E*TRADE FINANCIAL Corporation Announces Record First Quarter Results; Raises 2006 Earnings Guidance

NEW YORK, April 19 /PRNewswire-FirstCall/ -- E*TRADE FINANCIAL Corporation today announced record results for its first quarter ended March 31, 2006, reporting net income of $142 million, or $0.33 per share compared to $92 million, or $0.24 per share a year ago. As previously indicated, the results in the first quarter of 2006 included approximately $22 million, or $0.03 per share, of acquisition-related integration expenses. Excluding these expenses, the Company generated earnings of $0.36 per share. Total net revenue for the first quarter increased 43 percent year over year to a record $598 million. Net interest income after provision for loan losses increased 79 percent year over year to $315 million -- representing 53 percent of total net revenue. Enterprise net interest spread increased to 286 basis points as the Company continued to benefit from strong organic growth in customer cash and the integration of customer cash and credit from its recent acquisitions. Non-interest income increased 17 percent year over year to $284 million with higher commission-related revenue and lower gain on sales of loans and securities. Total client assets increased to a record $193 billion, including a record $30 billion in total customer cash and deposits. Total DARTs increased to 181,160 with continued strength from international and options-related activity.

The Company also raised its 2006 earnings guidance range to $1.35 - $1.50 per share from the previous range of $1.30 - $1.45. As previously indicated, this range excludes $0.05 per share of acquisition-related integration expenses. Of this $0.05, $0.03 was realized in the first quarter and the Company expects to realize an additional $0.01 in each of the second and third quarters. Including these expenses, the Company now expects to earn $1.30 - $1.45 per share in 2006, up from the previous range of $1.25 - $1.40.

"Our operational focus and financial discipline continue to drive increased customer engagement and unlock the full value of our integrated model," said Mitchell H. Caplan, Chief Executive Officer, E*TRADE FINANCIAL Corporation. "Given the strength of our first quarter results and the growth rates in customer cash, credit and assets, we are raising our 2006 earnings outlook today. Having completed the conversion of Harrisdirect and as we prepare to convert BrownCo in early May, we remain extremely encouraged by the trends we are experiencing with respect to economic attrition from these new customers. We will provide further updates to our earnings outlook in July or as we see necessary."

Other selected highlights from the first quarter of 2006: * Generated $1.6 billion in organic growth of customer cash and deposits * Recorded a 58 percent increase in international DARTs year over year * Increased options trades to 12 percent of U.S. DARTs, up from 11 percent in the fourth quarter and 9 percent in the year ago period * Deleveraged the balance sheet through the call/redemption of subordinated convertible notes * Launched the E*TRADE Complete(TM) Protection Guarantee providing complete fraud, bill pay and privacy protection to all customers * Launched the Intelligent Lending Optimizer * Introduced the E*TRADE Complete(TM) IRA * Enhanced investment tools and services available to retail customers including access to free research from industry-leading independent research providers such as Reuters and Standard & Poor's * Opened a new retail center in Seattle, increasing total center locations to 17 nationwide

Historical monthly metric data from January 2003 to March 2006 can be found on the E*TRADE FINANCIAL investor relations site at http://www.etrade.com/.

About E*TRADE FINANCIAL

The E*TRADE FINANCIAL family of companies provides financial services including trading, investing, banking and lending for Retail and Institutional customers. Securities products and services are offered by E*TRADE Securities LLC (Member NASD/SIPC). Bank and lending products and services are offered by E*TRADE Bank, a Federal savings bank, Member FDIC, or its subsidiaries.

Important Notice

E*TRADE FINANCIAL and the E*TRADE FINANCIAL logo are registered trademarks or trademarks of E*TRADE FINANCIAL Corporation. The statements contained in this news release that are forward-looking are based on current expectations that are subject to a number of uncertainties and risks, and actual results may differ materially. The uncertainties and risks include, but are not limited to, changes in market activity, anticipated increases in the rate of new customer acquisition, the conversion of new visitors to the site to customers, the activity of customers and assets held at the institution, seasonality, the development and enhancement of products and services, competitive pressures (including price competition), system failures, economic and political conditions, changes in consumer behavior and the introduction of competing products having technological and/or other advantages. Further information about these risks and uncertainties can be found in the information included in the annual reports previously filed by E*TRADE FINANCIAL Corporation with the SEC on Form 10-K (including information under the caption "Risk Factors") and quarterly reports on Form 10-Q.

E*TRADE FINANCIAL Media Contact Pam Erickson E*TRADE FINANCIAL Corporation 617-296-6080 pam.erickson@etrade.com E*TRADE FINANCIAL Investor Relations Contact Adam Townsend E*TRADE FINANCIAL Corporation 703-236-8719 adam.townsend@etrade.com Financial Statements E * T R A D E F I N A N C I A L C O R P O R A T I O N A N D S U B S I D I A R I E S C o n s o l i d a t e d S t a t e m e n t s o f I n c o m e (in thousands, except per share amounts) (unaudited) Three Months Ended March 31, December 31, March 31, 2006 2005 2005 Revenues: Interest income $594,294 $501,880 $336,521 Interest expense (269,505) (243,632) (148,791) Net interest income 324,789 258,248 187,730 Provision for loan losses (10,197) (16,070) (12,040) Net interest income after provision for loan losses 314,592 242,178 175,690 Commissions 175,869 135,723 109,894 Service charges and fees 31,990 34,675 33,293 Principal transactions 30,692 23,789 30,001 Gain on sales of loans and securities, net 11,628 14,737 45,015 Other revenues 33,578 27,823 23,504 Total non-interest income 283,757 236,747 241,707 Total net revenues 598,349 478,925 417,397 Expenses excluding interest: Compensation and benefits 115,988 100,331 92,460 Clearing and servicing 63,288 57,016 42,979 Advertising and market development 34,781 31,683 26,582 Communications 31,408 27,835 17,038 Professional services 27,755 24,248 19,702 Depreciation and amortization 18,789 21,671 17,076 Occupancy and equipment 20,504 18,416 17,452 Amortization of other intangibles 11,332 30,014 4,983 Facility restructuring and other exit charges (253) (30,512) 557 Other 31,005 (6,057) 26,372 Total expenses excluding interest 354,597 274,645 265,201 Income before other income (loss), income taxes and discontinued operations 243,752 204,280 152,196 Other income (loss): Corporate interest income 1,961 3,247 1,962 Corporate interest expense (40,508) (36,981) (11,567) Gain on sale and impairment of investments 17,616 14,972 15,537 Loss on early extinguishment of debt (135) -- -- Equity in income (losses) of investments and venture funds (1,007) (1,039) 2,641 Total other income (loss) (22,073) (19,801) 8,573 Income before income taxes and discontinued operations 221,679 184,479 160,769 Income tax expense 78,695 58,959 58,511 Minority interest in subsidiaries -- 9 52 Income from continuing operations 142,984 125,511 102,206 Discontinued operations, net of tax: Loss from discontinued operations (513) (2,595) (10,212) Gain on disposal of discontinued operations -- 6,444 -- Net gain (loss) from discontinued operations (513) 3,849 (10,212) Net income $142,471 $129,360 $91,994 Basic income per share from continuing operations $0.34 $0.32 $0.28 Basic income (loss) per share from discontinued operations (0.00) 0.01 (0.03) Basic net income per share $0.34 $0.33 $0.25 Diluted income per share from continuing operations $0.33 $0.31 $0.27 Diluted income (loss) per share from discontinued operations (0.00) 0.01 (0.03) Diluted net income per share $0.33 $0.32 $0.24 Shares used in computation of per share data: Basic 414,679 387,055 366,130 Diluted 432,302 400,717 378,734 E * T R A D E F I N A N C I A L C O R P O R A T I O N A N D S U B S I D I A R I E S C o n s o l i d a t e d B a l a n c e S h e e t s (dollars in thousands) (unaudited) March 31, December 31, 2006 2005 ASSETS Cash and equivalents $823,155 $844,188 Cash and investments required to be segregated under Federal or other regulations 1,096,396 610,174 Trading securities 188,667 146,657 Available-for-sale mortgage-backed and investment securities 13,234,261 12,763,438 Loans held-for-sale, net 80,612 87,371 Brokerage receivables, net 8,686,719 7,174,175 Loans receivable, net 19,548,678 19,424,895 Property and equipment, net 300,928 299,256 Goodwill 2,019,423 2,003,456 Other intangibles, net 515,856 532,108 Other assets 890,198 681,968 Total assets $47,384,893 $44,567,686 LIABILITIES AND SHAREHOLDERS' EQUITY Deposits $19,241,533 $15,948,015 Securities sold under agreements to repurchase 9,735,251 11,101,542 Brokerage payables 9,287,511 7,342,208 Other borrowings 2,990,249 4,206,996 Senior notes 1,396,121 1,401,947 Convertible subordinated notes 148,848 185,165 Mandatory convertible notes 436,836 435,589 Accounts payable, accrued and other liabilities 530,523 546,664 Total liabilities 43,766,872 41,168,126 Shareholders' equity: Common stock, $0.01 par value, shares authorized: 600,000,000; issued and outstanding: 420,035,982 at March 31, 2006 and 416,582,164 at December 31, 2005 4,200 4,166 Additional paid-in-capital 3,055,444 2,990,676 Retained earnings 722,901 580,430 Accumulated other comprehensive loss (164,524) (175,712) Total shareholders' equity 3,618,021 3,399,560 Total liabilities and shareholders' equity $47,384,893 $44,567,686 SEGMENT REPORTING Three Months Ended March 31, 2006 Institu- Elimin- Retail tional ations(2) Total Revenues: (in thousands) Interest income $318,202 $453,476 $(177,384) $594,294 Interest expense (112,282) (334,607) 177,384 (269,505) Net interest income 205,920 118,869 -- 324,789 Provision for loan losses -- (10,197) -- (10,197) Net interest income after provision for loan losses 205,920 108,672 -- 314,592 Commissions 135,864 40,005 -- 175,869 Service charges and fees 26,924 5,066 -- 31,990 Principal transactions -- 30,692 -- 30,692 Gain on sales of loans and securities, net 8,727 2,901 -- 11,628 Other revenues 35,719 1,836 (3,977) 33,578 Total non-interest income 207,234 80,500 (3,977) 283,757 Total net revenues 413,154 189,172 (3,977) 598,349 Expenses excluding interest: Compensation and benefits 71,207 44,781 -- 115,988 Clearing and servicing 17,365 49,900 (3,977) 63,288 Advertising and market development 33,055 1,726 -- 34,781 Communications 28,483 2,925 -- 31,408 Professional services 22,318 5,437 -- 27,755 Depreciation and amortization 14,568 4,221 -- 18,789 Occupancy and equipment 18,987 1,517 -- 20,504 Amortization of other intangibles 9,873 1,459 -- 11,332 Facility restructuring and other exit charges 375 (628) -- (253) Other 19,589 11,416 -- 31,005 Total expenses excluding interest 235,820 122,754 (3,977) 354,597 Segment income $177,334 $66,418 $-- $243,752 Three Months Ended December 31, 2005 Institu- Elimin- Retail tional ations(2) Total Revenues: (in thousands) Interest income $221,002 $411,979 $(131,101) $501,880 Interest expense (78,362) (296,371) 131,101 (243,632) Net interest income 142,640 115,608 -- 258,248 Provision for loan losses -- (16,070) -- (16,070) Net interest income after provision for loan losses 142,640 99,538 -- 242,178 Commissions 103,895 31,828 -- 135,723 Service charges and fees 29,419 5,256 -- 34,675 Principal transactions -- 23,789 -- 23,789 Gain on sales of loans and securities, net 11,959 2,778 -- 14,737 Other revenues 30,662 1,971 (4,810) 27,823 Total non-interest income 175,935 65,622 (4,810) 236,747 Total net revenues 318,575 165,160 (4,810) 478,925 Expenses excluding interest: Compensation and benefits 60,558 39,773 -- 100,331 Clearing and servicing 17,271 44,555 (4,810) 57,016 Advertising and market development 30,074 1,609 -- 31,683 Communications 25,109 2,726 -- 27,835 Professional services 18,334 5,914 -- 24,248 Depreciation and amortization 17,278 4,393 -- 21,671 Occupancy and equipment 16,167 2,249 -- 18,416 Amortization of other intangibles 6,968 23,046 -- 30,014 Facility restructuring and other exit charges (32,584) 2,072 -- (30,512) Other (18,786) 12,729 -- (6,057) Total expenses excluding interest 140,389 139,066 (4,810) 274,645 Segment income $178,186 $26,094 $-- $204,280 Three Months Ended March 31, 2005 Institu- Elimin- Retail tional ations(2) Total Revenues: (in thousands) Interest income $135,097 $290,277 $(88,853) $336,521 Interest expense (43,184) (194,298) 88,691 (148,791) Net interest income 91,913 95,979 (162) 187,730 Provision for loan losses -- (12,040) -- (12,040) Net interest income after provision for loan losses 91,913 83,939 (162) 175,690 Commissions 80,688 29,206 -- 109,894 Service charges and fees 29,575 3,718 -- 33,293 Principal transactions -- 29,840 161 30,001 Gain on sales of loans and securities, net 16,378 28,637 -- 45,015 Other revenues 27,522 4,093 (8,111) 23,504 Total non-interest income 154,163 95,494 (7,950) 241,707 Total net revenues 246,076 179,433 (8,112) 417,397 Expenses excluding interest: Compensation and benefits 58,136 34,324 -- 92,460 Clearing and servicing 9,400 41,691 (8,112) 42,979 Advertising and market development 23,187 3,395 -- 26,582 Communications 14,413 2,625 -- 17,038 Professional services 14,429 5,273 -- 19,702 Depreciation and amortization 14,876 2,200 -- 17,076 Occupancy and equipment 13,523 3,929 -- 17,452 Amortization of other intangibles 2,613 2,370 -- 4,983 Facility restructuring and other exit charges (335) 892 -- 557 Other 14,575 11,797 -- 26,372 Total expenses excluding interest 164,817 108,496 (8,112) 265,201 Segment income $81,259 $70,937 $-- $152,196 KEY PERFORMANCE METRICS(3) Qtr Qtr ended ended 3/31/06 3/31/06 Qtr Qtr vs. Qtr Qtr vs. Qtr ended ended ended ended ended CORPORATE METRICS 3/31/06 12/31/05 12/31/05 3/31/05 3/31/05 Operating margin %(1) Consolidated 41 % 43 % (2)% 36 % 5 % Retail 43 % 56 % (13)% 33 % 10 % Institutional 35 % 16 % 19 % 40 % (5)% Employees 3,823 3,439 11 % 3,273 17 % Consultants and other 702 497 41 % 515 36 % Total headcount 4,525 3,936 15 % 3,788 19 % Revenue per headcount(4) $132,232 $127,396 4 % $110,189 20 % Revenue per compensation and benefits Dollar $5.16 $4.77 8 % $4.51 14 % Book value per share $8.61 $8.16 6 % $6.20 39 % Tangible book value per share $2.58 $2.07 25 % $4.77 (46)% Cash & equivalents ($MM) $823.2 $844.2 (2)% $721.0 14 % Free cash ($MM) $650.7 $542.3 20 % $689.9 (6)% Enterprise net interest spread (basis points) 286 257 11 % 242 18 % Enterprise interest-earning assets, average ($MM)(5) $41,343 $35,619 16 % $29,081 42 % Earnings before interest, taxes, depreciation & amortization ($MM) Net income from continuing operations $143.0 $125.5 14 % $102.2 40 % Tax expense 78.7 59.0 33 % 58.5 35 % Depreciation & amortization 30.1 51.7 (42)% 22.1 37 % Corporate interest expense 40.5 37.0 10 % 11.6 250 % EBITDA $292.3 $273.1 7 % $194.3 50 % Interest coverage 7.2 7.4 (2)% 16.8 (57)% RETAIL METRICS Trading days 62.0 62.5 (1)% 61.0 2 % Daily Average Revenue Trades (DARTs) - US 159,199 113,017 41 % 74,133 115 % - International 21,960 15,391 43 % 13,942 58 % Total DARTs 181,159 128,408 41 % 88,075 106 % Total retail trades (MM) 11.2 8.0 40 % 5.4 109 % Retail average commission per trade $12.10 $12.95 (7)% $15.02 (19)% End of period margin debt ($B) $6.81 $6.56 4 % $2.24 205 % Average margin debt ($B) $6.63 $4.40 51 % $2.21 200 % Gross new trading/ investing accounts 190,027 782,052 (76)% 133,951 42 % Gross new deposit/ lending accounts 80,632 96,823 (17)% 58,454 38 % Inactive accounts (155,680) (169,065) 8 % (100,921) (54)% Customer closed accounts (64,323) (118,948) 46 % (56,239) (14)% Net new retail accounts 50,656 590,862 (91)% 35,245 44 % End of period trading/ investing accounts 3,634,803 3,617,778 0 % 2,975,744 22 % End of period deposit/ lending accounts 699,631 666,000 5 % 642,264 9 % End of period retail accounts 4,334,434 4,283,778 1 % 3,618,008 20 % Net new customers (14,671) 484,867 N.M. 8,584 N.M. End of period total retail customers 3,404,602 3,419,273 0 % 2,896,025 18 % End of period assets per customer $56,569 $52,193 8 % $32,562 74 % Consolidated net revenue per customer(6) $176 $144 22 % $144 22 % Consolidated segment income per customer(6) $72 $61 17 % $53 36 % Products per customer 2.1 2.1 0 % 1.9 9 % Total Retail Client Assets ($B) Security holdings $127.8 $117.6 9 % $50.7 152 % Cash (including money market funds) 11.5 13.3 (14)% 6.3 83 % Unexercised options (vested) 34.4 32.1 7 % 25.2 37 % Client assets in trading/ investing accounts 173.7 163.0 7 % 82.2 111 % Sweep Deposit Account 10.1 7.7 31 % 6.3 60 % Transaction accounts 5.7 5.1 12 % 3.7 54 % CDs 3.1 2.7 15 % 2.1 48 % Client assets in deposit accounts 18.9 15.5 22 % 12.1 56 % Total retail client assets $192.6 $178.5 8 % $94.3 104 % Total customer cash and deposits $30.4 $28.8 6 % $18.4 66 % Unexercised options (unvested) ($B) $21.8 $19.7 11 % $14.8 47 % INSTITUTIONAL METRICS Market Making Equity shares traded (MM) 90,871 33,264 173 % 57,385 58 % Average revenue capture per 1,000 equity shares $0.277 $0.545 (49)% $0.329 (16)% % of Bulletin Board equity shares to total equity shares 94.1% 86.6% 8 % 93.3% 1 % Enterprise Loans Receivable Detail ($MM) Mortgage and home equity loans, net $15,755 $15,517 2 % $8,969 76 % Margin loans 6,814 6,560 4 % 2,236 205 % Consumer loans, net 3,777 3,907 (3)% 4,257 (11)% Other 97 88 10 % 12 708 % Total enterprise loans receivable, net $26,443 $26,072 1 % $15,474 71 % Credit Quality and Reserve Metrics Net charge-offs as a % of average held-for-investment loans, net (annualized) 0.18 % 0.27 % (0.09)% 0.26 % (0.08)% Provision as a % of average held-for-investment loans, net (annualized) 0.21 % 0.34 % (0.13)% 0.40 % (0.19)% Allowance as a % of total ending gross held-for- investment loans 0.33 % 0.32 % 0.01 % 0.40 % (0.07)% Total non-performing loans, net, as a % of total gross held-for-investment loans 0.21 % 0.18 % 0.03 % 0.18 % 0.03 % Total loan loss allowance as a % of total non-performing loans, net 158 % 183 % (24)% 228 % (70)% Tier 1 Capital Ratio(7) 6.03 % 5.92 % 0.11 % 6.06 % (0.03)% Risk Weighted Capital Ratio(7) 11.21 % 10.94 % 0.27 % 11.27 % (0.06)% ACTIVITY IN ALLOWANCE FOR LOAN LOSSES Three Months Ended March 31, 2006 Mortgage Consumer Total (in thousands) Allowance for loan losses, ending 12/31/05 $30,907 $32,379 $63,286 Provision for loan losses 3,009 7,188 10,197 Charge-offs, net (2,515) (6,459) (8,974) Allowance for loan losses, ending 3/31/06 $31,401 $33,108 $64,509 AVERAGE ENTERPRISE BALANCE SHEET DATA ($ in thousands) Three Months Ended March 31, 2006 Average Interest Average Balance Inc./Exp. Yield/Cost Average interest-earning assets: Loans, net(8) $19,571,064 $281,270 5.75% Margin loans 6,477,585 104,904 6.57% Mortgage-backed and related available-for-sale securities 10,555,616 125,504 4.76% Available-for-sale investment securities 2,519,826 37,389 5.94% Trading securities 138,660 2,648 7.64% Cash and cash equivalents(9) 1,549,180 15,899 4.16% Stock borrow and other 530,629 7,730 5.91% Total average interest- earning assets $41,342,560 $575,344 5.56% Average interest-bearing liabilities: Retail deposits $18,120,089 $90,505 2.03% Brokered certificates of deposit 420,600 4,113 3.97% Free credits 6,759,733 16,373 0.98% Repurchase agreements and other borrowings 9,855,018 111,520 4.53% FHLB advances 3,054,111 32,539 4.26% Stock loan and other 669,753 4,197 2.54% Total average interest- bearing liabilities $38,879,304 $259,247 2.70% Enterprise net interest spread(3) $316,097 2.86% Three Months Ended December 31, 2005 Average Interest Average Balance Inc./Exp. Yield/Cost Average interest-earning assets: Loans, net(8) $18,370,193 $259,527 5.65% Margin loans 3,500,867 58,333 6.61% Mortgage-backed and related available-for-sale securities 10,259,119 116,417 4.54% Available-for-sale investment securities 1,999,562 27,926 5.59% Trading securities 148,957 2,711 7.28% Cash and cash equivalents(9) 889,445 7,494 3.34% Stock borrow and other 450,566 5,984 5.27% Total average interest- earning assets $35,618,709 $478,392 5.37% Average interest-bearing liabilities: Retail deposits $14,564,378 $69,062 1.88% Brokered certificates of deposit 512,379 4,862 3.76% Free credits 3,539,020 7,173 0.80% Repurchase agreements and other borrowings 10,472,887 112,845 4.31% FHLB advances 3,954,935 40,137 3.97% Stock loan and other 497,222 3,209 2.56% Total average interest- bearing liabilities 33,540,821 $237,288 2.80% Enterprise net interest spread(3) $241,104 2.57% Three Months Ended March 31, 2005 Average Interest Average Balance Inc./Exp. Yield/Cost Average interest-earning assets: Loans, net(8) $12,185,231 $153,188 5.03% Margin loans 2,211,434 30,466 5.59% Mortgage-backed and related available-for-sale securities 8,909,307 88,974 3.99% Available-for-sale investment securities 3,625,243 43,392 4.79% Trading securities 526,644 4,511 3.43% Cash and cash equivalents(9) 1,226,527 8,021 2.65% Stock borrow and other 396,416 4,022 4.12% Total average interest- earning assets $29,080,802 $332,574 4.57% Average interest-bearing liabilities: Retail deposits $11,865,690 $40,231 1.38% Brokered certificates of deposit 288,635 2,221 3.12% Free credits 2,844,612 2,053 0.29% Repurchase agreements and other borrowings 10,073,089 82,465 3.27% FHLB advances 1,961,644 17,944 3.66% Stock loan and other 427,848 945 0.90% Total average interest- bearing liabilities $27,461,518 $145,859 2.15% Enterprise net interest spread(3) $186,715 2.42% RECONCILIATION FROM ENTERPRISE NET INTEREST INCOME TO CONSOLIDATED NET INTEREST INCOME Three Months ended March 31, December 31, March 31, 2006 2005 2005 (in thousands) Enterprise net interest income(5) $316,097 $241,104 $186,715 Less: Taxable equivalent adjustment(10) (3,392) (2,656) (2,598) Plus: Stock conduit, net(11) 262 286 223 Plus: Customer cash held by others(12) 11,822 19,514 3,390 Consolidated net interest income $324,789 $258,248 $187,730 SUPPLEMENTAL INFORMATION AND ENDNOTES Explanation of Non-GAAP Measures and Certain Metrics

In order to better assess the Company's financial operating results, management believes consolidated operating margin, free cash, EBITDA and interest coverage are appropriate measures for evaluating the operating and liquidity performance of the Company. We believe that the elimination of certain items from these measures is helpful to analysts and investors who may wish to use some or all of this information to analyze our current performance, prospects and valuation. Our management uses non-GAAP information internally to evaluate our operating performance and in formulating our budget for future periods.

Consolidated Operating Margin

Consolidated operating margin is defined as income before other income, income taxes, discontinued operations and cumulative effect of accounting change divided by net revenues. Operating margin for Retail and Institutional is based on segment results. Our consolidated statements of operations contain a reconciliation of income before other income, income taxes, discontinued operations and cumulative effect of accounting change to net income.

Free Cash

Free cash as reported by the Company represents cash held at Parent and non-Bank or Brokerage subsidiaries less discretionary reserves plus excess capital at Bank and Brokerage after regulatory capital requirements and the Company's own regulatory capital guidelines. The Company believes that free cash is a useful measure of the Company's liquidity as it excludes cash reflected on the balance sheet that may not be freely available to the Company.

EBITDA

EBITDA represents net income from continuing operations before corporate interest expense, taxes and depreciation and amortization. Management believes that EBITDA provides a useful additional measure of our performance by excluding certain non-cash charges and expenses that are not directly related to the performance of our business.

Interest Coverage

Interest coverage represents EBITDA divided by corporate interest expense. Management believes that by excluding the charges and expenses that are excluded from EBITDA, interest coverage provides a useful additional measure of our ability to continue to meet our interest obligations and our liquidity.

It is important to note these metrics and other non-GAAP measures may involve judgment by management and should be considered in addition to, not as a substitute for, or superior to, net income, consolidated statements of cash flows, or other measures of financial performance prepared in accordance with GAAP. For complete information on the items excluded from these non-GAAP measures, please see our financial statements and "Management's Discussion and Analysis of Results of Operations and Financial Condition" that will be included in the periodic report we expect to file with the SEC with respect to the financial periods discussed herein.

(1) Operating margin is defined as income before other income, income taxes, discontinued operations and cumulative effect of accounting change ("segment income") divided by net revenues. Operating margin for Retail and Institutional is based on segment results.

(2) Reflects elimination of transactions between Retail and Institutional segments, which include deposit transfer pricing, servicing and order flow rebates.

(3) Amounts and percentages may not calculate due to rounding.

(4) Total headcount in the Q405 calculation was adjusted to reflect the contribution of BrownCo employees for only one month in the quarter.

(5) Enterprise net interest income is taxable equivalent consolidated net interest income excluding corporate interest income and expense, stock conduit interest income and expense and interest on customer cash held by external parties.

(6) Total retail customers in the Q405 calculations were adjusted to reflect the contribution of BrownCo customers for only one month in the quarter.

(7) Q106 estimate. (8) Excludes loans to customers on margin. (9) Includes segregated cash balances. (10) Gross-up for tax-exempt securities.

(11) Net interest from average stock conduit assets of $0.8 billion, $0.7 billion and $0.5 billion for the quarters ended March 31, 2006, December 31, 2005 and March 31, 2005, respectively.

(12) Includes interest earned on customer assets of $3.6 billion, $4.7 billion and $3.0 billion for the quarters ended March 31, 2006, December 31, 2005 and March 31, 2005, respectively, held outside E*TRADE FINANCIAL, including third party money market funds and sweep deposit accounts at unaffiliated broker-dealers.