E*TRADE FINANCIAL Corporation Announces First Quarter Earnings of $0.39 Per Share on Record Revenue

ERADE FINANCIAL Corporation (NASDAQ: ETFC) today announced results for its first quarter ended March 31, 2007, reporting net income of $169.4 million, or $0.39 per share, compared to $142.5 million, or $0.33 per share a year ago. Total net revenue for the first quarter increased to a record $645.0 million from $598.3 million in the year ago period.

"We are extremely pleased with the response to our marketing and service investments this past quarter which generated record net new accounts, with continued strong growth in our target segments, and record levels of customer assets and cash, said Mitchell H. Caplan, Chief Executive Officer, ERADE FINANCIAL Corporation. "The success we are seeing in attracting and retaining high-value customers is clearly beneficial to the long-term growth of the franchise.

The Company also announced today that its Board of Directors has authorized an additional $250 million stock repurchase plan. In addition to this program, the Company has $34 million remaining in its active program originally announced in December 2004. Under the outstanding authorizations, repurchases may be made through open market and privately negotiated transactions at times and in such amounts as management deems appropriate.

"Although the broad based markets have been strong, the recent volatility in the macroeconomic environment has affected retail customer behavior and engagement levels. As a result, we are reducing our 2007 earnings estimate to better reflect the muted retail environment we are now experiencing as compared to our expectations at the end of 2006, continued Mr. Caplan.

Other selected first quarter highlights:

Generated 20 percent annualized growth in target segment accounts
Experienced record Quick Transfer volume of over 400,000 transactions in March with record net cash inflows of more than $500 million
Produced record levels of options trades in March - 14.5 percent of U.S. Daily Average Revenue Trade ("DART) volumes
Generated record International retail trading volume of 29,000 DARTs during the quarter
Launched Global Trading Platform pilot program, providing retail investors online access to foreign stocks and currencies in six major international markets with the ability to buy, hold and sell in the respective local currencies
Launched Max-Rate Checking, a high-yield checking account that includes the full-functionality of a traditional checking account plus unlimited ATM fee refunds nationwide
Expanded branch network to 25 locations with the addition of Garden City, New York
Repurchased $23 million of common stock

Historical monthly metric data from January 2003 to March 2007 can be found on the ERADE FINANCIAL investor relations site at www.etrade.com.

About ERADE FINANCIAL

The ERADE 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 ERADE Securities LLC (Member NASD/SIPC). Bank and lending products and services are offered by ERADE Bank, a Federal savings bank, Member FDIC, or its subsidiaries.

Important Notice

ERADE FINANCIAL and the ERADE FINANCIAL logo are registered trademarks or trademarks of ERADE 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 ERADE Group, Inc. or ERADE FINANCIAL Corporation with the SEC on Form 10-K (including information under the caption "Risk Factors") and quarterly reports on Form 10-Q.

FINANCIAL STATEMENTS
�
*E TRADE FINANCIAL CORPORATION AND SUBSIDIARIES**
�
Consolidated Statement of Income
(In thousands, except per share amounts)
(Unaudited)
							�
							�
			Three Months Ended
			March 31,		December 31,		March 31,
			�	2007	�	2006	�	2006
Revenue:
	Operating interest income		$	829,795	$	788,583	$	594,294
	Operating interest expense		�	(439,209)	�	(413,078)	�	(269,505)
		Net operating interest income		390,586		375,505		324,789
	Provision for loan losses		�	(21,186)	�	(11,956)	�	(10,197)
		Net operating interest income after provision for loan losses	�	369,400	�	363,549	�	314,592
	Commission			158,993		148,494		175,869
	Fees and service charges			59,498		64,759		57,862
	Principal transactions			30,082		25,256		30,692
	Gain on sales of loans and securities, net			17,375		17,248		11,628
	Other revenue		�	9,650	�	9,542	�	7,706
		Total non-interest income	�	275,598	�	265,299	�	283,757
		Total net revenue	�	644,998	�	628,848	�	598,349
Expense excluding interest:
	Compensation and benefits			123,782		116,868		115,988
	Clearing and servicing			67,252		63,114		63,288
	Advertising and market development			45,592		30,667		34,781
	Communications			26,156		25,528		31,408
	Professional services			24,985		25,232		27,755
	Depreciation and amortization			19,383		17,664		18,789
	Occupancy and equipment			23,579		22,486		20,504
	Amortization of other intangibles			10,268		10,829		11,332
	Facility restructuring and other exit activities			733		9,222		(253)
	Other		�	32,675	�	34,154	�	31,005
		Total expense excluding interest	�	374,405	�	355,764	�	354,597
Income before other income (expense), income taxes and discontinued operations				270,593		273,084		243,752
							�
Other income (expense):
	Corporate interest income			1,705		2,342		1,961
	Corporate interest expense			(37,791)		(37,910)		(40,508)
	Gain on sales and impairment of investments			19,756		10,899		17,616
	Loss on early extinguishment of debt			-		(476)		(135)
	Equity in income (loss) of investments and venture funds		�	8,095	�	750	�	(1,007)
		Total other income (expense)	�	(8,235)	�	(24,395)	�	(22,073)
Income before income taxes and discontinued operations				262,358		248,689		221,679
Income tax expense			�	92,948	�	71,779	�	78,695
Net income from continuing operations				169,410		176,910		142,984
Discontinued operations, net of tax:
	Loss from discontinued operations			-		-		(513)
	Loss on disposal of discontinued operations		�	-	�	(255)	�	-
Loss from discontinued operations, net of tax			�	-	�	(255)	�	(513)
Net income			$	169,410	$	176,655	$	142,471
							�
Basic earnings per share from continuing operations			$	0.40	$	0.42	$	0.34
Basic earnings (loss) per share from discontinued operations			�	-	�	(0.00)	�	(0.00)
Basic net earnings per share			$	0.40	$	0.42	$	0.34
							�
Diluted earnings per share from continuing operations			$	0.39	$	0.40	$	0.33
Diluted earnings (loss) per share from discontinued operations			�	-	�	(0.00)	�	(0.00)
Diluted net earnings per share			$	0.39	$	0.40	$	0.33
Shares used in computation of per share data:
		Basic		423,786		424,050		414,679
		Diluted		437,535		438,086		432,302

*E TRADE FINANCIAL CORPORATION AND SUBSIDIARIES**
Consolidated Balance Sheet
(In thousands, except share amounts)
(Unaudited)
				�
				�
		March 31,		December 31,
		�	2007	�	2006
ASSETS
Cash and equivalents		$	1,176,981	$	1,212,234
Cash and investments required to be segregated under Federal or other regulations			411,003		281,622
Trading securities			151,046		178,600
Available-for-sale mortgage-backed and investment securities			16,458,481		13,921,983
Loans held-for-sale			193,385		283,496
Margin receivables			6,947,535		6,828,448
Loans receivable, net			29,671,642		26,372,697
Property and equipment, net			341,148		318,389
Goodwill			2,084,974		2,072,920
Other intangibles, net			461,694		471,933
Other assets		�	2,244,517	�	1,796,981
	Total assets	$	60,142,406	$	53,739,303
				�
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits		$	26,256,619	$	24,071,012
Securities sold under agreements to repurchase			12,125,686		9,792,422
Customer payables			6,311,657		6,182,672
Other borrowings			6,560,501		5,323,962
Senior notes			1,401,383		1,401,592
Mandatory convertible notes			441,824		440,577
Accounts payable, accrued and other liabilities		�	2,691,655	�	2,330,696
	Total liabilities	�	55,789,325	�	49,542,933
				�
Shareholders' equity:
Common stock, $0.01 par value, shares authorized: 600,000,000; shares issued and outstanding: 427,161,994 at March 31, 2007 and 426,304,136 at December 31, 2006
				�
			4,272		4,263
Additional paid-in-capital			3,192,508		3,184,290
Retained earnings			1,365,851		1,209,289
Accumulated other comprehensive loss		�	(209,550)	�	(201,472)
	Total shareholders' equity	�	4,353,081	�	4,196,370
	Total liabilities and shareholders' equity	$	60,142,406	$	53,739,303

SEGMENT REPORTING
			Three Months Ended March 31, 2007
			Retail		Institutional		Eliminations⁽¹⁾		Total
Revenue:			(In thousands)
	Operating interest income		$	457,764	$	671,243	$	(299,212)	$	829,795
	Operating interest expense		�	(230,283)	�	(508,138)	�	299,212	�	(439,209)
		Net operating interest income		227,481		163,105		-		390,586
	Provision for loan losses		�	-	�	(21,186)	�	-	�	(21,186)
		Net operating interest income after provision for loan losses	�	227,481	�	141,919	�	-	�	369,400
	Commission			123,305		35,688		-		158,993
	Fees and service charges			54,203		7,475		(2,180)		59,498
	Principal transactions			-		30,082		-		30,082
	Gain on sales of loans and securities, net			4,911		12,464		-		17,375
	Other revenue		�	9,751	�	41	�	(142)	�	9,650
		Total non-interest income	�	192,170	�	85,750	�	(2,322)	�	275,598
		Total net revenue	�	419,651	�	227,669	�	(2,322)	�	644,998
Expense excluding interest:
	Compensation and benefits			80,296		43,486		-		123,782
	Clearing and servicing			20,761		48,813		(2,322)		67,252
	Advertising and market development			43,924		1,668		-		45,592
	Communications			22,795		3,361		-		26,156
	Professional services			15,099		9,886		-		24,985
	Depreciation and amortization			14,809		4,574		-		19,383
	Occupancy and equipment			20,572		3,007		-		23,579
	Amortization of other intangibles			9,619		649		-		10,268
	Facility restructuring and other exit activities			1,017		(284)		-		733
	Other		�	19,301	�	13,374	�	-	�	32,675
		Total expense excluding interest	�	248,193	�	128,534	�	(2,322)	�	374,405
Segment income			$	171,458	$	99,135	$	-	$	270,593
		�
			Three Months Ended December 31, 2006
			Retail		Institutional		Eliminations⁽¹⁾		Total
Revenue:			(In thousands)
	Operating interest income		$	433,879	$	630,225	$	(275,521)	$	788,583
	Operating interest expense		�	(206,001)	�	(482,598)	�	275,521	�	(413,078)
		Net operating interest income		227,878		147,627		-		375,505
	Provision for loan losses		�	-	�	(11,956)	�	-	�	(11,956)
		Net operating interest income after provision for loan losses	�	227,878	�	135,671	�	-	�	363,549
	Commission			115,543		32,951		-		148,494
	Fees and service charges			59,000		8,611		(2,852)		64,759
	Principal transactions			-		25,256		-		25,256
	Gain on sales of loans and securities, net			8,405		8,843		-		17,248
	Other revenue		�	9,658	�	46	�	(162)	�	9,542
		Total non-interest income	�	192,606	�	75,707	�	(3,014)	�	265,299
		Total net revenue	�	420,484	�	211,378	�	(3,014)	�	628,848
Expense excluding interest:
	Compensation and benefits			78,433		38,435		-		116,868
	Clearing and servicing			18,687		47,441		(3,014)		63,114
	Advertising and market development			28,763		1,904		-		30,667
	Communications			22,101		3,427		-		25,528
	Professional services			15,471		9,761		-		25,232
	Depreciation and amortization			13,838		3,826		-		17,664
	Occupancy and equipment			19,044		3,442		-		22,486
	Amortization of other intangibles			10,002		827		-		10,829
	Facility restructuring and other exit activities			9,673		(451)		-		9,222
	Other		�	21,128	�	13,026	�	-	�	34,154
		Total expense excluding interest	�	237,140	�	121,638	�	(3,014)	�	355,764
Segment income			$	183,344	$	89,740	$	-	$	273,084
									�
									�
			Three Months Ended March 31, 2006
			Retail		Institutional		Eliminations⁽¹⁾		Total
Revenue:			(In thousands)
	Operating interest income		$	318,202	$	453,476	$	(177,384)	$	594,294
	Operating interest expense		�	(112,282)	�	(334,607)	�	177,384	�	(269,505)
		Net operating interest income		205,920		118,869		-		324,789
	Provision for loan losses		�	-	�	(10,197)	�	-	�	(10,197)
		Net operating interest income after provision for loan losses	�	205,920	�	108,672	�	-	�	314,592
	Commission			135,864		40,005		-		175,869
	Fees and service charges			53,344		6,791		(2,273)		57,862
	Principal transactions			-		30,692		-		30,692
	Gain on sales of loans and securities, net			8,727		2,901		-		11,628
	Other revenue		�	9,299	�	111	�	(1,704)	�	7,706
		Total non-interest income	�	207,234	�	80,500	�	(3,977)	�	283,757
		Total net revenue	�	413,154	�	189,172	�	(3,977)	�	598,349
Expense 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 activities			375		(628)		-		(253)
	Other		�	19,589	�	11,416	�	-	�	31,005
		Total expense excluding interest	�	235,820	�	122,754	�	(3,977)	�	354,597
Segment income			$	177,334	$	66,418	$	-	$	243,752

KEY PERFORMANCE METRICS⁽²⁾
Corporate Metrics	Qtr ended 3/31/07		Qtr ended 12/31/06		Qtr ended 3/31/07 vs. 12/31/06	Qtr ended 3/31/06		Qtr ended 3/31/07 vs. 3/31/06
								�
Operating margin %⁽³⁾
Consolidated		42 %		43 %	(1)%		41 %	1 %
Retail		41 %		44 %	(3)%		43 %	(2)%
Institutional		44 %		42 %	2 %		35 %	9 %
								�
Employees		4,217		4,126	2 %		3,823	10 %
Consultants and other	�	266	�	358	(26)%	�	702	(62)%
Total headcount		4,483		4,484	0 %		4,525	(1)%
								�
Revenue per headcount	$	143,876	$	140,243	3 %	$	132,232	9 %
								�
Revenue per compensation and benefits dollar	$	5.21	$	5.38	(3)%	$	5.16	1 %
								�
Book value per share	$	10.19	$	9.84	4 %	$	8.61	18 %
Tangible book value per share	$	4.23	$	3.87	9 %	$	2.58	64 %
								�
Cash & equivalents ($MM)	$	1,177.0	$	1,212.2	(3)%	$	823.2	43 %
Free cash ($MM)	$	464.7	$	525.8	(12)%	$	650.7	(29)%
								�
Enterprise net interest spread (basis points)⁽⁴⁾		274		285	(4)%		286	(4)%
Enterprise interest-earning assets, average ($MM)	$	52,871	$	49,597	7 %	$	41,343	28 %
								�
Earnings before interest, taxes, depreciation & amortization ("EBITDA") ($MM)
Net income from continuing operations	$	169.4	$	176.9	(4)%	$	143.0	18 %
Tax expense		92.9		71.8	29 %		78.7	18 %
Depreciation & amortization		29.7		28.5	4 %		30.1	(1)%
Corporate interest expense	�	37.8	�	37.9	0 %	�	40.5	(7)%
EBITDA	$	329.8	$	315.1	5 %	$	292.3	13 %
								�
Interest coverage		8.7		8.3	5 %		7.2	21 %
								�
�
Retail Metrics	�		�		�	�		�
								�
Trading days		61.0		62.5	(2)%		62.0	(2)%
								�
DARTs
US		141,238		132,716	6 %		159,199	(11)%
International	�	28,798	�	22,910	26 %	�	21,960	31 %
Total DARTs		170,036		155,626	9 %		181,159	(6)%
								�
Total trades (MM)		10.4		9.7	7 %		11.2	(7)%
								�
Average commission per trade	$	11.89	$	11.88	0 %	$	12.10	(2)%
								�
End of period margin debt ($B)	$	7.03	$	7.00	0 %	$	6.81	3 %
Average margin debt ($B)	$	6.91	$	6.72	3 %	$	6.63	4 %
								�
Gross new investing/trading accounts		170,672		159,145	7 %		190,027	(10)%
Gross new deposit/lending accounts		179,547		112,456	60 %		80,632	123 %
Inactive accounts		(150,981)		(170,605)	(12)%		(155,680)	(3)%
Customer closed accounts	�	(80,364)	�	(100,156)	(20)%	�	(64,323)	25 %
Net new accounts		118,874		840	N.M.		50,656	135 %
								�
End of period investing/trading accounts		3,613,762		3,606,582	0 %		3,634,803	(1)%
End of period deposit/lending accounts	�	932,782	�	821,088	14 %	�	699,631	33 %
End of period total accounts		4,546,544		4,427,670	3 %		4,334,434	5 %
								�
Account Segmentation Detail⁽⁵⁾
Retail accounts within target segment⁽⁶⁾		912,057		868,770	5 %	N.A.		N.M.
Other retail accounts⁽⁷⁾		2,583,257		2,497,808	3 %	N.A.		N.M.
Corporate Services accounts	�	1,051,230	�	1,061,092	(1)%	N.A.		N.M.
End of period total accounts		4,546,544		4,427,670	3 %	N.A.		N.M.
								�
Net new customers		37,100		(4,883)	N.M.		(14,671)	N.M.
End of period total customers		3,477,068		3,439,968	1 %		3,404,602	2 %
								�
End of period assets per customer	$	57,659	$	56,659	2 %	$	56,403	2 %
Consolidated net revenue per customer	$	186	$	183	2 %	$	176	6 %
Consolidated segment income per customer	$	78	$	79	(1)%	$	72	8 %
Products per customer		2.1		2.1	0 %		2.1	0 %
								�
Client Assets ($B)
Security holdings	$	133.5	$	130.3	2 %	$	127.8	4 %
Cash (including money market funds)		10.2		10.0	2 %		10.9	(6)%
Unexercised Corporate Services client options (vested)	�	31.0	�	31.0	0 %	�	34.4	(10)%
Client assets in investing/trading accounts	�	174.7	�	171.3	2 %	�	173.1	1 %
Sweep Deposit Account		10.8		10.8	0 %		10.1	7 %
Transaction accounts		10.3		8.0	29 %		5.7	81 %
CDs	�	4.7	�	4.8	(2)%	�	3.1	52 %
Client assets in deposit accounts	�	25.8	�	23.6	9 %	�	18.9	37 %
Total client assets	$	200.5	$	194.9	3 %	$	192.0	4 %
								�
Net new client assets ($B)⁽⁸⁾	$	2.9	N.A.		N.M.	N.A.		N.M.
								�
Total customer cash and deposits ($B)	$	36.0	$	33.6	7 %	$	29.8	21 %
								�
Unexercised Corporate Services client options (unvested) ($B)	$	20.5	$	19.8	4 %	$	21.8	(6)%
								�
								�
�
Institutional Metrics	�		�		�	�		�
								�
Market Making
Equity shares traded (MM)		47,425		41,645	14 %		90,871	(48)%
Average revenue capture per 1,000 equity shares	$	0.576	$	0.551	5 %	$	0.277	108 %
% of Bulletin Board equity shares to total equity shares		89.7%		87.9%	2 %		94.1%	(4)%
								�
End of Period
Enterprise Loans
Receivable
Detail ($MM)
Mortgage and home equity loans, net	$	26,628	$	23,256	14 %	$	15,755	69 %
Margin receivables		6,948		6,829	2 %		6,839	2 %
Consumer loans, net		3,006		3,184	(6)%		3,777	(20)%
Other	�	231	�	216	7 %	�	97	138 %
Total enterprise loans receivable, net	$	36,813	$	33,485	10 %	$	26,468	39 %
								�
Credit Quality and Reserve Metrics
Net charge-offs as a % of average loans receivable, net (annualized)		0.30 %		0.22 %	0.08 %		0.18 %	0.12 %
Provision as a % of average loans receivable, net (annualized)		0.30 %		0.19 %	0.11 %		0.21 %	0.09 %
Total allowance for loan losses as a % of total ending gross loans receivable		0.23 %		0.26 %	(0.03)%		0.33 %	(0.10)%
Total nonperforming loans receivable as a % of total gross loans receivable		0.39 %		0.28 %	0.11 %		0.21 %	0.18 %
Tier 1 Capital Ratio⁽⁹⁾		6.25 %		6.07 %	0.18 %		6.03 %	0.22 %
Risk Weighted Capital Ratio⁽⁹⁾		10.53 %		10.55 %	(0.02)%		11.21 %	(0.68)%

ACTIVITY IN ALLOWANCE FOR LOAN LOSSES
					�
	Three Months Ended March 31, 2007
	Mortgage		Consumer		Total
	(In thousands)
Allowance for loan losses, ending 12/31/06	$	39,431	$	28,197	$	67,628
Provision for loan losses		16,888		4,298		21,186
Charge-offs, net	�	(12,193)	�	(8,632)	�	(20,825)
Allowance for loan losses, ending 3/31/07	$	44,126	$	23,863	$	67,989

AVERAGE ENTERPRISE BALANCE SHEET DATA
	Three Months Ended			Three Months Ended
	March 31, 2007			December 31, 2006
	Average	Operating Interest	Average	Average	Operating Interest	Average
	Balance	Inc./Exp.	Yield/Cost	Balance	Inc./Exp.	Yield/Cost
Enterprise interest-earning assets:	(In thousands)			(In thousands)
Loans, net⁽¹⁰⁾	$ 28,093,409	$ 451,399	6.43%	$ 25,752,337	$ 415,360	6.45%
Margin receivables	6,787,828	123,986	7.41%	6,611,478	122,351	7.34%
Mortgage-backed and related available-for-sale securities	12,040,109	157,967	5.25%	11,815,399	158,435	5.36%
Available-for-sale investment securities	3,901,434	63,496	6.52%	3,473,702	57,022	6.56%
Trading securities	119,779	3,269	10.92%	134,143	3,194	9.53%
Cash and cash equivalents⁽¹¹⁾	1,358,120	15,930	4.76%	1,129,544	13,900	4.88%
Stock borrow and other	570,805	10,051	7.14%	680,179	11,565	6.75%
Total enterprise interest- earning assets	$ 52,871,484	826,098	6.27%	$ 49,596,782	781,827	6.30%
Enterprise interest-bearing liabilities:
Retail deposits	$ 24,696,611	177,329	2.91%	$ 22,612,957	159,889	2.81%
Brokered certificates of deposit	466,559	5,659	4.92%	524,934	6,464	4.89%
Customer payables	6,380,411	20,479	1.30%	6,357,471	20,243	1.26%
Repurchase agreements and other borrowings	12,137,872	159,031	5.24%	11,870,171	157,625	5.20%
FHLB advances	4,996,389	62,852	5.03%	4,456,304	56,849	4.99%
Stock loan and other	1,349,305	12,515	3.76%	1,176,498	10,016	3.38%
Total enterprise interest- bearing liabilities	$ 50,027,147	437,865	3.53%	$ 46,998,335	411,086	3.45%
Enterprise net interest income/spread⁽⁴⁾		$ 388,233	2.74%		$ 370,741	2.85%

	Three Months Ended
	March 31, 2006
	Average		Operating Interest			Average
	Balance		Inc./Exp.		�	Yield/Cost
Enterprise interest-earning assets:	(In thousands)
Loans, net⁽¹⁰⁾	$	19,571,064	$	281,270			5.75%
Margin receivables		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⁽¹¹⁾		1,549,180		15,899			4.16%
Stock borrow and other	�	530,629	�	7,730			5.91%
Total enterprise interest-earning assets	$	41,342,560	�	575,344			5.56%
Enterprise interest-bearing liabilities:
Retail deposits	$	18,120,089		90,505			2.03%
Brokered certificates of deposit		420,600		4,113			3.97%
Customer payables		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 enterprise interest-bearing liabilities	$	38,879,304	�	259,247			2.70%
Enterprise net interest income/spread⁽⁴⁾			$	316,097			2.86%
						�
						�
Reconciliation from Enterprise Net Interest Income to Net Operating Interest Income
	Three Months Ended
	March 31,		December 31,			March 31,
	�	2007	�	2006	�	�	2006
	(In thousands)
Enterprise net interest income	$	388,233	$	370,741		$	316,097
Taxable equivalent interest adjustment⁽¹²⁾		(7,320)		(6,353)			(3,392)
Stock conduit, net⁽¹³⁾		9		19			262
Customer cash held by third parties⁽¹⁴⁾	�	9,664	�	11,098		�	11,822
Net operating interest income	$	390,586	$	375,505		$	324,789

SUPPLEMENTAL INFORMATION

Explanation of Non-GAAP Measures and Certain Metrics

Management believes that free cash, EBITDA, interest coverage, EPS excluding acquisition-related integration expenses, enterprise net interest income and enterprise interest-earning assets are appropriate measures for evaluating the operating and liquidity performance of the Company. We believe that the elimination of certain items from the related GAAP measures is helpful to investors and analysts who may wish to use some or all of this information to analyze our current performance, prospects and valuation. Management uses non-GAAP information internally to evaluate our operating performance and in formulating our budget for future periods.

Reporting Changes

During the period ended March 31, 2007, the Company re-defined the line item "Service charges and fees" by reclassifying certain fee-like revenue items formerly reported in "Other revenue" into the "Service charges and fees" line item, now called "Fees and service charges". We also re-presented our balance sheet to report margin receivables and customer payables directly on the face of the balance sheet. The remaining components of brokerage receivables and brokerage payables are now reported in the "Other assets and "Accounts payable, accrued and other liabilities line items, respectively. The Company has re-presented the income statement and balance sheet for the past two years on our Investor Relations website.

Free Cash

Free cash represents cash held at the Company and its non-Bank and non-Brokerage subsidiaries, less discretionary reserves, plus excess capital at Bank and Brokerage after application of 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.

EPS Excluding Acquisition-Related Integration Expenses

EPS excluding acquisition-related integration expenses represents net income plus acquisition-related integration expenses, net of tax, divided by diluted shares. Management believes that excluding charges associated with the integration of our acquisitions from EPS provides a useful measure to assess the ongoing operating performance of the Company without the impact of nonrecurring charges associated with acquisitions.

Enterprise Net Interest Income

Enterprise net interest income is taxable equivalent basis net operating interest income excluding corporate interest income and corporate interest expense, stock conduit interest income and expense and interest earned on customer cash held by third parties. Management believes this non-GAAP measure is useful to investors and analysts as it is a measure of the net operating interest income generated by our core operations.

Enterprise Interest-Earning Assets

Enterprise interest-earning assets consists of the primary interest-earning assets of the Company and includes: loans receivable, mortgage-backed and available-for-sale securities, margin receivables, stock borrow balances, and cash required to be segregated under regulatory guidelines that earn interest for the Company. Management believes that this non-GAAP measure is useful to investors and analysts as it is a measure of the primary assets from which the Company generates net operating interest income.

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.

ENDNOTES

(1) Reflects elimination of transactions between retail and institutional segments, which include deposit transfer pricing, servicing and order flow rebates.

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

(3) Operating margin is the percentage of net revenue that results in income before other income (expense), income taxes and discontinued operations. The percentage is calculated by dividing our income before other income (expense), income taxes and discontinued operations by our total net revenue.

(4) Enterprise net interest spread is 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, stock conduit and customer cash held by third parties.

(5) Data prior to Q4 2006 is not available.

(6) Target segment accounts are accounts with over $50,000 in assets and/or generating 30 or more trades per quarter.

(7) Other retail accounts are accounts that (a) were opened less than 90 days prior to the end of the relevant quarter; (b) only include a lending relationship or (c) that otherwise do not meet the definition of a target segment account.

(8) Net new client assets are total inflows to all new and existing client accounts less total outflows from all closed and existing client and closed accounts. Data prior to Q1 2007 is not available.

(9) Q1 2007 estimate. Includes ERADE Clearing, LLC, which became ERADE Bank's subsidiary in Q1 2007.

(10) Excludes loans to customers on margin.

(11) Includes segregated cash balances.

(12) Gross-up for tax-exempt securities.

(13) Net operating interest income earned on average stock conduit assets of $2.7 million, $13.1 million and $824.0 million for the quarters ended March 31, 2007, December 31, 2006 and March 31, 2006, respectively.

(14) Includes interest earned on average customer assets of $3.9 billion, $3.8 billion and $3.6 billion for the quarters ended March 31, 2007, December 31, 2006 and March 31, 2006, respectively, held by parties outside ERADE FINANCIAL, including third party money market funds and sweep deposit accounts at unaffiliated financial institutions.

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