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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________
FORM 10-Q
_____________________________
(Mark One)
x    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2015
or
¨    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             .

Commission File Number 1-11921
 ____________________________
E*TRADE Financial Corporation
(Exact Name of Registrant as Specified in its Charter)
____________________________
Delaware
 
94-2844166
(State or other jurisdiction
of incorporation or organization)
 
(I.R.S. Employer
Identification Number)
1271 Avenue of the Americas, 14th Floor, New York, New York 10020
(Address of principal executive offices and Zip Code)

(646) 521-4300
(Registrant’s telephone number, including area code)
 ____________________________
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.    Yes x   No  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer   x
Accelerated filer
 
¨
Non-accelerated filer ¨ (Do not check if a smaller reporting company)
Smaller reporting company
 
¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No x
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:
As of April 30, 2015, there were 289,915,838 shares of common stock outstanding.



E*TRADE FINANCIAL CORPORATION
FORM 10-Q QUARTERLY REPORT
For the Quarter Ended March 31, 2015
TABLE OF CONTENTS
PART I
FINANCIAL INFORMATION
 
Item 1.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2.
 
 
 
 
 
 
 
 
 
Item 3.
Item 4.
PART II
OTHER INFORMATION
 
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
 
Unless otherwise indicated, references to "the Company," "we," "us," "our" and "E*TRADE" mean E*TRADE Financial Corporation and its subsidiaries.

i


E*TRADE, E*TRADE Financial, E*TRADE Bank, Equity Edge, OptionsLink and the Converging Arrows logo are registered trademarks of E*TRADE Financial Corporation in the United States and in other countries.

ii


PART I
FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, that involve risks and uncertainties. These statements relate to our future plans, objectives, expectations and intentions based on certain assumptions and include any statement that is not historical in nature. These statements may be identified by the use of words such as "assume," "expect," "believe," "may," "will," "should," "anticipate," "intend," "plan," "estimate," "continue" and similar expressions. We caution that actual results could differ materially from those discussed in these forward-looking statements. Important factors that could contribute to our actual results differing materially from any forward-looking statements include, but are not limited to, those discussed under Part I. Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations of this Form 10-Q; and Part I. Item 1A. Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2014, filed with the SEC, which are incorporated herein by reference. By their nature forward-looking statements are not guarantees of future performance or results and are subject to risks, uncertainties and assumptions that are difficult to predict or quantify. Actual future results may vary materially from expectations expressed or implied in this report or any of our prior communications. The forward-looking statements contained in this report reflect our expectations only as of the date of this report. You should not place undue reliance on forward-looking statements, as we do not undertake to update or revise forward-looking statements to reflect the impact of circumstances or events that arise after the date the forward-looking statements were made, except as required by law.
ITEM 2.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the consolidated financial statements and the related notes that appear elsewhere in this document and with the Annual Report on Form 10-K for the year ended December 31, 2014.
GLOSSARY OF TERMS
In analyzing and discussing our business, we utilize certain metrics, ratios and other terms that are defined in the Glossary of Terms, which is located at the end of Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
OVERVIEW
Strategy
Our business strategy is centered on two core objectives: accelerating the growth of our core brokerage business to improve market share, and strengthening our overall financial and franchise position.
Accelerate Growth of Core Brokerage Business
Capitalize on secular growth within the direct brokerage industry.
The direct brokerage industry is growing at a faster rate than the traditional brokerage industry. We are focused on capitalizing on this growth through ensuring our customers' trading and investing needs are met through our direct relationships.
Enhance digital and offline customer experience.
We are focused on maintaining our competitive position in trading, margin lending and cash management, while expanding our customer share of wallet in retirement, investing and savings. Through these offerings, we aim to continue acquiring new customers while also deepening the engagement of both new and existing customers.
Capitalize on value of corporate services business.
Our corporate services business is a strategically important driver of brokerage account growth for us. We are leveraging our industry-leading position to improve client acquisition, and are bolstering awareness among plan participants of our full suite of offerings.
Maximize value of customer deposits while improving balance sheet efficiency.
Our brokerage business generates a significant amount of stable, low-cost deposits, which we monetize through the bank by investing primarily in low-risk, agency mortgage-backed securities.


1


Strengthen Overall Financial and Franchise Position
Manage down legacy investments and mitigate credit losses.
We continue to manage down the size and risks associated with our legacy loan portfolio, while mitigating credit losses where possible.
Continue to execute on our capital plan.
Our capital plan was laid out in 2012 with a key goal of distributing capital from E*TRADE Bank to the parent company, with the key objective of reducing corporate debt. We are now focused on utilizing excess capital created through earnings and by achieving lower capital requirements at E*TRADE Bank, while continuing to demonstrate sustainability of our enterprise risk management culture and capabilities.
Key Factors Affecting Financial Performance
Our financial performance is affected by a number of factors outside of our control, including:
customer demand for financial products and services;
weakness or strength of the residential real estate and credit markets;
performance, volume and volatility of the equity and capital markets;
customer perception of the financial strength of our franchise;
market demand and liquidity in the secondary market for mortgage loans and securities;
market demand and liquidity in the wholesale borrowings market, including securities sold under agreements to repurchase;
the level and volatility of interest rates;
our ability to move capital to our parent company from our subsidiaries subject to various regulatory approvals; and
changes to the rules and regulations governing the financial services industry.
In addition to the items noted above, our success in the future will depend upon, among other things, our ability to:
have continued success in the acquisition, growth and retention of brokerage customers;
generate meaningful growth in our retirement, investing and savings customer products;
continue to demonstrate the sustainability of our enterprise risk management culture and capabilities;
mitigate credit costs;
manage to a lower Tier 1 leverage ratio at E*TRADE Bank, as stated in our capital plan;
generate capital sufficient to meet our operating needs at both E*TRADE Bank and our parent company;
evaluate and utilize excess capital to maximize shareholder value;
assess and manage interest rate risk;
maintain disciplined expense control and improved operational efficiency; and
compete in a technology-intensive industry characterized by rapid innovation.

2


Management monitors a number of metrics in evaluating the Company’s performance. The most significant of these are shown in the table and discussed in the text below: 
 
As of or For the
Three Months Ended
March 31,
Variance
 
2015
 
2014
 
2015 vs. 2014
Customer Activity Metrics:
 
 
 
 
 
Daily average revenue trades ("DARTs")
169,951

 
197,944

 
(14
)%
Average commission per trade
$
10.94

 
$
10.64

 
3
 %
Margin receivables (dollars in billions)
$
8.2

 
$
7.3

 
12
 %
End of period brokerage accounts
3,182,639

 
3,069,961

 
4
 %
Net new brokerage accounts
38,716

 
71,902

 
(46
)%
Annualized brokerage account attrition rate
8.8
%
 
7.1
%
 
*
Customer assets (dollars in billions)
$
299.4

 
$
269.0

 
11
 %
Net new brokerage assets (dollars in billions)
$
3.5

 
$
4.1

 
(15
)%
Brokerage related cash (dollars in billions)
$
41.6

 
$
40.1

 
4
 %
Company Financial Metrics:
 
 
 
 
 
Corporate cash (dollars in millions)
$
258

 
$
525

 
(51
)%
E*TRADE Financial Tier 1 leverage ratio(1)
8.4
%
 
7.0
%
 
1.4
 %
E*TRADE Bank Tier 1 leverage ratio(1)
9.8
%
 
9.7
%
 
0.1
 %
Special mention loan delinquencies (dollars in millions)
$
191

 
$
195

 
(2
)%
Allowance for loan losses (dollars in millions)
$
402

 
$
403

 
*
Enterprise net interest spread
2.62
%
 
2.47
%
 
0.15
 %
Enterprise interest-earning assets (average dollars in billions)
$
41.1

 
$
42.1

 
(2
)%
*
Percentage not meaningful. 
(1)
Beginning in the first quarter of 2015, E*TRADE Financial and E*TRADE Bank calculate regulatory capital under the Basel III framework using the Standardized Approach, subject to transition provisions. Prior to the first quarter of 2015, the risk-based capital guidelines that applied to E*TRADE Bank were based upon the 1988 capital accords of the Basel Committee on Banking Supervision ("BCBS"), a committee of central banks and bank supervisors, as implemented by the U.S. Federal banking agencies, including the OCC, commonly known as Basel I. As a savings and loan holding company, E*TRADE Financial was not previously subject to specific statutory capital requirements. Therefore, E*TRADE Financial's Tier 1 leverage ratio as of March 31, 2014 was a non-GAAP measure and was calculated based on the Federal Reserve’s well-capitalized requirements then applicable to bank holding companies. See Liquidity and Capital Resources for a reconciliation of this non-GAAP measure to the comparable GAAP measure.
Customer Activity Metrics
DARTs are the predominant driver of commissions revenue from our customers.
Average commission per trade is an indicator of changes in our customer mix, product mix and/or product pricing.
Margin receivables represent credit extended to customers to finance their purchases of securities by borrowing against securities they own and are a key driver of net operating interest income.
End of period brokerage accounts, net new brokerage accounts and brokerage account attrition rate are indicators of our ability to attract and retain brokerage customers. The brokerage account attrition rate is calculated by dividing attriting brokerage accounts, which are gross new brokerage accounts less net new brokerage accounts, by total brokerage accounts at the previous period end. This rate is presented on an annualized basis.
Changes in customer assets are an indicator of the value of our relationship with the customer. An increase in customer assets generally indicates that the use of our products and services by existing and new customers is expanding. Changes in this metric are also driven by changes in the valuations of our customers’ underlying securities.
Net new brokerage assets are total inflows to all new and existing brokerage accounts less total outflows from all closed and existing brokerage accounts and are a general indicator of the use of our products and services by new and existing brokerage customers.

3


Brokerage related cash is an indicator of the level of engagement with our brokerage customers and is a key driver of net operating interest income as well as fees earned on customer assets held by third parties outside the Company.
Company Financial Metrics
Corporate cash is an indicator of the liquidity at the parent company. It is the primary source of capital above and beyond the capital deployed in our regulated subsidiaries. See Liquidity and Capital Resources for a reconciliation of this non-GAAP measure to the comparable GAAP measure.
Tier 1 leverage ratio is an indication of capital adequacy for E*TRADE Financial and E*TRADE Bank. Tier 1 leverage ratio is Tier 1 capital divided by adjusted average total assets for leverage capital purposes. Beginning in the first quarter of 2015, E*TRADE Financial and E*TRADE Bank calculate regulatory capital under the Basel III framework using the Standardized Approach, subject to transition provisions. Prior to Basel III becoming effective, E*TRADE Financial capital ratios were non-GAAP measures as the parent company was not yet held to regulatory capital requirements. See Liquidity and Capital Resources for additional information, including the calculation of regulatory capital ratios and a reconciliation of previously non-GAAP capital ratios to the comparable GAAP measures.
Special mention loan delinquencies are loans 30-89 days past due and are an indicator of the expected trend for charge-offs in future periods as these loans have a greater propensity to migrate into nonaccrual status and ultimately be charged-off.
Allowance for loan losses is an estimate of probable losses inherent in the loan portfolio as of the balance sheet date and is typically equal to management’s forecast of loan losses in the twelve months following the balance sheet date, as well as the forecasted losses, including economic concessions to borrowers, over the estimated remaining life of loans modified as troubled debt restructurings ("TDR").
Enterprise interest-earning assets, in conjunction with our enterprise net interest spread, are indicators of our ability to generate net operating interest income.
Significant Events in the First Quarter of 2015
Received Regulatory Approval to Operate E*TRADE Bank at a 9.0% Tier 1 Leverage Ratio and to Move Broker-Dealers from under E*TRADE Bank
We received regulatory approval to operate E*TRADE Bank at a 9.0% Tier 1 leverage ratio, reflecting significant progress on our capital plan.

In addition, we recently received regulatory approval to move our broker-dealers, E*TRADE Securities LLC ("E*TRADE Securities") and E*TRADE Clearing LLC ("E*TRADE Clearing"), out from under E*TRADE Bank. The revised organizational structure provides increased capital flexibility as it enables us to dividend excess regulatory capital at our broker-dealers to the parent. E*TRADE Securities was moved from under E*TRADE Bank in February 2015 and subsequently paid a dividend of $434 million to the parent company. We plan to move E*TRADE Clearing in the second half of 2015.
$75 Million Dividend Issued from E*TRADE Bank to the Parent Company
We received approval from our regulators for a $75 million dividend from E*TRADE Bank to the parent company, totaling $550 million in quarterly dividends since the third quarter of 2013 and continuing to reflect significant progress in our capital plan.
Eliminated $340 Million of Corporate Debt and increased the Credit Facility at the Parent Company by $50 Million
We issued $460 million of 4 5/8% Senior Notes due 2023. We used the net proceeds together with $432 million of existing corporate cash to redeem $800 million of 6 3/8% Senior Notes due 2019, reducing our total corporate debt by $340 million to $1 billion and resulting in a $73 million loss on early extinguishment of debt. These transactions reduced our annual debt service costs from $80 million to $50 million and extended the maturity profile with no interest-bearing corporate debt maturing until 2022.

We also increased our senior secured revolving credit facility by $50 million to $250 million, which remains undrawn, enhancing liquidity for the parent company.

4


New Sweep Deposit Platform
We completed the conversion of our sweep deposits to a new platform which will allow us to more efficiently manage our balance sheet size. During the first quarter of 2015, we utilized this platform to direct $1.3 billion of customer sweep deposits to our balance sheet.
Enhancements to Our Trading and Investing Products and Services
We launched several mobile enhancements, including the addition of multi-leg options functionality and employee stock plan trading.
 
We announced the new Apple Watch app that will deliver market data in an engaging and simple format to help investors and traders monitor their portfolios, watchlists and the markets.

We unveiled the new tax center that centralizes the location of tax documents and better positions resources and education for cost basis reporting, gains and losses, and tax efficient investing.

We also made multiple improvements to E*TRADE Pro, our platform for active traders, including tax lot trading, pattern day trader enhancements and order entry updates, which when taken together deliver a more customized, intuitive, and hassle-free experience for our most active customers.
Third Party Recognition
Barron’s rated us 4 out of 5 stars in their annual online broker survey, scoring high marks in research amenities and customer service and education.

Stockbrokers.com gave us three first place awards in their 2015 Online Broker Review: #1 Smartphone App, #1 Client Dashboard and Best New Tool for E*TRADE Browser Trading. In the same review, we also earned five best-in-class ratings for Offering of Investments, Investor Education, Research, Mobile Trading, and New Investors.

Benzinga recognized us in their first-annual FinTech Awards with a Special Achievement award for our browser trading web app.
Effective Settlement of Uncertain Tax Positions Generates Approximately $225 Million Income Tax Benefit
In May 2015, we effectively settled uncertain tax positions related to the Internal Revenue Service ("IRS") examination of its 2007, 2009 and 2010 federal tax returns. As a result, we will recognize approximately $225 million of income tax benefit in the second quarter of 2015, the vast majority of which will increase our deferred tax assets. During the third quarter of 2009, the Company incurred a loss on the exchange of interest-bearing corporate debt for non-interest-bearing convertible debentures. The uncertain tax positions were primarily related to whether certain components of that loss were considered deductible or non-deductible for tax purposes.  This income tax benefit will have a material impact on the effective tax rate for both the second quarter of 2015 and full year 2015.
EARNINGS OVERVIEW
We generated net income of $40 million, or $0.14 per diluted share, on total net revenue of $456 million for the three months ended March 31, 2015. Net operating interest income increased 3% to $271 million for the three months ended March 31, 2015, compared to the same period in 2014, which was driven primarily by the size and mix of the balance sheet as well as an increase in net interest spread. Commissions, fees and service charges and other revenue decreased 6% to $176 million for the three months ended March 31, 2015, compared to the same period in 2014, which was driven primarily by decreased commissions revenue.
Provision for loan losses increased 25% to $5 million for the three months ended March 31, 2015, compared to the same period in 2014. Provision for loan losses for the first quarter of 2015 and 2014 reflected continued improvement in economic conditions and loan portfolio run-off. The lower provision for loan losses in the first quarter of 2014 was mainly due to the $11 million benefit we recognized from a settlement with a third party mortgage originator. Total operating expenses increased 3% to $300 million for the three months ended March 31, 2015, compared to the same period in 2014.
The following sections describe in detail the changes in key operating factors and other changes and events that affected net revenue, provision for loan losses, operating expense, other income (expense) and income tax expense.

5


Revenue
The components of revenue and the resulting variances are as follows (dollars in millions):
 
Three Months Ended March 31,
 
Variance
 
 
2015 vs. 2014
 
2015
 
2014
 
Amount
 
%
Net operating interest income
$
271

 
$
263

 
$
8

 
3
 %
Commissions
114

 
128

 
(14
)
 
(11
)%
Fees and service charges
52

 
50

 
2

 
4
 %
Principal transactions

 
10

 
(10
)
 
*
Gains on loans and securities, net
9

 
15

 
(6
)
 
(40
)%
Other revenues
10

 
9

 
1

 
11
 %
Total non-interest income
185

 
212

 
(27
)
 
(13
)%
Total net revenue
$
456

 
$
475

 
$
(19
)
 
(4
)%
 
*
Percentage not meaningful.
Net Operating Interest Income
Net operating interest income increased 3% to $271 million for the three months ended March 31, 2015, compared to the same period in 2014. Net operating interest income is earned primarily through investing deposits and customer payables in assets including: available-for-sale securities, held-to-maturity securities, margin receivables and real estate loans.
The following table presents enterprise average balance sheet data and enterprise income and expense data for our operations, as well as the related net interest spread, yields and rates prepared on the basis required by the SEC’s Industry Guide 3, "Statistical Disclosure by Bank Holding Companies" (dollars in millions): 
 

6


 
Three Months Ended March 31,
 
2015
 
2014
 
Average Balance
 
Operating Interest Inc./Exp.
 
Average Yield/Cost
 
Average Balance
 
Operating Interest Inc./Exp.
 
Average Yield/Cost
Enterprise interest-earning assets:
 
 
 
 
 
 
 
 
 
 
 
Loans(1)
$
6,204

 
$
62

 
4.00
%
 
$
8,397

 
$
84

 
3.99
%
Available-for-sale securities
12,341

 
66

 
2.15
%
 
13,492

 
79

 
2.33
%
Held-to-maturity securities
12,279

 
88

 
2.86
%
 
10,551

 
77

 
2.90
%
Margin receivables
7,888

 
68

 
3.49
%
 
6,937

 
62

 
3.64
%
Cash and equivalents
1,408

 
1

 
0.18
%
 
1,148

 

 
0.15
%
Segregated cash
309

 

 
0.08
%
 
837

 

 
0.11
%
Securities borrowed and other
657

 
31

 
19.13
%
 
752

 
17

 
9.42
%
Total enterprise interest-earning assets
41,086

 
316

 
3.09
%
 
42,114

 
319

 
3.05
%
Non-operating interest-earning and non-interest earning assets(2)
4,998

 
 
 
 
 
4,269

 
 
 
 
Total assets
$
46,084

 
 
 
 
 
$
46,383

 
 
 
 
Enterprise interest-bearing liabilities:
 
 
 
 
 
 
 
 
 
 
 
Deposits
$
25,051

 
2

 
0.03
%
 
$
25,693

 
2

 
0.03
%
Customer payables
6,388

 
1

 
0.08
%
 
6,371

 
2

 
0.15
%
Securities sold under agreements to repurchase
3,729

 
26

 
2.77
%
 
4,457

 
35

 
3.14
%
Federal Home Loan Bank ("FHLB") advances and other borrowings
1,301

 
15

 
4.65
%
 
1,281

 
17

 
5.28
%
Securities loaned and other
1,759

 
1

 
0.13
%
 
1,226

 

 
0.05
%
Total enterprise interest-bearing liabilities
38,228

 
45

 
0.47
%
 
39,028

 
56

 
0.58
%
Non-operating interest-bearing and non-interest bearing liabilities(3)
2,417

 
 
 
 
 
2,398

 
 
 
 
Total liabilities
40,645

 
 
 
 
 
41,426

 
 
 
 
Total shareholders’ equity
5,439

 
 
 
 
 
4,957

 
 
 
 
Total liabilities and shareholders’ equity
$
46,084

 
 
 
 
 
$
46,383

 
 
 
 
Excess of enterprise interest-earning assets over enterprise interest-bearing liabilities/Enterprise net interest income/Spread(4)
$
2,858

 
$
271

 
2.62
%
 
$
3,086

 
$
263

 
2.47
%
 
 
 
 
 
 
 
 
 
 
 
 
Enterprise net interest margin (net yield on enterprise interest-earning assets)
 
 
 
2.64
%
 
 
 
 
 
2.50
%
Ratio of enterprise interest-earning assets to enterprise interest-bearing liabilities
 
 
 
107.48
%
 
 
 
 
 
107.91
%
Return on average:
 
 
 
 
 
 
 
 
 
 
 
     Total assets
 
 
 
 
0.35
%
 
 
 
 
 
0.83
%
     Total shareholders' equity
 
 
 
 
2.93
%
 
 
 
 
 
7.80
%
Average equity to average total assets
 
 
 
 
11.80
%
 
 
 
 
 
10.68
%

(1)
Nonaccrual loans are included in the average loan balances. Interest payments received on nonaccrual loans are recognized on a cash basis in operating interest income until it is doubtful that full payment will be collected, at which point payments are applied to principal.
(2)
Non-operating interest-earning and non-interest earning assets consist of property and equipment, net, goodwill, other intangibles, net and other assets that do not generate operating interest income. Some of these assets generate corporate interest income.
(3)
Non-operating interest-bearing and non-interest bearing liabilities consist of corporate debt and other liabilities that do not generate operating interest expense. Some of these liabilities generate corporate interest expense.
(4)
Enterprise net interest spread represents the taxable equivalent rate earned on average enterprise interest-earning assets less the rate paid on average enterprise interest-bearing liabilities, excluding corporate interest-earning assets and liabilities. The taxable equivalent adjustment to reconcile to net operating interest income was less than $1 million for both the three months ended March 31, 2015 and 2014.
The fluctuation in enterprise interest-earning assets is driven primarily by changes in enterprise interest-bearing liabilities, specifically deposits and customer payables. Average enterprise interest-earning assets decreased 2% to $41.1 billion for the three months ended March 31, 2015, compared to the same period in 2014. The decrease in average enterprise interest-earning assets was primarily in the average loans and available-for-sale securities categories, which was partially offset by increases in the average held-to-maturity securities and margin receivables categories, compared to the same period in 2014.
Average enterprise interest-bearing liabilities decreased 2% to $38.2 billion for the three months ended March 31, 2015, compared to the same period in 2014. The decrease in average enterprise interest-bearing liabilities was primarily due to decreases in average securities sold under agreements to repurchase and average deposits, partially offset by increases in securities loaned and other.

7


At March 31, 2015, $14.9 billion of our customers' assets were held at third party institutions, including third party banks and money market funds. Approximately 70% of these off-balance sheet assets resulted from our deleveraging efforts completed in prior periods. We estimate the impact of our deleveraging efforts on net operating interest income to be approximately 111 basis points based on the estimated current re-investment rates on these assets, less approximately 28 basis points of cost associated with holding these assets on our balance sheet, primarily FDIC insurance premiums. We maintain the ability to transfer the majority of these customer assets back on the balance sheet with appropriate notification to the third party institutions and customer consent, as appropriate.
Enterprise net interest spread increased by 15 basis points to 2.62% for the three months ended March 31, 2015, compared to the same period in 2014. Enterprise net interest spread is driven by changes in average balances and average interest rates earned or paid on those balances. During the three months ended March 31, 2015, the increase in enterprise net interest spread was driven primarily by the growth in margin receivables and increased revenue earned from our securities lending activities, along with lower wholesale borrowing costs due to both a decrease in the amount and a reduction in the cost of securities sold under agreements to repurchase. These increases were partially offset by the continued run-off of loans and lower rates earned on margin receivables. Enterprise net interest spread may further fluctuate based on the size and mix of the balance sheet, as well as the impact from the level of interest rates.
Commissions
Commissions revenue decreased 11% to $114 million for the three months ended March 31, 2015, compared to the same period in 2014. The main factors that affect commissions are DARTs, average commission per trade and the number of trading days.
DART volume decreased 14% to 169,951 for the three months ended March 31, 2015, compared to the same period in 2014. Option-related DARTs as a percentage of total DARTs represented 23% of trading volume for the three months ended March 31, 2015, compared to 21% for the same period in 2014.
Average commission per trade increased 3% to $10.94 for the three months ended March 31, 2015, compared to the same period in 2014. Average commission per trade is impacted by customer mix and the different commission rates on various trade types (e.g. equities, options, fixed income, stock plan, exchange-traded funds, mutual funds, forex and cross border). Accordingly, favorable changes in customer mix and trade types impacted average commission per trade.
Fees and Service Charges
Fees and service charges increased 4% to $52 million for the three months ended March 31, 2015, compared to the same period in 2014. The table below shows the components of fees and service charges and the resulting variances (dollars in millions):
 
 
Three Months Ended March 31,
 
Variance
 
 
2015 vs. 2014
 
2015
 
2014
 
Amount
 
%
Order flow revenue
$
23

 
$
25

 
$
(2
)
 
(8
)%
Mutual fund service fees
6

 
5

 
1

 
20
 %
Advisor management fees
7

 
5

 
2

 
40
 %
Foreign exchange revenue
4

 
4

 

 
*
Reorganization fees
2

 
2

 

 
*
Money market funds and sweep deposit revenue(1)
5

 
3

 
2

 
67
 %
Other fees and service charges
5

 
6

 
(1
)
 
(17
)%
Total fees and service charges
$
52

 
$
50

 
$
2

 
4
 %
 
*
Percentage not meaningful.

(1)
Includes revenue earned on average customer assets held by third parties outside the Company, including money market funds and sweep deposit accounts at unaffiliated financial institutions. Fees earned on these customer assets are based on the federal funds rate or LIBOR plus a negotiated spread or other contractual arrangement with the third party institutions.
    
The increase in fees and services charges for the three months ended March 31, 2015, compared to the same period in 2014, was driven primarily by increased advisor management fees and an increase in money market funds and sweep deposit revenue, offset by a decrease in order flow revenue. The increase in advisor management fees was driven by assets in managed

8


accounts within our retirement, investing and savings products, which were $3.2 billion at March 31, 2015, compared to $2.6 billion at March 31, 2014.
Principal Transactions
There was no principal transactions revenue for the three months ended March 31, 2015, compared to $10 million for the same period in 2014. Principal transactions were derived from our market making business in which we acted as a market-maker for our brokerage customers’ orders as well as orders from third party customers. On February 10, 2014, we completed the sale of the market making business to an affiliate of Susquehanna International Group, LLP (“Susquehanna”) and no longer generate principal transactions revenue.
Gains on Loans and Securities, Net
The table below shows the components of gains on loans and securities, net and the resulting variances (dollars in millions):
 
Three Months Ended March 31,
 
Variance
 
 
2015 vs. 2014
 
2015
 
2014
 
Amount
 
%
Gains on available-for-sale securities, net
$
10

 
$
19

 
$
(9
)
 
(47
)%
Hedge ineffectiveness
(1
)
 
(4
)
 
3

 
(75
)%
Gains on loans and securities, net
$
9

 
$
15

 
$
(6
)
 
(40
)%
Gains on loans and securities, net decreased 40% to $9 million for the three months ended March 31, 2015 compared to 2014. During the first quarter of 2014, we recognized a $6 million gain on the sale of our remaining $17 million in amortized cost of available-for-sale non-agency CMOs.
Provision for Loan Losses
Provision for loan losses increased 25% to $5 million for the three months ended March 31, 2015, compared to the same period in 2014. Provision for loan losses for the first quarter of 2015 and 2014 reflected continued improving economic conditions and loan portfolio run-off. The lower provision for loan losses in the first quarter of 2014 was mainly due to the $11 million benefit we recognized from a settlement with a third party mortgage originator. The timing and magnitude of the provision for loan losses is affected by many factors and we anticipate variability, particularly as home equity lines of credit begin converting to amortizing loans.
Operating Expense
The components of operating expense and the resulting variances are as follows (dollars in millions):
 
 
Three Months Ended March 31,
 
Variance
 
 
2015 vs. 2014
 
2015
 
2014
 
Amount
 
%
Compensation and benefits
$
113

 
$
98

 
$
15

 
15
 %
Advertising and market development
34

 
34

 

 
*
Clearing and servicing
24

 
28

 
(4
)
 
(14
)%
FDIC insurance premiums
18

 
24

 
(6
)
 
(25
)%
Professional services
27

 
24

 
3

 
13
 %
Occupancy and equipment
21

 
18

 
3

 
17
 %
Communications
19

 
18

 
1

 
6
 %
Depreciation and amortization
20

 
21

 
(1
)
 
(5
)%
Amortization of other intangibles
5

 
5

 

 
*
Facility restructuring and other exit activities
4

 
3

 
1

 
33
 %
Other operating expenses
15

 
17

 
(2
)
 
(12
)%
Total operating expense
$
300

 
$
290

 
$
10

 
3
 %
*
Percentage not meaningful.

9


Compensation and Benefits
Compensation and benefits increased 15% to $113 million for the three months ended March 31, 2015, compared to the same period in 2014. The increase resulted primarily from increased salaries expense due to increased headcount and increased incentive compensation when compared to the same period in 2014.
Clearing and Servicing
Clearing and servicing decreased 14% to $24 million for the three months ended March 31, 2015, compared to the same period in 2014. The decrease resulted primarily from the sale of the market making business, lower trading volume and a decrease in loan servicing expenses, partially offset by an increase in fees paid to third parties that service our managed investment portfolio.
FDIC Insurance Premiums
FDIC insurance premiums decreased 25% to $18 million for the three months ended March 31, 2015, compared to the same period in 2014. The decrease for the three months ended March 31, 2015 was due to the continued improvement and quality of our balance sheet, improving capital ratios and overall risk profile when compared to the same period in 2014.
Professional Services
Professional services increased 13% to $27 million for the three months ended March 31, 2015, compared to the same period in 2014, primarily driven by professional services engagements focused on improving the customer experience and overall product offering, as well as our continued enterprise risk management build-out.
Other Income (Expense)
Other income (expense) was $88 million and $37 million of net expense for the three months ended March 31, 2015 and 2014, respectively, as shown in the following table (dollars in millions):
 
 
Three Months Ended March 31,
 
Variance
 
 
2015 vs. 2014
 
2015
 
2014
 
Amount
 
%
Corporate interest expense
$
(21
)
 
$
(28
)
 
$
7

 
(25
)%
Losses on early extinguishment of debt
(73
)
 
(12
)
 
(61
)
 
508
 %
Equity in income of investments and other
6

 
3

 
3

 
100
 %
Total other income (expense)
$
(88
)
 
$
(37
)
 
$
(51
)
 
138
 %
During the three months ended March 31, 2015, we issued $460 million of 4 5/8% Senior Notes and we used the net proceeds together with $432 million of existing corporate cash to redeem $800 million of 6 3/8% Senior Notes which resulted in a $73 million loss on early extinguishment of debt. This compares to $12 million of losses on early extinguishment of debt as a result of the early extinguishment of $100 million in repurchase agreements for the same period in 2014.
Total other income (expense) also includes corporate interest expense of $21 million for three months ended March 31, 2015, compared to $28 million for the same period in 2014. The decrease in corporate interest expense was driven by $740 million in cumulative corporate debt reductions since the first quarter of 2014 which reduced our annual debt service cost from approximately $110 million as of March 31, 2014 to $50 million as of March 31, 2015.
Income Tax Expense
Income tax expense was $23 million and $47 million for the three months ended March 31, 2015 and 2014, respectively. The effective tax rate was 37% for the three months ended March 31, 2015, compared to 33% for the same period in 2014. Income tax expense for the three months ended March 31, 2014 included $7 million of benefit related to a change to the New York state tax code and its impact on state deferred taxes. Excluding the impact of the change to the New York state tax code, the effective tax rate for the three months ended March 31, 2014 would have been 38%.
Valuation Allowance
We are required to establish a valuation allowance for deferred tax assets and record a corresponding increase to income tax expense if it is determined, based on evaluation of available evidence at the time the determination is made, that it is more likely than not that some or all of the deferred tax assets will not be realized. If we were to conclude that a valuation

10


allowance was required, the resulting loss could have a material adverse effect on our financial condition and results of operations. As of March 31, 2015, we did not establish a valuation allowance against our federal deferred tax assets as we believe that it is more likely than not that all of these assets will be realized.
SEGMENT RESULTS REVIEW
We report operating results in two segments: 1) trading and investing; and 2) balance sheet management. Trading and investing includes retail brokerage products and services; investor-focused banking products; and corporate services. Balance sheet management includes the management of asset allocation; loans previously originated by the Company or purchased from third parties; deposits and customer payables; and credit, liquidity and interest rate risk for the Company as described in the Risk Management section. Costs associated with certain functions that are centrally-managed are separately reported in a corporate/other category. For more information on our segments, see Note 14—Segment Information in Item 1. Consolidated Financial Statements (Unaudited).
Trading and Investing
The following table summarizes trading and investing financial information and key customer activity metrics as of and for the three months ended March 31, 2015 and 2014 (dollars in millions, except for key metrics): 
 
Three Months Ended March 31,
 
Variance
 
 
2015 vs. 2014
 
2015
 
2014
 
Amount
 
%
Net operating interest income
$
165

 
$
140

 
$
25

 
18
 %
Commissions
114

 
128

 
(14
)
 
(11
)%
Fees and service charges
52

 
50

 
2

 
4
 %
Principal transactions

 
10

 
(10
)
 
*
Other revenues
8

 
8

 

 
*
Total net revenue
339

 
336

 
3

 
1
 %
Total operating expense
203

 
195

 
8

 
4
 %
Trading and investing income
$
136

 
$
141

 
$
(5
)
 
(4
)%
 
 
 
 
 
 
 
 
Key Customer Activity Metrics:
 
 
 
 
 
 
 
DARTs
169,951

 
197,944

 
(27,993
)
 
(14
)%
Average commission per trade
$
10.94

 
$
10.64

 
$
0.30

 
3
 %
Margin receivables (dollars in billions)
$
8.2

 
$
7.3

 
$
0.9

 
12
 %
End of period brokerage accounts
3,182,639

 
3,069,961

 
112,678

 
4
 %
Net new brokerage accounts
38,716

 
71,902

 
(33,186
)
 
(46
)%
Annualized brokerage account attrition rate
8.8
%
 
7.1
%
 
1.7
%
 
*
Customer assets (dollars in billions)
$
299.4

 
$
269.0

 
$
30.4

 
11
 %
Net new brokerage assets (dollars in billions)
$
3.5

 
$
4.1

 
$
(0.6
)
 
(15
)%
Brokerage related cash (dollars in billions)
$
41.6

 
$
40.1

 
$
1.5

 
4
 %
*
Percentage not meaningful.
The trading and investing segment offers products and services to individual retail investors, generating revenue from these customer relationships and from corporate services activities. This segment currently generates four main sources of revenue: net operating interest income; commissions; fees and service charges; and other revenues. Net operating interest income is generated primarily from margin receivables and from a deposit transfer pricing arrangement with the balance sheet management segment. The balance sheet management segment utilizes deposits and customer payables and compensates the trading and investing segment via a market-based transfer pricing arrangement. This compensation is reflected in segment results as operating interest income for the trading and investing segment and operating interest expense for the balance sheet management segment, and is eliminated in consolidation. Other revenues include results from providing software and services for managing equity compensation plans from corporate customers, as we ultimately service retail investors through these corporate relationships. For the three months ended March 31, 2015 and 2014, our brokerage products contributed 80% and 81%, respectively, and our banking products contributed 20% and 19%, respectively, of total trading and investing net revenue.

11


Trading and investing income decreased 4% to $136 million for the three months ended March 31, 2015, compared to the same period in 2014, primarily driven by increased operating expenses.
Margin receivables, a key driver of net operating interest income, increased by $0.9 billion to $8.2 billion when compared to the same period in 2014. Brokerage related cash, which is one of our most profitable sources of funding, increased by $1.5 billion to $41.6 billion when compared to the same period in 2014. Trading and investing net operating interest income increased 18% to $165 million for the three months ended March 31, 2015, driven primarily by the growth in margin receivables, coupled with increased revenue earned on securities lending activities when compared to the same period in 2014.
Trading and investing commissions revenue decreased 11% to $114 million for the three months ended March 31, 2015, compared to the same period in 2014. The decrease in commissions was primarily due to a decrease in DARTs of 14% to 169,951 for the three months ended March 31, 2015, compared to the same period in 2014.
Trading and investing fees and service charges increased 4% to $52 million for the three months ended March 31, 2015, compared to the same period in 2014. The increase in fees and services charges was driven primarily by increased advisor management fees and an increase in money market funds and sweep deposit revenue, offset by a decrease in order flow revenue. The increase in advisor management fees was driven by assets in managed accounts within our retirement, investing and savings products, which were $3.2 billion at March 31, 2015, compared to $2.6 billion at March 31, 2014.
There was no principal transactions revenue for the three months ended March 31, 2015, compared to $10 million for the same period in 2014. Principal transactions were derived from our market making business in which we acted as a market-maker for our brokerage customers’ orders as well as orders from third party customers. On February 10, 2014, we completed the sale of the market making business to an affiliate of Susquehanna and no longer generate principal transactions revenue.
Trading and investing operating expense increased 4% to $203 million for the three months ended March 31, 2015, compared to the same period in 2014, primarily driven by increased compensation and benefits expenses to support our strategy of accelerating the growth of the core brokerage business.
As of March 31, 2015, we had approximately 3.2 million brokerage accounts, 1.3 million stock plan accounts and 0.4 million banking accounts.     
Balance Sheet Management
The following table summarizes balance sheet management financial information and key financial metrics as of and for the three months ended March 31, 2015 and 2014 (dollars in millions):
 
Three Months Ended March 31,
 
Variance
 
 
2015 vs. 2014
 
2015
 
2014
 
Amount
 
%
Net operating interest income
$
106

 
$
123

 
$
(17
)
 
(14
)%
Gains on loans and securities, net
9

 
15

 
(6
)
 
(40
)%
Other revenues
2

 
1

 
1

 
100
 %
Total net revenue
117

 
139

 
(22
)
 
(16
)%
Provision for loan losses
5

 
4

 
1

 
25
 %
Total operating expense
36

 
41

 
(5
)
 
(12
)%
Balance sheet management income
$
76

 
$
94

 
$
(18
)
 
(19
)%
Key Financial Metrics:
 
 
 
 
 
 
 
Special mention loan delinquencies
$
191

 
$
195

 
$
(4
)
 
(2
)%
Allowance for loan losses
$
402

 
$
403

 
$
(1
)
 
*
*
Percentage not meaningful.

The balance sheet management segment primarily generates revenue through net operating interest income. Net operating interest income is generated from interest earned on available-for-sale and held-to-maturity securities and loans receivable, net of interest paid on wholesale borrowings and on a deposit transfer pricing arrangement with the trading and investing segment. The balance sheet management segment utilizes deposits and customer payables to invest in available-for-sale and held-to-maturity securities, and compensates the trading and investing segment via a market-based transfer pricing arrangement. This compensation is reflected in segment results as operating interest income for the trading and investing segment and operating interest expense for the balance sheet management segment and is eliminated in consolidation.

12


The balance sheet management segment income decreased 19% to $76 million for the three months ended March 31, 2015, compared to the same period in 2014, primarily driven by a decrease in net operating interest income.
The balance sheet management net operating interest income decreased 14% to $106 million for the three months ended March 31, 2015, compared to the same period in 2014. The decrease for the three months ended March 31, 2015 was driven by the decrease in the interest earned on the loan portfolio as average loan balances decreased, partially offset by the growth in average balances of our held-to-maturity securities portfolio.
Gains on loans and securities, net decreased 40% to $9 million for the three months ended March 31, 2015, compared to the same period in 2014. During the first quarter of 2014, we recognized a $6 million gain on the sale of our remaining $17 million in amortized cost of available-for-sale non-agency CMOs.
Provision for loan losses increased 25% to $5 million for the three months ended March 31, 2015 compared to the same period in 2014. Provision for loan losses for the first quarter of 2015 and 2014 reflected continued improvement in economic conditions and loan portfolio run-off. The lower provision for loan losses in the first quarter of 2014 was mainly due to the $11 million benefit we recognized from a settlement with a third party mortgage originator. The timing and magnitude of the provision for loan losses is affected by many factors and we anticipate variability, particularly as home equity lines of credit begin converting to amortizing loans.
Total balance sheet management operating expense decreased 12% to $36 million for the three months ended March 31, 2015, compared to the same period in 2014. The decrease in operating expense for the three months ended March 31, 2015 resulted primarily from lower FDIC insurance premiums and reduced servicing expenses due to lower loan balances compared to the same period in 2014.
Corporate/Other
The following table summarizes corporate/other financial information for the three months ended March 31, 2015, and 2014 (dollars in millions):
 
 
Three Months Ended March 31,
 
Variance
 
 
2015 vs. 2014
 
2015
 
2014
 
Amount
 
%
Total net revenue
$

 
$

 
$

 
*
Compensation and benefits
31

 
24

 
7

 
29
 %
Professional services
12

 
12

 

 
*
Occupancy and equipment
4

 
3

 
1

 
33
 %
Depreciation and amortization
4

 
5

 
(1
)
 
(20
)%
Facility restructuring and other exit activities
4

 
3

 
1

 
33
 %
Other operating expenses
6

 
7

 
(1
)
 
(14
)%
Total operating expense
61

 
54

 
7

 
13
 %
Operating loss
(61
)
 
(54
)
 
(7
)
 
13
 %
Total other income (expense)
(88
)
 
(37
)
 
(51
)
 
138
 %
Corporate/other loss
$
(149
)
 
$
(91
)
 
$
(58
)
 
64
 %
*
Percentage not meaningful.
The corporate/other category includes costs that are centrally-managed, technology related costs incurred to support centrally-managed functions, restructuring and other exit activities, corporate debt and corporate investments.
The corporate/other loss before income taxes was $149 million for the three months ended March 31, 2015, compared to $91 million for the same period in 2014.
The operating loss increased 13% to $61 million for the three months ended March 31, 2015, compared to the same period in 2014. The increase during the three months ended March 31, 2015 was primarily due to increased salaries expense driven by higher headcount and increased incentive compensation when compared to the same period in 2014.
During the three months ended March 31, 2015, we issued $460 million of 4 5/8% Senior Notes and we used the net proceeds together with $432 million of existing corporate cash to redeem $800 million of 6 3/8% Senior Notes which resulted in a $73 million loss on early extinguishment of debt in other income (expense). This compares to $12 million of losses on early extinguishment of debt as a result of the early extinguishment of $100 million in repurchase agreements for the same period in

13


2014. Other income (expense) also includes corporate interest expense of $21 million for three months ended March 31, 2015, compared to $28 million for the same period in 2014. The decrease in corporate interest expense was driven by $740 million in cumulative corporate debt reductions since the first quarter of 2014 which reduced our annual debt service cost from approximately $110 million as of March 31, 2014 to $50 million as of March 31, 2015.
BALANCE SHEET OVERVIEW
The following table sets forth the significant components of the consolidated balance sheet (dollars in millions): 
 
 
 
 
 
Variance
 
March 31,
 
December 31,
 
2015 vs. 2014
 
2015
 
2014
 
Amount
 
%
Assets:
 
 
 
 
 
 
 
Cash and equivalents
$
1,025

 
$
1,783

 
$
(758
)
 
(43
)%
Segregated cash
849

 
555

 
294

 
53
 %
Securities(1)
26,358

 
24,636

 
1,722

 
7
 %
Margin receivables
8,220

 
7,675

 
545

 
7
 %
Loans receivable, net
5,664

 
5,979

 
(315
)
 
(5
)%
Investment in FHLB stock
86

 
88

 
(2
)
 
(2
)%
Other(2)
4,623

 
4,814

 
(191
)
 
(4
)%
Total assets
$
46,825

 
$
45,530

 
$
1,295

 
3
 %
Liabilities and shareholders’ equity:
 
 
 
 
 
 
 
Deposits
$
26,272

 
$
24,890

 
$
1,382

 
6
 %
Wholesale borrowings(3)
4,972

 
4,971

 
1

 
*
Customer payables
6,293

 
6,455

 
(162
)
 
(3
)%
Corporate debt
1,025

 
1,366

 
(341
)
 
(25
)%
Other liabilities
2,810

 
2,473

 
337

 
14
 %
Total liabilities
41,372

 
40,155

 
1,217

 
3
 %
Shareholders’ equity
5,453

 
5,375

 
78

 
1
 %
Total liabilities and shareholders’ equity
$
46,825

 
$
45,530

 
$
1,295

 
3
 %
*
Percentage not meaningful. 
(1)
Includes balance sheet line items available-for-sale and held-to-maturity securities.
(2)
Includes balance sheet line items property and equipment, net, goodwill, other intangibles, net and other assets.
(3)
Includes balance sheet line items securities sold under agreements to repurchase and FHLB advances and other borrowings.
Cash and Equivalents
Cash and equivalents decreased by 43% to $1.0 billion during the three months ended March 31, 2015. During the three months ended March 31, 2015, we issued $460 million of 4 5/8% Senior Notes and we used the net proceeds together with $432 million of existing corporate cash to redeem $800 million of 6 3/8% Senior Notes.
Segregated Cash
Segregated cash increased by 53% to $849 million during the three months ended March 31, 2015. The level of cash required to be segregated under federal or other regulations, or segregated cash, is driven largely by customer cash and securities lending balances we hold as a liability in excess of the amount of margin receivables and securities borrowed balances we hold as an asset. The excess represents customer cash that we are required by our regulators to segregate for the exclusive benefit of our brokerage customers.

14


Securities
Available-for-sale and held-to-maturity securities are summarized as follows (dollars in millions):
 
 
 
Variance
 
March 31,
 
December 31,
 
2015 vs. 2014
 
2015
 
2014
 
Amount
 
%
Available-for-sale securities:
 
 
 
 
 
 
 
Debt securities:
 
 
 
 
 
 
 
Agency residential mortgage-backed securities and CMOs
$
12,701

 
$
11,164

 
$
1,537

 
14
 %
Other debt securities
1,107

 
1,191

 
(84
)
 
(7
)%
Total debt securities
13,808

 
12,355

 
1,453

 
12
 %
Publicly traded equity securities(1)
33

 
33

 

 
*
Total available-for-sale securities
$
13,841

 
$
12,388

 
$
1,453

 
12
 %
Held-to-maturity securities:
 
 
 
 
 
 
 
Agency residential mortgage-backed securities and CMOs
$
9,899

 
$
9,793

 
$
106

 
1
 %
Other debt securities
2,618

 
2,455

 
163

 
7
 %
Total held-to-maturity securities
$
12,517

 
$
12,248

 
$
269

 
2
 %
Total investments in securities
$
26,358

 
$
24,636

 
$
1,722

 
7
 %
*
Percentage not meaningful. 
(1)
Publicly traded equity securities consisted of investments in a mutual fund related to the Community Reinvestment Act.
Securities represented 56% and 54% of total assets at March 31, 2015 and December 31, 2014, respectively. We classify debt securities as available-for-sale or held-to-maturity based on our investment strategy and management’s assessment of our intent and ability to hold the debt securities until maturity. The increase in total investments in securities during the three months ended March 31, 2015 was primarily due to the purchase of agency residential mortgage-backed securities and CMOs as a result of increased customer deposits and the reinvestment of funds as our loan portfolios pay down.
Loans Receivable, Net
Loans receivable, net are summarized as follows (dollars in millions): 
 
 
 
Variance
 
March 31,
 
December 31,
 
2015 vs. 2014
 
2015
 
2014
 
Amount
 
%
One- to four-family
$
2,927

 
$
3,060

 
$
(133
)
 
(4
)%
Home equity
2,681

 
2,834

 
(153
)
 
(5
)%
Consumer and other
426

 
455

 
(29
)
 
(6
)%
Unamortized premiums, net
32

 
34

 
(2
)
 
(6
)%
Allowance for loan losses
(402
)
 
(404
)
 
2

 
*
Total loans receivable, net
$
5,664

 
$
5,979

 
$
(315
)
 
(5
)%
*
Percentage not meaningful. 
Loans receivable, net decreased 5% to $5.7 billion at March 31, 2015 from $6.0 billion at December 31, 2014. We are continuing our strategy of reducing balance sheet risk by allowing the loan portfolio to pay down, which we plan to do for the foreseeable future. However, as our portfolio ages and we gather substantive performance history for loans converting from interest-only to amortizing, we will continue to assess the economic environment and the value of our portfolio in the marketplace. While it is our intention to continue to hold these loans, if the markets improve our strategy could change.

15


Deposits
Deposits are summarized as follows (dollars in millions): 
 
 
 
Variance
 
March 31,
 
December 31,
 
2015 vs. 2014
 
2015
 
2014
 
Amount
 
%
Sweep deposits
$
20,472

 
$
19,119

 
$
1,353

 
7
 %
Complete savings deposits
3,728

 
3,753

 
(25
)
 
(1
)%
Checking deposits
1,198

 
1,137

 
61

 
5
 %
Other money market and savings deposits
831

 
833

 
(2
)
 
*
Time deposits
43

 
48

 
(5
)
 
(10
)%
Total deposits
$
26,272

 
$
24,890

 
$
1,382

 
6
 %
*
Percentage not meaningful. 
Deposits represented 64% and 62% of total liabilities at March 31, 2015 and December 31, 2014, respectively. At March 31, 2015, 89% of our customer deposits were covered by FDIC insurance. Deposits provide the benefit of lower interest costs compared with wholesale funding alternatives.
The majority of the deposits balance, specifically sweep deposits, is included in brokerage related cash and reported as a customer activity metric of $41.6 billion and $41.1 billion at March 31, 2015 and December 31, 2014, respectively. The total brokerage related cash balance is summarized as follows (dollars in millions): 
 
 
 
Variance
 
March 31,
 
December 31,
 
2015 vs. 2014
 
2015
 
2014
 
Amount
 
%
Deposits
$
26,272

 
$
24,890

 
$
1,382

 
6
 %
Less: bank related cash(1)
(5,800
)
 
(5,771
)
 
(29
)
 
1
 %
Sweep deposits at banking subsidiaries(2)
20,472

 
19,119

 
1,353

 
7
 %
Customer payables
6,293

 
6,455

 
(162
)
 
(3
)%
Customer assets held by third parties(3)
14,863

 
15,520

 
(657
)
 
(4
)%
Total brokerage related cash(4)
$
41,628

 
$
41,094

 
$
534

 
1
 %
 
(1)
Bank related cash includes complete savings deposits, checking deposits, other money market and savings deposits and time deposits.
(2)
A sweep product transfers brokerage customer balances to banking subsidiaries, which hold these funds as customer deposits in FDIC insured demand deposit and money market deposit accounts.
(3)
Customer assets held by third parties are not reflected on our consolidated balance sheet and are not immediately available for liquidity purposes.
(4)
Increases in brokerage related cash generally indicate that the use of our products and services by existing and new brokerage customers is expanding.
The components of customer assets held by third parties are as follows (dollars in millions):
 
 
 
Variance
 
March 31,
 
December 31,
 
2015 vs. 2014
 
2015
 
2014
 
Amount
 
%
Money market fund
$
7,610

 
$
7,169

 
$
441

 
6
 %
Sweep deposits at unaffiliated financial institutions
3,588

 
4,744

 
(1,156
)
 
(24
)%
Subtotal
11,198

 
11,913

 
(715
)
 
(6
)%
Municipal funds and other
3,665

 
3,607

 
58

 
2
 %
Customer assets held by third parties
$
14,863

 
$
15,520

 
$
(657
)
 
(4
)%
At March 31, 2015, our customers held $14.9 billion of assets at third party financial institutions, including third party banks and money market funds. Approximately 70% of these off-balance sheet assets resulted from our deleveraging efforts that we completed in prior periods.  We maintain the ability to transfer the majority of these customer assets back on the balance sheet with appropriate notification to the third party financial institutions and customer consent, as appropriate. Customer assets held by third parties included $3.6 billion and $4.7 billion of customer sweep deposits at March 31, 2015 and December 31, 2014, respectively, in the extended insurance sweep deposit account program ("ESDA") that we have in place for brokerage customers.

16


The ESDA program utilized E*TRADE Bank in combination with additional third party program banks to allow certain customers the ability to insure at least $1,250,000 of the cash they hold in the ESDA program.
During the first quarter of 2015, we converted approximately $15.1 billion of customer assets in the ESDA program to the new sweep deposit platform that will enable us to more efficiently manage our balance sheet size. During the first quarter of 2015, we utilized this platform to direct $1.3 billion of customer sweep deposits to our balance sheet.
Wholesale Borrowings
Wholesale borrowings, which consist of securities sold under agreements to repurchase and FHLB advances and other borrowings, are summarized as follows (dollars in millions): 
 
 
Variance
 
March 31,
 
December 31,
 
2015 vs. 2014
 
2015
 
2014
 
Amount
 
%
Securities sold under agreements to repurchase
$
3,668

 
$
3,672

 
$
(4
)
 
*
FHLB advances
920

 
920

 

 
*
Total securities sold under agreements to repurchase and FHLB advances
4,588

 
4,592

 
(4
)
 
*
Subordinated debentures
428

 
428

 

 
*
Fair value hedge adjustments and deferred costs
(44
)
 
(49
)
 
5

 
(10)%
Total wholesale borrowings
$
4,972

 
$
4,971

 
$
1

 
*
*
Percentage not meaningful. 
Wholesale borrowings represented 12% of total liabilities at both March 31, 2015 and December 31, 2014. Securities sold under agreements to repurchase and FHLB advances are the primary wholesale funding sources of E*TRADE Bank. During 2015, we expect securities sold under agreements to repurchase to decrease by approximately $365 million due to planned decreases in the forecasted issuances of debt.
We currently have $4.6 billion of securities sold under agreements to repurchase and FHLB advances that are scheduled to run off over the next eight years. While these sources of funding are more expensive than other sources available to us, such as customer deposits, the estimated pre-tax cost to eliminate these obligations as of March 31, 2015 would be approximately $0.5 billion. Our intent remains to replace wholesale borrowings with customer deposits as the planned decreases in the forecasted issuances of wholesale borrowings occur; however, as we continue to execute on our capital plan and consider the best uses of excess capital, our intent could change. For additional information on our use of hedge accounting, see Note 7—Accounting for Derivative Instruments and Hedging Activities in Item 1. Consolidated Financial Statements (Unaudited).
Corporate Debt
Corporate debt by type is shown as follows (dollars in millions):
 
Face Value
 
Discount
 
Net
March 31, 2015
 
 
 
 
 
Interest-bearing notes:
 
 
 
 
 
3/8% Notes, due 2022
$
540

 
$
(6
)
 
$
534

5/8% Notes, due 2023
460

 
(6
)
 
454

Total interest-bearing notes
1,000

 
(12
)
 
988

Non-interest-bearing debt:
 
 
 
 
 
0% Convertible debentures, due 2019
37

 

 
37

Total corporate debt
$
1,037

 
$
(12
)
 
$
1,025


17


 
Face Value
 
Discount
 
Net
December 31, 2014
 
 
 
 
 
Interest-bearing notes:
 
 
 
 
 
3/8% Notes, due 2019
$
800

 
$
(5
)
 
$
795

3/8% Notes, due 2022
540

 
(7
)
 
533

Total interest-bearing notes
1,340

 
(12
)
 
1,328

Non-interest-bearing debt:
 
 
 
 
 
0% Convertible debentures, due 2019
38

 

 
38

Total corporate debt
$
1,378

 
$
(12
)
 
$
1,366

During the three months ended March 31, 2015, we issued an aggregate principal amount of $460 million in 4 5/8% Notes, due 2023. We used the net proceeds from the issuance of the 4 5/8% Notes, along with $432 million of existing corporate cash, to redeem all of the outstanding 6 3/8% Notes due 2019.    We also entered into an amendment to our senior secured revolving credit facility to increase commitments thereunder by $50 million. We now have available capacity for borrowing under the credit facility of $250 million, which expires in November 2017. We have the ability to borrow against the credit facility for working capital and general corporate purposes. As of March 31, 2015, there was no outstanding balance under this credit facility.
Other Liabilities
Other liabilities increased $0.3 billion to $2.8 billion due primarily to an increase of $0.2 billion in deposits received for securities loaned during the three months ended March 31, 2015.
Shareholders’ Equity
The activity in shareholders’ equity during the three months ended March 31, 2015 is summarized as follows (dollars in millions):
 
Common Stock /
Additional Paid-In
Capital
 
Accumulated Deficit /
Other
Comprehensive Loss
 
Total
Beginning balance, December 31, 2014
$
7,353

 
$
(1,978
)
 
$
5,375

Net income

 
40

 
40

Net change from available-for-sale securities

 
33

 
33

Net change from cash flow hedging instruments

 
5

 
5

Ending balance, March 31, 2015
$
7,353

 
$
(1,900
)
 
$
5,453

 
LIQUIDITY AND CAPITAL RESOURCES
We have established liquidity and capital policies to support the successful execution of our business strategies, while ensuring ongoing and sufficient liquidity through the business cycle. We believe liquidity is of critical importance to the Company and especially important within E*TRADE Bank and our broker-dealer subsidiaries. The objective of our policies is to ensure that we can meet our corporate, banking and broker-dealer liquidity needs under both normal operating conditions and under periods of stress in the financial markets.
Liquidity
Our corporate liquidity needs are primarily driven by capital needs at E*TRADE Bank and E*TRADE Clearing as well as by the amount of principal and interest due on our corporate debt. Our banking and brokerage liquidity needs are driven primarily by the level and volatility of our customer activity. Management maintains a set of liquidity sources and monitors certain business trends and market metrics closely in an effort to ensure we have sufficient liquidity and to avoid dependence on other more expensive sources of funding.
Management believes the following are the key sources of liquidity that impact our ability to meet our liquidity needs: corporate cash, bank cash, deposits, securities lending, customer payables, unused FHLB borrowing capacity and the revolving credit facility at the parent company.

18


Consolidated Cash and Equivalents
The consolidated cash and equivalents balance decreased by $758 million to $1.0 billion at March 31, 2015 when compared to December 31, 2014. The majority of this balance was cash held in regulated subsidiaries, primarily E*TRADE Bank, outlined as follows (dollars in millions): 
 
March 31,
 
December 31,
 
March 31,
 
2015
 
2014
 
2014
Corporate cash
$
258

 
$
233

 
$
525

Bank cash(1)
606

 
1,523

 
1,036

E*TRADE Securities
134

 
N/A

 
N/A

International brokerage and other cash
27

 
27

 
24

Total consolidated cash and equivalents
$
1,025

 
$
1,783

 
$
1,585

(1)
E*TRADE Securities was moved from under E*TRADE Bank effective February 1, 2015 and we plan to move E*TRADE Clearing in the second half of 2015. At March 31, 2015, December 31, 2014 and March 31, 2014, bank cash included $131 million, $235 million and $224 million, respectively, of cash held by E*TRADE Clearing, which is a broker-dealer subsidiary of E*TRADE Bank. Bank cash also included $529 million and $366 million of cash held by E*TRADE Securities at December 31, 2014 and March 31, 2014, respectively.
Corporate cash is the primary source of liquidity at the parent company. We define corporate cash as cash held at the parent company as well as cash held in certain subsidiaries that can distribute cash to the parent company without any regulatory approval or notification. We believe 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 our regulated subsidiaries. Corporate cash can fluctuate in any given quarter and is impacted primarily by tax settlements, approval and timing of subsidiary dividends, debt service costs and other overhead cost sharing arrangements.
Corporate cash ended the first quarter of 2015 at $258 million, up from $233 million at December 31, 2014. Corporate cash included dividends of $75 million from E*TRADE Bank and $434 million from E*TRADE Securities to the parent company during the first quarter of 2015. We used $432 million of corporate cash along with the net proceeds from the issuance of $460 million of corporate debt to redeem $800 million in aggregate principal amount of our higher cost corporate debt. This transaction decreased our annual debt service costs from $80 million to $50 million and reduced our total corporate debt to $1.0 billion. We target corporate cash to cover at least two times our scheduled annual corporate debt service payments and scheduled maturities over the next 12 months. As such, our target is approximately $100 million as we do not have any corporate debt with scheduled maturities in the next 12 months.
The senior secured revolving credit facility enhances our ability to meet liquidity needs at the parent company. During the first quarter of 2015, we increased our revolving credit facility at the parent company by an additional $50 million to a total available line of credit of $250 million. We have the ability to borrow against this revolving credit facility for working capital and general corporate purposes. The revolving credit facility contains certain maintenance covenants, including the requirement for the parent company to maintain unrestricted cash of at least $100 million. At March 31, 2015, there was no outstanding balance under this credit facility. Additionally, the parent company had $369 million in net deferred tax assets, which will ultimately become sources of corporate cash as the parent company’s subsidiaries reimburse the parent company for the use of its deferred tax assets.
Deposits
Management believes that within deposits, sweep deposits are of particular importance as they are the most stable source of liquidity for E*TRADE Bank when compared to non-sweep deposits. While in recent periods we have transferred customer sweep deposits to third party banks that participate in our ESDA program as well as to third party money market funds, we maintain the ability to transfer the majority of these off-balance sheet deposits back to E*TRADE Bank with appropriate notification to the third party financial institutions and customer consent, as appropriate. During the first quarter of 2015, we converted approximately $15.1 billion of customer assets in the ESDA program to the new sweep deposit platform that will enable us to more efficiently manage our balance sheet size. During the first quarter of 2015, we utilized this platform to direct $1.3 billion of customer sweep deposits to our balance sheet. We also have the ability to generate liquidity in the form of additional deposits by raising the yield on our customer deposit products.
Refer to Other Sources of Liquidity within this section for information on additional sources of liquidity outside of deposits.

19


Liquidity Available from Subsidiaries
Liquidity available to us from our subsidiaries is limited by regulatory requirements. Loans by E*TRADE Bank to the parent company and its other non-bank subsidiaries are subject to various quantitative, arm’s length, collateralization and other requirements. E*TRADE Bank and its subsidiaries require regulatory approval prior to the payment of dividends to the parent company. As E*TRADE Securities is no longer a subsidiary of E*TRADE Bank, it can pay dividends to the parent company with proper regulatory notifications.
Other Sources of Liquidity
We rely on borrowed funds, from sources such as securities sold under agreements to repurchase and FHLB advances, to provide liquidity for E*TRADE Bank. Our ability to borrow these funds is dependent upon the continued availability of funding in the wholesale borrowings market. In addition, we can borrow from the Federal Reserve Bank’s discount window to meet short-term liquidity requirements, although it is not viewed as a primary source of funding. At March 31, 2015, E*TRADE Bank had approximately $2.6 billion and $0.9 billion in additional collateralized borrowing capacity with the FHLB and the Federal Reserve Bank, respectively.
We rely on securities lending, customer payables, an unsecured line of credit with E*TRADE Bank and uncommitted lines of credit with unaffiliated banks to provide liquidity and finance margin lending for E*TRADE Clearing. E*TRADE Clearing's uncommitted lines of credit are subject to approval when utilized and there were no outstanding balances at March 31, 2015.
Capital Resources
Executing on our capital plan remains a priority for us. We submitted an initial capital plan to the OCC and Federal Reserve in 2012 and have subsequently updated the plan annually. The plan includes our five-year business strategy; forecasts of our business results and capital ratios; capital distribution plans in current and adverse operating conditions; and internally developed stress tests. We believe we have made important progress since we laid out our capital plan, as evidenced by:
$550 million in quarterly dividends that our regulators approved from E*TRADE Bank since 2013, including $75 million during the three months ended March 31, 2015; and
Regulatory approval to operate E*TRADE Bank at a 9.0% Tier 1 leverage ratio.
We also received regulatory approval to move our U.S. broker-dealers, E*TRADE Securities and E*TRADE Clearing, out from under E*TRADE Bank. E*TRADE Securities was moved from under E*TRADE Bank in February 2015 and subsequently paid a dividend of $434 million to the parent company. We plan to move E*TRADE Clearing out from under E*TRADE Bank in the second half of 2015, at which point it will require the necessary standalone capital and liquidity levels to operate. We are taking the necessary capital and liquidity steps and are focused on establishing these levels prior to moving E*TRADE Clearing out from under E*TRADE Bank. The revised organizational structure provides increased capital flexibility as it enables us to dividend excess regulatory capital at our broker-dealers to the parent company. In addition, starting in the second quarter of 2015, we plan to request regulatory approval to issue a dividend each quarter equivalent to E*TRADE Bank's net income from the previous quarter.
Bank Capital Requirements
The Dodd-Frank Act requires all companies, including savings and loan holding companies, that directly or indirectly control an insured depository institution to serve as a source of strength for the institution. The implementation of holding company capital requirements impacted us as the parent company was not previously subject to regulatory capital requirements. These requirements became effective for us during the first quarter of 2015, subject to a phase-in period for certain requirements over several years, as further explained below. We are currently in compliance with the Basel III capital requirements now applicable to us and we have no plans to raise additional capital as a result of these new requirements.
In July 2013, the U.S. Federal banking agencies finalized a rule to implement Basel III in the U.S., which provides an updated framework for the calculation of a banking organization’s regulatory capital and risk-weighted assets. The Basel III rule established Common Equity Tier 1 capital as a new tier of capital, raised the minimum thresholds for required capital, increased minimum required risk-based capital ratios, narrowed the eligibility criteria for regulatory capital instruments, provided for new regulatory capital deductions and adjustments, and modified methods for calculating risk-weighted assets (the denominator of risk-based capital ratios) by, among other things, strengthening counterparty credit risk capital requirements.
The Basel III final rule also introduces a capital conservation buffer that limits a banking organization’s ability to make capital distributions and discretionary bonus payments to executive officers if a banking organization fails to maintain a Common Equity Tier 1 capital conservation buffer of more than 2.5%, on a fully phased-in basis, of total risk-weighted assets above each of the following minimum risk-based capital ratio requirements: Common Equity Tier 1 (4.5%), Tier 1 (6.0%), and

20


total risk-based capital (8.0%). This requirement will begin to take effect on January 1, 2016, and will be fully phased in by 2019. Certain new regulatory deductions and adjustments are subject to a phase-in period over the next four years, beginning at 40% in 2015 and fully implemented at 100% in 2018.
Several elements of the final rule had a meaningful impact to us. The vast majority of our margin receivables qualified for 0% risk-weighting and we included a larger portion of our deferred tax assets in regulatory capital, both having a favorable impact on our current capital ratios. A portion of this benefit was offset as we are phasing out trust preferred securities from the parent company's capital. In addition, in the first quarter of 2015 we made the one-time permanent election to exclude accumulated other comprehensive income from the calculation of Common Equity Tier 1 capital.
At March 31, 2015, our regulatory capital ratios for E*TRADE Bank were well above the minimum ratios required to be "well capitalized." E*TRADE Bank's capital ratios are calculated as follows (dollars in millions):
 
March 31,
 
December 31,
 
March 31,
 
2015(1)
 
2014(1)
 
2014(1)
E*TRADE Bank shareholders’ equity(2)
$
4,165

 
$
6,102

 
$
5,857

Deduct:
 
 
 
 
 
Losses in other comprehensive income on available-for-sale debt securities and cash flow hedges, net of tax
(216
)
 
(255
)
 
(384
)
Goodwill and other intangible assets, net of deferred tax liabilities
38

 
1,467

 
1,513

Disallowed deferred tax assets
66

 
342

 
532

E*TRADE Bank Tier 1 capital/Common Equity Tier 1 capital(2)(3)
4,277

 
4,548

 
4,196

Add:
 
 
 
 
 
Allowable allowance for loan losses
130

 
224

 
233

E*TRADE Bank total capital(2)
$
4,407

 
$
4,772

 
$
4,429

 
 
 
 
 
 
E*TRADE Bank average/total assets(2)(4)
$
43,622

 
$
44,672

 
$
45,323

Deduct:
 
 
 
 
 
Disallowed deferred tax assets
66

 
342

 
532

Goodwill and other intangible assets, net of deferred tax liabilities
38

 
1,467

 
1,513

Other

 
(13
)
 
(102
)
E*TRADE Bank adjusted average/total assets for leverage capital purposes(1)
$
43,518

 
$
42,876

 
$
43,380

 
 
 
 
 
 
E*TRADE Bank total risk-weighted assets(2)(5)
$
10,095

 
$
17,717

 
$
18,439

 
 
 
 
 
 
E*TRADE Bank Tier 1 leverage ratio (Tier 1 capital / Adjusted total assets for leverage capital purposes)(2)
9.8
%
 
10.6
%
 
9.7
%
E*TRADE Bank Tier 1 capital / Total risk-weighted assets(2)
42.4
%
 
25.7
%
 
22.8
%
E*TRADE Bank total capital / Total risk-weighted assets(2)
43.7
%
 
26.9
%
 
24.0
%
E*TRADE Bank Common Equity Tier 1 capital(3) / Total risk-weighted assets(2)
42.4
%
 
25.7
%
 
22.8
%
 
(1)
Due to the change in regulatory requirements described above, the 2015 ratios were calculated under Basel III requirements and the 2014 ratios were calculated under Basel I requirements.
(2)
Amounts presented for E*TRADE Bank in 2015 exclude E*TRADE Securities as of February 1, 2015, the date the subsidiary was transferred out from under E*TRADE Bank.
(3)
Common Equity Tier 1 capital under Basel III replaced Tier 1 common capital. Prior to Basel III becoming effective, E*TRADE Bank’s Tier 1 common ratio was a non-GAAP measure that management believes is an important measure of capital strength.
(4)
As of March 31, 2015, E*TRADE Bank’s Tier 1 Leverage ratio was calculated using average total assets. Prior to Basel III becoming effective for E*TRADE Bank, E*TRADE Bank’s Tier 1 Leverage ratio was calculated using end of period total assets.
(5)
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. Due to the change in regulatory requirements described above, in 2015 the vast majority of our margin receivables qualified for 0% risk-weighting.


21


At March 31, 2015, our regulatory capital ratios for E*TRADE Financial were well above the minimum ratios required to be "well capitalized." E*TRADE Financial's capital ratios are calculated as follows (dollars in millions):
.
 
March 31,
 
December 31,
 
March 31,
 
2015(1)
 
2014(1)
 
2014(1)
E*TRADE Financial shareholders’ equity
$
5,453

 
$
5,375

 
$
5,032

Deduct:
 
 
 
 
 
Losses in other comprehensive income on available-for-sale debt securities and cash flow hedges, net of tax
(216
)
 
(255
)
 
(384
)
Goodwill and other intangible assets, net of deferred tax liabilities
1,451

 
1,592

 
1,638

Disallowed deferred tax assets
645

 
1,008

 
1,138

Other(2)
(108
)
 

 

E*TRADE Financial Common Equity Tier 1 capital(3)
3,681

 
3,030

 
2,640

Add:
 
 
 
 
 
Qualifying restricted core capital elements (trust preferred
securities)(2)

 
433

 
433

E*TRADE Financial Tier 1 capital
3,681

 
3,463

 
3,073

Add:
 
 
 
 
 
Allowable allowance for loan losses
140

 
223

 
232

Non-qualifying capital instruments subject to phase-out (trust preferred securities)(2)
325

 

 

E*TRADE Financial total capital
$
4,146

 
$
3,686

 
$
3,305

 
 
 
 
 
 
E*TRADE Financial average total assets
$
45,931

 
$
45,445

 
$
46,382

Deduct:
 
 
 
 
 
Goodwill and other intangible assets, net of deferred tax liabilities
1,451

 
1,592

 
1,638

Disallowed deferred tax assets
645

 
1,008

 
1,138

Other(2)
(108
)
 

 

E*TRADE Financial adjusted average total assets for leverage capital purposes
$
43,943