- GAAP Net Income of $101.6 million, or $0.27 per share
- Total Net Revenue of $391.3 million
- Operating Margin(1) of 36 percent
- Total Client Assets of $96.8 billion
- Net Interest Income of $208.2 million
- Total Daily Average Revenue Trades of 115,300
- Raises low end of 2005 guidance and tightens range to $0.96 - $1.06
NEW YORK, July 20 /PRNewswire-FirstCall/ -- E*TRADE FINANCIAL Corporation
(NYSE: ET) today announced results for its second quarter ended June 30, 2005,
reporting net income of $101.6 million, or $0.27 per diluted share.
Consolidated net revenue for the second quarter increased 3 percent to $391.3
million from $381.5 million a year ago. The Company continued to see
significant growth in net interest income, which increased 35 percent year
over year to $208.2 million and represented 53 percent of Total Net Revenue.
Total retail client assets increased to $96.8 billion, including $18.7 billion
in retail customer cash, representing a 10 percent increase over the year ago
period. Retail customer margin debt balances at quarter end also increased 10
percent from a year ago to $2.28 billion.
In the second quarter, the Company made the strategic decision to exit the
proprietary and hybrid trading business within E*TRADE Professional, and is in
negotiations to sell its RV and marine loan origination and servicing
business. The results of these businesses in the second quarter of 2005 are
presented as a $6.7 million after-tax loss from discontinued operations.
Therefore, net income from continuing operations increased to $0.29 in the
second quarter from $0.26 a year ago. Prior periods presented have been
adjusted for the discontinuation of these businesses.
The Company increased and narrowed its 2005 GAAP earnings guidance range
to $0.96 - $1.06 per share.
"We continue to drive strong and steady performance by appealing to new
customers with integrated product solutions, leveraging our ability to
monetize customer cash across our Retail and Institutional segments and
controlling operating expenses," said Mitchell H. Caplan, Chief Executive
Officer, E*TRADE FINANCIAL Corporation. "Through this discipline, we have made
decisions and delivered results that have put the Company on track to deliver
a third consecutive year of record results, while moving us closer to our goal
of delivering a consolidated return on equity of nearly 20 percent and an
operating margin of 40 percent in 2006."
Other selected highlights from the second quarter of 2005:
-- Added 204,000 gross new retail accounts, with 142,000 in
trading/investing and 62,000 in deposit/lending accounts
-- Increased products per customer 11 percent to 2.0 from 1.8 a year ago
and total segment income per customer by 2 percent to $48 from $47 a
year ago
-- Upgraded 1.4 million customer accounts to E*TRADE Complete
-- Issued and activated over 10,000 Digital Security ID tokens through
our two-factor authentication program for customers
-- Launched retail brokerage services in France and Estonia, increasing
global presence to 14 countries
Historical monthly metric data from January 2003 to June 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.
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
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 Six Months Ended
June 30, June 30,
2005 2004 2005 2004
Revenues:
Commissions $102,051 $105,319 $216,227 $248,032
Principal transactions 21,753 33,947 51,754 67,026
Gain on sales of loans and
securities, net 17,256 46,222 62,271 78,663
Service charges and fees 34,531 26,692 67,903 51,592
Other revenues 20,585 22,901 44,797 47,456
Interest income 387,807 273,926 724,390 529,560
Interest expense (179,640) (120,038) (328,431) (240,764)
Net interest income 208,167 153,888 395,959 288,796
Provision for loan losses (12,997) (7,501) (25,037) (16,556)
Net interest income after
provision for loan losses 195,170 146,387 370,922 272,240
Total net revenues 391,346 381,468 813,874 765,009
Expenses excluding interest:
Compensation and benefits 85,917 91,695 179,623 184,325
Occupancy and equipment 17,787 17,790 36,071 35,967
Communications 19,817 17,394 37,245 35,813
Professional services 16,201 14,989 35,608 28,809
Commissions, clearance and
floor brokerage 34,344 39,399 70,158 81,042
Advertising and market
development 26,482 13,700 53,069 36,520
Servicing and other banking
expenses 11,499 8,714 21,678 17,012
Fair value adjustments of
financial derivatives 1,748 (2,395) 2,636 (2,121)
Depreciation and amortization 18,246 19,829 35,572 39,433
Amortization of other
intangibles 4,649 5,078 9,894 10,602
Facility restructuring and
other exit charges 407 (34) 964 (1,006)
Other 14,849 20,517 40,577 44,581
Total expenses excluding
interest 251,946 246,676 523,095 510,977
Income before other income,
income taxes and discontinued
operations 139,400 134,792 290,779 254,032
Other income:
Corporate interest income 2,425 1,694 4,387 3,057
Corporate interest expense (11,625) (12,540) (23,192) (23,878)
Gain on sale and impairment of
investments 30,688 31,728 46,230 60,277
Loss on early extinguishment of
debt -- (4,357) -- (4,357)
Equity in income of investments
and venture funds 1,398 440 4,039 2,992
Total other income 22,886 16,965 31,464 38,091
Income before income taxes and
discontinued operations 162,286 151,757 322,243 292,123
Income tax expense 54,019 48,848 112,209 98,795
Minority interest in subsidiaries 6 89 56 829
Income from continuing operations 108,261 102,820 209,978 192,499
Discontinued operations, net of tax:
Loss from discontinued
operations (4,103) (11,158) (13,826) (12,362)
Gain (loss) on disposal of
discontinued operations (2,591) 31,244 (2,591) 31,244
Net income (loss) from
discontinued operations (6,694) 20,086 (16,417) 18,882
Net income $101,567 $122,906 $193,561 $211,381
Basic income per share from
continuing operations $0.30 $0.28 $0.57 $0.53
Basic income (loss) per share
from discontinued operations (0.02) 0.06 (0.04) 0.05
Basic net income per share $0.28 $0.34 $0.53 $0.58
Diluted income per share from
continuing operations $0.29 $0.26 $0.55 $0.50
Diluted income (loss) per share
from discontinued operations (0.02) 0.05 (0.04) 0.04
Diluted net income per share $0.27 $0.31 $0.51 $0.54
Shares used in computation of per
share data:
Basic 365,180 365,072 365,643 364,939
Diluted (2) 376,345 416,713 377,511 420,841
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
June 30, March 31, June 30,
2005 2005 2004
Revenues:
Commissions $102,051 $114,176 $105,319
Principal transactions 21,753 30,001 33,947
Gain on sales of loans and
securities, net 17,256 45,015 46,222
Service charges and fees 34,531 33,372 26,692
Other revenues 20,585 24,212 22,901
Interest income 387,807 336,583 273,926
Interest expense (179,640) (148,791) (120,038)
Net interest income 208,167 187,792 153,888
Provision for loan losses (12,997) (12,040) (7,501)
Net interest income after
provision for loan losses 195,170 175,752 146,387
Total net revenues 391,346 422,528 381,468
Expenses excluding interest:
Compensation and benefits 85,917 93,706 91,695
Occupancy and equipment 17,787 18,284 17,790
Communications 19,817 17,428 17,394
Professional services 16,201 19,407 14,989
Commissions, clearance and
floor brokerage 34,344 35,814 39,399
Advertising and market
development 26,482 26,587 13,700
Servicing and other
banking expenses 11,499 10,179 8,714
Fair value adjustments of
financial derivatives 1,748 888 (2,395)
Depreciation and
amortization 18,246 17,326 19,829
Amortization of other
intangibles 4,649 5,245 5,078
Facility restructuring and
other exit charges 407 557 (34)
Other 14,849 25,728 20,517
Total expenses excluding
interest 251,946 271,149 246,676
Income before other income,
income taxes and
discontinued operations 139,400 151,379 134,792
Other income:
Corporate interest income 2,425 1,962 1,694
Corporate interest expense (11,625) (11,567) (12,540)
Gain on sale and
impairment of investments 30,688 15,542 31,728
Loss on early
extinguishment of debt -- -- (4,357)
Equity in income of
investments and venture
funds 1,398 2,641 440
Total other income 22,886 8,578 16,965
Income before income taxes
and discontinued
operations 162,286 159,957 151,757
Income tax expense 54,019 58,190 48,848
Minority interest in
subsidiaries 6 50 89
Income from continuing
operations 108,261 101,717 102,820
Discontinued operations,
net of tax:
Loss from discontinued
operations (4,103) (9,723) (11,158)
Gain (loss) on disposal of
discontinued operations (2,591) -- 31,244
Net income (loss) from
discontinued operations (6,694) (9,723) 20,086
Net income $101,567 $91,994 $122,906
Basic income per share from
continuing operations $0.30 $0.28 $0.28
Basic income (loss) per
share from discontinued
operations (0.02) (0.03) 0.06
Basic net income per share $0.28 $0.25 $0.34
Diluted income per share
from continuing operations $0.29 $0.27 $0.26
Diluted income (loss) per
share from discontinued
operations (0.02) (0.03) 0.05
Diluted net income per
share $0.27 $0.24 $0.31
Shares used in computation
of per share data:
Basic 365,180 366,130 365,072
Diluted (2) 376,345 378,734 416,713
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)
June 30, December 31,
2005 2004
ASSETS
Cash and equivalents $1,095,378 $939,906
Cash and investments required to be
segregated under Federal or other
regulations 1,461,706 724,026
Brokerage receivables, net 3,459,047 3,034,548
Trading securities 213,816 593,245
Available-for-sale mortgage-backed
and investment securities 11,065,629 12,543,818
Other investments 52,004 46,269
Loans receivable, net 15,706,553 11,505,755
Loans held-for-sale, net 125,657 279,280
Property and equipment, net 306,611 302,291
Goodwill 396,282 395,043
Other intangibles, net 126,980 134,121
Other assets 931,648 534,281
Total assets $34,941,311 $31,032,583
LIABILITIES AND SHAREHOLDERS' EQUITY
Brokerage payables $4,695,629 $3,618,892
Deposits 13,057,010 12,302,974
Securities sold under agreements to
repurchase 9,350,983 9,897,191
Other borrowings by Bank subsidiary 4,087,749 1,760,732
Senior notes 400,258 400,452
Convertible subordinated notes 185,165 185,165
Accounts payable, accrued and other
liabilities 854,729 638,975
Total liabilities 32,631,523 28,804,381
Shareholders' equity:
Preferred stock, shares authorized:
1,000,000; issued and outstanding:
none at June 30, 2005 and December
31, 2004 -- --
Shares exchangeable into common
stock, $0.01 par value, shares
authorized: 10,644,223; issued and
outstanding: 1,300,301 at June 30, 2005
and 1,302,801 at December 31, 2004 13 13
Common stock, $0.01 par value,
shares authorized: 600,000,000;
issued and outstanding: 369,264,680
at June 30, 2005 and 369,623,604
at December 31, 2004 3,693 3,696
Additional paid-in-capital 2,217,522 2,234,093
Deferred stock compensation (22,089) (18,419)
Retained earnings 343,579 150,018
Accumulated other comprehensive loss (232,930) (141,199)
Total shareholders' equity 2,309,788 2,228,202
Total liabilities and
shareholders' equity $34,941,311 $31,032,583
SEGMENT REPORTING
Three Months Ended June 30, 2005
Institu- Elimina-
Retail tional tion (3) Total
Revenues: (In thousands)
Commissions $74,428 $27,623 $102,051
Principal transactions -- 21,753 21,753
Gain on sales of loans and
securities, net 17,834 (578) 17,256
Service charges and fees 30,253 4,278 34,531
Other revenues 27,136 1,418 (7,969) 20,585
Interest income 153,697 330,965 (96,855) 387,807
Interest expense (55,174) (221,321) 96,855 (179,640)
Net interest income 98,523 109,644 -- 208,167
Provision for loan losses -- (12,997) (12,997)
Net interest income after
provision for loan losses 98,523 96,647 -- 195,170
Total net revenues 248,174 151,141 (7,969) 391,346
Expenses excluding interest:
Compensation and benefits 55,890 30,027 85,917
Occupancy and equipment 14,723 3,064 17,787
Communications 17,197 2,620 19,817
Professional services 12,372 3,829 16,201
Commissions, clearance and
floor brokerage 11,287 24,983 (1,926) 34,344
Advertising and market
development 24,294 2,188 26,482
Servicing and other banking
expenses 1,600 15,942 (6,043) 11,499
Fair value adjustments of
financial derivatives -- 1,748 1,748
Depreciation and amortization 14,526 3,720 18,246
Amortization of other
intangibles 2,383 2,266 4,649
Facility restructuring and
other exit charges 435 (28) 407
Other 5,407 9,442 14,849
Total expenses excluding
interest 160,114 99,801 (7,969) 251,946
Segment income $88,060 $51,340 $-- $139,400
Three Months Ended March 31, 2005
Institu- Elimina-
Retail tional tion (3) Total
Revenues: (In thousands)
Commissions $84,970 $29,206 $114,176
Principal transactions -- 29,840 161 30,001
Gain on sales of loans and
securities, net 16,378 28,637 45,015
Service charges and fees 29,654 3,718 33,372
Other revenues 28,230 4,093 (8,111) 24,212
Interest income 135,159 290,277 (88,853) 336,583
Interest expense (43,184) (194,298) 88,691 (148,791)
Net interest income 91,975 95,979 (162) 187,792
Provision for loan losses -- (12,040) (12,040)
Net interest income after
provision for loan losses 91,975 83,939 (162) 175,752
Total net revenues 251,207 179,433 (8,112) 422,528
Expenses excluding interest:
Compensation and benefits 59,382 34,324 93,706
Occupancy and equipment 14,355 3,929 18,284
Communications 14,803 2,625 17,428
Professional services 14,150 5,257 19,407
Commissions, clearance and
floor brokerage 10,757 27,517 (2,460) 35,814
Advertising and market
development 23,192 3,395 26,587
Servicing and other banking
expenses 1,472 14,359 (5,652) 10,179
Fair value adjustments of
financial derivatives -- 888 888
Depreciation and amortization 15,126 2,200 17,326
Amortization of other
intangibles 2,875 2,370 5,245
Facility restructuring and
other exit charges (335) 892 557
Other 14,988 10,740 25,728
Total expenses excluding
interest 170,765 108,496 (8,112) 271,149
Segment income $80,442 $70,937 $-- $151,379
Three Months Ended June 30, 2004
Institu- Elimina-
Retail tional tion (3) Total
Revenues: (In thousands)
Commissions $79,156 $26,163 $105,319
Principal transactions -- 33,947 33,947
Gain on sales of loans and
securities, net 31,508 14,714 46,222
Service charges and fees 22,971 3,721 26,692
Other revenues 27,382 3,832 (8,313) 22,901
Interest income 119,605 226,937 (72,616) 273,926
Interest expense (40,535) (152,119) 72,616 (120,038)
Net interest income 79,070 74,818 -- 153,888
Provision for loan losses -- (7,501) (7,501)
Net interest income after
provision for loan losses 79,070 67,317 -- 146,387
Total net revenues 240,087 149,694 (8,313) 381,468
Expenses excluding interest:
Compensation and benefits 60,542 31,153 91,695
Occupancy and equipment 14,846 2,944 17,790
Communications 15,483 1,911 17,394
Professional services 9,277 5,712 14,989
Commissions, clearance and
floor brokerage 16,691 25,973 (3,265) 39,399
Advertising and market
development 12,421 1,279 13,700
Servicing and other banking
expenses 1,773 11,989 (5,048) 8,714
Fair value adjustments of
financial derivatives -- (2,395) (2,395)
Depreciation and amortization 16,797 3,032 19,829
Amortization of other
intangibles 3,493 1,585 5,078
Facility restructuring and
other exit charges 128 (162) (34)
Other 10,772 9,745 20,517
Total expenses excluding
interest 162,223 92,766 (8,313) 246,676
Segment income $77,864 $56,928 $-- $134,792
2005 GAAP EARNINGS GUIDANCE AND KEY DRIVER ASSUMPTIONS
2H05 Estimate FY2005 Estimate
Q105A Q205A 1H05A Low High Low High
Earnings per
share $0.24 $0.27 $0.51 $0.45 $0.55 $0.96 $1.06
Total DARTs 124,798 115,000 125,000 120,000 125,000
Average margin debt ($B) $2.2 $2.2 $2.4 $2.2 $2.3
Average commission per
revenue trade $10.22 $9.50 $9.70 $9.85 $9.95
Bank interest rate spread
(basis points) 221 222 225 222 223
Average interest-earnings
assets ($B) $26.3 $29.0 $31.0 $27.5 $28.5
KEY PERFORMANCE METRICS (4)
Qtr Qtr
ended ended
6/30/05 6/30/05
Qtr Qtr vs. Qtr Qtr vs. Qtr
ended ended ended ended ended
CORPORATE METRICS 6/30/05 3/31/05 3/31/05 6/30/04 6/30/04
Operating margin % (1)
Consolidated 36 % 36 % 0 % 35 % 1 %
Retail 35 % 32 % 3 % 32 % 3 %
Institutional 34 % 40 % (6)% 38 % (4)%
Employees 3,131 3,273 (4)% 3,394 (8)%
Consultants and other 375 515 (27)% 419 (11)%
Total headcount 3,506 3,788 (7)% 3,813 (8)%
Revenue per headcount $111,622 $111,544 0 % $100,044 12 %
Revenue per compensation and
benefits dollar $4.55 $4.51 1 % $4.16 9 %
Book value per share $6.23 $6.20 0 % $5.65 10 %
Tangible book value per share $4.82 $4.77 1 % $4.30 12 %
Cash & equivalents ($MM) $1,095.4 $721.0 52 % $1,243.6 (12)%
Free cash ($MM) $727.6 $689.9 5 % $717.0 1 %
Earnings before interest,
taxes, depreciation &
amortization ($MM)
Net income from continuing
operations $108.3 $101.7 6 % $102.8 5 %
Tax expense 54.0 58.2 (7)% 48.8 11 %
Depreciation & amortization 22.9 22.6 1 % 24.9 (8)%
Corporate interest expense 11.6 11.6 0 % 12.5 (7)%
EBITDA $196.8 $194.0 1 % $189.1 4 %
Interest coverage 16.9 16.8 1 % 15.1 12 %
RETAIL METRICS
Trading days 64.0 61.0 5 % 62.0 3 %
Daily Average Revenue
Trades (DARTs)
Total Retail 80,869 88,075 (8)% 79,675 1 %
- US 68,256 74,133 (8)% 69,073 (1)%
- International 12,613 13,942 (10)% 10,602 19 %
Professional 34,425 46,695 (26)% 47,758 (28)%
Total DARTs 115,294 134,770 (14)% 127,433 (10)%
Total retail trades (MM) 7.4 8.2 (10)% 7.9 (7)%
Average commission per
trade $10.09 $10.34 (2)% $10.02 1 %
End of period margin debt ($B) $2.28 $2.27 1 % $2.07 10 %
Average margin debt ($B) $2.20 $2.24 (2)% $2.13 3 %
Gross new trading/investing
accounts 142,010 133,951 6 % 130,793 9 %
Gross new deposit/lending
accounts 62,099 58,454 6 % 37,726 65 %
Inactive accounts (115,957) (100,921) (15)% (98,052) (18)%
Customer closed accounts (61,972) (56,239) (10)% (65,436) 5 %
Net new retail accounts 26,180 35,245 (26)% 5,031 420 %
End of period
trading/investing accounts 2,990,586 2,975,744 0 % 2,901,140 3 %
End of period
deposit/lending accounts 653,602 642,264 2 % 627,567 4 %
End of period
retail accounts 3,644,188 3,618,008 1 % 3,528,707 3 %
Net new customers 5,176 8,584 (40)% (6,577) 179 %
End of period total
retail customers 2,901,201 2,896,025 0 % 2,868,771 1 %
End of period assets
per customer $33,377 $32,605 2 % $30,800 8 %
Consolidated net revenue
per customer $135 $146 (8)% $133 1 %
Consolidated segment income
per customer $48 $52 (8)% $47 2 %
Products per customer 2.0 1.9 1 % 1.8 11 %
Total Retail Client Assets ($B)
Security holdings $52.5 $50.8 3 % $47.0 12 %
Cash (including money
market funds) 6.1 6.3 (3)% 6.4 (5)%
Unexercised options
(vested) 25.6 25.2 2 % 23.5 9 %
Client assets in
trading/investing accounts 84.2 82.3 2 % 76.9 9 %
Sweep Deposit Account 6.4 6.3 2 % 4.8 33 %
Transaction accounts 4.0 3.7 8 % 4.2 (5)%
CDs 2.2 2.1 5 % 2.5 (12)%
Client assets in
deposit accounts 12.6 12.1 4 % 11.5 10 %
Total retail client assets $96.8 $94.4 3 % $88.4 10 %
Total customer cash and
deposits $18.7 $18.4 2 % $17.9 4 %
Unexercised options
(unvested) ($B) $16.0 $14.8 8 % $17.1 (6)%
INSTITUTIONAL METRICS
Market Making
Equity shares traded (MM) 30,584 57,385 (47)% 89,792 (66)%
Average revenue capture per
1,000 equity shares $0.515 $0.329 56 % $0.274 88 %
% of Bulletin Board equity
shares to total equity
shares 87.8% 93.3% (6)% 96.1% (8)%
Bank Asset Portfolio Detail ($MM)
Cash & equivalents $323 $60 438 % $260 24 %
Trading securities 195 203 (4)% 764 (74)%
Investment securities,
available-for-sale 2,077 3,317 (37)% 3,029 (31)%
Mortgage securities,
available-for-sale 8,865 8,346 6 % 8,406 5 %
Loans receivable, net
including loans held-for-sale:
- Mortgage and home equity
loans, net 11,672 8,969 30 % 5,713 104 %
- Consumer loans, net 4,131 4,257 (3)% 4,290 (4)%
- Other 29 12 142 % 1 2800 %
Other assets 977 831 18 % 736 33 %
Total assets $28,269 $25,995 9 % $23,199 22 %
Bank net interest spread
(basis points) 222 220 1 % 205 8 %
Bank interest-earning assets,
average ($MM) $27,325 $25,280 8 % $21,574 27 %
Credit Quality and Reserve
Metrics
Net charge-offs as a % of
average held-for-investment
loans, net (annualized) 0.27 % 0.26 % 0.01 % 0.29 %(0.02)%
Provision as a % of average
held-for-investment loans,
net (annualized) 0.37 % 0.40 %(0.03)% 0.34 % 0.03 %
Allowance as a % of total
ending gross held-for-
investment loans 0.35 % 0.40 %(0.05)% 0.43 %(0.08)%
Total non-performing loans,
net, as a % of total gross
held-for-investment loans 0.15 % 0.18 %(0.03)% 0.18 %(0.03)%
Total loan loss allowance as
a % of total non-performing
loans, net 239 % 228 % 11 % 232 % 7 %
Tier 1 Capital Ratio (5) 5.93 % 6.06 %(0.13)% 5.98 %(0.05)%
Risk Weighted Capital
Ratio (5) 11.03 % 11.27 %(0.24)% 11.81 %(0.78)%
Other
Banking revenue ($MM) $168.3 $185.9 (9)% $161.4 4 %
Brokerage revenue (net of SDA
elimination) ($MM) 223.0 236.6 (6)% 220.1 1 %
Total revenue ($MM) $391.3 $422.5 (7)% $381.5 3 %
ACTIVITY IN ALLOWANCE FOR LOAN LOSSES
Three Months Ended June 30, 2005
Mortgage Consumer Total
(in thousands)
Allowance for loan losses,
ending 3/31/05 $22,152 $29,732 $51,884
Provision for loan losses 4,828 8,169 12,997
Charge-offs, net (1,388) (8,075) (9,463)
Allowance for loan losses,
ending 6/30/05 $25,592 $29,826 $55,418
BANK AVERAGE BALANCE DATA
Three Months Ended
June 30, 2005
Interest Average
Average Income/ Annualized
Balance Expense Yield/Cost
(in thousands)
Interest-earning banking assets:
Loans receivable, net $14,289,236 $183,999 5.15%
Mortgage-backed and related
available-for-sale securities 9,449,551 98,855 4.18%
Available-for-sale investment
securities 3,168,220 40,953 5.17%
Trading securities 215,438 2,328 4.32%
Other 202,188 2,104 4.17%
Total interest-earning banking
assets (6) 27,324,633 $328,239 4.81%
Non-interest-earning banking assets 365,151
Total banking assets $27,689,784
Interest-bearing banking liabilities:
Retail deposits $12,248,939 $49,629 1.63%
Brokered certificates of deposit 456,724 3,782 3.32%
Repurchase agreements and other
borrowings 10,409,125 87,507 3.33%
FHLB advances 3,001,297 27,500 3.62%
Total interest-bearing banking
liabilities 26,116,085 $168,418 2.59%
Non-interest bearing banking
liabilities 314,882
Total banking liabilities 26,430,967
Total banking shareholder's equity 1,258,817
Total banking liabilities and
shareholder's equity $27,689,784
Excess of interest-earning banking
assets over interest-bearing banking
liabilities/net interest income $1,208,548
Net interest spread $159,821 2.22%
Three Months Ended
June 30, 2004
Interest Average
Average Income/ Annualized
Balance Expense Yield/Cost
(in thousands)
Interest-earning banking assets:
Loans receivable, net $9,323,548 $111,862 4.80%
Mortgage-backed and related
available-for-sale securities 8,282,552 83,728 4.04%
Available-for-sale investment
securities 2,981,826 27,973 3.75%
Trading securities 771,775 6,131 3.18%
Other 214,603 1,899 3.56%
Total interest-earning banking
assets (6) 21,574,304 $231,593 4.29%
Non-interest-earning banking assets 571,327
Total banking assets $22,145,631
Interest-bearing banking liabilities:
Retail deposits $11,512,007 $42,928 1.50%
Brokered certificates of deposit 359,265 2,287 2.56%
Repurchase agreements and other
borrowings 7,906,398 60,222 3.01%
FHLB advances 967,297 10,467 4.28%
Total interest-bearing banking
liabilities 20,744,967 $115,904 2.24%
Non-interest bearing banking
liabilities 346,829
Total banking liabilities 21,091,796
Total banking shareholder's equity 1,053,835
Total banking liabilities and
shareholder's equity $22,145,631
Excess of interest-earning banking
assets over interest-bearing banking
liabilities/net interest income $829,337
Net interest spread $115,689 2.05%
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 margins, 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 and discontinued operations 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 and discontinued operations 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) Operating margin is defined as income before other income, income
taxes and discontinued operations divided by net revenues. Operating
margin for Retail and Institutional is based on segment results.
(2) For the three and six months ended June 30, 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 $7.4 million and $15.1 million, respectively. The denominator
includes the shares issuable from the assumed conversion of the
convertible debt of 39.9 million and 42.7 million, respectively. For
all other periods presented the 'if converted' method is not used as
its effect would be anti-dilutive.
(3) Reflects elimination of transactions between Retail and Institutional
segments, which include deposit transfer pricing, servicing and
orderflow rebates.
(4) Amounts and percentages may not calculate due to rounding.
(5) Q205 estimate.
(6) Amounts include a taxable equivalent increase in interest income of
$2.7 million and $1.4 million for the three months ended June 30, 2005
and 2004, respectively.
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
|
