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CorporateReport 2016Copyright 2017 E*TRADE Financial Corporation. All rights reserved.

TO OUR SHAREHOLDERS:This past year was a pivotal one for E*TRADE. I am tremendouslyproud to be leading a talented, synchronized, and reinvigoratedteam, intensely focused on recapturing our place as a marketleader, growing our business, and continuing to deliver value toyou. Following years of attending to the Company’s regulatory andcapital initiatives, this year we were presented with an opportunityto pivot firmly toward growth, provided we realign ourselves to seizeit. In response, we took action: Restructuring the leadership andclearly defining the growth targets for the Company. Together, weinstalled a structure and an agenda that appropriately shifted ourfocus from defense, resulting from past issues, to offense, movingforward to grow our business. And now it’s full speed ahead.Karl RoessnerChief Executive Officer

A SHIFT IN FOCUSIn conjunction with this charge, I moved into the CEOrole in September. My first order of business was to revivethe E*TRADE that I came to know and love over the manyyears I have spent here—the scrappy, innovative Companythat led this industry forward. While we were once theundisputed leader in the active trader segment, we hadlost ground over the past several years. Fortunately, as Itook the helm we had just completed the acquisition ofOptionsHouse—the #1-rated(1) retail options platform,which brings with it a fantastic and coveted set ofcapabilities, customers, and colleagues.Upon completion of the transaction, I installed astrong and experienced leadership team to propel ourbusiness, and together we redefined our mission andvision as a Company. Our mission is to enhance thefinancial independence of traders and investors througha powerful digital offering and professional guidance.Our vision is to be the #1 digital broker and advisor totraders and investors—known for our ease of use and thecompleteness of our offering.How will we measure our success? To begin, we settangible growth goals and instilled an accompanyingsense of urgency to achieve them by the latter part of2018. Specifically, we aim to improve our asset andaccount growth rates by 200 to 300 basis points, shiftthe mix of our trades to be 35 percent in derivatives(compared to around 30 percent at year-end 2016), andgrow our managed assets to 6 billion (from nearly 4billion).These goals demonstrate our sincere commitment tosignificantly raising the bar in the performance of ourcore business. We take this commitment seriously, andwe operate with a sense of accountability throughout ourentire organization. Together, we are all accountable todeliver.GROWING THE BUSINESSThere are three key areas of near-term focus that will driveus toward this achievement:1. Completing and fully capitalizing on the integrationof OptionsHouse;2. Tending to our shortcomings that result in customerpain points; and3. Revitalizing our brand and customer perceptionthrough marketing.First, we acquired the #1-rated(1) retail options platform inthe industry to elevate our offering to once again rival thebest in the industry. We will deliver superior active tradingcapabilities to our customer base, incorporating the bestof what the combined E*TRADE/OptionsHouse platformsoffer. Supplying an exceptional digital experience hasalways been part of our DNA and the integration affords usa unique moment in time to ensure that our entire digitaloffering captivates our customers.Next, we will revisit the issues that result in pain pointsfor our customers to ensure that once a trader or investorchooses E*TRADE, they rarely have any reason to leave.We do a very good job as a Company with respect tocustomer service, and over the years we’ve certainly beena contender on the functionality front. But in today’s ageof true customer-centricity and exceptionally simpletechnology, it is incumbent upon us to not only keepup with offerings available through the broad digital

marketplace, but to lead it in the sectors we should own.That is an aspirational goal, but in the most tangiblesense, we must begin by closing gaps and tightening upthe entire customer journey to ensure it is as seamless andas delightful as possible. Lastly on the service front, wemust take a good offering, and make it great.Finally, we must significantly enhance how we projectexactly who we are, and convey a compelling valueproposition, including all of what E*TRADE has to offer.We need to revitalize the brand and increase awarenessand understanding of our offerings. Our offerings mustresonate with customers and prospects. We enjoyphenomenal brand awareness, but I’m not certain thetrading and investing world still knows exactly why theyshould come to E*TRADE. A critical pillar of our successis clearly stating this rationale for investors and traders tohear, and doing so in a persuasive and differentiated way.We are avidly working to move the needle on our brandidentity, starting with a relaunch this year. We are alsoworking diligently to develop a unified message across allcommunication channels with our customers, and I amexcited for them to experience the changes that lie ahead.2016 HIGHLIGHTSSome of our most pronounced accomplishments in 2016were on the capital front, where we gained flexibility,generated meaningful amounts of capital, and put it towork for shareholders. Kicking off the year, we lowered thebank’s target Tier 1 leverage ratio by 100 basis points,reflective of our financial strength, improved regulatoryposition, and reduced risk profile. Coupled with strongearnings, this enabled us to move more than 850 millionof capital to the parent, which we deployed via multipleavenues: In the first half of the year we seized opportunitiesamidst dislocations in the market to accelerate ourshare repurchase program and bought in more than 450 million worth of our shares; We grew our balance sheet to nearly 50 billion,positioning ourselves to move beyond that thresholdin earnest this year; and Towards the end of the year we acquiredOptionsHouse—an accretive transaction that alsomarks our first major transaction in more than adecade.In addition to capital deployment, we delivered acommitment to you to be responsive to the revenueenvironment—shifting our investment philosophy to anoperating margin framework.Meanwhile, legacy risks continued to diminish as wemanaged through the last major credit risk overhang onthe legacy loan portfolio. By year-end, we had successfullymanaged the HELOC portion of the portfolio through 85%of the conversions from interest-only to fully amortizing.The performance significantly outperformed ourexpectations, providing a benefit to our financial resultsthis year through the provision line.In all, these actions and developments put us in a placewhere we took a long, hard look at our Company anddetermined that, as a financially strong institution, it wastime to stop looking behind us and focus on the roadahead.

FINANCIAL AND CAPITAL DISCIPLINELOOKING AHEADWe recognize that much of the financial progressE*TRADE achieved over the past several years stems fromthe disciplined execution of our multi-year capital planand stewardship of our shareholders’ capital. That is adiscipline that will be unwavering under my leadership aswe continue to focus on opportunities to drive meaningfulvalue through prudent stewardship of our shareholders’capital.In closing, I want to reiterate how good I feel about what isin motion at E*TRADE. We are in the midst of a critical andtransformative time. We will not lose sight of what we needto do for our customers and for you as our owners. Ourteam comprises passionate and highly skilled individualswith a shared enthusiasm for success. We are an alignedorganization with definitive goals and a plan to achievethem. I am confident in the road map we set forth, andlook forward to an exciting and eventful year for E*TRADE.At the forefront of capital deployment is growing ourbalance sheet. In mid-2016 we arrived at a point wherethe returns justified crossing 50 billion. We began toprepare for this event, addressing systems and structureto meet the heightened regulatory expectations of largerinstitutions. In the meantime, all factors affecting thereturn equation on this initiative have moved in our favor.The amount of available customer deposits has morethan doubled, the interest rate environment has improveddramatically, and the associated implementation costshave lessened—all of which serve to enhance the expectedreturns. We officially crossed the 50 billion threshold inJanuary 2017 and we plan to exceed 62 billion by yearend.We also intend to resume share repurchases in the secondhalf of this year, while simultaneously pursuing balancesheet growth. Importantly, both balance sheet growthand share repurchases afford us the flexibility to pursueadditional strategies including inorganic growth, providedthat the returns justify it. Needless to say, the fact thatwe are able to consider such a robust spectrum of capitaldeployment strategies is a testament to our strength thatgrows from our financial and capital discipline.Respectfully,Karl A. Roessner

OverviewE*TRADE is a financial services company that provides online brokerage and related products and services primarily toindividual retail investors. Founded on the principle of innovation, we aim to enhance the financial independence of tradersand investors through a powerful digital experience that includes tools and educational material, supported by professionalguidance, to help individual investors and traders meet their near- and long-term investing goals. We provide these servicesto customers through our digital platforms and network of industry-licensed customer service representatives and FinancialConsultants, over the phone and by email at two national branches and in-person at 30 regional branches across the UnitedStates. We operate federally chartered savings banks with the primary purpose of maximizing the value of deposits generatedthrough our brokerage business.

Delivering a powerful digital offering to our customers is a core pillar of our business strategy. We believe our focus on being adigital leader in the financial services industry is a competitive advantage. Our hybrid service delivery model is available throughthe following award-winning digital platforms, which include both E*TRADE and OptionsHouse products:WEBOur leading-edge sites forcustomers and our primarychannel to interact withprospects Access to a broad range oftrading solutions Actionable ideas andinformation Research and knowledgefor decision makingMOBILEPowerful trading applicationsfor smartphones, tablets andwatches Award-winning mobileapps Platform to manageaccounts on the move Stock and portfolio alertsACTIVE TRADING PLATFORMPowerful software-based tradingapplication Sophisticated trading tools Idea generation andanalysis Advanced portfolio andmarket trackingThese digital platforms are complemented by our offline channels, which include our network of customer service representatives andfinancial consultants and our 24/7 customer service available via phone, email and online at our two national branches and in personthrough our 30 regional branches.

Strategy