- Fourth-quarter Record Net Income of $129.4 million, or $0.32 per share
- Full-year 2005 Record Net Income of $430.4 million, or $1.12 per share
- Full-year Record Total Net Revenue of $1.7 billion
- Fourth-quarter Enterprise Net Interest Spread of 257 basis points
- Record Total Client Assets of $178.5 billion
- Fourth-quarter Record $1.0 billion of organic growth in customer
enterprise cash
- Fourth-quarter Total Daily Average Revenue Trades of 128,400
NEW YORK, Jan. 23 /PRNewswire-FirstCall/ -- E*TRADE FINANCIAL Corporation
(NYSE: ET) today announced results for its fourth quarter ended December 31,
2005, reporting record net income of $129.4 million, or $0.32 per diluted
share compared to $89.8 million, or $0.24 per diluted share a year ago -
representing a 44 percent increase in net income over the year ago period.
Total net revenue for the fourth quarter increased 19 percent to a record
$478.9 million from $403.7 million a year ago, with net interest income
increasing 43 percent year over year, representing over 50 percent of total
net revenue. For the year ended December 31, 2005, E*TRADE FINANCIAL reported
record net income of $430.4 million, or $1.12 per share, on record revenue of
$1.7 billion. This compares to net income of $380.5 million, or $0.99 per
share, on net revenue of $1.5 billion in 2004.
The fourth-quarter GAAP EPS of $0.32 included $0.08 per share non-
recurring gain related to the Company's previously announced sale of E*TRADE
Consumer Finance. This gain was partially offset by a net $0.06 per share in
incremental interest expense, share dilution, restructuring and other deal-
related costs associated with the Company's earlier than expected closing of
the Harrisdirect and BrownCo acquisitions. Excluding both the non-recurring
gain from E*TRADE Consumer Finance and the impact from the closing of these
acquisitions, the Company would have reported fourth-quarter earnings per
share of $0.30, or $1.10 for the year ended December 31, 2005.
"In 2005, we delivered our third consecutive year of exceptional growth,
resulting in record revenue, net income and profit margins. We achieved these
financial results while simultaneously strengthening the franchise through
strategic acquisitions," said Mitchell H. Caplan, Chief Executive Officer,
E*TRADE FINANCIAL Corporation. "Our compelling customer value proposition
resulted in significant organic growth in assets, cash, borrowings and
transactions which translated into double digit growth in net income and net
revenue year-over-year."
Other selected highlights from the fourth quarter of 2005:
-- Closed the acquisition of Harrisdirect from Bank of Montreal on
October 6th - three months ahead of schedule
-- Closed the acquisition of BrownCo from JPMorgan Chase on November
30th - a month ahead of schedule
-- Closed acquisition of Kobren Insight Management on November 3rd
-- Full-year record Net Interest Income of $817.1 million
-- Increased options-related DART volume by 28 percent
quarter-over-quarter and 64 percent year-over-year
-- Launched Pan Asian investor education website, providing investors in
Asia with an insightful mix of research, commentary and educational
information on the US stock and Forex markets
-- Launched the E*TRADE Mileage Maximizer Account, a credit solution
designed to enable consumers to enjoy low interest rates while
continuing to realize the benefits of their rewards credit cards
Historical monthly metric data from January 2003 to December 2005 can be
found on the E*TRADE FINANCIAL investor relations site at
http://www.etrade.com.
About E*TRADE FINANCIAL
The E*TRADE FINANCIAL family of companies provides financial services
including trading, investing, banking and lending for Retail and Institutional
customers. Securities products and services are offered by E*TRADE Securities
LLC (Member NASD/SIPC). Bank and lending products and services are offered by
E*TRADE Bank, a Federal savings bank, Member FDIC, or its subsidiaries.
Important Notice
E*TRADE FINANCIAL and the E*TRADE FINANCIAL logo are registered trademarks
or 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, 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.
FINANCIAL STATEMENTS
C o n s o l i d a t e d S t a t e m e n t s o f O p e r a t i o n s
(in thousands, except per share amounts)
(unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
2005 2004 2005 2004
Revenues:
Commissions $135,723 $114,842 $458,834 $431,638
Principal transactions 23,789 35,476 99,336 126,893
Gain on sales of loans and
securities, net 14,737 33,640 98,858 140,718
Service charges and fees 34,675 24,598 135,314 97,575
Other revenues 27,820 25,249 94,419 89,077
Interest income 501,880 323,127 1,650,264 1,145,597
Interest expense (243,632) (140,839) (779,164) (510,455)
Net interest income 258,248 182,288 871,100 635,142
Provision for loan losses (16,070) (12,420) (54,016) (38,121)
Net interest income after
provision for loan losses 242,178 169,868 817,084 597,021
Total net revenues 478,922 403,673 1,703,845 1,482,922
Expenses excluding interest:
Compensation and benefits 100,331 88,065 380,803 350,440
Occupancy and equipment 18,416 17,756 69,089 69,572
Communications 27,835 17,830 82,485 69,674
Professional services 23,681 22,838 75,237 67,747
Commissions, clearance and
floor brokerage 40,616 33,559 140,806 129,696
Advertising and market
development 31,683 16,346 105,935 62,155
Servicing and other banking
expenses 17,659 9,890 52,326 35,971
Fair value adjustments of
financial derivatives 987 518 4,892 (2,299)
Depreciation and
amortization 21,671 19,834 74,981 77,892
Amortization of other
intangibles 30,014 5,013 43,765 19,443
Facility restructuring and
other exit charges (30,512) 16,921 (30,017) 15,688
Other (7,736) 28,731 53,751 91,144
Total expenses excluding
interest 274,645 277,301 1,054,053 987,123
Income before other income
(loss), income taxes and
discontinued operations 204,277 126,372 649,792 495,799
Other income (loss):
Corporate interest income 3,247 1,937 11,043 6,692
Corporate interest expense (36,981) (11,774) (73,956) (47,525)
Gain on sale and impairment
of investments 14,972 20,605 83,144 128,111
Loss on early extinguishment
of debt - - - (22,972)
Equity in income of
investments and venture
funds (1,039) 1,306 6,103 4,382
Total other income (loss) (19,801) 12,074 26,334 68,688
Income before income taxes and
discontinued operations 184,476 138,446 676,126 564,487
Income tax expense 58,959 38,951 229,823 181,764
Minority interest in
subsidiaries 9 17 65 893
Income from continuing
operations 125,508 99,478 446,238 381,830
Discontinued operations, net
of tax:
Loss from discontinued
operations (2,592) (9,649) (21,495) (32,755)
Gain (loss) on disposal of
discontinued operations 6,444 - 4,023 31,408
Net income (loss) from
discontinued operations 3,852 (9,649) (17,472) (1,347)
Cumulative effect of
accounting change, net of tax - - 1,646 -
Net income $129,360 $89,829 $430,412 $380,483
Basic income per share from
continuing operations $0.32 $0.26 $1.20 $1.04
Basic income (loss) per share
from discontinued operations 0.01 (0.02) (0.04) (0.00)
Basic income per share from
cumulative effect of
accounting change - - 0.00 -
Basic net income per share $0.33 $0.24 $1.16 $1.04
Diluted income per share from
continuing operations $0.31 $0.26 $1.16 $0.99
Diluted income (loss) per
share from discontinued
operations 0.01 (0.02) (0.04) (0.00)
Diluted income per share from
cumulative effect of
accounting change - - 0.00 -
Diluted net income per share $0.32 $0.24 $1.12 $0.99
Shares used in computation of
per share data:
Basic 387,055 367,603 371,468 366,586
Diluted (1) 400,717 381,061 384,630 405,389
C o n s o l i d a t e d S t a t e m e n t s o f O p e r a t i o n s
(in thousands, except per share amounts)
(unaudited)
Three Months Ended
December 31, September 30, December 31,
2005 2005 2004
Revenues:
Commissions $135,723 $114,278 $114,842
Principal transactions 23,789 23,793 35,476
Gain on sales of loans and
securities, net 14,737 21,850 33,640
Service charges and fees 34,675 32,893 24,598
Other revenues 27,820 22,920 25,249
Interest income 501,880 424,114 323,127
Interest expense (243,632) (207,101) (140,839)
Net interest income 258,248 217,013 182,288
Provision for loan losses (16,070) (12,909) (12,420)
Net interest income after
provision for loan losses 242,178 204,104 169,868
Total net revenues 478,922 419,838 403,673
Expenses excluding interest:
Compensation and benefits 100,331 103,084 88,065
Occupancy and equipment 18,416 16,249 17,756
Communications 27,835 18,210 17,830
Professional services 23,681 16,058 22,838
Commissions, clearance and
floor brokerage 40,616 34,619 33,559
Advertising and market
development 31,683 21,188 16,346
Servicing and other
banking expenses 17,659 12,989 9,890
Fair value adjustments of
financial derivatives 987 1,269 518
Depreciation and
amortization 21,671 18,443 19,834
Amortization of other
intangibles 30,014 4,382 5,013
Facility restructuring and
other exit charges (30,512) (469) 16,921
Other (7,736) 21,827 28,731
Total expenses excluding
interest 274,645 267,849 277,301
Income before other income
(loss), income taxes and
discontinued operations 204,277 151,989 126,372
Other income (loss):
Corporate interest income 3,247 3,409 1,937
Corporate interest expense (36,981) (13,783) (11,774)
Gain on sale and
impairment of investments 14,972 22,028 20,605
Equity in income of
investments and venture
funds (1,039) 3,103 1,306
Total other income (loss) (19,801) 14,757 12,074
Income before income taxes
and discontinued operations 184,476 166,746 138,446
Income tax expense 58,959 57,608 38,951
Minority interest in
subsidiaries 9 - 17
Income from continuing
operations 125,508 109,138 99,478
Discontinued operations,
net of tax:
Loss from discontinued
operations (2,592) (3,464) (9,649)
Gain (loss) on disposal of
discontinued operations 6,444 171 -
Net gain (loss) from
discontinued operations 3,852 (3,293) (9,649)
Cumulative effect of
accounting change,
net of tax - 1,646 -
Net income $129,360 $107,491 $89,829
Basic income per share from
continuing operations $0.32 $0.29 $0.26
Basic income (loss) per
share from discontinued
operations 0.01 (0.00) (0.02)
Basic income per share from
cumulative effect of
accounting change - 0.00 -
Basic net income per share $0.33 $0.29 $0.24
Diluted income per share
from continuing operations $0.31 $0.28 $0.26
Diluted income (loss) per
share from discontinued
operations 0.01 (0.00) (0.02)
Diluted income per share
from cumulative effect of
accounting change - 0.00 -
Diluted net income per share $0.32 $0.28 $0.24
Shares used in computation
of per share data:
Basic 387,055 367,342 367,603
Diluted (1) 400,717 382,031 381,061
C o n s o l i d a t e d B a l a n c e S h e e t s
(dollars in thousands)
(unaudited)
December 31,
2005 2004
ASSETS
Cash and equivalents $844,188 $939,906
Cash and investments required to be
segregated under Federal or other
regulations 610,174 724,026
Brokerage receivables, net 7,174,175 3,034,548
Trading securities 146,657 593,245
Available-for-sale mortgage-backed
and investment securities 12,564,738 12,543,818
Other investments 65,189 46,269
Loans receivable, net 19,424,895 11,505,755
Loans held-for-sale, net 87,371 279,280
Property and equipment, net 299,256 302,291
Goodwill 2,003,456 395,043
Other intangibles, net 532,108 134,121
Other assets 807,392 534,281
Total assets $44,559,599 $31,032,583
LIABILITIES AND SHAREHOLDERS' EQUITY
Brokerage payables $7,315,659 $3,618,892
Deposits 15,948,015 12,302,974
Securities sold under agreements to
repurchase 11,101,542 9,897,191
Other borrowings by Bank subsidiary 4,166,592 1,760,732
Senior notes 1,401,947 400,452
Convertible subordinated notes 185,165 185,165
Mandatory convertible notes 435,589 -
Accounts payable, accrued and other
liabilities 605,530 638,975
Total liabilities 41,160,039 28,804,381
Shareholders' equity:
Preferred stock, shares authorized:
1,000,000; issued and outstanding:
none at December 31, 2005 and
December 31, 2004 - -
Shares exchangeable into common
stock, $0.01 par value, shares
authorized: 10,644,223; issued and
outstanding: none at December 31, 2005
and 1,302,801 at December 31, 2004 - 13
Common stock, $0.01 par value,
shares authorized: 600,000,000;
issued and outstanding:
416,582,164 at December 31, 2005
and 369,623,604 at December 31, 2004 4,166 3,696
Additional paid-in-capital 2,990,676 2,234,093
Deferred stock compensation - (18,419)
Retained earnings 580,430 150,018
Accumulated other comprehensive loss (175,712) (141,199)
Total shareholders' equity 3,399,560 2,228,202
Total liabilities and
shareholders' equity $44,559,599 $31,032,583
SEGMENT REPORTING
Three Months Ended December 31, 2005
Instit- Elimin-
Retail utional ations(2) Total
(in thousands)
Revenues:
Commissions $103,895 $31,828 $- $135,723
Principal transactions - 23,789 - 23,789
Gain on sales of loans and
securities, net 11,959 2,778 - 14,737
Service charges and fees 29,419 5,256 - 34,675
Other revenues 30,659 1,971 (4,810) 27,820
Interest income 221,002 411,979 (131,101) 501,880
Interest expense (78,362) (296,371) 131,101 (243,632)
Net interest income 142,640 115,608 - 258,248
Provision for loan losses - (16,070) (16,070)
Net interest income after
provision for loan losses 142,640 99,538 - 242,178
Total net revenues 318,572 165,160 (4,810) 478,922
Expenses excluding interest:
Compensation and benefits 60,558 39,773 - 100,331
Occupancy and equipment 16,167 2,249 - 18,416
Communications 25,109 2,726 - 27,835
Professional services 18,205 5,476 - 23,681
Commissions, clearance and
floor brokerage 15,914 26,532 (1,830) 40,616
Advertising and market
development 30,074 1,609 - 31,683
Servicing and other banking
expenses 1,491 19,148 (2,980) 17,659
Fair value adjustments of
financial derivatives - 987 - 987
Depreciation and amortization 17,278 4,393 - 21,671
Amortization of other
intangibles 6,968 23,046 - 30,014
Facility restructuring and
other exit charges (32,584) 2,072 - (30,512)
Other (18,791) 11,055 - (7,736)
Total expenses excluding
interest 140,389 139,066 (4,810) 274,645
Segment income $178,183 $26,094 $- $204,277
Three Months Ended September 30, 2005
Instit- Elimin-
Retail utional ations(2) Total
(in thousands)
Revenues:
Commissions $83,755 $30,523 $- $114,278
Principal transactions - 23,793 - 23,793
Gain on sales of loans and
securities, net 17,534 4,316 - 21,850
Service charges and fees 26,933 5,960 - 32,893
Other revenues 27,929 2,901 (7,910) 22,920
Interest income 175,329 362,548 (113,763) 424,114
Interest expense (63,223) (257,641) 113,763 (207,101)
Net interest income 112,106 104,907 - 217,013
Provision for loan losses - (12,909) (12,909)
Net interest income after
provision for loan losses 112,106 91,998 - 204,104
Total net revenues 268,257 159,491 (7,910) 419,838
Expenses excluding interest:
Compensation and benefits 58,899 44,185 - 103,084
Occupancy and equipment 14,271 1,978 - 16,249
Communications 15,389 2,821 - 18,210
Professional services 10,464 5,594 - 16,058
Commissions, clearance and
floor brokerage 9,344 27,315 (2,040) 34,619
Advertising and market
development 19,363 1,825 - 21,188
Servicing and other banking
expenses 1,603 17,256 (5,870) 12,989
Fair value adjustments of
financial derivatives - 1,269 - 1,269
Depreciation and amortization 14,379 4,064 - 18,443
Amortization of other
intangibles 2,193 2,189 - 4,382
Facility restructuring and
other exit charges (270) (199) - (469)
Other 13,297 8,530 - 21,827
Total expenses excluding
interest 158,932 116,827 (7,910) 267,849
Segment income $109,325 $42,664 $- $151,989
Three Months Ended December 31, 2004
Instit- Elimin-
Retail utional ations(2) Total
(in thousands)
Revenues:
Commissions $89,603 $25,239 $- $114,842
Principal transactions - 35,476 - 35,476
Gain on sales of loans and
securities, net 19,940 13,700 - 33,640
Service charges and fees 21,692 2,906 - 24,598
Other revenues 30,132 4,957 (9,840) 25,249
Interest income 130,519 272,106 (79,498) 323,127
Interest expense (44,264) (176,073) 79,498 (140,839)
Net interest income 86,255 96,033 182,288
Provision for loan losses - (12,420) (12,420)
Net interest income after
provision for loan losses 86,255 83,613 169,868
Total net revenues 247,622 165,891 (9,840) 403,673
Expenses excluding interest:
Compensation and benefits 57,274 30,791 - 88,065
Occupancy and equipment 14,485 3,271 - 17,756
Communications 15,512 2,318 - 17,830
Professional services 15,173 7,665 - 22,838
Commissions, clearance and
floor brokerage 11,146 25,972 (3,559) 33,559
Advertising and market
development 15,441 905 - 16,346
Servicing and other banking
expenses 1,709 14,462 (6,281) 9,890
Fair value adjustments of
financial derivatives - 518 - 518
Depreciation and amortization 17,091 2,743 - 19,834
Amortization of other
intangibles 2,549 2,464 - 5,013
Facility restructuring and
other exit charges 5,548 11,373 - 16,921
Other 15,948 12,783 - 28,731
Total expenses excluding
interest 171,876 115,265 (9,840) 277,301
Segment income $75,746 $50,626 $- $126,372
KEY PERFORMANCE METRICS (3)
Qtr ended Qtr ended
12/31/05 12/31/05
vs. Qtr vs. Qtr
Qtr ended Qtr ended ended Qtr ended ended
CORPORATE METRICS 12/31/05 9/30/05 9/30/05 12/31/04 12/31/04
Operating margin % (4)
Consolidated 43 % 36 % 7 % 31 % 12 %
Retail 56 % 41 % 15 % 31 % 25 %
Institutional 16 % 27 % (11)% 31 % (15)%
Employees 3,439 3,039 13 % 3,320 4 %
Consultants and other 497 413 20 % 505 (2)%
Total headcount 3,936 3,452 14 % 3,825 3 %
Revenue per headcount (5) $127,396 $121,622 5 % $105,535 21 %
Revenue per compensation
and benefits dollar $4.77 $4.07 17 % $4.58 4 %
Book value per share $8.16 $6.72 21 % $6.01 36 %
Tangible book value
per share $2.07 $5.33 (61)% $4.58 (55)%
Cash & equivalents ($MM) $844.2 $1,389.6 (39)% $939.9 (10)%
Free cash ($MM) $542.3 $784.3 (31)% $691.0 (22)%
Enterprise net interest
spread (basis points)(6) 257 252 2 % 244 5 %
Enterprise interest-earning
assets, average ($MM)(6) $35,619 $32,690 9 % $28,454 25 %
Earnings before interest,
taxes, depreciation &
amortization ($MM)
Net income from continuing
operations $125.5 $109.1 15 % $99.5 26 %
Tax expense 59.0 57.6 2 % 39.0 51 %
Depreciation & amortization 51.7 22.8 126 % 24.8 108 %
Corporate interest expense 37.0 13.8 168 % 11.8 214 %
EBITDA $273.1 $203.4 34 % $175.1 56 %
Interest coverage 7.4 14.8 (50)% 14.9 (50)%
RETAIL METRICS
Trading days 62.5 64.0 (2)% 63.5 (2)%
Daily Average Revenue
Trades (DARTs)
- US 113,017 79,257 43 % 76,955 47 %
- International 15,391 14,619 5 % 12,649 22 %
Total DARTs 128,408 93,876 37 % 89,604 43 %
Total retail trades (MM) 8.0 6.0 34 % 5.7 41 %
Retail average commission
per trade $12.95 $13.94 (7)% $15.75 (18)%
End of period margin
debt ($B) $6.56 $2.43 170 % $2.20 198 %
Average margin debt ($B) $4.40 $2.27 94 % $2.07 113 %
Gross new trading/investing
accounts 782,052 155,304 404 % 161,737 384 %
Gross new deposit/lending
accounts 96,823 68,560 41 % 42,072 130 %
Inactive accounts (169,065) (121,107) (40)% (90,106) (88)%
Customer closed accounts (118,948) (54,029) N.M. (58,374) N.M.
Net new retail accounts 590,862 48,728 N.M. 55,329 N.M.
End of period
trading/investing
accounts 3,617,778 3,014,467 20 % 2,956,090 22 %
End of period
deposit/lending accounts 666,000 678,449 (2)% 626,673 6 %
End of period retail
accounts 4,283,778 3,692,916 16 % 3,582,763 20 %
Net new customers 524,668 33,205 1480 % 28,429 1746 %
End of period total
retail customers 3,459,074 2,934,406 18 % 2,887,441 20 %
End of period assets
per customer $51,592 $36,243 42 % $34,639 49 %
Consolidated net revenue
per customer (7) $142 $143 (1)% $140 2 %
Consolidated segment
income per customer (7) $61 $52 17 % $44 38 %
Products per customer 2.1 2.0 5 % 1.9 10 %
Total Retail Client
Assets ($B)
Security holdings $117.6 $57.2 106 % $52.6 124 %
Cash (including money
market funds) 13.3 5.4 146 % 6.7 99 %
Unexercised options
(vested) 32.1 29.8 8 % 28.7 12 %
Client assets in
trading/investing
accounts 163.0 92.4 76 % 88.0 85 %
Sweep Deposit Account 7.7 7.4 4 % 6.2 24 %
Transaction accounts 5.1 4.2 21 % 3.7 38 %
CDs 2.7 2.4 13 % 2.1 29 %
Client assets in deposit
accounts 15.5 14.0 11 % 12.0 29 %
Total retail client
assets $178.5 $106.4 68 % $100.0 79 %
Total customer cash and
deposits $28.8 $19.4 48 % $18.7 53 %
Unexercised options
(unvested) ($B) $19.7 $18.7 5 % $20.1 (2)%
INSTITUTIONAL METRICS
Market Making
Equity shares traded (MM) 33,264 35,125 (5)% 75,717 (56)%
Average revenue capture per
1,000 equity shares $0.545 $0.535 2 % $0.318 71 %
% of Bulletin Board equity
shares to total
equity shares 86.6% 86.0% 1 % 93.9% (7)%
Bank Asset Portfolio
Detail ($MM)
Cash & equivalents $64 $99 (35)% $82 (22)%
Trading securities 125 200 (38)% 567 (78)%
Investment securities,
available-for-sale 1,969 1,684 17 % 3,367 (42)%
Mortgage securities,
available-for-sale 10,424 9,359 11 % 9,052 15 %
Loans receivable, net
including loans held-for-
sale:
- Mortgage and home equity
loans, net 15,517 13,556 14 % 7,634 103 %
- Consumer loans, net 3,907 4,081 (4)% 4,148 (6)%
- Other 88 48 83 % 3 2833 %
Other assets 941 954 (1)% 700 34 %
Total assets $33,035 $29,981 10 % $25,553 29 %
Bank net interest spread
(basis points) 223 223 0 % 220 1 %
Bank interest-earning assets,
average ($MM) $30,819 $28,303 9 % $24,780 24 %
Credit Quality and Reserve Metrics
Net charge-offs as a % of
average held-for-investment
loans, net (annualized) 0.27 % 0.20 % 0.07 % 0.27 % 0.00 %
Provision as a % of average
held-for-investment loans,
net (annualized) 0.34 % 0.30 % 0.04 % 0.44 % (0.10)%
Allowance as a % of total
ending gross held-for-
investment loans 0.32 % 0.34 % (0.02)% 0.41 % (0.09)%
Total non-performing loans,
net, as a % of total gross
held-for-investment loans 0.18 % 0.13 % 0.05 % 0.17 % 0.01 %
Total loan loss allowance as
a % of total non-performing
loans, net 183 % 256 % (73)% 239 % (56)%
Tier 1 Capital Ratio (8) 5.93 % 5.87 % 0.06 % 5.83 % 0.10 %
Risk Weighted Capital
Ratio (8) 10.97 % 11.13 % (0.16)% 11.09 % (0.12)%
OTHER METRICS
Banking revenue ($MM) $183.7 $179.0 3 % $168.7 9 %
Brokerage revenue (net of
SDA elimination) ($MM) 295.2 240.8 23 % 235.0 26 %
Total revenue ($MM) $478.9 $419.8 14 % $403.7 19 %
ACTIVITY IN ALLOWANCE FOR LOAN LOSSES
Three Months Ended December 31, 2005
Mortgage Consumer Total
(in thousands)
Allowance for loan losses,
ending 9/30/05 $28,516 $31,338 $59,854
Provision for loan losses 3,294 12,776 16,070
Charge-offs, net (903) (11,735) (12,638)
Allowance for loan losses,
ending 12/31/05 $30,907 $32,379 $63,286
BANK AVERAGE BALANCE DATA
Three Months Ended
December 31, 2005
Interest Average
Average Income/ Annualized
Balance Expense Yield/Cost
(in thousands)
Interest-earning banking assets:
Loans receivable, net $18,370,193 $259,527 5.65%
Mortgage-backed and related
available-for-sale securities 10,259,120 116,416 4.54%
Available-for-sale investment
securities 1,796,590 25,573 5.69%
Trading securities 148,957 2,711 7.28%
Other 244,027 2,823 4.59%
Total interest-earning banking
assets (9) 30,818,887 $407,050 5.28%
Non-interest-earning banking assets 404,915
Total banking assets $31,223,802
Interest-bearing banking liabilities:
Retail deposits $14,564,378 $69,062 1.88%
Brokered certificates of deposit 512,379 4,862 3.76%
Repurchase agreements and other
borrowings 10,472,888 112,845 4.22%
FHLB advances 3,954,934 40,137 3.97%
Total interest-bearing banking
liabilities 29,504,579 $226,906 3.05%
Non-interest bearing banking
liabilities 278,228
Total banking liabilities 29,782,807
Total banking shareholder's equity 1,440,995
Total banking liabilities and
shareholder's equity $31,223,802
Excess of interest-earning banking
assets over interest-bearing banking
liabilities/net interest income $1,314,308
Net interest spread $180,144 2.23%
Three Months Ended
December 31, 2004
Interest Average
Average Income/ Annualized
Balance Expense Yield/Cost
(in thousands)
Interest-earning banking assets:
Loans receivable, net $11,678,476 $143,885 4.93%
Mortgage-backed and related
available-for-sale securities 9,031,367 89,563 3.97%
Available-for-sale investment
securities 3,347,929 36,904 4.41%
Trading securities 581,458 4,546 3.13%
Other 140,312 1,130 3.20%
Total interest-earning banking
assets (9) 24,779,542 $276,028 4.45%
Non-interest-earning banking assets 497,226
Total banking assets $25,276,768
Interest-bearing banking liabilities:
Retail deposits $11,834,734 $40,663 1.37%
Brokered certificates of deposit 325,269 2,176 2.66%
Repurchase agreements and other
borrowings 9,905,559 75,068 2.97%
FHLB advances 1,664,272 16,457 3.87%
Total interest-bearing banking
liabilities 23,729,834 $134,364 2.25%
Non-interest bearing banking
liabilities 389,069
Total banking liabilities 24,118,903
Total banking shareholder's equity 1,157,865
Total banking liabilities and
shareholder's equity $25,276,768
Excess of interest-earning banking
assets over interest-bearing banking
liabilities/net interest income $1,049,708
Net interest spread $141,664 2.20%
SUPPLEMENTAL INFORMATION AND ENDNOTES
Explanation of Non-GAAP Measures and Certain Metrics
In order to better assess the Company's financial operating results,
management believes consolidated operating margin, free cash, EBITDA and
interest coverage are appropriate measures of evaluating the operating and
liquidity performance of the Company. We believe that the elimination of
certain items from these measures is helpful to analysts and investors who may
wish to use some or all of this information to analyze our current
performance, prospects and valuation. Our management uses non-GAAP
information internally to evaluate our operating performance and in
formulating our budget for future periods.
Consolidated Operating Margin
Consolidated operating margin is defined as income before other income,
income taxes, discontinued operations and cumulative effect of accounting
change divided by net revenues. Operating margin for Retail and Institutional
is based on segment results. Our consolidated statements of operations
contain a reconciliation of income before other income, income taxes,
discontinued operations and cumulative effect of accounting change to net
income.
Free Cash
Free cash as reported by the Company represents cash held at Parent and
non-Bank or Brokerage subsidiaries less discretionary reserves and excess
capital at Bank and Brokerage after 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.
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.
(1) For the twelve months ended December 31, 2004, diluted earnings per
share is calculated using the 'if converted' method, which includes
the additional dilutive impact assuming conversion of the Company's
subordinated convertible debt. Under the 'if converted' method, the
per share numerator excludes the interest expense and related
amortization of offering costs from the convertible debt, net of tax,
of $20.0 million. The denominator includes the shares issuable from
the assumed conversion of the convertible debt of 25.8 million. For
all other periods presented the 'if converted' method is not used as
its effect would be anti-dilutive.
(2) Reflects elimination of transactions between Retail and Institutional
segments, which include deposit transfer pricing, servicing and order
flow rebates.
(3) Amounts and percentages may not calculate due to rounding.
(4) Operating margin is defined as income before other income, income
taxes, discontinued operations and cumulative effect of accounting
change ("segment income") divided by net revenues. Operating margin
for Retail and Institutional is based on segment results.
(5) Total headcount in the quarter ended December 31, 2005, calculation
was adjusted to reflect the contribution of BrownCo employees for
only one month in the quarter.
(6) Enterprise spread is defined as the combined net interest spread
generated from the interest-earning assets and liabilities of our
segment operating results and does not include corporate interest
income or interest expense.
(7) Total retail customers in the quarter ended December 31, 2005,
calculations were adjusted to reflect the contribution of BrownCo
customers for only one month in the quarter.
(8) Quarter ended December 31, 2005, estimate.
(9) Amounts include a taxable equivalent increase in interest income of
$2.6 million and $2.4 million for the three months ended December 31,
2005 and 2004, respectively.
E*TRADE FINANCIAL Media Contact
Pam Erickson
E*TRADE FINANCIAL Corporation
617-296-6080
pam.erickson@etrade.com
E*TRADE FINANCIAL Investor Relations Contact
Adam Townsend
E*TRADE FINANCIAL Corporation
703-236-8719
adam.townsend@etrade.com
SOURCE E*TRADE FINANCIAL Corporation
 back to top
Related links:
http://www.etrade.com
CONTACT:
Media, Pam Erickson, +1-617-296-6080, or
pam.erickson@etrade.com, or Investor Relations, Adam Townsend,
+1-703-236-8719, or adam.townsend@etrade.com, both of E*TRADE
FINANCIAL Corporation
|
