8-K
Schwab Charles Corp (SCHW)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Date of Report (date of earliest event reported): July 16, 2024
The Charles Schwab Corporation
(Exact name of registrant as specified in its charter)
Commission File Number: 1-9700
| Delaware | 94-3025021 |
|---|---|
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
3000 Schwab Way, Westlake, TX 76262
(Address of principal executive offices, including zip code)
(817) 859-5000
(Registrant’s telephone number, including area code)
N/A
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
|---|---|---|---|---|
| Common Stock – $.01 par value per share | SCHW | New York Stock Exchange | ||
| Depositary Shares, each representing a 1/40th ownership interest in a share of 5.95% Non-Cumulative Preferred Stock, Series D | SCHW PrD | New York Stock Exchange | ||
| Depositary Shares, each representing a 1/40th ownership interest in a share of 4.450% Non-Cumulative Preferred Stock, Series J | SCHW PrJ | New York Stock Exchange | Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). | |
| --- |
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
| Item 2.02 | Results of Operations and Financial Condition |
|---|
On July 16, 2024, The Charles Schwab Corporation issued a press release announcing its financial results for the quarter ended June 30, 2024. A copy of the press release is furnished as Exhibit 99.1 to this report.
| Item 9.01 | Financial Statements and Exhibits | | --- | --- || (d) | Exhibits | | --- | --- | | Exhibit No. | Description | | 99.1 | Press Release datedJuly 16, 2024 | | 104 | Cover Page Interactive Data File – the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
Signature(s)
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| THE CHARLES SCHWAB CORPORATION | |||
|---|---|---|---|
| Date: | July 16, 2024 | By: | /s/ Peter Crawford |
| Peter Crawford | |||
| Managing Director and Chief Financial Officer |
Document
Exhibit 99.1
| SCHWAB REPORTS SECOND QUARTER RESULTS<br><br>Total Client Assets Reached A Record $9.4 Trillion, Up 17% Year-Over-Year<br><br>Core Net New Assets Rose 17% to $61.2 Billion, Highlighting Continued Momentum |
|---|
WESTLAKE, Texas, July 16, 2024 – The Charles Schwab Corporation reported net income for the second quarter totaling $1.3 billion, or $.66 diluted earnings per common share. Excluding $175 million of pre-tax transaction-related and restructuring costs, adjusted (1) net income and diluted common earnings per share equaled $1.5 billion and $.73, respectively.
| Client Driven<br><br>Growth | +17%<br><br>Core Net New Asset Growth Versus 2Q23 | “Schwab’s ‘no trade-offs’ value proposition continued to resonate with investors, as new brokerage accounts opened this year grew to<br><br>over 2 million and second quarter core asset gathering<br><br>equaled $61.2 billion – a year-over-year increase of 17%.”<br><br>Co-Chairman and CEO Walt Bettinger |
|---|---|---|
| Modern Wealth<br><br>Solutions | +56%<br><br>YTD Inflows<br><br>to Managed Investing Solutions Versus 2023 | “Client interest in our broad array of wealth solutions remained strong through June. Year-to-date enrollments are up ~30% versus the prior year period and net flows into Managed Investing solutions reached $25 billion – an increase of 56% versus the first 6 months of 2023.”<br><br>Co-Chairman and CEO Walt Bettinger |
| Diversified Operating Model | 41.0%<br><br>2Q24 Adjusted<br><br>Pre-Tax Profit Margin (1) | “Record asset management and administration fees, along with our balanced approach to expense management, helped Schwab produce a second quarter pre-tax margin of 37.2% – 41.0% adjusted (1).”<br><br>CFO Peter Crawford |
| Balance Sheet<br><br>Management | 9.4%<br><br>Tier 1 Leverage Ratio<br><br>5.9%<br><br>Adj. Tier 1<br><br>Leverage Ratio (1) | “Similar to prior years, our strong capital levels and all-weather model enabled us to successfully complete the 2024 Federal Reserve stress test, with Schwab notching the highest post-stress ratios among all major banks.”<br><br>CFO Peter Crawford |
2Q24 Client and Business Highlights
•Sustained equity market strength and organic asset gathering pushed total client assets to a record $9.41 trillion
•Active brokerage accounts increased 4% year-over-year to 35.6 million
•Despite expected integration-related attrition, core net new assets grew 17% versus the prior year to $61.2 billion
•Client assets receiving ongoing advisory services are up 16% year-over-year, including year-to-date net flow increases into Schwab Wealth AdvisoryTM and Wasmer SchroederTM Strategies of 40% and 53%, respectively
•Margin balances totaled $71.7 billion at quarter-end, up 15% since the end of 2023
•Second quarter trading activity remained robust versus 2023 levels as client engagement in the markets persisted
•Strong year-to-date client net buying of mutual and exchange-traded funds totaled $77 billion – the 2nd highest first half ever
•Schwab ranked #1 for mobile app customer experience by Corporate Insight for the second year in a row (2)
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| Three Months Ended<br>June 30, | % | Six Months Ended<br>June 30, | % | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Financial Highlights (1) | 2024 | 2023 | Change | 2024 | 2023 | Change | ||||||||
| Net revenues (in millions) | $ | 4,690 | $ | 4,656 | 1% | $ | 9,430 | $ | 9,772 | (3)% | ||||
| Net income (in millions) | ||||||||||||||
| GAAP | $ | 1,332 | $ | 1,294 | 3% | $ | 2,694 | $ | 2,897 | (7)% | ||||
| Adjusted (1) | $ | 1,465 | $ | 1,494 | (2)% | $ | 2,934 | $ | 3,274 | (10)% | ||||
| Diluted earnings per common share | ||||||||||||||
| GAAP | $ | .66 | $ | .64 | 3% | $ | 1.34 | $ | 1.48 | (9)% | ||||
| Adjusted (1) | $ | .73 | $ | .75 | (3)% | $ | 1.47 | $ | 1.68 | (13)% | ||||
| Pre-tax profit margin | ||||||||||||||
| GAAP | 37.2 | % | 36.3 | % | 37.6 | % | 38.9 | % | ||||||
| Adjusted (1) | 41.0 | % | 42.0 | % | 40.9 | % | 44.0 | % | ||||||
| Return on average common | ||||||||||||||
| stockholders’ equity (annualized) | 14 | % | 17 | % | 15 | % | 20 | % | ||||||
| Return on tangible | ||||||||||||||
| common equity (annualized) (1) | 34 | % | 62 | % | 36 | % | 71 | % | ||||||
| Note: All per-share results are rounded to the nearest cent, based on weighted-average diluted common shares outstanding. |
2Q24 Financial Commentary
•Total net revenue increased by 1% year-over-year led by sustained market strength
•Net interest margin expanded to 2.03%, up 1 basis point sequentially
•Client transactional sweep cash balances ended June at $374.8 billion, reflecting clients’ April tax disbursements, slowing client cash realignment activity, and continued net securities purchases by clients
•Supplemental funding (3) finished the second quarter at $73.7 billion, up from the first quarter as we redirected some client cash from the bank to the broker-dealer to support increased margin lending
•Asset management and administration fees totaled $1.4 billion, a new quarterly record
•GAAP expenses declined by 1% versus the prior year period and included $43 million in accruals in connection with an industry-wide regulatory review of off-channel communications
•Second quarter acquisition and integration-related costs, amortization of acquired intangibles, and restructuring costs totaled $175 million, down $89 million from 2Q23. Exclusive of these items, adjusted total expenses (1) grew by 2%
•Charles Schwab Bank, SSB (CSB) capital ratios continued to build, with preliminary Tier 1 Leverage and adjusted Tier 1 Leverage (1) reaching 10.9% and 6.2%, respectively
(1) Further details on non-GAAP financial measures and a reconciliation of such measures to GAAP reported results are included on pages 10–12 of this release.
(2) Charles Schwab leads in mobile in Corporate Insight’s 2024 Brokerage Experience Benchmarks (https://corporateinsight.com/the-2024-brokerage-experience-benchmarks-find-hybrids-still-offer-best-experiences/), which evaluate the individual investor experience offered by 20 leading brokerage websites and mobile apps. This research was independently conducted by Corporate Benchmarks’ analytical frameworks that are built on over 25 years of research and provide a clear view of how the nation’s top brokerage websites and mobile apps stack up against one another in terms of functionality, design, navigation, and usability. Schwab paid a licensing fee to Corporate Insight for use of the award and logos.
(3) Supplemental funding includes repurchase agreements, Schwab Bank Certificates of Deposit (CDs), and Federal Home Loan Bank balances.
Summer Business Update
The company will host its Summer Business Update for institutional investors this morning from 7:30 a.m. - 8:30 a.m. CT, 8:30 a.m. - 9:30 a.m. ET.
Registration for this Update webcast is accessible at https://www.aboutschwab.com/schwabevents.
Forward-Looking Statements
This press release contains forward-looking statements relating to the company’s value proposition and success with investors, Ameritrade integration-related attrition, expense management and capital levels. These forward-looking statements 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 are described in the company’s most recent reports on Form 10-K and Form 10-Q, which have been filed with the Securities and Exchange Commission and are available on the company’s
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website (https://www.aboutschwab.com/financial-reports) and on the Securities and Exchange Commission’s website (https://www.sec.gov). The company makes no commitment to update any forward-looking statements.
About Charles Schwab
The Charles Schwab Corporation (NYSE: SCHW) is a leading provider of financial services, with 35.6 million active brokerage accounts, 5.4 million workplace plan participant accounts, 1.9 million banking accounts, and $9.41 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 subsidiary, Charles Schwab & Co., Inc. (member SIPC, https://www.sipc.org), and its 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.
Contact Information
MEDIA
Mayura Hooper, 415-667-1525
public.relations@schwab.com
INVESTORS/ANALYSTS
Jeff Edwards, 415-667-1524
investor.relations@schwab.com
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THE CHARLES SCHWAB CORPORATION
Consolidated Statements of Income
(In millions, except per share amounts)
(Unaudited)
| Three Months Ended<br>June 30, | Six Months Ended<br>June 30, | |||||||
|---|---|---|---|---|---|---|---|---|
| 2024 | 2023 | 2024 | 2023 | |||||
| Net Revenues | ||||||||
| Interest revenue | $ | 3,817 | $ | 4,104 | $ | 7,758 | $ | 8,120 |
| Interest expense | (1,659) | (1,814) | (3,367) | (3,060) | ||||
| Net interest revenue | 2,158 | 2,290 | 4,391 | 5,060 | ||||
| Asset management and administration fees | 1,383 | 1,173 | 2,731 | 2,291 | ||||
| Trading revenue | 777 | 803 | 1,594 | 1,695 | ||||
| Bank deposit account fees | 153 | 175 | 336 | 326 | ||||
| Other | 219 | 215 | 378 | 400 | ||||
| Total net revenues | 4,690 | 4,656 | 9,430 | 9,772 | ||||
| Expenses Excluding Interest | ||||||||
| Compensation and benefits | 1,450 | 1,498 | 2,988 | 3,136 | ||||
| Professional services | 259 | 272 | 500 | 530 | ||||
| Occupancy and equipment | 248 | 319 | 513 | 618 | ||||
| Advertising and market development | 107 | 103 | 195 | 191 | ||||
| Communications | 172 | 188 | 313 | 334 | ||||
| Depreciation and amortization | 233 | 191 | 461 | 368 | ||||
| Amortization of acquired intangible assets | 129 | 134 | 259 | 269 | ||||
| Regulatory fees and assessments | 96 | 80 | 221 | 163 | ||||
| Other | 249 | 180 | 435 | 362 | ||||
| Total expenses excluding interest | 2,943 | 2,965 | 5,885 | 5,971 | ||||
| Income before taxes on income | 1,747 | 1,691 | 3,545 | 3,801 | ||||
| Taxes on income | 415 | 397 | 851 | 904 | ||||
| Net Income | 1,332 | 1,294 | 2,694 | 2,897 | ||||
| Preferred stock dividends and other | 121 | 121 | 232 | 191 | ||||
| Net Income Available to Common Stockholders | $ | 1,211 | $ | 1,173 | $ | 2,462 | $ | 2,706 |
| Weighted-Average Common Shares Outstanding: | ||||||||
| Basic | 1,828 | 1,820 | 1,827 | 1,827 | ||||
| Diluted | 1,834 | 1,825 | 1,832 | 1,834 | ||||
| Earnings Per Common Shares Outstanding (1): | ||||||||
| Basic | $ | .66 | $ | .64 | $ | 1.35 | $ | 1.48 |
| Diluted | $ | .66 | $ | .64 | $ | 1.34 | $ | 1.48 |
(1) The Company has voting and nonvoting common stock outstanding. As the participation rights, including dividend and liquidation rights, are identical between the voting and nonvoting stock classes, basic and diluted earnings per share are the same for each class.
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| THE CHARLES SCHWAB CORPORATION | |||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Financial and Operating Highlights | |||||||||||||||||||
| (Unaudited) | |||||||||||||||||||
| Q2-24 % change | 2024 | 2023 | |||||||||||||||||
| vs. | vs. | Second | First | Fourth | Third | Second | |||||||||||||
| (In millions, except per share amounts and as noted) | Q2-23 | Q1-24 | Quarter | Quarter | Quarter | Quarter | Quarter | ||||||||||||
| Net Revenues | |||||||||||||||||||
| Net interest revenue | (6) | % | (3) | % | $ | 2,158 | $ | 2,233 | $ | 2,130 | $ | 2,237 | $ | 2,290 | |||||
| Asset management and administration fees | 18 | % | 3 | % | 1,383 | 1,348 | 1,241 | 1,224 | 1,173 | ||||||||||
| Trading revenue | (3) | % | (5) | % | 777 | 817 | 767 | 768 | 803 | ||||||||||
| Bank deposit account fees | (13) | % | (16) | % | 153 | 183 | 174 | 205 | 175 | ||||||||||
| Other | 2 | % | 38 | % | 219 | 159 | 147 | 172 | 215 | ||||||||||
| Total net revenues | 1 | % | (1) | % | 4,690 | 4,740 | 4,459 | 4,606 | 4,656 | ||||||||||
| Expenses Excluding Interest | |||||||||||||||||||
| Compensation and benefits (1) | (3) | % | (6) | % | 1,450 | 1,538 | 1,409 | 1,770 | 1,498 | ||||||||||
| Professional services | (5) | % | 7 | % | 259 | 241 | 253 | 275 | 272 | ||||||||||
| Occupancy and equipment | (22) | % | (6) | % | 248 | 265 | 331 | 305 | 319 | ||||||||||
| Advertising and market development | 4 | % | 22 | % | 107 | 88 | 104 | 102 | 103 | ||||||||||
| Communications | (9) | % | 22 | % | 172 | 141 | 144 | 151 | 188 | ||||||||||
| Depreciation and amortization | 22 | % | 2 | % | 233 | 228 | 238 | 198 | 191 | ||||||||||
| Amortization of acquired intangible assets | (4) | % | (1) | % | 129 | 130 | 130 | 135 | 134 | ||||||||||
| Regulatory fees and assessments | 20 | % | (23) | % | 96 | 125 | 270 | 114 | 80 | ||||||||||
| Other (2) | 38 | % | 34 | % | 249 | 186 | 386 | 173 | 180 | ||||||||||
| Total expenses excluding interest | (1) | % | — | 2,943 | 2,942 | 3,265 | 3,223 | 2,965 | |||||||||||
| Income before taxes on income | 3 | % | (3) | % | 1,747 | 1,798 | 1,194 | 1,383 | 1,691 | ||||||||||
| Taxes on income | 5 | % | (5) | % | 415 | 436 | 149 | 258 | 397 | ||||||||||
| Net Income | 3 | % | (2) | % | 1,332 | 1,362 | 1,045 | 1,125 | 1,294 | ||||||||||
| Preferred stock dividends and other | — | 9 | % | 121 | 111 | 119 | 108 | 121 | |||||||||||
| Net Income Available to Common Stockholders | 3 | % | (3) | % | $ | 1,211 | $ | 1,251 | $ | 926 | $ | 1,017 | $ | 1,173 | |||||
| Earnings per common share (3): | |||||||||||||||||||
| Basic | 3 | % | (4) | % | $ | .66 | $ | .69 | $ | .51 | $ | .56 | $ | .64 | |||||
| Diluted | 3 | % | (3) | % | $ | .66 | $ | .68 | $ | .51 | $ | .56 | $ | .64 | |||||
| Dividends declared per common share | — | — | $ | .25 | $ | .25 | $ | .25 | $ | .25 | $ | .25 | |||||||
| Weighted-average common shares outstanding: | |||||||||||||||||||
| Basic | — | — | 1,828 | 1,825 | 1,823 | 1,821 | 1,820 | ||||||||||||
| Diluted | — | — | 1,834 | 1,831 | 1,828 | 1,827 | 1,825 | ||||||||||||
| Performance Measures | |||||||||||||||||||
| Pre-tax profit margin | 37.2 | % | 37.9 | % | 26.8 | % | 30.0 | % | 36.3 | % | |||||||||
| Return on average common stockholders’ equity (annualized) (4) | 14 | % | 15 | % | 12 | % | 14 | % | 17 | % | |||||||||
| Financial Condition (at quarter end, in billions) | |||||||||||||||||||
| Cash and cash equivalents | (47) | % | (20) | % | $ | 25.4 | $ | 31.8 | $ | 43.3 | $ | 33.3 | $ | 47.7 | |||||
| Cash and investments segregated | (14) | % | (16) | % | 21.7 | 25.9 | 31.8 | 18.6 | 25.1 | ||||||||||
| Receivables from brokerage clients — net | 12 | % | 2 | % | 72.8 | 71.2 | 68.7 | 69.1 | 65.2 | ||||||||||
| Available for sale securities | (26) | % | (7) | % | 93.6 | 101.1 | 107.6 | 110.3 | 125.8 | ||||||||||
| Held to maturity securities | (8) | % | (2) | % | 153.2 | 156.4 | 159.5 | 162.5 | 166.3 | ||||||||||
| Bank loans — net | 5 | % | 3 | % | 42.2 | 40.8 | 40.4 | 40.3 | 40.1 | ||||||||||
| Total assets | (12) | % | (4) | % | 449.7 | 468.8 | 493.2 | 475.2 | 511.5 | ||||||||||
| Bank deposits | (17) | % | (6) | % | 252.4 | 269.5 | 290.0 | 284.4 | 304.4 | ||||||||||
| Payables to brokerage clients | (6) | % | (5) | % | 80.0 | 84.0 | 84.8 | 72.8 | 84.8 | ||||||||||
| Other short-term borrowings | 28 | % | 19 | % | 10.0 | 8.4 | 6.6 | 7.6 | 7.8 | ||||||||||
| Federal Home Loan Bank borrowings | (40) | % | 2 | % | 24.4 | 24.0 | 26.4 | 31.8 | 41.0 | ||||||||||
| Long-term debt | — | (2) | % | 22.4 | 22.9 | 26.1 | 24.8 | 22.5 | |||||||||||
| Stockholders’ equity | 19 | % | 4 | % | 44.0 | 42.4 | 41.0 | 37.8 | 37.1 | ||||||||||
| Other | |||||||||||||||||||
| Full-time equivalent employees (at quarter end, in thousands) | (12) | % | (1) | % | 32.3 | 32.6 | 33.0 | 35.9 | 36.6 | ||||||||||
| Capital expenditures — purchases of equipment, office facilities, and property, <br> net (in millions) | (45) | % | (25) | % | $ | 92 | $ | 122 | $ | 199 | $ | 250 | $ | 168 | |||||
| Expenses excluding interest as a percentage of average client assets (annualized) | 0.13 | % | 0.14 | % | 0.16 | % | 0.16 | % | 0.15 | % | |||||||||
| Clients’ Daily Average Trades (DATs) (in thousands) | 4 | % | (8) | % | 5,486 | 5,958 | 5,192 | 5,218 | 5,272 | ||||||||||
| Number of Trading Days | 2 | % | 3 | % | 63.0 | 61.0 | 62.5 | 62.5 | 62.0 | ||||||||||
| Revenue Per Trade (5) | (9) | % | — | $ | 2.25 | $ | 2.25 | $ | 2.36 | $ | 2.35 | $ | 2.46 |
(1) Fourth quarter of 2023 includes $16 million in restructuring costs. Third quarter of 2023 includes $276 million in restructuring costs.
(2) Fourth quarter of 2023 includes $181 million in restructuring costs.
(3) The Company has voting and nonvoting common stock outstanding. As the participation rights, including dividend and liquidation rights, are identical between the voting and nonvoting stock classes, basic and diluted earnings per share are the same for each class.
(4) Return on average common stockholders’ equity is calculated using net income available to common stockholders divided by average common stockholders’ equity.
(5) Revenue per trade is calculated as trading revenue divided by DATs multiplied by the number of trading days.
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THE CHARLES SCHWAB CORPORATION
Net Interest Revenue Information
(In millions, except ratios or as noted)
(Unaudited)
| Three Months Ended<br>June 30, | Six Months Ended<br>June 30, | |||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||
| Average<br>Balance | Interest<br>Revenue/<br>Expense | Average<br>Yield/<br>Rate | Average<br>Balance | Interest<br>Revenue/<br>Expense | Average<br>Yield/<br>Rate | Average<br>Balance | Interest<br>Revenue/<br>Expense | Average<br>Yield/<br>Rate | Average<br>Balance | Interest<br>Revenue/<br>Expense | Average<br>Yield/<br>Rate | |||||||||||||
| Interest-earning assets | ||||||||||||||||||||||||
| Cash and cash equivalents | $ | 28,839 | $ | 382 | 5.24 | % | $ | 44,683 | $ | 547 | 4.84 | % | $ | 31,394 | $ | 836 | 5.26 | % | $ | 40,891 | $ | 960 | 4.67 | % |
| Cash and investments segregated | 21,493 | 281 | 5.17 | % | 27,399 | 324 | 4.68 | % | 25,503 | 669 | 5.19 | % | 33,699 | 756 | 4.46 | % | ||||||||
| Receivables from brokerage clients | 68,715 | 1,351 | 7.78 | % | 60,709 | 1,167 | 7.60 | % | 66,259 | 2,611 | 7.80 | % | 60,626 | 2,251 | 7.39 | % | ||||||||
| Available for sale securities (1) | 104,045 | 555 | 2.13 | % | 145,032 | 791 | 2.18 | % | 107,956 | 1,149 | 2.12 | % | 150,382 | 1,616 | 2.15 | % | ||||||||
| Held to maturity securities | 154,314 | 658 | 1.70 | % | 167,499 | 720 | 1.72 | % | 155,862 | 1,348 | 1.73 | % | 169,184 | 1,466 | 1.73 | % | ||||||||
| Bank loans | 41,562 | 460 | 4.44 | % | 40,124 | 410 | 4.09 | % | 41,046 | 900 | 4.40 | % | 40,185 | 801 | 4.00 | % | ||||||||
| Total interest-earning assets | 418,968 | 3,687 | 3.50 | % | 485,446 | 3,959 | 3.24 | % | 428,020 | 7,513 | 3.49 | % | 494,967 | 7,850 | 3.16 | % | ||||||||
| Securities lending revenue | 95 | 124 | 171 | 236 | ||||||||||||||||||||
| Other interest revenue | 35 | 21 | 74 | 34 | ||||||||||||||||||||
| Total interest-earning assets | $ | 418,968 | $ | 3,817 | 3.62 | % | $ | 485,446 | $ | 4,104 | 3.36 | % | $ | 428,020 | $ | 7,758 | 3.60 | % | $ | 494,967 | $ | 8,120 | 3.27 | % |
| Funding sources | ||||||||||||||||||||||||
| Bank deposits | $ | 258,119 | $ | 840 | 1.31 | % | $ | 312,543 | $ | 863 | 1.11 | % | $ | 266,243 | $ | 1,761 | 1.33 | % | $ | 327,739 | $ | 1,481 | 0.91 | % |
| Payables to brokerage clients | 67,680 | 77 | 0.45 | % | 64,892 | 64 | 0.40 | % | 68,011 | 150 | 0.44 | % | 70,997 | 139 | 0.40 | % | ||||||||
| Other short-term borrowings | 9,268 | 129 | 5.59 | % | 7,622 | 97 | 5.08 | % | 8,327 | 232 | 5.60 | % | 7,272 | 183 | 5.06 | % | ||||||||
| Federal Home Loan Bank borrowings | 25,582 | 348 | 5.42 | % | 46,813 | 606 | 5.13 | % | 25,220 | 678 | 5.35 | % | 35,697 | 910 | 5.07 | % | ||||||||
| Long-term debt | 22,460 | 208 | 3.70 | % | 21,237 | 157 | 2.95 | % | 23,730 | 432 | 3.64 | % | 20,766 | 296 | 2.85 | % | ||||||||
| Total interest-bearing liabilities | 383,109 | 1,602 | 1.68 | % | 453,107 | 1,787 | 1.57 | % | 391,531 | 3,253 | 1.66 | % | 462,471 | 3,009 | 1.31 | % | ||||||||
| Non-interest-bearing funding sources | 35,859 | 32,339 | 36,489 | 32,496 | ||||||||||||||||||||
| Securities lending expense | 57 | 28 | 112 | 50 | ||||||||||||||||||||
| Other interest expense | — | (1) | 2 | 1 | ||||||||||||||||||||
| Total funding sources | $ | 418,968 | $ | 1,659 | 1.59 | % | $ | 485,446 | $ | 1,814 | 1.49 | % | $ | 428,020 | $ | 3,367 | 1.57 | % | $ | 494,967 | $ | 3,060 | 1.24 | % |
| Net interest revenue | $ | 2,158 | 2.03 | % | $ | 2,290 | 1.87 | % | $ | 4,391 | 2.03 | % | $ | 5,060 | 2.03 | % |
(1) Amounts have been calculated based on amortized cost.
- 6 -
THE CHARLES SCHWAB CORPORATION
Asset Management and Administration Fees Information
(In millions, except ratios or as noted)
(Unaudited)
| Three Months Ended<br>June 30, | Six Months Ended<br>June 30, | |||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||
| Average<br>Client<br>Assets | Revenue | Average<br>Fee | Average<br>Client<br>Assets | Revenue | Average<br>Fee | Average<br>Client<br>Assets | Revenue | Average<br>Fee | Average<br>Client<br>Assets | Revenue | Average<br>Fee | |||||||||||||
| Schwab money market funds | $ | 523,665 | $ | 357 | 0.27 | % | $ | 375,898 | $ | 252 | 0.27 | % | $ | 511,776 | $ | 693 | 0.27 | % | $ | 346,145 | $ | 465 | 0.27 | % |
| Schwab equity and bond funds, exchange-traded funds (ETFs), and collective trust funds (CTFs) | 565,848 | 112 | 0.08 | % | 465,079 | 94 | 0.08 | % | 552,755 | 219 | 0.08 | % | 457,830 | 185 | 0.08 | % | ||||||||
| Mutual Fund OneSource® and other no-transaction-<br><br>fee funds | 338,198 | 214 | 0.25 | % | 229,207 | 151 | 0.26 | % | 326,387 | 423 | 0.26 | % | 225,822 | 299 | 0.27 | % | ||||||||
| Other third-party mutual funds and ETFs | 600,902 | 102 | 0.07 | % | 681,486 | 133 | 0.08 | % | 603,263 | 208 | 0.07 | % | 678,915 | 266 | 0.08 | % | ||||||||
| Total mutual funds, ETFs, and CTFs (1) | $ | 2,028,613 | 785 | 0.16 | % | $ | 1,751,670 | 630 | 0.14 | % | $ | 1,994,181 | 1,543 | 0.16 | % | $ | 1,708,712 | 1,215 | 0.14 | % | ||||
| Advice solutions (1) | ||||||||||||||||||||||||
| Fee-based | $ | 525,689 | 510 | 0.39 | % | $ | 455,859 | 464 | 0.41 | % | $ | 515,911 | 1,013 | 0.39 | % | $ | 449,443 | 917 | 0.41 | % | ||||
| Non-fee-based | 110,234 | — | — | 95,427 | — | — | 108,133 | — | — | 94,948 | — | — | ||||||||||||
| Total advice solutions | $ | 635,923 | 510 | 0.32 | % | $ | 551,286 | 464 | 0.34 | % | $ | 624,044 | 1,013 | 0.33 | % | $ | 544,391 | 917 | 0.34 | % | ||||
| Other balance-based fees (2) | 763,750 | 69 | 0.04 | % | 594,528 | 63 | 0.04 | % | 741,599 | 138 | 0.04 | % | 578,158 | 125 | 0.04 | % | ||||||||
| Other (3) | 19 | 16 | 37 | 34 | ||||||||||||||||||||
| Total asset management and administration fees | $ | 1,383 | $ | 1,173 | $ | 2,731 | $ | 2,291 |
(1) Advice solutions include managed portfolios, specialized strategies, and customized investment advice such as Schwab Wealth AdvisoryTM, 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®, Schwab Intelligent Portfolios Premium®, AdvisorDirect®, Essential Portfolios, Selective Portfolios, and Personalized Portfolios; 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.
(2) Includes various asset-related fees, such as trust fees, 401(k) recordkeeping fees, and mutual fund clearing fees and other service fees.
(3) Includes miscellaneous service and transaction fees relating to mutual funds and ETFs that are not balance-based.
- 7 -
THE CHARLES SCHWAB CORPORATION
Growth in Client Assets and Accounts
(Unaudited)
| Q2-24 % Change | 2024 | 2023 | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| vs. | vs. | Second | First | Fourth | Third | Second | ||||||||
| (In billions, at quarter end, except as noted) | Q2-23 | Q1-24 | Quarter | Quarter | Quarter | Quarter | Quarter | |||||||
| Assets in client accounts | ||||||||||||||
| Schwab One®, certain cash equivalents, and bank deposits | (14) | % | (5) | % | $ | 330.7 | $ | 348.2 | $ | 368.3 | $ | 353.1 | $ | 384.4 |
| Bank deposit account balances | (18) | % | (6) | % | 84.5 | 90.2 | 97.4 | 99.5 | 102.7 | |||||
| Proprietary mutual funds (Schwab Funds® and Laudus Funds®) and CTFs | ||||||||||||||
| Money market funds (1) | 36 | % | 3 | % | 533.6 | 515.7 | 476.4 | 436.3 | 392.9 | |||||
| Equity and bond funds and CTFs (2) | 24 | % | 4 | % | 214.4 | 206.0 | 186.7 | 167.9 | 172.6 | |||||
| Total proprietary mutual funds and CTFs | 32 | % | 4 | % | 748.0 | 721.7 | 663.1 | 604.2 | 565.5 | |||||
| Mutual Fund Marketplace® (3) | ||||||||||||||
| Mutual Fund OneSource® and other no-transaction-fee funds | 35 | % | 5 | % | 344.8 | 329.2 | 306.2 | 288.0 | 254.6 | |||||
| Mutual fund clearing services | 20 | % | 7 | % | 264.7 | 248.1 | 233.4 | 216.9 | 220.7 | |||||
| Other third-party mutual funds | 2 | % | — | 1,177.5 | 1,182.9 | 1,126.5 | 1,055.3 | 1,150.8 | ||||||
| Total Mutual Fund Marketplace | 10 | % | 2 | % | 1,787.0 | 1,760.2 | 1,666.1 | 1,560.2 | 1,626.1 | |||||
| Total mutual fund assets | 16 | % | 2 | % | 2,535.0 | 2,481.9 | 2,329.2 | 2,164.4 | 2,191.6 | |||||
| Exchange-traded funds | ||||||||||||||
| Proprietary ETFs (2) | 19 | % | 2 | % | 349.6 | 342.9 | 319.4 | 286.2 | 293.2 | |||||
| Other third-party ETFs | 26 | % | 4 | % | 1,738.6 | 1,676.6 | 1,521.7 | 1,352.6 | 1,381.4 | |||||
| Total ETF assets | 25 | % | 3 | % | 2,088.2 | 2,019.5 | 1,841.1 | 1,638.8 | 1,674.6 | |||||
| Equity and other securities | 22 | % | 5 | % | 3,648.8 | 3,467.7 | 3,163.5 | 2,886.4 | 3,002.7 | |||||
| Fixed income securities | 10 | % | 2 | % | 792.0 | 779.0 | 779.7 | 747.4 | 722.6 | |||||
| Margin loans outstanding | 14 | % | 5 | % | (71.7) | (68.1) | (62.6) | (65.1) | (62.8) | |||||
| Total client assets | 17 | % | 3 | % | $ | 9,407.5 | $ | 9,118.4 | $ | 8,516.6 | $ | 7,824.5 | $ | 8,015.8 |
| Client assets by business | ||||||||||||||
| Investor Services | 18 | % | 4 | % | $ | 5,055.7 | $ | 4,852.2 | $ | 4,519.1 | $ | 4,157.7 | $ | 4,267.9 |
| Advisor Services | 16 | % | 2 | % | 4,351.8 | 4,266.2 | 3,997.5 | 3,666.8 | 3,747.9 | |||||
| Total client assets | 17 | % | 3 | % | $ | 9,407.5 | $ | 9,118.4 | $ | 8,516.6 | $ | 7,824.5 | $ | 8,015.8 |
| Net growth in assets in client accounts (for the quarter ended) | ||||||||||||||
| Net new assets by business | ||||||||||||||
| Investor Services (4) | 11 | % | 14 | % | $ | 39.9 | $ | 34.9 | $ | 25.0 | $ | 28.6 | $ | 36.0 |
| Advisor Services (5) | (5) | % | (36) | % | 34.3 | 53.3 | 41.3 | 19.6 | 36.0 | |||||
| Total net new assets | 3 | % | (16) | % | $ | 74.2 | $ | 88.2 | $ | 66.3 | $ | 48.2 | $ | 72.0 |
| Net market gains (losses) | 214.9 | 513.6 | 625.8 | (239.5) | 363.8 | |||||||||
| Net growth (decline) | $ | 289.1 | $ | 601.8 | $ | 692.1 | $ | (191.3) | $ | 435.8 | ||||
| New brokerage accounts (in thousands, for the quarter ended) | 3 | % | (10) | % | 985 | 1,094 | 910 | 894 | 960 | |||||
| Client accounts (in thousands) | ||||||||||||||
| Active brokerage accounts | 4 | % | 1 | % | 35,612 | 35,301 | 34,838 | 34,540 | 34,382 | |||||
| Banking accounts | 8 | % | 2 | % | 1,931 | 1,885 | 1,838 | 1,799 | 1,781 | |||||
| Workplace Plan Participant Accounts (6) | 7 | % | 2 | % | 5,363 | 5,277 | 5,221 | 5,141 | 5,003 |
(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 June 30, 2024, off-platform equity and bond funds, CTFs, and ETFs were $31.6 billion, $3.7 billion, and $117.3 billion, respectively.
(3) Excludes all proprietary mutual funds and ETFs.
(4) Second quarter of 2024 includes net inflows of $2.7 billion from off-platform Schwab Bank Retail CDs and an inflow of $10.3 billion from a mutual fund clearing services client. First quarter of 2024 includes net outflows of $7.4 billion from off-platform Schwab Bank Retail CDs. Fourth quarter of 2023 includes net inflows of $2.4 billion from off-platform Schwab Bank Retail CDs and outflows of $5.8 billion from an international relationship. Third quarter of 2023 includes net inflows of $3.3 billion from off-platform Schwab Bank Retail CDs. Second quarter of 2023 includes an inflow of $12.0 billion from a mutual fund clearing services client and inflows of $7.8 billion from off-platform Schwab Bank Retail CDs.
(5) Fourth quarter of 2023 includes outflows of $6.4 billion from an international relationship. Third quarter of 2023 includes an outflow of $0.8 billion from an international relationship.
(6) Beginning in the fourth quarter 2023, Retirement Plan Participants was expanded to include accounts in Stock Plan Services, Designated Brokerage Services, and Retirement Business Services. Participants may be enrolled in services in more than one Workplace business. Prior periods have been recast to reflect this change.
- 8 -
The Charles Schwab Corporation Monthly Activity Report For June 2024
| 2023 | 2024 | Change | ||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Jun | Jul | Aug | Sep | Oct | Nov | Dec | Jan | Feb | Mar | Apr | May | Jun | Mo. | Yr. | ||||||||||||||||
| Market Indices (at month end) | ||||||||||||||||||||||||||||||
| Dow Jones Industrial Average® | 34,408 | 35,560 | 34,722 | 33,508 | 33,053 | 35,951 | 37,690 | 38,150 | 38,996 | 39,807 | 37,816 | 38,686 | 39,119 | 1 | % | 14 | % | |||||||||||||
| Nasdaq Composite® | 13,788 | 14,346 | 14,035 | 13,219 | 12,851 | 14,226 | 15,011 | 15,164 | 16,092 | 16,379 | 15,658 | 16,735 | 17,733 | 6 | % | 29 | % | |||||||||||||
| Standard & Poor’s® 500 | 4,450 | 4,589 | 4,508 | 4,288 | 4,194 | 4,568 | 4,770 | 4,846 | 5,096 | 5,254 | 5,036 | 5,278 | 5,460 | 3 | % | 23 | % | |||||||||||||
| Client Assets (in billions of dollars) | ||||||||||||||||||||||||||||||
| Beginning Client Assets | 7,650.2 | 8,015.8 | 8,241.0 | 8,094.7 | 7,824.5 | 7,653.4 | 8,180.6 | 8,516.6 | 8,558.1 | 8,879.5 | 9,118.4 | 8,847.5 | 9,206.3 | |||||||||||||||||
| Net New Assets (1) | 33.8 | 12.9 | 8.1 | 27.2 | 5.0 | 19.2 | 42.1 | 14.8 | 31.7 | 41.7 | 10.0 | 31.0 | 33.2 | 7 | % | (2) | % | |||||||||||||
| Net Market Gains (Losses) | 331.8 | 212.3 | (154.4) | (297.4) | (176.1) | 508.0 | 293.9 | 26.7 | 289.7 | 197.2 | (280.9) | 327.8 | 168.0 | |||||||||||||||||
| Total Client Assets (at month end) | 8,015.8 | 8,241.0 | 8,094.7 | 7,824.5 | 7,653.4 | 8,180.6 | 8,516.6 | 8,558.1 | 8,879.5 | 9,118.4 | 8,847.5 | 9,206.3 | 9,407.5 | 2 | % | 17 | % | |||||||||||||
| Core Net New Assets (1,2) | 33.8 | 13.7 | 4.9 | 27.1 | 11.3 | 21.7 | 43.1 | 17.2 | 33.4 | 45.0 | 1.0 | 31.1 | 29.1 | (6) | % | (14) | % | |||||||||||||
| Receiving Ongoing Advisory Services (at month end) | ||||||||||||||||||||||||||||||
| Investor Services | 547.5 | 560.6 | 552.2 | 533.0 | 522.2 | 557.0 | 581.4 | 584.1 | 601.8 | 618.5 | 602.2 | 624.0 | 632.9 | 1 | % | 16 | % | |||||||||||||
| Advisor Services (3) | 3,527.8 | 3,619.8 | 3,554.2 | 3,448.0 | 3,380.3 | 3,604.4 | 3,757.4 | 3,780.4 | 3,902.5 | 4,009.5 | 3,893.9 | 4,027.3 | 4,090.0 | 2 | % | 16 | % | |||||||||||||
| Client Accounts (at month end, in thousands) | ||||||||||||||||||||||||||||||
| Active Brokerage Accounts | 34,382 | 34,434 | 34,440 | 34,540 | 34,571 | 34,672 | 34,838 | 35,017 | 35,127 | 35,301 | 35,426 | 35,524 | 35,612 | — | 4 | % | ||||||||||||||
| Banking Accounts | 1,781 | 1,792 | 1,798 | 1,799 | 1,812 | 1,825 | 1,838 | 1,856 | 1,871 | 1,885 | 1,901 | 1,916 | 1,931 | 1 | % | 8 | % | |||||||||||||
| Workplace Plan Participant Accounts (4) | 5,003 | 5,030 | 5,037 | 5,141 | 5,212 | 5,212 | 5,221 | 5,226 | 5,268 | 5,277 | 5,282 | 5,345 | 5,363 | — | 7 | % | ||||||||||||||
| Client Activity | ||||||||||||||||||||||||||||||
| New Brokerage Accounts (in thousands) | 315 | 303 | 311 | 280 | 284 | 286 | 340 | 366 | 345 | 383 | 361 | 314 | 310 | (1) | % | (2) | % | |||||||||||||
| Client Cash as a Percentage of Client Assets (5,6) | 10.5 | % | 10.2 | % | 10.4 | % | 10.8 | % | 11.2 | % | 10.7 | % | 10.5 | % | 10.5 | % | 10.2 | % | 10.0 | % | 10.2 | % | 9.9 | % | 9.7 | % | (20) bp | (80) bp | ||
| Derivative Trades as a Percentage of Total Trades | 23.9 | % | 23.0 | % | 24.4 | % | 24.2 | % | 23.2 | % | 23.1 | % | 21.8 | % | 21.8 | % | 22.2 | % | 21.9 | % | 22.1 | % | 21.9 | % | 21.3 | % | (60) bp | (260) bp | ||
| Selected Average Balances (in millions of dollars) | ||||||||||||||||||||||||||||||
| Average Interest-Earning Assets (7) | 479,752 | 466,659 | 449,483 | 444,864 | 438,522 | 439,118 | 446,305 | 443,694 | 434,822 | 431,456 | 423,532 | 415,950 | 417,150 | — | (13) | % | ||||||||||||||
| Average Margin Balances | 61,543 | 63,040 | 64,226 | 64,014 | 63,946 | 61,502 | 62,309 | 61,368 | 63,600 | 66,425 | 68,827 | 67,614 | 69,730 | 3 | % | 13 | % | |||||||||||||
| Average Bank Deposit Account Balances (8) | 102,917 | 102,566 | 101,928 | 100,404 | 97,893 | 94,991 | 95,518 | 95,553 | 92,075 | 90,774 | 88,819 | 86,844 | 85,195 | (2) | % | (17) | % | |||||||||||||
| Mutual Fund and Exchange-Traded Fund | ||||||||||||||||||||||||||||||
| Net Buys (Sells) (9,10) (in millions of dollars) | ||||||||||||||||||||||||||||||
| Equities | 9,190 | 7,423 | (278) | 675 | (3,039) | 6,099 | 7,903 | 8,182 | 7,624 | 10,379 | 3,472 | 5,734 | 3,379 | |||||||||||||||||
| Hybrid | (903) | (407) | (1,037) | (828) | (1,457) | (1,466) | (1,596) | (501) | (1,330) | (439) | (703) | (558) | (843) | |||||||||||||||||
| Bonds | 3,302 | 2,515 | 4,696 | 2,723 | 1,094 | 255 | 6,104 | 7,510 | 9,883 | 7,561 | 5,949 | 5,854 | 6,346 | |||||||||||||||||
| Net Buy (Sell) Activity (in millions of dollars) | ||||||||||||||||||||||||||||||
| Mutual Funds (9) | (4,485) | (3,333) | (6,476) | (5,853) | (12,245) | (9,267) | (7,406) | (966) | (1,348) | (1,607) | (4,818) | (5,544) | (4,254) | |||||||||||||||||
| Exchange-Traded Funds (10) | 16,074 | 12,864 | 9,857 | 8,423 | 8,843 | 14,155 | 19,817 | 16,157 | 17,525 | 19,108 | 13,536 | 16,574 | 13,136 | |||||||||||||||||
| Money Market Funds | 9,112 | 7,911 | 16,869 | 13,388 | 16,976 | 11,670 | 7,745 | 11,717 | 10,129 | 9,085 | (2,357) | 9,790 | 3,858 |
Note: Certain supplemental details related to the information above can be found at: https://www.aboutschwab.com/financial-reports.
(1) Unless otherwise noted, differences between net new assets and core net new assets are net flows from off-platform Schwab Bank Retail CDs. Additionally, 2024 includes an inflow of $10.3 billion from a mutual fund clearing services client in April, and 2023 includes outflows from a large international relationship of $0.8 billion in September, $6.2 billion in October, $5.4 billion in November, and $0.6 billion in December.
(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, and activity from off-platform Schwab Bank Retail CDs. These flows may span multiple reporting periods.
(3) Excludes Retirement Business Services.
(4) Beginning October 2023, Retirement Plan Participants was expanded to include accounts in Stock Plan Services, Designated Brokerage Services, and Retirement Business Services. Participants may be enrolled in services in more than one Workplace business. Prior periods have been recast to reflect this change.
(5) Schwab One®, certain cash equivalents, bank deposits, third-party bank deposit accounts, and money market fund balances as a percentage of total client assets.
(6) Beginning July 2023, client cash as a percentage of client assets excludes brokered CDs issued by Charles Schwab Bank. Prior periods have been recast to reflect this change.
(7) Represents average total interest-earning assets on the Company’s balance sheet.
(8) Represents average clients’ uninvested cash sweep account balances held in deposit accounts at third-party financial institutions.
(9) 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.
(10) Represents the principal value of client ETF transactions handled by Schwab, including transactions in proprietary ETFs.
- 9 -
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 second 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. Beginning in the third quarter of 2023, these adjustments also include restructuring costs, which the Company began incurring in connection with its previously announced plans to streamline its operations to prepare for post-integration of Ameritrade. See Part I – Item 1 – Note 10 of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2024 for additional information.
| Non-GAAP Adjustment or Measure | Definition | Usefulness to Investors and Uses by Management |
|---|---|---|
| Acquisition and integration-related costs, amortization of acquired intangible assets, and restructuring costs | Schwab adjusts certain GAAP financial measures to exclude the impact of acquisition and integration-related costs incurred as a result of the Company’s acquisitions, amortization of acquired intangible assets, restructuring costs, and, where applicable, the income tax effect of these expenses. <br><br>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, amortization of acquired intangible assets, and restructuring costs for the purpose of calculating certain non-GAAP measures because we believe doing so provides additional transparency of Schwab’s ongoing operations, and is useful in both evaluating the operating performance of the business and facilitating comparison of results with prior and future periods. <br><br>Costs related to acquisition and integration or restructuring fluctuate based on the timing of acquisitions, integration and restructuring activities, thereby limiting comparability of results among periods, and are not representative of the costs of running the Company’s ongoing 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. |
| Adjusted Tier 1 Leverage Ratio | Adjusted Tier 1 Leverage Ratio represents the Tier 1 Leverage Ratio as prescribed by bank regulatory guidance for the consolidated company and for CSB, adjusted to reflect the inclusion of accumulated other comprehensive income (AOCI) in the ratio. | Inclusion of the impacts of AOCI in the Company’s Tier 1 Leverage Ratio provides additional information regarding the Company’s current capital position. We believe Adjusted Tier 1 Leverage Ratio may be useful to investors as a supplemental measure of the Company’s capital levels. |
The Company also uses adjusted diluted EPS and return on tangible common equity as components of performance criteria for employee bonus and certain executive management incentive compensation arrangements. The Compensation Committee of CSC’s Board of Directors maintains discretion in evaluating performance against these criteria.
- 10 -
THE CHARLES SCHWAB CORPORATION
Non-GAAP Financial Measures
(In millions, except ratios and per share amounts)
(Unaudited)
The tables below present reconciliations of GAAP measures to non-GAAP measures:
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Total <br>Expenses Excluding Interest | Net <br>Income | Total <br>Expenses Excluding Interest | Net <br>Income | Total <br>Expenses Excluding Interest | Net <br>Income | Total <br>Expenses Excluding <br>Interest | Net <br>Income | |||||||||
| Total expenses excluding interest (GAAP), <br> Net income (GAAP) | $ | 2,943 | $ | 1,332 | $ | 2,965 | $ | 1,294 | $ | 5,885 | $ | 2,694 | $ | 5,971 | $ | 2,897 |
| Acquisition and integration-related costs (1) | (36) | 36 | (130) | 130 | (74) | 74 | (228) | 228 | ||||||||
| Amortization of acquired intangible assets | (129) | 129 | (134) | 134 | (259) | 259 | (269) | 269 | ||||||||
| Restructuring costs (2) | (10) | 10 | — | — | 18 | (18) | — | — | ||||||||
| Income tax effects (3) | N/A | (42) | N/A | (64) | N/A | (75) | N/A | (120) | ||||||||
| Adjusted total expenses (non-GAAP), <br> Adjusted net income (non-GAAP) | $ | 2,768 | $ | 1,465 | $ | 2,701 | $ | 1,494 | $ | 5,570 | $ | 2,934 | $ | 5,474 | $ | 3,274 |
(1) Acquisition and integration-related costs for the three and six months ended June 30, 2024 primarily consist of $18 million and $35 million of compensation and benefits, $12 million and $29 million of professional services, and $5 million of depreciation and amortization. Acquisition and integration-related costs for the three and six months ended June 30, 2023 primarily consist of $48 million and $106 million of compensation and benefits, $41 million and $74 million of professional services, $10 million and $14 million of occupancy and equipment, and $20 million and $22 million of other.
(2) Restructuring costs for the three and six months ended June 30, 2024 reflect a change in estimate of $3 million and $34 million in compensation and benefits, offset by $1 million and $3 million of occupancy and equipment and $12 million and $13 million of other expense for the periods. There were no restructuring costs for the three and six months ended June 30, 2023.
(3) The income tax effects of the non-GAAP adjustments are determined using an effective tax rate reflecting the exclusion of non-deductible acquisition costs and are used to present the acquisition and integration-related costs, amortization of acquired intangible assets and restructuring costs on an after-tax basis.
N/A Not applicable.
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Amount | % of <br>Total Net Revenues | Amount | % of <br>Total Net Revenues | Amount | % of <br>Total Net Revenues | Amount | % of <br>Total Net Revenues | |||||||||
| Income before taxes on income (GAAP), <br> Pre-tax profit margin (GAAP) | $ | 1,747 | 37.2 | % | $ | 1,691 | 36.3 | % | $ | 3,545 | 37.6 | % | $ | 3,801 | 38.9 | % |
| Acquisition and integration-related costs | 36 | 0.8 | % | 130 | 2.8 | % | 74 | 0.8 | % | 228 | 2.3 | % | ||||
| Amortization of acquired intangible assets | 129 | 2.8 | % | 134 | 2.9 | % | 259 | 2.7 | % | 269 | 2.8 | % | ||||
| Restructuring costs | 10 | 0.2 | % | — | — | (18) | (0.2 | %) | — | — | ||||||
| Adjusted income before taxes on income (non-GAAP), <br> Adjusted pre-tax profit margin (non-GAAP) | $ | 1,922 | 41.0 | % | $ | 1,955 | 42.0 | % | $ | 3,860 | 40.9 | % | $ | 4,298 | 44.0 | % |
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Amount | Diluted <br>EPS | Amount | Diluted <br>EPS | Amount | Diluted <br>EPS | Amount | Diluted <br>EPS | |||||||||
| Net income available to common stockholders (GAAP), <br> Earnings per common share — diluted (GAAP) | $ | 1,211 | $ | .66 | $ | 1,173 | $ | .64 | $ | 2,462 | $ | 1.34 | $ | 2,706 | $ | 1.48 |
| Acquisition and integration-related costs | 36 | .02 | 130 | .07 | 74 | .04 | 228 | .12 | ||||||||
| Amortization of acquired intangible assets | 129 | .07 | 134 | .07 | 259 | .14 | 269 | .15 | ||||||||
| Restructuring costs | 10 | .01 | — | — | (18) | (.01) | — | — | ||||||||
| Income tax effects | (42) | (.03) | (64) | (.03) | (75) | (.04) | (120) | (.07) | ||||||||
| Adjusted net income available to common stockholders <br> (non-GAAP), Adjusted diluted EPS (non-GAAP) | $ | 1,344 | $ | .73 | $ | 1,373 | $ | .75 | $ | 2,702 | $ | 1.47 | $ | 3,083 | $ | 1.68 |
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THE CHARLES SCHWAB CORPORATION
Non-GAAP Financial Measures
(In millions, except ratios and per share amounts)
(Unaudited)
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2024 | 2023 | 2024 | 2023 | |||||||||
| Return on average common stockholders’ equity (GAAP) | 14 | % | 17 | % | 15 | % | 20 | % | ||||
| Average common stockholders’ equity | $ | 33,991 | $ | 27,556 | $ | 33,264 | $ | 27,429 | ||||
| Less: Average goodwill | (11,951) | (11,951) | (11,951) | (11,951) | ||||||||
| Less: Average acquired intangible assets — net | (8,067) | (8,591) | (8,132) | (8,657) | ||||||||
| Plus: Average deferred tax liabilities related to goodwill <br> and acquired intangible assets — net | 1,747 | 1,834 | 1,753 | 1,837 | ||||||||
| Average tangible common equity | $ | 15,720 | $ | 8,848 | $ | 14,934 | $ | 8,658 | ||||
| Adjusted net income available to common stockholders (1) | $ | 1,344 | $ | 1,373 | $ | 2,702 | $ | 3,083 | ||||
| Return on tangible common equity (non-GAAP) | 34 | % | 62 | % | 36 | % | 71 | % |
(1) See table above for the reconciliation of net income available to common stockholders to adjusted net income available to common stockholders (non-GAAP).
| (Preliminary) | ||||||
|---|---|---|---|---|---|---|
| June 30, 2024 | ||||||
| CSC | CSB | |||||
| Tier 1 Leverage Ratio (GAAP) | 9.4 | % | 10.9 | % | ||
| Tier 1 Capital | $ | 42,624 | $ | 32,091 | ||
| Plus: AOCI adjustment | (16,926) | (14,755) | ||||
| Adjusted Tier 1 Capital | 25,698 | 17,336 | ||||
| Average assets with regulatory adjustments | 451,304 | 294,465 | ||||
| Plus: AOCI adjustment | (17,301) | (15,251) | ||||
| Adjusted average assets with regulatory adjustments | $ | 434,003 | $ | 279,214 | ||
| Adjusted Tier 1 Leverage Ratio (non-GAAP) | 5.9 | % | 6.2 | % |
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