Schwab Reports Record Quarterly Net Income of $350 Million

2014 Revenues Rise 11% to $6.1 Billion; Net Income Grows 23% to $1.3 Billion, both records

Total Client Assets Reach $2.46 Trillion at Year-end, Up 10%

Friday, January 16, 2015 5:45 am PST

Dateline:

SAN FRANCISCO

Public Company Information:

NYSE:
SCHW
"Our success with clients and ongoing expense discipline in 2014 led to some of the strongest annual financial results in company history despite the extraordinarily low interest rate environment"

SAN FRANCISCO--(BUSINESS WIRE)--The Charles Schwab Corporation announced today that its net income for the fourth quarter of 2014 was a record $350 million, up 9% from $321 million for the third quarter of 2014, and up 10% from $319 million for the fourth quarter of 2013. Net income for the twelve months ended December 31, 2014 was $1.3 billion, up 23% year-over-year. The company’s financial results for the fourth quarter and full-year 2014 include two nonrecurring items: net litigation proceeds of approximately $28 million and net losses of $8 million from selling securities totaling approximately $500 million, both relating to the company’s non-agency residential mortgage-backed securities portfolio. Taken together, these items increased pre-tax income by approximately $20 million, or $0.01 per share. The company’s financial results for full-year 2014 also include a net insurance settlement and a charge relating to future changes in the company’s geographic footprint, which were recognized in the third quarter.

  Three Months Ended     Twelve Months Ended  
--December 31,-- % --December 31,-- %
Financial Highlights     2014       2013     Change     2014       2013     Change
 
Net revenues (in millions) $ 1,551   $ 1,435 8 % $ 6,058   $ 5,435 11 %
Net income (in millions) $ 350 $ 319 10 % $ 1,321 $ 1,071 23 %
Diluted earnings per common share $ .25 $ .23 9 % $ .95 $ .78 22 %
Pre-tax profit margin 35.7 % 34.47 % 34.9 % 31.4 %
Return on average common stockholders’ equity (annualized) 12 % 13 % 12 % 11 %
                                 
 

CEO Walt Bettinger commented, “We’ve become one of the most successful investment services firms in the U.S. by staying true to our ‘through clients’ eyes’ strategy. A steady focus on serving investor needs has helped our business grow to $2.46 trillion in client assets by year-end 2014. That’s an increase of more than $214 billion, which is consistent with the 10% compound annual growth rate we’ve achieved over the past decade. Clients brought us $124.8 billion in net new assets during 2014, marking the third consecutive year of core net new assets in excess of $100 billion. The range of planning and advice solutions available through our contemporary full-service investing model continues to resonate with clients, and $1.23 trillion in client assets were enrolled in some form of ongoing advisory service at year-end, up 12% from last December. We ended 2014 with record client account levels – active brokerage accounts were up 3% to 9.4 million and banking accounts rose 8% to 985,000.”

“Our success with clients and ongoing expense discipline in 2014 led to some of the strongest annual financial results in company history despite the extraordinarily low interest rate environment,” Mr. Bettinger continued. “While net interest revenue remained severely constrained, our growth and diversified sources enabled us to achieve record net revenues of $6.1 billion and record net income of $1.3 billion, up 11% and 23%, respectively. We also surpassed each of our initial financial expectations for the year. Our double-digit revenue growth exceeded our earlier mid-to-high single-digit target; the gap between revenue and expense growth reached approximately 580 basis points, compared with our goal of 300-500 basis points; and our pre-tax profit margin of 34.9% topped our objective of around 34%.”

Mr. Bettinger said, “We continued to challenge the status quo on behalf of individual investors throughout 2014. We transitioned the first 401(k) plan to the ETF version of our Schwab Index Advantage® 401(k) offering, giving participants unprecedented access to low cost index funds and personalized advice. Approximately 120 plans and 73,000 participants have enrolled in the ETF and Mutual Fund versions of SIA to date. Schwab ETF OneSource, the largest commission-free, open-architecture platform of its kind, grew to include 65 additional funds. Clients can now choose from a total offering of 182 ETFs without incurring transaction costs. We also added 3- and 4-leg online options trading capabilities to StreetSmart Edge®, increasing the number of strategies available to traders. We launched Schwab OpenView Mobile, a customizable app that registered investment advisors can use to create a turnkey, branded mobile presence for their firms, and advisors and their clients also benefited from new approval tools allowing secure electronic signatures and wire transfer authorizations. Most recently, we announced the planned first quarter 2015 launch of Schwab Intelligent Portfolios, a new automated investment advisory service that will provide sophisticated, diversified portfolios with no advisory fees, commissions or account service fees charged. Schwab is positioned for more innovation in 2015 as we continue our work to make quality help and advice available to a broad spectrum of investors.”

CFO Joe Martinetto said, “Schwab’s 2014 results reflect our financial ‘formula’ hitting its stride. As we’ve mentioned before, as long as economic drivers are stable or improving we should be able to turn client growth into revenue growth, which combined with sustained expense discipline should enable Schwab to build earnings faster than revenues. 2013 was the first year since the financial crisis where the macro environment did not mask our progress and the formula visibly returned to life from the sideways performance of prior periods. We delivered more of the same in 2014 – we turned 10% client asset growth into 11% revenue growth, and then produced 23% earnings growth and a comparable level of EPS growth. As clients increasingly took advantage of our full-service capabilities and the equity markets generally strengthened, asset management and administration fees grew 9% to a record $2.5 billion. In addition, our growing client base helped net interest revenue rise 15% to a record $2.3 billion despite the ultra-low interest rate environment. While trading revenue was roughly flat from year to year, overall revenue growth and careful expense management enabled us to increase our investment in client-related projects by 9% to a record $188 million while still achieving a 350-plus basis point improvement in our pre-tax profit margin. Delivering margin improvement of that magnitude every year may not be practical or wise as we pursue the tremendous growth opportunities ahead, but we do expect to continue producing meaningful operating leverage on a consistent basis.”

Mr. Martinetto continued, “At Schwab, we view expense discipline as something more than simply capping costs – to us, it’s the art of thoughtfully balancing near-term profitability with reinvestment to drive growth. Finding that balance is clearly critical to sustaining and enhancing our business momentum while building stockholder value, but we believe it’s also critical to leveraging Schwab’s enormous and growing scale. We have been able to invest $2 billion in client-related projects and marketing over the past five years, which has helped us expand our client base by $1 trillion, or over 70%. At the same time, our discipline enabled us to reduce the relative cost of serving those assets – measured by the ratio of total expenses to average client assets – by a third, to just 16 basis points. We believe this growing scale provides us with an important competitive advantage: superior flexibility in making investment and pricing decisions as we remain intent on providing our clients great products and services at an outstanding value. As the interest rate environment improves, we expect to remain among an elite group of companies that reliably invest for and exhibit healthy growth while also maintaining superior levels of profitability.”

“We ended the year with a healthy balance sheet and a capital base poised to support ongoing growth,” Mr. Martinetto concluded. “Our strong financial performance helped build our consolidated Tier 1 Leverage Ratio throughout 2014 and we’ve begun to take advantage of that growing flexibility. During the fourth quarter, we took steps to harmonize our thresholds for sweeping idle client cash to Schwab Bank, sending an increased flow of that cash to our balance sheet at an improved revenue yield. At year-end, stockholder’s equity exceeded $11.8 billion, and our preliminary Tier 1 Leverage Ratio came in at 6.9%.”

Business highlights for the fourth quarter (data as of quarter-end unless otherwise noted):

Investor Services

  • New retail brokerage accounts for the quarter totaled approximately 146,000, down 5% from the year-earlier period; total accounts were 6.7 million as of December 31, 2014, up 2% year-over-year.
  • Held planning conversations with approximately 24,000 clients. Approximately 109,000 planning conversations were held in 2014, up 8% from 2013.
  • Launched a new Proposal Tool that allows our Financial Consultants to work more collaboratively with clients and prospects on their financial goals, providing a detailed comparison of the client’s current and proposed portfolios.
  • Schwab Private Client increased its industry-leading asset allocation models from 5 to 26, further customizing client portfolios and supporting both total-return and income-generation approaches to wealth management.
  • Schwab Trading Services hosted its first all-day educational event, reaching over 2,600 active traders with both in-person and online seminars that offered real-time trading insights and in-depth educational workshops.
  • Expanded Schwab.com’s third-party research offering to include Morningstar® equity reports and ratings, sector information, and analyst insights, giving clients more choice and depth as they research investments, at no charge.

Advisor Services

  • Hosted over 5,000 advisors, exhibitors, sponsors, and media for our best-attended IMPACT® conference ever. IMPACT is the largest and longest-running annual gathering of independent registered investment advisors. Schwab executives and industry leaders addressed product, technology, and practice management solutions for advisors.
  • Released enhancements to PortfolioCenter®, Schwab’s desktop and cloud-based platform for portfolio management and reporting, that improve advisor efficiency and accuracy by providing richer data and shorter processing times.
  • Launched trading integration with Tamarac, enabling advisors to send trades directly from Tamarac’s Advisor Xi® platform to Schwab Advisor Center® for streamlined processing.
  • Announced Envestnet’s participation in the Schwab OpenView Gateway, which will allow advisors to access data on Schwab Advisor Center in real-time from the Envestnet Advisor Suite.

Products and Infrastructure

  • For Charles Schwab Bank:
    • Balance sheet assets = $111.2 billion, up 11% year-over-year.
    • Outstanding mortgage and home equity loans = $11.1 billion.
    • First mortgage originations through its loan program during the quarter = $741 million.
    • Pledged Asset Line® balances = $2.3 billion.
    • Delinquency, nonaccrual, and loss reserve ratios for Schwab Bank’s loan portfolio = 0.27%, 0.26% and 0.31%, respectively, at month-end December.
    • Schwab Bank High Yield Investor Checking® accounts = 791,000, with $12.3 billion in balances.
  • For Charles Schwab Investment Management:
    • Schwab proprietary funds posted record net inflows of $12.3 billion in 2014. The largest share of net inflows was to Schwab ETFs, which attracted $8.7 billion; Schwab Fundamental Index Mutual Funds also had record net inflows of $1.7 billion (Fundamental Index is a registered trademark of Research Affiliates LLC).
    • Assets in Schwab ETFs totaled a record $26.9 billion at year-end, up almost 60% from December 2013.
    • Total client assets invested in Schwab proprietary funds reached a record $267.5 billion, up 8% year-over-year.
  • Client assets managed by Windhaven® totaled $16.2 billion, down 12% from the fourth quarter of 2013.
  • Client assets managed by ThomasPartners® totaled $6.8 billion, up 51% from the fourth quarter of 2013.
  • Opened new facilities in Denver and El Paso, helping improve the company’s efficiency by migrating existing operations and future growth to cost-effective areas.

Supporting schedules are either attached or located at: http://www.aboutschwab.com/investor-relations/financial-reports.

Commentary from the CFO

Joe Martinetto, Executive Vice President and Chief Financial Officer, provides insight and commentary regarding Schwab’s financial picture at: http://aboutschwab.com/investor-relations/cfo-commentary.

Forward Looking Statements

This press release contains forward-looking statements relating to the launch of Schwab Intelligent Portfolios and other help and advice services and products; growth in clients, revenue and earnings; expense discipline; growth opportunities; operating leverage; business momentum; stockholder value; growing scale; flexibility in making investment and pricing decisions; profitability; and capital base and flexibility.

Important factors that may cause such differences include, but are not limited to, the company’s ability to develop and launch new products, services and capabilities in a timely and successful manner, including Schwab Intelligent Portfolios; use of the company’s advisory services and other products, solutions and services; the company’s ability to attract and retain clients and grow client assets/relationships; competitive pressures on rates and fees; general market conditions, including the level of interest rates, equity valuations and trading activity; the level of client assets, including cash balances; the company’s ability to monetize client assets; the company’s ability to manage expenses; timing and amount of severance and other costs related to reducing the company’s San Francisco footprint; capital needs and management; the impact of changes in market conditions on money market fund fee waivers, revenues, expenses and pre-tax margins; regulatory guidance; acquisition integration costs; trading activity; the effect of adverse developments in litigation or regulatory matters and the extent of any charges associated with legal matters; any adverse impact of financial reform legislation and related regulations; and other factors set forth in the company’s most recent reports on Form 10-K and Form 10-Q.

About Charles Schwab

The Charles Schwab Corporation (NYSE:SCHW) is a leading provider of financial services, with more than 325 offices and 9.4 million active brokerage accounts, 1.4 million corporate retirement plan participants, 985,000 banking accounts, and $2.46 trillion in client assets as of December 31, 2014. Through its operating subsidiaries, the company provides a full range of wealth management, securities brokerage, banking, money management and financial advisory services to individual investors and independent investment advisors. Its broker-dealer subsidiary, Charles Schwab & Co., Inc. (member SIPC, http://www.sipc.org), and affiliates offer a complete range of investment services and products including an extensive selection of mutual funds; financial planning and investment advice; retirement plan and equity compensation plan services; referrals to independent fee-based investment advisors; and custodial, operational and trading support for independent, fee-based investment advisors through Schwab Advisor Services. Its banking subsidiary, Charles Schwab Bank (member FDIC and an Equal Housing Lender), provides banking and lending services and products. More information is available at www.schwab.com and www.aboutschwab.com.

       
THE CHARLES SCHWAB CORPORATION
Consolidated Statements of Income
(In millions, except per share amounts)
(Unaudited)
                         
Three Months Ended Twelve Months Ended
December 31, December 31,
    2014   2013   2014   2013
Net Revenues
Asset management and administration fees $ 641 $ 608 $ 2,533 $ 2,315
Interest revenue 607 558 2,374 2,085
Interest expense   (23 )   (26 )   (102 )   (105 )
Net interest revenue 584 532 2,272 1,980
Trading revenue 239 231 907 913
Other 90 64 343 236
Provision for loan losses (3 ) 2 4 1
Net impairment losses on securities (1)     -       (2 )     (1 )     (10 )
Total net revenues     1,551       1,435       6,058       5,435  
Expenses Excluding Interest
Compensation and benefits 543 515 2,184 2,027
Professional services 122 107 457 415
Occupancy and equipment 82 78 324 309
Advertising and market development 58 59 245 257
Communications 55 55 223 220
Depreciation and amortization 54 49 199 202
Other     83       74       311       300  
Total expenses excluding interest     997       937       3,943       3,730  
Income before taxes on income 554 498 2,115 1,705
Taxes on income     204       179       794       634  
Net Income     350       319       1,321       1,071  
Preferred stock dividends     21       22       60       61  
Net Income Available to Common Stockholders   $ 329     $ 297     $ 1,261     $ 1,010  
Weighted-Average Common Shares Outstanding — Diluted     1,320       1,304       1,315       1,293  
Earnings Per Common Share — Basic $

.25

$ .23 $ .96 $ .78
Earnings Per Common Share — Diluted   $ .25     $ .23     $ .95     $ .78  
(1)   There were less than $1 million of impairment losses on securities for the three months ended December 31, 2014. Net impairment losses on securities include total other-than-temporary impairment losses of $0 and $0 recognized in other comprehensive income, net of less than $(1) million and $(2) million reclassified from other comprehensive income, for the three months ended December 31, 2014 and 2013, respectively. Net impairment losses on securities include total other-than-temporary impairment losses of $1 million and $2 million recognized in other comprehensive income, net of $0 and $(8) million reclassified from other comprehensive income, for the twelve months ended December 31, 2014 and 2013, respectively.
 
See Note to Consolidated Statements of Income, Financial and Operating Highlights, and Net Interest Revenue Information.
 
THE CHARLES SCHWAB CORPORATION
Financial and Operating Highlights
(Unaudited)
                       
     

Q4-14 % change

  2014 2013
vs.   vs. Fourth Third Second First Fourth
(In millions, except per share amounts and as noted) Q4-13 Q3-14   Quarter     Quarter     Quarter     Quarter   Quarter
Net Revenues
Asset management and administration fees 5% (1%) $ 641 $ 649 $ 632 $ 611 $ 608
Net interest revenue 10% 2% 584 573 562 553 532
Trading revenue 3% 14% 239 209 212 247 231
Other 41% (25%) 90 120 65 68 64
Provision for loan losses N/M N/M (3 ) 1 7 (1 ) 2
Net impairment losses on securities (100%) (100%)     -         (1 )       -       -         (2 )  
Total net revenues 8% -     1,551         1,551         1,478       1,478         1,435    
Expenses Excluding Interest
Compensation and benefits 5% (8%) 543 593 520 528 515
Professional services 14% 4% 122 117 112 106 107
Occupancy and equipment 5% - 82 82 80 80 78
Advertising and market development (2%) (2%) 58 59 65 63 59
Communications - - 55 55 57 56 55
Depreciation and amortization 10% 10% 54 49 48 48 49
Other 12% 6%     83         78         75       75         74    
Total expenses excluding interest 6% (3%)     997         1,033         957       956         937    
Income before taxes on income 11% 7% 554 518 521 522 498
Taxes on income 14% 4%     204         197         197       196         179    
Net Income 10% 9%   $ 350       $ 321       $ 324     $ 326       $ 319    
Preferred stock dividends (5%) 133%     21         9         22       8         22    
Net Income Available to Common Stockholders 11% 5%   $ 329       $ 312       $ 302     $ 318       $ 297    
Basic earnings per common share 9% 4% $ .25 $ .24 $ .23 $ .24 $ .23
Diluted earnings per common share 9% 4% $ .25 $ .24 $ .23 $ .24 $ .23
Dividends declared per common share - - $ .06 $ .06 $ .06 $ .06 $ .06
Weighted-average common shares outstanding - diluted 1% -     1,320         1,316         1,313       1,311         1,304    
Performance Measures
Pre-tax profit margin 35.7 % 33.4 % 35.3 % 35.3 % 34.7 %
Return on average common stockholders’ equity (annualized) (1)     12   %     12   %     12 %     13   %     13   %
Financial Condition (at quarter end, in billions)
Cash and investments segregated (12%) 5% $ 20.8 $ 19.9 $ 19.1 $ 20.5 $ 23.6
Receivables from brokerage clients 12% 2% $ 15.7 $ 15.4 $ 14.7 $ 14.6 $ 14.0
Loans to banking clients 8% 2% $ 13.4 $ 13.1 $ 12.9 $ 12.6 $ 12.4
Total assets 8% 5% $ 154.6 $ 147.4 $ 143.4 $ 144.1 $ 143.6
Deposits from banking clients 11% 6% $ 102.8 $ 97.3 $ 95.7 $ 95.6 $ 93.0
Payables to brokerage clients (3%) 4% $ 34.3 $ 33.1 $ 31.5 $ 32.3 $ 35.3
Long-term debt - - $ 1.9 $ 1.9 $ 1.9 $ 1.9 $ 1.9
Stockholders’ equity 13% 3%   $ 11.8       $ 11.5       $ 11.2     $ 10.8       $ 10.4    
Other
Full-time equivalent employees (at quarter end, in thousands) 6% 2% 14.6 14.3 14.1 14.0 13.8

Annualized net revenues per average full-time equivalent employee (in thousands)

3% (2%) $ 428 $ 437 $ 422 $ 422 $ 416

Capital expenditures - cash purchases of equipment, office facilities, and property, net (in millions)

- (38%)   $ 90       $ 146       $ 101     $ 67       $ 90    
Clients’ Daily Average Trades (in thousands)
Revenue trades (2) 6% 17% 315 269 274 337 297
Asset-based trades (3) 27% 25% 80 64 75 72 63
Other trades (4) 32% 24%     169         136         134       145         128    
Total 16% 20%     564         469         483       554         488    
Average Revenue Per Revenue Trade (2) (2%) (2%)   $ 12.04       $ 12.24       $ 12.26     $ 12.03       $ 12.33    
         
(1)   Return on average common stockholders’ equity is calculated using net income available to common stockholders divided by average common stockholders’ equity.
(2) Includes all client trades that generate either commission revenue or revenue from principal markups (i.e., fixed income); also known as DART.
(3) Includes eligible trades executed by clients who participate in one or more of the Company’s asset-based pricing relationships.
(4) Includes all commission free trades, including Schwab Mutual Fund OneSource® funds and ETFs, and other proprietary products.
N/M Not meaningful.
 
See Note to Consolidated Statements of Income, Financial and Operating Highlights, and Net Interest Revenue Information.
 
THE CHARLES SCHWAB CORPORATION
Net Interest Revenue Information
(In millions)
(Unaudited)
                                                                   
    Three Months Ended Twelve Months Ended
December 31, December 31,
2014   2013 2014   2013
  Interest   Average   Interest   Average   Interest   Average   Interest   Average
Average Revenue/ Yield/ Average Revenue/ Yield/ Average Revenue/ Yield/ Average Revenue/ Yield/
      Balance   Expense   Rate Balance   Expense   Rate Balance   Expense   Rate Balance   Expense   Rate
Interest-earning assets:
Cash and cash equivalents $ 8,031 $ 5 0.25 % $ 6,497 $ 4 0.24 % $ 7,179 $ 16 0.22 % $ 6,943 $ 16 0.23 %
Cash and investments segregated 20,321 6 0.12 % 23,256 6 0.10 % 20,268 24 0.12 % 25,419 35 0.14 %

Broker-related receivables (1)

330 - 0.07 % 399 - - 325 - 0.09 % 377 - 0.04 %
Receivables from brokerage clients 14,338 124 3.43 % 12,427 113 3.61 % 13,778 482 3.50 % 11,800 434 3.68 %
Securities available for sale (2) 52,271 133 1.01 % 51,680 144 1.11 % 52,057 546 1.05 % 49,114 557 1.13 %
Securities held to maturity 33,909 215 2.52 % 28,815 180 2.48 % 32,361 828 2.56 % 24,915 610 2.45 %
Loans to banking clients   13,291     91     2.72 %   12,320     86   2.77 %   12,906     355     2.75 %   11,758     329   2.80 %
Total interest-earning assets   142,491     574     1.60 %   135,394     533   1.56 %   138,874     2,251     1.62 %   130,326     1,981   1.52 %
Other interest revenue         33               25             123               104    
Total interest-earning assets $ 142,491   $ 607     1.69 % $ 135,394   $ 558   1.64 % $ 138,874   $ 2,374     1.71 % $ 130,326   $ 2,085   1.60 %
Funding sources:
Deposits from banking clients $ 98,485 $ 8 0.03 % $ 91,322 $ 7 0.03 % $ 95,842 $ 30 0.03 % $ 85,465 $ 31 0.04 %
Payables to brokerage clients (1) 26,965 - 0.01 % 28,510 1 0.01 % 26,731 2 0.01 % 30,258 3 0.01 %
Long-term debt   1,899     18     3.76 %   1,903     18   3.75 %   1,901     73     3.84 %   1,751     69   3.94 %
Total interest-bearing liabilities   127,349     26     0.08 %   121,735     26   0.08 %   124,474     105     0.08 %   117,474     103   0.09 %
Non-interest-bearing funding sources 15,142 13,659 14,400 12,852
Other interest expense (1,3)         (3 )             -             (3 )             2    
Total funding sources $ 142,491   $ 23     0.06 % $ 135,394   $ 26   0.08 % $ 138,874   $ 102     0.07 % $ 130,326   $ 105   0.08 %
Net interest revenue       $ 584     1.63 %       $ 532   1.56 %       $ 2,272     1.64 %       $ 1,980   1.52 %
(1)   Interest revenue or expense was less than $500,000 in the period or periods presented.
(2) Amounts have been calculated based on amortized cost.
(3) Includes the impact of capitalizing interest on building construction and software development.
 
See Note to Consolidated Statements of Income, Financial and Operating Highlights, and Net Interest Revenue Information.
 
Note to Consolidated Statements of Income, Financial and Operating Highlights,

and Net Interest Revenue Information

(Unaudited)
 
The Company

The consolidated statements of income, financial and operating highlights, and net interest revenue information include The Charles Schwab Corporation (CSC) and its majority-owned subsidiaries (collectively referred to as the Company), including Charles Schwab & Co., Inc. and Charles Schwab Bank. The consolidated statements of income, financial and operating highlights, and net interest revenue information should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013.

 
**********
 
THE CHARLES SCHWAB CORPORATION

Asset Management and Administration Fees Information

(In millions)
(Unaudited)
                                                                   
    Three Months Ended Twelve Months Ended
  December 31,   December 31,
2014   2013 2014   2013
Average     Average     Average     Average    
Client Average Client Average Client Average Client Average
      Assets   Revenue   Fee Assets   Revenue   Fee Assets   Revenue   Fee Assets   Revenue   Fee

Schwab money market funds before fee waivers

$ 165,631 $ 243 0.58 % $ 165,170 $ 241 0.58 % $ 164,564 $ 957 0.58 % $ 162,484 $ 936 0.58 %
Fee waivers         (193 )             (182 )             (751 )             (674 )    
Schwab money market funds 165,631 50 0.12 % 165,170 59 0.14 % 164,564 206 0.13 % 162,484 262 0.16 %
Equity and bond funds (1) 90,351 50 0.22 % 70,278 43 0.24 % 83,916 192 0.23 % 63,012 157 0.25 %
Mutual Fund OneSource ®   261,617     208     0.32 %   255,255     204     0.32 %   264,021     839     0.32 %   242,907     774     0.32 %
Total mutual funds (2) $ 517,599     308     0.24 % $ 490,703     306     0.25 % $ 512,501     1,237     0.24 % $ 468,403     1,193     0.25 %
Advice solutions (2) $ 174,513 217 0.49 % $ 155,436 195 0.50 % $ 169,455 840 0.50 % $ 144,639 718 0.50 %
Other (3)         116               107               456               404      

Total asset management and administration fees

      $ 641             $ 608               $ 2,533             $ 2,315      
(1)   Includes Schwab Exchange-traded Funds.
(2) Advice solutions include separately managed accounts, customized personal advice for tailored portfolios, and specialized planning and full-time portfolio management offered through the Company’s Schwab Private Client, Schwab Managed Portfolio and Managed Account Select programs. Advice solutions also include Schwab Advisor Network, Schwab Advisor Source, Windhaven, and ThomasPartners. Average client assets for advice solutions may also include the asset balances contained in the three categories of mutual funds listed above.
(3) Includes various asset based fees, such as trust fees, 401(k) record keeping fees, and mutual fund clearing and other service fees.
 
THE CHARLES SCHWAB CORPORATION
Growth in Client Assets and Accounts
(Unaudited)
                       
     

Q4-14 % Change

  2014   2013
vs.   vs. Fourth Third Second First Fourth
(In billions, at quarter end, except as noted) Q4-13 Q3-14     Quarter     Quarter     Quarter     Quarter     Quarter
 
Assets in client accounts

Schwab One®, other cash equivalents and deposits from banking clients

7% 5% $ 136.0 $ 129.7 $ 126.5 $ 126.8 $ 127.3
Proprietary mutual funds (Schwab Funds® and Laudus Funds®):
Money market funds - 2% 167.9 164.7 160.0 166.3 167.7
Equity and bond funds (1) 13% 4%     61.5       59.1       59.1       56.7       54.4  
Total proprietary funds 3% 3%     229.4       223.8       219.1       223.0       222.1  
Mutual Fund Marketplace® (2)
Mutual Fund OneSource® - (1%) 260.5 262.1 271.6 264.5 260.5
Mutual fund clearing services 12% (1%) 164.7 166.3 161.1 151.5 147.4
Other third-party mutual funds 10% 1%     461.9       456.1       463.5       439.4       420.9  
Total Mutual Fund Marketplace 7% -     887.1       884.5       896.2       855.4       828.8  
Total mutual fund assets 6% 1%     1,116.5       1,108.3       1,115.3       1,078.4       1,050.9  
Exchange-traded funds (ETFs) (1)
Proprietary ETFs 60% 17% 26.9 22.9 21.5 19.0 16.8
ETF OneSource® (2) 73% 4% 14.7 14.1 10.6 9.5 8.5
Other third-party ETFs 9% 6%     194.7       184.2       190.1       184.3       179.0  
Total ETF assets 16% 7%     236.3       221.2       222.2       212.8       204.3  
Equity and other securities (1) 14% 4% 800.4 771.6 766.5 722.0 702.0
Fixed income securities 6% 1% 188.7 187.3 185.2 181.2 177.5
Margin loans outstanding 13% (1%)     (14.3 )     (14.4 )     (13.8 )     (13.2 )     (12.6 )
Total client assets 10% 2%   $ 2,463.6     $ 2,403.7     $ 2,401.9     $ 2,308.0     $ 2,249.4  
 
Client assets by business
Investor Services 9% 2% $ 1,351.5 $ 1,323.3 $ 1,321.0 $ 1,270.9 $ 1,241.5
Advisor Services 10% 3%     1,112.1       1,080.4       1,080.9       1,037.1       1,007.9  
Total client assets 10% 2%   $ 2,463.6     $ 2,403.7     $ 2,401.9     $ 2,308.0     $ 2,249.4  
 
Net growth in assets in client accounts (for the quarter ended)
Net new assets
Investor Services (3) N/M (26%) $ 13.8 $ 18.7 $ 9.7 $ 16.9 $ (12.8 )
Advisor Services 33% 21%     19.4       16.0       13.0       17.3       14.6  
Total net new assets N/M (4%)     33.2       34.7       22.7       34.2       1.8  
Net market gains (losses) (74%) 181%     26.7       (32.9 )     71.2       24.4       102.6  
Net growth (43%) N/M   $ 59.9     $ 1.8     $ 93.9     $ 58.6     $ 104.4  
 
New brokerage accounts (in thousands, for the quarter ended) (3%) 6% 243 229 242 258 250
Clients (in thousands)
Active Brokerage Accounts 3% 1% 9,386 9,309 9,252 9,178 9,093
Banking Accounts 8% 2% 985 970 950 933 916
Corporate Retirement Plan Participants 9% 2%     1,428       1,405       1,344       1,338       1,305  
     
(1)   Beginning in the first quarter of 2014, exchange-traded funds (ETFs) are presented separately; they were previously included in Equity and bond funds and Equity and other securities. Prior period information has been recast to reflect this change.
(2) Excludes all proprietary mutual funds and ETFs.
(3) Third quarter of 2014 includes inflows of $10.2 billion and an outflow of $3.4 billion from certain mutual fund clearing services clients. Fourth quarter of 2013 includes inflows of $5.4 billion from certain mutual fund clearing services clients and an outflow of $30.2 billion relating to the planned transfer of a mutual fund clearing services client.
N/M Not meaningful.
 
The Charles Schwab Corporation Monthly Activity Report For December 2014
                                 
2013 2014  

Change

Dec

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Mo.

Yr.

Market Indices
(at month end)
Dow Jones Industrial Average 16,577 15,699 16,322 16,458 16,581 16,717 16,827 16,563 17,098 17,043 17,391 17,828 17,823 - 8%
Nasdaq Composite 4,177 4,104 4,308 4,199 4,115 4,243 4,408 4,370 4,580 4,493 4,631 4,792 4,736 (1%) 13%
Standard & Poor’s 500 1,848 1,783 1,859 1,872 1,884 1,924 1,960 1,931 2,003 1,972 2,018 2,068 2,059 - 11%
Client Assets
(in billions of dollars)
Beginning Client Assets 2,217.1 2,249.4 2,217.4 2,294.3 2,308.0 2,312.9 2,354.2 2,401.9 2,382.7 2,448.3 2,403.7 2,440.6 2,478.8
Net New Assets (1) 9.9 11.9 10.9 11.4 0.3 10.9 11.5 15.9 8.5 10.3 7.9 10.9 14.4 32% 45%
Net Market Gains (Losses) 22.4     (43.9 )   66.0     2.3     4.6     30.4     36.2     (35.1 )   57.1     (54.9 )   29.0     27.3   (29.6 )
Total Client Assets (at month end) 2,249.4     2,217.4     2,294.3     2,308.0     2,312.9     2,354.2     2,401.9     2,382.7     2,448.3     2,403.7     2,440.6     2,478.8   2,463.6   (1%) 10%
 
Receiving Ongoing Advisory Services
(at month end)
Investor Services 155.1 153.0 158.3 159.2 160.6 163.7 176.5 175.1 180.0 177.3 180.2 183.3 182.5 - 18%
Advisor Services (2) 946.3 934.1 966.4 973.5 977.4 995.3 1,014.9 1,007.2 1,035.3 1,015.3 1,032.4 1,049.0 1,045.6 - 10%
Client Accounts
(at month end, in thousands)
Active Brokerage Accounts 9,093 9,119 9,146 9,178 9,217 9,228 9,252 9,269 9,288 9,309 9,326 9,346 9,386 - 3%
Banking Accounts 916 923 928 933 938 944 950 956 964 970 974 979 985 1% 8%
Corporate Retirement Plan Participants 1,305 1,325 1,327 1,338 1,344 1,346 1,344 1,381 1,383 1,405 1,416 1,416 1,428 1% 9%
Client Activity
New Brokerage Accounts (in thousands) 93 90 78 90 95 71 76 78 75 76 76 70 97 39% 4%
Inbound Calls (in thousands) 1,961 2,048 1,846 1,961 1,938 1,691 1,806 1,873 1,768 1,755 1,928 1,656 1,980 20% 1%
Web Logins (in thousands) 31,751 35,348 33,394 34,200 34,254 32,165 32,768 33,426 32,491 31,098 32,409 31,528 34,580 10% 9%
Cash as a Percentage of Client Assets (3) 13.1 % 13.2 % 12.7 % 12.7 % 12.4 % 12.2 % 11.9 % 12.1 % 11.9 % 12.2 % 12.1 % 11.9 % 12.3 % 40 bp (80) bp

Mutual Fund and Exchange-Traded Fund Net Buys (Sells) (4, 5, 6)

(in millions of dollars)
Large Capitalization Stock 942 226 (33 ) 676 95 129 311 773 620 228 1,881 1,538 1,347
Small / Mid Capitalization Stock 400 373 (381 ) 680 (430 ) (564 ) 220 (355 ) (639 ) (127 ) (307 ) 91 (346 )
International 1,403 1,782 891 1,028 1,665 1,240 2,137 817 524 166 (20 ) 794 177
Specialized (278 ) 1,213 1,183 912 609 377 1,690 1,082 373 (24 ) 781 503 566
Hybrid 301 447 599 107 230 406 201 532 165 - (531 ) (363 ) (687 )
Taxable Bond (963 ) 1,256 3,208 1,344 449 1,346 606 92 683 (3,475 ) 797 577 (1,914 )
Tax-Free Bond (354 ) 464 429 474 246 584 516 277 400 463 584 479 603
Net Buy (Sell) Activity
(in millions of dollars)
Mutual Funds (5) (480 ) 4,838 3,658 3,611 1,312 2,236 3,313 1,804 612 (4,022 ) 358 254 (4,381 )
Exchange-Traded Funds (6) 1,930 923 2,237 1,612 1,553 1,284 2,368 1,414 1,514 1,253 2,827 3,365 4,127
Money Market Funds 3,429 (986 ) (318 ) (135 ) (4,141 ) (561 ) (1,664 ) 1,493 1,248 2,224 477 (1,643 ) 4,294
Average Interest-Earning Assets (7)
(in millions of dollars) 136,046 137,029 136,947 137,625 137,164 136,588 137,328 137,785 139,027 140,115 141,502 141,884 144,695   2% 6%
(1)   September 2014 includes an inflow of $7.8 billion and outflow of $3.4 billion from certain mutual fund clearing services clients. July 2014 includes an inflow of $2.4 billion from a mutual fund clearing services client.
(2) Excludes Retirement Business Services Trust.
(3) Schwab One®, other cash equivalents, deposits from banking clients and money market fund balances as a percentage of total client assets.
(4) Beginning in March 2014, amounts include both mutual fund and exchange-traded fund (ETF) transactions. Prior period amounts have been recast to reflect this change.
(5) Represents the principal value of client mutual fund transactions handled by Schwab, including transactions in proprietary funds. Includes institutional funds available only to Investment Managers. Excludes money market fund transactions.
(6) Represents the principal value of client ETF transactions handled by Schwab, including transactions in proprietary ETFs.
(7) Represents total interest-earning assets on the Company's balance sheet.

Contact:

MEDIA:
Charles Schwab
Greg Gable, 415-667-0473
or
INVESTORS/ANALYSTS:
Charles Schwab
Rich Fowler, 415-667-1841

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