Schwab Reports Third Quarter Net Income Up 11% Year-Over-Year

Year-to-Date Earnings of $971 Million Highest in Company History

Net New Assets Total $34.7 Billion

Wednesday, October 15, 2014 5:45 am PDT

Dateline:

SAN FRANCISCO

Public Company Information:

NYSE:
SCHW
"The charge described above is consistent with expectations we’ve shared for shrinking our footprint in San Francisco and setting the stage for future growth in other more cost-effective locations"

SAN FRANCISCO--(BUSINESS WIRE)--The Charles Schwab Corporation announced today that its net income for the third quarter of 2014 was $321 million, comparable to $324 million in the second quarter of 2014, and up 11% from $290 million for the third quarter of 2013. Net income for the nine months ended September 30, 2014 was $971 million, up 29% from the year-earlier period. The company’s financial results for the third quarter and first nine months of 2014 include two nonrecurring items: a net insurance recovery of approximately $45 million (included in Other revenue); and a charge relating to future changes in the company’s geographic footprint totaling $68 million (included in Compensation and benefits expense). Taken together, these two items reduced pre-tax income by approximately $23 million, or $0.01 per share.

 

 

Three Months Ended

   

Nine Months Ended

 
--September 30,-- % --September 30,-- %
Financial Highlights   2014   2013   Change   2014   2013   Change
 
Net revenues (in millions) $ 1,551   $ 1,373 13 % $ 4,507   $ 4,000 13 %
Net income (in millions) $ 321 $ 290 11 % $ 971 $ 752 29 %
Diluted earnings per common share $ .24 $ .22 9 % $ .70 $ .55 27 %
Pre-tax profit margin 33.4 % 33.8 % 34.6 % 30.2 %

Return on average common stockholders’ equity (annualized)

12 % 13 % 12 % 11 %
                                           
 

CEO Walt Bettinger commented, “Our full-service investing model continues to resonate with clients and drive business growth. During the third quarter of 2014, we gathered $34.7 billion in net new assets – a 6% annualized growth rate – and we ended the quarter with $2.40 trillion in total client assets, up 12% from last September. While there were signs of a summer effect in client interactions during the quarter, we still attracted 229,000 new brokerage accounts, and we finished the period serving 9.3 million brokerage accounts, 970,000 banking accounts, and 1.4 million retirement plan participants, up 3, 4 and 8%, respectively, from month-end September 2013.”

“Against a backdrop of heightened market volatility during the quarter, we saw increased utilization of the help and advice available through Schwab, reflecting investors’ trust in our ability to help them navigate towards a better financial future,” Mr. Bettinger continued. “We held another 27,000 planning conversations during the quarter, and assets enrolled in one of our retail or other advisory solutions reached $177 billion at quarter end. Including relationships under the guidance of independent advisors, $1.19 trillion in client assets at Schwab are currently receiving some form of ongoing advisory service, an increase of 15% versus year-ago levels.”

Mr. Bettinger added, “We continue to focus on creating an unparalleled investing experience via our ‘through clients’ eyes’ strategy. During the third quarter we expanded our commission-free Schwab ETF OneSource platform to include 65 additional funds. Clients can now choose from a total offering of 182 ETFs, from Schwab and 12 other providers, covering 65 Morningstar categories, without incurring transaction costs. Schwab ETF OneSource balances have grown by $19.4 billion following the launch of the program in February 2013. We also converted the first 401(k) plan to the recently launched ETF version of our Schwab Index Advantage® offering. SIA provides access to low cost, index-focused mutual funds or ETFs, in combination with personalized advice, to help retirement plan participants achieve better outcomes. More than 100 plans and over 50,000 participants have enrolled in SIA to date.”

CFO Joe Martinetto said, “Continued success with clients, diversified revenue sources, and sustained expense discipline kept Schwab’s financial performance in line with our expectations for the third quarter given the environment. Asset management and administration fees and net interest revenue both showed double-digit percentage increases over the year-ago quarter and set new quarterly records, more than offsetting the effect of lower client revenue trades. With or without the $45 million recovery, our third quarter revenues are the second highest quarter in our history – surpassed only by an extraordinary spike during the internet bubble – and they mark the 8th consecutive quarter of sequential growth for the firm.”

“The charge described above is consistent with expectations we’ve shared for shrinking our footprint in San Francisco and setting the stage for future growth in other more cost-effective locations,” Mr. Martinetto noted. “Recognizing the charge in the third quarter reflects our progress to the point where we can estimate severance relating to this effort, which is expected to extend over the next three years. By carefully managing our reinvestment for growth and other operating costs to ensure they continued to track closely to plan, we were able to achieve a pre-tax profit margin of 33.4% for the quarter including both non-recurring items. This is a particularly strong result given that the one-timers represent a 250 basis point net reduction in the ratio. Even with that drag, our year-to-date earnings of $971 million keep us on the strongest pace of any year in our history. Given our strong business momentum, operating and expense discipline, a healthy balance sheet and growing capital flexibility, we are well positioned to continue driving profitable growth in the months ahead.”

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

Investor Services

  • New retail brokerage accounts for the quarter totaled approximately 141,000, comparable to the year-earlier period; total accounts reached 6.7 million as of September 30, 2014, up 2% year-over-year.
  • Held planning conversations with approximately 27,000 clients. Approximately 86,000 planning conversations have been held year-to-date, up 16% year-over-year.
  • Schwab transitioned the first 401(k) plan to the exchange-traded funds (ETFs) version of Schwab Index Advantage® (SIA). Since its launch in March 2012, over 100 companies have adopted SIA with low-cost options of either index mutual funds or ETFs.
  • Launched 3- and 4-leg online options trading capabilities on StreetSmart Edge®, enabling Schwab clients to trade sophisticated strategies in a workflow inspired by optionsXpress’s All-in-One Trade Ticket® tool.
  • 28 Schwab Private Client Portfolio Consultants graduated from the company’s inaugural Wealth Management Academy, each holding Certified Financial Planner® and Certified Wealth Strategist® designations. Top program graduates provide financial planning and ongoing portfolio management to high net worth clients across the nation.

Advisor Services

  • Schwab Intelligent Technologies® announced that Morningstar Inc. will participate in Schwab OpenView Gateway™, the open-architecture platform enabling data integration between Schwab systems and those of technology providers used by advisors.

Products and Infrastructure

  • For Charles Schwab Bank:
    • Balance sheet assets = $105.6 billion, up 8% year-over-year.
    • Outstanding mortgage and home equity loans = $11.1 billion.
    • First mortgage originations through its loan program during the quarter = $722 million.
    • Pledged Asset Line® (PAL) balances = $2.0 billion. Year-to-date, average PAL cycle time from application receipt to document generation is less than five days.
    • Delinquency, nonaccrual, and loss reserve ratios for Schwab Bank’s loan portfolio = 0.31%, 0.30% and 0.30%, respectively, at month-end September.
    • Schwab Bank High Yield Investor Checking® accounts = 777,000, with $11.8 billion in balances.
    • Launched the Schwab Bank® Visa® Platinum chip debit card, enhancing security and reducing the chance of failed transactions for clients traveling in more than 130 countries, where chip readers are now standard.
  • Client assets managed by Windhaven® totaled $17.7 billion, down 3% from the third quarter of 2013.
  • Client assets managed by ThomasPartners® totaled $6.1 billion, up 85% from the third quarter of 2013.
  • Schwab added 65 ETFs to Schwab ETF OneSource, the largest commission-free ETF platform; investors can now trade 182 ETFs covering 65 Morningstar Categories for $0 online trade commissions.

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

Commentary from the CFO

Effective today, Schwab is adopting a new approach to reporting client trading activity. Updated client trading activity will be posted after 1:00 pm Pacific time on the second business day of each week, on our Investor Relations page at: www.aboutschwab.com/investor-relations.

Schwab is also making changes to its monthly client activity report, as reflected on page 9 of this release. Joe Martinetto, Executive Vice President and Chief Financial Officer, provides commentary regarding these changes at: www.aboutschwab.com/investor-relations/cfo-commentary.

Forward Looking Statements

This press release contains forward-looking statements relating to shrinking the company’s footprint in San Francisco and related severance cost and timing; future growth in other more cost-effective locations; business growth; earnings; operating and expense discipline; balance sheet strength; capital flexibility; and profitable growth. Achievement of these expectations and objectives is subject to risks and uncertainties that could cause actual results to differ materially from the expressed expectations.

Important factors that may cause such differences include, but are not limited to, the actual timing and severance and other costs for reducing the San Francisco footprint; the company’s ability to grow in other more cost-effective locations; use of the company’s wealth management and other products, solutions and services; general market conditions, including the level of interest rates, equity valuations and trading activity; the company’s ability to attract and retain clients and grow client assets/relationships; competitive pressures on rates and fees; the level of client assets, including cash balances; the company’s ability to monetize client assets; capital needs and management; client enrollments in advisory services; the company’s ability to develop and launch new products, services and capabilities in a timely and successful manner; the company’s ability to manage expenses; 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 9.3 million active brokerage accounts, 1.4 million corporate retirement plan participants, 970,000 banking accounts, and $2.40 trillion in client assets as of September 30, 2014. Through its operating subsidiaries, the company provides a full range of 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, 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   Nine Months Ended
September 30, September 30,
    2014   2013   2014   2013
Net Revenues    
Asset management and administration fees $ 649 $ 583 $ 1,892 $ 1,707
Interest revenue 600 531 1,767 1,527
Interest expense   (27 )   (25 )   (79 )   (79 )
Net interest revenue 573 506 1,688 1,448
Trading revenue 209 224 668 682
Other 120 57 253 172
Provision for loan losses 1 4 7 (1 )
Net impairment losses on securities (1)     (1 )     (1 )     (1 )     (8 )
Total net revenues     1,551       1,373       4,507       4,000  
Expenses Excluding Interest
Compensation and benefits 593 482 1,641 1,512
Professional services 117 103 335 308
Occupancy and equipment 82 77 242 231
Advertising and market development 59 57 187 198
Communications 55 55 168 165
Depreciation and amortization 49 51 145 153
Other     78       84       228       226  
Total expenses excluding interest     1,033       909       2,946       2,793  
Income before taxes on income 518 464 1,561 1,207
Taxes on income     197       174       590       455  
Net Income     321       290       971       752  
Preferred stock dividends     9       8       39       39  
Net Income Available to Common Stockholders   $ 312     $ 282     $ 932     $ 713  
Weighted-Average Common Shares Outstanding — Diluted     1,316       1,296       1,313       1,288  
Earnings Per Common Share — Basic $ .24 $ .22 $ .71 $ .55
Earnings Per Common Share — Diluted   $ .24     $ .22     $ .70     $ .55  
(1)   Net impairment losses on securities include total other-than-temporary impairment losses of $1 million and $0 million recognized in other comprehensive income, net of $0 million and $(1) million reclassified from other comprehensive income, for the three months ended September 30, 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 million and $(6) million reclassified from other comprehensive income, for the nine months ended September 30, 2014 and 2013, respectively.
 
See Note to Consolidated Statements of Income, Financial and Operating Highlights, and Net Revenue Information.
 
THE CHARLES SCHWAB CORPORATION
Financial and Operating Highlights
(Unaudited)
     
 

Q3-14 % change

2014

  2013
vs.   vs. Third   Second   First Fourth   Third
(In millions, except per share amounts and as noted) Q3-13 Q2-14 Quarter   Quarter   Quarter   Quarter   Quarter
Net Revenues
Asset management and administration fees 11 % 3 % $ 649 $ 632 $ 611 $ 608 $ 583
Net interest revenue 13 % 2 % 573 562 553 532 506
Trading revenue (7 %) (1 %) 209 212 247 231 224
Other 111 % 85 % 120 65 68 64 57
Provision for loan losses (75 %) (86 %) 1 7 (1 ) 2 4
Net impairment losses on securities - N/M   (1 )       -       -         (2 )       (1 )  
Total net revenues 13 % 5 %   1,551         1,478       1,478         1,435         1,373    
Expenses Excluding Interest
Compensation and benefits 23 % 14 % 593 520 528 515 482
Professional services 14 % 4 % 117 112 106 107 103
Occupancy and equipment 6 % 3 % 82 80 80 78 77
Advertising and market development 4 % (9 %) 59 65 63 59 57
Communications - (4 %) 55 57 56 55 55
Depreciation and amortization (4 %) 2 % 49 48 48 49 51
Other (7 %) 4 %   78         75       75         74         84    
Total expenses excluding interest 14 % 8 %   1,033         957       956         937         909    
Income before taxes on income 12 % (1 %) 518 521 522 498 464
Taxes on income 13 % -   197         197       196         179         174    
Net Income 11 % (1 %) $ 321       $ 324     $ 326       $ 319       $ 290    
Preferred stock dividends 13 % (59 %)   9         22       8         22         8    
Net Income Available to Common Stockholders 11 % 3 % $ 312       $ 302     $ 318       $ 297       $ 282    
Basic earnings per common share 9 % 4 % $ .24 $ .23 $ .24 $ .23 $ .22
Diluted earnings per common share 9 % 4 % $ .24 $ .23 $ .24 $ .23 $ .22
Dividends declared per common share - - $ .06 $ .06 $ .06 $ .06 $ .06
Weighted-average common shares outstanding - diluted 2 % -   1,316         1,313       1,311         1,304         1,296    
Performance Measures
Pre-tax profit margin 33.4 % 35.3 % 35.3 % 34.7 % 33.8 %
Return on average common stockholders’ equity (annualized) (1)   12   %     12 %     13   %     13   %     13   %
Financial Condition (at quarter end, in billions)
Cash and investments segregated (15 %) 4 % $ 19.9 $ 19.1 $ 20.5 $ 23.6 $ 23.5
Receivables from brokerage clients 18 % 5 % $ 15.4 $ 14.7 $ 14.6 $ 14.0 $ 13.1
Loans to banking clients 8 % 2 % $ 13.1 $ 12.9 $ 12.6 $ 12.4 $ 12.1
Total assets 5 % 3 % $ 147.4 $ 143.4 $ 144.1 $ 143.6 $ 140.2
Deposits from banking clients 7 % 2 % $ 97.3 $ 95.7 $ 95.6 $ 93.0 $ 91.2
Payables to brokerage clients (4 %) 5 % $ 33.1 $ 31.5 $ 32.3 $ 35.3 $ 34.5
Long-term debt - - $ 1.9 $ 1.9 $ 1.9 $ 1.9 $ 1.9
Stockholders’ equity 14 % 3 % $ 11.5       $ 11.2     $ 10.8       $ 10.4       $ 10.1    
Other
Full-time equivalent employees (at quarter end, in thousands) 4 % 1 % 14.3 14.1 14.0 13.8 13.8

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

10 % 4 % $ 437 $ 422 $ 422 $ 416 $ 398

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

125 % 45 % $ 146       $ 101     $ 67       $ 90       $ 65    
Clients’ Daily Average Trades (in thousands)
Revenue trades (2) (5 %) (2 %) 269 274 337 297 283
Asset-based trades (3) 10 % (15 %) 64 75 72 63 58
Other trades (4) (1 %) 1 %   136         134       145         128         138    
Total (2 %) (3 %)   469         483       554         488         479    
Average Revenue Per Revenue Trade (2) (1 %) - $ 12.24       $ 12.26     $ 12.03       $ 12.33       $ 12.39    
 
(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 Nine Months Ended
September 30, September 30,
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 $ 7,961 $ 4 0.20 % $ 8,034 $ 4 0.20 % $ 6,892 $ 11 0.21 % $ 7,094 $ 12 0.23 %
Cash and investments segregated 19,542 6 0.12 % 24,425 8 0.13 % 20,251 18 0.12 % 26,148 29 0.15 %
Broker-related receivables (1) 363 - 0.01 % 351 - 0.01 % 323 - 0.10 % 370 - 0.09 %
Receivables from brokerage clients 13,965 122 3.47 % 11,846 109 3.65 % 13,589 358 3.52 % 11,588 321 3.70 %
Securities available for sale (2) 51,425 135 1.04 % 49,205 138 1.11 % 51,984 413 1.06 % 48,250 413 1.14 %
Securities held to maturity 32,609 208 2.53 % 26,819 166 2.46 % 31,839 613 2.57 % 23,601 430 2.44 %
Loans to banking clients     13,001     89   2.72 %   12,004     84   2.78 %   12,776     264   2.76 %   11,569     243   2.81 %
Total interest-earning assets     138,866     564   1.61 %   132,684     509   1.52 %   137,654     1,677   1.63 %   128,620     1,448   1.51 %
Other interest revenue           36             22             90             79    
Total interest-earning assets   $ 138,866   $ 600   1.72 % $ 132,684   $ 531   1.59 % $ 137,654   $ 1,767   1.72 % $ 128,620   $ 1,527   1.59 %
Funding sources:
Deposits from banking clients $ 96,114 $ 7 0.03 % $ 87,793 $ 7 0.03 % $ 94,951 $ 22 0.03 % $ 83,492 $ 24 0.04 %
Payables to brokerage clients 26,403 1 0.01 % 29,312 1 0.01 % 26,652 2 0.01 % 30,847 2 0.01 %
Long-term debt     1,900     19   3.97 %   1,833     17   3.68 %   1,901     55   3.87 %   1,699     51   4.01 %
Total interest-bearing liabilities     124,417     27   0.09 %   118,938     25   0.08 %   123,504     79   0.09 %   116,038     77   0.09 %
Non-interest-bearing funding sources 14,449 13,746 14,150 12,582
Other interest expense (1)           -             -             -             2    
Total funding sources   $ 138,866   $ 27   0.08 % $ 132,684   $ 25   0.08 % $ 137,654   $ 79   0.08 % $ 128,620   $ 79   0.08 %
Net interest revenue         $ 573   1.64 %       $ 506   1.51 %       $ 1,688   1.64 %       $ 1,448   1.51 %
(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.
 
See Note to Consolidated Statements of Income, Financial and Operating Highlights, and Net 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 Nine Months Ended
September 30, September 30,
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

$ 162,805 $ 240 0.58 % $ 163,936 $ 239 0.58 % $ 164,208 $ 714 0.58 % $ 161,589 $ 695 0.58 %
Fee waivers           (190 )             (180 )             (558 )             (492 )    
Schwab money market funds 162,805 50 0.12 % 163,936 59 0.14 % 164,208 156 0.13 % 161,589 203 0.17 %
Equity and bond funds (1) 86,416 50 0.23 % 64,956 41 0.25 % 81,770 142 0.23 % 60,591 114 0.25 %
Mutual Fund OneSource ®     268,360     216     0.32 %   241,653     195     0.32 %   264,822     631     0.32 %   238,792     570     0.32 %
Total mutual funds (2)   $ 517,581     316     0.24 % $ 470,545     295     0.25 % $ 510,800     929     0.24 % $ 460,972     887     0.26 %
Advice solutions (2) $ 170,630 215 0.50 % $ 145,468 183 0.50 % $ 164,742 623 0.51 % $ 141,040 523 0.50 %
Other (3)           118               105               340               297      

Total asset management and administration fees

        $ 649             $ 583             $ 1,892             $ 1,707      
(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)
     
 

Q3-14 % Change

2014   2013
vs.   vs. Third   Second   First Fourth   Third
(In billions, at quarter end, except as noted) Q3-13 Q2-14 Quarter   Quarter   Quarter   Quarter   Quarter
 
Assets in client accounts

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

4 % 3 % $ 129.7 $ 126.5 $ 126.8 $ 127.3 $ 125.0
Proprietary mutual funds (Schwab Funds® and Laudus Funds®):
Money market funds - 3 % 164.7 160.0 166.3 167.7 165.1
Equity and bond funds (1) 18 % -   59.1       59.1       56.7       54.4       50.0  
Total proprietary funds 4 % 2 %   223.8       219.1       223.0       222.1       215.1  
Mutual Fund Marketplace® (2)
Mutual Fund OneSource® 6 % (3 %) 262.1 271.6 264.5 260.5 246.5
Mutual fund clearing services 1 % 3 % 166.3 161.1 151.5 147.4 164.5
Other third-party mutual funds 15 % (2 %)   456.1       463.5       439.4       420.9       398.3  
Total Mutual Fund Marketplace 9 % (1 %)   884.5       896.2       855.4       828.8       809.3  
Total mutual fund assets 8 % (1 %)   1,108.3       1,115.3       1,078.4       1,050.9       1,024.4  
Exchange-traded funds (ETFs) (1)
Proprietary ETFs 61 % 7 % 22.9 21.5 19.0 16.8 14.2
ETF OneSource® (2) 83 % 33 % 14.1 10.6 9.5 8.5 7.7
Other third-party ETFs 12 % (3 %)   184.2       190.1       184.3       179.0       165.2  
Total ETF assets 18 % -   221.2       222.2       212.8       204.3       187.1  
Equity and other securities (1) 20 % 1 % 771.6 766.5 722.0 702.0 643.6
Fixed income securities 6 % 1 % 187.3 185.2 181.2 177.5 176.9
Margin loans outstanding 20 % 4 %   (14.4 )     (13.8 )     (13.2 )     (12.6 )     (12.0 )
Total client assets 12 % - $ 2,403.7     $ 2,401.9     $ 2,308.0     $ 2,249.4     $ 2,145.0  
 
Client assets by business
Investor Services 11 % - $ 1,323.3 $ 1,321.0 $ 1,270.9 $ 1,241.5 $ 1,196.0
Advisor Services 14 % -   1,080.4       1,080.9       1,037.1       1,007.9       949.0  
Total client assets 12 % - $ 2,403.7     $ 2,401.9     $ 2,308.0     $ 2,249.4     $ 2,145.0  
 
Net growth (decline) in assets in client accounts (for the quarter ended)
Net new assets
Investor Services (3, 4) N/M 93 % $ 18.7 $ 9.7 $ 16.9 $ (12.8 ) $ 2.4
Advisor Services 2 % 23 %   16.0       13.0       17.3       14.6       15.7  
Total net new assets 92 % 53 %   34.7       22.7       34.2       1.8       18.1  
Net market (losses) gains (143 %) (146 %)   (32.9 )     71.2       24.4       102.6       76.0  
Net growth (98 %) (98 %) $ 1.8     $ 93.9     $ 58.6     $ 104.4     $ 94.1  
 
New brokerage accounts (in thousands, for the quarter ended) 3 % (5 %) 229 242 258 250 223
Clients (in thousands)
Active Brokerage Accounts 3 % 1 % 9,309 9,252 9,178 9,093 9,013
Banking Accounts 4 % 2 % 970 950 933 916 930
Corporate Retirement Plan Participants (3) 8 % 5 %   1,405       1,344       1,338       1,305       1,297  
 
(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) In the third quarter of 2013, the Company reduced its reported totals for overall client assets and retirement plan participants by $24.7 billion and 317,000, respectively, to reflect the estimated impact of the consolidation of its retirement plan recordkeeping platforms and subsequent resignation from certain retirement plan clients.
(4) 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. Fourth quarter of 2013 also includes an outflow of $30.2 billion relating to the planned transfer of a mutual fund clearing services client. Third quarter of 2013 includes inflows of $17.5 billion and an outflow of $2.1 billion from certain mutual fund clearing services clients.
N/M Not meaningful.
 
The Charles Schwab Corporation Monthly Activity Report For September 2014
                           
2013 2014  

Change

Sep

Oct

Nov

Dec

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Mo.

Yr.

Market Indices
(at month end)
Dow Jones Industrial Average 15,130 15,546 16,086 16,577 15,699 16,322 16,458 16,581 16,717 16,827 16,563 17,098 17,043 - 13 %
Nasdaq Composite 3,771 3,920 4,060 4,177 4,104 4,308 4,199 4,115 4,243 4,408 4,370 4,580 4,493 (2 %) 19 %
Standard & Poor’s 500 1,682 1,757 1,806 1,848 1,783 1,859 1,872 1,884 1,924 1,960 1,931 2,003 1,972 (2 %) 17 %
Client Assets
(in billions of dollars)
Beginning Client Assets 2,081.5 2,145.0 2,177.2 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
Net New Assets (1) 11.7 (19.8 ) 11.7 9.9 11.9 10.9 11.4 0.3 10.9 11.5 15.9 8.5 10.3 21 % (12 %)
Net Market Gains (Losses) 51.8     52.0     28.2     22.4     (43.9 )   66.0     2.3     4.6     30.4     36.2     (35.1 )   57.1   (54.9 )
Total Client Assets (at month end) 2,145.0     2,177.2     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 %) 12 %
 
Receiving Ongoing Advisory Services
(at month end)
Investor Services 145.2 149.5 152.1 155.1 153.0 158.3 159.2 160.6 163.7 176.5 175.1 180.0 177.3 (1 %) 22 %
Advisor Services (2) 890.9 915.1 932.2 946.3 934.1 966.4 973.5 977.4 995.3 1,014.9 1,007.2 1,035.3 1,015.3 (2 %) 14 %
Client Accounts
(at month end, in thousands)
Active Brokerage Accounts 9,013 9,032 9,055 9,093 9,119 9,146 9,178 9,217 9,228 9,252 9,269 9,288 9,309 - 3 %
Banking Accounts 930 930 922 916 923 928 933 938 944 950 956 964 970 1 % 4 %
Corporate Retirement Plan Participants 1,297 1,294 1,301 1,305 1,325 1,327 1,338 1,344 1,346 1,344 1,381 1,383 1,405 2 % 8 %
Client Activity
New Brokerage Accounts (in thousands) 70 81 76 93 90 78 90 95 71 76 78 75 76 1 % 9 %
Inbound Calls (in thousands) 1,764 2,051 1,803 1,961 2,048 1,846 1,961 1,938 1,691 1,806 1,873 1,768 1,755 (1 %) (1 %)
Web Logins (in thousands) 27,871 32,435 30,832 31,751 35,348 33,394 34,200 34,254 32,165 32,768 33,426 32,491 31,098 (4 %) 12 %
Cash as a Percentage of Client Assets (3) 13.5 % 13.2 % 13.0 % 13.1 % 13.2 % 12.7 % 12.7 % 12.4 % 12.2 % 11.9 % 12.1 % 11.9 % 12.2 %

30bp

(130)bp

Mutual Fund and Exchange-traded Fund
Net Buys (Sells) (4, 5, 6)
(in millions of dollars)
Large Capitalization Stock 292 725 929 942 226 (33 ) 676 95 129 311 773 620 228
Small / Mid Capitalization Stock 319 1,022 227 400 373 (381 ) 680 (430 ) (564 ) 220 (355 ) (639 ) (127 )
International 1,616 2,746 1,535 1,403 1,782 891 1,028 1,665 1,240 2,137 817 524 166
Specialized 175 711 386 (278 ) 1,213 1,183 912 609 377 1,690 1,082 373 (24 )
Hybrid 243 213 82 301 447 599 107 230 406 201 532 165 -
Taxable Bond (990 ) 314 563 (963 ) 1,256 3,208 1,344 449 1,346 606 92 683 (3,475 )
Tax-Free Bond (391 ) (256 ) (144 ) (354 ) 464 429 474 246 584 516 277 400 463
Net Buy (Sell) Activity
(in millions of dollars)
Mutual Funds (5) 356 2,842 1,407 (480 ) 4,838 3,658 3,611 1,312 2,236 3,313 1,804 612 (4,022 )
Exchange Traded Funds (6) 908 2,633 2,171 1,930 923 2,237 1,612 1,553 1,284 2,368 1,414 1,514 1,253
Money Market Funds 846 (1,431 ) 616 3,429 (986 ) (318 ) (135 ) (4,141 ) (561 ) (1,664 ) 1,493 1,248 2,224
Average Interest-Earning Assets (7)
(in millions of dollars) 133,723 135,353 135,090 136,046 137,029 136,947 137,625 137,164 136,588 137,328 137,785 139,027 140,115   1 % 5 %
(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 certain mutual fund clearing services client. November and October 2013 include inflows of $2.5 billion and $2.9 billion, respectively, from certain mutual fund clearing services clients. October 2013 also includes an outflow of $30.2 billion relating to the planned transfer of a mutual fund clearing services client. September 2013 includes an inflow of $4.9 billion and outflow of $2.1 billion from certain mutual fund clearing services clients.
(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

Corporate Public Relations
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888-767-5432

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