Press Release

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Schwab Reports Third Quarter Earnings Per Share of $.48 GAAP, $.51 Adjusted(1)

10/15/2020

Core Net New Assets Total $42.7 Billion, Including a Record September of $20.0 Billion

Client Assets Total $4.40 Trillion, Up 17% Year-Over-Year

SAN FRANCISCO--(BUSINESS WIRE)-- The Charles Schwab Corporation announced today that its net income for the third quarter of 2020 was $698 million compared with $671 million for the second quarter of 2020, and $951 million for the third quarter of 2019. Net income for the nine months ended September 30, 2020 was $2.2 billion, compared with $2.9 billion for the year-earlier period. The company’s financial results for both the third quarter and first nine months of 2020 include certain acquisition and integration-related costs as well as the amortization of acquired intangibles, which together totaled $67 million and $203 million pre-tax, respectively. Unless otherwise noted, the results presented in this release exclude TD Ameritrade, which was acquired in October 2020.

This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20201015005382/en/

The company’s financial presentations now include references to adjusted measures of expenses, net income, diluted earnings per common share, pre-tax profit margin, as well as return on tangible common equity (ROTCE), which are intended to help investors evaluate Schwab’s operating performance as well as facilitate a meaningful comparison of our current results to both historic and future periods.

 

Three Months Ended September 30,

 

%

 

Nine Months Ended September 30,

 

%

Financial Highlights

2020

 

2019

 

Change

 

2020

 

2019

 

Change

 

 

 

 

 

 

 

 

 

 

 

 

Net revenues (in millions)

$

2,448

 

 

$

2,711

 

 

(10)%

 

$

7,515

 

 

$

8,115

 

 

(7)%

Net income (in millions)

 

 

 

 

 

 

 

 

 

 

 

GAAP

$

698

 

 

$

951

 

 

(27)%

 

$

2,164

 

 

$

2,852

 

 

(24)%

Adjusted (1)

$

749

 

 

$

958

 

 

(22)%

 

$

2,318

 

 

$

2,873

 

 

(19)%

Diluted earnings per common share

 

 

 

 

 

 

 

 

 

 

 

GAAP

$

.48

 

 

$

.70

 

 

(31)%

 

$

1.54

 

 

$

2.05

 

 

(25)%

Adjusted (1)

$

.51

 

 

$

.70

 

 

(27)%

 

$

1.66

 

 

$

2.07

 

 

(20)%

Pre-tax profit margin

 

 

 

 

 

 

 

 

 

 

 

GAAP

36.3

%

 

45.6

%

 

 

 

37.6

%

 

46.0

%

 

 

Adjusted (1)

39.1

%

 

46.0

%

 

 

 

40.3

%

 

46.4

%

 

 

Return on average common stockholders’ equity (annualized)

10

%

 

20

%

 

 

 

12

%

 

20

%

 

 

Return on tangible common equity (annualized) (1)

12

%

 

21

%

 

 

 

14

%

 

22

%

 

 

Note: All per-share results are rounded to the nearest cent, based on weighted-average diluted common shares outstanding.

(1)

Further details on non-GAAP financial measures and a reconciliation of such measures to reported results are included on pages 11-12 of this release.

CEO Walt Bettinger said, “Following yet another quarter of strong business fundamentals, we find ourselves at a pivotal moment in Schwab’s history – one made possible by the groundwork we’ve been laying over the course of four-plus decades. As a result of our watershed acquisition of TD Ameritrade, which closed on October 6, 2020, we have created a company with tremendous reach – approximately $6 trillion in client assets and 28 million brokerage accounts – that will leverage the proud history of both firms by helping individual investors across every phase of their financial journey as well as support the independent advisors who serve them. Our singular focus on executing our ‘Through Clients’ Eyes’ strategy will guide us forward into this exciting next chapter, utilizing our scale to build upon our existing strengths and expertise as well as further expanding our broad array of investing, trading, and custodial services. I’m proud of the work both companies put in to get us to this point, and I’m honored to lead our combined team as we work together to make the most of the opportunities that lie ahead of us.”

“During the final months leading up to closing the acquisition, the all-weather business model we’ve created and our unwavering focus on clients’ needs helped to drive sustained momentum even as the COVID-19 pandemic and its effects continued to test us all in multiple ways.” Mr. Bettinger added, “Throughout the third quarter, the equity markets generally worked their way upwards while both short and long-term interest rates remained under pressure. Clients entrusted us with $51.2 billion in net new assets, despite seasonal tax outflows in July from a delayed tax filing deadline. In addition to an $8.5 billion inflow to our Advisor Services business related to closing the Wasmer Schroeder transaction, core net new assets totaled $42.7 billion, bringing year-to-date core net new assets to $162.5 billion, which represents a 5% annualized organic growth rate. New brokerage account formation was also healthy with 592 thousand new accounts opened during the quarter, and we ended the period with a record 14.4 million accounts, up 19% year-over-year. Our clients continued to be highly engaged with their investments – daily trades averaged 1.5 million in the third quarter, which is modestly down from the peak activity observed throughout the first half of the year, but still up 103% over last year’s third quarter. Against this backdrop, total client assets ended the quarter at $4.40 trillion, up 17%.”

Mr. Bettinger concluded, “2020 has been a year of advancing our strategic goals to drive scale, monetization, and segmentation in ways that benefit our clients. We continue to build upon our scale advantage via providing low cost, high-value products and services across multiple channels, including new digital capabilities like Schwab PlanTM, our web-based complementary personalized planning tool. In the first nine months of 2020, our website has supported nearly 6 million unique client logins, already surpassing 2019’s full-year total. While digital engagement is growing strongly, we also continue to recognize the importance of our broader branch network, including the offices operated by franchisees. We recently opened our 73rd independent branch, up from 64 a year ago, extending our in-person capabilities through community-based professionals at a time when many of our clients have shifted geographically due to the pandemic. Our recent acquisitions of Wasmer Schroeder and Motif will help us further diversify revenues by expanding the range of proprietary investment and advisory solutions we can offer. Within our Advisor Services business, Schwab Advisor Network® (SAN) reached a new milestone by crossing the $100 billion mark during the quarter. The referral program, which encompasses nearly 175 prescreened independent advisory firms nationwide, provides clients with access to a comprehensive and local approach to managing their unique financial needs and is one part of our commitment to offering a full suite of tailored advisory solutions. Approximately 50 thousand clients are currently in a SAN relationship, and program assets have grown at a 10% compound annual rate since 2010. Through all of this and a total of four closed acquisitions in 2020 – which also included USAA Investment Management client assets and of course, TD Ameritrade – our values, beliefs, and commitment to clients and stockholders remain firm. We will continue to adapt and evolve, maintaining trust and thoughtfully delivering products and solutions designed to meet our clients’ needs.”

CFO Peter Crawford commented, “Our third quarter results reflect our business’ strength and financial wherewithal to navigate the headwinds created by the current macroeconomic environment. Net interest revenue was helped by rising interest-earning asset levels, and rates stayed relatively within expectations throughout the quarter. The overall decline in both short- and long-term rates, however, driven by the Fed’s monetary policy easing, as well as the related acceleration of mortgage-backed security prepayment speeds within our bank investment portfolio, led to an 18% year-over-year decline to $1.3 billion. Asset management and administration fees increased 4% to $860 million as a result of rising balances in advisory solutions, which more than offset elevated levels of money market fund fee waivers. Trading volumes continued to show strength relative to prior years; trading revenue, however, declined 12% to $181 million due to our October 2019 pricing actions. All together, while total revenue declined 10% year-over-year to $2.4 billion, it was roughly flat sequentially. On the expense front, our total outlays rose to $1.6 billion, up 6% year-over-year; noteworthy contributors included $42 million in acquisition and integration-related costs and $25 million in amortization of acquired intangibles. Exclusive of these items (1), adjusted total expenses were up only 2% year-over-year, well within our expectations and particularly significant in a period when key drivers of our workload – transactions, new accounts, households – have been increasing dramatically. For example, successfully growing our client base and supporting elevated engagement has resulted in new-to-firm households and Retail call volumes reaching extraordinary levels, up 101% and 26%, respectively, from a year ago. We’ve therefore carefully expanded our staffing to help deliver the quality service our clients expect. Moderating expense growth under these circumstances demonstrates our ability to harness efficiencies through investing in our business and highlights the importance of our ongoing digital transformation efforts. Regardless of the environment, our resolve does not waver: we will continue to balance near-term profitability with the investments necessary to support current and future growth.”

Mr. Crawford concluded, “Through attentive capital management we’ve been able to sustain ongoing balance sheet expansion driven by our growing client base, the waning attractiveness of alternative vehicles for their cash, and some continued net equity selling as they manage their investment allocations. Total balance sheet assets grew 5% from month-end June to approximately $419 billion as of September 30th – up a substantial 43% from year-end 2019. Even amidst turbulent environments, we maintain our disciplined approach to balance sheet management, with considerable allocations to investment securities carrying a U.S. government or agency guarantee; currently 85%-90% of our bank’s investment portfolio is backed by such protection. The company’s preliminary Tier 1 leverage ratio was 5.7% at quarter end, remaining well above regulatory minimums; following the close of the TD Ameritrade transaction we continue to see a path back towards our long-term operating objective of 6.75%-7.00%. By focusing on the levers under our control in this environment, we were still able to produce a 36.3% pre-tax profit margin (39.1% on an adjusted basis) and 10% return on equity (12% ROTCE) (1). We don’t know how long current interest rate dynamics will persist. We believe that what endures, and ultimately drives our success, is our intense client focus and commitment to operating resilience. Coupling our strong business momentum with the added scale from TD Ameritrade will add to our competitive positioning and allow us to emerge from the shadow of current operating conditions even stronger than before.”

(1)

Further details on non-GAAP financial measures and a reconciliation of such measures to reported results are included on pages 11-12 of this release.

Commentary from the CFO

Periodically, our Chief Financial Officer provides insight and commentary regarding Schwab’s financial picture at: https://www.aboutschwab.com/cfo-commentary. The most recent commentary, which provides perspective on The Charles Schwab Corporation’s recently completed acquisition of TD Ameritrade was posted on October 6, 2020.

Business Update

The company has scheduled a Fall Business Update for institutional investors on Thursday, October 29, 2020. The Update, which will be held via webcast, is scheduled to run from approximately 8:00 a.m. - 9:15 a.m. PT, 11:00 a.m. - 12:15 p.m. ET. In addition, this Update will include a discussion of TD Ameritrade’s financial results for the calendar quarter ending September 30th. Participants will include members of the company’s executive management. This Update will be accessible at https://www.schwabevents.com/corporation.

Forward-Looking Statements

This press release contains forward-looking statements relating to scale; investments to drive efficiency, scale and monetization, diversify revenues, and expand low cost, high-value products and services; all-weather business model; digital transformation; availability of and enrollment in advisory solutions; growth in the client base, accounts, and assets; expense growth; balancing near-term profitability with continued investment to support current and future growth; balance sheet management and expansion; Tier 1 Leverage Ratio operating objective; operating resilience; business momentum; and competitive positioning, that reflect management’s expectations as of the date hereof. 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 risk that expected revenue, expense, operational and other synergies from recent acquisitions may not be fully realized or may take longer to realize than expected; the company’s ability to develop and launch new and enhanced products, services, and capabilities, as well as enhance its infrastructure, in a timely and successful manner; client use of the company’s advisory solutions and other products and services; general market conditions, including equity valuations, trading activity, the level of interest rates – which can impact money market fund fee waivers – and credit spreads; the company’s ability to attract and retain clients and registered investment advisors and grow those relationships and client assets; competitive pressures on pricing, including deposit rates; the company’s ability to manage expenses; capital and liquidity needs and management; client cash allocations; client sensitivity to rates; the level of client assets, including cash balances; the company’s ability to monetize client assets; the scope and duration of the COVID-19 pandemic and actions taken by governmental authorities to contain the spread of the virus and the economic impact; 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 28 million active brokerage accounts, 2.0 million corporate retirement plan participants, 1.5 million banking accounts, and approximately $6 trillion in client assets*. Through its operating subsidiaries, the company provides a full range of wealth management, securities brokerage, banking, asset management, custody, and financial advisory services to individual investors and independent investment advisors. Its broker-dealer subsidiaries, Charles Schwab & Co., Inc., TD Ameritrade, Inc., and TD Ameritrade Clearing, Inc., (members SIPC, https://www.sipc.org), and their 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 primary banking subsidiary, Charles Schwab Bank, SSB (member FDIC and an Equal Housing Lender), provides banking and lending services and products. More information is available at https://www.aboutschwab.com.

TD Ameritrade, Inc. and TD Ameritrade Clearing, Inc. are separate but affiliated companies and subsidiaries of TD Ameritrade Holding Corporation. TD Ameritrade Holding Corporation is a wholly owned subsidiary of The Charles Schwab Corporation. TD Ameritrade is a trademark jointly owned by TD Ameritrade IP Company, Inc. and The Toronto-Dominion Bank.

*Total client assets based on combined data for Schwab and TD Ameritrade as of August 31, 2020, using company reports; all other combined data as of June 30, 2020, calculated using Schwab’s methodology.

THE CHARLES SCHWAB CORPORATION

Consolidated Statements of Income

(In millions, except per share amounts)

(Unaudited)

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

2020

 

2019

 

2020

 

2019

Net Revenues

 

 

 

 

 

 

 

Interest revenue

$

1,432

 

 

$

1,892

 

 

$

4,626

 

 

$

5,817

 

Interest expense

(89)

 

 

(261)

 

 

(322)

 

 

(896)

 

Net interest revenue

1,343

 

 

1,631

 

 

4,304

 

 

4,921

 

Asset management and administration fees

860

 

 

825

 

 

2,488

 

 

2,366

 

Trading revenue (1)

181

 

 

206

 

 

562

 

 

630

 

Other (1)

64

 

 

49

 

 

161

 

 

198

 

Total net revenues

2,448

 

 

2,711

 

 

7,515

 

 

8,115

 

Expenses Excluding Interest

 

 

 

 

 

 

 

Compensation and benefits

840

 

 

857

 

 

2,556

 

 

2,514

 

Professional services

194

 

 

168

 

 

574

 

 

516

 

Occupancy and equipment

155

 

 

144

 

 

449

 

 

408

 

Advertising and market development

66

 

 

71

 

 

203

 

 

217

 

Communications

73

 

 

63

 

 

226

 

 

187

 

Depreciation and amortization (2)

97

 

 

82

 

 

284

 

 

235

 

Amortization of acquired intangible assets (2)

25

 

 

6

 

 

43

 

 

20

 

Regulatory fees and assessments

36

 

 

30

 

 

106

 

 

92

 

Other

73

 

 

54

 

 

250

 

 

190

 

Total expenses excluding interest

1,559

 

 

1,475

 

 

4,691

 

 

4,379

 

Income before taxes on income

889

 

 

1,236

 

 

2,824

 

 

3,736

 

Taxes on income

191

 

 

285

 

 

660

 

 

884

 

Net Income

698

 

 

951

 

 

2,164

 

 

2,852

 

Preferred stock dividends and other

83

 

 

38

 

 

171

 

 

127

 

Net Income Available to Common Stockholders

$

615

 

 

$

913

 

 

$

1,993

 

 

$

2,725

 

Weighted-Average Common Shares Outstanding:

 

 

 

 

 

 

 

Basic

1,289

 

 

1,300

 

 

1,288

 

 

1,320

 

Diluted

1,294

 

 

1,308

 

 

1,294

 

 

1,329

 

Earnings Per Common Shares Outstanding:

 

 

 

 

 

 

 

Basic

$

.48

 

 

$

.70

 

 

$

1.55

 

 

$

2.06

 

Diluted

$

.48

 

 

$

.70

 

 

$

1.54

 

 

$

2.05

 

(1)

Beginning in the first quarter of 2020, order flow revenue was reclassified from other revenue to trading revenue. Prior periods have been reclassified to reflect this change.

(2)

Beginning in the third quarter of 2020, amortization of acquired intangible assets was reclassified from depreciation and amortization. Prior periods have been reclassified to reflect this change.

THE CHARLES SCHWAB CORPORATION

Financial and Operating Highlights

(Unaudited)

 

   

 

Q3-20 % change

 

 

2020

 

2019

 

vs.

 

vs.

 

 

Third

 

Second

 

First

 

Fourth

 

Third

(In millions, except per share amounts and as noted)

Q3-19

 

Q2-20

 

 

Quarter

 

Quarter

 

Quarter

 

Quarter

 

Quarter

Net Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest revenue

(18)

%

 

(3)

%

 

 

$

1,343

 

 

$

1,389

 

 

$

1,572

 

 

$

1,595

 

 

$

1,631

 

Asset management and administration fees

4

%

 

7

%

 

 

860

 

 

801

 

 

827

 

 

845

 

 

825

 

Trading revenue (1)

(12)

%

 

(6)

%

 

 

181

 

 

193

 

 

188

 

 

122

 

 

206

 

Other (1)

31

%

 

(4)

%

 

 

64

 

 

67

 

 

30

 

 

44

 

 

49

 

Total net revenues

(10)

%

 

 

 

 

2,448

 

 

2,450

 

 

2,617

 

 

2,606

 

 

2,711

 

Expenses Excluding Interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Compensation and benefits

(2)

%

 

3

%

 

 

840

 

 

819

 

 

897

 

 

806

 

 

857

 

Professional services

15

%

 

(2)

%

 

 

194

 

 

198

 

 

182

 

 

186

 

 

168

 

Occupancy and equipment

8

%

 

2

%

 

 

155

 

 

152

 

 

142

 

 

151

 

 

144

 

Advertising and market development

(7)

%

 

(6)

%

 

 

66

 

 

70

 

 

67

 

 

90

 

 

71

 

Communications

16

%

 

(6)

%

 

 

73

 

 

78

 

 

75

 

 

66

 

 

63

 

Depreciation and amortization (2)

18

%

 

 

 

 

97

 

 

97

 

 

90

 

 

87

 

 

82

 

Amortization of acquired intangible assets (2)

N/M

 

108

%

 

 

25

 

 

12

 

 

6

 

 

7

 

 

6

 

Regulatory fees and assessments

20

%

 

 

 

 

36

 

 

36

 

 

34

 

 

30

 

 

30

 

Other

35

%

 

(27)

%

 

 

73

 

 

100

 

 

77

 

 

71

 

 

54

 

Total expenses excluding interest

6

%

 

 

 

 

1,559

 

 

1,562

 

 

1,570

 

 

1,494

 

 

1,475

 

Income before taxes on income

(28)

%

 

 

 

 

889

 

 

888

 

 

1,047

 

 

1,112

 

 

1,236

 

Taxes on income

(33)

%

 

(12)

%

 

 

191

 

 

217

 

 

252

 

 

260

 

 

285

 

Net Income

(27)

%

 

4

%

 

 

$

698

 

 

$

671

 

 

$

795

 

 

$

852

 

 

$

951

 

Preferred stock dividends and other

118

%

 

66

%

 

 

83

 

 

50

 

 

38

 

 

51

 

 

38

 

Net Income Available to Common Stockholders

(33)

%

 

(1)

%

 

 

$

615

 

 

$

621

 

 

$

757

 

 

$

801

 

 

$

913

 

Earnings per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

(31)

%

 

 

 

 

$

.48

 

 

$

.48

 

 

$

.59

 

 

$

.62

 

 

$

.70

 

Diluted

(31)

%

 

 

 

 

$

.48

 

 

$

.48

 

 

$

.58

 

 

$

.62

 

 

$

.70

 

Dividends declared per common share

6

%

 

 

 

 

$

.18

 

 

$

.18

 

 

$

.18

 

 

$

.17

 

 

$

.17

 

Weighted-average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

(1)

%

 

 

 

 

1,289

 

 

1,288

 

 

1,287

 

 

1,284

 

 

1,300

 

Diluted

(1)

%

 

 

 

 

1,294

 

 

1,294

 

 

1,294

 

 

1,293

 

 

1,308

 

Performance Measures

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pre-tax profit margin

 

 

 

 

 

36.3

%

 

36.2

%

 

40.0

%

 

42.7

%

 

45.6

%

Return on average common stockholders’ equity (annualized) (3)

 

 

 

 

 

10

%

 

10

%

 

14

%

 

17

%

 

20

%

Financial Condition (at quarter end, in billions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

35

%

 

(18)

%

 

 

$

27.5

 

 

$

33.6

 

 

$

68.5

 

 

$

29.3

 

 

$

20.3

 

Cash and investments segregated

83

%

 

(11)

%

 

 

29.6

 

 

33.2

 

 

34.3

 

 

20.5

 

 

16.2

 

Receivables from brokerage clients — net

20

%

 

19

%

 

 

25.4

 

 

21.4

 

 

19.0

 

 

21.8

 

 

21.1

 

Available for sale securities (4)

N/M

 

8

%

 

 

303.8

 

 

281.2

 

 

221.2

 

 

61.4

 

 

56.5

 

Held to maturity securities (4)

(100)

%

 

 

 

 

 

 

 

 

 

 

134.7

 

 

140.2

 

Bank loans — net

32

%

 

7

%

 

 

22.3

 

 

20.9

 

 

19.5

 

 

18.2

 

 

16.9

 

Total assets

50

%

 

5

%

 

 

419.4

 

 

400.5

 

 

370.8

 

 

294.0

 

 

279.0

 

Bank deposits

53

%

 

6

%

 

 

320.7

 

 

301.6

 

 

277.5

 

 

220.1

 

 

209.3

 

Payables to brokerage clients

46

%

 

4

%

 

 

52.0

 

 

50.1

 

 

49.3

 

 

39.2

 

 

35.6

 

Long-term debt

5

%

 

(8)

%

 

 

7.8

 

 

8.5

 

 

8.5

 

 

7.4

 

 

7.4

 

Stockholders’ equity

46

%

 

2

%

 

 

31.3

 

 

30.8

 

 

26.3

 

 

21.7

 

 

21.4

 

Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Full-time equivalent employees (at quarter end, in thousands)

12

%

 

1

%

 

 

22.1

 

 

21.8

 

 

20.2

 

 

19.7

 

 

19.8

 

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

(36)

%

 

(28)

%

 

 

$

122

 

 

$

169

 

 

$

250

 

 

$

209

 

 

$

190

 

Expenses excluding interest as a percentage of average client assets (annualized)

 

 

 

 

 

0.14

%

 

0.16

%

 

0.16

%

 

0.15

%

 

0.16

%

Clients’ Daily Average Trades (DATs) (in thousands)

103

%

 

(10)

%

 

 

1,460

 

 

1,619

 

 

1,540

 

 

785

 

 

718

 

Number of Trading Days

1

%

 

2

%

 

 

64.0

 

 

63.0

 

 

62.0

 

 

63.0

 

 

63.5

 

Revenue Per Trade (5)

(57)

%

 

3

%

 

 

$

1.94

 

 

$

1.89

 

 

$

1.97

 

 

$

2.47

 

 

$

4.52

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

Beginning in the first quarter of 2020, order flow revenue was reclassified from other revenue to trading revenue. Prior periods have been reclassified to reflect this change.

(2)

Beginning in the third quarter of 2020, amortization of acquired intangible assets was reclassified from depreciation and amortization. Prior periods have been reclassified to reflect this change.

(3)

Return on average common stockholders’ equity is calculated using net income available to common stockholders divided by average common stockholders’ equity.

(4)

On January 1, 2020, the Company transferred all of its investment securities designated as held to maturity to the available for sale category, as described in Part I – Item 1 – Note 5 of our Quarterly Report on Form 10-Q for the quarter ended June 30, 2020.

(5)

Revenue per trade is calculated as trading revenue divided by DATs multiplied by the number of trading days.

N/M Not meaningful.

THE CHARLES SCHWAB CORPORATION

Net Interest Revenue Information

(In millions, except ratios or as noted)

(Unaudited)

 

 

Three Months Ended
September 30,

 

 

Nine Months Ended
September 30,

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Average
Balance

 

Interest
Revenue/
Expense

 

Average
Yield/
Rate

 

 

Average
Balance

 

Interest
Revenue/
Expense

 

Average
Yield/
Rate

 

 

Average
Balance

 

Interest
Revenue/
Expense

 

Average
Yield/
Rate

 

 

Average
Balance

 

Interest
Revenue/
Expense

 

Average
Yield/
Rate

Interest-earning assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

$

32,628

 

 

$

8

 

 

0.10

%

 

 

$

22,288

 

 

$

123

 

 

2.16

%

 

 

$

40,410

 

 

$

112

 

 

0.37

%

 

 

$

24,506

 

 

$

432

 

 

2.33

%

Cash and investments segregated

33,214

 

 

14

 

 

0.16

%

 

 

16,140

 

 

92

 

 

2.25

%

 

 

30,162

 

 

128

 

 

0.56

%

 

 

14,771

 

 

264

 

 

2.36

%

Broker-related receivables (1)

754

 

 

 

 

0.05

%

 

 

216

 

 

2

 

 

2.34

%

 

 

638

 

 

2

 

 

0.60

%

 

 

225

 

 

4

 

 

2.21

%

Receivables from brokerage clients

21,242

 

 

125

 

 

2.31

%

 

 

19,438

 

 

205

 

 

4.13

%

 

 

19,442

 

 

404

 

 

2.73

%

 

 

19,279

 

 

636

 

 

4.35

%

Available for sale securities (2,3)

276,081

 

 

1,103

 

 

1.59

%

 

 

53,487

 

 

366

 

 

2.71

%

 

 

236,204

 

 

3,434

 

 

1.93

%

 

 

58,738

 

 

1,203

 

 

2.72

%

Held to maturity securities (3)

 

 

 

 

 

 

 

136,880

 

 

906

 

 

2.63

%

 

 

 

 

 

 

 

 

 

134,031

 

 

2,721

 

 

2.70

%

Bank loans

21,668

 

 

134

 

 

2.46

%

 

 

16,724

 

 

146

 

 

3.49

%

 

 

20,248

 

 

411

 

 

2.70

%

 

 

16,621

 

 

443

 

 

3.56

%

Total interest-earning assets

385,587

 

 

1,384

 

 

1.43

%

 

 

265,173

 

 

1,840

 

 

2.75

%

 

 

347,104

 

 

4,491

 

 

1.72

%

 

 

268,171

 

 

5,703

 

 

2.82

%

Other interest revenue

 

 

48

 

 

 

 

 

 

 

52

 

 

 

 

 

 

 

135

 

 

 

 

 

 

 

114

 

 

 

Total interest-earning assets

$

385,587

 

 

$

1,432

 

 

1.47

%

 

 

$

265,173

 

 

$

1,892

 

 

2.82

%

 

 

$

347,104

 

 

$

4,626

 

 

1.77

%

 

 

$

268,171

 

 

$

5,817

 

 

2.88

%

Funding sources

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bank deposits

$

310,685

 

 

$

12

 

 

0.02

%

 

 

$

208,592

 

 

$

166

 

 

0.32

%

 

 

$

275,860

 

 

$

81

 

 

0.04

%

 

 

$

213,089

 

 

$

616

 

 

0.39

%

Payables to brokerage clients

40,169

 

 

1

 

 

0.01

%

 

 

25,080

 

 

21

 

 

0.33

%

 

 

36,001

 

 

10

 

 

0.04

%

 

 

23,443

 

 

68

 

 

0.39

%

Short-term borrowings (1)

5

 

 

 

 

0.12

%

 

 

21

 

 

 

 

2.48

%

 

 

16

 

 

 

 

0.29

%

 

 

18

 

 

 

 

2.49

%

Long-term debt

7,992

 

 

69

 

 

3.46

%

 

 

7,425

 

 

67

 

 

3.58

%

 

 

8,014

 

 

212

 

 

3.53

%

 

 

7,122

 

 

192

 

 

3.59

%

Total interest-bearing liabilities

358,851

 

 

82

 

 

0.09

%

 

 

241,118

 

 

254

 

 

0.42

%

 

 

319,891

 

 

303

 

 

0.13

%

 

 

243,672

 

 

876

 

 

0.48

%

Non-interest-bearing funding sources

26,736

 

 

 

 

 

 

 

24,055

 

 

 

 

 

 

 

27,213

 

 

 

 

 

 

 

24,499

 

 

 

 

 

Other interest expense

 

 

7

 

 

 

 

 

 

 

7

 

 

 

 

 

 

 

19

 

 

 

 

 

 

 

20

 

 

 

Total funding sources

$

385,587

 

 

$

89

 

 

0.09

%

 

 

$

265,173

 

 

$

261

 

 

0.39

%

 

 

$

347,104

 

 

$

322

 

 

0.13

%

 

 

$

268,171

 

 

$

896

 

 

0.45

%

Net interest revenue

 

 

$

1,343

 

 

1.38

%

 

 

 

 

$

1,631

 

 

2.43

%

 

 

 

 

$

4,304

 

 

1.64

%

 

 

 

 

$

4,921

 

 

2.43

%

(1)

Interest revenue or expense was less than $500 thousand in the period or periods presented.

(2)

Amounts have been calculated based on amortized cost.

(3)

On January 1, 2020, the Company transferred all of its investment securities designated as held to maturity to the available for sale category, as described in Part I – Item 1 – Note 5 of our Quarterly Report on Form 10-Q for the quarter ended June 30, 2020.

THE CHARLES SCHWAB CORPORATION

Asset Management and Administration Fees Information

(In millions, except ratios or as noted)

(Unaudited)

 

 

 

Three Months Ended
September 30,

 

 

Nine Months Ended
September 30,

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

 

Average
Client
Assets

 

Revenue

 

Average
Fee

 

 

Average
Client
Assets

 

Revenue

 

Average
Fee

 

 

Average
Client
Assets

 

Revenue

 

Average
Fee

 

 

Average
Client
Assets

 

Revenue

 

Average
Fee

Schwab money market funds before fee waivers

$

199,822

 

 

$

153

 

 

0.30

%

 

 

$

177,892

 

 

$

133

 

 

0.30

%

 

 

$

205,544

 

 

$

469

 

 

0.30

%

 

 

$

166,053

 

 

$

378

 

 

0.30

%

Fee waivers

 

 

(44)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(59)

 

 

 

 

 

 

 

 

 

 

Schwab money market funds

199,822

 

 

109

 

 

0.22

%

 

 

177,892

 

 

133

 

 

0.30

%

 

 

205,544

 

 

410

 

 

0.27

%

 

 

166,053

 

 

378

 

 

0.30

%

Schwab equity and bond funds, ETFs, and
collective trust funds (CTFs)

306,899

 

 

75

 

 

0.10

%

 

 

274,005

 

 

75

 

 

0.11

%

 

 

290,759

 

 

219

 

 

0.10

%

 

 

260,034

 

 

219

 

 

0.11

%

Mutual Fund OneSource® and other non-

transaction fee funds

197,809

 

 

154

 

 

0.31

%

 

 

192,409

 

 

153

 

 

0.32

%

 

 

187,153

 

 

436

 

 

0.31

%

 

 

190,847

 

 

452

 

 

0.32

%

Other third-party mutual funds and ETFs (1)

469,822

 

 

85

 

 

0.07

%

 

 

486,285

 

 

84

 

 

0.07

%

 

 

446,007

 

 

235

 

 

0.07

%

 

 

469,901

 

 

238

 

 

0.07

%

Total mutual funds, ETFs, and CTFs (2)

$

1,174,352

 

 

423

 

 

0.14

%

 

 

$

1,130,591

 

 

445

 

 

0.16

%

 

 

$

1,129,463

 

 

1,300

 

 

0.15

%

 

 

$

1,086,835

 

 

1,287

 

 

0.16

%

Advice solutions (2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fee-based

$

307,983

 

 

373

 

 

0.48

%

 

 

$

251,591

 

 

305

 

 

0.48

%

 

 

$

277,297

 

 

999

 

 

0.48

%

 

 

$

241,678

 

 

878

 

 

0.49

%

Non-fee-based

73,850

 

 

 

 

 

 

 

71,195

 

 

 

 

 

 

 

71,438

 

 

 

 

 

 

 

69,136

 

 

 

 

 

Total advice solutions

$

381,833

 

 

373

 

 

0.39

%

 

 

$

322,786

 

 

305

 

 

0.37

%

 

 

$

348,735

 

 

999

 

 

0.38

%

 

 

$

310,814

 

 

878

 

 

0.38

%

Other balance-based fees (3)

443,929

 

 

51

 

 

0.05

%

 

 

421,241

 

 

56

 

 

0.05

%

 

 

428,191

 

 

150

 

 

0.05

%

 

 

407,762

 

 

162

 

 

0.05

%

Other (4)

 

 

13

 

 

 

 

 

 

 

19

 

 

 

 

 

 

 

39

 

 

 

 

 

 

 

39

 

 

 

Total asset management and administration fees

 

 

$

860

 

 

 

 

 

 

 

$

825

 

 

 

 

 

 

 

$

2,488

 

 

 

 

 

 

 

$

2,366

 

 

 

(1)

Beginning in the fourth quarter of 2019, Schwab ETF OneSourceTM was discontinued as a result of the elimination of online trading commissions for U.S. and Canadian-listed ETFs.

(2)

Advice solutions include managed portfolios, specialized strategies, and customized investment advice such as Schwab Private ClientTM, Schwab Managed PortfoliosTM, Managed Account Select®, Schwab Advisor Network®, Windhaven® Strategies, ThomasPartners® Strategies, Schwab Index Advantage® advised retirement plan balances, Schwab Intelligent Portfolios®, Institutional Intelligent Portfolios®, and Schwab Intelligent Portfolios PremiumTM; as well as legacy non-fee advice solutions including Schwab Advisor Source and certain retirement plan balances. Average client assets for advice solutions may also include the asset balances contained in the mutual fund and/or ETF categories listed above. For the total end of period view, please see the Monthly Activity Report.

(3)

Includes various asset-related fees, such as trust fees, 401(k) recordkeeping fees, and mutual fund clearing fees and other service fees.

(4)

Includes miscellaneous service and transaction fees relating to mutual funds and ETFs that are not balance-based.

THE CHARLES SCHWAB CORPORATION

Growth in Client Assets and Accounts

(Unaudited)

   

 

Q3-20 % Change

 

 

2020

 

2019

 

vs.

 

vs.

 

 

Third

 

Second

 

First

 

Fourth

 

Third

(In billions, at quarter end, except as noted)

Q3-19

 

Q2-20

 

 

Quarter

 

Quarter

 

Quarter

 

Quarter

 

Quarter

Assets in client accounts

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Schwab One®, certain cash equivalents and bank deposits

52

%

 

6

%

 

 

$

370.3

 

 

$

349.2

 

 

$

324.4

 

 

$

256.7

 

 

$

242.9

 

Proprietary mutual funds (Schwab Funds® and Laudus Funds®) and CTFs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds (1)

2

%

 

(10)

%

 

 

190.3

 

 

211.6

 

 

203.7

 

 

200.8

 

 

187.0

 

Equity and bond funds and CTFs (2)

12

%

 

7

%

 

 

125.5

 

 

117.0

 

 

99.1

 

 

122.5

 

 

112.4

 

Total proprietary mutual funds and CTFs

5

%

 

(4)

%

 

 

315.8

 

 

328.6

 

 

302.8

 

 

323.3

 

 

299.4

 

Mutual Fund Marketplace® (3)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mutual Fund OneSource® and other non-transaction fee funds

5

%

 

5

%

 

 

203.6

 

 

193.0

 

 

161.6

 

 

202.1

 

 

194.7

 

Mutual fund clearing services

16

%

 

5

%

 

 

228.4

 

 

217.3

 

 

180.8

 

 

217.4

 

 

197.2

 

Other third-party mutual funds

9

%

 

6

%

 

 

848.1

 

 

796.5

 

 

676.2

 

 

824.5

 

 

776.8

 

Total Mutual Fund Marketplace

10

%

 

6

%

 

 

1,280.1

 

 

1,206.8

 

 

1,018.6

 

 

1,244.0

 

 

1,168.7

 

Total mutual fund assets

9

%

 

4

%

 

 

1,595.9

 

 

1,535.4

 

 

1,321.4

 

 

1,567.3

 

 

1,468.1

 

Exchange-traded funds (ETFs)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Proprietary ETFs (2)

12

%

 

8

%

 

 

168.9

 

 

156.3

 

 

136.5

 

 

163.8

 

 

150.8

 

Schwab ETF OneSource™ (3,4)

N/M

 

N/M

 

 

 

 

 

 

 

 

 

 

94.1

 

Other third-party ETFs (4)

59

%

 

10

%

 

 

512.6

 

 

468.0

 

 

382.5

 

 

457.0

 

 

321.6

 

Total ETF assets

20

%

 

9

%

 

 

681.5

 

 

624.3

 

 

519.0

 

 

620.8

 

 

566.5

 

Equity and other securities

23

%

 

11

%

 

 

1,453.2

 

 

1,305.8

 

 

1,035.5

 

 

1,286.4

 

 

1,178.0

 

Fixed income securities

(4)

%

 

1

%

 

 

318.0

 

 

314.8

 

 

313.8

 

 

327.1

 

 

332.3

 

Margin loans outstanding

22

%

 

22

%

 

 

(23.6)

 

 

(19.4)

 

 

(17.2)

 

 

(19.5)

 

 

(19.4)

 

Total client assets

17

%

 

7

%

 

 

$

4,395.3

 

 

$

4,110.1

 

 

$

3,496.9

 

 

$

4,038.8

 

 

$

3,768.4

 

Client assets by business

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investor Services

20

%

 

7

%

 

 

$

2,377.7

 

 

$

2,223.5

 

 

$

1,846.8

 

 

$

2,131.0

 

 

$

1,978.7

 

Advisor Services

13

%

 

7

%

 

 

2,017.6

 

 

1,886.6

 

 

1,650.1

 

 

1,907.8

 

 

1,789.7

 

Total client assets

17

%

 

7

%

 

 

$

4,395.3

 

 

$

4,110.1

 

 

$

3,496.9

 

 

$

4,038.8

 

 

$

3,768.4

 

Net growth in assets in client accounts (for the quarter ended)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net new assets by business

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investor Services (5)

(26)

%

 

(83)

%

 

 

$

18.9

 

 

$

113.0

 

 

$

35.3

 

 

$

43.1

 

 

$

25.4

 

Advisor Services (6)

4

%

 

32

%

 

 

32.3

 

 

24.4

 

 

37.9

 

 

34.2

 

 

31.2

 

Total net new assets

(10)

%

 

(63)

%

 

 

$

51.2

 

 

$

137.4

 

 

$

73.2

 

 

$

77.3

 

 

$

56.6

 

Net market gains (losses)

N/M

 

(51)

%

 

 

234.0

 

 

475.8

 

 

(615.1)

 

 

193.1

 

 

9.4

 

Net growth (decline)

N/M

 

(53)

%

 

 

$

285.2

 

 

$

613.2

 

 

$

(541.9)

 

 

$

270.4

 

 

$

66.0

 

New brokerage accounts (in thousands, for the quarter ended) (7)

63

%

 

(64)

%

 

 

592

 

 

1,652

 

 

609

 

 

433

 

 

363

 

Client accounts (in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Active brokerage accounts

19

%

 

2

%

 

 

14,393

 

 

14,107

 

 

12,736

 

 

12,333

 

 

12,118

 

Banking accounts

9

%

 

2

%

 

 

1,486

 

 

1,463

 

 

1,426

 

 

1,390

 

 

1,361

 

Corporate retirement plan participants

 

 

 

 

 

1,722

 

 

1,716

 

 

1,721

 

 

1,748

 

 

1,718

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

Total client assets in purchased money market funds are located at: https://www.aboutschwab.com/investor-relations.

(2)

Includes balances held on and off the Schwab platform. As of September 30, 2020, off-platform equity and bond funds, CTFs, and ETFs were $14.8 billion, $5.1 billion, and $51.3 billion, respectively.

(3)

Excludes all proprietary mutual funds and ETFs.

(4)

Beginning in the fourth quarter of 2019, Schwab ETF OneSource™ was discontinued. These assets are now included with other third-party ETFs.

(5)

Second quarter of 2020 includes inflows of $79.9 billion related to the acquisition of the assets of USAA’s Investment Management Company and $10.9 billion from a mutual fund clearing services client.Fourth quarter of 2019 includes an inflow of $11.1 billion from a mutual fund clearing services client.

(6)

Third quarter of 2020 includes an inflow of $8.5 billion related to the acquisition of Wasmer, Schroeder & Company, LLC.

(7)

Second quarter of 2020 includes 1.1 million new brokerage accounts related to the acquisition of the assets of USAA’s Investment Management Company.

N/M Not meaningful.

The Charles Schwab Corporation Monthly Activity Report For September 2020

 

 

 

2019

 

 

 

 

 

 

 

2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

26,917

 

27,046

 

28,051

 

28,538

 

28,256

 

25,409

 

21,917

 

24,346

 

25,383

 

25,813

 

26,428

 

28,430

 

27,782

 

(2)

%

3

%

Nasdaq Composite

7,999

 

8,292

 

8,665

 

8,973

 

9,151

 

8,567

 

7,700

 

8,890

 

9,490

 

10,059

 

10,745

 

11,775

 

11,168

 

(5)

%

40

%

Standard & Poor’s 500

2,977

 

3,038

 

3,141

 

3,231

 

3,226

 

2,954

 

2,585

 

2,912

 

3,044

 

3,100

 

3,271

 

3,500

 

3,363

 

(4)

%

13

%

Client Assets (in billions of dollars)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning Client Assets

3,716.5

 

3,768.4

 

3,854.6

 

3,942.2

 

4,038.8

 

4,051.6

 

3,862.8

 

3,496.9

 

3,778.3

 

4,009.0

 

4,110.1

 

4,278.0

 

4,489.7

 

 

 

Net New Assets (1)

17.4

 

35.2

 

12.0

 

30.1

 

20.9

 

24.4

 

27.9

 

15.3

 

97.5

 

24.6

 

11.2

 

20.0

 

20.0

 

 

15

%

Net Market Gains (Losses)

34.5

 

51.0

 

75.6

 

66.5

 

(8.1)

 

(213.2)

 

(393.8)

 

266.1

 

133.2

 

76.5

 

156.7

 

191.7

 

(114.4)

 

 

 

Total Client Assets (at month end)

3,768.4

 

3,854.6

 

3,942.2

 

4,038.8

 

4,051.6

 

3,862.8

 

3,496.9

 

3,778.3

 

4,009.0

 

4,110.1

 

4,278.0

 

4,489.7

 

4,395.3

 

(2)

%

17

%

Core Net New Assets (2)

17.4

 

24.1

 

12.0

 

30.1

 

20.9

 

24.4

 

27.9

 

15.3

 

17.6

 

13.7

 

2.7

 

20.0

 

20.0

 

 

15

%

Receiving Ongoing Advisory Services (at month end)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investor Services

318.5

 

324.6

 

330.8

 

337.1

 

336.8

 

323.2

 

291.5

 

309.9

 

339.8

 

345.2

 

355.6

 

366.8

 

361.2

 

(2)

%

13

%

Advisor Services (3)

1,659.4

 

1,691.6

 

1,728.2

 

1,769.7

 

1,773.2

 

1,694.0

 

1,531.3

 

1,647.9

 

1,711.7

 

1,747.5

 

1,818.5

 

1,900.5

 

1,870.1

 

(2)

%

13

%

Client Accounts (at month end, in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Active Brokerage Accounts

12,118

 

12,189

 

12,247

 

12,333

 

12,431

 

12,521

 

12,736

 

12,866

 

14,007

 

14,107

 

14,220

 

14,311

 

14,393

 

1

%

19

%

Banking Accounts

1,361

 

1,374

 

1,384

 

1,390

 

1,403

 

1,411

 

1,426

 

1,439

 

1,448

 

1,463

 

1,480

 

1,493

 

1,486

 

 

9

%

Corporate Retirement Plan Participants

1,718

 

1,735

 

1,743

 

1,748

 

1,732

 

1,726

 

1,721

 

1,696

 

1,714

 

1,716

 

1,712

 

1,715

 

1,722

 

 

 

Client Activity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

New Brokerage Accounts (in thousands) (4)

108

 

142

 

127

 

164

 

167

 

159

 

283

 

201

 

1,250

 

201

 

206

 

202

 

184

 

(9)

%

70

%

Inbound Calls (in thousands)

1,570

 

1,771

 

1,605

 

1,884

 

1,947

 

1,831

 

2,366

 

1,824

 

1,736

 

2,128

 

2,105

 

2,025

 

1,811

 

(11)

%

15

%

Web Logins (in thousands)

63,530

 

72,547

 

66,394

 

69,733

 

77,716

 

76,941

 

97,523

 

92,491

 

93,803

 

106,720

 

103,474

 

104,468

 

91,110

 

(13)

%

43

%

Client Cash as a Percentage of Client Assets (5)

11.4

%

11.3

%

11.3

%

11.3

%

11.3

%

12.0

%

15.1

%

14.3

%

14.0

%

13.6

%

13.0

%

12.5

%

12.8

%

30 bp

140 bp

Mutual Fund and Exchange-Traded Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Buys (Sells) (6,7) (in millions of dollars)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Large Capitalization Stock

23

 

900

 

1,406

 

991

 

845

 

(178)

 

984

 

(693)

 

(768)

 

(1,254)

 

(2,536)

 

(1,422)

 

(1,360)

 

 

 

Small / Mid Capitalization Stock

(212)

 

(458)

 

73

 

201

 

(314)

 

(531)

 

(954)

 

151

 

(401)

 

(1,063)

 

(1,476)

 

(441)

 

(497)

 

 

 

International

(355)

 

340

 

735

 

993

 

1,360

 

132

 

(2,116)

 

(2,207)

 

(1,953)

 

(1,580)

 

(773)

 

230

 

370

 

 

 

Specialized

583

 

618

 

484

 

455

 

762

 

397

 

333

 

2,059

 

1,512

 

1,020

 

1,505

 

906

 

115

 

 

 

Hybrid

(372)

 

(202)

 

(290)

 

(96)

 

615

 

(257)

 

(4,790)

 

(860)

 

(518)

 

(97)

 

(769)

 

(124)

 

(12)

 

 

 

Taxable Bond

2,935

 

2,813

 

2,274

 

4,710

 

5,714

 

3,830

 

(23,142)

 

1,642

 

5,469

 

9,215

 

7,314

 

7,680

 

5,734

 

 

 

Tax-Free Bond

593

 

809

 

860

 

1,255

 

1,481

 

1,066

 

(5,229)

 

(242)

 

805

 

1,710

 

1,297

 

1,648

 

1,123

 

 

 

Net Buy (Sell) Activity (in millions of dollars)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mutual Funds (6)

(573)

 

(473)

 

(761)

 

1,097

 

2,684

 

(565)

 

(34,382)

 

(3,863)

 

(564)

 

1,768

 

(147)

 

2,568

 

757

 

 

 

Exchange-Traded Funds (7)

3,768

 

5,293

 

6,303

 

7,412

 

7,779

 

5,024

 

(532)

 

3,713

 

4,710

 

6,183

 

4,709

 

5,909

 

4,716

 

 

 

Money Market Funds

5,833

 

7,059

 

4,768

 

1,515

 

1,911

 

1,312

 

(1,233)

 

8,465

 

4,833

 

(5,673)

 

(9,039)

 

(5,614)

 

(6,627)

 

 

 

Average Interest-Earning Assets (8)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in millions of dollars)

266,430

 

266,089

 

268,254

 

274,911

 

279,437

 

278,966

 

317,850

 

353,018

 

361,814

 

373,986

 

379,521

 

384,690

 

392,784

 

2

%

47

%

(1)

July 2020 includes an inflow of $8.5 billion related to the acquisition of Wasmer, Schroeder & Company, LLC. June 2020 includes an inflow of $10.9 billion from a mutual fund clearing services client. May 2020 includes inflows of $79.9 billion related to the acquisition of the assets of USAA’s Investment Management Company. October 2019 includes an inflow of $11.1 billion from a mutual fund clearing services client.

(2)

Net new assets before significant one-time inflows or outflows, such as acquisitions/divestitures or extraordinary flows (generally greater than $10 billion) relating to a specific client. These flows may span multiple reporting periods.

(3)

Excludes Retirement Business Services.

(4)

May 2020 includes 1.1 million new brokerage accounts related to the acquisition of the assets of USAA’s Investment Management Company.

(5)

Schwab One®, certain cash equivalents, bank deposits, and money market fund balances as a percentage of total client assets.

(6)

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.

(7)

Represents the principal value of client ETF transactions handled by Schwab, including transactions in proprietary ETFs.

(8)

Represents average total interest-earning assets on the company’s balance sheet.

THE CHARLES SCHWAB CORPORATION
Non-GAAP Financial Measures
(In millions, except ratios and per share amounts)
(Unaudited)

In addition to disclosing financial results in accordance with generally accepted accounting principles in the U.S. (GAAP), Schwab’s third quarter earnings release contains references to the non-GAAP financial measures described below. We believe these non-GAAP financial measures provide useful supplemental information about the financial performance of the Company, and facilitate meaningful comparison of Schwab’s results in the current period to both historic and future results. These non-GAAP measures should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and may not be comparable to non-GAAP financial measures presented by other companies.

Schwab’s use of non-GAAP measures is reflective of certain adjustments made to GAAP financial measures as described below.

Non-GAAP
Adjustment or
Measure

Definition

Usefulness to Management and Investors

Acquisition and integration-related costs and amortization of acquired intangible assets

Schwab adjusts certain GAAP financial measures to exclude the impact of acquisition and integration-related costs incurred as a result of the Company’s business acquisitions, amortization of acquired intangible assets, and, where applicable, the income tax effect of these expenses.

Adjustments made to exclude amortization of acquired intangible assets are reflective of all acquired intangible assets, which were recorded as part of purchase accounting. These acquired intangible assets contribute to the Company’s revenue generation. Amortization of acquired intangible assets will continue in future periods over their remaining useful lives.

We exclude acquisition and integration-related costs and amortization of acquired intangible assets for the purpose of calculating certain non-GAAP measures because we believe doing so provides additional transparency of Schwab’s ongoing operations, and may be useful in both evaluating the operating performance of the business and facilitating comparison of results with prior and future periods.

Acquisition and integration-related costs fluctuate based on the timing of acquisitions and integration activities, thereby limiting comparability of results among periods, and are not representative of the costs of running the Company’s on-going business. Amortization of acquired intangible assets is excluded because management does not believe it is indicative of the Company’s underlying operating performance.

Return on tangible common equity

Return on tangible common equity represents annualized adjusted net income available to common stockholders as a percentage of average tangible common equity. Tangible common equity represents common equity less goodwill, acquired intangible assets — net, and related deferred tax liabilities.

Acquisitions typically result in the recognition of significant amounts of goodwill and acquired intangible assets. We believe return on tangible common equity may be useful to investors as a supplemental measure to facilitate assessing capital efficiency and returns relative to the composition of Schwab’s balance sheet.

The following tables present reconciliations of GAAP measures to non-GAAP measures:

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

2020

 

2019

 

2020

 

2019

 

Total
Expenses
Excluding
Interest

 

Net
Income

 

Total
Expenses
Excluding
Interest

 

Net
Income

 

Total
Expenses
Excluding
Interest

 

Net
Income

 

Total
Expenses
Excluding
Interest

 

Net
Income

Total expenses excluding interest (GAAP),
Net income (GAAP)

$

1,559

 

$

698

 

$

1,475

 

$

951

 

 

$

4,691

 

$

2,164

 

$

4,379

 

$

2,852

 

Acquisition and integration-related costs (1)

(42)

 

42

 

(4)

 

4

 

 

(160)

 

160

 

(8)

 

8

 

Amortization of acquired intangible assets

(25)

 

25

 

(6)

 

6

 

 

(43)

 

43

 

(20)

 

20

 

Income tax effects (2)

N/A

(16)

 

N/A

(3)

 

 

N/A

(49)

 

N/A

(7)

 

Adjusted total expenses (non-GAAP),
Adjusted net income (non-GAAP)

$

1,492

 

$

749

 

$

1,465

 

$

958

 

 

$

4,488

 

$

2,318

 

$

4,351

 

$

2,873

 

(1)

Acquisition and integration-related costs are primarily included in professional services, compensation and benefits, and other expense.

(2)

The income tax effect of the non-GAAP adjustments is determined using an effective tax rate reflecting the exclusion of non-deductible acquisition costs and is used to present the acquisition and integration-related costs and amortization of acquired intangible assets on an after-tax basis.

N/A Not applicable.

THE CHARLES SCHWAB CORPORATION

Non-GAAP Financial Measures

(In millions, except ratios and per share amounts)

(Unaudited)

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

2020

 

2019

 

2020

 

2019

 

 

Amount

 

% of Total
Net
Revenues

 

Amount

 

% of Total
Net
Revenues

 

Amount

 

% of Total
Net
Revenues

 

Amount

 

% of Total
Net
Revenues

Income before taxes on income (GAAP), Pre-tax
profit margin (GAAP)

$

889

 

36.3

%

$

1,236

 

45.6

%

 

$

2,824

 

37.6

%

$

3,736

 

46.0

%

Acquisition and integration-related costs

42

 

1.7

%

4

 

0.1

%

 

160

 

2.1

%

8

 

0.1

%

Amortization of acquired intangible assets

25

 

1.1

%

6

 

0.3

%

 

43

 

0.6

%

20

 

0.3

%

Adjusted income before taxes on income (non-GAAP),
Adjusted pre-tax profit margin (non-GAAP)

$

956

 

39.1

%

$

1,246

 

46.0

%

 

$

3,027

 

40.3

%

$

3,764

 

46.4

%

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

2020

 

2019

 

2020

 

2019

 

Amount

 

Diluted
EPS

 

Amount

 

Diluted
EPS

 

Amount

 

Diluted
EPS

 

Amount

 

Diluted
EPS

Net income available to common stockholders (GAAP),
Earnings per common share — diluted (GAAP)

$

615

 

$

.48

 

$

913

 

$

.70

 

 

$

1,993

 

$

1.54

 

$

2,725

 

$

2.05

 

Acquisition and integration-related costs

42

 

.03

 

4

 

 

 

160

 

.12

 

8

 

.01

 

Amortization of acquired intangible assets

25

 

.02

 

6

 

 

 

43

 

.03

 

20

 

.02

 

Income tax effects

(16)

 

(.02)

 

(3)

 

 

 

(49)

 

(.03)

 

(7)

 

(.01)

 

Adjusted net income available to common stockholders
(non-GAAP), Adjusted diluted EPS (non-GAAP)

$

666

 

$

.51

 

$

920

 

$

.70

 

 

$

2,147

 

$

1.66

 

$

2,746

 

$

2.07

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

2020

 

2019

 

2020

 

2019

Return on average common stockholders' equity (GAAP)

10

%

20

%

 

12

%

20

%

Average common stockholders' equity

$

25,810

 

$

18,544

 

 

$

22,511

 

$

18,219

 

Less: Average goodwill

(1,735)

 

(1,227)

 

 

(1,482)

 

(1,227)

 

Less: Average acquired intangible assets — net

(1,268)

 

(137)

 

 

(693)

 

(143)

 

Plus: Average deferred tax liabilities related to goodwill and acquired intangible assets — net

67

 

67

 

 

67

 

67

 

Average tangible common equity

$

22,874

 

$

17,247

 

 

$

20,403

 

$

16,916

 

Adjusted net income available to common stockholders (1)

$

666

 

$

920

 

 

$

2,147

 

$

2,746

 

Return on tangible common equity (non-GAAP)

12

%

21

%

 

14

%

22

%

(1)

See table above for the reconciliation of net income available to common stockholders to adjusted net income available to common stockholders (non-GAAP).

 

MEDIA:
Mayura Hooper
Charles Schwab
Phone: 415-667-1525

INVESTORS/ANALYSTS:
Jeff Edwards
Charles Schwab
Phone: 415-667-1524

Source: The Charles Schwab Corporation

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