UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
Proxy
Statement Pursuant to Section 14(a) of the Securities
Exchange
Act of 1934 (Amendment No. )
Filed by the Registrant x
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¨ Preliminary Proxy
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¨ Confidential, for Use of the
Commission Only (as permitted by Rule 14a-6(e)(2))
¨ Definitive Proxy
Statement
¨ Definitive Additional
Materials
x Soliciting Material Pursuant to
§240.14a-12
E*TRADE
FINANCIAL CORPORATION
(Name of Registrant as Specified In Its
Charter)
(Name of Person(s) Filing Proxy
Statement, if other than the Registrant)
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Dear
E*TRADErs:
Over the
past year I have frequently likened E*TRADE’s current position to that famous
line from Charles Dickens’ A Tale of Two
Cities – “it was the best of times, it was the
worst of times.”
Well,
soon I will need to find a new phrase to use – because our recently-completed
equity issuances and pending debt exchange are making a major dent in the “worst
of times.”
Let me
explain.
The “best
of times” continues to reflect how well our actual operating business is
performing. In fact, online brokerage may be the only sector of the
consumer financial services industry that is having a good year. And
as shown by our strong customer metrics through the end of May, you all have
been doing a great job making sure that E*TRADE is getting its fair share of the
business, growing right along with our top competitors.
The
“worst of times” has referred to our credit losses and the subsequent need for
capital to ensure our balance sheet remains strong for our
customers. And this is where “the times” are most assuredly
improving:
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The
approximately $586 million of net cash equity raised in the second quarter
of 2009 has materially strengthened our balance sheet. E*TRADE
Bank’s capital ratios are now much stronger than they were at the
beginning of the year.
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If
we complete our pending debt exchange – which was more heavily subscribed
than we had hoped – our debt interest expense at the Parent company will
be cut by more than half.
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Through
the end of May, we have seen declines in loan delinquencies – which are
the precursor to charge-offs. While these metrics remain high,
we are encouraged by the trends and, as such, have publicly predicted a
material reduction in loan losses in the second half of
2009.
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However,
while credit is becoming demonstrably less bad, it is simply too early to
declare the “worst of times” totally behind us. Provision for loan
losses, while most recently declining, are still high enough that we are running
a bottom-line loss. In order to return to quarterly profitability, we
will need to see a substantial reduction in the amount of money we set aside to
cover loan loss provisions.
My
personal goal is to be in a position to retire the “worst of times” description
– dead and happily gone – later this year.
I know
you all are looking forward to that as much as I am.
As we
announced this morning, on Tuesday, July 22, we will report our second quarter
financial results. I encourage you all to read the earnings release
and to listen to our quarterly investor call that evening for additional
information on our progress.
In the
meantime, thanks for all of your hard work and for keeping the faith with
E*TRADE and its customers.
Don
Forward-Looking Statements.
The statements contained in this letter 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. Such statements include those
relating to the ability of the Company to complete the debt exchange, declines
in loan losses and delinquencies and future quarterly profitability. The
uncertainties and risks include, but are not limited to, potential negative
regulatory consequences resulting from actions by the Office of Thrift
Supervision or other regulators, potential failure to obtain regulatory and
shareholder approval for the debt exchange and related matters. Additional
uncertainties and risks affecting the business, financial condition, results of
operations and prospects of the Company include, but are not limited to,
potential changes in market activity, anticipated changes 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, macro
trends of the economy in general and the residential real estate market,
instability in the consumer credit markets and credit trends, rising mortgage
interest rates, tighter mortgage lending guidelines across the industry,
increased mortgage loan delinquency and default rates, portfolio growth,
portfolio seasoning and resolution through collections, sales or charge-offs,
the development and enhancement of products and services, competitive pressures
(including price competition), system failures, economic and political
conditions, including changes to the U.S. Treasury's Troubled Asset Relief
Program, 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 "Risk Factors" section of the
Company’s prospectus supplement dated June 18, 2009, and in the information
included or incorporated in the annual, quarterly and current reports on Form
10-K, Form 10-Q and Form 8-K previously filed by E*TRADE FINANCIAL Corporation
with the SEC (including information under the caption "Risk Factors"). Any
forward-looking statement included in this letter speaks only as of the date of
this communication; the Company disclaims any obligation to update any
information.
Shareholders
are strongly advised to read E*TRADE’s definitive proxy statement related to the
special shareholder meeting it intends to call in connection with the debt
exchange when such statement becomes available, as it will contain
important
information. Shareholders may obtain additional copies of E*TRADE’s
definitive proxy statement and any other documents filed or to be filed by
E*TRADE with the SEC for free at the Internet website maintained by the SEC at
www.sec.gov. Copies of E*TRADE proxy materials may be requested by contacting
our proxy solicitor, Morrow & Co, LLC at (800) 607-0088-2885
toll-free.