During the reported quarter, the Company made very substantial progress in executing its comprehensive capital plan. The additional net cash equity strengthens the Company’s capital position considerably, and assuming completion, the pending debt exchange will significantly reduce the Parent Company’s debt service burden, according to the firms.

On June, 2009, the Company successfully raised more than $600.0 million of common equity, which was being used to inject capital into ETFC as well as to enhance the Parent company’s liquidity. In total, the Company injected $500.0 million in equity into the Company during 2Q09. As a result, the Company reported Bank Tier 1 capital ratios of 6.79% to total adjusted assets and 12.65% to risk-weighted assets. The Company had excess risk-based capital (i.e., above the level regulators define as well-capitalized) of $916.0 million as of June 30, 2009.

In addition, the Company expects to exchange approximately $1.7 billion of its 8.0% Senior Notes due 2011 and 12.5% Springing Lien Notes due 2017 for an equal principal amount of newly issued Convertible Debentures due 2019 by the end of 3Q09, pending shareholder and regulatory approval. The debentures will not bear interest nor will the principal amount increase over time in lieu of interest.

In the home equity portfolio, which represents the Company’s greatest exposure to loan losses, special mention delinquencies (30-89 days) decreased 12.0% sequentially in the reported quarter, while “at risk” delinquencies (30-179 days) declined 19.0% sequentially. Total special mention delinquencies for the Company’s loan portfolio, which also includes one-to-four-family and consumer and other loans, declined by 8.0% sequentially.

According to the firms, for 2Q09, the loan portfolio has shown improving delinquency trends. Later in 2H09, management expects the quarterly provision to drop below the amount of quarterly charge-offs, which it believes have peaked in the reported quarter.

Delinquency trends in the first lien portfolio were dominated by a 57.0% increase in loans delinquent greater than 180 days, mixed with lower delinquencies in the 30–89 day (–4.1%) and 90–179 day (–1.8%). The firms believe these major trends were indicative of the credit deterioration that occurred in 4Q08 and 1Q09, which drove early-stage delinquencies sharply higher.