ETFC E TRADE Financial Corporation

E*TRADE Financial Corporation (NASDAQ: ETFC):

First Quarter Results

• Net income of $247 million; net income available to common shareholders of $235 million
• Diluted earnings per common share of $0.88
• Total net revenue of $708 million
• Operating margin of 47 percent; adjusted operating margin of 44 percent(1)
• Average interest-earning assets of $59.8 billion; net interest margin of 297 basis points
• Daily Average Revenue Trades (DARTs) of 309,000, a Company record(2), including derivative DARTs of 98,000, a Company record(2)
• Customer margin balances of $10.5 billion, a Company record(2)
• Net new brokerage accounts of 60,000
• Net new brokerage assets of $5.3 billion, a Company record(2); end of period total customer assets of $392.8 billion
• Managed products of $5.6 billion
• Repurchased 2.7 million shares at an average price of $52.12, bringing total utilization under the Company's $1 billion program to $502 million

E*TRADE Financial Corporation (NASDAQ: ETFC) today announced results for its first quarter ended March 31, 2018, reporting net income of $247 million, or diluted earnings per common share of $0.88 and total net revenue of $708 million. Operating margin for the quarter was 47 percent and adjusted operating margin was 44 percent(1).

“This was yet another quarter defined by meaningful progress in the business and excellent financial results, as we produced the strongest quarterly revenues and adjusted operating margin in Company history.” said Karl Roessner, Chief Executive Officer. “Amid volatility’s return to the market, our customers fully engaged, setting records across trading, margin balances, net asset flows, and net buying, and our teams and systems ably managed the significant increase in activity. Meanwhile, we remained steadfast in our drive to innovate—rolling out a series of enhancements to our trading tools, corporate services platform, and retail site. With our continued strong results, and the team’s determination to win, we raise the bar on our own performance, and remain focused on delivering an exceptional experience for our customers and driving value for 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) 753 4387 while international participants should dial +1 (212) 231 2937. 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 brokerage and banking products and services to retail customers. Securities products and services are offered by E*TRADE Securities LLC (Member FINRA/SIPC). Commodity futures and options on futures products and services are offered by E*TRADE Futures LLC (Member NFA). Managed Account Solutions are offered through E*TRADE Capital Management, LLC, a Registered Investment Adviser. Bank products and services are offered by E*TRADE Bank, and RIA custody solutions are offered by E*TRADE Savings Bank, both of which are national federal savings banks (Members FDIC). More information is available at www.etrade.com. ETFC-E

Important Notices

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

Forward-Looking Statements

The statements contained in this press release that are forward looking, including statements regarding the Company's ability to improve its financial performance, deliver quality services to customers, and drive value for shareholders, 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: risks related to the proposed transaction with Capital One Financial Corporation, including that the closing of the transaction may not occur or may be delayed and that the actual aggregate consideration paid in connection with the proposed transaction with Capital One Financial Corporation is still subject to final determination; 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; increased restrictions resulting from financial regulatory reform or changes in the policies of our regulators; adverse developments in litigation or regulatory matters; the timing and duration of, and the amount of shares repurchased and amount of cash expended in connection with, the share repurchase program; 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.

© 2018 E*TRADE Financial Corporation. All rights reserved.

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, 2018 2017 2017 Revenue: Interest income $ 468 $ 439 $ 341 Interest expense (23 ) (20 ) (22 ) Net interest income(3) 445   419   319   Commissions 137 109 127 Fees and service charges 105 93 86 Gains on securities and other, net(3) 10 5 10 Other revenue 11   11   11   Total non-interest income 263   218   234   Total net revenue 708   637   553   Provision (benefit) for loan losses (21 ) (26 ) (14 ) Non-interest expense: Compensation and benefits 152 138 136 Advertising and market development 60 43 43 Clearing and servicing 36 30 32 Professional services 22 28 22 Occupancy and equipment 30 32 27 Communications 31 31 25 Depreciation and amortization 22 22 20 FDIC insurance premiums 9 7 8 Amortization of other intangibles 10 9 9 Restructuring and acquisition-related activities — 3 4 Other non-interest expenses 23   21   16   Total non-interest expense 395   364   342   Income before income tax expense 334 299 225 Income tax expense 87   170   80   Net income $ 247 $ 129 $ 145 Preferred stock dividends 12   —   13   Net income available to common shareholders $ 235   $ 129   $ 132     Basic earnings per common share $ 0.88 $ 0.48 $ 0.48 Diluted earnings per common share $ 0.88 $ 0.48 $ 0.48 Shares used in computation of per common share data: Basic (in thousands) 266,558 269,111 274,876 Diluted (in thousands) 267,699 270,347 276,277     E*TRADE FINANCIAL CORPORATION AND SUBSIDIARIES Consolidated Balance Sheet (In millions, except share data) (Unaudited)             March 31, December 31, March 31, 2018 2017 2017 ASSETS Cash and equivalents $ 498 $ 931 $ 998

Cash required to be segregated under federal or otherregulations

472 872 1,876 Available-for-sale securities 24,835 20,679 17,769 Held-to-maturity securities 20,657 23,839 19,191 Margin receivables 10,515 9,071 6,906 Loans receivable, net 2,506 2,654 3,288

Receivables from brokers, dealers and clearingorganizations

735 1,178 1,410 Property and equipment, net 251 253 239 Goodwill 2,370 2,370 2,370 Other intangibles, net 275 284 312 Other assets(3) 1,073   1,234   1,520   Total assets $ 64,187   $ 63,365   $ 55,879     LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Deposits $ 42,902 $ 42,742 $ 37,384 Customer payables 8,947 9,449 8,926 Payables to brokers, dealers and clearing organizations 2,892 1,542 1,288 Other borrowings 910 910 409 Corporate debt 992 991 991 Other liabilities 655   800   437   Total liabilities 57,298   56,434   49,435     Shareholders' equity:

Preferred stock, $0.01 par value; shares authorized:1,000,000; shares issued and outstanding at March 31,2018: 403,000

689 689 394

Common stock, $0.01 par value; shares authorized:400,000,000; shares issued and outstanding at March 31,2018: 264,792,847

3 3 3 Additional paid-in-capital 6,434 6,582 6,919 Accumulated deficit (61 ) (317 ) (774 ) Accumulated other comprehensive loss (176 ) (26 ) (98 ) Total shareholders' equity 6,889   6,931   6,444   Total liabilities and shareholders' equity $ 64,187   $ 63,365   $ 55,879       Key Performance Metrics(4)          

Corporate

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  Operating margin %(1) 47 % 47 % —% 41% 6% Adjusted operating margin %(1) 44 % 43 % 1% 38% 6%   Employees 3,768 3,607 4% 3,629 4% Consultants and other 136   107   27% 114 19% Total headcount 3,904 3,714 5% 3,743 4%   Common equity book value per share(5) $ 23.41 $ 23.39 —% $ 22.00 6% Tangible common equity book value per share(5) $ 15.03 $ 14.96 —% $ 14.36 5%   Cash and equivalents ($MM) $ 498 $ 931 (47)% $ 998 (50)% Corporate cash ($MM)(6) $ 439 $ 541 (19)% $ 417 5%   Net interest margin (basis points) 297 292 5 263 34 Interest-earning assets, average ($MM) $ 59,837 $ 57,357 4% $ 48,654 23%  

Customer Activity

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  Trading days 61.0 62.5 N.M. 62.0 N.M.   DARTs 309,469 235,941 31% 207,221 49% Derivative DARTs 97,658 69,448 41% 59,078 65% Derivative DARTs % 32 % 29 % 3% 29% 3%   Total trades (MM) 18.9 14.7 29% 12.8 48% Average commission per trade $ 7.27 $ 7.41 (2)% $ 9.87 (26)%     Key Performance Metrics(4)          

Customer Activity

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  Gross new brokerage accounts 161,042 133,031 21% 137,854 17% Gross new stock plan accounts 93,690 65,004 44% 57,919 62% Gross new banking accounts 1,179 924 28% 880 34% Closed accounts (160,041 ) (140,920 ) 14% (136,666 ) 17% Net new accounts 95,870 58,039 65% 59,987 60%   Net new brokerage accounts 59,685 46,195 29% 58,215 3% Net new stock plan accounts 39,953 17,130 133% 5,478 N.M. Net new banking accounts (3,768 ) (5,286 ) 29% (3,706 ) (2)% Net new accounts 95,870 58,039 65% 59,987 60%   End of period brokerage accounts 3,694,594 3,634,909 2% 3,521,218 5% End of period stock plan accounts 1,532,329 1,492,376 3% 1,461,538 5% End of period banking accounts 295,081   298,849   (1)% 312,967   (6)% End of period total accounts 5,522,004 5,426,134 2% 5,295,723 4%  

Annualized net new brokerage accountgrowth rate

6.6 % 5.1 % 1.5% 6.7 % (0.1)%   Customer margin balances(7) ($B) $ 10.5 $ 9.1 15% $ 7.3 44%  

Customer Assets($B)

Security holdings $ 296.0 $ 287.3 3% $ 243.8 21% Sweep deposits 38.0 37.7 1% 32.0 19% Customer cash held by third parties(8) 5.0 5.7 (12)% 12.6 (60)% Customer payables (cash) 8.9   9.5   (6)% 8.9   —% Brokerage customer assets 347.9   340.2   2% 297.3   17% Unexercised stock plan holdings (vested) 39.9 38.1 5% 33.0 21% Savings, checking and other banking assets 5.0   5.0   —% 5.4   (7)% Total customer assets $ 392.8   $ 383.3   2% $ 335.7   17%   Net new brokerage assets(9) $ 5.3 $ 3.2 66% $ 4.2 26% Net new banking assets(9) —   —   —% 0.1   (100)% Net new customer assets $ 5.3 $ 3.2 66% $ 4.3 23%  

Annualized net new brokerage asset growthrate

6.3 % 3.9 % 2.4% 6.1 % 0.2%   Brokerage related cash $ 51.9 $ 52.9 (2)% $ 53.5 (3)% Other cash and deposits 5.0   5.0   —% 5.4   (7)% Total customer cash and deposits $ 56.9 $ 57.9 (2)% $ 58.9 (3)%   Managed products $ 5.6 $ 5.4 4% $ 4.3 30% Stock plan customer holdings (unvested) $ 95.3 $ 93.9 1% $ 82.7 15%   Customer net (buy) / sell activity $ (6.9 ) $ (2.3 ) N.M. $ (1.6 ) N.M.     Key Performance Metrics(4)          

Loans

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Loans receivable ($MM)

One- to four-family $ 1,327 $ 1,417 $ (90 ) $ 1,785 $ (458 ) Home equity 991 1,051 (60 ) 1,275 (284 ) Consumer and other 188   186   2   228   (40 ) Loans receivable, net $ 2,506   $ 2,654   $ (148 ) $ 3,288   $ (782 )   Loan servicing expense $ 5 6 (1 ) 6 (1 )  

Loan performance detail ($MM)

Current $ 2,335 $ 2,479 $ (144 ) $ 3,190 $ (855 ) 30-89 days delinquent 93 98 (5 ) 131 (38 ) 90-179 days delinquent 33 37 (4 ) 46 (13 ) 180+ days delinquent 103   114   (11 ) 134   (31 ) Total delinquent loans 229   249   (20 ) 311   (82 ) Gross loans receivable(10) $ 2,564   $ 2,728   $ (164 ) $ 3,501   $ (937 )     Activity in Allowance for Loan Losses       ($MM)   Three Months Ended March 31, 2018

One- to Four-Family

Home Equity

Consumerand Other

Total Allowance for loan losses, ending 12/31/17 $ 24 $ 46 $ 4 $ 74 Provision (benefit) for loan losses (5 ) (16 ) — (21 ) (Charge-offs) recoveries, net 1   5   (1 ) 5   Allowance for loan losses, ending 3/31/18 $ 20   $ 35   $ 3   $ 58     Three Months Ended December 31, 2017

One- to Four-Family

Home Equity

Consumerand Other

Total Allowance for loan losses, ending 9/30/17 $ 21 $ 69 $ 4 $ 94 Provision (benefit) for loan losses 1 (28 ) 1 (26 ) (Charge-offs) recoveries, net 2   5   (1 ) 6   Allowance for loan losses, ending 12/31/17 $ 24   $ 46   $ 4   $ 74     Three Months Ended March 31, 2017

One- to Four-Family

Home Equity

Consumerand Other

Total 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       Capital  

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E*TRADE Financial

Tier 1 leverage ratio(11) 7.3% 7.4% (0.1)% 7.2% 0.1% Common Equity Tier 1 capital ratio(11) 35.0% 33.9% 1.1% 33.0% 2.0% Tier 1 risk-based capital ratio(11) 41.4% 39.5% 1.9% 35.4% 6.0% Total risk-based capital ratio(11) 45.7% 43.8% 1.9% 40.7% 5.0%  

E*TRADE Bank

Tier 1 leverage ratio(12) 7.6% 7.6% —% 8.1% (0.5)% Common Equity Tier 1 capital ratio(12) 37.4% 35.7% 1.7% 35.0% 2.4% Tier 1 risk-based capital ratio(12) 37.4% 35.7% 1.7% 35.0% 2.4% Total risk-based capital ratio(12) 38.0% 36.4% 1.6% 36.3% 1.7%     Average Balance Sheet Data ($MM)   Three Months Ended   March 31, 2018   December 31, 2017 Average   Interest   Average Average   Interest   Average Balance Inc./Exp. Yield/Cost Balance Inc./Exp. Yield/Cost Cash and equivalents $ 803 $ 3 1.42% $ 911 $ 3 1.12%

Cash required to be segregated under federal orother regulations

795 3 1.62% 957 3 1.32% Investment securities(a) 45,194 290 2.57% 42,976 270 2.51% Margin receivables 9,466 103 4.41% 8,724 92 4.22% Loans 2,629 33 5.07% 2,821 36 5.15% Broker-related receivables and other 950   4 1.55% 968 1 0.45% Subtotal interest-earning assets 59,837 436 2.92% 57,357 405 2.82% Other interest revenue(b) —   32 — 34 Total interest-earning assets 59,837 468 3.14% 57,357 439 3.06% Total non-interest earning assets 4,787   4,686 Total assets $ 64,624   $ 62,043   Deposits $ 43,178 $ 2 0.02% $ 42,039 $ 1 0.01% Customer payables 9,556 1 0.06% 9,334 1 0.06% Broker-related payables and other 1,566 1 0.20% 1,300 — 0.00% Other borrowings 932 7 3.12% 658 6 3.47% Corporate debt 991   9 3.62% 991 9 3.64% Subtotal interest-bearing liabilities 56,223 20 0.14% 54,322 17 0.13% Other interest expense(c) —   3 — 3 Total interest-bearing liabilities 56,223 23 0.17% 54,322 20 0.15% Total non-interest-bearing liabilities 1,329   1,051 Total liabilities 57,552 55,373 Total shareholders' equity 7,072   6,670 Total liabilities and shareholders' equity $ 64,624   $ 62,043  

Excess interest earning assets over interestbearing liabilities/ net interest income/ net interestmargin

$ 3,614   $ 445 2.97% $ 3,035 $ 419 2.92%     (a)   For the three months ended March 31, 2018, includes a $3 million net loss related to fair value hedging adjustments, previously referred to as hedge ineffectiveness. Hedge ineffectiveness for the prior periods continues to be reflected within the gains on securities and other, net line item. (b) Represents interest income on securities loaned. (c) Represents interest expense on securities borrowed.     Three Months Ended March 31, 2017 Average   Interest   Average Balance Inc./Exp. Yield/Cost Cash and equivalents $ 1,345 $ 2 0.64% Cash required to be segregated under federal or other regulations 1,684 3 0.71% Investment securities 34,117 205 2.41% Margin receivables 6,781 66 3.93% Loans 3,608 43 4.77% Broker-related receivables and other 1,119 — 0.12% Subtotal interest-earning assets 48,654 319 2.63% Other interest revenue(a) — 22 Total interest-earning assets 48,654 341 2.81% Total non-interest-earning assets 5,252 Total assets $ 53,906   Deposits $ 34,869 $ 1 0.01% Customer payables 8,686 1 0.06% Broker-related payables and other 1,160 — 0.00% Other borrowings 492 5 3.85% Corporate debt 994 14 5.39% Subtotal interest-bearing liabilities 46,201 21 0.18% Other interest expense(b) — 1 Total interest-bearing liabilities 46,201 22 0.19% Total non-interest-bearing liabilities 1,402 Total liabilities 47,603 Total shareholders' equity 6,303 Total liabilities and shareholders' equity $ 53,906  

Excess interest earning assets over interest bearing liabilities/ net interestincome/ net interest margin

$ 2,453 $ 319 2.63%     (a)   Represents interest revenue on securities loaned. (b) Represents interest expense on securities borrowed.       Fees and Service Charges ($MM) Three Months Ended March 31, 2018 December 31, 2017 March 31, 2017 Order flow revenue $ 47 $ 37 $ 31 Money market funds and sweep deposits revenue(a) 17 21 22 Mutual fund service fees 11 10 9 Advisor management fees 11 10 8 Foreign exchange revenue 8 6 8 Reorganization fees 3 3 3 Other fees and service charges 8   6   5 Total fees and service charges $ 105   $ 93   $ 86     (a)   Includes revenue earned on average customer cash held by third parties based on the federal funds rate or LIBOR plus a negotiated spread or other contractual arrangements with the third party institutions.

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 brokerage 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 (6) 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 (5) 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 2018   Q4 2017   Q1 2017 Amount  

OperatingMargin %

Amount  

OperatingMargin %

Amount  

OperatingMargin %

 

Income before income tax expense andoperating margin

$ 334 47% $ 299 47% $ 225 41% Provision (benefit) for loan losses (21 ) (26 ) (14 )

Adjusted income before income taxexpense and adjusted operating margin

$ 313   44% $ 273   43% $ 211   38%    

(2) Records based on the period during which metric has been reported by the Company. Net new brokerage assets of $5.3 billion in Q1 2018 is a record for the Company when compared to organic net asset growth from prior quarters, excluding one-time inflows related to past acquisitions. See endnote (9) for additional information on net new brokerage assets.

(3) Beginning in the first quarter of 2018, the Company updated the presentation of its consolidated financial statements as follows:

• On the consolidated balance sheet, reclassified deferred tax assets, net to other assets. Prior periods have been reclassified to conform to current period presentation. Deferred tax assets were $218 million, $251 million and $653 million at March 31, 2018, December 31, 2017 and March 31, 2017, respectively.
• On the consolidated statement of income, fair value hedging adjustments, previously referred to as hedge ineffectiveness, are included within net interest income beginning in the first quarter of 2018. Prior period amounts have not been reclassified to conform to current period presentation and continue to be reflected within gains on securities and other, net for the comparative periods. Fair value hedging adjustments were expenses of $3 million, $9 million and $1 million for the three months ended March 31, 2018, December 31, 2017 and March 31, 2017, respectively.

(4) Amounts and percentages may not recalculate due to rounding. For percentage based metrics, the variance represents the current period less the prior period.

(5) 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 2018   Q4 2017   Q1 2017 Amount  

PerShare

Amount  

PerShare

Amount  

PerShare

Common equity book value $ 6,200 $ 23.41 $ 6,242 $ 23.39 $ 6,050 $ 22.00 Less: Goodwill and other intangibles, net (2,645 ) (2,654 ) (2,682 )

Add: Deferred tax liabilities related togoodwill and other intangibles, net

426     404     580     Tangible common equity book value $ 3,981   $ 15.03 $ 3,992   $ 14.96 $ 3,948   $ 14.36    

(6) The following table provides a reconciliation of GAAP consolidated cash and equivalents to non-GAAP corporate cash at period end (dollars in millions):

  Q1 2018   Q4 2017   Q1 2017 Consolidated cash and equivalents $ 498 $ 931 $ 998 Less: Cash at regulated subsidiaries(a) (59 ) (390 ) (581 ) Corporate cash $ 439   $ 541   $ 417       (a) Reported net of corporate cash on deposit at E*TRADE Bank that is eliminated in consolidation.

(7) Customer margin balances include the following (dollars in billions):

  Q1 2018   Q4 2017   Q1 2017 Margin receivables held on balance sheet $ 10.5 $ 9.1 $ 6.9 Customer margin balances held by a third party clearing firm — — 0.4 Total customer margin balances(a) $ 10.5 $ 9.1 $ 7.3     (a) Represents margin receivables held on the balance sheet and customer margin balances held by a third party clearing firm. The balances held by a third party were transferred to E*TRADE Securities during the three months ended September 30, 2017 in connection with the OptionsHouse integration.

(8) 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 2018   Q4 2017   Q1 2017 Sweep deposits at unaffiliated financial institutions $ 3.4 $ 4.7 $ 10.6 Customer cash held by a third party clearing firm(a) — — 1.7 Money market funds and other 1.6 1.0 0.3 Total customer cash held by third parties $ 5.0 $ 5.7 $ 12.6 (a) During the three months ended September 30, 2017, customer cash held by a third party clearing firm was transferred to E*TRADE Securities in connection with the integration of OptionsHouse.

(9) Net new brokerage assets are total inflows to all new and existing brokerage customer accounts less total outflows from all closed and existing brokerage customer accounts, excluding the effects of market movements in the value of brokerage customer assets. Net new banking assets are total inflows to all new and existing banking customer accounts less total outflows from all closed and existing banking 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.

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

(11) E*TRADE Financial’s capital ratios are calculated as follows and are preliminary for the current period (dollars in millions):

  Q1 2018   Q4 2017   Q1 2017 E*TRADE Financial shareholders' equity $ 6,889 $ 6,931 $ 6,444 DEDUCT: Preferred stock (689 ) (689 ) (394 )

E*TRADE Financial Common Equity Tier 1 capital before regulatoryadjustments

$ 6,200   $ 6,242   $ 6,050   ADD:

(Gains) losses in other comprehensive income on available-for-sale debtsecurities, net of tax

176 26 98 DEDUCT: Goodwill and other intangible assets, net of deferred tax liabilities (2,219 ) (2,191 ) (2,058 ) Disallowed deferred tax assets (353 ) (304 ) (638 ) E*TRADE Financial Common Equity Tier 1 capital $ 3,804   $ 3,773   $ 3,452   ADD: Preferred stock 689 689 394 DEDUCT: Disallowed deferred tax assets —   (76 ) (136 ) E*TRADE Financial Tier 1 capital $ 4,493   $ 4,386   $ 3,710   ADD: Allowable allowance for loan losses 58 74 135

Non-qualifying capital instruments subject to phase-out (trust preferredsecurities)

414   414   414   E*TRADE Financial total capital $ 4,965   $ 4,874   $ 4,259     E*TRADE Financial average assets for leverage capital purposes $ 64,486 $ 62,095 $ 54,032 DEDUCT: Goodwill and other intangible assets, net of deferred tax liabilities (2,219 ) (2,191 ) (2,058 ) Disallowed deferred tax assets (353 ) (380 ) (774 ) E*TRADE Financial adjusted average assets for leverage capital purposes $ 61,914   $ 59,524   $ 51,200     E*TRADE Financial total risk-weighted assets(a) $ 10,856 $ 11,115 $ 10,466  

E*TRADE Financial Tier 1 leverage ratio (Tier 1 capital / Adjusted averageassets for leverage capital purposes)

7.3 % 7.4 % 7.2 % E*TRADE Financial Common Equity Tier 1 capital / Total risk-weighted assets 35.0 % 33.9 % 33.0 % E*TRADE Financial Tier 1 capital / Total risk-weighted assets 41.4 % 39.5 % 35.4 % E*TRADE Financial total capital / Total risk-weighted assets 45.7 % 43.8 % 40.7 %     (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.

(12) E*TRADE Bank’s capital ratios are calculated as follows and are preliminary for the current period (dollars in millions):

  Q1 2018   Q4 2017   Q1 2017 E*TRADE Bank shareholder's equity $ 3,721 $ 3,703 $ 3,291 ADD:

(Gains) losses in other comprehensive income on available-for-sale debtsecurities, net of tax

176 26 98 DEDUCT: Goodwill and other intangible assets, net of deferred tax liabilities (38 ) (38 ) (38 ) Disallowed deferred tax assets (66 ) (71 ) (100 ) E*TRADE Bank Common Equity Tier 1 capital / Tier 1 capital $ 3,793   $ 3,620   $ 3,251   ADD: Allowable allowance for loan losses 58   74   118   E*TRADE Bank total capital $ 3,851   $ 3,694   $ 3,369     E*TRADE Bank average assets for leverage capital purposes $ 50,063 $ 47,992 $ 40,501 DEDUCT: Goodwill and other intangible assets, net of deferred tax liabilities (38 ) (38 ) (38 ) Disallowed deferred tax assets (66 ) (71 ) (100 ) E*TRADE Bank adjusted average assets for leverage capital purposes $ 49,959   $ 47,883   $ 40,363     E*TRADE Bank total risk-weighted assets(a) $ 10,133 $ 10,147 $ 9,280  

E*TRADE Bank Tier 1 leverage ratio (Tier 1 capital / Adjusted average assetsfor leverage capital purposes)

7.6 % 7.6 % 8.1 % E*TRADE Bank Common Equity Tier 1 capital / Total risk-weighted assets 37.4 % 35.7 % 35.0 % E*TRADE Bank Tier 1 capital / Total risk-weighted assets 37.4 % 35.7 % 35.0 % E*TRADE Bank total capital / Total risk-weighted assets 38.0 % 36.4 % 36.3 %     (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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