E*TRADE Financial Corporation (NASDAQ:ETFC):
First Quarter Results
- Net income of $145 million; net income
available to common shareholders of $132 million
- Diluted earnings per common share of
$0.48
- Total net revenue of $553 million
- Net interest income of $319 million on
average interest-earning assets of $48.7 billion; net interest
margin of 263 basis points
- Allowance for loan losses of $213
million, resulting in a benefit to provision for loan losses of $14
million
- Total non-interest expense of $342
million
- Operating margin of 41 percent;
adjusted operating margin of 38 percent(1)
- Daily Average Revenue Trades (DARTs) of
207,000; 29 percent in derivatives
- Customer margin balances(2) of $7.3
billion
- Net new brokerage accounts of 58,000;
annualized growth rate of 6.7 percent
- Net new brokerage assets of $4.2
billion; annualized growth rate of 6.1 percent; end of period total
customer assets of $336 billion
- Managed products of $4.3 billion
E*TRADE Financial Corporation (NASDAQ: ETFC) today announced
results for its first quarter ended March 31, 2017, reporting
net income of $145 million and $0.48 diluted earnings per common
share. This compares to net income of $153 million, or $0.53
diluted earnings per common share, in the first quarter of 2016
which included an income tax benefit related to the release of
valuation allowances. Total net revenue of $553 million increased
from net revenue of $472 million in the first quarter of 2016.
Total non-interest expense in the quarter was $342 million compared
to $312 million in the year-ago period.
“We had an outstanding start to the year, with strong bottom
line results fueled by business growth, capital deployment, and a
favorable operating environment,” said Karl Roessner, Chief
Executive Officer. “Amidst a period of extraordinary and
intensifying competition, we produced record growth in brokerage
assets, and our strongest brokerage account growth in three years -
well on pace to exceed our 2018 goals. Meanwhile, we continued to
put capital to work for shareholders, onboarding deposits and
taking advantage of the strong rate environment to outpace our
balance sheet growth targets. While immensely gratifying to see the
early benefits of our hard work to grow the business, we will not
rest on our laurels. Specifically, we will remain steadfast in the
integration of OptionsHouse to deliver a blockbuster customer
experience, capitalize on our new creative agency to reinvigorate
our iconic brand, and keep our team focused on continuing to
deliver value for our customers and our shareholders.”
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 p.m. ET today. This conference call will be
available to domestic participants by dialing (800) 705-8289 while
international participants should dial +1 (303) 223-2689. A live
audio webcast and replay of this conference call will also be
available at about.etrade.com.
About E*TRADE Financial
E*TRADE Financial and its subsidiaries provide financial
services including online brokerage and related banking products
and services to retail customers. Securities products and services
are offered by E*TRADE Securities LLC (Member FINRA/SIPC/NFA) and
OptionsHouse (Member FINRA/SIPC/NFA). Bank products and services
are offered by E*TRADE Bank, a Federal savings bank, Member FDIC,
or its subsidiaries. More information is available at
www.etrade.com. ETFC-E
Important Notices
E*TRADE, E*TRADE Financial, E*TRADE Bank, the Converging Arrows
logo and OptionsHouse are registered trademarks of E*TRADE
Financial Corporation in the United States and in other
countries.
Forward-Looking Statements
The statements contained in this news release that are forward
looking, including statements regarding the Company’s ability to
execute on its business growth plans, successfully integrate
OptionsHouse, reinvigorate its brand, or deliver additional value
for shareholders and customers are “forward-looking statements”
within the meaning of the federal securities laws, and are subject
to a number of uncertainties and risks. Actual results may differ
materially from those indicated in the forward-looking statements.
The uncertainties and risks include, but are not limited to, macro
trends of the economy in general, market volatility and its impact
on trading volumes, fluctuations in interest rates, the ability to
attract and retain customers and develop new products and services,
increased competition, potential system disruptions and security
breaches, the ability to realize synergies or to implement
integration plans and other risks from mergers and acquisitions,
increased restrictions resulting from financial regulatory reform
or changes in the policies of our regulators, adverse developments
in litigation or regulatory matters, and the other factors set
forth in our annual, quarterly, and current reports on Form 10-K,
Form 10-Q, and Form 8-K previously filed 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,
except as required by law.
© 2017 E*TRADE Financial Corporation. All rights reserved.
Financial Statements E*TRADE FINANCIAL
CORPORATION AND SUBSIDIARIES Consolidated Statement of
Income (In millions, except share data and per share
amounts) (Unaudited) Three Months Ended
March 31, December 31, March 31,
2017 2016 2016 Revenue: Interest income $ 341
$ 310 $ 308 Interest expense (22 ) (22 ) (21 ) Net interest income
319 288 287 Commissions 127 122 107 Fees and
service charges 86 80 58 Gains on securities and other, net 10 8 10
Other revenue 11 11 10 Total non-interest
income 234 221 185 Total net revenue 553
509 472 Provision (benefit) for loan losses
(14 ) (18 ) (34 ) Non-interest expense: Compensation and benefits
136 127 126 Advertising and market development 43 31 43 Clearing
and servicing 32 30 24 Professional services 22 27 22 Occupancy and
equipment 27 27 23 Communications 25 22 23 Depreciation and
amortization 20 19 20 FDIC insurance premiums 8 7 6 Amortization of
other intangibles 9 8 5 Restructuring and acquisition-related
activities 4 7 2 Other non-interest expenses 16 17 18
Total non-interest expense 342 322 312
Income before income tax expense 225 205 194 Income tax expense 80
78 41 Net income $ 145 $ 127 $ 153 Preferred
stock dividends 13 — — Net income available to
common shareholders $ 132 $ 127 $ 153
Basic earnings per common share $ 0.48 $ 0.46 $ 0.54 Diluted
earnings per common share $ 0.48 $ 0.46 $ 0.53 Shares used in
computation of per common share data: Basic (in thousands) 274,876
274,585 285,274 Diluted (in thousands) 276,277 275,840 286,680
E*TRADE FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheet (In millions, except share
data) (Unaudited) March 31,
December 31, March 31, 2017 2016
2016 ASSETS Cash and equivalents $ 998 $ 1,950 $
1,627 Cash required to be segregated under federal or other
regulations 1,876 1,460 2,158 Available-for-sale securities 17,769
13,892 14,005 Held-to-maturity securities 19,191 15,751 14,968
Margin receivables 6,906 6,731 6,336 Loans receivable, net 3,288
3,551 4,360 Receivables from brokers, dealers and clearing
organizations 1,410 1,056 611 Property and equipment, net 239 239
232 Goodwill 2,370 2,370 1,792 Other intangibles, net 312 320 169
Deferred tax assets, net 653 756 940 Other assets 867 923
745 Total assets $ 55,879 $ 48,999 $
47,943
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities: Deposits $ 37,384 $ 31,682 $ 31,829 Customer
payables 8,926 8,159 6,793 Payables to brokers, dealers and
clearing organizations 1,288 983 1,437 Other borrowings 409 409 409
Corporate debt 991 994 993 Other liabilities 437 500
745 Total liabilities 49,435 42,727 42,206
Shareholders' equity: Preferred stock, $0.01
par value; $1,000 liquidation preference; shares authorized:
1,000,000; shares issued and outstanding at March 31, 2017: 400,000
394 394 — Common stock, $0.01 par value; shares authorized:
400,000,000; shares issued and outstanding
at March 31,2017: 275,006,536
3 3 3 Additional paid-in-capital 6,919 6,921 7,056 Accumulated
deficit (774 ) (909 ) (1,308 ) Accumulated other comprehensive loss
(98 ) (137 ) (14 ) Total shareholders' equity 6,444 6,272
5,737 Total liabilities and shareholders' equity $
55,879 $ 48,999 $ 47,943
Key Performance Metrics(3)
Corporate
Qtrended3/31/17
Qtrended12/31/16
Qtrended3/31/17
vs. 12/31/16
Qtrended3/31/16
Qtr ended3/31/17 vs.
3/31/16
Operating margin %(1) 41% 40% 1% 41% —% Adjusted operating
margin %(1) 38% 37% 1% 34% 4% Employees 3,629 3,601 1% 3,498
4% Consultants and other 114 134 (15)% 107 7% Total headcount 3,743
3,735 —% 3,605 4% Common equity book value per share(4) $
22.00 $ 21.46 3% $ 20.52 7% Tangible common equity book value per
share(4) $ 14.36 $ 13.71 5% $ 15.10 (5)% Cash and
equivalents ($MM) $ 998 $ 1,950 (49)% $ 1,627 (39)% Corporate cash
($MM)(5) $ 417 $ 461 (10)% $ 482 (13)% Net interest margin
(basis points) 263 260 —% 281 (0.2)% Interest-earning assets,
average ($MM) $ 48,654 $ 44,260 10% $ 40,892 19%
Customer
Activity
Qtrended3/31/17
Qtrended12/31/16
Qtrended3/31/17
vs. 12/31/16
Qtrended3/31/16
Qtr ended3/31/17 vs.
3/31/16
Trading days 62.0 62.5 N.M. 61.0 N.M. DARTs 207,221
187,620 10% 165,122 25% Derivative DARTs % 29% 29% —% 24% 5%
Total trades (MM) 12.8 11.7 9% 10.1 27% Average commission per
trade $ 9.87 $ 10.42 (5)% $ 10.64 (7)%
Key Performance Metrics(3)
Customer
Activity
Qtr ended3/31/17
Qtr ended12/31/16
Qtr
ended3/31/17vs.12/31/16
Qtr ended3/31/16
Qtr
ended3/31/17vs.3/31/16
Gross new brokerage accounts 137,854 102,137 35% 103,508 33%
Gross new stock plan accounts 57,919 64,397 (10)% 60,250 (4)% Gross
new banking accounts 880 843 4% 1,070 (18)% Closed accounts
(136,666) (149,687) N.M. (112,294) N.M. Net new accounts 59,987
17,690 N.M. 52,534 N.M. Net new brokerage accounts 58,215
24,028 N.M. 40,459 N.M. Net new stock plan accounts 5,478 1,639
N.M. 16,412 N.M. Net new banking accounts (3,706) (7,977) N.M.
(4,337) N.M. Net new accounts 59,987 17,690 N.M. 52,534 N.M.
End of period brokerage accounts 3,521,218 3,463,003 2% 3,254,000
8% End of period stock plan accounts 1,461,538 1,456,060 —%
1,424,565 3% End of period banking accounts 312,967 316,673 (1)%
335,551 (7)% End of period total accounts 5,295,723 5,235,736 1%
5,014,116 6% Annualized net new brokerage account growth
rate 6.7% 2.8% 3.9% 5.0% 1.7% Annualized brokerage account
attrition rate(6) 9.2% 9.1% N.M. 7.8% N.M. Customer margin
balances(2) ($B) $ 7.3 $ 7.1 3% $ 6.3 16%
Customer
Assets($B)
Security holdings $ 243.8 $ 224.4 9% $ 205.6 19% Sweep deposits
32.0 26.4 21% 26.4 21% Customer cash held by third parties(7) 12.6
16.8 (25)% 9.4 34% Customer payables (cash) 8.9 8.2 9% 6.8 31%
Brokerage customer assets 297.3 275.8 8% 248.2 20% Unexercised
stock plan holdings (vested) 33.0 30.2 9% 30.9 7% Savings, checking
and other banking assets 5.4 5.3 2% 5.4 —% Total customer assets $
335.7 $ 311.3 8% $ 284.5 18% Net new brokerage assets(8) $
4.2 $ 3.2 N.M. $ 2.9 N.M. Net new banking assets(8) 0.1 0.1 N.M. —
N.M. Net new customer assets(8) $ 4.3 $ 3.3 N.M. $ 2.9 N.M.
Annualized net new brokerage asset growth rate 6.1% 4.7% 1.4% 4.7%
1.4% Brokerage related cash $ 53.5 $ 51.4 4% $ 42.6 26%
Other cash and deposits 5.4 5.3 2% 5.4 —% Total customer cash and
deposits $ 58.9 $ 56.7 4% $ 48.0 23% Managed products $ 4.3
$ 3.9 10% $ 3.3 30% Stock plan customer holdings (unvested) $ 82.7
$ 73.2 13% $ 65.5 26% Customer net (buy) / sell activity $
(1.6) $ 0.8 N.M. $ (1.2) N.M.
Key Performance Metrics(3)
Loans
Qtr ended3/31/17
Qtr ended12/31/16
Qtr
ended3/31/17vs.12/31/16
Qtr ended3/31/16
Qtr
ended3/31/17vs.3/31/16
Loans receivable
($MM)
One- to Four-Family $ 1,785 $ 1,918 $ (133) $ 2,337 $ (552) Home
Equity 1,275 1,385 (110) 1,709 (434) Consumer 228 248 (20) 314 (86)
Loans receivable, net $ 3,288 $ 3,551 $ (263) $ 4,360 $ (1,072)
Loan servicing expense $ 6 $ 6 $ — $ 7 $ (1)
Loan performance
detail ($MM)
Current $ 3,190 $ 3,477 $ (287) $ 4,331 $ (1,141) 30-89 days
delinquent 131 114 17 131 — 90-179 days delinquent 46 42 4 57 (11)
180+ days delinquent 134 139 (5) 163 (29) Total delinquent loans
311 295 16 351 (40) Gross loans receivable(9) $ 3,501 $ 3,772 $
(271) $ 4,682 $ (1,181)
Activity in
Allowance for Loan Losses Three Months Ended March
31, 2017
One- to Four-Family
Home Equity
Consumer Total (In millions) Allowance for loan
losses, ending 12/31/16 $ 45 $ 171 $ 5 $ 221 Provision (benefit)
for loan losses — (15 ) 1 (14 ) (Charge-offs) recoveries, net 1
6 (1 ) 6 Allowance for loan losses, ending
3/31/17 $ 46 $ 162 $ 5 $ 213
Three Months Ended December 31, 2016
One- to Four-Family
Home Equity Consumer Total (In millions)
Allowance for loan losses, ending 9/30/16 $ 47 $ 183 $ 5 $ 235
Provision (benefit) for loan losses (4 ) (14 ) — (18 )
(Charge-offs) recoveries, net 2 2 — 4
Allowance for loan losses, ending 12/31/16 $ 45 $ 171
$ 5 $ 221
Three Months Ended March 31,
2016
One- to Four-Family
Home Equity Consumer Total (In millions)
Allowance for loan losses, ending 12/31/15 $ 40 $ 307 $ 6 $ 353
Provision (benefit) for loan losses 8 (42 ) — (34 ) (Charge-offs)
recoveries, net 1 2 — 3 Allowance for
loan losses, ending 3/31/16 $ 49 $ 267 $ 6 $
322
Capital
Qtr ended3/31/17
Qtr ended12/31/16
Qtr ended3/31/17 vs.
12/31/16
Qtr ended3/31/16
Qtr ended3/31/17 vs.
3/31/16
E*TRADE
Financial
Tier 1 leverage ratio(10) 7.2% 7.8% (0.6)% 7.8% (0.6)% Common
Equity Tier 1 capital ratio(10) 33.0% 37.0% (4.0)% 34.5% (1.5)%
Tier 1 risk-based capital ratio(10) 35.4% 38.3% (2.9)% 34.5% 0.9%
Total risk-based capital ratio(10) 40.7% 44.0% (3.3)% 40.0% 0.7%
E*TRADE
Bank
Tier 1 leverage ratio(11) 8.1% 8.8% (0.7)% 8.6% (0.5)% Common
Equity Tier 1 capital ratio(11) 35.0% 38.3% (3.3)% 33.3% 1.7% Tier
1 risk-based capital ratio(11) 35.0% 38.3% (3.3)% 33.3% 1.7% Total
risk-based capital ratio(11) 36.3% 39.5% (3.2)% 34.6% 1.7%
Average Balance Sheet
Data Three Months Ended March 31, 2017
December 31, 2016 Average Interest
Average Average Interest Average
Balance Inc./Exp. Yield/Cost Balance
Inc./Exp. Yield/Cost Cash and equivalents $ 1,345 $ 2
0.64% $ 1,610 $ 2 0.47% Cash required to be segregated under
federal or other regulations 1,684 3 0.71% 1,590 2 0.44%
Available-for-sale securities 16,586 85 2.05% 13,612 68 2.01%
Held-to-maturity securities 17,531 120 2.74% 15,884 106 2.68%
Margin receivables 6,781 66 3.93% 6,711 64 3.76% Loans 3,608 43
4.77% 3,892 45 4.59% Broker-related receivables and other 1,119
— 0.12% 961 — 0.08% Subtotal
interest-earning assets 48,654 319 2.63% 44,260 287 2.59% Other
interest revenue(a) — 22 — 23 Total
interest-earning assets 48,654 341 2.81% 44,260 310
2.79% Total non-interest earning assets 5,252 4,816
Total assets $ 53,906 $ 49,076 Deposits $
34,869 $ 1 0.01% $ 31,601 $ — 0.01% Customer payables 8,686 1 0.06%
7,915 1 0.06% Broker-related payables and other 1,160 — 0.00% 1,093
— 0.00% Other borrowings 492 5 3.85% 411 5 4.30% Corporate debt 994
14 5.39% 994 14 5.47% Subtotal
interest-bearing liabilities 46,201 21 0.18% 42,014 20 0.19% Other
interest expense(b) — 1 — 2 Total
interest-bearing liabilities 46,201 22 0.19% 42,014 22
0.21% Total non-interest-bearing liabilities 1,402
723 Total liabilities 47,603 42,737 Total shareholders'
equity 6,303 6,339 Total liabilities and
shareholders' equity $ 53,906 $ 49,076
Excess interest earning assets over
interestbearing liabilities/ net interest income/ net interest
margin
$ 2,453 $ 319 2.63% $ 2,246 $ 288 2.60%
(a) Represents interest revenue on securities loaned
for the periods presented. (b) Represents interest expense on
securities borrowed for the periods presented.
Three Months Ended March 31, 2016 Average
Interest Average Balance
Inc./Exp. Yield/Cost Cash and equivalents $ 1,611 $ 2
0.41% Cash required to be segregated under federal or other
regulations 1,133 1 0.32% Available-for-sale securities 12,642 64
2.03% Held-to-maturity securities 13,676 103 3.01% Margin
receivables 6,677 64 3.89% Loans 4,804 51 4.23% Broker-related
receivables and other 349 — 0.29% Subtotal
interest-earning assets 40,892 285 2.79% Other interest revenue(a)
— 23 Total interest-earning assets 40,892 308
3.01% Total non-interest-earning assets 4,921 Total assets $
45,813 Deposits $ 29,567 $ 1 0.01% Customer payables
6,452 1 0.07% Broker-related payables and other 1,450 — 0.00% Other
borrowings 436 5 4.13% Corporate debt 995 13 5.39%
Subtotal interest-bearing liabilities 38,900 20 0.21% Other
interest expense(b) — 1 Total interest-bearing
liabilities 38,900 21 0.21% Total non-interest-bearing
liabilities 1,189 Total liabilities 40,089 Total
shareholders' equity 5,724 Total liabilities and
shareholders' equity $ 45,813
Excess interest earning assets over
interest bearing liabilities/ net interestincome/ net interest
margin
$ 1,992 $ 287 2.81% (a) Represents
interest revenue on securities loaned for the periods presented.
(b) Represents interest expense on securities borrowed for the
periods presented.
Explanation of Non-GAAP Measures
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 this non-GAAP information internally to evaluate operating
performance and in formulating the budget for future periods.
Management believes that the non-GAAP measures discussed below are
appropriate for evaluating the operating and liquidity performance
of the Company.
Adjusted Operating Margin
Adjusted operating margin is calculated by dividing adjusted
income before income taxes by net revenue. Adjusted income before
income taxes excludes the provision (benefit) for loan losses.
Management believes that excluding the provision (benefit) for loan
losses from operating margin provides a useful measure of the
Company's ongoing operating performance because management excludes
it when evaluating operating margin performance. See endnote (1)
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, not including bank and
broker-dealer subsidiaries, that can distribute cash to the parent
company without any regulatory approval or notification. 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 endnote (5) for a reconciliation of this non-GAAP measure to
the comparable GAAP measure.
Tangible Common Equity Book Value per Share
Tangible common equity book value per share represents common
shareholders’ equity, which excludes preferred stock, less goodwill
and other intangible assets (net of related deferred tax
liabilities) divided by common stock outstanding. The Company
believes that tangible common equity book value per share is a
measure of the Company’s capital strength. See endnote (4) for a
reconciliation of this non-GAAP measure to the comparable GAAP
measure.
It is important to note that these non-GAAP measures may involve
judgment by management and should be considered in addition to, not
as substitutes for, or superior to, measures 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 Financial Condition
and Results of Operations” 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) Operating margin is the percentage of net revenue that
results in income before income taxes. The percentage is calculated
by dividing income before income taxes by total net revenue. The
following table provides a reconciliation of GAAP operating margin
percentage to non-GAAP adjusted operating margin percentage
(dollars in millions):
Q1 2017 Q4 2016 Q1 2016
Amount
OperatingMargin %
Amount
OperatingMargin %
Amount
OperatingMargin %
Income before income tax expense and operating margin $ 225
41% $ 205 40% $ 194 41% Provision (benefit) for loan losses (14 )
(18 ) (34 ) Adjusted income before income tax
expense / adjusted operating margin $ 211 38% $ 187
37% $ 160 34%
(2) Customer margin balances include the following (dollars in
billions):
Q1 2017 Q4 2016 Q1 2016
Margin receivables held on balance sheet $ 6.9 $ 6.7 $ 6.3 Customer
margin balances held by a third party clearing firm(a) 0.4
0.4 — Total customer margin balances $ 7.3 $ 7.1
$ 6.3 (a) Represents OptionsHouse's customer
margin receivables held by a third party clearing firm.
(3) Amounts and percentages may not recalculate due to
rounding.
(4) The following table provides a reconciliation of GAAP common
equity book value and common equity book value per share to
non-GAAP tangible common equity book value and tangible common
equity book value per share at period end (dollars in millions,
except per share amounts):
Q1 2017 Q4 2016 Q1 2016
Amount
PerShare
Amount
PerShare
Amount
PerShare
Common equity book value $ 6,050 $ 22.00 $ 5,878 $ 21.46 $ 5,737 $
20.52 Less: Goodwill and other intangibles, net (2,682 ) (2,690 )
(1,961 ) Add: Deferred tax liabilities related to goodwill and
other intangibles, net 580 569 467
Tangible common equity book value $ 3,948 $
14.36 $ 3,757 $ 13.71 $ 4,243 $ 15.18
(5) The following table provides a reconciliation of GAAP
consolidated cash and equivalents to non-GAAP corporate cash at
period end (dollars in millions):
Q1 2017 Q4 2016 Q1 2016
Consolidated cash and equivalents $ 998 $ 1,950 $ 1,627 Less: Bank
cash (115 ) (840 ) (680 ) Less: U.S. broker-dealers' cash (433 )
(614 ) (440 ) Less: Other (33 ) (35 ) (25 ) Corporate cash $ 417
$ 461 $ 482
(6) The brokerage account attrition rate is calculated by
dividing attriting brokerage accounts by total brokerage accounts
at the previous period end, and is presented on an annualized
basis. Attriting brokerage accounts are derived by subtracting net
new brokerage accounts from gross new brokerage accounts.
(7) Customer cash held by third parties is held outside E*TRADE
Financial and includes money market funds and sweep deposit
accounts at unaffiliated financial institutions and customer cash
held by a third party clearing firm. Customer cash held by third
parties is not reflected in the Company’s consolidated balance
sheet and is not immediately available for liquidity purposes. The
following table provides details of customer cash held by third
parties (dollars in billions):
Q1 2017 Q4 2016 Q1 2016
Sweep deposits at unaffiliated financial institutions $ 10.6 $ 14.9
$ 5.6 Customer cash held by a third party clearing firm(a) 1.7 1.6
— Municipal funds and other 0.3 0.3 3.6 Money market fund —
— 0.2 Total customer cash held by third parties $ 12.6
$ 16.8 $ 9.4 (a) Represents
OptionsHouse's customer cash held by a third party clearing firm.
(8) 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.
(9) Includes unpaid principal balances and premiums
(discounts).
(10) E*TRADE Financial’s capital ratios are calculated as
follows and are preliminary for the current period (dollars in
millions):
Q1 2017 Q4 2016 Q1 2016
E*TRADE Financial shareholders' equity $ 6,444 $ 6,272 $ 5,737
DEDUCT: Preferred stock (394 ) (394 ) — E*TRADE Financial
Common Equity Tier 1 capital before regulatory adjustments $ 6,050
$ 5,878 $ 5,737 ADD: (Gains) losses in other
comprehensive income on available-for-sale debt securities, net of
tax 98 139 17 DEDUCT: Goodwill and other intangible assets, net of
deferred tax liabilities (2,058 ) (2,029 ) (1,435 ) Disallowed
deferred tax assets (638 ) (505 ) (909 ) E*TRADE Financial Common
Equity Tier 1 capital $ 3,452 $ 3,483 $ 3,410
ADD: Preferred stock 394 394 — DEDUCT: Disallowed deferred tax
assets (136 ) (267 ) — E*TRADE Financial Tier 1 capital $
3,710 $ 3,610 $ 3,410 ADD: Allowable allowance
for loan losses 135 124 131 Non-qualifying capital instruments
subject to phase-out (trust preferred securities) 414 414
414 E*TRADE Financial total capital $ 4,259 $
4,148 $ 3,955 E*TRADE Financial average assets
for leverage capital purposes $ 54,032 $ 49,113 $ 45,886 DEDUCT:
Goodwill and other intangible assets, net of deferred tax
liabilities (2,058 ) (2,029 ) (1,435 ) Disallowed deferred tax
assets (774 ) (772 ) (909 ) Other — — E*TRADE
Financial adjusted average assets for leverage capital purposes $
51,200 $ 46,312 $ 43,542 E*TRADE
Financial total risk-weighted assets(a) $ 10,466 $ 9,422 $ 9,882
E*TRADE Financial Tier 1 leverage ratio (Tier 1 capital /
Adjusted average assets for leverage capital purposes) 7.2 % 7.8 %
7.8 % E*TRADE Financial Common Equity Tier 1 capital / Total
risk-weighted assets 33.0 % 37.0 % 34.5 % E*TRADE Financial Tier 1
capital / Total risk-weighted assets 35.4 % 38.3 % 34.5 % E*TRADE
Financial total capital / Total risk-weighted assets 40.7 % 44.0 %
40.0 % (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.
(11) E*TRADE Bank’s capital ratios are calculated as follows and
are preliminary for the current period (dollars in millions):
Q1 2017 Q4 2016 Q1 2016
E*TRADE Bank shareholder's equity $ 3,291 $ 3,153 $ 3,126 ADD:
(Gains) losses in other comprehensive income on available-for-sale
debt securities, net of tax 98 139 17 DEDUCT: Goodwill and other
intangible assets, net of deferred tax liabilities (38 ) (38 ) (38
) Disallowed deferred tax assets (100 ) (122 ) (209 ) E*TRADE Bank
Common Equity Tier 1 capital / Tier 1 capital $ 3,251 $
3,132 $ 2,896 ADD: Allowable allowance for loan
losses 118 105 113 E*TRADE Bank total capital
$ 3,369 $ 3,237 $ 3,009 E*TRADE Bank
average assets for leverage capital purposes $ 40,501 $ 35,885 $
34,073 DEDUCT: Goodwill and other intangible assets, net of
deferred tax liabilities (38 ) (38 ) (38 ) Disallowed deferred tax
assets (100 ) (122 ) (209 ) E*TRADE Bank adjusted average assets
for leverage capital purposes $ 40,363 $ 35,725 $
33,826 E*TRADE Bank total risk-weighted assets(a) $
9,280 $ 8,187 $ 8,695 E*TRADE Bank Tier 1 leverage ratio
(Tier 1 capital / Adjusted average assets for leverage capital
purposes) 8.1 % 8.8 % 8.6 % E*TRADE Bank Common Equity Tier 1
capital / Total risk-weighted assets 35.0 % 38.3 % 33.3 % E*TRADE
Bank Tier 1 capital / Total risk-weighted assets 35.0 % 38.3 % 33.3
% E*TRADE Bank total capital / Total risk-weighted assets 36.3 %
39.5 % 34.6 % (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.
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version on businesswire.com: http://www.businesswire.com/news/home/20170420006287/en/
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