NEW YORK--(BUSINESS WIRE)--E*TRADE Financial Corporation (NASDAQ:ETFC)

Second Quarter Results

• Net income of $133 million, or $0.48 per diluted share
• Total net revenue of $474 million
• Allowance for loan losses of $293 million resulting in a benefit to provision for loan losses of $35 million
• Total non-interest expense of $295 million
• Daily Average Revenue Trades (DARTs) of 152,000
• End of period margin receivables of $6.8 billion
• Net new brokerage accounts of 23,000 and an annualized attrition rate of 8.3 percent
• Net new brokerage assets of $1.6 billion; end of period total customer assets of $286 billion
• Utilized $151 million to repurchase 5.9 million shares at an average price of $25.64, bringing the total utilization under the Company’s program to $502 million

E*TRADE Financial Corporation (NASDAQ:ETFC) today announced results for its second quarter ended June 30, 2016, reporting net income of $133 million, or $0.48 per diluted share. This compares to net income of $153 million, or $0.53 per diluted share, in the prior quarter which includes a $31 million(1) income tax benefit related to the release of valuation allowances against certain state deferred tax assets. This also compares to net income of $292 million, or $0.99 per diluted share, in the second quarter of 2015 which includes a $220 million(1) income tax benefit related to the settlement of an IRS examination. Total net revenue of $474 million increased from $472 million in the prior quarter and $429 million in the second quarter of 2015.

“The second quarter was positive from several perspectives as our core business performed steadily, and we continued to deploy capital to the benefit of our owners,” said Paul Idzik, Chief Executive Officer. “The quarter closed in a frenzy of market activity that impelled a single-day record of net buying as customers seized opportunities following sharp market declines. As part of our effort to deepen engagement with our customers, we raised the bar with the launch of our Adaptive Portfolio offering – a solution that meets a broad array of customer needs and truly embodies our strengths as a best-in-class digital experience backed by the support of our financial consultants. With respect to capital, we distributed approximately $190 million to the parent, which allowed us to execute $151 million of share repurchases and continue our balance sheet growth initiative. Entering the second half of the year we are poised to capitalize on opportunities to improve our customer experience and deploy capital, while being mindful of the overall operating environment.”

E*TRADE reported DARTs of 152,000 during the quarter, a decrease of eight percent from the prior quarter and an increase of two percent versus the same quarter a year ago.

The Company ended the quarter with 3.3 million brokerage accounts, an increase of 23,000 from the prior quarter. This compares to 45,000(2) net new brokerage accounts in the first quarter of 2016 and 25,000(2) in the second quarter of 2015. Brokerage account attrition for the second quarter was 8.3 percent annualized.

The Company ended the quarter with $286 billion in total customer assets, compared with $285 billion at the end of the prior quarter and $302 billion a year ago.

During the quarter, customers added $1.6 billion in net new brokerage assets. Brokerage related cash increased by $0.4 billion to $43.0 billion during the second quarter. Customers were net buyers of approximately $1.4 billion of securities. Margin receivables averaged $6.5 billion in the quarter, down three percent from the prior quarter and 20 percent from the year ago quarter, ending the quarter at $6.8 billion.

Corporate cash, which is a component of consolidated cash and equivalents, ended the quarter at $523 million(3), an increase of $41 million from the prior quarter. The increase in corporate cash was primarily driven by $187 million in capital distributions to the parent from the Company's bank and broker-dealer subsidiaries, offset by utilization of $151 million to repurchase shares of the Company's common stock. Consolidated cash and equivalents ended the quarter at $2.4 billion.

Net interest income for the second quarter was $286 million, down from $287 million in the prior quarter and up from $252 million a year ago. Second quarter results reflected a net interest margin of 2.64 percent on average interest-earning assets of $43.4 billion, compared with 2.81 percent on $40.9 billion in the prior quarter and 2.37 percent on $42.5 billion in the second quarter of 2015.

Commissions, fees and service charges, and other revenue in the second quarter were $178 million, compared to $175 million in the prior quarter and $167 million in the second quarter of 2015. Average commission per trade for the quarter was $10.82, up from $10.64 in the prior quarter and down from $10.96 in the second quarter of 2015. Total net revenue in the quarter also included $10 million of net gains on the sale of securities and other. This compares to $10 million in both the prior quarter and the second quarter of 2015.

Total non-interest expense in the quarter of $295 million decreased $17 million from the prior quarter, primarily driven by a decrease in advertising and market development spend, and decreased $14 million from the year ago period, which included $6 million of executive severance and $9 million related to a third party contract amendment. The Company’s operating margin for the quarter was 45 percent. This compared to an operating margin of 41 percent in the prior quarter and 27 percent a year ago. Adjusted operating margin in the second quarter was 38 percent(1), which compared to 34 percent(1) in the prior quarter and 28 percent(1) in the second quarter of 2015.

The Company’s total assets ended the quarter at $49.2 billion, an increase of $1.3 billion from the prior quarter. The increase was driven by the movement of customer assets held at third party institutions onto the Company's balance sheet during the quarter.

The Company’s loan portfolio ended the quarter at $4.4 billion, declining $0.3 billion from the prior quarter. Net charge-offs in the quarter resulted in a recovery of $6 million compared with a recovery of $3 million in the prior quarter and net charge-offs of $3 million in the second quarter of 2015. The allowance for loan losses ended the quarter at $293 million, down from $322 million in the prior quarter and $402 million in the second quarter of 2015. The decrease in the allowance resulted in a benefit to provision for loan losses of $35 million, which compared to a benefit of $34 million in the previous quarter and a provision of $3 million in the second quarter of 2015.

As of June 30, 2016, the Company reported consolidated and bank Tier 1 leverage ratios of 7.5 percent(4) and 8.2 percent(5), compared with 7.8 percent(4) and 8.6 percent(5) in the previous quarter.

Historical metrics and financials can be found on the E*TRADE Financial corporate website at about.etrade.com.

The Company will host a conference call to discuss the results beginning at 5 p.m. ET today. This conference call will be available to domestic participants by dialing (800) 686-0136 while international participants should dial +1 (303) 223-4378. A live audio webcast and replay of this conference call will also be available at about.etrade.com.

About E*TRADE Financial

E*TRADE Financial and its subsidiaries provide financial services including online brokerage and related banking products and services to retail investors. Securities products and services are offered by E*TRADE Securities (Member FINRA/SIPC). Bank products and services are offered by E*TRADE Bank, a Federal savings bank, Member FDIC, or its subsidiaries and affiliates. More information is available at www.etrade.com. ETFC-E