage, Tier 1 risk-based capital and total risk-based capital ratios at E*TRADE Financial are Q213 estimates based on the Federal Reserve regulatory minimum well-capitalized requirements. E*TRADE Financial is not currently subject to capital requirements; however, the implementation of holding company capital requirements are expected to become effective in 2015 as a result of the Dodd-Frank Act. Management believes these ratios are an important measure of the Company's capital strength and accordingly manages 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 and total risk-based capital ratios are calculated as follows (dollars in millions):

	Q2 2013			Q1 2013			Q2 2012
E*TRADE Financial shareholders' equity	$	4,760.6		$	4,951.8		$	5,079.6
DEDUCT:
Losses in OCI on AFS debt securities and cash flow hedges, net of tax		(444.7	)		(304.4	)		(343.2	)
Goodwill & other intangible assets, net of deferred tax liabilities		1,703.2			1,883.1			1,914.0
ADD:
Qualifying restricted core capital elements (TRUPs)(a)		433.0			433.0			433.0
Subtotal		3,935.1			3,806.1			3,941.8
DEDUCT:
Disallowed servicing assets and deferred tax assets		1,252.8			1,265.2			1,304.8
E*TRADE Financial Tier 1 capital		2,682.3			2,540.9			2,637.0
ADD:
Allowable allowance for loan losses		234.5			237.6			275.3
E*TRADE Financial total capital	$	2,916.8		$	2,778.5		$	2,912.3
E*TRADE Financial total average assets	$	44,917.8		$	45,679.4		$	49,374.6
DEDUCT:
Goodwill & other intangible assets, net of deferred tax liabilities		1,703.2			1,883.1			1,914.0
Subtotal		43,214.6			43,796.3			47,460.6
DEDUCT:
Disallowed servicing assets and deferred tax assets		1,252.8			1,265.2			1,304.8
Average total assets for leverage capital purposes	$	41,961.8		$	42,531.1		$	46,155.8
E*TRADE Financial total risk-weighted assets(b)	$	18,502.1		$	18,741.8		$	21,696.2
E*TRADE Financial Tier 1 leverage ratio (Tier 1 capital / Average total assets for leverage capital purposes)		6.4	%		6.0	%		5.7	%
E*TRADE Financial Tier 1 capital / Total risk-weighted assets		14.5	%		13.6	%		12.2	%
E*TRADE Financial total capital / Total risk-weighted assets		15.8	%		14.8	%		13.4	%

^(a) The Company is continuing to include TRUPs in E*TRADE Financial’s Tier 1 capital due to the regulatory agencies announcement of a delay in the implementation of the TRUPs phase-out.
^(b) 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.

(4) The Tier 1 common ratio at E*TRADE Financial is a Q213 estimate and is a non-GAAP measure. Management believes this ratio is an important measure of the Company's capital strength. The Tier 1 common ratio is calculated as follows (dollars in millions):

	Q2 2013			Q1 2013			Q2 2012
E*TRADE Financial shareholders' equity	$	4,760.6		$	4,951.8		$	5,079.6
DEDUCT:
Losses in OCI on AFS debt securities and cash flow hedges, net of tax		(444.7	)		(304.4	)		(343.2	)
Goodwill & other intangible assets, net of deferred tax liabilities		1,703.2			1,883.1			1,914.0
Subtotal		3,502.1			3,373.1			3,508.8
DEDUCT:
Disallowed servicing assets and deferred tax assets		1,252.8			1,265.2			1,304.8
E*TRADE Financial Tier 1 common	$	2,249.3		$	2,107.9		$	2,204.0
E*TRADE Financial total risk-weighted assets(a)	$	18,502.1		$	18,741.8		$	21,696.2
E*TRADE Financial Tier 1 common / Total risk-weighted assets		12.2	%		11.2	%		10.2	%

^(a) Under the regulatory guidelines for risk-based capital, on-balance sheet assets and credit equivalent amounts of derivatives and off-balance sheet items are assigned to one of several broad risk categories according to the obligor or, if relevant, the guarantor or the nature of any collateral. The aggregate dollar amount in each risk category is then multiplied by the risk weight associated with that category. The resulting weighted values from each of the risk categories are aggregated for determining total risk-weighted assets.

(5) The Tier 1 leverage, Tier 1 risk-based capital and total risk-based capital ratios at E*TRADE Bank are Q213 estimates and calculated as follows (dollars in millions):

	Q2 2013			Q1 2013			Q2 2012
E*TRADE Bank shareholders' equity	$	5,749.5		$	5,779.4		$	5,629.4
DEDUCT:
Losses in OCI on AFS debt securities and cash flow hedges, net of tax		(444.7	)		(304.4	)		(351.6	)
Goodwill & other intangible assets, net of deferred tax liabilities		1,568.6			1,584.5			1,623.5
Subtotal		4,625.6			4,499.3			4,357.5
DEDUCT:
Disallowed servicing assets and deferred tax assets		654.5			689.6			825.6
E*TRADE Bank Tier 1 capital		3,971.1			3,809.7			3,531.9
ADD:
Allowable allowance for loan losses		233.1			234.1			268.7
E*TRADE Bank total capital	$	4,204.2		$	4,043.8		$	3,800.6
E*TRADE Bank total assets	$	43,951.6		$	43,514.5		$	47,107.0
DEDUCT:
Losses in OCI on AFS debt securities and cash flow asset hedges, net of tax		(112.4	)		93.6			94.9
Goodwill & other intangible assets, net of deferred tax liabilities		1,568.6			1,584.5			1,623.5
Subtotal		42,495.4			41,836.4			45,388.6
DEDUCT:
Disallowed servicing assets and deferred tax assets		654.5			689.6			825.6
E*TRADE Bank total assets for leverage capital purposes	$	41,840.9		$	41,146.8		$	44,563.0
E*TRADE Bank total risk-weighted assets(a)	$	18,374.7		$	18,442.4		$	21,144.8
E*TRADE Bank Tier 1 leverage ratio (Tier 1 capital / Average total assets for leverage capital purposes)		9.5	%		9.3	%		7.9	%
E*TRADE Bank Tier 1 capital / Total risk-weighted assets		21.6	%		20.7	%		16.7	%
E*TRADE Bank total capital / Total risk-weighted assets		22.9	%		21.9	%		18.0	%

^(a) Under the regulatory guidelines for risk-based capital, on-balance sheet assets and credit equivalent amounts of derivatives and off-balance sheet items are assigned to one of several broad risk categories according to the obligor or, if relevant, the guarantor or the nature of any collateral. The aggregate dollar amount in each risk category is then multiplied by the risk weight associated with that category. The resulting weighted values from each of the risk categories are aggregated for determining total risk-weighted assets.

(6) Reflects elimination of transactions between Trading and Investing and Balance Sheet Management segments, which includes deposit and intercompany transfer pricing arrangements.

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

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

(9) The following tables provide a reconciliation of GAAP book value and book value per share to non-GAAP tangible book value and tangible book value per share (dollars in millions, except per share amounts):

	Q2 2013			Q1 2013			Q2 2012
Book value	$	4,760.6		$	4,951.8		$	5,079.6
Less: Goodwill and other intangibles, net		(2,019.1	)		(2,188.8	)		(2,207.4	)
Less: Deferred tax liability related to goodwill		316.0			305.7			293.4
Tangible book value	$	3,057.5		$	3,068.7		$	3,165.6

	Q2 2013			Q1 2013			Q2 2012
Book value per share	$	16.59		$	17.27		$	17.78
Less: Goodwill and other intangibles, net per share		(7.03	)		(7.63	)		(7.73	)
Less: Deferred tax liability related to goodwill per share		1.10			1.06			1.03
Tangible book value per share	$	10.66		$	10.70		$	11.08

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

(11) Interest coverage represents the ratio of the Company’s EBITDA to its corporate interest expense. Adjusted interest coverage represents the ratio of the Company’s adjusted EBITDA to its corporate interest expense. The interest coverage ratio based on the Company’s net income (loss) was (1.9), 1.2, and 0.9 for the three months ended June 30, 2013, March 31, 2013, and June 30, 2012, respectively.

(12) Bank earnings before taxes and before credit losses represents the pre-tax earnings of E*TRADE Bank’s holding company, ETB Holdings, Inc. (“Bank”) before provision for loan losses, gains on loans and securities, net, net impairment and losses on early extinguishment of wholesale borrowings. 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 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 (dollars in millions):

	Q2 2013			Q1 2013			Q2 2012
Income (loss) before income taxes	$	(47.8	)	$	57.4		$	60.5
Add back:
Non-bank loss before income tax benefit(b)		184.5			43.4			45.5
Provision for loan losses		46.1			42.6			67.3
Gains on loans and securities, net		(21.0	)		(15.7	)		(24.7	)
Net impairment		0.6			1.2			5.3
Bank earnings before taxes and before credit losses	$	162.4		$	128.9		$	153.9

^(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 loss represents all of the Company’s subsidiaries, including Corporate, but excluding the Bank.

(13) 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.

(14) Customer cash balances held by third parties are held outside E*TRADE Financial and include money market funds and sweep deposit accounts at unaffiliated financial institutions.

(15) Net new customer assets are total inflows to all new and existing customer accounts less total outflows from all closed and existing customer accounts. The net new banking assets and net new brokerage assets metrics treat asset flows between E*TRADE entities in the same manner as unrelated third party accounts.

(16) Delinquent loans include charge-offs for loans that are in bankruptcy or are 180 days past due which have been written down to their expected recovery value. The following table shows the total amount of charge-offs on loans that are still held by the Company as of the periods presented (dollars in millions):

	Q2 2013		Q1 2013		Q2 2012
One- to four-family	$	439	$	447	$	470
Home equity		293		296		277
Total charge-offs	$	732	$	743	$	747

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

(18) The TDR loan performance detail is a subset of the Company’s total loan performance. TDRs include loan modifications performed under the Company’s modification programs. Beginning in Q412, loans that had been charged-off due to bankruptcy notification were also considered TDRs.

(19) The Tier 1 common ratio at E*TRADE Bank is a Q213 estimate and is a non-GAAP measure. Management believes this ratio is an important measure of E*TRADE Bank's capital strength. The E*TRADE Bank Tier 1 common ratio is calculated as follows (dollars in millions):

	Q2 2013			Q1 2013			Q2 2012
E*TRADE Bank shareholders' equity	$	5,749.5		$	5,779.4		$	5,629.4
DEDUCT:
Losses in OCI on AFS debt securities and cash flow hedges, net of tax		(444.7	)		(304.4	)		(351.6	)
Goodwill and other intangible assets, net of deferred tax liabilities		1,568.6			1,584.5			1,623.5
Subtotal		4,625.6			4,499.3			4,357.5
DEDUCT:
Disallowed servicing assets and deferred tax assets		654.5			689.6			825.6
E*TRADE Bank Tier 1 common	$	3,971.1		$	3,809.7		$	3,531.9
E*TRADE Bank total risk-weighted assets(a)	$	18,374.7		$	18,442.4		$	21,144.8
E*TRADE Bank Tier 1 common / Total risk-weighted assets		21.6	%		20.7	%		16.7	%

^(a) Under the regulatory guidelines for risk-based capital, on-balance sheet assets and credit equivalent amounts of derivatives and off-balance sheet items are assigned to one of several broad risk categories according to the obligor or, if relevant, the guarantor or the nature of any collateral. The aggregate dollar amount in each risk category is then multiplied by the risk weight associated with that category. The resulting weighted values from each of the risk categories are aggregated for determining total risk-weighted assets.

(20) E*TRADE Bank excess capital amounts are Q213 estimates based on the regulatory minimum well-capitalized threshold. Below is a reconciliation of beginning to ending E*TRADE Bank excess risk-based capital for the quarterly periods presented:

	Q2 2013			Q1 2013			Q2 2012
Beginning E*TRADE Bank excess risk-based capital ($MM)	$	2,200		$	2,064		$	1,514
Bank earnings before taxes and before credit losses		162			129			154
Provision for loan losses		(46	)		(43	)		(67	)
Loan portfolio run-off(a)		40			42			55
Margin decrease (increase)		(22	)		6			(52	)
Tax impact, including changes in disallowed deferred tax assets		8			(68	)		22
Other capital changes(b)		25			70			60
Ending E*TRADE Bank excess risk-based capital ($MM)	$	2,367		$	2,200		$	1,686

^(a) The capital release from loan portfolio run-off includes the decrease in risk-based capital required for the one- to four-family, home equity and consumer loan portfolios.
^(b) Represents the capital impact related to changes in other risk-weighted assets.

(21) Modifications are a subset of TDRs, and represent loan modifications performed under the Company’s modification programs. They do not include loans that have been charged-off due to the Company receiving notification of bankruptcy if the loan has not been modified previously by the Company. The following table shows the reconciliation of total TDRs that had a modification and those which the Company received a notification of bankruptcy (dollars in millions):

	Q2 2013		Q1 2013		Q2 2012
Modified loans	$	1,268	$	1,285	$	1,335
Bankruptcy loans		201		207		-
Total TDRs	$	1,469	$	1,492	$	1,335

(22) The total expected losses on modifications includes both the previously recorded charge-offs and the specific valuation allowance.

(23) Excludes loans to customers on margin.

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

(25) Includes interest earned on average customer assets of $11.2 billion, $9.5 billion, and $3.6 billion for the quarters ended June 30, 2013, March 31, 2013, and June 30, 2012, respectively, held by third parties outside E*TRADE Financial, including money market funds and sweep deposit accounts at unaffiliated financial institutions.

CONTACT:
E*TRADE Financial Media Relations
646-521-4418
mediainq@etrade.com
or
E*TRADE Financial Investor Relations
Brett Goodman, 646-521-4406
brett.goodman@etrade.com