Delaware (State or other jurisdiction of incorporation or organization) | 94-3025021 (I.R.S. Employer Identification No.) |
Large accelerated filer ☒ | Accelerated filer ☐ |
Non-accelerated filer ☐ (Do not check if a smaller reporting company) | Smaller reporting company ☐ |
Emerging growth company ☐ |
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Item 2. | 1-18 | |||
Item 3. | ||||
Item 4. | 50 | |||
Item 1. | ||||
Item 1A. | ||||
Item 2. | ||||
Item 3. | ||||
Item 4. | ||||
Item 5. | ||||
Item 6. | 52-53 | |||
• | Charles Schwab & Co., Inc. (Schwab), a securities broker-dealer; |
• | Charles Schwab Bank (Schwab Bank), a federal savings bank; and |
• | Charles Schwab Investment Management, Inc. (CSIM), the investment advisor for Schwab’s proprietary mutual funds, which are referred to as the Schwab Funds®, and for Schwab’s exchange-traded funds (ETFs), which are referred to as the Schwab ETFs™. |
• | The Company’s aim to maximize its market valuation and stockholder returns over time; and the Company’s belief that developing trusted relationships will translate into more client assets which drives revenue and, along with expense discipline, earnings growth and stockholder value (see Introduction in Part I, Item 2); |
• | The expected impact of new accounting standards not yet adopted (see New Accounting Standards in Part I, Item 1, Financial Information – Notes to Condensed Consolidated Financial Statements (Item 1) – Note 2); |
• | The likelihood of indemnification and guarantee payment obligations (see Commitments and Contingencies in Item 1 – Note 8); and |
• | The impact of legal proceedings and regulatory matters (see Commitments and Contingencies in Item 1 – Note 8 and Legal Proceedings in Part II, Item 1). |
• | General market conditions, including the level of interest rates, equity valuations and trading activity; |
• | The Company’s ability to attract and retain clients, develop trusted relationships, and grow client assets; |
• | Client use of the Company’s investment advisory services and other products and services; |
• | The level of client assets including cash balances; |
• | Competitive pressure on pricing; |
• | Client sensitivity to rates; |
• | Regulatory guidance; |
• | Timing, amount, and impact of migration of certain balances from brokerage accounts and sweep money market funds into Schwab Bank; |
• | Capital and liquidity needs and management; |
• | The Company’s ability to manage expenses; |
• | The Company’s ability to develop and launch new products, services and capabilities in a timely and successful manner; |
• | The effect of adverse developments in litigation or regulatory matters and the extent of any related charges; and |
• | Potential breaches of contractual terms for which the Company has indemnification and guarantee obligations. |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2017 | 2016 | Percent Change | 2017 | 2016 | Percent Change | |||||||||||
Client Metrics: | ||||||||||||||||
Net new client assets (in billions) | $ | 51.6 | $ | 30.0 | 72 | % | $ | 155.0 | $ | 88.6 | 75 | % | ||||
Core net new client assets (in billions) | $ | 51.6 | $ | 30.0 | 72 | % | $ | 136.7 | $ | 88.6 | 54 | % | ||||
Client assets (in billions, at quarter end) | $ | 3,181.2 | $ | 2,725.3 | 17 | % | ||||||||||
Average client assets (in billions) | $ | 3,107.8 | $ | 2,699.5 | 15 | % | $ | 2,986.3 | $ | 2,576.8 | 16 | % | ||||
New brokerage accounts (in thousands) | 336 | 264 | 27 | % | 1,055 | 800 | 32 | % | ||||||||
Active brokerage accounts (in thousands, at quarter end) | 10,565 | 10,046 | 5 | % | ||||||||||||
Assets receiving ongoing advisory services | ||||||||||||||||
(in billions, at quarter end) | $ | 1,613.6 | $ | 1,368.8 | 18 | % | ||||||||||
Client cash as a percentage of client assets (at quarter end) | 11.1 | % | 12.5 | % | ||||||||||||
Company Financial Metrics: | ||||||||||||||||
Net revenues | $ | 2,165 | $ | 1,914 | 13 | % | $ | 6,376 | $ | 5,506 | 16 | % | ||||
Expenses excluding interest | 1,220 | 1,120 | 9 | % | 3,679 | 3,337 | 10 | % | ||||||||
Income before taxes on income | 945 | 794 | 19 | % | 2,697 | 2,169 | 24 | % | ||||||||
Taxes on income | 327 | 291 | 12 | % | 940 | 802 | 17 | % | ||||||||
Net income | 618 | 503 | 23 | % | 1,757 | 1,367 | 29 | % | ||||||||
Preferred stock dividends and other | 43 | 33 | 30 | % | 127 | 99 | 28 | % | ||||||||
Net income available to common stockholders | $ | 575 | $ | 470 | 22 | % | $ | 1,630 | $ | 1,268 | 29 | % | ||||
Earnings per common share – diluted | $ | .42 | $ | .35 | 20 | % | $ | 1.21 | $ | .95 | 27 | % | ||||
Net revenue growth from prior year | 13 | % | 20 | % | 16 | % | 17 | % | ||||||||
Pre-tax profit margin | 43.6 | % | 41.5 | % | 42.3 | % | 39.4 | % | ||||||||
Return on average common stockholders’ equity | 15 | % | 14 | % | 15 | % | 13 | % | ||||||||
Expenses excluding interest as a percentage of average | ||||||||||||||||
client assets (annualized) | 0.16 | % | 0.17 | % | 0.16 | % | 0.17 | % | ||||||||
Consolidated Tier 1 Leverage Ratio (at quarter end) | 7.7 | % | 7.1 | % |
Three Months Ended September 30, | 2017 | 2016 | |||||||||||||||
Percent Change | Amount | % of Total Net Revenues | Amount | % of Total Net Revenues | |||||||||||||
Asset management and administration fees | |||||||||||||||||
Mutual funds and ETF service fees | 7 | % | $ | 519 | 24 | % | $ | 486 | 25 | % | |||||||
Advice Solutions | 12 | % | 265 | 12 | % | 237 | 12 | % | |||||||||
Other | 3 | % | 77 | 4 | % | 75 | 5 | % | |||||||||
Asset management and administration fees | 8 | % | 861 | 40 | % | 798 | 42 | % | |||||||||
Net interest revenue | |||||||||||||||||
Interest revenue | 32 | % | 1,176 | 54 | % | 891 | 46 | % | |||||||||
Interest expense | 104 | % | (94 | ) | (4 | )% | (46 | ) | (2 | )% | |||||||
Net interest revenue | 28 | % | 1,082 | 50 | % | 845 | 44 | % | |||||||||
Trading revenue | |||||||||||||||||
Commissions | (25 | )% | 136 | 6 | % | 181 | 10 | % | |||||||||
Principal transactions | 67 | % | 15 | 1 | % | 9 | — | ||||||||||
Trading revenue | (21 | )% | 151 | 7 | % | 190 | 10 | % | |||||||||
Other | (7 | )% | 71 | 3 | % | 76 | 4 | % | |||||||||
Provision for loan losses | (100 | )% | — | — | 5 | — | |||||||||||
Total net revenues | 13 | % | $ | 2,165 | 100 | % | $ | 1,914 | 100 | % |
Nine Months Ended September 30, | 2017 | 2016 | |||||||||||||||
Percent Change | Amount | % of Total Net Revenues | Amount | % of Total Net Revenues | |||||||||||||
Asset management and administration fees | |||||||||||||||||
Mutual funds and ETF service fees | 13 | % | $ | 1,538 | 24 | % | $ | 1,362 | 25 | % | |||||||
Advice solutions | 13 | % | 765 | 12 | % | 678 | 12 | % | |||||||||
Other | 6 | % | 226 | 4 | % | 214 | 4 | % | |||||||||
Asset management and administration fees | 12 | % | 2,529 | 40 | % | 2,254 | 41 | % | |||||||||
Net interest revenue | |||||||||||||||||
Interest revenue | 32 | % | 3,358 | 52 | % | 2,541 | 46 | % | |||||||||
Interest expense | 77 | % | (223 | ) | (3 | )% | (126 | ) | (2 | )% | |||||||
Net interest revenue | 30 | % | 3,135 | 49 | % | 2,415 | 44 | % | |||||||||
Trading revenue | |||||||||||||||||
Commissions | (22 | )% | 456 | 7 | % | 586 | 10 | % | |||||||||
Principal transactions | 19 | % | 44 | 1 | % | 37 | 1 | % | |||||||||
Trading revenue | (20 | )% | 500 | 8 | % | 623 | 11 | % | |||||||||
Other | 1 | % | 212 | 3 | % | 209 | 4 | % | |||||||||
Provision for loan losses | (100 | )% | — | — | 5 | — | |||||||||||
Total net revenues | 16 | % | $ | 6,376 | 100 | % | $ | 5,506 | 100 | % |
Schwab Money Market Funds | Schwab Equity and Bond Funds and ETFs | Mutual Fund OneSource® | ||||||||||||||||||||||
Three Months Ended September 30, | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||||
Balance at beginning of period | $ | 156,186 | $ | 160,951 | $ | 151,336 | $ | 110,722 | $ | 224,749 | $ | 203,352 | ||||||||||||
Net inflows (outflows) | 2,753 | (725 | ) | 7,086 | 3,297 | (13,255 | ) | (5,453 | ) | |||||||||||||||
Net market gains (losses) and other | 235 | 26 | 6,676 | 4,435 | 9,684 | 8,184 | ||||||||||||||||||
Balance at end of period | $ | 159,174 | $ | 160,252 | $ | 165,098 | $ | 118,454 | $ | 221,178 | $ | 206,083 |
Schwab Money Market Funds | Schwab Equity and Bond Funds and ETFs | Mutual Fund OneSource® | ||||||||||||||||||||||
Nine Months Ended September 30, | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||||
Balance at beginning of period | $ | 163,495 | $ | 166,148 | $ | 125,813 | $ | 102,112 | $ | 198,924 | $ | 207,654 | ||||||||||||
Net inflows (outflows) | (4,832 | ) | (5,968 | ) | 22,347 | 8,951 | (23,494 | ) | (14,632 | ) | ||||||||||||||
Net market gains (losses) and other (1) | 511 | 72 | 16,938 | 7,391 | 45,748 | 13,061 | ||||||||||||||||||
Balance at end of period | $ | 159,174 | $ | 160,252 | $ | 165,098 | $ | 118,454 | $ | 221,178 | $ | 206,083 |
Three Months Ended September 30, | 2017 | 2016 | |||||||||||||||||||
Average Client Assets | Revenue | Average Fee | Average Client Assets | Revenue | Average Fee | ||||||||||||||||
Schwab money market funds before fee waivers | $ | 158,927 | $ | 220 | 0.55 | % | $ | 161,904 | $ | 239 | 0.59 | % | |||||||||
Fee waivers | (1 | ) | (41 | ) | |||||||||||||||||
Schwab money market funds | 158,927 | 219 | 0.55 | % | 161,904 | 198 | 0.49 | % | |||||||||||||
Schwab equity and bond funds and ETFs | 164,011 | 56 | 0.14 | % | 121,378 | 57 | 0.19 | % | |||||||||||||
Mutual Fund OneSource® | 219,076 | 179 | 0.32 | % | 203,589 | 175 | 0.34 | % | |||||||||||||
Other third-party mutual funds and ETFs (1) | 291,307 | 65 | 0.09 | % | 263,995 | 56 | 0.08 | % | |||||||||||||
Total mutual funds and ETFs (2) | $ | 833,321 | 519 | 0.25 | % | $ | 750,866 | 486 | 0.26 | % | |||||||||||
Advice solutions (2) : | |||||||||||||||||||||
Fee-based | $ | 206,781 | 265 | 0.51 | % | $ | 183,191 | 237 | 0.51 | % | |||||||||||
Intelligent Portfolios | 21,184 | — | — | 8,249 | — | — | |||||||||||||||
Legacy Non-Fee | 19,022 | — | — | 17,232 | — | — | |||||||||||||||
Total advice solutions | $ | 246,987 | 265 | 0.43 | % | $ | 208,672 | 237 | 0.45 | % | |||||||||||
Other balance-based fees (3) | 424,280 | 67 | 0.06 | % | 350,117 | 62 | 0.07 | % | |||||||||||||
Other (4) | 10 | 13 | |||||||||||||||||||
Total asset management and administration fees | $ | 861 | $ | 798 |
Nine Months Ended September 30, | 2017 | 2016 | |||||||||||||||||||
Average Client Assets | Revenue | Average Fee | Average Client Assets | Revenue | Average Fee | ||||||||||||||||
Schwab money market funds before fee waivers | $ | 160,230 | $ | 675 | 0.56 | % | $ | 164,758 | $ | 724 | 0.59 | % | |||||||||
Fee waivers | (10 | ) | (193 | ) | |||||||||||||||||
Schwab money market funds | 160,230 | 665 | 0.55 | % | 164,758 | 531 | 0.43 | % | |||||||||||||
Schwab equity and bond funds and ETFs | 151,579 | 163 | 0.14 | % | 112,528 | 160 | 0.19 | % | |||||||||||||
Mutual Fund OneSource ® | 214,058 | 528 | 0.33 | % | 199,758 | 508 | 0.34 | % | |||||||||||||
Other third-party mutual funds and ETFs (1) | 278,479 | 182 | 0.09 | % | 251,211 | 163 | 0.09 | % | |||||||||||||
Total mutual funds and ETFs (2) | $ | 804,346 | 1,538 | 0.26 | % | $ | 728,255 | 1,362 | 0.25 | % | |||||||||||
Advice solutions (2) : | |||||||||||||||||||||
Fee-based | $ | 199,468 | 765 | 0.51 | % | $ | 175,210 | 678 | 0.52 | % | |||||||||||
Intelligent Portfolios | 17,740 | — | — | 6,662 | — | — | |||||||||||||||
Legacy Non-Fee | 18,267 | — | — | 16,901 | — | — | |||||||||||||||
Total advice solutions | $ | 235,475 | 765 | 0.43 | % | $ | 198,773 | 678 | 0.46 | % | |||||||||||
Other balance-based fees (3) | 406,442 | 192 | 0.06 | % | 335,555 | 176 | 0.07 | % | |||||||||||||
Other (4) | 34 | 38 | |||||||||||||||||||
Total asset management and administration fees | $ | 2,529 | $ | 2,254 |
Three Months Ended September 30, | 2017 | 2016 | ||||||||||||||||||||
Average Balance | Interest Revenue/ Expense | Average Yield/ Rate | Average Balance | Interest Revenue/ Expense | Average Yield/ Rate | |||||||||||||||||
Interest-earning assets: | ||||||||||||||||||||||
Cash and cash equivalents | $ | 10,498 | $ | 33 | 1.25 | % | $ | 12,875 | $ | 17 | 0.53 | % | ||||||||||
Cash and investments segregated | 17,355 | 44 | 1.01 | % | 19,941 | 24 | 0.48 | % | ||||||||||||||
Broker-related receivables (1) | 459 | 1 | 0.96 | % | 667 | — | 0.31 | % | ||||||||||||||
Receivables from brokerage clients | 16,498 | 151 | 3.63 | % | 14,940 | 123 | 3.28 | % | ||||||||||||||
Available for sale securities (2) | 45,906 | 187 | 1.62 | % | 74,064 | 227 | 1.22 | % | ||||||||||||||
Held to maturity securities | 107,557 | 606 | 2.24 | % | 57,669 | 349 | 2.41 | % | ||||||||||||||
Bank loans | 16,058 | 122 | 3.01 | % | 14,739 | 100 | 2.70 | % | ||||||||||||||
Total interest-earning assets | 214,331 | 1,144 | 2.12 | % | 194,895 | 840 | 1.71 | % | ||||||||||||||
Other interest revenue | 32 | 51 | ||||||||||||||||||||
Total interest-earning assets | $ | 214,331 | $ | 1,176 | 2.18 | % | $ | 194,895 | $ | 891 | 1.82 | % | ||||||||||
Funding sources: | ||||||||||||||||||||||
Bank deposits | $ | 163,039 | $ | 49 | 0.12 | % | $ | 143,578 | $ | 10 | 0.03 | % | ||||||||||
Payables to brokerage clients | 24,833 | 6 | 0.10 | % | 26,204 | 1 | 0.01 | % | ||||||||||||||
Short-term borrowings | 1,695 | 6 | 1.40 | % | 2,952 | 4 | 0.54 | % | ||||||||||||||
Long-term debt | 3,436 | 30 | 3.46 | % | 2,876 | 26 | 3.60 | % | ||||||||||||||
Total interest-bearing liabilities | 193,003 | 91 | 0.19 | % | 175,610 | 41 | 0.09 | % | ||||||||||||||
Non-interest-bearing funding sources | 21,328 | 19,285 | ||||||||||||||||||||
Other interest expense | 3 | 5 | ||||||||||||||||||||
Total funding sources | $ | 214,331 | $ | 94 | 0.18 | % | $ | 194,895 | $ | 46 | 0.10 | % | ||||||||||
Net interest revenue | $ | 1,082 | 2.00 | % | $ | 845 | 1.72 | % |
Nine Months Ended September 30, | 2017 | 2016 | ||||||||||||||||||||
Average Balance | Interest Revenue/ Expense | Average Yield/ Rate | Average Balance | Interest Revenue/ Expense | Average Yield/ Rate | |||||||||||||||||
Interest-earning assets: | ||||||||||||||||||||||
Cash and cash equivalents | $ | 9,375 | $ | 72 | 1.03 | % | $ | 11,510 | $ | 44 | 0.51 | % | ||||||||||
Cash and investments segregated | 19,609 | 120 | 0.82 | % | 19,788 | 65 | 0.44 | % | ||||||||||||||
Broker-related receivables (1) | 428 | 2 | 0.74 | % | 579 | — | 0.21 | % | ||||||||||||||
Receivables from brokerage clients | 15,861 | 415 | 3.50 | % | 14,952 | 372 | 3.32 | % | ||||||||||||||
Available for sale securities (2) | 55,070 | 615 | 1.49 | % | 71,230 | 636 | 1.19 | % | ||||||||||||||
Held to maturity securities | 99,523 | 1,691 | 2.27 | % | 53,791 | 1,006 | 2.50 | % | ||||||||||||||
Bank loans | 15,764 | 347 | 2.94 | % | 14,570 | 297 | 2.72 | % | ||||||||||||||
Total interest-earning assets | 215,630 | 3,262 | 2.02 | % | 186,420 | 2,420 | 1.73 | % | ||||||||||||||
Other interest revenue | 96 | 121 | ||||||||||||||||||||
Total interest-earning assets | $ | 215,630 | $ | 3,358 | 2.08 | % | $ | 186,420 | $ | 2,541 | 1.82 | % | ||||||||||
Funding sources: | ||||||||||||||||||||||
Bank deposits | $ | 163,475 | $ | 98 | 0.08 | % | $ | 137,093 | $ | 26 | 0.03 | % | ||||||||||
Payables to brokerage clients | 26,198 | 11 | 0.06 | % | 26,079 | 2 | 0.01 | % | ||||||||||||||
Short-term borrowings | 1,475 | 11 | 1.00 | % | 1,674 | 6 | 0.48 | % | ||||||||||||||
Long-term debt | 3,349 | 89 | 3.55 | % | 2,876 | 78 | 3.62 | % | ||||||||||||||
Total interest-bearing liabilities | 194,497 | 209 | 0.14 | % | 167,722 | 112 | 0.09 | % | ||||||||||||||
Non-interest-bearing funding sources | 21,133 | 18,698 | ||||||||||||||||||||
Other interest expense | 14 | 14 | ||||||||||||||||||||
Total funding sources | $ | 215,630 | $ | 223 | 0.14 | % | $ | 186,420 | $ | 126 | 0.09 | % | ||||||||||
Net interest revenue | $ | 3,135 | 1.94 | % | $ | 2,415 | 1.73 | % |
• | Gathering additional assets from new and current clients; |
• | Transferring uninvested cash balances in certain client brokerage accounts to Schwab Bank; and |
• | Establishing the Schwab Bank sweep feature as the default investment option for uninvested cash balances within all new brokerage accounts as of June 2016. |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||
2017 | 2016 | Percent Change | 2017 | 2016 | Percent Change | |||||||||||||||||
Daily average revenue trades (in thousands) | 312 | 268 | 16 | % | 313 | 291 | 8 | % | ||||||||||||||
Clients’ daily average trades (in thousands) | 633 | 543 | 17 | % | 602 | 558 | 8 | % | ||||||||||||||
Number of trading days | 62.5 | 64.0 | (2 | )% | 187.5 | 189.0 | (1 | )% | ||||||||||||||
Average revenue per revenue trade | $ | 7.74 | $ | 11.17 | (31 | )% | $ | 8.52 | $ | 11.30 | (25 | )% | ||||||||||
Trading revenue | $ | 151 | $ | 190 | (21 | )% | $ | 500 | $ | 623 | (20 | )% |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||
2017 | 2016 | Percent Change | 2017 | 2016 | Percent Change | |||||||||||||||||
Compensation and benefits | ||||||||||||||||||||||
Salaries and wages | $ | 372 | $ | 343 | 8 | % | $ | 1,110 | $ | 1,018 | 9 | % | ||||||||||
Incentive compensation | 187 | 170 | 10 | % | 580 | 509 | 14 | % | ||||||||||||||
Employee benefits and other | 103 | 96 | 7 | % | 336 | 310 | 8 | % | ||||||||||||||
Total compensation and benefits | $ | 662 | $ | 609 | 9 | % | $ | 2,026 | $ | 1,837 | 10 | % | ||||||||||
Professional services | 152 | 131 | 16 | % | 429 | 372 | 15 | % | ||||||||||||||
Occupancy and equipment | 111 | 100 | 11 | % | 323 | 299 | 8 | % | ||||||||||||||
Advertising and market development | 63 | 64 | (2 | )% | 205 | 204 | — | |||||||||||||||
Communications | 56 | 57 | (2 | )% | 171 | 179 | (4 | )% | ||||||||||||||
Depreciation and amortization | 69 | 60 | 15 | % | 200 | 173 | 16 | % | ||||||||||||||
Other | 107 | 99 | 8 | % | 325 | 273 | 19 | % | ||||||||||||||
Total expenses excluding interest | $ | 1,220 | $ | 1,120 | 9 | % | $ | 3,679 | $ | 3,337 | 10 | % | ||||||||||
Expenses as a percentage of total net revenues: | ||||||||||||||||||||||
Compensation and benefits | 31 | % | 32 | % | 32 | % | 33 | % | ||||||||||||||
Advertising and market development | 3 | % | 3 | % | 3 | % | 4 | % | ||||||||||||||
Full-time equivalent employees (in thousands): | ||||||||||||||||||||||
At quarter end | 17.3 | 16.1 | 7 | % | ||||||||||||||||||
Average | 17.1 | 16.2 | 6 | % | 16.7 | 15.9 | 5 | % |
Investor Services | Advisor Services | Total | |||||||||||||||||||||||||||||||
Three Months Ended September 30, | Percent Change | 2017 | 2016 | Percent Change | 2017 | 2016 | Percent Change | 2017 | 2016 | ||||||||||||||||||||||||
Net Revenues: | |||||||||||||||||||||||||||||||||
Asset management and administration fees | 8 | % | $ | 595 | $ | 550 | 7 | % | $ | 266 | $ | 248 | 8 | % | $ | 861 | $ | 798 | |||||||||||||||
Net interest revenue | 25 | % | 818 | 654 | 38 | % | 264 | 191 | 28 | % | 1,082 | 845 | |||||||||||||||||||||
Trading revenue | (24 | )% | 94 | 123 | (15 | )% | 57 | 67 | (21 | )% | 151 | 190 | |||||||||||||||||||||
Other | (4 | )% | 54 | 56 | (15 | )% | 17 | 20 | (7 | )% | 71 | 76 | |||||||||||||||||||||
Provision for loan losses | (100 | )% | — | 4 | — | — | 1 | (100 | )% | — | 5 | ||||||||||||||||||||||
Total net revenues | 13 | % | 1,561 | 1,387 | 15 | % | 604 | 527 | 13 | % | 2,165 | 1,914 | |||||||||||||||||||||
Expenses Excluding Interest | 8 | % | 918 | 847 | 11 | % | 302 | 273 | 9 | % | 1,220 | 1,120 | |||||||||||||||||||||
Income before taxes on income | 19 | % | $ | 643 | $ | 540 | 19 | % | $ | 302 | $ | 254 | 19 | % | $ | 945 | $ | 794 |
Investor Services | Advisor Services | Total | |||||||||||||||||||||||||||||||
Nine Months Ended September 30, | Percent Change | 2017 | 2016 | Percent Change | 2017 | 2016 | Percent Change | 2017 | 2016 | ||||||||||||||||||||||||
Net Revenues: | |||||||||||||||||||||||||||||||||
Asset management and administration fees | 13 | % | $ | 1,743 | $ | 1,536 | 9 | % | $ | 786 | $ | 718 | 12 | % | $ | 2,529 | $ | 2,254 | |||||||||||||||
Net interest revenue | 25 | % | 2,366 | 1,895 | 48 | % | 769 | 520 | 30 | % | 3,135 | 2,415 | |||||||||||||||||||||
Trading revenue | (21 | )% | 311 | 395 | (17 | )% | 189 | 228 | (20 | )% | 500 | 623 | |||||||||||||||||||||
Other | 4 | % | 159 | 153 | (5 | )% | 53 | 56 | 1 | % | 212 | 209 | |||||||||||||||||||||
Provision for loan losses | — | — | 4 | — | — | 1 | — | — | 5 | ||||||||||||||||||||||||
Total net revenues | 15 | % | 4,579 | 3,983 | 18 | % | 1,797 | 1,523 | 16 | % | 6,376 | 5,506 | |||||||||||||||||||||
Expenses Excluding Interest | 10 | % | 2,762 | 2,518 | 12 | % | 917 | 819 | 10 | % | 3,679 | 3,337 | |||||||||||||||||||||
Income before taxes on income | 24 | % | $ | 1,817 | $ | 1,465 | 25 | % | $ | 880 | $ | 704 | 24 | % | $ | 2,697 | $ | 2,169 |
September 30, 2017 | December 31, 2016 | |||||
Increase of 100 basis points | 5.2 | % | 6.5 | % | ||
Decrease of 100 basis points | (8.3 | )% | (9.8 | )% |
Available at | ||||
Description | Borrower | September 30, 2017 (1) | ||
Committed, unsecured credit facility with various external banks (2) | CSC | $ | 750 | |
Uncommitted, unsecured lines of credit with various external banks | CSC, Schwab | 1,129 | ||
Federal Reserve Bank discount window | Schwab Bank | 3,402 | ||
Federal Home Loan Bank secured credit facility | Schwab Bank | 14,875 | ||
Unsecured commercial paper | CSC | 750 |
September 30, 2017 | December 31, 2016 | ||||||||||||||
CSC | Schwab Bank | CSC | Schwab Bank | ||||||||||||
Total stockholders’ equity | $ | 18,027 | $ | 12,769 | $ | 16,421 | $ | 11,726 | |||||||
Less: | |||||||||||||||
Preferred Stock | 2,783 | — | 2,783 | — | |||||||||||
Common Equity Tier 1 Capital before regulatory adjustments | $ | 15,244 | $ | 12,769 | $ | 13,638 | $ | 11,726 | |||||||
Less: | |||||||||||||||
Goodwill, net of associated deferred tax liabilities | $ | 1,175 | $ | 11 | $ | 1,175 | $ | 11 | |||||||
Other intangible assets, net of associated deferred tax liabilities | 46 | — | 52 | — | |||||||||||
Deferred tax assets, net of valuation allowances and deferred tax liabilities | 1 | — | — | — | |||||||||||
AOCI adjustment (1) | (106 | ) | (104 | ) | (163 | ) | (163 | ) | |||||||
Common Equity Tier 1 Capital | $ | 14,128 | $ | 12,862 | $ | 12,574 | $ | 11,878 | |||||||
Tier 1 Capital | $ | 16,911 | $ | 12,862 | $ | 15,357 | $ | 11,878 | |||||||
Total Capital | $ | 16,939 | $ | 12,889 | $ | 15,384 | $ | 11,904 | |||||||
Risk-Weighted Assets | 72,037 | 64,173 | 68,179 | 59,915 | |||||||||||
Common Equity Tier 1 Capital/Risk-Weighted Assets | 19.6 | % | 20.0 | % | 18.4 | % | 19.8 | % | |||||||
Tier 1 Capital/Risk-Weighted Assets | 23.5 | % | 20.0 | % | 22.5 | % | 19.8 | % | |||||||
Total Capital/Risk-Weighted Assets | 23.5 | % | 20.1 | % | 22.6 | % | 19.9 | % | |||||||
Tier 1 Leverage Ratio | 7.7 | % | 7.2 | % | 7.2 | % | 7.0 | % |
Nine Months Ended September 30, | 2017 | 2016 | ||||||||||||||
Cash Paid | Per Share Amount | Cash Paid | Per Share Amount | |||||||||||||
Common Stock | $ | 323 | $ | 0.24 | $ | 266 | $ | 0.20 | ||||||||
Series A Preferred Stock (1) | 28 | 70.00 | 28 | 70.00 | ||||||||||||
Series B Preferred Stock (2) | 22 | 45.00 | 22 | 45.00 | ||||||||||||
Series C Preferred Stock (2) | 27 | 45.00 | 27 | 45.00 | ||||||||||||
Series D Preferred Stock (2,3) | 33 | 44.64 | 22 | 28.77 | ||||||||||||
Series E Preferred Stock (4) | 23 | 3,867.01 | N/A | N/A |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Net Revenues | ||||||||||||||||
Asset management and administration fees (1) | $ | 861 | $ | 798 | $ | 2,529 | $ | 2,254 | ||||||||
Interest revenue | 1,176 | 891 | 3,358 | 2,541 | ||||||||||||
Interest expense | (94 | ) | (46 | ) | (223 | ) | (126 | ) | ||||||||
Net interest revenue | 1,082 | 845 | 3,135 | 2,415 | ||||||||||||
Trading revenue | 151 | 190 | 500 | 623 | ||||||||||||
Other | 71 | 76 | 212 | 209 | ||||||||||||
Provision for loan losses | — | 5 | — | 5 | ||||||||||||
Total net revenues | 2,165 | 1,914 | 6,376 | 5,506 | ||||||||||||
Expenses Excluding Interest | ||||||||||||||||
Compensation and benefits | 662 | 609 | 2,026 | 1,837 | ||||||||||||
Professional services | 152 | 131 | 429 | 372 | ||||||||||||
Occupancy and equipment | 111 | 100 | 323 | 299 | ||||||||||||
Advertising and market development | 63 | 64 | 205 | 204 | ||||||||||||
Communications | 56 | 57 | 171 | 179 | ||||||||||||
Depreciation and amortization | 69 | 60 | 200 | 173 | ||||||||||||
Other | 107 | 99 | 325 | 273 | ||||||||||||
Total expenses excluding interest | 1,220 | 1,120 | 3,679 | 3,337 | ||||||||||||
Income before taxes on income | 945 | 794 | 2,697 | 2,169 | ||||||||||||
Taxes on income (2) | 327 | 291 | 940 | 802 | ||||||||||||
Net Income | 618 | 503 | 1,757 | 1,367 | ||||||||||||
Preferred stock dividends and other (3) | 43 | 33 | 127 | 99 | ||||||||||||
Net Income Available to Common Stockholders | $ | 575 | $ | 470 | $ | 1,630 | $ | 1,268 | ||||||||
Weighted-Average Common Shares Outstanding: | ||||||||||||||||
Basic | 1,339 | 1,324 | 1,338 | 1,322 | ||||||||||||
Diluted | 1,353 | 1,334 | 1,352 | 1,332 | ||||||||||||
Earnings Per Common Share: | ||||||||||||||||
Basic | $ | .43 | $ | .36 | $ | 1.22 | $ | .96 | ||||||||
Diluted | $ | .42 | $ | .35 | $ | 1.21 | $ | .95 | ||||||||
Dividends Declared Per Common Share | $ | .08 | $ | .07 | $ | .24 | $ | .20 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Net Income | $ | 618 | $ | 503 | $ | 1,757 | $ | 1,367 | ||||||||
Other comprehensive income (loss), before tax: | ||||||||||||||||
Change in net unrealized gain (loss) on available for sale securities: | ||||||||||||||||
Net unrealized gain (loss) | — | 77 | 81 | 266 | ||||||||||||
Reclassification of net unrealized loss transferred to held to maturity | — | — | 227 | — | ||||||||||||
Other reclassifications included in other revenue | — | — | (7 | ) | (3 | ) | ||||||||||
Change in net unrealized gain (loss) on held to maturity securities: | ||||||||||||||||
Reclassification of net unrealized loss transferred from available for sale | — | — | (227 | ) | — | |||||||||||
Amortization of amounts previously recorded upon transfer from available for sale | 10 | — | 21 | — | ||||||||||||
Other | — | — | (3 | ) | 1 | |||||||||||
Other comprehensive income (loss), before tax | 10 | 77 | 92 | 264 | ||||||||||||
Income tax effect | (4 | ) | (29 | ) | (35 | ) | (99 | ) | ||||||||
Other comprehensive income (loss), net of tax | 6 | 48 | 57 | 165 | ||||||||||||
Comprehensive Income | $ | 624 | $ | 551 | $ | 1,814 | $ | 1,532 |
September 30, 2017 | December 31, 2016 | ||||||
Assets | |||||||
Cash and cash equivalents | $ | 12,253 | $ | 10,828 | |||
Cash and investments segregated and on deposit for regulatory purposes | |||||||
(including resale agreements of $7,247 at September 30, 2017 and $9,547 | |||||||
at December 31, 2016) | 15,933 | 22,174 | |||||
Receivables from brokers, dealers, and clearing organizations | 665 | 728 | |||||
Receivables from brokerage clients — net | 18,461 | 17,155 | |||||
Other securities owned — at fair value | 427 | 449 | |||||
Available for sale securities | 48,062 | 77,365 | |||||
Held to maturity securities (fair value — $114,332 at September 30, 2017 and | |||||||
$74,444 at December 31, 2016) | 114,376 | 75,203 | |||||
Bank loans — net | 16,232 | 15,403 | |||||
Equipment, office facilities, and property — net | 1,392 | 1,299 | |||||
Goodwill | 1,227 | 1,227 | |||||
Intangible assets — net | 115 | 144 | |||||
Other assets | 1,571 | 1,408 | |||||
Total assets | $ | 230,714 | $ | 223,383 | |||
Liabilities and Stockholders’ Equity | |||||||
Bank deposits | $ | 165,263 | $ | 163,454 | |||
Payables to brokers, dealers, and clearing organizations | 5,427 | 2,407 | |||||
Payables to brokerage clients | 31,480 | 35,894 | |||||
Accrued expenses and other liabilities | 2,249 | 2,331 | |||||
Short-term borrowings | 5,000 | — | |||||
Long-term debt | 3,268 | 2,876 | |||||
Total liabilities | 212,687 | 206,962 | |||||
Stockholders’ equity: | |||||||
Preferred stock — $.01 par value per share; aggregate liquidation preference | |||||||
of $2,835 at September 30, 2017 and December 31, 2016 | 2,783 | 2,783 | |||||
Common stock — 3 billion shares authorized; $.01 par value per share; 1,487,543,446 | |||||||
shares issued | 15 | 15 | |||||
Additional paid-in capital | 4,365 | 4,267 | |||||
Retained earnings | 13,963 | 12,649 | |||||
Treasury stock, at cost — 147,513,629 shares at September 30, 2017 and | |||||||
154,793,560 shares at December 31, 2016 | (2,993 | ) | (3,130 | ) | |||
Accumulated other comprehensive income (loss) | (106 | ) | (163 | ) | |||
Total stockholders’ equity | 18,027 | 16,421 | |||||
Total liabilities and stockholders’ equity | $ | 230,714 | $ | 223,383 |
Accumulated Other Comprehensive Income (Loss) | |||||||||||||||||||||||||||||||
Preferred Stock | Common stock | Additional Paid-in Capital | Treasury Stock, at cost | ||||||||||||||||||||||||||||
Shares | Amount | Retained Earnings | Total | ||||||||||||||||||||||||||||
Balance at December 31, 2015 | $ | 1,459 | 1,488 | $ | 15 | $ | 4,152 | $ | 11,253 | $ | (3,343 | ) | $ | (134 | ) | $ | 13,402 | ||||||||||||||
Net income | — | — | — | — | 1,367 | — | — | 1,367 | |||||||||||||||||||||||
Other comprehensive income (loss), net of tax | — | — | — | — | — | — | 165 | 165 | |||||||||||||||||||||||
Issuance of preferred stock, net | 733 | — | — | — | — | — | — | 733 | |||||||||||||||||||||||
Dividends declared on preferred stock | — | — | — | — | (84 | ) | — | — | (84 | ) | |||||||||||||||||||||
Dividends declared on common stock | — | — | — | — | (266 | ) | — | — | (266 | ) | |||||||||||||||||||||
Stock option exercises and other | — | — | — | (16 | ) | — | 48 | — | 32 | ||||||||||||||||||||||
Share-based compensation and | |||||||||||||||||||||||||||||||
related tax effects | — | — | — | 104 | — | — | — | 104 | |||||||||||||||||||||||
Other | — | — | — | 14 | (9 | ) | 12 | — | 17 | ||||||||||||||||||||||
Balance at September 30, 2016 | $ | 2,192 | 1,488 | $ | 15 | $ | 4,254 | $ | 12,261 | $ | (3,283 | ) | $ | 31 | $ | 15,470 | |||||||||||||||
Balance at December 31, 2016 | $ | 2,783 | 1,488 | $ | 15 | $ | 4,267 | $ | 12,649 | $ | (3,130 | ) | $ | (163 | ) | $ | 16,421 | ||||||||||||||
Net income | — | — | — | — | 1,757 | — | — | 1,757 | |||||||||||||||||||||||
Other comprehensive income (loss), net of tax | — | — | — | — | — | — | 57 | 57 | |||||||||||||||||||||||
Dividends declared on preferred stock | — | — | — | — | (120 | ) | — | — | (120 | ) | |||||||||||||||||||||
Dividends declared on common stock | — | — | — | — | (323 | ) | — | — | (323 | ) | |||||||||||||||||||||
Stock option exercises and other | — | — | — | (30 | ) | — | 128 | — | 98 | ||||||||||||||||||||||
Share-based compensation and | |||||||||||||||||||||||||||||||
related tax effects | — | — | — | 105 | — | — | — | 105 | |||||||||||||||||||||||
Other | — | — | — | 23 | — | 9 | — | 32 | |||||||||||||||||||||||
Balance at September 30, 2017 | $ | 2,783 | 1,488 | $ | 15 | $ | 4,365 | $ | 13,963 | $ | (2,993 | ) | $ | (106 | ) | $ | 18,027 |
Nine Months Ended September 30, | ||||||||
2017 | 2016 | |||||||
Cash Flows from Operating Activities | ||||||||
Net income | $ | 1,757 | $ | 1,367 | ||||
Adjustments to reconcile net income to net cash provided by (used for) operating activities: | ||||||||
Provision for loan losses | — | (5 | ) | |||||
Share-based compensation | 111 | 101 | ||||||
Depreciation and amortization | 200 | 173 | ||||||
Premium amortization, net, on available for sale securities and held to maturity securities | 240 | 181 | ||||||
Other | 35 | 25 | ||||||
Net change in: | ||||||||
Cash and investments segregated and on deposit for regulatory purposes | 6,241 | (479 | ) | |||||
Receivables from brokers, dealers, and clearing organizations | 61 | (370 | ) | |||||
Receivables from brokerage clients | (1,310 | ) | 928 | |||||
Other securities owned | 22 | (325 | ) | |||||
Other assets | (76 | ) | (61 | ) | ||||
Payables to brokers, dealers, and clearing organizations | (957 | ) | (111 | ) | ||||
Payables to brokerage clients | (4,414 | ) | (224 | ) | ||||
Accrued expenses and other liabilities | (82 | ) | (226 | ) | ||||
Net cash provided by (used for) operating activities | 1,828 | 974 | ||||||
Cash Flows from Investing Activities | ||||||||
Purchases of available for sale securities | (6,375 | ) | (22,782 | ) | ||||
Proceeds from sales of available for sale securities | 5,773 | 4,645 | ||||||
Principal payments on available for sale securities | 6,532 | 8,652 | ||||||
Purchases of held to maturity securities | (19,886 | ) | (19,439 | ) | ||||
Principal payments on held to maturity securities | 7,927 | 3,841 | ||||||
Net increase in bank loans | (829 | ) | (600 | ) | ||||
Purchases of equipment, office facilities, and property | (267 | ) | (272 | ) | ||||
Purchases of Federal Home Loan Bank stock | (160 | ) | (152 | ) | ||||
Proceeds from sales of Federal Home Loan Bank stock | 106 | 88 | ||||||
Other investing activities | (52 | ) | (25 | ) | ||||
Net cash provided by (used for) investing activities | (7,231 | ) | (26,044 | ) | ||||
Cash Flows from Financing Activities | ||||||||
Net change in bank deposits | 1,809 | 20,128 | ||||||
Net proceeds from short-term borrowings | 5,000 | 3,001 | ||||||
Issuance of long-term debt | 643 | — | ||||||
Repayment of long-term debt | (256 | ) | (5 | ) | ||||
Net proceeds from preferred stock offering | — | 725 | ||||||
Dividends paid | (456 | ) | (365 | ) | ||||
Proceeds from stock options exercised and other | 98 | 31 | ||||||
Other financing activities | (10 | ) | 8 | |||||
Net cash provided by (used for) financing activities | 6,828 | 23,523 | ||||||
Increase (Decrease) in Cash and Cash Equivalents | 1,425 | (1,547 | ) | |||||
Cash and Cash Equivalents at Beginning of Period | 10,828 | 11,978 | ||||||
Cash and Cash Equivalents at End of Period | $ | 12,253 | $ | 10,431 | ||||
Supplemental Cash Flow Information | ||||||||
Cash paid during the period for: | ||||||||
Interest | $ | 233 | $ | 141 | ||||
Income taxes | $ | 890 | $ | 757 | ||||
Non-cash investing activity: | ||||||||
Securities purchased during the period but settled after period end | $ | 3,977 | $ | 1,021 |
September 30, 2017 | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | ||||||||||||
Available for sale securities: | ||||||||||||||||
U.S. agency mortgage-backed securities | $ | 19,717 | $ | 54 | $ | 25 | $ | 19,746 | ||||||||
Asset-backed securities | 9,960 | 40 | 4 | 9,996 | ||||||||||||
Corporate debt securities | 6,449 | 20 | 1 | 6,468 | ||||||||||||
U.S. Treasury securities | 7,741 | 7 | 49 | 7,699 | ||||||||||||
Certificates of deposit | 1,840 | 3 | — | 1,843 | ||||||||||||
U.S. agency notes | 1,913 | — | 6 | 1,907 | ||||||||||||
Commercial paper | 312 | — | — | 312 | ||||||||||||
Non-agency commercial mortgage-backed securities | 41 | — | — | 41 | ||||||||||||
Foreign government agency securities | 50 | — | — | 50 | ||||||||||||
Total available for sale securities | $ | 48,023 | $ | 124 | $ | 85 | $ | 48,062 | ||||||||
Held to maturity securities: | ||||||||||||||||
U.S. agency mortgage-backed securities | $ | 96,045 | $ | 492 | $ | 721 | $ | 95,816 | ||||||||
Non-agency commercial mortgage-backed securities | 995 | 13 | 2 | 1,006 | ||||||||||||
Asset-backed securities | 12,237 | 100 | 1 | 12,336 | ||||||||||||
Corporate debt securities | 3,377 | 26 | — | 3,403 | ||||||||||||
U.S. Treasury securities | 223 | — | 1 | 222 | ||||||||||||
U.S. state and municipal securities | 1,249 | 50 | — | 1,299 | ||||||||||||
Certificates of deposit | 200 | — | — | 200 | ||||||||||||
Foreign government agency securities | 50 | — | — | 50 | ||||||||||||
Total held to maturity securities | $ | 114,376 | $ | 681 | $ | 725 | $ | 114,332 |
December 31, 2016 | ||||||||||||||||
Available for sale securities: | ||||||||||||||||
U.S. agency mortgage-backed securities | $ | 33,167 | $ | 120 | $ | 92 | $ | 33,195 | ||||||||
Asset-backed securities | 20,520 | 29 | 214 | 20,335 | ||||||||||||
Corporate debt securities | 9,850 | 20 | 18 | 9,852 | ||||||||||||
U.S. Treasury securities | 8,679 | 3 | 59 | 8,623 | ||||||||||||
Certificates of deposit | 2,070 | 2 | 1 | 2,071 | ||||||||||||
U.S. agency notes | 1,915 | — | 8 | 1,907 | ||||||||||||
U.S. state and municipal securities | 1,167 | 2 | 46 | 1,123 | ||||||||||||
Commercial paper | 214 | — | — | 214 | ||||||||||||
Non-agency commercial mortgage-backed securities | 45 | — | — | 45 | ||||||||||||
Total available for sale securities | $ | 77,627 | $ | 176 | $ | 438 | $ | 77,365 | ||||||||
Held to maturity securities: | ||||||||||||||||
U.S. agency mortgage-backed securities | $ | 72,439 | $ | 324 | $ | 1,086 | $ | 71,677 | ||||||||
Non-agency commercial mortgage-backed securities | 997 | 11 | 4 | 1,004 | ||||||||||||
Asset-backed securities | 941 | — | — | 941 | ||||||||||||
Corporate debt securities | 436 | — | — | 436 | ||||||||||||
U.S. Treasury securities | 223 | — | 4 | 219 | ||||||||||||
Commercial paper | 99 | — | — | 99 | ||||||||||||
U.S. state and municipal securities | 68 | 1 | 1 | 68 | ||||||||||||
Total held to maturity securities | $ | 75,203 | $ | 336 | $ | 1,095 | $ | 74,444 |
Less than | 12 months | ||||||||||||||||||||||
12 months | or longer | Total | |||||||||||||||||||||
September 30, 2017 | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | |||||||||||||||||
Available for sale securities: | |||||||||||||||||||||||
U.S. agency mortgage-backed securities | $ | 3,254 | $ | 6 | $ | 2,805 | $ | 19 | $ | 6,059 | $ | 25 | |||||||||||
Asset-backed securities | 638 | — | 578 | 4 | 1,216 | 4 | |||||||||||||||||
Corporate debt securities | 990 | 1 | 153 | — | 1,143 | 1 | |||||||||||||||||
U.S. Treasury securities | 6,421 | 49 | — | — | 6,421 | 49 | |||||||||||||||||
U.S. agency notes | 1,409 | 5 | 498 | 1 | 1,907 | 6 | |||||||||||||||||
Total | $ | 12,712 | $ | 61 | $ | 4,034 | $ | 24 | $ | 16,746 | $ | 85 | |||||||||||
Held to maturity securities: | |||||||||||||||||||||||
U.S. agency mortgage-backed securities | $ | 2,386 | $ | 90 | $ | 47,136 | $ | 631 | $ | 49,522 | $ | 721 | |||||||||||
Non-agency commercial mortgage-backed securities | — | — | 491 | 2 | 491 | 2 | |||||||||||||||||
Asset-backed securities | 409 | — | 672 | 1 | 1,081 | 1 | |||||||||||||||||
U.S. Treasury securities | — | — | 222 | 1 | 222 | 1 | |||||||||||||||||
Total | $ | 2,795 | $ | 90 | $ | 48,521 | $ | 635 | $ | 51,316 | $ | 725 | |||||||||||
Total securities with unrealized losses (1) | $ | 15,507 | $ | 151 | $ | 52,555 | $ | 659 | $ | 68,062 | $ | 810 |
December 31, 2016 | |||||||||||||||||||||||
Available for sale securities: | |||||||||||||||||||||||
U.S. agency mortgage-backed securities | $ | 14,816 | $ | 69 | $ | 2,931 | $ | 23 | $ | 17,747 | $ | 92 | |||||||||||
Asset-backed securities | 1,670 | 13 | 9,237 | 201 | 10,907 | 214 | |||||||||||||||||
Corporate debt securities | 2,407 | 17 | 653 | 1 | 3,060 | 18 | |||||||||||||||||
U.S. Treasury securities | 6,926 | 59 | — | — | 6,926 | 59 | |||||||||||||||||
Certificates of deposit | 474 | — | 100 | 1 | 574 | 1 | |||||||||||||||||
U.S. agency notes | 1,907 | 8 | — | — | 1,907 | 8 | |||||||||||||||||
U.S. state and municipal securities | 956 | 46 | — | — | 956 | 46 | |||||||||||||||||
Total | $ | 29,156 | $ | 212 | $ | 12,921 | $ | 226 | $ | 42,077 | $ | 438 | |||||||||||
Held to maturity securities: | |||||||||||||||||||||||
U.S. agency mortgage-backed securities | $ | 51,361 | $ | 1,086 | $ | — | $ | — | $ | 51,361 | $ | 1,086 | |||||||||||
Non-agency commercial mortgage-backed securities | 591 | 4 | — | — | 591 | 4 | |||||||||||||||||
U.S. Treasury securities | 219 | 4 | — | — | 219 | 4 | |||||||||||||||||
U.S. state and municipal securities | 14 | 1 | — | — | 14 | 1 | |||||||||||||||||
Total | $ | 52,185 | $ | 1,095 | $ | — | $ | — | $ | 52,185 | $ | 1,095 | |||||||||||
Total securities with unrealized losses (2) | $ | 81,341 | $ | 1,307 | $ | 12,921 | $ | 226 | $ | 94,262 | $ | 1,533 |
September 30, 2017 | Within 1 year | After 1 year through 5 years | After 5 years through 10 years | After 10 years | Total | |||||||||||||||
Available for sale securities: | ||||||||||||||||||||
U.S. agency mortgage-backed securities (1) | $ | 83 | $ | 2,390 | $ | 6,646 | $ | 10,627 | $ | 19,746 | ||||||||||
Asset-backed securities | — | 8,096 | 1,243 | 657 | 9,996 | |||||||||||||||
Corporate debt securities | 3,381 | 3,087 | — | — | 6,468 | |||||||||||||||
U.S. Treasury securities | 2,069 | 5,630 | — | — | 7,699 | |||||||||||||||
Certificates of deposit | 876 | 967 | — | — | 1,843 | |||||||||||||||
U.S. agency notes | 847 | 1,060 | — | — | 1,907 | |||||||||||||||
Commercial paper | 312 | — | — | — | 312 | |||||||||||||||
Non-agency commercial mortgage-backed securities (1) | — | — | — | 41 | 41 | |||||||||||||||
Foreign government agency securities | — | 50 | — | — | 50 | |||||||||||||||
Total fair value | $ | 7,568 | $ | 21,280 | $ | 7,889 | $ | 11,325 | $ | 48,062 | ||||||||||
Total amortized cost | $ | 7,563 | $ | 21,278 | $ | 7,881 | $ | 11,301 | $ | 48,023 | ||||||||||
Held to maturity securities: | ||||||||||||||||||||
U.S. agency mortgage-backed securities (1) | $ | 303 | $ | 11,401 | $ | 29,606 | $ | 54,506 | $ | 95,816 | ||||||||||
Non-agency commercial mortgage-backed securities (1) | — | — | 364 | 642 | 1,006 | |||||||||||||||
Asset-backed securities | — | 1,016 | 5,364 | 5,956 | 12,336 | |||||||||||||||
Corporate debt securities | 250 | 3,153 | — | — | 3,403 | |||||||||||||||
U.S. Treasury securities | — | — | 222 | — | 222 | |||||||||||||||
U.S. state and municipal securities | — | — | 98 | 1,201 | 1,299 | |||||||||||||||
Certificates of deposit | — | 200 | — | — | 200 | |||||||||||||||
Foreign government agency securities | — | 50 | — | — | 50 | |||||||||||||||
Total fair value | $ | 553 | $ | 15,820 | $ | 35,654 | $ | 62,305 | $ | 114,332 | ||||||||||
Total amortized cost | $ | 553 | $ | 15,672 | $ | 35,558 | $ | 62,593 | $ | 114,376 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Proceeds | $ | 288 | $ | 571 | $ | 5,773 | $ | 4,645 | |||||||
Gross realized gains | — | — | 7 | 3 | |||||||||||
Gross realized losses | — | — | — | — |
September 30, 2017 | Current | 30-59 days past due | 60-89 days past due | >90 days past due and other nonaccrual loans | Total past due and other nonaccrual loans | Total loans | Allowance for loan losses | Total bank loans - net | ||||||||||||||||
Residential real estate mortgages | $ | 9,773 | $ | 11 | $ | 2 | $ | 16 | $ | 29 | $ | 9,802 | $ | 16 | $ | 9,786 | ||||||||
Home equity loans and lines of credit | 2,027 | 4 | 1 | 10 | 15 | 2,042 | 8 | 2,034 | ||||||||||||||||
Pledged asset lines | 4,278 | 1 | — | — | 1 | 4,279 | — | 4,279 | ||||||||||||||||
Other | 135 | — | — | — | — | 135 | 2 | 133 | ||||||||||||||||
Total bank loans | $ | 16,213 | $ | 16 | $ | 3 | $ | 26 | $ | 45 | $ | 16,258 | $ | 26 | $ | 16,232 | ||||||||
December 31, 2016 | ||||||||||||||||||||||||
Residential real estate mortgages | $ | 9,100 | $ | 15 | $ | 3 | $ | 16 | $ | 34 | $ | 9,134 | $ | 17 | $ | 9,117 | ||||||||
Home equity loans and lines of credit | 2,336 | 2 | 2 | 10 | 14 | 2,350 | 8 | 2,342 | ||||||||||||||||
Pledged asset lines | 3,846 | 4 | 1 | — | 5 | 3,851 | — | 3,851 | ||||||||||||||||
Other | 94 | — | — | — | — | 94 | 1 | 93 | ||||||||||||||||
Total bank loans | $ | 15,376 | $ | 21 | $ | 6 | $ | 26 | $ | 53 | $ | 15,429 | $ | 26 | $ | 15,403 |
Three Months Ended | September 30, 2017 | September 30, 2016 | ||||||||||||||||||||||||||||||
Residential real estate mortgages | Home equity loans and lines of credit | Other | Total | Residential real estate mortgages | Home equity loans and lines of credit | Other | Total | |||||||||||||||||||||||||
Balance at beginning of period | $ | 17 | $ | 8 | $ | 1 | $ | 26 | $ | 20 | $ | 10 | $ | 1 | $ | 31 | ||||||||||||||||
Charge-offs | (1 | ) | — | — | (1 | ) | — | — | — | — | ||||||||||||||||||||||
Recoveries | — | — | 1 | 1 | — | — | — | — | ||||||||||||||||||||||||
Provision for loan losses | — | — | — | — | (5 | ) | — | — | (5 | ) | ||||||||||||||||||||||
Balance at end of period | $ | 16 | $ | 8 | $ | 2 | $ | 26 | $ | 15 | $ | 10 | $ | 1 | $ | 26 |
Nine Months Ended | September 30, 2017 | September 30, 2016 | ||||||||||||||||||||||||||||||
Residential real estate mortgages | Home equity loans and lines of credit | Other | Total | Residential real estate mortgages | Home equity loans and lines of credit | Other | Total | |||||||||||||||||||||||||
Balance at beginning of period | $ | 17 | $ | 8 | $ | 1 | $ | 26 | $ | 20 | $ | 11 | $ | — | $ | 31 | ||||||||||||||||
Charge-offs | (2 | ) | (1 | ) | — | (3 | ) | (1 | ) | — | — | (1 | ) | |||||||||||||||||||
Recoveries | 1 | 1 | 1 | 3 | 1 | — | — | 1 | ||||||||||||||||||||||||
Provision for loan losses | — | — | — | — | (5 | ) | (1 | ) | 1 | (5 | ) | |||||||||||||||||||||
Balance at end of period | $ | 16 | $ | 8 | $ | 2 | $ | 26 | $ | 15 | $ | 10 | $ | 1 | $ | 26 |
• | Year of origination; |
• | Borrower FICO scores at origination (Origination FICO); |
• | Updated borrower FICO scores (Updated FICO); |
• | Loan-to-value ratios at origination (Origination LTV); and |
• | Estimated current LTV ratios (Estimated Current LTV). |
September 30, 2017 | Balance | Weighted Average Updated FICO | Utilization Rate (1) | Percent of Loans on Nonaccrual Status | |||||||||
Residential real estate mortgages: | |||||||||||||
Estimated Current LTV | |||||||||||||
<70% | $ | 8,896 | 776 | N/A | 0.05 | % | |||||||
>70% – <90% | 893 | 768 | N/A | 0.47 | % | ||||||||
>90% – <100% | 8 | 720 | N/A | 4.60 | % | ||||||||
>100% | 5 | 724 | N/A | — | |||||||||
Total | $ | 9,802 | 776 | N/A | 0.09 | % | |||||||
Home equity loans and lines of credit: | |||||||||||||
Estimated Current LTV (2) | |||||||||||||
<70% | $ | 1,855 | 772 | 33 | % | 0.16 | % | ||||||
>70% – <90% | 160 | 757 | 49 | % | 0.46 | % | |||||||
>90% – <100% | 17 | 747 | 74 | % | 2.08 | % | |||||||
>100% | 10 | 718 | 74 | % | 2.12 | % | |||||||
Total | $ | 2,042 | 770 | 34 | % | 0.21 | % | ||||||
Pledged asset lines: | |||||||||||||
Weighted-Average LTV (2) | |||||||||||||
=70% | $ | 4,279 | 767 | 42 | % | — |
September 30, 2017 | Residential real estate mortgages | Home equity loans and lines of credit | ||||||
Year of origination | ||||||||
Pre-2013 | $ | 1,639 | $ | 1,448 | ||||
2013 | 1,437 | 158 | ||||||
2014 | 569 | 126 | ||||||
2015 | 1,280 | 134 | ||||||
2016 | 2,967 | 107 | ||||||
2017 | 1,910 | 69 | ||||||
Total | $ | 9,802 | $ | 2,042 | ||||
Origination FICO | ||||||||
<620 | $ | 7 | $ | 1 | ||||
620 – 679 | 85 | 10 | ||||||
680 – 739 | 1,533 | 377 | ||||||
>740 | 8,177 | 1,654 | ||||||
Total | $ | 9,802 | $ | 2,042 | ||||
Origination LTV | ||||||||
<70% | $ | 7,395 | $ | 1,423 | ||||
>70% – <90% | 2,400 | 608 | ||||||
>90% – <100% | 7 | 11 | ||||||
Total | $ | 9,802 | $ | 2,042 |
December 31, 2016 | Balance | Weighted Average Updated FICO | Utilization Rate (1) | Percent of Loans on Nonaccrual Status | |||||||||
Residential real estate mortgages: | |||||||||||||
Estimated Current LTV | |||||||||||||
<70% | $ | 8,350 | 774 | N/A | 0.04 | % | |||||||
>70% – <90% | 743 | 768 | N/A | 0.35 | % | ||||||||
>90% – <100% | 21 | 747 | N/A | 2.08 | % | ||||||||
>100% | 20 | 709 | N/A | 14.50 | % | ||||||||
Total | $ | 9,134 | 773 | N/A | 0.10 | % | |||||||
Home equity loans and lines of credit: | |||||||||||||
Estimated Current LTV (2) | |||||||||||||
<70% | $ | 2,070 | 771 | 35 | % | 0.12 | % | ||||||
>70% – <90% | 234 | 757 | 50 | % | 0.40 | % | |||||||
>90% – <100% | 29 | 747 | 66 | % | 1.74 | % | |||||||
>100% | 17 | 728 | 70 | % | 3.73 | % | |||||||
Total | $ | 2,350 | 769 | 36 | % | 0.20 | % | ||||||
Pledged asset lines: | |||||||||||||
Weighted-Average LTV (2) | |||||||||||||
=70% | $ | 3,851 | 763 | 46 | % | — |
December 31, 2016 | Residential real estate mortgages | Home equity loans and lines of credit | ||||||
Year of origination | ||||||||
Pre-2013 | $ | 2,136 | $ | 1,765 | ||||
2013 | 1,746 | 193 | ||||||
2014 | 685 | 152 | ||||||
2015 | 1,458 | 146 | ||||||
2016 | 3,109 | 94 | ||||||
Total | $ | 9,134 | $ | 2,350 | ||||
Origination FICO | ||||||||
<620 | $ | 8 | $ | — | ||||
620 – 679 | 92 | 13 | ||||||
680 – 739 | 1,427 | 432 | ||||||
>740 | 7,607 | 1,905 | ||||||
Total | $ | 9,134 | $ | 2,350 | ||||
Origination LTV | ||||||||
<70% | $ | 6,865 | $ | 1,628 | ||||
>70% – <90% | 2,260 | 709 | ||||||
>90% – <100% | 9 | 13 | ||||||
Total | $ | 9,134 | $ | 2,350 |
September 30, 2017 | Balance | |||
Converted to an amortizing loan by period end | $ | 447 | ||
Within 1 year | 475 | |||
> 1 year – 3 years | 346 | |||
> 3 years – 5 years | 148 | |||
> 5 years | 626 | |||
Total | $ | 2,042 |
September 30, 2017 | December 31, 2016 | |||||||||||||||||||||||
Aggregate assets | Aggregate liabilities | Maximum exposure to loss | Aggregate assets | Aggregate liabilities | Maximum exposure to loss | |||||||||||||||||||
LIHTC investments (1) | $ | 253 | $ | 169 | $ | 253 | $ | 189 | $ | 135 | $ | 189 | ||||||||||||
Other CRA investments (2) | 63 | — | 82 | 60 | — | 80 | ||||||||||||||||||
Total | $ | 316 | $ | 169 | $ | 335 | $ | 249 | $ | 135 | $ | 269 |
September 30, 2017 | December 31, 2016 | |||||||
Interest-bearing deposits: | ||||||||
Deposits swept from brokerage accounts | $ | 144,293 | $ | 141,146 | ||||
Checking | 12,943 | 13,842 | ||||||
Savings and other | 7,441 | 7,792 | ||||||
Total interest-bearing deposits | 164,677 | 162,780 | ||||||
Non-interest-bearing deposits | 586 | 674 | ||||||
Total bank deposits | $ | 165,263 | $ | 163,454 |
September 30, 2017 | December 31, 2016 | |||||||
Senior Notes | $ | 3,205 | $ | 2,558 | ||||
Medium-Term Notes | — | 250 | ||||||
Finance lease obligation | 63 | 68 | ||||||
Total long-term debt | $ | 3,268 | $ | 2,876 |
September 30, 2017 | |||
2017 | $ | 3 | |
2018 | 908 | ||
2019 | 8 | ||
2020 | 709 | ||
2021 | 9 | ||
Thereafter | 1,657 | ||
Total maturities | 3,294 | ||
Unamortized discount, net | (13 | ) | |
Debt issuance costs | (13 | ) | |
Total long-term debt | $ | 3,268 |
Gross Amounts Not Offset in the Condensed Consolidated Balance Sheets | |||||||||||||||||||||||||
Gross Assets/ Liabilities | Gross Amounts Offset in the Condensed Consolidated Balance Sheets | Net Amounts Presented in the Condensed Consolidated Balance Sheets | Counterparty Offsetting | Collateral | Net Amount | ||||||||||||||||||||
September 30, 2017 | |||||||||||||||||||||||||
Assets: | |||||||||||||||||||||||||
Resale agreements (1) | $ | 7,247 | $ | — | $ | 7,247 | $ | — | $ | (7,247 | ) | (2) | $ | — | |||||||||||
Securities borrowed (3) | 344 | — | 344 | (297 | ) | (46 | ) | 1 | |||||||||||||||||
Total | $ | 7,591 | $ | — | $ | 7,591 | $ | (297 | ) | $ | (7,293 | ) | $ | 1 | |||||||||||
Liabilities: | |||||||||||||||||||||||||
Securities loaned (4,5) | $ | 1,324 | $ | — | $ | 1,324 | $ | (297 | ) | $ | (919 | ) | $ | 108 | |||||||||||
Total | $ | 1,324 | $ | — | $ | 1,324 | $ | (297 | ) | $ | (919 | ) | $ | 108 | |||||||||||
December 31, 2016 | |||||||||||||||||||||||||
Assets: | |||||||||||||||||||||||||
Resale agreements (1) | $ | 9,547 | $ | — | $ | 9,547 | $ | — | $ | (9,547 | ) | (2) | $ | — | |||||||||||
Securities borrowed (3) | 393 | — | 393 | (200 | ) | (189 | ) | 4 | |||||||||||||||||
Total | $ | 9,940 | $ | — | $ | 9,940 | $ | (200 | ) | $ | (9,736 | ) | $ | 4 | |||||||||||
Liabilities: | |||||||||||||||||||||||||
Securities loaned (4,5) | $ | 1,996 | $ | — | $ | 1,996 | $ | (200 | ) | $ | (1,660 | ) | $ | 136 | |||||||||||
Total | $ | 1,996 | $ | — | $ | 1,996 | $ | (200 | ) | $ | (1,660 | ) | $ | 136 |
September 30, 2017 | December 31, 2016 | |||||||||||
Fair value of client securities available to be pledged | $ | 23,520 | $ | 21,516 | ||||||||
Fair value of client securities pledged for: | ||||||||||||
Securities lending to other broker-dealers | 1,115 | 1,626 | ||||||||||
Fulfillment of client short sales | 2,281 | 2,048 | ||||||||||
Fulfillment of requirements with the Options Clearing Corporation (1) | 1,949 | 1,519 | ||||||||||
Total collateral pledged | $ | 5,345 | $ | 5,193 |
• | Cash and cash equivalents are short-term in nature and accordingly are recorded at amounts that approximate fair value. |
• | Cash and investments segregated and on deposit for regulatory purposes include cash and securities purchased under resale agreements. Securities purchased under resale agreements are short-term in nature and are backed by collateral that both exceeds the carrying value of the resale agreement and is highly liquid in nature. Accordingly, the carrying values of these financial instruments approximate their fair values. |
• | Receivables from/payables to brokers, dealers, and clearing organizations are short-term in nature, recorded at contractual amounts and historically have been settled at those values. Accordingly, the carrying values of these financial instruments approximate their fair values. |
• | Receivables from/payables to brokerage clients — net are short-term in nature, recorded at contractual amounts and historically have been settled at those values. Accordingly, the carrying values of these financial instruments approximate their fair values. |
• | HTM securities – The fair values of HTM securities are obtained using an independent third-party pricing service similar to investment assets recorded at fair value as discussed above. |
• | Bank loans – The fair values of the Company’s First Mortgages and HELOCs are estimated based on prices of mortgage-backed securities collateralized by similar types of loans. PALs are non-purpose revolving lines of credit secured by eligible assets; accordingly, the carrying values of these loans approximate their fair values. |
• | Financial instruments included in other assets primarily consist of LIHTC investments, cost method investments, and FHLB stock, whose carrying values approximate their fair values. FHLB stock is recorded at par, which approximates its fair value. |
• | Bank deposits have no stated maturity and are recorded at the amount payable on demand as of the balance sheet date. The carrying values of these deposits approximate their fair values. |
• | Financial instruments included in accrued expenses and other liabilities consist of drafts payable and certain amounts due under contractual obligations, including unfunded LIHTC commitments. The carrying values of these instruments approximate their fair values. |
• | Short-term borrowings consist of commercial paper, borrowings on Schwab’s uncommitted, unsecured bank credit lines, and funds drawn on Schwab Bank’s secured credit facility with the Federal Home Loan Bank of San Francisco. Due to the short-term nature of these borrowings, carrying value approximates fair value. |
• | Long-term debt – Except for the finance lease obligation, the fair values of long-term debt are estimated using indicative, non-binding quotes from independent brokers. The Company validates indicative prices for its debt through comparison to other independent non-binding quotes. The finance lease obligation is recorded at carrying value, which approximates fair value. |
• | Firm commitments to extend credit – The Company extends credit to banking clients through HELOCs and PALs. The Company considers the fair value of these unused commitments to not be material because the interest rates earned on these balances are based on floating interest rates that reset monthly. |
September 30, 2017 | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Balance at Fair Value | |||||||||||
Cash equivalents: | |||||||||||||||
Money market funds | $ | 1,720 | $ | — | $ | — | $ | 1,720 | |||||||
Commercial paper | — | 115 | — | 115 | |||||||||||
Total cash equivalents | 1,720 | 115 | — | 1,835 | |||||||||||
Investments segregated and on deposit for regulatory purposes: | |||||||||||||||
Certificates of deposit | — | 1,200 | — | 1,200 | |||||||||||
U.S. Government securities | — | 3,814 | — | 3,814 | |||||||||||
Total investments segregated and on deposit for regulatory purposes | — | 5,014 | — | 5,014 | |||||||||||
Other securities owned: | |||||||||||||||
Equity and bond mutual funds | 294 | — | — | 294 | |||||||||||
Schwab Funds® money market funds | 68 | — | — | 68 | |||||||||||
State and municipal debt obligations | — | 35 | — | 35 | |||||||||||
Equity, U.S. Government and corporate debt, and other securities | 4 | 26 | — | 30 | |||||||||||
Total other securities owned | 366 | 61 | — | 427 | |||||||||||
Available for sale securities: | |||||||||||||||
U.S. agency mortgage-backed securities | — | 19,746 | — | 19,746 | |||||||||||
Asset-backed securities | — | 9,996 | — | 9,996 | |||||||||||
Corporate debt securities | — | 6,468 | — | 6,468 | |||||||||||
U.S. Treasury securities | — | 7,699 | — | 7,699 | |||||||||||
Certificates of deposit | — | 1,843 | — | 1,843 | |||||||||||
U.S. agency notes | — | 1,907 | — | 1,907 | |||||||||||
Commercial paper | — | 312 | — | 312 | |||||||||||
Non-agency commercial mortgage-backed securities | — | 41 | — | 41 | |||||||||||
Foreign government agency securities | — | 50 | — | 50 | |||||||||||
Total available for sale securities | — | 48,062 | — | 48,062 | |||||||||||
Total | $ | 2,086 | $ | 53,252 | $ | — | $ | 55,338 |
December 31, 2016 | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Balance at Fair Value | ||||||||||||
Cash equivalents: | ||||||||||||||||
Money market funds | $ | 1,514 | $ | — | $ | — | $ | 1,514 | ||||||||
Total cash equivalents | 1,514 | — | — | 1,514 | ||||||||||||
Investments segregated and on deposit for regulatory purposes: | ||||||||||||||||
Certificates of deposit | — | 2,525 | — | 2,525 | ||||||||||||
U.S. Government securities | — | 6,111 | — | 6,111 | ||||||||||||
Total investments segregated and on deposit for regulatory purposes | — | 8,636 | — | 8,636 | ||||||||||||
Other securities owned: | ||||||||||||||||
Equity and bond mutual funds | 272 | — | — | 272 | ||||||||||||
Schwab Funds® money market funds | 108 | — | — | 108 | ||||||||||||
State and municipal debt obligations | — | 41 | — | 41 | ||||||||||||
Equity, U.S. Government and corporate debt, and other securities | 2 | 26 | — | 28 | ||||||||||||
Total other securities owned | 382 | 67 | — | 449 | ||||||||||||
Available for sale securities: | ||||||||||||||||
U.S. agency mortgage-backed securities | — | 33,195 | — | 33,195 | ||||||||||||
Asset-backed securities | — | 20,335 | — | 20,335 | ||||||||||||
Corporate debt securities | — | 9,852 | — | 9,852 | ||||||||||||
U.S. Treasury securities | — | 8,623 | — | 8,623 | ||||||||||||
Certificates of deposit | — | 2,071 | — | 2,071 | ||||||||||||
U.S. agency notes | — | 1,907 | — | 1,907 | ||||||||||||
U.S. state and municipal securities | — | 1,123 | — | 1,123 | ||||||||||||
Commercial paper | — | 214 | — | 214 | ||||||||||||
Non-agency commercial mortgage-backed securities | — | 45 | — | 45 | ||||||||||||
Total available for sale securities | — | 77,365 | — | 77,365 | ||||||||||||
Total | $ | 1,896 | $ | 86,068 | $ | — | $ | 87,964 |
September 30, 2017 | Carrying Amount | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Balance at Fair Value | |||||||||||||||
Assets: | ||||||||||||||||||||
Cash and cash equivalents | $ | 10,418 | $ | — | $ | 10,418 | $ | — | $ | 10,418 | ||||||||||
Cash and investments segregated and on deposit for regulatory purposes | 10,916 | — | 10,916 | — | 10,916 | |||||||||||||||
Receivables from brokers, dealers, and clearing organizations | 665 | — | 665 | — | 665 | |||||||||||||||
Receivables from brokerage clients – net | 18,456 | — | 18,456 | — | 18,456 | |||||||||||||||
Held to maturity securities: | ||||||||||||||||||||
U.S. agency mortgage-backed securities | 96,045 | — | 95,816 | — | 95,816 | |||||||||||||||
Non-agency commercial mortgage-backed securities | 995 | — | 1,006 | — | 1,006 | |||||||||||||||
Asset-backed securities | 12,237 | — | 12,336 | — | 12,336 | |||||||||||||||
Corporate debt securities | 3,377 | — | 3,403 | — | 3,403 | |||||||||||||||
U.S. Treasury securities | 223 | — | 222 | — | 222 | |||||||||||||||
U.S. state and municipal securities | 1,249 | — | 1,299 | — | 1,299 | |||||||||||||||
Certificates of deposit | 200 | — | 200 | — | 200 | |||||||||||||||
Foreign government agency securities | 50 | — | 50 | — | 50 | |||||||||||||||
Total held to maturity securities | 114,376 | — | 114,332 | — | 114,332 | |||||||||||||||
Bank loans – net: | ||||||||||||||||||||
Residential real estate mortgages | 9,786 | — | 9,771 | — | 9,771 | |||||||||||||||
Home equity loans and lines of credit | 2,034 | — | 2,127 | — | 2,127 | |||||||||||||||
Pledged asset lines | 4,279 | — | 4,279 | — | 4,279 | |||||||||||||||
Other | 133 | — | 133 | — | 133 | |||||||||||||||
Total bank loans – net | 16,232 | — | 16,310 | — | 16,310 | |||||||||||||||
Other assets | 465 | — | 465 | — | 465 | |||||||||||||||
Total | $ | 171,528 | $ | — | $ | 171,562 | $ | — | $ | 171,562 | ||||||||||
Liabilities: | ||||||||||||||||||||
Bank deposits | $ | 165,263 | $ | — | $ | 165,263 | $ | — | $ | 165,263 | ||||||||||
Payables to brokers, dealers, and clearing organizations | 5,427 | — | 5,427 | — | 5,427 | |||||||||||||||
Payables to brokerage clients | 31,480 | — | 31,480 | — | 31,480 | |||||||||||||||
Accrued expenses and other liabilities | 1,067 | — | 1,067 | — | 1,067 | |||||||||||||||
Short-term borrowings | 5,000 | — | 5,000 | — | 5,000 | |||||||||||||||
Long-term debt | 3,268 | — | 3,347 | — | 3,347 | |||||||||||||||
Total | $ | 211,505 | $ | — | $ | 211,584 | $ | — | $ | 211,584 |
December 31, 2016 | Carrying Amount | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Balance at Fair Value | |||||||||||||||
Assets: | ||||||||||||||||||||
Cash and cash equivalents | $ | 9,314 | $ | — | $ | 9,314 | $ | — | $ | 9,314 | ||||||||||
Cash and investments segregated and on deposit for regulatory purposes | 13,533 | — | 13,533 | — | 13,533 | |||||||||||||||
Receivables from brokers, dealers, and clearing organizations | 728 | — | 728 | — | 728 | |||||||||||||||
Receivables from brokerage clients – net | 17,151 | — | 17,151 | — | 17,151 | |||||||||||||||
Held to maturity securities: | ||||||||||||||||||||
U.S. agency mortgage-backed securities | 72,439 | — | 71,677 | — | 71,677 | |||||||||||||||
Non-agency commercial mortgage-backed securities | 997 | — | 1,004 | — | 1,004 | |||||||||||||||
Asset-backed securities | 941 | — | 941 | — | 941 | |||||||||||||||
Corporate debt securities | 436 | — | 436 | — | 436 | |||||||||||||||
U.S. Treasury securities | 223 | — | 219 | — | 219 | |||||||||||||||
Commercial paper | 99 | — | 99 | — | 99 | |||||||||||||||
U.S. state and municipal securities | 68 | — | 68 | — | 68 | |||||||||||||||
Total held to maturity securities | 75,203 | — | 74,444 | — | 74,444 | |||||||||||||||
Bank loans – net: | ||||||||||||||||||||
Residential real estate mortgages | 9,117 | — | 9,064 | — | 9,064 | |||||||||||||||
Home equity loans and lines of credit | 2,342 | — | 2,458 | — | 2,458 | |||||||||||||||
Pledged asset lines | 3,851 | — | 3,851 | — | 3,851 | |||||||||||||||
Other | 93 | — | 94 | — | 94 | |||||||||||||||
Total bank loans – net | 15,403 | — | 15,467 | — | 15,467 | |||||||||||||||
Other assets | 328 | — | 328 | — | 328 | |||||||||||||||
Total | $ | 131,660 | $ | — | $ | 130,965 | $ | — | $ | 130,965 | ||||||||||
Liabilities: | ||||||||||||||||||||
Bank deposits | $ | 163,454 | $ | — | $ | 163,454 | $ | — | $ | 163,454 | ||||||||||
Payables to brokers, dealers, and clearing organizations | 2,407 | — | 2,407 | — | 2,407 | |||||||||||||||
Payables to brokerage clients | 35,894 | — | 35,894 | — | 35,894 | |||||||||||||||
Accrued expenses and other liabilities | 1,169 | — | 1,169 | — | 1,169 | |||||||||||||||
Long-term debt | 2,876 | — | 2,941 | — | 2,941 | |||||||||||||||
Total | $ | 205,800 | $ | — | $ | 205,865 | $ | — | $ | 205,865 |
September 30, 2017 | December 31, 2016 | |||||||||||||||||||||||||||||
Shares Issued and Outstanding (In thousands) | Liquidation Preference Per Share | Liquidation Preference | Carrying Value | Shares Issued and Outstanding (In thousands) | Liquidation Preference Per Share | Liquidation Preference | Carrying Value | |||||||||||||||||||||||
Series A | 400 | $ | 1,000 | $ | 400 | $ | 397 | 400 | $ | 1,000 | $ | 400 | $ | 397 | ||||||||||||||||
Series B | 485 | 1,000 | 485 | 482 | 485 | 1,000 | 485 | 482 | ||||||||||||||||||||||
Series C | 600 | 1,000 | 600 | 585 | 600 | 1,000 | 600 | 585 | ||||||||||||||||||||||
Series D | 750 | 1,000 | 750 | 728 | 750 | 1,000 | 750 | 728 | ||||||||||||||||||||||
Series E | 6 | 100,000 | 600 | 591 | 6 | 100,000 | 600 | 591 | ||||||||||||||||||||||
Total Preferred Stock | 2,241 | $ | 2,835 | $ | 2,783 | 2,241 | $ | 2,835 | $ | 2,783 |
Three Months Ended September 30, | 2017 | 2016 | |||||||||||||||||||||
Before Tax | Tax Effect | Net of Tax | Before Tax | Tax Effect | Net of Tax | ||||||||||||||||||
Change in net unrealized gain (loss) on available for sale securities: | |||||||||||||||||||||||
Net unrealized gain (loss) | $ | — | $ | — | $ | — | $ | 77 | $ | (29 | ) | $ | 48 | ||||||||||
Other reclassifications included in other revenue | — | — | — | — | — | — | |||||||||||||||||
Change in net unrealized gain (loss) on held to maturity securities: | |||||||||||||||||||||||
Amortization of amounts previously recorded upon transfer from available for sale | 10 | (4 | ) | 6 | — | — | — | ||||||||||||||||
Other comprehensive income (loss) | $ | 10 | $ | (4 | ) | $ | 6 | $ | 77 | $ | (29 | ) | $ | 48 |
Nine Months Ended September 30, | 2017 | 2016 | |||||||||||||||||||||
Before Tax | Tax Effect | Net of Tax | Before Tax | Tax Effect | Net of Tax | ||||||||||||||||||
Change in net unrealized gain (loss) on available for sale securities: | |||||||||||||||||||||||
Net unrealized gain (loss) | $ | 81 | $ | (30 | ) | $ | 51 | $ | 266 | $ | (100 | ) | $ | 166 | |||||||||
Reclassification of net unrealized loss on securities transferred to held to maturity (1) | 227 | (85 | ) | 142 | — | — | — | ||||||||||||||||
Other reclassifications included in other revenue | (7 | ) | 3 | (4 | ) | (3 | ) | 1 | (2 | ) | |||||||||||||
Change in net unrealized gain (loss) on held to maturity securities: | |||||||||||||||||||||||
Reclassification of net unrealized loss on securities transferred from available for sale (1) | (227 | ) | 85 | (142 | ) | — | — | — | |||||||||||||||
Amortization of amounts previously recorded upon transfer from available for sale | 21 | (9 | ) | 12 | — | — | — | ||||||||||||||||
Other | (3 | ) | 1 | (2 | ) | 1 | — | 1 | |||||||||||||||
Other comprehensive income (loss) | $ | 92 | $ | (35 | ) | $ | 57 | $ | 264 | $ | (99 | ) | $ | 165 |
Total Accumulated Other Comprehensive Income | ||||
Balance at December 31, 2015 | $ | (134 | ) | |
Net unrealized gain (loss) on available for sale securities | 164 | |||
Other | 1 | |||
Balance at September 30, 2016 | $ | 31 | ||
Balance at December 31, 2016 | $ | (163 | ) | |
Available for sale securities: | ||||
Net unrealized gain (loss) | 51 | |||
Reclassification of net unrealized loss on securities transferred to held to maturity | 142 | |||
Other reclassifications included in other revenue | (4 | ) | ||
Held to maturity securities: | ||||
Reclassification of net unrealized loss on securities transferred from available for sale | (142 | ) | ||
Amortization of amounts previously recorded upon transfer to held to maturity from available for sale | 12 | |||
Other | (2 | ) | ||
Balance at September 30, 2017 | $ | (106 | ) |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Net income | $ | 618 | $ | 503 | $ | 1,757 | $ | 1,367 | ||||||||
Preferred stock dividends and other (1) | (43 | ) | (33 | ) | (127 | ) | (99 | ) | ||||||||
Net income available to common stockholders | $ | 575 | $ | 470 | $ | 1,630 | $ | 1,268 | ||||||||
Weighted-average common shares outstanding — basic | 1,339 | 1,324 | 1,338 | 1,322 | ||||||||||||
Common stock equivalent shares related to stock incentive plans | 14 | 10 | 14 | 10 | ||||||||||||
Weighted-average common shares outstanding — diluted (2) | 1,353 | 1,334 | 1,352 | 1,332 | ||||||||||||
Basic EPS | $ | .43 | $ | .36 | $ | 1.22 | $ | .96 | ||||||||
Diluted EPS | $ | .42 | $ | .35 | $ | 1.21 | $ | .95 |
Actual | Minimum to be Well Capitalized | Minimum Capital Requirement | |||||||||||||||||||
September 30, 2017 | Amount | Ratio | Amount | Ratio | Amount | Ratio | |||||||||||||||
CSC | |||||||||||||||||||||
Common Equity Tier 1 Risk-Based Capital | $ | 14,128 | 19.6 | % | N/A | $ | 3,242 | 4.5 | % | ||||||||||||
Tier 1 Risk-Based Capital | 16,911 | 23.5 | % | N/A | 4,322 | 6.0 | % | ||||||||||||||
Total Risk-Based Capital | 16,939 | 23.5 | % | N/A | 5,763 | 8.0 | % | ||||||||||||||
Tier 1 Leverage | 16,911 | 7.7 | % | N/A | 8,802 | 4.0 | % | ||||||||||||||
Schwab Bank | |||||||||||||||||||||
Common Equity Tier 1 Risk-Based Capital | $ | 12,862 | 20.0 | % | $ | 4,171 | 6.5 | % | $ | 2,888 | 4.5 | % | |||||||||
Tier 1 Risk-Based Capital | 12,862 | 20.0 | % | 5,134 | 8.0 | % | 3,850 | 6.0 | % | ||||||||||||
Total Risk-Based Capital | 12,889 | 20.1 | % | 6,417 | 10.0 | % | 5,134 | 8.0 | % | ||||||||||||
Tier 1 Leverage | 12,862 | 7.2 | % | 8,923 | 5.0 | % | 7,138 | 4.0 | % | ||||||||||||
December 31, 2016 | |||||||||||||||||||||
CSC | |||||||||||||||||||||
Common Equity Tier 1 Risk-Based Capital | $ | 12,574 | 18.4 | % | N/A | $ | 3,068 | 4.5 | % | ||||||||||||
Tier 1 Risk-Based Capital | 15,357 | 22.5 | % | N/A | 4,091 | 6.0 | % | ||||||||||||||
Total Risk-Based Capital | 15,384 | 22.6 | % | N/A | 5,454 | 8.0 | % | ||||||||||||||
Tier 1 Leverage | 15,357 | 7.2 | % | N/A | 8,516 | 4.0 | % | ||||||||||||||
Schwab Bank | |||||||||||||||||||||
Common Equity Tier 1 Risk-Based Capital | $ | 11,878 | 19.8 | % | $ | 3,894 | 6.5 | % | $ | 2,696 | 4.5 | % | |||||||||
Tier 1 Risk-Based Capital | 11,878 | 19.8 | % | 4,793 | 8.0 | % | 3,595 | 6.0 | % | ||||||||||||
Total Risk-Based Capital | 11,904 | 19.9 | % | 5,992 | 10.0 | % | 4,793 | 8.0 | % | ||||||||||||
Tier 1 Leverage | 11,878 | 7.0 | % | 8,456 | 5.0 | % | 6,765 | 4.0 | % |
September 30, 2017 | Net Capital | Minimum Net Capital Required | 2% of Aggregate Debit Balances | Net Capital in Excess of Required Capital | ||||||||||||
Schwab | $ | 1,974 | $ | 0.250 | $ | 394 | $ | 1,580 | ||||||||
optionsXpress | 295 | 1 | 7 | 288 | ||||||||||||
December 31, 2016 | ||||||||||||||||
Schwab | $ | 1,846 | $ | 0.250 | $ | 355 | $ | 1,491 | ||||||||
optionsXpress | 269 | 1 | 8 | 261 |
Investor Services | Advisor Services | Total | ||||||||||||||||||||||
Three Months Ended September 30, | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||||
Net Revenues: | ||||||||||||||||||||||||
Asset management and administration fees | $ | 595 | $ | 550 | $ | 266 | $ | 248 | $ | 861 | $ | 798 | ||||||||||||
Net interest revenue | 818 | 654 | 264 | 191 | 1,082 | 845 | ||||||||||||||||||
Trading revenue | 94 | 123 | 57 | 67 | 151 | 190 | ||||||||||||||||||
Other | 54 | 56 | 17 | 20 | 71 | 76 | ||||||||||||||||||
Provision for loan losses | — | 4 | — | 1 | — | 5 | ||||||||||||||||||
Total net revenues | 1,561 | 1,387 | 604 | 527 | 2,165 | 1,914 | ||||||||||||||||||
Expenses Excluding Interest | 918 | 847 | 302 | 273 | 1,220 | 1,120 | ||||||||||||||||||
Income before taxes on income | $ | 643 | $ | 540 | $ | 302 | $ | 254 | $ | 945 | $ | 794 |
Investor Services | Advisor Services | Total | ||||||||||||||||||||||
Nine Months Ended September 30, | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||||
Net Revenues: | ||||||||||||||||||||||||
Asset management and administration fees | $ | 1,743 | $ | 1,536 | $ | 786 | $ | 718 | $ | 2,529 | $ | 2,254 | ||||||||||||
Net interest revenue | 2,366 | 1,895 | 769 | 520 | 3,135 | 2,415 | ||||||||||||||||||
Trading revenue | 311 | 395 | 189 | 228 | 500 | 623 | ||||||||||||||||||
Other | 159 | 153 | 53 | 56 | 212 | 209 | ||||||||||||||||||
Provision for loan losses | — | 4 | — | 1 | — | 5 | ||||||||||||||||||
Total net revenues | 4,579 | 3,983 | 1,797 | 1,523 | 6,376 | 5,506 | ||||||||||||||||||
Expenses Excluding Interest | 2,762 | 2,518 | 917 | 819 | 3,679 | 3,337 | ||||||||||||||||||
Income before taxes on income | $ | 1,817 | $ | 1,465 | $ | 880 | $ | 704 | $ | 2,697 | $ | 2,169 |
Month | Total number of shares Purchased (in thousands) | Average Price Paid per shares | |||||
July: | |||||||
Employee transactions (1) | 7 | $ | 43.43 | ||||
August: | |||||||
Employee transactions (1) | 9 | $ | 42.68 | ||||
September: | |||||||
Employee transactions (1) | 9 | $ | 39.90 | ||||
Total: | |||||||
Employee Transactions (1) | 25 | $ | 41.90 |
Exhibit Number | Exhibit | ||
3.20 | |||
10.377 | (1) | ||
10.378 | (1) (2) | ||
10.379 | (1) (2) | ||
10.380 | (1) (2) | ||
10.381 | (1) (2) | ||
10.382 | (1) (2) | ||
10.383 | (1) (2) | ||
10.384 | (1) (2) | ||
12.1 | |||
31.1 | |||
31.2 | |||
32.1 | (2) | ||
32.2 | (2) | ||
Exhibit Number | Exhibit | ||
101.INS | XBRL Instance Document | (3) | |
101.SCH | XBRL Taxonomy Extension Schema | (3) | |
101.CAL | XBRL Taxonomy Extension Calculation | (3) | |
101.DEF | XBRL Extension Definition | (3) | |
101.LAB | XBRL Taxonomy Extension Label | (3) | |
101.PRE | XBRL Taxonomy Extension Presentation | (3) | |
(1 | ) | Management contract or compensatory plan. | |
(2 | ) | Furnished as an exhibit to this Quarterly Report on Form 10-Q. | |
(3 | ) | Attached as Exhibit 101 to this Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2017 are the following materials formatted in XBRL (Extensible Business Reporting Language) (i) the Condensed Consolidated Statements of Income, (ii) the Condensed Consolidated Statements of Comprehensive Income, (iii) the Condensed Consolidated Balance Sheets, (iv) the Condensed Consolidated Statements of Stockholders’ Equity, (v) the Condensed Consolidated Statements of Cash Flows, and (vi) Notes to Condensed Consolidated Financial Statements. |
THE CHARLES SCHWAB CORPORATION | |||
(Registrant) | |||
Date: | November 7, 2017 | /s/ Peter Crawford | |
Peter Crawford | |||
Executive Vice President and Chief Financial Officer |
Name of Recipient: | <first_name> <last_name> |
Number of Target Restricted Stock Units Granted: | <shares_awarded> |
Grant Date: | <award_date> |
Performance Period(s): | [xxxx to xxxx] |
Vesting Schedule: | So long as you remain in service in good standing and subject to the terms of the Restricted Stock Unit Agreement and certification of the achievement of the Performance Goal by Schwab’s Compensation Committee, this grant vests as follows: |
Number of Target Restricted Stock Units on Vesting Date: <vesting_schedule> |
Payment for Units | No payment is required for the Restricted Stock Units that you are receiving. Restricted Stock Units are an unfunded and unsecured obligation of The Charles Schwab Corporation (“Schwab”). |
Vesting | Subject to the provisions of this Restricted Stock Unit Agreement (“Agreement”), a Restricted Stock Unit becomes vested as described in the Notice of Restricted Stock Unit Grant based on the achievement of the Performance Goal established by the Compensation Committee (the “Compensation Committee”) of the Board of Directors of Schwab (the “Board”), of which this Restricted Stock Unit Agreement is a part. Unvested units will be considered “Restricted Stock Units.” If your service terminates for any reason, then your Restricted Stock Units will automatically and permanently be forfeited to the extent that they have not vested before the termination date and will not vest as a result of the termination, unless otherwise noted below. This means that the Restricted Stock Units will immediately revert to Schwab. You will receive no payment for Restricted Stock Units that are forfeited. Schwab determines when your service terminates for this purpose. For all purposes of this Agreement, “service” means continuous employment as a common-law employee of Schwab or a parent company or subsidiary of Schwab, and “subsidiary” means a subsidiary corporation as defined in section 424(f) of the Internal Revenue Code of 1986, as amended (the “Code”). |
Accelerated Vesting | This grant, to the extent not already forfeited, will become fully vested and payable at target upon your death or disability. If, prior to the date your service terminates, Schwab is subject to a “change in control”, as defined in [The Charles Schwab Corporation 2013 Stock Incentive Plan] (the “Plan”), this grant, to the extent not already forfeited, will become fully vested and payable at target as of the date that the change in control occurs. |
Continued Vesting | If your service terminates on account of your retirement as defined below, you will be treated as in service in good standing for purposes of determining further vesting of the |
grant. If you are entitled to severance benefits under The Charles Schwab Severance Pay Plan (or any successor plan) and have signed your Severance Agreement, then you may be treated as in service in good standing during your Severance Period for purposes of determining further vesting of the grant under the terms of that plan. | |
Definition of Fair Market Value | “Fair market value” means the average of the high and low price of a Share (as defined below) as reported on the New York Stock Exchange on the applicable determination date. |
Definition of Disability | For all purposes of this Agreement, "disability" means that you have a disability such that you have been determined to be eligible for benefits under Schwab’s long-term disability plan, or if you are not covered by Schwab’s long-term disability plan, you are unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which has lasted, or can be expected to last, for a continuous period of not less than 12 months or which can be expected to result in death as determined by Schwab in its sole discretion. |
Definition of Retirement | If you are an employee of Schwab and its subsidiaries, “retirement” means termination of service for any reason other than death at any time after you attain age 55, but only if, at the time of your termination, you have been credited with at least 10 years of service. The phrase "years of service" above has the same meaning given to it under The SchwabPlan Retirement Savings and Investment Plan (or any successor plan). |
Payment of Shares | The Target Restricted Stock Units in the Notice of Restricted Stock Unit Grant will be used to determine the shares of common stock of The Charles Schwab Corporation (“Shares”) payable based on the Performance Goal and formula established by the Compensation Committee not later than the 90th day of the applicable Performance Period (or, in the event that a Performance Period is expected to be less than 12 months, not later than the date when 25% of the Performance Period has elapsed). The Shares payable are calculated following the end of the Performance Period based on the Performance Goal achieved and any adjustments provided for under the Plan and this Agreement. The Shares shall be paid as soon as administratively possible following vesting, but in |
no event beyond March 15th of the year following the year of vesting. | |
Restrictions on Restricted Stock Units | You may not sell, transfer, pledge, or otherwise dispose of any Restricted Stock Units without Schwab’s written consent. Schwab will deliver Shares to you only after the Restricted Stock Units vest and after all other terms and conditions in this Agreement have been satisfied. Schwab may, in its sole discretion, allow you to transfer these Restricted Stock Units under a domestic relations order in settlement of marital or domestic property rights. In order to transfer these Restricted Stock Units, you and the transferee(s) must follow the procedures prescribed by Schwab, and the transferee must follow the terms of this Agreement. |
Delivery of Shares After Death | In the event of your death prior to the date your service terminates, your Shares will be delivered to your beneficiary or beneficiaries. You may designate one or more beneficiaries by filing a beneficiary designation form with Schwab. You may change your beneficiary designation by filing a new form with Schwab at any time prior to your death. If you do not designate a beneficiary or if your designated beneficiary predeceases you, then, your Shares will be delivered to your estate. The Compensation Committee, in its sole discretion, will determine the form and time of the distribution of Shares. In no event will the payment be made beyond March 15th of the year following the year of death. |
Restrictions on Resale | You agree not to sell any Shares at a time when applicable laws, Schwab’s policies, or an agreement between Schwab and its underwriters prohibit a sale. This restriction will apply as long as your service continues and for such period of time after the termination of your service as Schwab may specify. |
Cancellation of Restricted Stock Units | To the fullest extent permitted by applicable laws, these Restricted Stock Units will immediately be cancelled and will expire in the event that Schwab terminates your employment on account of conduct contrary to the best interests of Schwab, including, without limitation, conduct constituting a violation of law or Schwab policy, fraud, theft, conflict of interest, dishonesty or harassment. The determination whether your employment has been terminated on account of conduct inimical to the best interests of Schwab shall be made by Schwab in its sole discretion, and will be entitled to deference |
upon any review. | |
Withholding Taxes | The Restricted Stock Units will not be paid in Shares unless you have made acceptable arrangements to pay any applicable withholding of income and employment taxes that may be due as a result of this grant. These arrangements may include withholding Shares. Schwab may withhold the number of whole Shares, valued at the fair market value on the applicable date required to satisfy such applicable withholding taxes. Schwab will round up to the next whole Share to cover the applicable withholding taxes, and any amounts in excess of the applicable withholding taxes resulting from rounding up to the next whole Share will be added to your federal income tax withholdings. Applicable withholding taxes due on the distribution of Shares subject to this award following termination of employment will be withheld as noted above, unless you have made acceptable arrangements to pay any applicable withholding taxes in cash. If you elect to pay applicable withholding taxes due on the distribution of Shares in cash, you are responsible for having sufficient funds in your Schwab brokerage account to cover the applicable withholding taxes at the time they are due. |
No Stockholder Rights | Your Restricted Stock Units carry no voting or other stockholder rights. You have no rights as a Schwab stockholder until your units are settled by issuing Shares. |
Contribution of Par Value | On your behalf, Schwab will contribute to its capital an amount equal to the par value of the Shares issued to you. |
Dividend Equivalent Rights | If Schwab pays cash dividends on Shares, each Restricted Stock Unit will accrue a dividend equivalent equal to the cash dividend paid per Share, subject to the same vesting and forfeiture provisions as the associated Restricted Stock Units, to be paid in cash without interest at the time the associated Restricted Stock Units vest and Shares are released. In no event will the accumulated dividend equivalent be paid beyond March 15th of the year following the year in which the associated Restricted Stock Units vest. |
No Right to Remain Employee | Nothing in this Agreement will be construed as giving you the right to be retained as an employee, contingent worker, or director of Schwab and its subsidiaries for any specific duration or at all. |
Limitation on | If a payment from the Plan would constitute an excess |
Payments | parachute payment under section 280G of the Code or if there have been certain securities law violations, then your grant may be reduced or forfeited and you may be required to disgorge any profit that you have realized from your grant. If a disqualified individual receives a payment or transfer under the Plan that would constitute an excess parachute payment under section 280G of the Code, such payment will be reduced, as described below. Generally, someone is a “disqualified individual” under section 280G if he or she is (a) an officer of Schwab, (b) a member of the group consisting of the highest paid 1% of the employees of Schwab or, if less, the highest paid 250 employees of Schwab, or (c) a 1% stockholder of Schwab. For purposes of this section on “Limitation on Payments,” the term “Schwab” will include affiliated corporations to the extent determined by the independent auditors most recently selected by the Board (the “Auditors”) in accordance with section 280G(d)(5) of the Code. In the event that the Auditors determine that any payment or transfer in the nature of compensation to or for your benefit, whether paid or payable (or transferred or transferable) pursuant to the terms of the Plan or otherwise (a “Payment”), would be nondeductible for federal income tax purposes because of the provisions concerning “excess parachute payments” in section 280G of the Code, then the aggregate present value of all Payments will be reduced (but not below zero) to the Reduced Amount (as defined below); provided, however, that the Compensation Committee may specify in writing that the grant will not be so reduced and will not be subject to reduction under this section. For this purpose, the “Reduced Amount” will be the amount, expressed as a present value, which maximizes the aggregate present value of the Payments without causing any Payment to be nondeductible by Schwab because of section 280G of the Code. If the Auditors determine that any Payment would be nondeductible because of section 280G of the Code, then Schwab will promptly give you notice to that effect and a copy of the detailed calculation of the Reduced Amount. You may then elect, in your discretion, which and how much of the Payments will be eliminated or reduced (as long as after such election, the aggregate present value of the Payments equals |
the Reduced Amount, and your election is consistent with any mandatory eliminations or reductions that apply under other agreements or the Plan). You will advise Schwab in writing of your election within 10 days of receipt of the notice. If you do not make such an election within the 10-day period, then Schwab may elect which and how much of the Payments will be eliminated or reduced (as long as after such election the aggregate present value of the Payments equals the Reduced Amount). Schwab will notify you promptly of its election. Present value will be determined in accordance with section 280G(d)(4) of the Code. The Auditors’ determinations will be binding upon you and Schwab and will be made within 60 days of the date when a Payment becomes payable or transferable. As promptly as practicable following these determinations and elections, Schwab will pay or transfer to or for your benefit such amounts as are then due to you under the Plan and will promptly pay or transfer to or for your benefit in the future such amounts as become due to you under the Plan. As a result of uncertainty in the application of section 280G of the Code at the time of an initial determination by the Auditors, it is possible that Payments will have been made by Schwab that should not have been made (an “Overpayment”) or that additional Payments that will not have been made by Schwab could have been made (an “Underpayment”) consistent in each case with the calculation of the Reduced Amount. In the event the Auditors, based upon the assertion of a deficiency by the Internal Revenue Service against you or Schwab that the Auditors believe has a high probability of success, determine that an Overpayment has been made, the amount of such Overpayment will be paid by you to Schwab on demand, together with interest at the applicable federal rate provided in section 7872(f)(2) of the Code. However, no amount will be payable by you to Schwab if and to the extent that such payment would not reduce the amount that is subject to taxation under section 4999 of the Code. In the event the Auditors determine that an Underpayment has occurred, such Underpayment will promptly be paid or transferred by Schwab to or for your benefit, together with interest at the applicable federal rate provided in section 7872(f)(2) of the Code. Notwithstanding the foregoing, in no event will a payment be made under this Section beyond March 15th of the year following the year in which the amount ceases to be subject to |
a substantial risk of forfeiture. | |
Plan Administration | The Plan administrator has discretionary authority to make all determinations related to this grant and to construe the terms of the Plan, the Notice of Restricted Stock Unit Grant and this Agreement. The Plan administrator’s determinations are conclusive and binding on all persons, and they are entitled to deference upon any review. |
Adjustments | In the event of a stock split, a stock dividend or a similar change in the Shares, the number of Restricted Stock Units that remain subject to forfeiture shall be adjusted accordingly. |
Severability | In the event that any provision of this Agreement is held invalid or unenforceable, the provision will be severable from, and such invalidity or unenforceability will not be construed to have any effect on, the remaining provisions of this Agreement. |
Applicable Law | This Agreement will be interpreted and enforced under the laws of the State of Delaware (without regard to their choice-of-law provisions), as such laws are applied to contracts entered into and performed in Delaware. |
The Plan and Other Agreements | The text of the Plan is incorporated in this Agreement by reference. This Agreement, the Notice of Restricted Stock Unit Grant and the Plan constitute the entire understanding between you and Schwab regarding this grant. Any prior agreements, commitments or negotiations concerning this grant are superseded. This Agreement may be amended only by another written agreement, signed by both parties and approved by the Compensation Committee. If there is any inconsistency or conflict between any provision of this Agreement and the Plan, the terms of the Plan will control. |
Name of Recipient: | <first_name> <last_name> |
Total Number of Shares Granted: | <shares_awarded> |
Exercise Price Per Share: | <award_price> |
Grant Date: | <award_date> |
Expiration Date: | <expire_date> |
Vesting Schedule | So long as you remain employed in good standing by Schwab or its subsidiaries and subject to the terms of the Nonqualified Stock Option Agreement, you will acquire the right to exercise this option (become "vested" in this option) on the following dates and in the following amounts: Number of Shares on Vesting Date: <vesting_schedule> |
Tax Treatment | This option is a nonqualified stock option and is not intended to qualify as an incentive stock option under federal tax laws. |
Vesting | Subject to the provisions of this Nonqualified Stock Option Agreement (“Agreement”), this option becomes vested in installments as described in the Notice of Nonqualified Stock Option Grant. |
Accelerated Vesting | This option will become fully exercisable if your service with The Charles Schwab Corporation (“Schwab”) and its subsidiaries terminates on account of your death or disability. This option will become fully exercisable if your service with Schwab and its subsidiaries terminates on account of your retirement as defined below. If, prior to the date your service terminates, Schwab is subject to a “change in control” (as defined in [The Charles Schwab Corporation 2013 Stock Incentive Plan] (the “Plan”)), this option will become fully exercisable immediately preceding the change in control. If the Compensation Committee (or its delegate) (the “Compensation Committee”) of the Board of Directors of Schwab (the “Board”) determines that a change in control is likely to occur, Schwab will advise you and this option will become fully exercisable as of the date 10 days prior to the anticipated date of the change in control. |
Definition of Disability | For all purposes of this Agreement, "disability" means that you have a disability such that you have been determined to be eligible for benefits under Schwab’s long-term disability plan or if you are not covered by Schwab’s long-term disability plan, you are unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which has lasted, or can be expected to last, for a continuous period of not less than 12 months or which can be expected to result in death as determined by Schwab in its sole discretion. |
Definition of Retirement | For all purposes of this Agreement, “retirement” will mean any termination of employment with Schwab and its subsidiaries for any reason other than death at any time after you attain age 55, but only if, at the time of your termination, you have been credited with at least 10 years of service. The phrase "years of service" above has the same meaning given to it under the SchwabPlan Retirement Savings and Investment Plan (or |
any successor plan). | |
Exercise Procedures | You or your representative may exercise this option by following the procedures prescribed by Schwab. If this option is being exercised by your representative, your representative must furnish proof satisfactory to Schwab of your representative’s right to exercise this option. After completing the prescribed procedures, Schwab will cause to be issued the shares of common stock of Schwab (“Shares”) purchased, which will be registered in the name of the person exercising this option. |
Forms of Payment | When you submit your notice of exercise, you must pay the option exercise price for the Shares you are purchasing. Payment may be made in one of the following forms: • Cash in your Schwab brokerage account in an amount sufficient to cover the option exercise price of the Shares and the required tax withholding. (This exercise method is sometimes referred to as “Exercise and Hold”). • Shares surrendered to Schwab. These Shares will be valued at their fair market value on the date when the new Shares are purchased. (This exercise method is sometimes referred to as a “Stock Swap.”) • By delivery (in a manner prescribed by Schwab) of an irrevocable direction to Charles Schwab & Co., Inc. to sell Shares (including Shares to be issued upon exercise of this option) and to deliver all or part of the sale proceeds to Schwab in payment of all or part of the exercise price. (This exercise method is sometimes referred to as “Exercise and Sell” or “Sell to Cover.”) |
Term | This option expires no later than the Expiration Date specified in the Notice of Nonqualified Stock Option Grant but may expire earlier upon your termination of service, as described below. |
Termination of Service | This option will expire on the date three months following the date of your termination of employment with Schwab and its subsidiaries for any reason other than on account of death, disability or retirement. The terms “disability” and “retirement” are defined above. If you cease to be an employee of Schwab and its subsidiaries by reason of your disability or death, then this option will expire on the first anniversary of the date of your death or disability. If you cease to be an employee of Schwab and its subsidiaries by reason of your retirement and have been credited with at least 10 years of service, then this option will expire on the earlier of the fifth |
anniversary of the date of your termination or the Expiration Date specified in the Notice of Nonqualified Stock Option Grant. If you cease to be an employee of Schwab and its subsidiaries by reason of your retirement and have been credited with at least 15 years of service, then this option will expire on the Expiration Date specified in the Notice of Nonqualified Stock Option Grant. | |
Effect of Entitlement to Severance | If you are entitled to severance benefits under The Charles Schwab Severance Pay Plan (or any successor plan) and have signed your Severance Agreement, then vesting of this option shall be determined under the terms of that plan. |
Cancellation of Options | To the fullest extent permitted by applicable laws, this option will immediately be cancelled and will expire in the event that Schwab terminates your employment on account of conduct contrary to the best interests of Schwab, including, without limitation, conduct constituting a violation of law or Schwab policy, fraud, theft, conflict of interest, dishonesty or harassment. The determination whether your employment has been terminated on account of conduct inimical to the best interests of Schwab shall be made by Schwab in its sole discretion. |
Withholding Taxes and Stock Withholding | You will not be allowed to exercise this option unless you make arrangements acceptable to Schwab to pay any applicable withholding of income and employment taxes that may be due as a result of the option exercise. These arrangements may include without limitation withholding Shares that otherwise would be issued to you when you exercise this option. |
Restrictions on Exercise and Issuance or Transfer of Shares | You cannot exercise this option and no Shares may be issued under this option if the issuance of Shares at that time would violate any applicable law, regulation, or rule. Schwab may impose restrictions upon the sale, pledge, or other transfer of Shares (including the placement of appropriate legends on stock certificates) if, in the judgment of Schwab and its counsel, such restrictions are necessary or desirable to comply with applicable law, regulations or rules. |
No Stockholder Rights | You, or your estate or heirs, have no rights as a stockholder of Schwab until you have exercised this option by giving the required notice to Schwab and paying the exercise price. No adjustments are made for dividends or other rights if the applicable record date occurs before you exercise this option, except as described in the Plan. |
No Right to Employment | Nothing in this Agreement will be construed as giving you the right to be retained as an employee, consultant, or director of Schwab and its subsidiaries for any specific duration or at all. |
Transfer of | In general, only you may exercise this option prior to your death. You |
Option | may not transfer or assign this option, except as provided below. For instance, you may not sell this option or use it as security for a loan. If you attempt to do any of these things, this option will immediately become invalid. |
You may dispose of this option in your will or in a beneficiary designation. You may designate one or more beneficiaries by filing a beneficiary designation form with Schwab. You may change your beneficiary designation by filing a new form with Schwab at any time prior to your death. If you do not designate a beneficiary or if your designated beneficiary predeceases you, then your options will be exercisable by your estate. Schwab may, in its sole discretion, allow you to transfer this option under a domestic relations order in settlement of marital or domestic property rights. In order to transfer this option, you and the transferee(s) must follow the procedures prescribed by Schwab, and the transferee(s) must follow the terms of this Agreement. | |
Limitation on Payments | If a payment from the Plan would constitute an excess parachute payment or if there have been certain securities law violations, then your grant may be reduced or cancelled and you may be required to disgorge any profit that you have realized from your grant. If a disqualified individual receives a payment or transfer under the Plan that would constitute an excess parachute payment under the Internal Revenue Code of 1986, as amended (the “Code”), such payment will be reduced, as described below. Generally, someone is a “disqualified individual” under section 280G if he or she is (a) an officer of Schwab, (b) a member of the group consisting of the highest paid 1% of the employees of Schwab or, if less, the highest paid 250 employees of Schwab, or (c) a 1% stockholder of Schwab. For purposes of this section on “Limitation on Payments,” the term “Schwab " will include affiliated corporations to the extent determined by the Auditors (as defined below) in accordance with section 280G(d)(5) of the Code. In the event that the independent auditors most recently selected by the Board (the “Auditors”) determine that any payment or transfer in the nature of compensation to or for your benefit, whether paid or payable (or transferred or transferable) pursuant to the terms of the Plan or otherwise (a “Payment”), would be nondeductible for federal income tax purposes because of the provisions concerning “excess parachute payments” in section 280G of the Code, then the aggregate present value of all Payments will be reduced (but not below zero) to the |
Reduced Amount (as defined below); provided, however, that the Compensation Committee may specify in writing that the grant will not be so reduced and will not be subject to reduction under this section. For this purpose, the “Reduced Amount” will be the amount, expressed as a present value, which maximizes the aggregate present value of the Payments without causing any Payment to be nondeductible by Schwab because of section 280G of the Code. If the Auditors determine that any Payment would be nondeductible because of section 280G of the Code, then Schwab will promptly give you notice to that effect and a copy of the detailed calculation and of the Reduced Amount. You may then elect, in your discretion, which and how much of the Payments will be eliminated or reduced (as long as after such election, the aggregate present value of the Payments equals the Reduced Amount, and your election is consistent with any mandatory eliminations or reductions that apply under other agreements or the Plan). You will advise Schwab in writing of your election within 10 days of receipt of the notice. If you do not make such an election within the 10-day period, then Schwab may elect which and how much of the Payments will be eliminated or reduced (as long as after such election the aggregate present value of the Payments equals the Reduced Amount). Schwab will notify you promptly of its election. Present value will be determined in accordance with section 280G(d)(4) of the Code. The Auditors’ determinations will be binding upon you and Schwab and will be made within 60 days of the date when a Payment becomes payable or transferable. As promptly as practicable following these determinations and elections, Schwab will pay or transfer to or for your benefit such amounts as are then due to you under the Plan, and will promptly pay or transfer to or for your benefit in the future such amounts as become due to you under the Plan. As a result of uncertainty in the application of section 280G of the Code at the time of an initial determination by the Auditors, it is possible that Payments will have been made by Schwab that should not have been made (an “Overpayment”) or that additional Payments that will not have been made by Schwab could have been made (an “Underpayment”) consistent in each case with the calculation of the Reduced Amount. In the event the Auditors, based upon the assertion of a deficiency by the Internal Revenue Service against you or Schwab that the Auditors believe has a high probability of success determine that an Overpayment has been made, such Overpayment will be treated for all purposes as a loan to you that you will repay to Schwab on |
demand, together with interest at the applicable federal rate provided in section 7872(f)(2) of the Code. However, no amount will be payable by you to Schwab if and to the extent that such payment would not reduce the amount that is subject to taxation under section 4999 of the Code. In the event the Auditors determine that an Underpayment has occurred, such Underpayment will promptly be paid or transferred by Schwab to or for your benefit, together with interest at the applicable federal rate provided in section 7872(f)(2) of the Code. | |
Plan Administration | The Plan administrator has discretionary authority to make all determinations related to this option and to construe the terms of the Plan, the Notice of Nonqualified Stock Option Grant, and this Agreement. The Plan administrator’s determinations are conclusive and binding on all persons, and they are entitled to deference upon any review. |
Adjustments | In the event of a stock split, a stock dividend or a similar change in Shares, the Compensation Committee, in its discretion, may adjust the number of Shares covered by this option and the exercise price per Share. |
Severability | In the event that any provision of this Agreement is held invalid or unenforceable, the provision will be severable from, and such invalidity or unenforceability will not be construed to have any effect on, the remaining provisions of this Agreement. |
Applicable Law | This Agreement will be interpreted and enforced under the laws of the State of Delaware (without regard to their choice-of-law provisions), as such laws are applied to contracts entered into and performed in Delaware. |
The Plan and Other Agreements | The text of the Plan is incorporated in this Agreement by reference. This Agreement (including the Additional Terms and Conditions for Non-U.S. Recipients and the Country-Specific Provisions), the Notice of Nonqualified Stock Option Grant, and the Plan constitute the entire understanding between you and Schwab regarding this option. Any prior agreements, commitments or negotiations concerning this option are superseded. This Agreement may be amended only by another written agreement approved by the Compensation Committee and signed by both parties. If there is any inconsistency or conflict between any provision of this Agreement and the Plan, the terms of the Plan will control. Nothing in this Agreement gives you the ability to negotiate or change the key terms and conditions described above, in the Notice of Nonqualified Stock Option Grant and in the Plan. |
(1) | the Plan is established voluntarily by Schwab, it is discretionary in nature and it may be modified, amended, suspended or terminated by Schwab at any time, to the extent permitted by the Plan; |
(2) | the grant of this option is exceptional, voluntary and occasional and does not create any contractual or other right to receive future grants of options, or benefits in lieu of options, even if options have been granted in the past; |
(3) | all decisions with respect to future options or other grants, if any, will be at the sole discretion of Schwab; |
(4) | you are voluntarily participating in the Plan; |
(5) | this option, any Shares acquired under this option, and the income and value of same, are not intended to replace any pension rights or compensation; |
(6) | this option and any Shares acquired under this option, and the income and value of same, are not part of normal or expected compensation for any purpose, including calculating any severance, resignation, termination, redundancy, dismissal, end-of-service payments, bonuses, holiday pay, long-service awards, pension or retirement or welfare benefits or similar mandatory payments; |
(7) | unless otherwise agreed with Schwab, this option and the Shares acquired under this option, and the income and value of same, are not granted as consideration for, or in connection with, the service you may provide as a director of a subsidiary of Schwab; |
(8) | the future value of the underlying Shares is unknown, indeterminable and cannot be predicted with certainty; |
(9) | if the underlying Shares do not increase in value, this option will have no value; |
(10) | if you exercise this option and acquire Shares, the value of such Shares may increase or decrease in value, even below the exercise price; |
(11) | for purposes of this option, your employment or service relationship will be considered terminated as of the date you are no longer actively providing services to Schwab and its subsidiaries (regardless of the reason for such termination and whether or not later found to be invalid or in breach of employment laws in the jurisdiction where you are employed or the terms of your employment agreement, if any), and unless otherwise expressly provided in this Agreement or determined by Schwab, (i) your right to vest in this option under the Plan, if any, will terminate as of such date and will not be extended by any notice period (e.g., your period of service would not include any contractual notice period or any period of “garden leave” or similar period mandated under employment laws in the jurisdiction where you are employed or the terms of your employment agreement, if any); and (ii) the period (if any) during which you may exercise this option after such termination of your employment or service relationship will commence on the date you cease to actively provide services and will not be extended by any notice period mandated under employment laws in the jurisdiction where you are employed or terms of your employment agreement, if any; the Plan administrator shall have the exclusive discretion to determine when you are no longer actively providing services for purposes of this option grant (including whether you may still be considered to be providing services while on a leave of absence); |
(12) | unless otherwise provided in the Plan or by Schwab in its discretion, this option and the benefits evidenced by this Agreement do not create any entitlement to have this option or any such benefits transferred to, or assumed by, another company nor to be exchanged, cashed out or substituted for, in connection with any corporate transaction affecting the Shares; and |
(13) | neither Schwab, its subsidiaries nor your Employer shall be liable for any foreign exchange rate fluctuation between your local currency and the United States Dollar that may affect the value of this option or of any amounts due to you pursuant to the exercise of this option or the subsequent sale of any Shares acquired upon exercise. |
Name of Recipient: | <first_name> <last_name> |
Total Number of Restricted Stock Units Granted: | <shares_awarded> |
Grant Date: | <award_date> |
Vesting Schedule: | So long as you remain in service in good standing and subject to the terms of the Restricted Stock Unit Agreement, the Restricted Stock Units subject to this grant will become vested and distributable on the following dates and in the following amounts, subject to the restrictions below: |
Number of Restricted Stock Units on Vesting Date: <vesting_schedule> |
Payment for Units | No payment is required for the Restricted Stock Units that you are receiving. Restricted Stock Units are an unfunded and unsecured obligation of The Charles Schwab Corporation (“Schwab”). |
Vesting | Subject to the provisions of this Restricted Stock Unit Agreement (“Agreement”), a Restricted Stock Unit becomes vested and distributable as of the earliest of the following: (1) The applicable Vesting Date for the Restricted Stock Unit indicated in the Notice of Restricted Stock Unit Grant. (2) Your death. (3) Your disability. (4) Your separation from service, if the separation qualifies as a retirement or a severance eligible termination (provided that vesting shall occur upon a severance eligible termination only to the extent provided in The Charles Schwab Severance Pay Plan (or any successor plan)). (5) A change in control. Unvested units will be considered “Restricted Stock Units.” If your service terminates for any reason, then your Restricted Stock Units will be forfeited to the extent that they have not vested before the termination date and do not vest as a result of the termination. This means that the Restricted Stock Units will immediately revert to Schwab. You will receive no payment for Restricted Stock Units that are forfeited. Schwab determines when your service terminates for this purpose. For all purposes of this Agreement, “service” means continuous employment as a common-law employee of Schwab or a parent corporation or subsidiary of Schwab, and “subsidiary” means a subsidiary corporation as defined in section 424(f) of the Internal Revenue Code of 1986, as amended (the “Code”). |
Definition of Fair Market Value | “Fair market value” means the average of the high and low price of a Share (as defined below) as reported on the New York Stock Exchange on the applicable determination date. |
Definition of Disability | For all purposes of this Agreement, "disability" means that you have a disability that qualifies as such under section 409A of the Code and due to which you have been determined to be eligible for benefits under Schwab’s long-term disability plan or if you are not covered by Schwab’s long-term disability plan, you are unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which has lasted, or can be expected to last, for a continuous period of not less than 12 months or which can be expected to result in death as determined by Schwab in its sole discretion. |
Definition of Retirement | If you are an employee of Schwab and its subsidiaries, "retirement" means a separation from service for any reason other than death at any time after you attain age 55, but only if, at the time of your separation, you have been credited with at least 10 years of service. The phrase "years of service" above has the same meaning given to it under The SchwabPlan Retirement Savings and Investment Plan (or any successor plan). |
Definition of Severance Eligible Termination | For all purposes of this Agreement, "severance eligible termination" means a separation from service entitling you to severance benefits when you have signed your Severance Agreement under The Charles Schwab Severance Pay Plan (or any successor plan). |
Definition of Change in Control | For all purposes of this Agreement, "change in control" means an event that qualifies as a change in control event under section 409A of the Code and as a change in control as defined in [The Charles Schwab Corporation 2013 Stock Incentive Plan] (the “Plan”). |
Definition of Separation From Service | For all purposes of this Agreement, "separation from service" means a separation from service as defined under section 409A of the Code. |
Payment of Shares | Any vested Restricted Stock Units will be paid in shares of common stock of Schwab (“Shares”) as provided herein. Shares that have become vested and distributable under this Agreement shall be distributed as follows: (1) Shares that vest and become distributable on a Vesting Date shall be distributed within 30 days of the Vesting Date. (2) Shares that vest and become distributable on death, |
disability or a change in control, shall be distributable within 90 days of such event. (3) Shares that vest and become distributable on a separation from service (either a retirement or a severance eligible termination) shall be distributed within 90 days of the separation from service. Generally, for severance eligible terminations, the distribution date shall be the "termination date" specified in the notice under The Charles Schwab Severance Pay Plan. Notwithstanding the foregoing, if at the time of your separation from service, you are a “specified employee”, you will receive your Shares six months after your separation from service. "Specified Employee" means a "specified employee" within the meaning of section 409A of the Code and any regulatory guidance promulgated thereunder, provided that in determining the compensation of individuals for this purpose, the definition of compensation in Treas. Reg. § 1.415(c)-2(d)(2) shall be used. | |
Restrictions on Restricted Stock Units | You may not sell, transfer, pledge, or otherwise dispose of any Restricted Stock Units without Schwab’s written consent. Schwab will deliver Shares to you only after the Restricted Stock Units vest and after all other terms and conditions in this Agreement have been satisfied. Schwab may, in its sole discretion, allow you to transfer these Restricted Stock Units under a domestic relations order in settlement of marital or domestic property rights. In order to transfer these Restricted Stock Units, you and the transferee(s) must follow the procedures prescribed by Schwab, and the transferee(s) must follow the terms of this Agreement. |
Delivery of Shares After Death | In the event that Shares are distributable upon your death, the Shares will be delivered to your beneficiary or beneficiaries. You may designate one or more beneficiaries by filing a beneficiary designation form with Schwab. You may change your beneficiary designation by filing a new form with Schwab at any time prior to your death. If you do not designate a beneficiary or if your designated beneficiary predeceases you, then your Shares will be delivered to your estate. |
Cancellation of Restricted Stock Units | To the fullest extent permitted by applicable laws, these Restricted Stock Units will immediately be cancelled and will |
expire in the event that Schwab terminates your employment on account of conduct contrary to the best interests of Schwab, including, without limitation, conduct constituting a violation of law or Schwab policy, fraud, theft, conflict of interest, dishonesty or harassment. The determination whether your employment has been terminated on account of conduct inimical to the best interests of Schwab shall be made by Schwab in its sole discretion, and will be entitled to deference upon any review. | |
Restrictions on Resale | You agree not to sell any Shares at a time when applicable laws, Schwab’s policies, or an agreement between Schwab and its underwriters prohibit a sale. This restriction will apply as long as your service continues and for such period of time after the termination of your service as Schwab may specify. |
Withholding Taxes | Shares will not be distributed unless you have made acceptable arrangements to pay any applicable withholding taxes that may be due as a result of the vesting and or the distribution of the Shares. These arrangements may include withholding Shares. Schwab may withhold the number of whole Shares, valued at the fair market value on the applicable date, required to satisfy such applicable withholding taxes. Schwab will round up to the next whole Share to cover the applicable withholding taxes, and any amounts in excess of the applicable withholding taxes resulting from rounding up to the next whole Share will be added to your federal income tax withholdings. Applicable withholding taxes due on the distribution of Shares subject to this award following termination of employment will be withheld as noted above, unless you have made acceptable arrangements to pay any applicable withholding taxes in cash. If you elect to pay applicable withholding taxes due upon the distribution of Shares in cash, you are responsible for having sufficient funds in your Schwab brokerage account to cover the applicable withholding taxes at the time they are due. Any withholding taxes due prior to distribution of Shares (e.g., under section 3121(v)(2) of the Code upon retirement eligibility) shall be paid by accelerating the vesting of and withholding of Shares payable in connection with such Restricted Stock Units for participants other than executive officers of Schwab (i.e., individuals holding the office of Executive Vice President or above), who shall pay such withholding taxes in cash upon Schwab’s request. Prior to the distribution of Shares, the number of Shares accelerated and |
withheld for withholding taxes will be rounded down to the next whole Share, and any amounts of less than the fair market value of a Share will be deducted from your pay to cover the applicable withholding taxes due prior to distribution of Shares. Participants may not make any election as to the payment of withholding taxes due prior to the distribution of Shares (e.g., under section 3121(v)(2) of the Code upon retirement eligibility). | |
No Stockholder Rights | Your Restricted Stock Units carry no voting or other stockholder rights. You have no rights as a Schwab stockholder until your Restricted Stock Units are settled by issuing Shares. |
Contribution of Par Value | On your behalf, Schwab will contribute to its capital an amount equal to the par value of the Shares issued to you. |
Dividend Equivalent Rights | If Schwab pays cash dividends on Shares, you will receive cash equal to the dividend per Share multiplied by the number of unvested Restricted Stock Units. Each such payment shall be made as soon as practicable following the payment of the actual dividend, but in no event beyond March 15 of the year following the year the actual dividend is paid. |
No Right to Remain Employee | Nothing in this Agreement will be construed as giving you the right to be retained as an employee, contingent worker, or director of Schwab and its subsidiaries for any specific duration or at all. |
Limitation on Payments | If a payment from the Plan would constitute an excess parachute payment under section 280G of the Code or if there have been certain securities law violations, then your grant may be reduced or forfeited and you may be required to disgorge any profit that you have realized from your grant. If a disqualified individual receives a payment or transfer under the Plan that would constitute an excess parachute payment under section 280G of the Code, such payment will be reduced, as described below. Generally, someone is a “disqualified individual” under section 280G if he or she is (a) an officer of Schwab, (b) a member of the group consisting of the highest paid 1% of the employees of Schwab or, if less, the highest paid 250 employees of Schwab, or (c) a 1% stockholder of Schwab. For purposes of this section on “Limitation on Payments,” the term “Schwab" will include affiliated corporations to the extent determined by the independent auditors most recently selected by the Board of |
Directors (the “Auditors”) in accordance with section 280G(d)(5) of the Code. In the event that the Auditors determine that any payment or transfer in the nature of compensation to or for your benefit, whether paid or payable (or transferred or transferable) pursuant to the terms of the Plan or otherwise (a “Payment”), would be nondeductible for federal income tax purposes because of the provisions concerning “excess parachute payments” in section 280G of the Code, then the aggregate present value of all Payments will be reduced (but not below zero) to the Reduced Amount (as defined below); provided, however, that the Compensation Committee (the “Compensation Committee”) of the Board of Directors may specify in writing that the grant will not be so reduced and will not be subject to reduction under this section. For this purpose, the “Reduced Amount” will be the amount, expressed as a present value, which maximizes the aggregate present value of the Payments without causing any Payment to be nondeductible by Schwab because of section 280G of the Code. If the Auditors determine that any Payment would be nondeductible because of section 280G of the Code, then Schwab will promptly give you notice to that effect and a copy of the detailed calculation of the Reduced Amount. The Auditors will determine which and how much of the Payments will be eliminated or reduced (such that the aggregate present value of the Payments equals the Reduced Amount and is consistent with any mandatory eliminations or reductions that apply under other agreements or the Plan). Schwab will notify you promptly of the Auditor's determination. Present value will be determined in accordance with section 280G(d)(4) of the Code. The Auditors’ determinations will be binding upon you and Schwab and will be made within 60 days of the date when a Payment becomes payable or transferable. As a result of uncertainty in the application of section 280G of the Code at the time of an initial determination by the Auditors, it is possible that Payments will have been made by Schwab that should not have been made (an “Overpayment”) or that additional Payments that will not have been made by Schwab could have been made (an “Underpayment”) consistent in each case with the calculation of the Reduced Amount. In the event the Auditors, based upon the assertion of a deficiency by the Internal Revenue Service against you or |
Schwab that the Auditors believe has a high probability of success, determine that an Overpayment has been made, the amount of such Overpayment will be paid by you to Schwab on demand, together with interest at the applicable federal rate provided in section 7872(f)(2) of the Code. However, no amount will be payable by you to Schwab if and to the extent that such payment would not reduce the amount that is subject to taxation under section 4999 of the Code. In the event the Auditors determine that an Underpayment has occurred, such Underpayment will promptly be paid or transferred by Schwab to or for your benefit, together with interest at the applicable federal rate provided in section 7872(f)(2) of the Code, provided that no such Underpayment related to Shares distributable under this Agreement shall be paid beyond the deadline for making such payments under section 409A of the Code. | |
Plan Administration | The Plan administrator has discretionary authority to make all determinations related to this grant and to construe the terms of the Plan, the Notice of Restricted Stock Unit Grant and this Agreement. The Plan administrator’s determinations are conclusive and binding on all persons, and they are entitled to deference upon any review. |
Adjustments | In the event of a stock split, a stock dividend or a similar change in the Shares, the number of Restricted Stock Units that remain subject to forfeiture will be adjusted accordingly. |
Severability | In the event that any provision of this Agreement is held invalid or unenforceable, the provision will be severable from, and such invalidity or unenforceability will not be construed to have any effect on, the remaining provisions of this Agreement. |
Applicable Law | This Agreement will be interpreted and enforced under the laws of the State of Delaware (without regard to their choice-of-law provisions), as such laws are applied to contracts entered into and performed in Delaware. |
The Plan and Other Agreements | The text of the Plan is incorporated in this Agreement by reference. This Agreement (including the Additional Terms and Conditions for Non-U.S. Recipients and the Country-Specific Provisions), the Notice of Restricted Stock Unit Grant, and the Plan constitute the entire understanding between you and Schwab regarding this grant. Any prior agreements, commitments or negotiations concerning this grant are superseded. This Agreement may be amended only by another written agreement, signed by both parties and |
approved by the Compensation Committee. If there is any inconsistency or conflict between any provision of this Agreement and the Plan, the terms of the Plan will control. |
(1) | the Plan is established voluntarily by Schwab, it is discretionary in nature and it may be modified, amended, suspended or terminated by Schwab at any time, to the extent permitted by the Plan; |
(2) | the grant of the Restricted Stock Units is exceptional, voluntary and occasional and does not create any contractual or other right to receive future grants of Restricted Stock Units, or benefits in lieu of Restricted Stock Units, even if Restricted Stock Units have been granted in the past; |
(3) | all decisions with respect to future Restricted Stock Units or other grants, if any, will be at the sole discretion of Schwab; |
(4) | you are voluntarily participating in the Plan; |
(5) | the Restricted Stock Units, the Shares subject to the Restricted Stock Units, and the income and value of same, are not intended to replace any pension rights or compensation; |
(6) | the Restricted Stock Units and the Shares subject to the Restricted Stock Units, and the income and value of same, are not part of normal or expected compensation for any purpose, including calculating any severance, resignation, termination, redundancy, dismissal, end-of-service payments, bonuses, holiday pay, long-service awards, pension or retirement or welfare benefits or similar mandatory payments; |
(7) | unless otherwise agreed with Schwab, the Restricted Stock Units and the Shares subject to the Restricted Stock Units, and the income and value of same, are not granted as consideration for, or in connection with, the service you may provide as a director of a subsidiary of Schwab; |
(8) | the future value of the underlying Shares is unknown, indeterminable and cannot be predicted with certainty; |
(9) | for purposes of the Restricted Stock Units, your service will be considered terminated as of the date you are no longer actively providing services to Schwab and its subsidiaries (regardless of the reason for such termination and whether or not later found to be invalid or in breach of employment laws in the jurisdiction where you are employed or the terms of your employment agreement, if any), and unless otherwise expressly provided in this Agreement or determined by Schwab, your right to vest in the Restricted Stock Units under the Plan, if any, will terminate as of such date and will not be extended by any |
(10) | unless otherwise provided in the Plan or by Schwab in its discretion, the Restricted Stock Units and the benefits evidenced by this Agreement do not create any entitlement to have the Restricted Stock Units or any such benefits transferred to, or assumed by, another company nor to be exchanged, cashed out or substituted for, in connection with any corporate transaction affecting the Shares; and |
(11) | neither Schwab, its subsidiaries nor your Employer shall be liable for any foreign exchange rate fluctuation between your local currency and the United States Dollar that may affect the value of the Restricted Stock Units or of any amounts due to you pursuant to the settlement of the Restricted Stock Units or the subsequent sale of any Shares acquired upon settlement. |
Name of Recipient: | <first_name> <last_name> |
Total Number of Shares Granted: | <shares_awarded> |
Exercise Price per Share: | <award_date> |
Grant Date: | <award_date> |
Expiration Date: | <expire_date> |
Vesting Schedule: | So long as you continue as a non-employee director on the Board of Directors of Schwab ("Board") or the board of a subsidiary of Schwab or an employee of Schwab or its subsidiaries and subject to the terms of the Stock Option Agreement, you will acquire the right to exercise this option (become "vested" in this option) on the following dates and in the following amounts: |
Number of Options on Vesting Date: | |
<vesting_schedule> |
Tax Treatment | This option is a non-qualified stock option and is not intended to qualify as an incentive stock option under federal tax laws. |
Vesting | This option becomes vested in installments as described in the Notice of Non-Employee Director Retainer Stock Option Grant. If you become a common-law employee of The Charles Schwab Corporation (“Schwab”) Schwab or its subsidiaries, then this option will continue to vest as described in the Notice of Non-Employee Director Retainer Stock Option Grant so long as you continue as either a non-employee director or an employee of Schwab or its subsidiaries. |
Accelerated Vesting | This option will become fully exercisable if your service as a non‑employee director terminates on account of your death, disability or retirement. If, prior to the date your service terminates, Schwab is subject to a “change in control” (as defined in [The Charles Schwab Corporation 2013 Stock Incentive Plan] (the “Plan”) document), this option will become fully exercisable immediately preceding the change in control. If the Compensation Committee (the “Compensation Committee”) of the Board of Directors (the “Board”) of Schwab determines that a change in control is likely to occur, Schwab will advise you and this option will become fully exercisable as of the date 10 days prior to the anticipated date of the change in control. |
Definition of Disability | For all purposes of this Agreement, "disability" means that you are unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which has lasted, or can be expected to last, for a continuous period of not less than 12 months or which can be expected to result in death as determined by Schwab in its sole discretion. |
Definition of Retirement | For all purposes of this Agreement, "retirement" means your resignation or removal from the Board or the board of a subsidiary of Schwab at any time after you have attained age 70 or completed 5 continuous years of service as a non‑employee director on the Board and/or the board of a subsidiary of Schwab. Serving simultaneously for a year on the Board and the board of a subsidiary of Schwab is counted as one year total for purposes of determining years of service. If you serve on the Board and the board of a subsidiary of Schwab, you must leave both boards to qualify for retirement. |
Exercise Procedures | You or your representative may exercise this option by following the procedures prescribed by Schwab. If this option is being exercised by your representative, your representative must furnish proof satisfactory to Schwab of your representative's right to exercise this option. After completing the prescribed procedures, Schwab will cause to be issued the shares of common stock of Schwab (“Shares”) purchased, which will be registered in the name of the person exercising this option. |
Forms of Payment | When you submit your notice of exercise, you must pay the option exercise price for the Shares you are purchasing. Payment may be made in one of the following forms: |
• Cash in your Schwab brokerage account in an amount sufficient to cover the option exercise price of the Shares and the required tax withholding (this exercise method is sometimes referred to as “Exercise and Hold”). • Shares surrendered to Schwab. These Shares will be valued at their fair market value on the date when the new Shares are purchased. (This exercise method is sometimes referred to as a “Stock Swap.”) • By delivery (in a manner prescribed by Schwab) of an irrevocable direction to Charles Schwab & Co., Inc. to sell Shares (including Shares to be issued upon exercise of this option) and to deliver all or part of the sale proceeds to Schwab in payment of all or part of the exercise price. (This exercise method is sometimes referred to as “Exercise and Sell” or “Sell to Cover.”) | |
Term | This option expires no later than the 10th anniversary of the Grant Date but may expire earlier upon your termination of service, as described below. |
Termination of Service as a Non‑Employee Director | This option will expire on the date three months following the date of your termination of service as a non-employee director if such service terminates for any reason other than on account of becoming a common‑law employee of Schwab or its subsidiaries, death, disability or retirement. The terms “disability” and “retirement” are defined above. If you become an employee of Schwab or its subsidiaries, this option will expire on the date three months following the date you cease to be an employee of Schwab and its subsidiaries (other than by reason of disability, death or retirement). If you cease to be a non-employee director or an employee of Schwab and its subsidiaries by reason of your disability or death, then this option will expire on the first anniversary of the date of your death or disability. If you cease to be a non‑employee director by reason of your retirement, then this option will expire on the 10th anniversary of the Grant Date. |
Restrictions on Exercise and Issuance or Transfer of Shares | You cannot exercise this option and no Shares may be issued under this option if the issuance of Shares at that time would violate any applicable law, regulation, or rule. Schwab may impose restrictions upon the sale, pledge, or other transfer of Shares (including the placement of appropriate legends on stock certificates) if, in the judgment of Schwab and its counsel, such restrictions are necessary or desirable to comply with applicable law, regulations, or rules. |
No Stockholder Rights | You, or your estate or heirs, have no rights as a stockholder of Schwab until you have exercised this option by giving the required notice to the Company and paying the exercise price. No adjustments are made for dividends or other rights if the applicable record date occurs before you exercise this option, except as described in the Plan. |
No Right to Remain Director or Employee | Nothing in this Agreement will be construed as giving you the right to be retained as a director or an employee of Schwab and its subsidiaries. |
Transfer of Option | In general, only you may exercise this option prior to your death. You may not transfer or assign this option, except as provided below. For instance, you may not sell this option or use it as security for a loan. If you attempt to do any of these things, this option will immediately become invalid. You may dispose of this option in your will or in a beneficiary designation. You may designate one or more beneficiaries by filing a beneficiary designation form with Schwab. You may change your beneficiary designation by filing a new form with Schwab at any time prior to your death. If you do not designate a beneficiary or if your designated beneficiary predeceases you, then your options will be exercisable by your estate. Schwab may, in its sole discretion, allow you to transfer this option under a domestic relations order in settlement of marital or domestic property rights. In order to transfer this option, you and the transferee(s) must follow the procedures prescribed by Schwab, and the transferee(s) must follow the terms of this Agreement. |
Limitation on Payments | If a payment from the Plan would constitute an excess parachute payment or if there have been certain securities law violations, then your grant may be reduced or forfeited and you may be required to disgorge any profit that you have realized from your grant. If a disqualified individual receives a payment or transfer under the Plan that would constitute an excess parachute payment under section 280G of the Internal Revenue Code of 1986, as amended (the “Code”), such payment will be reduced, as described below. Generally, someone is a “disqualified individual” under section 280G if he or she is (a) an officer of Schwab, (b) a member of the group consisting of the highest paid 1% of the employees of Schwab or, if less, the highest paid 250 employees of Schwab, or (c) a 1% stockholder of Schwab. For purposes of this section on “Limitation on Payments,” the term “Schwab" will include affiliated corporations to the extent determined by the Auditors (as defined below) in accordance with section 280G(d)(5) of the Code. |
In the event that the independent auditors most recently selected by the Board (the “Auditors”) determine that any payment or transfer in the nature of compensation to or for your benefit, whether paid or payable (or transferred or transferable) pursuant to the terms of the Plan or otherwise (a “Payment”), would be nondeductible for federal income tax purposes because of the provisions concerning “excess parachute payments” in section 280G of the Code, then the aggregate present value of all Payments will be reduced (but not below zero) to the Reduced Amount (as defined below); provided, however, that the Compensation Committee may specify in writing that the grant will not be so reduced and will not be subject to reduction under this section. | |
For this purpose, the “Reduced Amount” will be the amount, expressed as a present value, which maximizes the aggregate present value of the Payments without causing any Payment to be nondeductible by Schwab because of section 280G of the Code. |
If the Auditors determine that any Payment would be nondeductible because of section 280G of the Code, then Schwab will promptly give you notice to that effect and a copy of the detailed calculation of the Reduced Amount. You may then elect, in your discretion, which and how much of the Payments will be eliminated or reduced (as long as after such election, the aggregate present value of the Payments equals the Reduced Amount). You will advise Schwab in writing of your election within 10 days of receipt of the notice. If you do not make such an election within the 10-day period, then Schwab may elect which and how much of the Payments will be eliminated or reduced (as long as after such election the aggregate present value of the Payments equals the Reduced Amount, and your election is consistent with any mandatory eliminations or reductions that apply under other agreements or the Plan). Schwab will notify you promptly of its election. Present value will be determined in accordance with section 280G(d)(4) of the Code. The Auditors’ determinations will be binding upon you and Schwab and will be made within 60 days of the date when a Payment becomes payable or transferable. As promptly as practicable following these determinations and elections, Schwab will pay or transfer to or for your benefit such amounts as are then due to you under the Plan and will promptly pay or transfer to or for your benefit in the future such amounts as become due to you under the Plan. | |
As a result of uncertainty in the application of section 280G of the Code at the time of an initial determination by the Auditors, it is possible that Payments will have been made by Schwab that should not have been made (an “Overpayment”) or that additional Payments that will not have been made by Schwab could have been made (an “Underpayment”) consistent in each case with the calculation of the Reduced Amount. In the event the Auditors, based upon the assertion of a deficiency by the Internal Revenue Service against you or Schwab that the Auditors believe has a high probability of success, determine that an Overpayment has been made, such Overpayment will be treated for all purposes as a loan to you that you will repay to Schwab on demand, together with interest at the applicable federal rate provided in section 7872(f)(2) of the Code. However, no amount will be payable by you to Schwab if and to the extent that such payment would not reduce the amount that is subject to taxation under section 4999 of the Code. In the event the Auditors determine that an Underpayment has occurred, such Underpayment will promptly be paid or transferred by Schwab to or for your benefit, together with interest at the applicable federal rate provided in section 7872(f)(2) of the Code. | |
Plan Administration | The Plan administrator has discretionary authority to make all determinations related to this grant and to construe the terms of the Plan and this Agreement. The Plan administrator’s determinations are conclusive and binding on all persons, and they are entitled to deference upon any review. |
Adjustments | In the event of a stock split, a stock dividend or a similar change in Shares, the Compensation Committee shall adjust the number of Shares covered by this option and the exercise price per Share. |
Severability | In the event that any provision of this Agreement is held invalid or unenforceable, the provision will be severable from, and such invalidity or unenforceability will not be construed to have any effect on, the remaining provisions of this Agreement. |
Applicable Law | This Agreement will be interpreted and enforced under the laws of the State of Delaware (without regard to their choice-of-law provisions), as such laws are applied to contracts entered into and performed in Delaware. |
The Plan and Other Agreements | The text of the Plan is incorporated in this Agreement by reference. This Agreement and the Plan constitute the entire understanding between you and Schwab regarding this option. Any prior agreements, commitments or negotiations concerning this option are superseded. This Agreement may be amended only by another written agreement, signed by both parties. If there is any inconsistency or conflict between any provision of this Agreement and the Plan, the terms of the Plan will control. |
Name of Recipient: | <first_name> <last_name> |
Total Number of Restricted Stock Units Granted: | <shares_awarded> |
Grant Date: | <award_date> |
Vesting Schedule: | So long as you continue as a non‑employee director on the Board of Directors of Schwab (“Board”) or the board of a subsidiary of Schwab or an employee of Schwab or its subsidiaries and subject to the terms of the Restricted Stock Unit Agreement, the Restricted Stock Units subject to this grant will become vested and distributable on the following dates and in the following amounts, subject to the restrictions below: |
Number of Options on Vesting Date: | |
<vesting_schedule> |
Payment for Units | No payment is required for the Restricted Stock Units that you are receiving. Restricted Stock Units are an unfunded and unsecured obligation of The Charles Schwab Corporation (“Schwab”). |
Vesting | Subject to the provisions of this Restricted Stock Unit Agreement (“Agreement”), a Restricted Stock Unit becomes vested and distributable as of the earliest of the following: (1) The applicable Vesting Date for the Restricted Stock Unit indicated in the Notice of Non-Employee Director Retainer Restricted Stock Unit Grant. (2) Your death. (3) Your disability. (4) Your separation from service, if the separation qualifies as a retirement. (5) A change in control. If you become a common-law employee of Schwab or a subsidiary of Schwab (“subsidiary” means a subsidiary corporation as defined in section 424(f) of the Internal Revenue Code of 1986, as amended (the “Code”)), then the Restricted Stock Units will continue to vest as described in the Notice of Non-Employee Director Retainer Restricted Stock Unit Grant so long as you continue as either a non‑employee director or an employee of Schwab or its subsidiaries. Unvested units will be considered “Restricted Stock Units.” If your service terminates for any reason, then your Restricted Stock Units will be forfeited to the extent that they have not vested before the termination date and do not vest as a result of the termination. This means that the Restricted Stock Units will immediately revert to Schwab. You will receive no payment for Restricted Stock Units that are forfeited. Schwab determines when your service terminates for this purpose. |
Definition of Fair Market Value | “Fair market value” means the average of the high and low price of a Share (as defined below) as reported on the New York Stock Exchange on the applicable determination date. |
Definition of Disability | For all purposes of this Agreement, "disability" means that you have a disability that qualifies as such under section 409A of the Code. |
Definition of Retirement | For all purposes of this Agreement, "retirement" means your resignation or removal from the Board of Directors of Schwab (the “Board”) or a subsidiary of Schwab at any time after you have attained age 70 or completed 5 continuous years of service as a non‑employee director on the Board and/or a subsidiary of Schwab. Serving simultaneously for a year on the Board and the board of a subsidiary of Schwab is counted as one year total for purposes of determining years of service. If you serve on the Board and the board of a subsidiary of Schwab, you must leave both boards to qualify for retirement. |
Definition of Change in Control | For all purposes of this Agreement, "change in control" means an event that qualifies as a change in control event under section 409A of the Code and as a change in control as defined in [The Charles Schwab Corporation 2013 Stock Incentive Plan] (the “Plan”). |
Definition of Separation From Service | For all purposes of this Agreement, "separation from service" means a separation from service as defined under section 409A of the Code. |
Payment of Shares | Any vested Restricted Stock Units will be paid in shares of common stock of Schwab (“Shares”) as provided herein. Shares that have become vested and distributable under this Agreement shall be distributed as follows: (1) Shares that vest and become distributable on a Vesting Date shall be distributed within 30 days of the Vesting Date. (2) Shares that vest and become distributable on death, disability or a change in control shall be distributable within 90 days of such event. (3) Shares that vest and become distributable on a separation from service that qualifies as a retirement shall be distributed within 90 days of the separation from service. Notwithstanding the foregoing, if at the time of your separation from service, you are a “specified employee”, you will receive your Shares six months after your separation from service. "Specified Employee" means a "specified employee" within the meaning of section 409A of the Code and any regulatory guidance promulgated thereunder, provided that in determining the compensation of individuals for this purpose, the definition of compensation in Treas. Reg. § 1.415(c)-2(d)(2) shall be used. |
Restrictions on Restricted Stock Units | You may not sell, transfer, pledge or otherwise dispose of any Restricted Stock Units without Schwab’s written consent. Schwab will deliver Shares to you only after the Restricted Stock Units vest and after all other terms and conditions in this Agreement have been satisfied. Schwab may, in its sole discretion, allow you to transfer these Restricted Stock Units under a domestic relations order in settlement of marital or domestic property rights. In order to transfer these Restricted Stock Units, you and the transferee(s) must follow the procedures prescribed by Schwab, and the transferee(s) must follow the terms of this Agreement. |
Delivery of Shares After Death | In the event that Shares are distributable upon your death, the Shares will be delivered to your beneficiary or beneficiaries. You may designate one or more beneficiaries by filing a beneficiary designation form with Schwab. You may change your beneficiary designation by filing a new form with Schwab at any time prior to your death. If you do not designate a beneficiary or if your designated beneficiary predeceases you, then your Shares will be delivered to your estate. |
Restrictions on Resale | You agree not to sell any Shares at a time when applicable laws, Schwab’s policies, or an agreement between Schwab and its underwriters prohibit a sale. This restriction will apply as long as your service continues and for such period of time after the termination of your service as Schwab may specify. |
No Stockholder Rights | Your Restricted Stock Units carry no voting or other stockholder rights. You have no rights as a Schwab stockholder until your Restricted Stock Units are settled by issuing Shares. |
Contribution of Par Value | On your behalf, Schwab will contribute to its capital an amount equal to the par value of the Shares issued to you. |
Dividend Equivalent Rights | If Schwab pays cash dividends on Shares, you will receive cash equal to the dividend per Share multiplied by the number of unvested Restricted Stock Units. Each such payment shall be made as soon as practicable following the payment of the actual dividend, but in no event beyond March 15 of the year following the year the actual dividend is paid. |
No Right to Remain Employee or Director | Nothing in this Agreement will be construed as giving you the right to be retained as an employee, contingent worker or director of Schwab and its subsidiaries for any specific duration or at all. |
Limitation on Payments | If a payment from the Plan would constitute an excess parachute payment under section 280G of the Code or if there have been |
certain securities law violations, then your grant may be reduced or forfeited and you may be required to disgorge any profit that you have realized from your grant. If a disqualified individual receives a payment or transfer under the Plan that would constitute an excess parachute payment under section 280G of the Code, such payment will be reduced, as described below. Generally, someone is a “disqualified individual” under section 280G if he or she is (a) an officer of Schwab, (b) a member of the group consisting of the highest paid 1% of the employees of Schwab or, if less, the highest paid 250 employees of Schwab, or (c) a 1% stockholder of Schwab. For purposes of this section on “Limitation on Payments,” the term “Schwab " will include affiliated corporations to the extent determined by the independent auditors most recently selected by the Schwab Board of Directors (the “Auditors”) in accordance with section 280G(d)(5) of the Code. In the event that the Auditors determine that any payment or transfer in the nature of compensation to or for your benefit, whether paid or payable (or transferred or transferable) pursuant to the terms of the Plan or otherwise (a “Payment”), would be nondeductible for federal income tax purposes because of the provisions concerning “excess parachute payments” in section 280G of the Code, then the aggregate present value of all Payments will be reduced (but not below zero) to the Reduced Amount (as defined below); provided, however, that the Compensation Committee (the “Compensation Committee”) of the Board of Schwab may specify in writing that the grant will not be so reduced and will not be subject to reduction under this section. For this purpose, the “Reduced Amount” will be the amount, expressed as a present value, which maximizes the aggregate present value of the Payments without causing any Payment to be nondeductible by Schwab because of section 280G of the Code. If the Auditors determine that any Payment would be nondeductible because of section 280G of the Code, then Schwab will promptly give you notice to that effect and a copy of the detailed calculation of the Reduced Amount. The Auditors will determine which and how much of the Payments will be eliminated or reduced (such that the aggregate present value of the Payments equals the Reduced Amount). Schwab will notify you promptly of the Auditor's determination. Present value will be determined in accordance with section 280G(d)(4) of the |
Code. The Auditors’ determinations will be binding upon you and Schwab and will be made within 60 days of the date when a Payment becomes payable or transferable. As a result of uncertainty in the application of section 280G of the Code at the time of an initial determination by the Auditors, it is possible that Payments will have been made by Schwab that should not have been made (an “Overpayment”) or that additional Payments that will not have been made by Schwab could have been made (an “Underpayment”) consistent in each case with the calculation of the Reduced Amount. In the event the Auditors, based upon the assertion of a deficiency by the Internal Revenue Service against you or Schwab that the Auditors believe has a high probability of success, determine that an Overpayment has been made, the amount of such Overpayment will be paid by you to Schwab on demand, together with interest at the applicable federal rate provided in section 7872(f)(2) of the Code. However, no amount will be payable by you to Schwab if and to the extent that such payment would not reduce the amount that is subject to taxation under section 4999 of the Code. In the event the Auditors determine that an Underpayment has occurred, such Underpayment will promptly be paid or transferred by Schwab to or for your benefit, together with interest at the applicable federal rate provided in section 7872(f)(2) of the Code, provided that no such Underpayment related to Shares distributable under this Agreement shall be paid beyond the deadline for making such payments under section 409A of the Code. | |
Plan Administration | The Plan administrator has discretionary authority to make all determinations related to this grant and to construe the terms of the Plan, the Notice of Non-Employee Director Retainer Restricted Stock Unit Grant, and this Agreement. The Plan administrator’s determinations are conclusive and binding on all persons, and they are entitled to deference upon any review. |
Adjustments | In the event of a stock split, a stock dividend or a similar change in the Shares, the number of Restricted Stock Units that remain subject to forfeiture will be adjusted accordingly. |
Severability | In the event that any provision of this Agreement is held invalid or unenforceable, the provision will be severable from, and such invalidity or unenforceability will not be construed to have any effect on, the remaining provisions of this Agreement. |
Applicable Law | This Agreement will be interpreted and enforced under the laws of the State of Delaware (without regard to their choice-of-law provisions), as such laws are applied to contracts entered into and performed in Delaware. |
The Plan and Other Agreements | The text of the Plan is incorporated in this Agreement by reference. This Agreement, the Notice of Non-Employee Director Retainer Restricted Stock Unit Grant and the Plan constitute the entire understanding between you and Schwab regarding this grant. Any prior agreements, commitments or negotiations concerning this grant are superseded. This Agreement may be amended only by another written agreement, signed by both parties and approved by the Compensation Committee. If there is any inconsistency or conflict between any provision of this Agreement and the Plan, the terms of the Plan will control. |
Name of Recipient: | <first_name> <last_name> |
Total Number of Shares Granted: | <shares_awarded> |
Exercise Price per Share: | <award_price> |
Grant Date: | <award_date> |
Expiration Date: | <expire_date> |
Vesting Schedule: | This option is fully vested and non-forfeitable at all times. |
Tax Treatment | This option is a non-qualified stock option and is not intended to qualify as an incentive stock option under federal tax laws. |
Vesting | This option has been issued under The Charles Schwab Corporation 2013 Stock Incentive Plan (the “Plan”) pursuant to your deferral election under The Charles Schwab Corporation Directors’ Deferred Compensation Plan II (the "Deferred Compensation Plan") and is fully vested and non-forfeitable at all times. |
Exercise Procedures | You or your representative may exercise this option by following the procedures prescribed by The Charles Schwab Corporation (“Schwab”). If this option is being exercised by your representative, your representative must furnish proof satisfactory to Schwab of your representative's right to exercise this option. After completing the prescribed procedures, Schwab will cause to be issued the shares of common stock of Schwab (“Shares”) purchased, which will be registered in the name of the person exercising this option. |
Forms of Payment | When you submit your notice of exercise, you must pay the option exercise price for the Shares you are purchasing. Payment may be made in one of the following forms: |
• Cash in your Schwab brokerage account in an amount sufficient to cover the option exercise price of the Shares and the required tax withholding (this exercise method is sometimes referred to as “Exercise and Hold”). • Shares are surrendered to Schwab. These shares will be valued at their fair market value on the date when the new Shares are purchased. (This exercise method is sometimes referred to as a “Stock Swap.”) • By delivery (in a manner prescribed by Schwab) of an irrevocable direction to Charles Schwab & Co., Inc. to sell Shares (including Shares to be issued upon exercise of this option) and to deliver all or part of the sale proceeds to Schwab in payment of all or part of the exercise price. (This exercise method is sometimes referred to as “Exercise and Sell” or “Sell to Cover.”) | |
Term | This option expires no later than the 10th anniversary of the Grant Date but may expire earlier upon your termination of service, as described below. |
Termination of Service as a Non‑Employee Director | This option will expire on the date three months following the date of your termination of service as a non-employee director if such service terminates for any reason other than on account of becoming a common‑law employee of Schwab or its subsidiaries, death, disability or retirement. The terms “disability” and “retirement” are defined below. If you become an employee of Schwab or its subsidiaries, this option will expire on the date three months following the date you cease to be an employee of Schwab and its subsidiaries (other than by reason of disability, death or retirement). If you cease to be a non-employee director or an employee of Schwab and its subsidiaries by reason of your disability or death, then this option will expire on the first anniversary of the date of your death or disability. If you cease to be a non‑employee director by reason of your retirement, then this option will expire on the 10th anniversary of the Grant Date. |
Definition of Disability | For all purposes of this Agreement, "disability" means that you are unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which has lasted, or can be expected to last, for a continuous period of not less than 12 months or which can be expected to result in death as determined by Schwab in its sole discretion. |
Definition of Retirement | For all purposes of this Agreement, "retirement" means your resignation or removal from the Board of Directors of Schwab (“Board”) or the board of a subsidiary of Schwab at any time after you have attained age 70 or completed 5 continuous years of service as a non‑employee director on the Board and/or the board of a subsidiary of Schwab. Serving simultaneously for a year on the Board and the board of a subsidiary of Schwab is counted as one year total for purposes of determining years of service. If you serve on the Board and the board of a subsidiary of Schwab, you must leave both boards to qualify for retirement. |
Restrictions on Exercise and Issuance or Transfer of Shares | You cannot exercise this option and no Shares may be issued under this option if the issuance of Shares at that time would violate any applicable law, regulation or rule. Schwab may impose restrictions upon the sale, pledge, or other transfer of Shares (including the placement of appropriate legends on stock certificates) if, in the judgment of Schwab and its counsel, such restrictions are necessary or desirable to comply with applicable law, regulations, or rules. |
No Stockholder Rights | You, or your estate or heirs, have no rights as a stockholder of Schwab until you have exercised this option by giving the required notice to the Company and paying the exercise price. No adjustments are made for dividends or other rights if the applicable record date occurs before you exercise this option, except as described in the Plan. |
No Right to Remain Director or Employee | Nothing in this Agreement will be construed as giving you the right to be retained as a director or an employee of Schwab and its subsidiaries. |
Transfer of Option | In general, only you may exercise this option prior to your death. You may not transfer or assign this option, except as provided below. For instance, you may not sell this option or use it as security for a loan. If you attempt to do any of these things, this option will immediately become invalid. You may dispose of this option in your will or in a beneficiary designation. You may designate one or more beneficiaries by filing a beneficiary designation form with Schwab. You may change your beneficiary designation by filing a new form with Schwab at any time prior to your death. If you do not designate a beneficiary or if your designated beneficiary predeceases you, then your options will be exercisable by your estate. Schwab may, in its sole discretion, allow you to transfer this option under a domestic relations order in settlement of marital or domestic property rights. In order to transfer this option, you and the transferee(s) must follow the procedures prescribed by Schwab, and the transferee(s) must follow the terms of this Agreement. |
Plan Administration | The Plan administrator has discretionary authority to make all determinations related to this grant and to construe the terms of the Plan and this Agreement. The Plan administrator’s determinations are conclusive and binding on all persons, and they are entitled to deference upon any review. |
Adjustments | In the event of a stock split, a stock dividend or a similar change in the Shares, the Compensation Committee of the Board shall adjust the number of Shares covered by this option and the exercise price per Share. |
Severability | In the event that any provision of this Agreement is held invalid or unenforceable, the provision will be severable from, and such invalidity or unenforceability will not be construed to have any effect on, the remaining provisions of this Agreement. |
Applicable Law | This Agreement will be interpreted and enforced under the laws of the State of Delaware (without regard to their choice-of-law provisions), as such laws are applied to contracts entered into and performed in Delaware. |
The Plan and Other Agreements | The text of the Plan is incorporated in this Agreement by reference. This Agreement and the Plan constitute the entire understanding between you and Schwab regarding this option. Any prior agreements, commitments or negotiations concerning this option are superseded. This Agreement may be amended only by another written agreement, signed by both parties. If there is any inconsistency or conflict between any provision of this Agreement and the Plan, the terms of the Plan will control. |
Name of Recipient: | |
Total Number of Restricted Stock Units Granted: | |
Grant Date: | |
Vesting Schedule: | These Restricted Stock Units are fully vested and non-forfeitable at all times. |
Vesting | These restricted stock units have been issued under The Charles Schwab Corporation 2013 Stock Incentive Plan (the “Plan”) pursuant to your deferral election under The Charles Schwab Corporation Directors’ Deferred Compensation Plan II (the "Deferred Compensation Plan") and are fully vested and non-forfeitable at all times. |
Nature of Units | Your units are mere bookkeeping entries. They represent only The Charles Schwab Corporation’s (“Schwab’s”) unfunded and unsecured promise to issue shares of Schwab common stock (“Shares”) on a future date. As a holder of units, you have no rights other than the rights of a general creditor of Schwab. |
Voting Rights and Dividend Equivalent Rights | Your units carry no voting or dividend rights. If Schwab pays cash dividends on Shares, any dividend equivalents paid on Restricted Stock Units shall be credited to you as additional Restricted Stock Units. Otherwise, you have no rights as a Schwab stockholder until your units are settled by issuing Shares. |
Settlement of Units | Your units will be settled in accordance with the terms of the Deferred Compensation Plan. At the time of settlement, you will receive one Share for each unit. |
Other Terms and Conditions | Your units will be governed by all of the applicable terms and conditions of the Deferred Compensation Plan, which are made part of this Restricted Stock Unit Agreement (“Agreement”). |
Restrictions on Restricted Stock Units | You may not sell, transfer, pledge or otherwise dispose of any Restricted Stock Units. Schwab will deliver Shares to you in accordance with the terms of the Deferred Compensation Plan. Schwab may, in its sole discretion, allow you to transfer these Restricted Stock Units under a domestic relations order in settlement of marital or domestic property rights. In order to transfer these Restricted Stock Units, you and the transferee(s) must follow the procedures prescribed by Schwab, and the transferee must follow the terms of this Agreement. |
Delivery of Shares After | In the event that Shares are distributable upon your death, the Shares will be delivered to your beneficiary or |
Death | beneficiaries. You may designate one or more beneficiaries by filing a beneficiary designation form with Schwab. You may change your beneficiary designation by filing a new form with Schwab at any time prior to your death. If you do not designate a beneficiary or if your designated beneficiary predeceases you, then your Shares will be delivered to your estate. |
Restrictions on Resale | You agree not to sell any shares at a time when applicable laws, Schwab policies, or an agreement between Schwab and its underwriters prohibit a sale. This restriction will apply as long as your service continues and for such period of time after the termination of your service as Schwab may specify. |
Plan Administration | The Plan administrator has discretionary authority to make all determinations related to this grant and to construe the terms of the Plan, the Notice of Non-Employee Director Deferred Compensation Restricted Stock Unit Grant and this Agreement. The Plan administrator’s determinations are conclusive and binding on all persons, and they are entitled to deference upon any review. |
Adjustments | In the event of a stock split, a stock dividend or a similar change in Shares, the number of your units will be adjusted accordingly, as Schwab may determine pursuant to the Plan. |
The Plan and Other Agreements | The text of the Plan and the Deferred Compensation Plan (the "Plans") are incorporated in this Agreement by reference. This Agreement and the Plans constitute the entire understanding between you and Schwab regarding these units. Any prior agreements, commitments or negotiations concerning these units are superseded. This Agreement may be amended only by another written agreement, signed by both parties. If there is any inconsistency or conflict between any provision of this Agreement and the Plans, the terms of the Plans will control. |
Nine Months | ||||||||||||||||||||||||
Ended | ||||||||||||||||||||||||
September 30, 2017 | 2016 | 2015 | 2014 | 2013 | 2012 | |||||||||||||||||||
Earnings before taxes on earnings | $ | 2,697 | $ | 2,993 | $ | 2,279 | $ | 2,115 | $ | 1,705 | $ | 1,450 | ||||||||||||
Fixed charges | ||||||||||||||||||||||||
Interest expense: | ||||||||||||||||||||||||
Bank deposits | 98 | 37 | 29 | 30 | 31 | 42 | ||||||||||||||||||
Payables to brokerage clients | 11 | 3 | 2 | 2 | 3 | 3 | ||||||||||||||||||
Short-term borrowings | 11 | 9 | — | — | — | — | ||||||||||||||||||
Long-term debt | 89 | 104 | 92 | 73 | 69 | 103 | ||||||||||||||||||
Other | 14 | 18 | 9 | (3 | ) | 2 | 2 | |||||||||||||||||
Total | 223 | 171 | 132 | 102 | 105 | 150 | ||||||||||||||||||
Interest portion of rental expense | 73 | 88 | 77 | 71 | 69 | 68 | ||||||||||||||||||
Total fixed charges (A) | 296 | 259 | 209 | 173 | 174 | 218 | ||||||||||||||||||
Earnings before taxes on earnings and fixed charges (B) | $ | 2,993 | $ | 3,252 | $ | 2,488 | $ | 2,288 | $ | 1,879 | $ | 1,668 | ||||||||||||
Ratio of earnings to fixed charges (B) ÷ (A) (1) | 10.1 | 12.6 | 11.9 | 13.2 | 10.8 | 7.7 | ||||||||||||||||||
Ratio of earnings to fixed charges, excluding | ||||||||||||||||||||||||
bank deposits and payables to brokerage | ||||||||||||||||||||||||
clients interest expense (2) | 15.4 | 14.7 | 13.8 | 16.0 | 13.2 | 9.4 | ||||||||||||||||||
Total fixed charges | $ | 296 | $ | 259 | $ | 209 | $ | 173 | $ | 174 | $ | 218 | ||||||||||||
Preferred stock dividends and other (3) | 195 | 227 | 131 | 96 | 97 | 70 | ||||||||||||||||||
Total fixed charges and preferred stock dividends and other (C) | $ | 491 | $ | 486 | $ | 340 | $ | 269 | $ | 271 | $ | 288 | ||||||||||||
Ratio of earnings to fixed charges and preferred | ||||||||||||||||||||||||
stock dividends and other (B) ÷ (C) (1) | 6.1 | 6.7 | 7.3 | 8.5 | 6.9 | 5.8 | ||||||||||||||||||
Ratio of earnings to fixed charges and preferred stock | ||||||||||||||||||||||||
dividends and other, excluding bank deposits and | ||||||||||||||||||||||||
payables to brokerage clients interest expense (2) | 7.5 | 7.2 | 8.0 | 9.5 | 7.8 | 6.7 |
1. | I have reviewed this Quarterly Report on Form 10-Q of The Charles Schwab Corporation; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: | November 7, 2017 | /s/ Walter W. Bettinger II | |
Walter W. Bettinger II | |||
President and Chief Executive Officer |
1. | I have reviewed this Quarterly Report on Form 10-Q of The Charles Schwab Corporation; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: | November 7, 2017 | /s/ Peter Crawford | |
Peter Crawford | |||
Executive Vice President and Chief Financial Officer |
(1) | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company for the periods presented therein. |
/s/ Walter W. Bettinger II | Date: | November 7, 2017 | |
Walter W. Bettinger II | |||
President and Chief Executive Officer |
/s/ Peter Crawford | Date: | November 7, 2017 | |
Peter Crawford | |||
Executive Vice President and Chief Financial Officer |
Document and Entity Information - shares |
9 Months Ended | |
---|---|---|
Sep. 30, 2017 |
Oct. 31, 2017 |
|
Document and Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Sep. 30, 2017 | |
Document Fiscal Year Focus | 2017 | |
Document Fiscal Period Focus | Q3 | |
Trading Symbol | SCHW | |
Entity Registrant Name | SCHWAB CHARLES CORP | |
Entity Central Index Key | 0000316709 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 1,340,576,376 |
Condensed Consolidated Statements of Income - USD ($) shares in Millions, $ in Millions |
3 Months Ended | 9 Months Ended | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
||||||||||
Net Revenues | |||||||||||||
Asset management and administration fees | [1] | $ 861 | $ 798 | $ 2,529 | $ 2,254 | ||||||||
Interest revenue | 1,176 | 891 | 3,358 | 2,541 | |||||||||
Interest expense | (94) | (46) | (223) | (126) | |||||||||
Net interest revenue | 1,082 | 845 | 3,135 | 2,415 | |||||||||
Trading revenue | 151 | 190 | 500 | 623 | |||||||||
Other | 71 | 76 | 212 | 209 | |||||||||
Provision for loan losses | 0 | 5 | 0 | 5 | |||||||||
Total net revenues | 2,165 | 1,914 | 6,376 | 5,506 | |||||||||
Expenses Excluding Interest | |||||||||||||
Compensation and benefits | 662 | 609 | 2,026 | 1,837 | |||||||||
Professional services | 152 | 131 | 429 | 372 | |||||||||
Occupancy and equipment | 111 | 100 | 323 | 299 | |||||||||
Advertising and market development | 63 | 64 | 205 | 204 | |||||||||
Communications | 56 | 57 | 171 | 179 | |||||||||
Depreciation and amortization | 69 | 60 | 200 | 173 | |||||||||
Other | 107 | 99 | 325 | 273 | |||||||||
Total expenses excluding interest | 1,220 | 1,120 | 3,679 | 3,337 | |||||||||
Income before taxes on income | 945 | 794 | 2,697 | 2,169 | |||||||||
Taxes on income | [2] | 327 | 291 | 940 | 802 | ||||||||
Net Income | 618 | 503 | 1,757 | 1,367 | |||||||||
Preferred stock dividends and other | [3] | 43 | 33 | 127 | 99 | ||||||||
Net Income Available to Common Stockholders | $ 575 | $ 470 | $ 1,630 | $ 1,268 | |||||||||
Weighted-Average Common Shares Outstanding: | |||||||||||||
Basic (shares) | 1,339 | 1,324 | 1,338 | 1,322 | |||||||||
Diluted (shares) | [4] | 1,353 | 1,334 | 1,352 | 1,332 | ||||||||
Earnings Per Common Share: | |||||||||||||
Basic (USD per share) | $ 0.43 | $ 0.36 | $ 1.22 | $ 0.96 | |||||||||
Diluted (USD per share) | 0.42 | 0.35 | 1.21 | 0.95 | |||||||||
Dividends Declared Per Common Share (USD per share) | $ 0.08 | $ 0.07 | $ 0.24 | $ 0.20 | |||||||||
Fee waivers | $ 1 | $ 41 | $ 10 | $ 193 | |||||||||
|
Condensed Consolidated Statements of Comprehensive Income - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Statement of Comprehensive Income [Abstract] | ||||
Net Income | $ 618 | $ 503 | $ 1,757 | $ 1,367 |
Change in net unrealized gain (loss) on available for sale securities: | ||||
Net unrealized gain (loss) | 0 | 77 | 81 | 266 |
Reclassification of net unrealized loss transferred to held to maturity | 0 | 0 | 227 | 0 |
Other reclassifications included in other revenue | 0 | 0 | (7) | (3) |
Change in net unrealized gain (loss) on held to maturity securities: | ||||
Reclassification of net unrealized loss transferred from available for sale | 0 | 0 | (227) | 0 |
Amortization of amounts previously recorded upon transfer from available for sale | 10 | 0 | 21 | 0 |
Other | 0 | 0 | (3) | 1 |
Other comprehensive income (loss), before tax | 10 | 77 | 92 | 264 |
Income tax effect | (4) | (29) | (35) | (99) |
Other comprehensive income (loss), net of tax | 6 | 48 | 57 | 165 |
Comprehensive Income | $ 624 | $ 551 | $ 1,814 | $ 1,532 |
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Millions |
Sep. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Cash and investments segregated and on deposit for regulatory purposes, resale agreements | $ 7,247 | $ 9,547 |
Held to maturity securities | $ 114,332 | $ 74,444 |
Preferred stock, par value (USD per share) | $ 0.01 | $ 0.01 |
Preferred stock, aggregate liquidation preference | $ 2,835 | $ 2,835 |
Common stock, shares authorized (shares) | 3,000,000,000 | 3,000,000,000 |
Common stock, par value (USD per share) | $ 0.01 | $ 0.01 |
Common stock, shares issued (shares) | 1,487,543,446 | 1,487,543,446 |
Treasury stock (shares) | 147,513,629 | 154,793,560 |
Introduction and Basis of Presentation |
9 Months Ended |
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Sep. 30, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Introduction and Basis of Presentation | Introduction and Basis of Presentation CSC is a savings and loan holding company engaged, through its subsidiaries, in wealth management, securities brokerage, banking, asset management, custody, and financial advisory services. Schwab is a securities broker-dealer with over 345 domestic branch offices in 46 states, as well as a branch in the Commonwealth of Puerto Rico. In addition, Schwab serves clients in London, England and Hong Kong through one of CSC’s subsidiaries. Other subsidiaries include Schwab Bank, a federal savings bank, and CSIM, the investment advisor for Schwab Funds® and Schwab ETFs™. The accompanying unaudited condensed consolidated financial statements include CSC and its majority-owned subsidiaries (collectively, referred to as the Company). Intercompany balances and transactions have been eliminated. These condensed consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the U.S. (GAAP), which require management to make certain estimates and assumptions that affect the reported amounts in the accompanying financial statements. Certain estimates relate to other-than-temporary impairment (OTTI) of investment securities, valuation of goodwill, allowance for loan losses, legal and regulatory reserves, and income taxes. Actual results may differ from those estimates. These condensed consolidated financial statements reflect all adjustments that are, in the opinion of management, necessary for a fair presentation of the results for the periods presented. These adjustments are of a normal recurring nature. The Company’s results for any interim period are not necessarily indicative of results for a full year or any other interim period. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the 2016 Form 10-K. The Company’s significant accounting policies are included in Note 2 in the 2016 Form 10-K. There have been no significant changes to these accounting policies during the first nine months of 2017 except as described in Note 2 below. Principles of Consolidation The Company evaluates for consolidation all entities in which it has financial interests, except for money market funds which are specifically excluded from consolidation guidance. For an entity subject to consolidation, the Company evaluates whether the Company’s interest in the entity constitutes a controlling financial interest under either the variable interest entity (VIE) model or a voting interest entity (VOE) model. Based upon the Company’s assessments, the Company is not deemed to have a controlling financial interest in and, therefore, is not required to consolidate any VIEs. See Note 5 for further information about VIEs. The Company consolidates all VOEs in which it has majority-voting interests. For investments in entities in which the Company does not have a controlling financial interest, the Company accounts for those investments under the equity method of accounting when the Company has the ability to exercise significant influence over operating and financing decisions of the entity. Investments in entities for which the Company does not have the ability to exercise significant influence are generally carried at cost. Both equity method and cost method investments are included in other assets on the condensed consolidated balance sheets. |
New Accounting Standards |
9 Months Ended |
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Sep. 30, 2017 | |
Accounting Changes and Error Corrections [Abstract] | |
New Accounting Standards | New Accounting Standards Adoption of New Accounting Standards The Company adopted ASU 2016-09, “Stock Compensation – Improvements to Employee Share-Based Payment Accounting (Topic 718),” on a prospective basis as of January 1, 2017. This guidance requires entities to recognize the income tax effects for the difference between GAAP and federal income tax treatment (i.e., excess tax benefit or deficiency) of share-based awards in the income statement when the awards vest or are settled, rather than recording such effects in additional paid-in capital. As a result, the Company’s tax expense was reduced by approximately $11 million and $47 million in the third quarter and first nine months of 2017, respectively. Future effects will depend on the Company’s share price, restricted stock vesting, and the volume of equity incentive options exercised. ASU 2016-09 also provides entities with an accounting policy election to account for the impact of forfeitures of awards on compensation expense as they occur or continue with the current practice of estimating forfeitures at the grant date to determine the number of awards expected to vest and adjusting that estimate as necessary. The Company has elected to continue to follow the current practice of estimating forfeitures. New Accounting Standards Not Yet Adopted ASU 2014-09, “Revenue from Contracts with Customers (Topic 606),” provides new guidance on revenue recognition. The guidance clarifies that revenue from contracts with customers should be recognized in a manner that depicts the timing of the related transfer of goods or performance of services at an amount that reflects the expected consideration. The Financial Accounting Standards Board (FASB) has subsequently issued several amendments to the standard, including deferral of the effective date until January 1, 2018, clarification of principal versus agent considerations, narrow scope improvements, and other technical corrections. Entities may elect either full or modified retrospective transition. Full retrospective transition will require a cumulative effect adjustment to retained earnings as of the earliest comparative period presented. Modified retrospective transition will require a cumulative effect adjustment to retained earnings as of the beginning of the reporting period in which the entity first applies the new guidance. The Company plans to adopt the revenue recognition guidance in the first quarter of 2018 using the modified retrospective method. The guidance does not apply to the Company’s loans and securities. Accordingly, the Company does not expect an impact to net interest revenue. The Company believes the primary areas of potential impact for the Company are (i) the capitalization of costs to obtain a contract and (ii) gross versus net presentation of certain revenue streams in the income statement. The Company believes adoption of this guidance will likely alter the timing of recognition for costs to obtain a contract in the income statement. The next phase of the Company’s implementation work is to evaluate the disclosure provisions. The Company does not expect this guidance will have a material impact on its financial statements and EPS. ASU 2016-01, “Financial Instruments – Overall (Subtopic 825-10),” will be effective January 1, 2018 and requires a cumulative effect adjustment to the balance sheet as of the beginning of the year of initial application, except for certain changes that require prospective adoption. The main provisions of the guidance require: (i) equity investments to be measured at fair value, with changes in fair value recognized in net income, unless the equity method is applied or the equity investments do not have readily determinable fair values in which case a practical alternative may be elected; (ii) use of an exit price when measuring the fair value of financial instruments for disclosures; and (iii) separate presentation of financial assets and liabilities by measurement category and form of instrument on the balance sheet or in the accompanying notes. The Company does not expect this guidance will have a material impact on its financial statements and EPS. ASU 2016-02, “Leases (Topic 842),” amends the accounting for leases by lessees and lessors. The primary change from the new guidance is the recognition of right-of-use assets and lease liabilities by lessees for those leases classified as operating leases. Additional changes include accounting for lease origination and executory costs, required lessee reassessments during the lease term due to changes in circumstances, and expanded lease disclosures. ASU 2016-02 will become effective January 1, 2019, with early adoption permitted, and requires entities to apply the new guidance using a modified retrospective transition. Modified retrospective transition requires entities to apply the new guidance as of the beginning of the earliest comparative period presented in the financial statements in which the entity first applies the new standard. Certain transition relief is permitted if elected by the entity. The adoption of ASU 2016-02 will result in the Company recognizing a right-of-use asset and lease liability on the consolidated balance sheet based on the present value of remaining operating lease payments (see Note 14 of the Company’s 2016 Form 10-K for the undiscounted future annual minimum rental commitments for operating leases). The Company does not expect this guidance will have a material impact on its EPS. ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” provides new guidance for recognizing impairment of most debt instruments measured at amortized cost, including loans and held to maturity (HTM) debt securities. The new guidance will require estimating current expected credit losses (CECL) over the remaining life of an instrument or a portfolio of instruments with similar risk characteristics based on relevant information about past events, current conditions, and reasonable forecasts. The initial estimate of, and the subsequent changes in, CECL will be recognized as credit loss expense through current earnings and will be reflected as an allowance for credit losses offsetting the carrying value of the financial instrument(s) on the balance sheet. The new guidance also amends the OTTI model for AFS debt securities by requiring the use of an allowance, rather than directly reducing the carrying value of the security, and eliminating consideration of the length of time such security has been in an unrealized loss position as a factor in concluding whether a credit loss exists. ASU 2016-13 will become effective January 1, 2020, with early adoption permitted as of January 1, 2019. The new guidance will be applied through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the entity applies the new guidance except that a prospective transition is required for AFS debt securities for which an OTTI had been recognized before the effective date. The Company is currently evaluating the impact of this guidance on its financial statements and EPS. ASU 2017-08, “Receivables – Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities,” shortens the amortization period for the premium on certain callable debt securities to the earliest call date. The amendments are applicable to any purchased individual debt security with an explicit and noncontingent call feature that is callable at a fixed price on a preset date. The amendments do not impact the accounting for callable debt securities held at a discount. ASU 2017-08 will become effective on January 1, 2019, with early adoption permitted including in an interim period. The amendments will be applied on a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the period of adoption. The Company is currently evaluating the impact of adopting this guidance on its financial statements and EPS. |
Investment Securities |
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Investments, Debt and Equity Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investment Securities | Investment Securities The amortized cost, gross unrealized gains and losses, and fair value of AFS and HTM securities are as follows:
The increase in the HTM portfolio at September 30, 2017 compared to December 31, 2016 was primarily attributable to the transfer of $24.7 billion of investment securities from the AFS category to the HTM category during the first quarter of 2017. These securities had a total net unrealized loss of $227 million before income tax in AOCI on the date of transfer. The transfer was made to mitigate the potential volatility in regulatory capital from changes in market values in the AFS securities portfolio and the related impact to AOCI once the Company crosses $250 billion in consolidated assets. The year after the Company surpasses $250 billion in consolidated assets, it can no longer exclude AOCI from regulatory capital. The transfer included U.S. agency mortgage-backed securities, asset-backed securities, corporate debt securities, and U.S. state and municipal securities. The unrealized holding gains and losses on the date of transfer are reported as a separate component of AOCI and as an adjustment to the purchase premium and discount on the securities transferred. The separate component of AOCI will be amortized or accreted into interest income over the remaining life of the securities transferred, offsetting the revised premium or discount amortization or accretion on the transferred assets. Schwab Bank pledges securities issued by federal agencies to secure certain trust deposits. The fair value of these pledged securities was $936 million at September 30, 2017. A summary of securities with unrealized losses, aggregated by category and period of continuous unrealized loss, is as follows:
(1) The number of investment positions with unrealized losses totaled 212 for AFS securities and 698 for HTM securities. (2) The number of investment positions with unrealized losses totaled 627 for AFS securities and 612 for HTM securities. At September 30, 2017, substantially all securities in the investment portfolios were rated investment grade. U.S. agency mortgage-backed securities do not have explicit credit ratings; however, management considers these to be of the highest credit quality and rating given the guarantee of principal and interest by the U.S. government-sponsored enterprises. Management evaluates whether investment securities are OTTI on a quarterly basis as described in Note 2 in the 2016 Form 10-K. The maturities of AFS and HTM securities are as follows:
(1) Mortgage-backed securities have been allocated to maturity groupings based on final contractual maturities. Actual maturities will differ from final contractual maturities because borrowers on a certain portion of loans underlying these securities have the right to prepay their obligations. Proceeds and gross realized gains and losses from sales of AFS securities are as follows:
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Bank Loans and Related Allowance for Loan Losses |
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Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Bank Loans and Related Allowance for Loan Losses | Bank Loans and Related Allowance for Loan Losses The composition of bank loans and delinquency analysis by loan type is as follows:
Residential real estate mortgages (First Mortgages) and home equity loans and lines of credit (HELOCs) include unamortized premiums and discounts and direct origination costs of $77 million and $78 million at September 30, 2017 and December 31, 2016, respectively. The Company had commitments to extend credit related to unused HELOCs, pledged asset lines (PALs), and other lines of credit, which totaled $9.6 billion and $8.4 billion at September 30, 2017 and December 31, 2016, respectively. The Company had commitments to purchase First Mortgage loans of $459 million and $466 million at September 30, 2017 and December 31, 2016, respectively. All PALs were fully collateralized by securities with fair values in excess of borrowings at September 30, 2017 and December 31, 2016. Schwab Bank provides a co-branded loan origination program for Schwab Bank clients (the Program) with Quicken Loans, Inc. (Quicken Loans®). Pursuant to the Program, Quicken Loans originates and services First Mortgages and HELOCs for Schwab Bank clients. Under the Program, Schwab Bank purchases certain First Mortgages and HELOCs that are originated by Quicken Loans. Schwab Bank purchased First Mortgages of $696 million and $858 million during the third quarters of 2017 and 2016, respectively, and $2.0 billion and $2.1 billion during the first nine months of 2017 and 2016, respectively. Schwab Bank purchased HELOCs with commitments of $115 million and $93 million during the third quarters of 2017 and 2016, respectively, and $344 million and $315 million during the first nine months of 2017 and 2016, respectively. Credit Quality Changes in the allowance for loan losses were as follows:
Substantially all of the bank loans were collectively evaluated for impairment at September 30, 2017 and December 31, 2016. There were no loans accruing interest that were contractually 90 days or more past due at September 30, 2017 or December 31, 2016. Nonperforming assets, which include nonaccrual loans and other real estate owned, totaled $29 million and $31 million at September 30, 2017 and December 31, 2016, respectively. Impaired assets, which include nonaccrual loans, other real estate owned and troubled debt restructurings, totaled $38 million and $45 million at September 30, 2017 and December 31, 2016, respectively. Troubled debt restructurings were not material at September 30, 2017 or December 31, 2016. In addition to monitoring delinquency, the Company monitors the credit quality of First Mortgages and HELOCs by stratifying the portfolios by the following:
Borrowers’ FICO scores are provided by an independent third-party credit reporting service and were last updated in September 2017. The Origination LTV and Estimated Current LTV for a HELOC include any first lien mortgage outstanding on the same property at the time of the HELOC’s origination. The Estimated Current LTV for each loan is estimated by reference to a home price appreciation index. As of September 30, 2017 and December 31, 2016, 47% and 48% of the Company’s HELOC and First Mortgage portfolio was concentrated in California. These loans have performed in a manner consistent with the portfolio as a whole. The credit quality indicators of the Company’s bank loan portfolio are detailed below:
(1) The Utilization Rate is calculated using the outstanding balance divided by the associated total line of credit. (2) Represents the LTV for the full line of credit (drawn and undrawn). N/A Not applicable.
(1) The Utilization Rate is calculated using the outstanding balance divided by the associated total line of credit. (2) Represents the LTV for the full line of credit (drawn and undrawn). N/A Not applicable.
The Company’s bank loans include $8.8 billion of adjustable rate First Mortgage loans at September 30, 2017. The Company’s adjustable rate mortgages have initial fixed interest rates for three to ten years and interest rates that adjust annually thereafter. Approximately 34% of these mortgages consisted of loans with interest-only payment terms. The interest rates on approximately 56% of these interest-only loans are not scheduled to reset for three or more years. The Company’s mortgage loans do not include interest terms described as temporary introductory rates below current market rates. The Company’s HELOC product has a 30-year loan term with an initial draw period of ten years from the date of origination. After the initial draw period, the balance outstanding at such time is converted to a 20-year amortizing loan. The interest rate during the initial draw period and the 20-year amortizing period is a floating rate based on the prime rate plus a margin. HELOCs that convert to an amortizing loan may experience higher delinquencies and higher loss rates than those in the initial draw period. The Company’s allowance for loan loss methodology takes this increased inherent risk into consideration. The following table presents when current outstanding HELOCs will convert to amortizing loans:
At September 30, 2017, $1.6 billion of the HELOC portfolio was secured by second liens on the associated properties. Second lien mortgage loans typically possess a higher degree of credit risk given the subordination to the first lien holder in the event of default. In addition to the credit monitoring activities described previously, the Company also monitors credit risk by reviewing the delinquency status of the first lien loan on the associated property. At September 30, 2017, approximately 39% of the HELOC borrowers that had a balance only paid the minimum amount of interest due. |
Variable Interest Entities |
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Variable Interest Entities [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Variable Interest Entities | Variable Interest Entities A VIE requires consolidation by the entity’s primary beneficiary. The Company evaluates all entities in which it has a financial interest to determine if the entity is a VIE and if so, whether the Company is the primary beneficiary. See Principles of Consolidation in Note 1 for discussion of the Company’s evaluations of VIEs and whether it is deemed to be the primary beneficiary of any VIEs in which it holds an interest. The Company was not the primary beneficiary of, and therefore not required to consolidate any VIEs at September 30, 2017 and December 31, 2016. As of September 30, 2017 and December 31, 2016, the majority of the Company’s VIEs related to Schwab Bank’s Low-Income Housing Tax Credit (LIHTC) investments. Schwab Bank’s LIHTC investments are accounted for using the proportional amortization method. Amortization, tax credits, and other tax benefits recognized in relation to LIHTC investments are included in taxes on income in the condensed consolidated statements of income. For further information on the Community Reinvestment Act (CRA) and Schwab Bank’s LIHTC investments, see Note 2 and Note 10 in the 2016 Form 10-K. Aggregate assets, liabilities, and maximum exposure to loss The aggregate assets, liabilities, and maximum exposure to loss from those VIEs in which the Company holds a variable interest, but as to which the Company has concluded it is not the primary beneficiary, are summarized in the table below:
(1) Aggregate assets and aggregate liabilities are included in other assets and accrued expenses and other liabilities, respectively, on the condensed consolidated balance sheets. (2) Other CRA investments are recorded using either the cost method or the equity method. Aggregate assets are included in either other assets or bank loans – net on the condensed consolidated balance sheets. The Company’s maximum exposure to loss would result from the loss of the investments, including any committed amounts. During the nine months ended September 30, 2017 and 2016, the Company did not provide or intend to provide financial or other support to the VIEs that it was not contractually required to provide. Schwab Bank’s funding of these remaining commitments is dependent upon the occurrence of certain conditions and Schwab Bank expects to pay substantially all of these commitments between 2017 and 2020. |
Bank Deposits |
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Bank Deposits | Bank Deposits Bank deposits consist of interest-bearing and non-interest-bearing deposits as follows:
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Borrowings |
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Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Borrowings | Borrowings Long-term debt was net of unamortized debt discounts/premiums and debt issuance costs of $26 million and $24 million at September 30, 2017 and December 31, 2016, respectively.
On March 2, 2017, CSC issued $650 million aggregate principal amount of Senior Notes that mature in 2027. The Senior Notes have a fixed interest rate of 3.200% with interest payable semi-annually. The Company’s long-term debt at September 30, 2017 had a weighted-average interest rate of 3.11%. Annual maturities on long-term debt outstanding are as follows:
Short-term borrowings: Schwab Bank maintains a secured credit facility with the Federal Home Loan Bank of San Francisco (FHLB). Amounts available under this facility are dependent on the value of Schwab Bank’s First Mortgages, HELOCs, and investment securities that are pledged as collateral. As of September 30, 2017, the collateral pledged by Schwab Bank provided a total borrowing capacity of $19.9 billion including the $5.0 billion outstanding. The Company could increase its borrowing capacity by pledging additional securities. At December 31, 2016, there were no amounts outstanding under this facility. As a condition of the FHLB borrowings, Schwab Bank is required to hold FHLB stock, with the investment recorded in other assets on the condensed consolidated balance sheets. The investment in FHLB was $135 million at September 30, 2017 and $81 million at December 31, 2016. CSC has authorization from its Board of Directors to issue Commercial Paper Notes not to exceed $1.5 billion. Management has set a current limit for the commercial paper program not to exceed the amount of the committed, unsecured credit facility, which was $750 million at September 30, 2017. CSC had no Commercial Paper Notes outstanding at September 30, 2017 and December 31, 2016. CSC and Schwab also have access to uncommitted, unsecured bank credit lines with several banks. Schwab had no borrowings outstanding under these lines at September 30, 2017 and December 31, 2016. |
Commitments and Contingencies |
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Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies Guarantees and indemnifications: The Company has clients that sell (i.e., write) listed option contracts that are cleared by the Options Clearing Corporation – a clearing house that establishes margin requirements on these transactions. The Company partially satisfies the margin requirements by arranging unsecured standby letter of credit agreements (LOCs), in favor of the Options Clearing Corporation, which are issued by several banks. At September 30, 2017, the aggregate face amount of these LOCs totaled $295 million. There were no funds drawn under any of these LOCs at September 30, 2017. In connection with its securities lending activities, the Company is required to provide collateral to certain brokerage clients. The Company satisfies the collateral requirements by providing cash as collateral. The Company also provides guarantees to securities clearing houses and exchanges under standard membership agreements, which require members to guarantee the performance of other members. Under the agreements, if another member becomes unable to satisfy its obligations to the clearing houses and exchanges, other members would be required to meet shortfalls. The Company’s liability under these arrangements is not quantifiable and may exceed the cash and securities it has posted as collateral. The potential requirement for the Company to make payments under these arrangements is remote. Accordingly, no liability has been recognized for these guarantees. Legal contingencies: The Company is subject to claims and lawsuits in the ordinary course of business, including arbitrations, class actions and other litigation, some of which include claims for substantial or unspecified damages. The Company is also the subject of inquiries, investigations, and proceedings by regulatory and other governmental agencies. The Company believes it has strong defenses in all significant matters currently pending and is contesting liability and any damages claimed. Nevertheless, some of these matters may result in adverse judgments or awards, including penalties, injunctions or other relief, and the Company may also determine to settle a matter because of the uncertainty and risks of litigation. Described below are certain matters in which there is a reasonable possibility that a material loss could be incurred or where the matter may otherwise be of significant interest to stockholders. Unless otherwise noted, the Company is unable to provide a reasonable estimate of any potential liability given the stage of proceedings in the matter. With respect to all other pending matters, based on current information and consultation with counsel, it does not appear reasonably possible that the outcome of any such matter would be material to the financial condition, operating results or cash flows of the Company. Predicting the outcome of a litigation or regulatory matter is inherently difficult, requiring significant judgment and evaluation of various factors, including the procedural status of the matter and any recent developments; prior experience and the experience of others in similar cases; available defenses, including potential opportunities to dispose of a case on the merits or procedural grounds before trial (e.g., motions to dismiss or for summary judgment); the progress of fact discovery; the opinions of counsel and experts regarding potential damages; potential opportunities for settlement and the status of any settlement discussions; and potential insurance coverage and indemnification. It may not be possible to reasonably estimate potential liability, if any, or a range of potential liability until the matter is closer to resolution – pending, for example, further proceedings, the outcome of key motions or appeals, or discussions among the parties. Numerous issues may have to be developed, such as discovery of important factual matters and determination of threshold legal issues, which may include novel or unsettled questions of law. Reserves are established or adjusted or further disclosure and estimates of potential loss are provided as the matter progresses and more information becomes available. Total Bond Market Fund Litigation: On August 28, 2008, a class action lawsuit was filed in the U.S. District Court for the Northern District of California on behalf of investors in the Schwab Total Bond Market Fund™. The lawsuit, which alleged violations of state law and federal securities law in connection with the fund’s investment policy, named CSIM, Schwab Investments (registrant and issuer of the fund’s shares) and certain current and former fund trustees as defendants. Allegations include that the fund improperly deviated from its stated investment objectives by investing in collateralized mortgage obligations (CMOs) and investing more than 25% of fund assets in CMOs and mortgage-backed securities without obtaining a fundholder vote. Plaintiff seeks unspecified compensatory and rescission damages, unspecified equitable and injunctive relief, costs and attorneys’ fees. Plaintiff’s federal securities law claim and certain of plaintiff’s state law claims were dismissed. On August 8, 2011, the court dismissed plaintiff’s remaining claims with prejudice. Plaintiff appealed to the Ninth Circuit, which issued a ruling on March 9, 2015 reversing the district court’s dismissal of the case and remanding the case for further proceedings. Plaintiff filed a fourth amended complaint on June 25, 2015, and in decisions issued October 6, 2015 and February 23, 2016, the court dismissed all claims with prejudice. Plaintiff has appealed to the Ninth Circuit, where the case is again pending. |
Offsetting Assets and Liabilities |
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Offsetting Assets and Liabilities | Offsetting Assets and Liabilities Resale and repurchase agreements: Schwab enters into collateralized resale agreements principally with other broker-dealers, which could result in losses in the event the counterparty fails to purchase the securities held as collateral for the cash advanced and the fair value of the securities declines. To mitigate this risk, Schwab requires that the counterparty deliver securities to a custodian, to be held as collateral, with a fair value at or in excess of the resale price. Schwab also sets standards for the credit quality of the counterparty, monitors the fair value of the underlying securities as compared to the related receivable, including accrued interest, and requires additional collateral where deemed appropriate. Schwab utilizes the collateral provided under these resale agreements to meet obligations under broker-dealer client protection rules, which place limitations on its ability to access such segregated securities. For Schwab to repledge or sell this collateral, it would be required to deposit cash and/or securities of an equal amount into its segregated reserve bank accounts in order to meet its segregated cash and investment requirement. The Company’s resale agreements are not subject to master netting arrangements. Securities lending: The Company loans brokerage client securities temporarily to other brokers and clearing houses in connection with its securities lending activities and receives cash as collateral for the securities loaned. Increases in security prices may cause the fair value of the securities loaned to exceed the amount of cash received as collateral. In the event the counterparty to these transactions does not return the loaned securities or provide additional cash collateral, the Company may be exposed to the risk of acquiring the securities at prevailing market prices in order to satisfy its client obligations. The Company mitigates this risk by requiring credit approvals for counterparties, monitoring the fair value of securities loaned, and requiring additional cash as collateral when necessary. The Company borrows securities from other broker-dealers to fulfill short sales by brokerage clients and delivers cash to the lender in exchange for the securities. The fair value of these borrowed securities was $336 million at September 30, 2017 and $213 million at December 31, 2016. All of the Company’s securities lending transactions are subject to enforceable master netting arrangements with other broker-dealers; however, the Company does not net securities lending transactions. Therefore, the Company’s securities loaned and securities borrowed are presented gross in the condensed consolidated balance sheets. The following table presents information about the Company’s resale agreements and securities lending activity to enable the users of the Company’s financial statements to evaluate the potential effect of rights of setoff between these recognized assets and recognized liabilities at September 30, 2017 and December 31, 2016.
(1) Included in cash and investments segregated and on deposit for regulatory purposes in the Company’s condensed consolidated balance sheets. (2) Actual collateral was greater than or equal to 102% of the related assets. At September 30, 2017 and December 31, 2016, the fair value of collateral received in connection with resale agreements that are available to be repledged or sold was $7.4 billion and $9.8 billion, respectively. (3) Included in receivables from brokers, dealers, and clearing organizations in the Company’s condensed consolidated balance sheets. (4) Included in payables to brokers, dealers, and clearing organizations in the Company’s condensed consolidated balance sheets. (5) Securities loaned are predominantly comprised of equity securities held in client brokerage accounts with overnight and continuous remaining contractual maturities. Margin lending: Clients with margin loans have agreed to allow the Company to pledge collateralized securities in their brokerage accounts in accordance with federal regulations. The following table summarizes the fair value of client securities available, under such regulations, for the Company to utilize as collateral, and the amounts pledged by the Company:
Note: Excludes amounts available and pledged for securities lending from fully-paid client securities. The fair value of fully-paid client securities available and pledged was $92 million as of September 30, 2017 and $58 million as of December 31, 2016. (1) Client securities pledged to fulfill client margin requirements for open option contracts established with the Options Clearing Corporation. |
Fair Values of Assets and Liabilities |
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Fair Values of Assets and Liabilities | Fair Values of Assets and Liabilities Assets and liabilities measured at fair value on a recurring basis The Company’s assets and liabilities measured at fair value on a recurring basis include certain cash equivalents, certain investments segregated and on deposit for regulatory purposes, other securities owned, and AFS securities. The Company uses the market approach to determine the fair value of assets and liabilities. When available, the Company uses quoted prices in active markets to measure the fair value of assets and liabilities. When utilizing market data and bid-ask spread, the Company uses the price within the bid-ask spread that best represents fair value. When quoted prices do not exist, the Company uses prices obtained from independent third-party pricing services to measure the fair value of investment assets. The Company generally obtains prices from at least three independent pricing sources for assets recorded at fair value. The Company’s primary independent pricing service provides prices based on observable trades and discounted cash flows that incorporate observable information such as yields for similar types of securities (a benchmark interest rate plus observable spreads) and weighted-average maturity for the same or similar “to-be-issued” securities. The Company compares the prices obtained from its primary independent pricing service to the prices obtained from the additional independent pricing services to determine if the price obtained from the primary independent pricing service is reasonable. The Company does not adjust the prices received from independent third-party pricing services unless such prices are inconsistent with the definition of fair value and result in a material difference in the recorded amounts. Fair value of other financial instruments Descriptions of the valuation methodologies and assumptions used to estimate the fair value of other financial instruments are described below. The Company’s financial instruments not recorded at fair value but for which fair value can be approximated and disclosed include:
For a description of the fair value hierarchy, see Note 2 in the 2016 Form 10-K. There were no significant changes in these policies and methodologies during the first nine months of 2017. The Company did not transfer any assets or liabilities between Level 1, Level 2, or Level 3 during the nine months ended September 30, 2017, or the year ended December 31, 2016. In addition, the Company did not adjust prices received from the primary independent third-party pricing service at September 30, 2017 or December 31, 2016. Assets and Liabilities Measured at Fair Value on a Recurring Basis The following tables present the fair value hierarchy for assets measured at fair value on a recurring basis. Liabilities recorded at fair value were not material, and therefore are not included in the following tables:
Fair Value of Other Financial Instruments The following tables present the fair value hierarchy for other financial instruments:
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Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stockholders' Equity | Stockholders’ Equity The Company’s preferred stock issued and outstanding is as follows:
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Accumulated Other Comprehensive Income |
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Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accumulated Other Comprehensive Income | Accumulated Other Comprehensive Income Accumulated other comprehensive income represents cumulative gains and losses that are not reflected in earnings. The components of other comprehensive income are as follows:
(1) See Note 3 for discussion of the transfer of securities from the AFS category to the HTM category during the first quarter of 2017. Accumulated other comprehensive income balances are as follows:
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Earnings Per Common Share |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Common Share | Earnings Per Common Share EPS under the basic and diluted computations is as follows:
(1) Includes preferred stock dividends and undistributed earnings and dividends allocated to non-vested restricted stock units. (2) Antidilutive stock options and restricted stock awards excluded from the calculation of diluted EPS totaled 9 million and 17 million shares for the third quarters of 2017 and 2016, respectively, and 10 million and 21 million shares for the first nine months of 2017 and 2016, respectively. |
Regulatory Requirements |
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Banking and Thrift [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Regulatory Requirements | Regulatory Requirements At September 30, 2017, both CSC and Schwab Bank met all of their respective capital requirements. Certain events, such as growth in bank deposits and regulatory discretion, could adversely affect CSC’s or Schwab Bank’s ability to meet future capital requirements. The regulatory capital and ratios for CSC and Schwab Bank are as follows:
Based on its regulatory capital ratios at September 30, 2017, Schwab Bank is considered well capitalized (the highest category) under its respective regulatory capital rules. There are no conditions or events since September 30, 2017 that management believes have changed Schwab Bank’s capital category. At September 30, 2017, both CSC’s and Schwab Bank’s capital levels exceeded the fully implemented capital conservation buffer requirement. Net capital and net capital requirements for Schwab and optionsXpress are as follows:
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Segment Information |
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Segment Information | Segment Information The Company’s two reportable segments are Investor Services and Advisor Services. The Company structures its operating segments according to its clients and the services provided to those clients. The Investor Services segment provides retail brokerage and banking services, retirement plan services, and other corporate brokerage services. The Advisor Services segment provides custodial, trading, banking, and support services as well as retirement business services. Revenues and expenses are allocated to the Company’s two segments based on which segment services the client. Management evaluates the performance of its segments on a pre-tax basis. Segment assets and liabilities are not used for evaluating segment performance or in deciding how to allocate resources to segments. There are no revenues from transactions between the segments. Financial information for the Company’s reportable segments is presented in the following tables:
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Subsequent Event |
9 Months Ended |
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Sep. 30, 2017 | |
Subsequent Events [Abstract] | |
Subsequent Event | Subsequent Event On October 31, 2017, the Company issued and sold 500,000 depositary shares, each representing a 1/100th ownership interest in a share of fixed-to-floating rate non-cumulative perpetual preferred stock, Series F, $0.01 par value, with a liquidation preference of $100,000 per share (equivalent to $1,000 per depositary share). The Series F Preferred Stock has a fixed dividend rate of 5.00% through November 30, 2027, payable semi-annually, and thereafter a floating rate of three-month LIBOR plus a fixed spread of 2.575%, payable quarterly. The net proceeds received from the sale were $492 million after deducting related expenses and fees. Also on October 31, 2017, the Company announced that it will redeem on December 1, 2017, all of the outstanding shares of its 6.00% non-cumulative perpetual preferred stock, Series B, and the corresponding depositary shares. The redemption will be funded with the net proceeds from the Series F offering. |
New Accounting Standards (Policy) |
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Sep. 30, 2017 | |
Accounting Changes and Error Corrections [Abstract] | |
Adoption of New Accounting Standards and New Accounting Standards Not Yet Adopted | Adoption of New Accounting Standards The Company adopted ASU 2016-09, “Stock Compensation – Improvements to Employee Share-Based Payment Accounting (Topic 718),” on a prospective basis as of January 1, 2017. This guidance requires entities to recognize the income tax effects for the difference between GAAP and federal income tax treatment (i.e., excess tax benefit or deficiency) of share-based awards in the income statement when the awards vest or are settled, rather than recording such effects in additional paid-in capital. As a result, the Company’s tax expense was reduced by approximately $11 million and $47 million in the third quarter and first nine months of 2017, respectively. Future effects will depend on the Company’s share price, restricted stock vesting, and the volume of equity incentive options exercised. ASU 2016-09 also provides entities with an accounting policy election to account for the impact of forfeitures of awards on compensation expense as they occur or continue with the current practice of estimating forfeitures at the grant date to determine the number of awards expected to vest and adjusting that estimate as necessary. The Company has elected to continue to follow the current practice of estimating forfeitures. New Accounting Standards Not Yet Adopted ASU 2014-09, “Revenue from Contracts with Customers (Topic 606),” provides new guidance on revenue recognition. The guidance clarifies that revenue from contracts with customers should be recognized in a manner that depicts the timing of the related transfer of goods or performance of services at an amount that reflects the expected consideration. The Financial Accounting Standards Board (FASB) has subsequently issued several amendments to the standard, including deferral of the effective date until January 1, 2018, clarification of principal versus agent considerations, narrow scope improvements, and other technical corrections. Entities may elect either full or modified retrospective transition. Full retrospective transition will require a cumulative effect adjustment to retained earnings as of the earliest comparative period presented. Modified retrospective transition will require a cumulative effect adjustment to retained earnings as of the beginning of the reporting period in which the entity first applies the new guidance. The Company plans to adopt the revenue recognition guidance in the first quarter of 2018 using the modified retrospective method. The guidance does not apply to the Company’s loans and securities. Accordingly, the Company does not expect an impact to net interest revenue. The Company believes the primary areas of potential impact for the Company are (i) the capitalization of costs to obtain a contract and (ii) gross versus net presentation of certain revenue streams in the income statement. The Company believes adoption of this guidance will likely alter the timing of recognition for costs to obtain a contract in the income statement. The next phase of the Company’s implementation work is to evaluate the disclosure provisions. The Company does not expect this guidance will have a material impact on its financial statements and EPS. ASU 2016-01, “Financial Instruments – Overall (Subtopic 825-10),” will be effective January 1, 2018 and requires a cumulative effect adjustment to the balance sheet as of the beginning of the year of initial application, except for certain changes that require prospective adoption. The main provisions of the guidance require: (i) equity investments to be measured at fair value, with changes in fair value recognized in net income, unless the equity method is applied or the equity investments do not have readily determinable fair values in which case a practical alternative may be elected; (ii) use of an exit price when measuring the fair value of financial instruments for disclosures; and (iii) separate presentation of financial assets and liabilities by measurement category and form of instrument on the balance sheet or in the accompanying notes. The Company does not expect this guidance will have a material impact on its financial statements and EPS. ASU 2016-02, “Leases (Topic 842),” amends the accounting for leases by lessees and lessors. The primary change from the new guidance is the recognition of right-of-use assets and lease liabilities by lessees for those leases classified as operating leases. Additional changes include accounting for lease origination and executory costs, required lessee reassessments during the lease term due to changes in circumstances, and expanded lease disclosures. ASU 2016-02 will become effective January 1, 2019, with early adoption permitted, and requires entities to apply the new guidance using a modified retrospective transition. Modified retrospective transition requires entities to apply the new guidance as of the beginning of the earliest comparative period presented in the financial statements in which the entity first applies the new standard. Certain transition relief is permitted if elected by the entity. The adoption of ASU 2016-02 will result in the Company recognizing a right-of-use asset and lease liability on the consolidated balance sheet based on the present value of remaining operating lease payments (see Note 14 of the Company’s 2016 Form 10-K for the undiscounted future annual minimum rental commitments for operating leases). The Company does not expect this guidance will have a material impact on its EPS. ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” provides new guidance for recognizing impairment of most debt instruments measured at amortized cost, including loans and held to maturity (HTM) debt securities. The new guidance will require estimating current expected credit losses (CECL) over the remaining life of an instrument or a portfolio of instruments with similar risk characteristics based on relevant information about past events, current conditions, and reasonable forecasts. The initial estimate of, and the subsequent changes in, CECL will be recognized as credit loss expense through current earnings and will be reflected as an allowance for credit losses offsetting the carrying value of the financial instrument(s) on the balance sheet. The new guidance also amends the OTTI model for AFS debt securities by requiring the use of an allowance, rather than directly reducing the carrying value of the security, and eliminating consideration of the length of time such security has been in an unrealized loss position as a factor in concluding whether a credit loss exists. ASU 2016-13 will become effective January 1, 2020, with early adoption permitted as of January 1, 2019. The new guidance will be applied through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the entity applies the new guidance except that a prospective transition is required for AFS debt securities for which an OTTI had been recognized before the effective date. The Company is currently evaluating the impact of this guidance on its financial statements and EPS. ASU 2017-08, “Receivables – Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities,” shortens the amortization period for the premium on certain callable debt securities to the earliest call date. The amendments are applicable to any purchased individual debt security with an explicit and noncontingent call feature that is callable at a fixed price on a preset date. The amendments do not impact the accounting for callable debt securities held at a discount. ASU 2017-08 will become effective on January 1, 2019, with early adoption permitted including in an interim period. The amendments will be applied on a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the period of adoption. The Company is currently evaluating the impact of adopting this guidance on its financial statements and EPS. |
Investment Securities (Tables) |
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Investments, Debt and Equity Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Amortized Cost, Gross Unrealized Gains and Losses, and Fair Value of Securities Available for Sale and Securities Held to Maturity | The amortized cost, gross unrealized gains and losses, and fair value of AFS and HTM securities are as follows:
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Securities with Unrealized Losses, Aggregated by Category and Period of Continuous Unrealized Loss | A summary of securities with unrealized losses, aggregated by category and period of continuous unrealized loss, is as follows:
(1) The number of investment positions with unrealized losses totaled 212 for AFS securities and 698 for HTM securities. (2) The number of investment positions with unrealized losses totaled 627 for AFS securities and 612 for HTM securities. |
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Maturities of Securities Available for Sale and Securities Held to Maturity | The maturities of AFS and HTM securities are as follows:
(1) Mortgage-backed securities have been allocated to maturity groupings based on final contractual maturities. Actual maturities will differ from final contractual maturities because borrowers on a certain portion of loans underlying these securities have the right to prepay their obligations. |
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Proceeds and Gross Realized Gains And Losses from Sales of Securities Available for Sale | Proceeds and gross realized gains and losses from sales of AFS securities are as follows:
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Bank Loans and Related Allowance for Loan Losses (Tables) |
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Receivables [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Composition of Bank Loans and Delinquency Analysis by Loan Segment | The composition of bank loans and delinquency analysis by loan type is as follows:
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Changes in Allowance for Loan Losses | Changes in the allowance for loan losses were as follows:
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Credit Quality Indicators of Bank Loan Portfolio | The credit quality indicators of the Company’s bank loan portfolio are detailed below:
(1) The Utilization Rate is calculated using the outstanding balance divided by the associated total line of credit. (2) Represents the LTV for the full line of credit (drawn and undrawn). N/A Not applicable.
(1) The Utilization Rate is calculated using the outstanding balance divided by the associated total line of credit. (2) Represents the LTV for the full line of credit (drawn and undrawn). N/A Not applicable.
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Converting to Amortizing Loans | The following table presents when current outstanding HELOCs will convert to amortizing loans:
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Variable Interest Entities (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Variable Interest Entities [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Aggregate Assets, Liabilities and Maximum Exposure to Loss | The aggregate assets, liabilities, and maximum exposure to loss from those VIEs in which the Company holds a variable interest, but as to which the Company has concluded it is not the primary beneficiary, are summarized in the table below:
(1) Aggregate assets and aggregate liabilities are included in other assets and accrued expenses and other liabilities, respectively, on the condensed consolidated balance sheets. (2) Other CRA investments are recorded using either the cost method or the equity method. Aggregate assets are included in either other assets or bank loans – net on the condensed consolidated balance sheets. |
Bank Deposits (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Banking and Thrift [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Deposits from Banking Clients Consisting of Interest Bearing and Noninterest Bearing Deposits | Bank deposits consist of interest-bearing and non-interest-bearing deposits as follows:
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Borrowings (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Long-term Debt Including Unamortized Debt Discounts and Premiums | Long-term debt was net of unamortized debt discounts/premiums and debt issuance costs of $26 million and $24 million at September 30, 2017 and December 31, 2016, respectively.
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Annual Maturities on Long-term Debt Outstanding | Annual maturities on long-term debt outstanding are as follows:
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Offsetting Assets and Liabilities (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Offsetting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Offsetting Assets and Liabilities | The following table presents information about the Company’s resale agreements and securities lending activity to enable the users of the Company’s financial statements to evaluate the potential effect of rights of setoff between these recognized assets and recognized liabilities at September 30, 2017 and December 31, 2016.
(1) Included in cash and investments segregated and on deposit for regulatory purposes in the Company’s condensed consolidated balance sheets. (2) Actual collateral was greater than or equal to 102% of the related assets. At September 30, 2017 and December 31, 2016, the fair value of collateral received in connection with resale agreements that are available to be repledged or sold was $7.4 billion and $9.8 billion, respectively. (3) Included in receivables from brokers, dealers, and clearing organizations in the Company’s condensed consolidated balance sheets. (4) Included in payables to brokers, dealers, and clearing organizations in the Company’s condensed consolidated balance sheets. (5) Securities loaned are predominantly comprised of equity securities held in client brokerage accounts with overnight and continuous remaining contractual maturities. |
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Summary of the Fair Value of Client Securities Available to Utilize as Collateral and Amounts Pledged | The following table summarizes the fair value of client securities available, under such regulations, for the Company to utilize as collateral, and the amounts pledged by the Company:
Note: Excludes amounts available and pledged for securities lending from fully-paid client securities. The fair value of fully-paid client securities available and pledged was $92 million as of September 30, 2017 and $58 million as of December 31, 2016. (1) Client securities pledged to fulfill client margin requirements for open option contracts established with the Options Clearing Corporation. |
Fair Values of Assets and Liabilities (Tables) |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Hierarchy for Assets and Liabilities Measured at Fair Value on a Recurring Basis | The following tables present the fair value hierarchy for assets measured at fair value on a recurring basis. Liabilities recorded at fair value were not material, and therefore are not included in the following tables:
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Fair Value of Other Financial Instruments | The following tables present the fair value hierarchy for other financial instruments:
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Stockholders' Equity (Tables) |
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Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Preferred Stock Issued and Outstanding | The Company’s preferred stock issued and outstanding is as follows:
|
Accumulated Other Comprehensive Income (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of Other Comprehensive Income (Loss) | Accumulated other comprehensive income represents cumulative gains and losses that are not reflected in earnings. The components of other comprehensive income are as follows:
(1) See Note 3 for discussion of the transfer of securities from the AFS category to the HTM category during the first quarter of 2017. |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accumulated Other Comprehensive Income Balances | Accumulated other comprehensive income balances are as follows:
|
Earnings Per Common Share (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
EPS under Basic and Diluted Computations | EPS under the basic and diluted computations is as follows:
(1) Includes preferred stock dividends and undistributed earnings and dividends allocated to non-vested restricted stock units. (2) Antidilutive stock options and restricted stock awards excluded from the calculation of diluted EPS totaled 9 million and 17 million shares for the third quarters of 2017 and 2016, respectively, and 10 million and 21 million shares for the first nine months of 2017 and 2016, respectively. |
Regulatory Requirements (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Banking and Thrift [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Regulatory Capital and Ratios | The regulatory capital and ratios for CSC and Schwab Bank are as follows:
|
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Net Capital and Net Capital Requirements for Schwab and optionsXpress, Inc. | Net capital and net capital requirements for Schwab and optionsXpress are as follows:
|
Segment Information (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financial Information for Reportable Segments | Financial information for the Company’s reportable segments is presented in the following tables:
|
Introduction and Basis of Presentation (Details) |
Sep. 30, 2017
state
office
|
---|---|
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Number of domestic branch offices, more than | office | 345 |
States with domestic branch offices | state | 46 |
New Accounting Standards (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||||
---|---|---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||||
Tax expense | [1] | $ (327) | $ (291) | $ (940) | $ (802) | |
Accounting Standards Update 2016-09 [Member] | ||||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||||
Tax expense | $ 11 | $ 47 | ||||
|
Investment Securities (Narrative) (Details) - USD ($) $ in Millions |
9 Months Ended | ||
---|---|---|---|
Sep. 30, 2017 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Schedule of Held-to-maturity Securities [Line Items] | |||
Debt securities transferred from AFS to HTM | $ 24,700 | ||
Unrealized loss on transferred securities | 227 | ||
Consolidated assets | 230,714 | $ 223,383 | |
Fair value of pledged securities | $ 936 | ||
Scenario, Forecast [Member] | |||
Schedule of Held-to-maturity Securities [Line Items] | |||
Consolidated assets | $ 250,000 |
Investment Securities (Proceeds and Gross Realized Gains And Losses from Sales of Securities Available for Sale) (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Investments, Debt and Equity Securities [Abstract] | ||||
Proceeds | $ 288 | $ 571 | $ 5,773 | $ 4,645 |
Gross realized gains | 0 | 0 | 7 | 3 |
Gross realized losses | $ 0 | $ 0 | $ 0 | $ 0 |
Bank Loans and Related Allowance for Loan Losses (Convert to Amortizing Loans) (Details) - Home equity loans and lines of credit [Member] $ in Millions |
Sep. 30, 2017
USD ($)
|
---|---|
Accounts, Notes, Loans and Financing Receivable [Line Items] | |
Converted to an amortizing loan by period end | $ 447 |
Within 1 year | 475 |
1 year – 3 years | 346 |
3 years – 5 years | 148 |
5 years | 626 |
Total | $ 2,042 |
Variable Interest Entities (Aggregate Assets, Liabilities and Maximum Exposure to Loss) (Details) - Variable Interest Entity, Not Primary Beneficiary [Member] - USD ($) $ in Millions |
Sep. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
Variable Interest Entity [Line Items] | ||
Aggregate assets | $ 316 | $ 249 |
Aggregate liabilities | 169 | 135 |
Maximum exposure to loss | 335 | 269 |
LIHTC Investments [Member] | ||
Variable Interest Entity [Line Items] | ||
Aggregate assets | 253 | 189 |
Aggregate liabilities | 169 | 135 |
Maximum exposure to loss | 253 | 189 |
Other CRA Investments [Member] | ||
Variable Interest Entity [Line Items] | ||
Aggregate assets | 63 | 60 |
Aggregate liabilities | 0 | 0 |
Maximum exposure to loss | $ 82 | $ 80 |
Variable Interest Entities (Narrative) (Details) - LIHTC Investments [Member] |
9 Months Ended |
---|---|
Sep. 30, 2017 | |
Minimum [Member] | |
Variable Interest Entity [Line Items] | |
Commitment, expected payment date | 2017 |
Maximum [Member] | |
Variable Interest Entity [Line Items] | |
Commitment, expected payment date | 2020 |
Bank Deposits (Details) - USD ($) $ in Millions |
Sep. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
Interest-bearing deposits: | ||
Deposits swept from brokerage accounts | $ 144,293 | $ 141,146 |
Checking | 12,943 | 13,842 |
Savings and other | 7,441 | 7,792 |
Total interest-bearing deposits | 164,677 | 162,780 |
Non-interest-bearing deposits | 586 | 674 |
Total bank deposits | $ 165,263 | $ 163,454 |
Borrowings (Long-term Debt Including Unamortized Debt Discounts and Premiums) (Details) - USD ($) $ in Millions |
Sep. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
Debt Disclosure [Abstract] | ||
Senior Notes | $ 3,205 | $ 2,558 |
Medium-Term Notes | 0 | 250 |
Finance lease obligation | 63 | 68 |
Total long-term debt | $ 3,268 | $ 2,876 |
Borrowings (Annual Maturities on Long-term Debt Outstanding) (Details) - USD ($) $ in Millions |
Sep. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
Debt Disclosure [Abstract] | ||
2017 | $ 3 | |
2018 | 908 | |
2019 | 8 | |
2020 | 709 | |
2021 | 9 | |
Thereafter | 1,657 | |
Total maturities | 3,294 | |
Unamortized discount, net | (13) | |
Debt issuance costs | (13) | |
Total long-term debt | $ 3,268 | $ 2,876 |
Offsetting Assets and Liabilities (Narrative) (Details) - USD ($) $ in Millions |
Sep. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
Securities Financing Transaction, Fair Value [Member] | ||
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items] | ||
Fair value of borrowed securities from other broker-dealers to fulfill short sales by clients | $ 336 | $ 213 |
Offsetting Assets and Liabilities (Summary of the Fair Value of Client Securities Available to Utilize as Collateral and Amounts Pledged) (Details) - USD ($) $ in Millions |
Sep. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
Securities Financing Transaction [Line Items] | ||
Fair value of client securities available to be pledged | $ 23,520 | $ 21,516 |
Total collateral pledged | 5,345 | 5,193 |
Securities Lending to Other Broker-Dealers [Member] | ||
Securities Financing Transaction [Line Items] | ||
Total collateral pledged | 1,115 | 1,626 |
Fulfillment of Client Short Sales [Member] | ||
Securities Financing Transaction [Line Items] | ||
Total collateral pledged | 2,281 | 2,048 |
Fulfillment of Requirements with the Options Clearing Corporation [Member] | ||
Securities Financing Transaction [Line Items] | ||
Total collateral pledged | 1,949 | 1,519 |
Fully Paid Client Securities [Member] | ||
Securities Financing Transaction [Line Items] | ||
Total collateral pledged | $ 92 | $ 58 |
Earnings Per Common Share (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions |
3 Months Ended | 9 Months Ended | |||||||
---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
||||||
Earnings Per Share [Abstract] | |||||||||
Net income | $ 618 | $ 503 | $ 1,757 | $ 1,367 | |||||
Preferred stock dividends and other | [1] | (43) | (33) | (127) | (99) | ||||
Net Income Available to Common Stockholders | $ 575 | $ 470 | $ 1,630 | $ 1,268 | |||||
Weighted-average common shares outstanding — basic (shares) | 1,339 | 1,324 | 1,338 | 1,322 | |||||
Common stock equivalent shares related to stock incentive plans (shares) | 14 | 10 | 14 | 10 | |||||
Weighted-average common shares outstanding — diluted (shares) | [2] | 1,353 | 1,334 | 1,352 | 1,332 | ||||
Basic EPS (USD per share) | $ 0.43 | $ 0.36 | $ 1.22 | $ 0.96 | |||||
Diluted EPS (USD per share) | $ 0.42 | $ 0.35 | $ 1.21 | $ 0.95 | |||||
Antidilutive stock options and restricted stock awards excluded from the calculation of diluted EPS (in shares) | 9 | 17 | 10 | 21 | |||||
|
Regulatory Requirements (Net Capital and Net Capital Requirements for Schwab and optionsXpress, Inc) (Details) - USD ($) $ in Thousands |
Sep. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
Schwab [Member] | ||
Compliance with Regulatory Capital Requirements for Broker Dealers [Line Items] | ||
Net Capital | $ 1,974,000 | $ 1,846,000 |
Minimum Net Capital Required | 250 | 250 |
2% of Aggregate Debit Balances | 394,000 | 355,000 |
Net Capital in Excess of Required Capital | 1,580,000 | 1,491,000 |
OptionsXpress [Member] | ||
Compliance with Regulatory Capital Requirements for Broker Dealers [Line Items] | ||
Net Capital | 295,000 | 269,000 |
Minimum Net Capital Required | 1,000 | 1,000 |
2% of Aggregate Debit Balances | 7,000 | 8,000 |
Net Capital in Excess of Required Capital | $ 288,000 | $ 261,000 |
Segment Information (Narrative) (Details) |
9 Months Ended |
---|---|
Sep. 30, 2017
segment
| |
Segment Reporting [Abstract] | |
Number of reportable segments | 2 |
Segment Information (Financial Information for Reportable Segments) (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||||
---|---|---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|||
Net Revenues | ||||||
Asset management and administration fees | [1] | $ 861 | $ 798 | $ 2,529 | $ 2,254 | |
Net interest revenue | 1,082 | 845 | 3,135 | 2,415 | ||
Trading revenue | 151 | 190 | 500 | 623 | ||
Other | 71 | 76 | 212 | 209 | ||
Provision for loan losses | 0 | 5 | 0 | 5 | ||
Total net revenues | 2,165 | 1,914 | 6,376 | 5,506 | ||
Expenses Excluding Interest | 1,220 | 1,120 | 3,679 | 3,337 | ||
Income before taxes on income | 945 | 794 | 2,697 | 2,169 | ||
Investor Services [Member] | ||||||
Net Revenues | ||||||
Asset management and administration fees | 595 | 550 | 1,743 | 1,536 | ||
Net interest revenue | 818 | 654 | 2,366 | 1,895 | ||
Trading revenue | 94 | 123 | 311 | 395 | ||
Other | 54 | 56 | 159 | 153 | ||
Provision for loan losses | 0 | 4 | 0 | 4 | ||
Total net revenues | 1,561 | 1,387 | 4,579 | 3,983 | ||
Expenses Excluding Interest | 918 | 847 | 2,762 | 2,518 | ||
Income before taxes on income | 643 | 540 | 1,817 | 1,465 | ||
Advisor Services [Member] | ||||||
Net Revenues | ||||||
Asset management and administration fees | 266 | 248 | 786 | 718 | ||
Net interest revenue | 264 | 191 | 769 | 520 | ||
Trading revenue | 57 | 67 | 189 | 228 | ||
Other | 17 | 20 | 53 | 56 | ||
Provision for loan losses | 0 | 1 | 0 | 1 | ||
Total net revenues | 604 | 527 | 1,797 | 1,523 | ||
Expenses Excluding Interest | 302 | 273 | 917 | 819 | ||
Income before taxes on income | $ 302 | $ 254 | $ 880 | $ 704 | ||
|
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