EX-99.1 2 exhibit991123117.htm EXHIBIT 99.1 Exhibit
 
 
EXHIBIT 99.1

News Release

Contacts:
 
logcscorprtnstckcoreblue.jpg
MEDIA:
Mayura Hooper
Charles Schwab
Phone: 415-667-1525
INVESTORS/ANALYSTS:
Rich Fowler
Charles Schwab
Phone: 415-667-1841


SCHWAB FOURTH QUARTER NET INCOME OF $597 MILLION CAPS RECORD YEAR
2017 Revenues Rise 15% to $8.6 Billion, Net Income Grows 25% to $2.4 Billion, Both Records
Core Net New Assets Rise 58% to a Record $198.6 Billion for the Year

SAN FRANCISCO, January 17, 2018 The Charles Schwab Corporation announced today that its net income for the fourth quarter of 2017 was $597 million, up 14% from $522 million for the fourth quarter of 2016. Net income for the twelve months ended December 31, 2017 was nearly $2.4 billion, up 25% year-over-year. The company’s financial results for the fourth quarter and full-year 2017 were impacted by the tax reform legislation signed in December − a one-time tax expense of approximately $46 million decreased earnings per share by $0.03.

 
 
Three Months Ended December 31,
 
%
 
Twelve Months Ended December 31,
 
%
Financial Highlights
 
2017 (1)
 
2016
 
Change
 
2017 (1)
 
2016 (2)
 
Change
 
 
 
 
 
 
 
 
 
 
 
 
 
   Net revenues (in millions)
 
$
2,242

 
$
1,972

 
14%
 
$
8,618

 
$
7,478

 
15%
   Net income (in millions)
 
$
597

 
$
522

 
14%
 
$
2,354

 
$
1,889

 
25%
   Diluted earnings per common share
 
$
.41

 
$
.36

 
14%
 
$
1.61

 
$
1.31

 
23%
   Pre-tax profit margin
 
42.5
%
 
41.8
%
 
 
 
42.4
%
 
40.0
%
 
 
   Return on average common
 
 
 
 
 
 
 
 
 
 
 
 
      stockholders’ equity (annualized)
 
14
%
 
14
%
 
 
 
15
%
 
14
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Note: All per-share results are rounded to the nearest cent, based on weighted-average diluted common shares outstanding.
(1) Effective January 1, 2017, a new accounting standard prospectively changed the treatment of a portion of the tax deductions relating to equity compensation. These deductions were previously reflected in additional paid-in capital, a component of stockholders’ equity, and are now included in taxes on income, a component of net income. The company’s tax expense for the fourth quarter and full year 2017 decreased by approximately $40 million and $87 million, respectively, as a result of this change. Future effects will depend on the company’s share price, restricted stock vesting, and the volume of equity incentive options exercised.
(2) Reflects net litigation proceeds of $16 million in 2016, relating to the company’s non-agency residential mortgage-backed securities (RMBS) portfolio, which are included in Other revenue.
 
CEO Walt Bettinger said, “Our steady focus on operating ‘through clients’ eyes’ has been a driving force in helping Schwab achieve another record year. In 2017, clients opened 1.4 million accounts, and households new to Schwab’s Retail business rose by 49% versus 2016; 54% of these households were age 40 or younger. In addition, clients trusted Schwab with a record $198.6 billion of core net new assets, up 58% from 2016 and marking a 7% organic growth rate. Both of our primary businesses attracted record inflows, with Retail and Advisor Services net new assets rising 57% and 59%, respectively, year-over-year. This impressive asset gathering was helped by a 75% increase in net transfers of assets from other firms, reflecting our strengthened competitive position. Our success with clients was bolstered by strength in the equity markets − the S&P 500® Index finished 2017 up 19%. In this environment, investor sentiment reached highs not seen in almost two decades, and clients actively engaged in the markets.”

Mr. Bettinger continued, “With a second straight top ranking in J.D. Power’s U.S. Full-Service Investor Satisfaction Survey*, we believe that the range of planning and advice solutions available through our modern approach

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to wealth management continues to resonate with clients. Assets enrolled in one of our retail or other advisory solutions continued to grow faster than client assets overall, reaching a record $268.7 billion at year-end, up 24%. In addition, our digital advisory solutions (Schwab Intelligent Portfolios®, Institutional Intelligent Portfolios®, and Schwab Intelligent Advisory®) have surpassed $27 billion in client assets with 223,000 active accounts. Total client assets as of December 31st were a record $3.36 trillion, up 21% year-over-year. We ended 2017 serving 10.8 million active brokerage accounts, 1.2 million banking accounts, and 1.6 million retirement plan participants.”

Mr. Bettinger noted, “In 2017, we continued to build Schwab through our ‘Virtuous Cycle’ approach: we challenged the status quo to benefit investors, resulting in clients entrusting us with record assets, which helped lead to record financial results. We achieved record annual net revenues for the fifth straight year, reaching $8.6 billion, up 15% from 2016. At the same time, we increased project spending, hired more client-facing employees, and made ongoing investments to support the growth we’ve achieved and to help meet client service expectations. By once again effectively balancing near-term profitability and reinvestment for long-term growth, we were able to deliver a fourth consecutive year of record net income, up 25% to almost $2.4 billion. We recognize that these results are made possible by our employees’ passion for serving our clients every day, and in the fourth quarter we rewarded about 9,000 of our non-executive staff with a one-time ‘Through Clients’ Eyes’ award, totaling $9 million overall.”

Mr. Bettinger added, “When Chuck Schwab started the company over 40 years ago, he sought to level the playing field for all investors. Last year, we continued to deliver on that vision by pursuing our goal of a ‘no trade-offs’ combination of value, service, transparency, and trust. We shared the benefits of scale with our clients by announcing nearly $400 million in annualized price reductions. In February, we lowered equity and options trade commissions from $8.95 to $4.95 and dropped the per contract option fee to $0.65. We also reduced the operating expense ratios on our market cap-weighted index mutual funds to align with their ETF equivalents. Additionally and perhaps more importantly, we eliminated investment minimums and multiple share classes for both fundamental and market cap-weighted index funds, offering our best pricing to every investor, from the smallest to the largest. At the same time, we introduced a broad-reaching Satisfaction Guarantee, unique for our industry.** In the fourth quarter, we streamlined share classes and decreased operating expense ratios on our money market funds, enhancing the net yields available to our clients. Also during the year, we started an industry-first national advertising campaign on behalf of the RIAs that we serve and we rolled-out Schwab Advisor StreetSmart Edge®, providing advisors with streaming of real-time quotes, advanced charting, and additional trading capabilities. We continued to enhance our product offerings during 2017, adding 34 ETFs to Schwab ETF OneSource – investors and advisors can now buy and sell 242 ETFs covering 69 Morningstar categories. Later in the year we initiated the Schwab 1000 Index® ETF – a new low-cost way to gain exposure to America’s largest 1,000 stocks. Additionally, we launched three index mutual funds: Schwab® U.S. Large-Cap Value Index Fund, Schwab® U.S. Large-Cap Growth Index Fund, and Schwab® U.S. Mid-Cap Index Fund. On the technology front, we released a new account summary page, allowing clients to aggregate their non-Schwab account information on Schwab.com and enabling a more holistic view of their finances. We are proud of the progress we made in 2017, humbled by our clients’ response, and committed to sustaining Chuck’s vision in everything we do.”

CFO Peter Crawford commented, “Schwab’s record 2017 financial results demonstrate the power of our financial formula working as designed: our robust business growth supported strong revenue growth through multiple sources, which we combined with continued expense discipline to drive significantly improved profitability. As Walt described, our success with clients and a favorable environment resulted in a 21% increase in client assets. We turned this growth into a 15% lift in revenues through record contributions from our two largest revenue sources. Net interest revenue rose 29% to $4.3 billion due to rising interest rates as well as growing client cash balances. Asset management and administration fees reached a record $3.4 billion, up 11% from 2016, driven by growing balances in advised solutions, mutual funds, and ETFs. These increases more than offset the 21% decline in trading revenue resulting from our pricing actions. Turning to expenses, our 11% year-over-year rise was consistent with expectations and included higher Compensation due to added staffing and incentive costs relating to our strong asset gathering, as well as higher Professional services outlays relating to project spending and third-party fees tied to higher balances in our asset management business. Through our continued expense discipline we achieved a 440 basis point gap between revenue and expense growth, resulting in a record 42.4% pre-tax profit margin, a 240 basis point expansion over last year.”

Mr. Crawford concluded, “Effective balance sheet management remains core to supporting our success and our 2017 return on equity was 15%, the highest since 2009. Throughout last year, we were mindful of approaching the

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$250 billion consolidated asset threshold and the related implications for heightened regulatory requirements. As we aimed for crossing the threshold in 2018, we limited bulk transfers of sweep balances from money market funds to Schwab Bank – which help us more effectively optimize the spread earned on client cash – to $2.0 billion, including approximately $1.1 billion in the fourth quarter. We also transferred $2.9 billion of Schwab One® sweep balances, which were already on our balance sheet, to the Bank, including $400 million in the fourth quarter. Another part of managing our approach to $250 billion involved the utilization of Federal Home Loan Bank advances to provide temporary funding for Bank portfolio investments that will eventually be supported by bulk transfers. These borrowings, which totaled $15 billion at year-end, enabled us to strengthen net interest revenue by getting a head-start on anticipated 2018 bulk transfers while controlling our approach to the threshold. We also worked to improve our capital mix by replacing $485 million of 6% preferred shares with a lower rate preferred offering, and by issuing $1.5 billion of senior notes in advance of debt maturing in 2018 and to support continued business growth. By month-end December, our consolidated balance sheet reached $243 billion and our preliminary Tier 1 Leverage Ratio was 7.6%. We ended the year poised to cross the $250 billion consolidated asset threshold during the first half of 2018 as we continue to drive strong balance sheet growth through a combination of asset gathering and bulk transfers.”

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 248,000, up 36% year-over-year; total accounts were 7.4 million, up 4% year-over-year.
Opened one independent branch in Germantown, WI, to bring the total to 40, continuing the company’s franchising initiative designed to make financial advice more accessible.

Advisor Services
Hosted 4,900 advisors, exhibitors, sponsors, and media at our IMPACT® conference – the largest and longest-running annual gathering of independent registered investment advisors.
Expanded Schwab OpenView Gateway®, the open architecture platform that enables integration between Schwab systems and technology providers, by adding eMoney for financial planning and Addepar for portfolio management.

Products and Infrastructure
Launched new StreetSmart Central and StreetSmart Mobile Trading Platforms, marking the full integration of optionsXpress® technology within Schwab.
For Charles Schwab Bank:
Balance sheet assets = $198.6 billion, up 13% year-over-year.
Outstanding mortgage and home equity loans = $12.0 billion, up 4% year-over-year.
Pledged Asset Line® balances = $4.4 billion, up 13% year-over-year.
Schwab Bank High Yield Investor Checking® accounts = 1.0 million, with $13.4 billion in balances.
Client assets managed by Windhaven® totaled $8.1 billion, down 10% from the fourth quarter of 2016.
Client assets managed by ThomasPartners® totaled $14.6 billion, up 43% from the fourth quarter of 2016.
Client assets managed by one of the company’s digital advisory solutions (Schwab Intelligent Portfolios®, Institutional Intelligent Portfolios®, and Schwab Intelligent Advisory®) totaled $27.3 billion, up 122% from the fourth quarter of 2016.

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

*Charles Schwab received the highest numerical score in the J.D. Power 2016 and 2017 Full Service Investor Satisfaction Studies, based on 6,006 responses from 20 firms measuring opinions of investors who used full-service investment institutions and were surveyed in January 2016 and 6,579 responses from 20 firms measuring opinions of investors who used full-service investment institutions and were surveyed in January 2017. Your experiences may vary. Visit jdpower.com

**Restrictions apply: The $4.95 commission does not apply to certain transactions. All broker-assisted and automated phone trades are subject to service charges. See the Charles Schwab Pricing Guide for Individual Investors for full fee and commission schedules. If you are not completely satisfied for any reason, at your request Charles Schwab & Co., Inc. will

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refund any eligible fee related to your concern within the time frames described below. Two kinds of “Fees” are eligible for this guarantee: (1) asset-based “Program Fees” for certain investment advisory services sponsored by Schwab; and (2) commissions and fees listed in the Charles Schwab Pricing Guide for Individual Investors (“Account Fees”). Program Fee refund requests must be received no later than the next calendar quarter after the Fee was charged. Account Fee refund requests must be received within one year of the date that the Fee was charged.

Commentary from the CFO
Periodically, our Chief Financial Officer provides insight and commentary regarding Schwab’s financial picture at: http://www.aboutschwab.com/investor-relations/cfo-commentary. The most recent commentary, which discusses the impact of tax reform legislation, was posted on December 22, 2017.

Business Update
The company has scheduled a Business Update for institutional investors on Tuesday, February 6, 2018. The Update is scheduled to run from approximately 8:30 a.m. - 12:15 p.m. PT, 11:30 a.m. - 3:15 p.m. ET. Participants will include members of the company’s executive management. A simultaneous webcast of this Update will be accessible to the public at http://schwabevents.com/corporation.

Forward-Looking Statements
This press release contains forward-looking statements relating to the company’s business growth; crossing the $250 billion asset threshold; balance sheet growth; asset gathering; and bulk transfers. 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 company’s ability to attract and retain clients and registered investment advisors and grow those relationships and client assets; general market conditions, including the level of interest rates and equity valuations; competitive pressures on pricing, including deposit rates; the company’s ability to develop and launch new products, services and capabilities in a timely and successful manner; client use of the company’s investment advisory services and other products and services; the timing and amount of bulk transfers; the quality of the company’s balance sheet assets; client sensitivity to interest rates; regulatory guidance; 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 345 offices and 10.8 million active brokerage accounts, 1.6 million corporate retirement plan participants, 1.2 million banking accounts, and $3.36 trillion in client assets as of December 31, 2017. Through its operating subsidiaries, the company provides a full range of wealth management, securities brokerage, banking, money management, custody, 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.

###

- 4 -



THE CHARLES SCHWAB CORPORATION
Consolidated Statements of Income
(In millions, except per share amounts)
(Unaudited)





 
 
Three Months Ended
December 31,
 
Twelve Months Ended
December 31,
 
 
2017
 
2016
 
2017
 
2016
Net Revenues
  
 
 
 
 
 
 
 
         Interest revenue
  
$
1,266

 
$
952

  
$
4,624

 
$
3,493

         Interest expense
  
(119
)
 
(45
)
 
(342
)
 
(171
)
     Net interest revenue
  
1,147

 
907

 
4,282

 
3,322

      Asset management and administration fees (1)
  
863

 
801

  
3,392

 
3,055

     Trading revenue
  
154

 
202

 
654

 
825

     Other
  
78

 
62

 
290

 
271

     Provision for loan losses
  

 

 

 
5

          Total net revenues
  
2,242

 
1,972

 
8,618

 
7,478

Expenses Excluding Interest
  
 
 
 
 
 
 
 
      Compensation and benefits
  
711

 
629

  
2,737

 
2,466

      Professional services
  
151

 
134

  
580

 
506

      Occupancy and equipment
  
113

 
99

  
436

 
398

      Advertising and market development
  
63

 
61

  
268

 
265

      Communications
  
60

 
58

  
231

 
237

      Depreciation and amortization
  
69

 
61

  
269

 
234

Regulatory fees and assessments
 
46

 
42

 
179

 
144

      Other
  
76

 
64

  
268

 
235

          Total expenses excluding interest
  
1,289

 
1,148

  
4,968

 
4,485

Income before taxes on income
  
953

 
824

  
3,650

 
2,993

Taxes on income (2)
  
356

 
302

  
1,296

 
1,104

Net Income
  
597

 
522

  
2,354

 
1,889

Preferred stock dividends and other (3)
  
47

 
44

  
174

 
143

Net Income Available to Common Stockholders
  
$
550

 
$
478

  
$
2,180

 
$
1,746

Weighted-Average Common Shares Outstanding:
 
 
 
 
 
 
 
 
      Basic
  
1,343

 
1,329

  
1,339

 
1,324

      Diluted
 
1,358

 
1,341

 
1,353

 
1,334

Earnings Per Common Shares Outstanding:
 
 
 
 
 
 
 
 
      Basic
  
$
.41

 
$
.36

  
$
1.63

 
$
1.32

      Diluted
  
$
.41

 
$
.36

  
$
1.61

 
$
1.31

Dividends Declared Per Common Share
 
$
.08

 
$
.07

 
$
.32

 
$
.27


(1) Includes fee waivers of $0 million and $31 million during the fourth quarters of 2017 and 2016, respectively, and $10 million and $224 million during the twelve months ended December 31, 2017 and 2016, respectively, relating to Schwab-sponsored money market funds.
(2) Taxes on income were reduced by approximately $40 million and $87 million for the three and twelve months ended December 31, 2017 to reflect the required adoption of Accounting Standards Update 2016-09, which changes the accounting treatment of a portion of the tax deductions relating to equity compensation. Taxes on income were also increased by approximately $46 million in December 2017 due to the enactment of the Tax Cuts and Jobs Act legislation resulting in the remeasurement of deferred tax assets and other tax adjustments.
(3) Includes preferred stock dividends and undistributed earnings and dividends allocated to non-vested restricted stock units.

         



- 5 -


THE CHARLES SCHWAB CORPORATION
Financial and Operating Highlights
(Unaudited)
 
Q4-17 % change
 
 
2017
 
2016
 
vs.
 
vs.
 
 
Fourth
 
Third
 
Second
 
First
 
Fourth
(In millions, except per share amounts and as noted)
 Q4-16
 
Q3-17
 
 
Quarter
 
Quarter
 
Quarter
 
Quarter
 
Quarter
Net Revenues
 
 
 
 
 
 
 
 
 
 
 
 
 
 
      Net interest revenue
26
 %
 
6
 %
 
 
$
1,147

 
$
1,082

 
$
1,053

 
$
1,000

 
$
907

      Asset management and administration fees
8
 %
 

 
 
863

 
861

 
845

 
823

 
801

      Trading revenue
(24
)%
 
2
 %
 
 
154

 
151

 
157

 
192

 
202

      Other
26
 %
 
10
 %
 
 
78

 
71

 
75

 
66

 
62

      Provision for loan losses

 

 
 

 

 

 

 

Total net revenues
14
 %
 
4
 %
 
 
2,242

 
2,165

 
2,130

 
2,081

 
1,972

Expenses Excluding Interest
 
 
 
 
 
 
 
 
 
 
 
 
 
 
      Compensation and benefits
13
 %
 
7
 %
 
 
711

 
662

 
663

 
701

 
629

      Professional services
13
 %
 
(1
)%
 
 
151

 
152

 
144

 
133

 
134

      Occupancy and equipment
14
 %
 
2
 %
 
 
113

 
111

 
107

 
105

 
99

      Advertising and market development
3
 %
 

 
 
63

 
63

 
71

 
71

 
61

      Communications
3
 %
 
7
 %
 
 
60

 
56

 
58

 
57

 
58

      Depreciation and amortization
13
 %
 

 
 
69

 
69

 
66

 
65

 
61

      Regulatory fees and assessments
10
 %
 
7
 %
 
 
46

 
43

 
46

 
44

 
42

      Other
19
 %
 
19
 %
 
 
76

 
64

 
66

 
62

 
64

Total expenses excluding interest
12
 %
 
6
 %
 
 
1,289

 
1,220

 
1,221

 
1,238

 
1,148

Income before taxes on income
16
 %
 
1
 %
 
 
953

 
945

 
909

 
843

 
824

Taxes on income
18
 %
 
9
 %
 
 
356

 
327

 
334

 
279

 
302

Net Income
14
 %
 
(3
)%
 
 
$
597

 
$
618

 
$
575

 
$
564

 
$
522

Preferred stock dividends and other
7
 %
 
9
 %
 
 
47

 
43

 
45

 
39

 
44

Net Income Available to Common Stockholders
15
 %
 
(4
)%
 
 
$
550

 
$
575

 
$
530

 
$
525

 
$
478

Earnings per common share:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
      Basic
14
 %
 
(5
)%
 
 
$
.41

 
$
.43

 
$
.40

 
$
.39

 
$
.36

      Diluted
14
 %
 
(2
)%
 
 
$
.41

 
$
.42

 
$
.39

 
$
.39

 
$
.36

Dividends declared per common share
14
 %
 

 
 
$
.08

 
$
.08

 
$
.08

 
$
.08

 
$
.07

Weighted-average common shares outstanding:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
      Basic
1
 %
 

 
 
1,343

 
1,339

 
1,338

 
1,336

 
1,329

      Diluted
1
 %
 

 
 
1,358

 
1,353

 
1,351

 
1,351

 
1,341

Performance Measures
 
 
 
 
 
 
 
 
 
 
 
 
 
 
      Pre-tax profit margin
 
 
 
 
 
42.5
%
 
43.6
%
 
42.7
%
 
40.5
%
 
41.8
%
      Return on average common stockholders’ equity (annualized) (1)
 
 
 
 
 
14
%
 
15
%
 
15
%
 
15
%
 
14
%
Financial Condition (at quarter end, in billions)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
      Cash and investments segregated
(32
)%
 
(5
)%
 
 
$
15.1

 
$
15.9

 
$
18.5

 
$
21.2

 
$
22.2

      Receivables from brokerage clients  net
20
 %
 
11
 %
 
 
20.6

 
18.5

 
18.0

 
16.7

 
17.2

      Bank loans  net
7
 %
 
2
 %
 
 
16.5

 
16.2

 
15.8

 
15.5

 
15.4

      Total assets
9
 %
 
5
 %
 
 
243.3

 
230.7

 
220.6

 
227.1

 
223.4

      Bank deposits
4
 %
 
3
 %
 
 
169.7

 
165.3

 
162.3

 
166.9

 
163.5

      Payables to brokerage clients
(13
)%
 
(1
)%
 
 
31.2

 
31.5

 
33.0

 
34.3

 
35.9

      Short-term borrowings
N/M

 
200
 %
 
 
15.0

 
5.0

 
.3

 
.6

 

      Long-term debt
66
 %
 
45
 %
 
 
4.8

 
3.3

 
3.5

 
3.5

 
2.9

      Stockholders’ equity
13
 %
 
3
 %
 
 
18.5

 
18.0

 
17.5

 
17.0

 
16.4

Other
 
 
 
 
 
 
 
 
 
 
 
 
 
 
      Full-time equivalent employees (at quarter end, in thousands)
9
 %
 
2
 %
 
 
17.6

 
17.3

 
16.9

 
16.5

 
16.2

      Capital expenditures  purchases of equipment, office facilities, and
 
 
 
 
 
 
 
 
 
 
 
 
 
 
         property, net (in millions)
64
 %
 
19
 %
 
 
$
141

 
$
118

 
$
86

 
$
67

 
$
86

      Expenses excluding interest as a percentage of average client assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
         (annualized)
 
 
 
 
 
0.16
%
 
0.16
%
 
0.16
%
 
0.18
%
 
0.17
%
Clients’ Daily Average Trades (in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
      Revenue trades (2)
18
 %
 
11
 %
 
 
345

 
312

 
311

 
317

 
293

      Asset-based trades (3)
13
 %
 
(12
)%
 
 
120

 
137

 
103

 
103

 
106

      Other trades (4)
(6
)%
 
(11
)%
 
 
163

 
184

 
175

 
165

 
174

Total
10
 %
 
(1
)%
 
 
628

 
633

 
589

 
585

 
573

Average Revenue Per Revenue Trade (2)
(34
)%
 
(5
)%
 
 
$
7.33

 
$
7.74

 
$
7.96

 
$
9.84

 
$
11.03

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(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 trading revenue (i.e., commission revenue or principal transaction revenue); 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.

- -6 -


THE CHARLES SCHWAB CORPORATION
Net Interest Revenue Information
(In millions)
(Unaudited)

 
Three Months Ended
December 31,
 
 
Twelve Months Ended
December 31,
 
2017
 
 
2016
 
 
2017
 
 
2016
 
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
$
11,582

 
$
37

 
1.27
%
 
 
$
10,052

 
$
13

 
0.51
%
 
 
$
9,931

 
$
109

 
1.10
%
 
 
$
11,143

 
$
57

 
0.51
%
Cash and investments segregated
15,307

 
46

 
1.19
%
 
 
21,047

 
28

 
0.53
%
 
 
18,525

 
166

 
0.90
%
 
 
20,104

 
93

 
0.46
%
Broker-related receivables
438

 
1

 
0.91
%
 
 
493

 
1

 
0.27
%
 
 
430

 
3

 
0.70
%
 
 
558

 
1

 
0.22
%
Receivables from brokerage clients
17,478

 
160

 
3.63
%
 
 
15,145

 
125

 
3.28
%
 
 
16,269

 
575

 
3.53
%
 
 
15,001

 
497

 
3.31
%
Available for sale securities (1)
47,016

 
200

 
1.69
%
 
 
76,624

 
247

 
1.28
%
 
 
53,040

 
815

 
1.54
%
 
 
72,586

 
883

 
1.22
%
Held to maturity securities
115,694

 
663

 
2.27
%
 
 
68,351

 
396

 
2.30
%
 
 
103,599

 
2,354

 
2.27
%
 
 
57,451

 
1,402

 
2.44
%
Bank loans
16,378

 
125

 
3.03
%
 
 
15,148

 
103

 
2.71
%
 
 
15,919

 
472

 
2.97
%
 
 
14,715

 
400

 
2.72
%
  Total interest-earning assets
223,893

 
1,232

 
2.18
%
 
 
206,860

 
913

 
1.76
%
 
 
217,713

 
4,494

 
2.06
%
 
 
191,558

 
3,333

 
1.74
%
Other interest revenue
 
 
34

 
 
 
 
 
 
39

 
 
 
 
 
 
130

 
 
 
 
 
 
160

 
 
Total interest-earning assets
$
223,893

 
$
1,266

 
2.24
%
 
 
$
206,860

 
$
952

 
1.83
%
 
 
$
217,713

 
$
4,624

 
2.12
%
 
 
$
191,558

 
$
3,493

 
1.82
%
Funding sources:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Bank deposits
$
165,552

 
$
50

 
0.12
%
 
 
$
154,357

 
$
11

 
0.03
%
 
 
$
163,998

 
$
148

 
0.09
%
 
 
$
141,432

 
$
37

 
0.03
%
Payables to brokerage clients
23,038

 
5

 
0.09
%
 
 
27,141

 
1

 
0.01
%
 
 
25,403

 
16

 
0.06
%
 
 
26,311

 
3

 
0.01
%
Short-term borrowings
9,520

 
30

 
1.25
%
 
 
2,429

 
3

 
0.49
%
 
 
3,503

 
41

 
1.17
%
 
 
1,864

 
9

 
0.48
%
Long-term debt
3,671

 
30

 
3.24
%
 
 
2,876

 
26

 
3.60
%
 
 
3,431

 
119

 
3.47
%
 
 
2,876

 
104

 
3.62
%
  Total interest-bearing liabilities
201,781

 
115

 
0.23
%
 
 
186,803

 
41

 
0.09
%
 
 
196,335

 
324

 
0.17
%
 
 
172,483

 
153

 
0.09
%
Non-interest-bearing funding sources
22,112

 
 
 
 
 
 
20,057

 
 
 
 
 
 
21,378

 
 
 
 
 
 
19,075

 
 
 
 
Other interest expense
 
 
4

 
 
 
 
 
 
4

 
 
 
 
 
 
18

 
 
 
 
 
 
18

 
 
Total funding sources
$
223,893

 
$
119

 
0.21
%
 
 
$
206,860

 
$
45

 
0.09
%
 
 
$
217,713

 
$
342

 
0.15
%
 
 
$
191,558

 
$
171

 
0.09
%
Net interest revenue
 
 
$
1,147

 
2.03
%
 
 
 
 
$
907

 
1.74
%
 
 
 
 
$
4,282

 
1.97
%
 
 
 
 
$
3,322

 
1.73
%
(1) Amounts have been calculated based on amortized cost.


- 7 -


THE CHARLES SCHWAB CORPORATION
Asset Management and Administration Fees Information
(In millions)
(Unaudited)


 
 
Three Months Ended
 
 
Twelve Months Ended
 
 
 December 31,
 
 
December 31,
 
 
2017
 
 
2016
 
 
2017
 
 
2016
 
 
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
 
$
162,249

 
$
200

 
0.49
%
 
 
$
162,207

 
$
238

 
0.58
%
 
 
$
160,735

 
$
875

 
0.54
%
 
 
$
164,120

 
$
962

 
0.59
%
Fee waivers
 
 
 

 
 
 
 
 
 
(31
)
 
 
 
 
 
 
(10
)
 
 
 
 
 
 
(224
)
 
 
Schwab money market funds
 
162,249

 
200

 
0.49
%
 
 
162,207

 
207

 
0.51
%
 
 
160,735

 
865

 
0.54
%
 
 
164,120

 
738

 
0.45
%
Schwab equity and bond funds and ETFs
 
179,764

 
60

 
0.13
%
 
 
125,814

 
57

 
0.18
%
 
 
158,625

 
223

 
0.14
%
 
 
115,849

 
217

 
0.19
%
Mutual Fund OneSource ® and other
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   non-transaction fee funds
 
219,157

 
178

 
0.32
%
 
 
198,289

 
168

 
0.34
%
 
 
215,333

 
706

 
0.33
%
 
 
199,389

 
676

 
0.34
%
Other third-party mutual funds and ETFs (1)
 
309,007

 
69

 
0.09
%
 
 
264,703

 
59

 
0.09
%
 
 
286,111

 
251

 
0.09
%
 
 
254,584

 
222

 
0.09
%
      Total mutual funds and ETFs (2)
 
$
870,177

 
507

 
0.23
%
 
 
$
751,013

 
491

 
0.26
%
 
 
$
820,804

 
2,045

 
0.25
%
 
 
$
733,942

 
1,853

 
0.25
%
Advice solutions (2) :
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fee-based
 
$
216,546

 
278

 
0.51
%
 
 
$
184,007

 
237

 
0.51
%
 
 
$
203,794

 
1,043

 
0.51
%
 
 
$
177,409

 
915

 
0.52
%
Non-fee based
 
55,368

 

 

 
 
38,714

 

 

 
 
48,936

 

 

 
 
35,262

 

 

      Total advice solutions
 
$
271,914

 
278

 
0.41
%
 
 
$
222,721

 
237

 
0.42
%
 
 
$
252,730

 
1,043

 
0.41
%
 
 
$
212,671

 
915

 
0.43
%
Other balance-based fees (3)
 
$
451,310

 
66

 
0.06
%
 
 
$
349,610

 
59

 
0.07
%
 
 
$
417,659

 
258

 
0.06
%
 
 
$
339,071

 
235

 
0.07
%
Other (4)
 
 
 
12

 
 
 
 
 
 
14

 
 
 
 
 
 
46

 
 
 
 
 
 
52

 
 
Total asset management and administration fees
 
 
 
$
863

 
 
 
 
 
 
$
801

 
 
 
 
 
 
$
3,392

 
 
 
 
 
 
$
3,055

 
 
(1) Includes Schwab ETF OneSource.
(2) Advice solutions include managed portfolios, specialized strategies, and customized investment advice such as Schwab Private Client, Schwab Managed Portfolios, 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 Advisory®, launched in March 2017; as well as legacy non-fee advice solutions including Schwab Advisor Source and certain retirement plan balances. Beginning in the fourth quarter of 2017, a prospective change was made to add non-fee based average assets from managed portfolios. Average client assets for advice solutions may also include the asset balances contained in the mutual fund and/or ETF categories listed above. For a 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. Beginning in the first quarter of 2017, a prospective methodology change was made to average client assets relating to 401(k) recordkeeping fees to provide improved insight into the associated fee driver, which resulted in an increase of approximately $25 billion. There was no impact to revenue or the average fee.
(4) Includes miscellaneous service and transaction fees relating to mutual funds and ETFs that are not balance-based.
 

- 8 -


THE CHARLES SCHWAB CORPORATION
Growth in Client Assets and Accounts
(Unaudited)


 
Q4-17 % Change
 
 
2017
 
2016
 
vs.
 
vs.
 
 
Fourth
 
Third
 
Second
 
First
 
Fourth
(In billions, at quarter end, except as noted)
Q4-16
 
Q3-17
 
 
Quarter
 
Quarter
 
Quarter
 
Quarter
 
Quarter
Assets in client accounts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
      Schwab One®, certain cash equivalents and bank deposits
1
%
 
2
%
 
 
$
198.6

 
$
195.0

 
$
193.7

 
$
199.6

 
$
197.4

      Proprietary mutual funds (Schwab Funds® and Laudus Funds®):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
         Money market funds

 
3
%
 
 
163.6

 
159.2

 
156.2

 
162.9

 
163.5

         Equity and bond funds (1)
25
%
 
7
%
 
 
82.5

 
77.3

 
73.3

 
70.1

 
66.1

                Total proprietary mutual funds
7
%
 
4
%
 
 
246.1

 
236.5

 
229.5

 
233.0

 
229.6

      Mutual Fund Marketplace® (2)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
         Mutual Fund OneSource® and other non-transaction fee funds
13
%
 
2
%
 
 
225.2

 
221.2

 
224.7

 
204.9

 
198.9

         Mutual fund clearing services
35
%
 
12
%
 
 
265.4

 
236.5

 
226.4

 
197.5

 
196.6

         Other third-party mutual funds
22
%
 
5
%
 
 
682.6

 
652.5

 
609.0

 
596.2

 
558.2

                Total Mutual Fund Marketplace
23
%
 
6
%
 
 
1,173.2

 
1,110.2

 
1,060.1

 
998.6

 
953.7

                    Total mutual fund assets
20
%
 
5
%
 
 
1,419.3

 
1,346.7

 
1,289.6

 
1,231.6

 
1,183.3

      Exchange-traded funds (ETFs)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
         Proprietary ETFs (1)
66
%
 
13
%
 
 
99.1

 
87.8

 
78.0

 
69.3

 
59.8

         ETF OneSource™ (2)
35
%
 
8
%
 
 
28.7

 
26.6

 
24.9

 
23.1

 
21.2

         Other third-party ETFs
30
%
 
8
%
 
 
308.8

 
286.7

 
270.2

 
257.0

 
238.3

                Total ETF assets
37
%
 
9
%
 
 
436.6

 
401.1

 
373.1

 
349.4

 
319.3

      Equity and other securities
22
%
 
6
%
 
 
1,080.0

 
1,016.9

 
971.4

 
939.7

 
886.5

      Fixed income securities
18
%
 
3
%
 
 
245.6

 
238.4

 
229.3

 
217.5

 
208.3

      Margin loans outstanding
20
%
 
8
%
 
 
(18.3
)
 
(16.9
)
 
(16.5
)
 
(15.3
)
 
(15.3
)
      Total client assets
21
%
 
6
%
 
 
$
3,361.8

 
$
3,181.2

 
$
3,040.6

 
$
2,922.5

 
$
2,779.5

Client assets by business
 
 
 
 
 
 
 
 
 
 
 
 
 
 
      Investor Services
21
%
 
6
%
 
 
$
1,810.9

 
$
1,707.0

 
$
1,634.1

 
$
1,565.9

 
$
1,495.4

      Advisor Services
21
%
 
5
%
 
 
1,550.9

 
1,474.2

 
1,406.5

 
1,356.6

 
1,284.1

      Total client assets
21
%
 
6
%
 
 
$
3,361.8

 
$
3,181.2

 
$
3,040.6

 
$
2,922.5

 
$
2,779.5

Net growth in assets in client accounts (for the quarter ended)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
      Net new assets by business
 
 
 
 
 
 
 
 
 
 
 
 
 
 
             Investor Services (3)
N/M

 
98
%
 
 
$
46.4

 
$
23.4

 
$
39.9

 
$
14.0

 
$
13.7

             Advisor Services
37
%
 
12
%
 
 
31.7

 
28.2

 
24.6

 
24.9

 
23.2

      Total net new assets
112
%
 
51
%
 
 
$
78.1

 
$
51.6

 
$
64.5

 
$
38.9

 
$
36.9

      Net market gains
N/M

 
15
%
 
 
102.5

 
89.0

 
53.6

 
104.1

 
17.3

      Net growth
N/M

 
28
%
 
 
$
180.6

 
$
140.6

 
$
118.1

 
$
143.0

 
$
54.2

New brokerage accounts (in thousands, for the quarter ended)
32
%
 
15
%
 
 
386

 
336

 
357

 
362

 
293

Clients (in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
      Active Brokerage Accounts
6
%
 
2
%
 
 
10,755

 
10,565

 
10,487

 
10,320

 
10,155

      Banking Accounts
8
%
 
2
%
 
 
1,197

 
1,176

 
1,143

 
1,120

 
1,106

      Corporate Retirement Plan Participants
2
%
 
1
%
 
 
1,568

 
1,552

 
1,540

 
1,545

 
1,543

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

(1) Includes proprietary equity and bond funds and ETFs held on and off the Schwab platform. As of December 31, 2017, off-platform equity and bond funds and ETFs were $10.1 billion and $24.0 billion, respectively.
(2) Excludes all proprietary mutual funds and ETFs.
(3) Fourth quarter of 2017 includes an inflow of $16.2 billion from a mutual fund clearing services client. Second quarter of 2017 includes inflows of $18.3 billion from a mutual fund clearing services client. First quarter of 2017 includes an outflow of $9.0 billion from a mutual fund clearing services client.
N/M Not meaningful.


- 9 -


The Charles Schwab Corporation Monthly Activity Report For December 2017
 
 
2016
2017