Statement Of Income Securities
Statement Of Income Securities Based Income (USD $) | |||
In Millions, except Per Share data | 12 Months Ended
Dec. 31, 2009 | 12 Months Ended
Dec. 31, 2008 | 12 Months Ended
Dec. 31, 2007 |
Net Revenues | |||
Asset management and administration fees | $1,875 | $2,355 | $2,358 |
Interest revenue | 1,428 | 1,908 | 2,270 |
Interest expense | (221) | (243) | (623) |
Net interest revenue | 1,207 | 1,665 | 1,647 |
Trading revenue | 996 | 1,080 | 860 |
Other | 175 | 94 | 129 |
Total other-than-temporary impairment losses | (278) | (44) | 0 |
Noncredit portion of loss recognized in other comprehensive income | 218 | 0 | 0 |
Net impairment losses on securities | (60) | (44) | 0 |
Total net revenues | 4,193 | 5,150 | 4,994 |
Expenses Excluding Interest | |||
Compensation and benefits | 1,544 | 1,667 | 1,781 |
Professional services | 275 | 334 | 324 |
Occupancy and equipment | 318 | 299 | 282 |
Advertising and market development | 191 | 243 | 230 |
Communications | 206 | 211 | 200 |
Depreciation and amortization | 159 | 152 | 156 |
Other | 224 | 216 | 168 |
Total expenses excluding interest | 2,917 | 3,122 | 3,141 |
Income from continuing operations before taxes on income | 1,276 | 2,028 | 1,853 |
Taxes on income | (489) | (798) | (733) |
Income from continuing operations | 787 | 1,230 | 1,120 |
(Loss) income from discontinued operations, net of tax | 0 | (18) | 1,287 |
Net Income | $787 | $1,212 | $2,407 |
Weighted-Average Common Shares Outstanding - Diluted | 1,160 | 1,157 | 1,222 |
Earnings Per Share - Basic | |||
Income from continuing operations | 0.68 | 1.07 | 0.93 |
(Loss) income from discontinued operations, net of tax | $0 | -0.01 | 1.05 |
Net income | 0.68 | 1.06 | 1.98 |
Earnings Per Share - Diluted | |||
Income from continuing operations | 0.68 | 1.06 | 0.92 |
(Loss) income from discontinued operations, net of tax | $0 | -0.01 | 1.04 |
Net income | 0.68 | 1.05 | 1.96 |
Dividends Declared Per Common Share | 0.24 | 0.22 | 1.2 |
Statement Of Financial Position
Statement Of Financial Position Unclassified - Securities Based Operations (USD $) | ||
In Millions | Dec. 31, 2009
| Dec. 31, 2008
|
Assets | ||
Cash and cash equivalents | $8,241 | $5,442 |
Cash and investments segregated and on deposit for regulatory purposes (including resale agreements of $8,346 in 2009 and $6,701 in 2008) | 18,373 | 14,685 |
Receivables from brokers, dealers, and clearing organizations | 560 | 759 |
Receivables from brokerage clients - net | 8,627 | 7,129 |
Other securities owned - at fair value | 916 | 626 |
Securities available for sale | 22,120 | 14,446 |
Securities held to maturity (fair value - $6,880 in 2009 and $244 in 2008) | 6,839 | 243 |
Loans to banking clients - net | 7,348 | 6,044 |
Loans held for sale | 104 | 41 |
Equipment, office facilities, and property - net | 641 | 661 |
Goodwill | 528 | 528 |
Other assets | 1,134 | 1,071 |
Total assets | 75,431 | 51,675 |
Liabilities and Stockholders' Equity | ||
Deposits from banking clients | 38,820 | 23,841 |
Payables to brokers, dealers, and clearing organizations | 2,373 | 1,100 |
Payables to brokerage clients | 26,246 | 20,256 |
Accrued expenses and other liabilities | 1,407 | 1,534 |
Long-term debt | 1,512 | 883 |
Total liabilities | 70,358 | 47,614 |
Stockholders' equity: | ||
Preferred stock - 9,940,000 shares authorized; $.01 par value per share; none issued | 0 | 0 |
Common stock - 3 billion shares authorized; $.01 par value per share; 1,392,091,544 shares issued | 14 | 14 |
Additional paid-in capital | 2,298 | 2,214 |
Retained earnings | 7,243 | 6,735 |
Treasury stock, at cost - 229,983,936 shares in 2009 and 234,991,565 shares in 2008 | (4,291) | (4,349) |
Accumulated other comprehensive loss | (191) | (553) |
Total stockholders' equity | 5,073 | 4,061 |
Total liabilities and stockholders' equity | $75,431 | $51,675 |
1_Statement Of Financial Positi
Statement Of Financial Position Unclassified - Securities Based Operations (Parenthetical) (USD $) | ||
In Millions, except Share data | Dec. 31, 2009
| Dec. 31, 2008
|
Cash and investments segregated and on deposit for regulatory purposes, resale agreements | $8,346 | $6,701 |
Securities held to maturity, fair value | $6,880 | $244 |
Preferred stock, shares authorized | 9,940,000 | 9,940,000 |
Preferred stock, par value | 0.01 | 0.01 |
Preferred stock, issued | 0 | 0 |
Common stock, shares authorized | 3,000,000,000 | 3,000,000,000 |
Common stock, par value | 0.01 | 0.01 |
Common stock, shares issued | 1,392,091,544 | 1,392,091,544 |
Treasury stock, shares | 229,983,936 | 234,991,565 |
Statement Of Cash Flows Indirec
Statement Of Cash Flows Indirect Securities Based Operations (USD $) | |||
In Millions | 12 Months Ended
Dec. 31, 2009 | 12 Months Ended
Dec. 31, 2008 | 12 Months Ended
Dec. 31, 2007 |
Cash Flows from Operating Activities | |||
Net income | $787 | $1,212 | $2,407 |
Adjustments to reconcile net income to net cash provided by operating activities: | |||
Loss (income) from discontinued operations, net of tax | 0 | 18 | (1,287) |
Depreciation and amortization expense | 159 | 152 | 156 |
Stock-based compensation expense | 75 | 69 | 58 |
Excess tax benefits from stock-based compensation | (8) | (50) | (108) |
Provision for deferred income taxes | 16 | 97 | 175 |
Net impairment losses on securities | 60 | 44 | 0 |
Other | (4) | 70 | 16 |
Originations of loans held for sale | (2,746) | (1,526) | (863) |
Proceeds from sales of loans held for sale | 2,695 | 1,522 | 849 |
Net change in: | |||
Cash and investments segregated and on deposit for regulatory purposes | (3,688) | (5,882) | 2,059 |
Other securities owned | (290) | 48 | (277) |
Receivables from brokers, dealers, and clearing organizations | 202 | (32) | (75) |
Receivables from brokerage clients | (1,503) | 5,171 | (1,394) |
Other assets | (253) | 51 | (33) |
Payables to brokers, dealers, and clearing organizations | 56 | (822) | 424 |
Payables to brokerage clients | 5,990 | (34) | (331) |
Accrued expenses and other liabilities | (111) | (106) | (419) |
Net cash provided by discontinued operations | 0 | 0 | 389 |
Net cash provided by operating activities | 1,437 | 2 | 1,746 |
Cash Flows from Investing Activities | |||
Purchases of securities available for sale | (14,342) | (9,839) | (3,554) |
Proceeds from sales of securities available for sale | 107 | 14 | 0 |
Principal payments on securities available for sale | 7,063 | 2,003 | 2,034 |
Purchases of securities held to maturity | (5,470) | (245) | 0 |
Principal payments on securities held to maturity | 139 | 2 | 0 |
Net increase in loans to banking clients | (1,411) | (2,642) | (1,129) |
Purchase of equipment, office facilities, and property | (140) | (188) | (168) |
Proceeds from sale of U.S. Trust, net of transaction costs | 0 | 0 | 3,237 |
Cash payments for business combinations, net of cash acquired | 0 | (5) | (119) |
Other investing activities | (3) | (1) | (1) |
Net cash provided by discontinued operations | 0 | 0 | 67 |
Net cash (used for) provided by investing activities | (14,057) | (10,901) | 367 |
Cash Flows from Financing Activities | |||
Net change in deposits from banking clients | 14,979 | 10,019 | 2,802 |
Issuance of long-term debt | 747 | 0 | 549 |
Repayment of long-term debt | (80) | (20) | (43) |
Excess tax benefits from stock-based compensation | 8 | 50 | 108 |
Dividends paid | (279) | (253) | (1,500) |
Purchase of treasury stock | 0 | (350) | (2,742) |
Proceeds from stock options exercised and other | 53 | 131 | 414 |
Other financing activities | (9) | 0 | (7) |
Net cash provided by discontinued operations | 0 | 0 | 563 |
Net cash provided by financing activities | 15,419 | 9,577 | 144 |
Increase (decrease) in Cash and Cash Equivalents | 2,799 | (1,322) | 2,257 |
Cash and Cash Equivalents at Beginning of Year | 5,442 | 6,764 | 4,507 |
Cash and Cash Equivalents at End of Year | 8,241 | 5,442 | 6,764 |
Cash paid during the year for: | |||
Interest | 173 | 232 | 616 |
Income taxes (2008 and 2007 amounts include discontinued operations) | 446 | 767 | 1,071 |
Non-cash investing activity: | |||
Securities purchased during the year but settled after year end | $1,267 | $0 | $0 |
Statement Of Shareholders Equit
Statement Of Shareholders Equity And Other Comprehensive Income (USD $) | ||||||
In Millions | Common Stock
| Additional Paid-In Capital
| Retained Earnings
| Treasury Stock, at cost
| Accumulated Other Comprehensive Loss
| Total
|
Beginning Balance at Dec. 31, 2006 | $14 | $1,868 | $4,901 | ($1,739) | ($36) | $5,008 |
Beginning Balance (in shares) at Dec. 31, 2006 | 1,392 | |||||
Comprehensive income: | ||||||
Net income | 2,407 | 2,407 | ||||
Other comprehensive income, net of tax: | ||||||
Net unrealized loss on cash flow hedging instruments | (3) | (3) | ||||
Net unrealized gain (loss) on securities available for sale | 17 | 17 | ||||
Minimum pension liability adjustment | 5 | 5 | ||||
Dividends declared on common stock | (1,498) | (1,498) | ||||
Purchase of treasury stock | (2,742) | (2,742) | ||||
Stock option exercises and other | 53 | 362 | 415 | |||
Stock-based compensation expense | 78 | 78 | ||||
Excess tax benefits from stock-based compensation | 108 | 108 | ||||
Effect of change in accounting for sabbatical leave | (17) | (17) | ||||
Effect of change in accounting for income taxes | (17) | (17) | ||||
Restricted shares withheld for tax | (29) | (29) | ||||
Ending Balance (in shares) at Dec. 31, 2007 | 1,392 | |||||
Ending Balance at Dec. 31, 2007 | 14 | 2,107 | 5,776 | (4,148) | (17) | 3,732 |
Comprehensive income: | ||||||
Net income | 1,212 | 1,212 | ||||
Other comprehensive income, net of tax: | ||||||
Net unrealized gain (loss) on securities available for sale | (535) | (535) | ||||
Foreign currency translation adjustment | (1) | (1) | ||||
Dividends declared on common stock | (253) | (253) | ||||
Purchase of treasury stock | (350) | (350) | ||||
Stock option exercises and other | (20) | 149 | 129 | |||
Stock-based compensation expense | 65 | 65 | ||||
Excess tax benefits from stock-based compensation | 50 | 50 | ||||
Restricted shares withheld for tax | (11) | (11) | ||||
Employee stock purchase plan purchases | 12 | 11 | 23 | |||
Ending Balance (in shares) at Dec. 31, 2008 | 1,392 | |||||
Ending Balance at Dec. 31, 2008 | 14 | 2,214 | 6,735 | (4,349) | (553) | 4,061 |
Comprehensive income: | ||||||
Net income | 787 | 787 | ||||
Other comprehensive income, net of tax: | ||||||
Net unrealized gain on securities available for sale-Non-OTTI securities | 327 | 327 | ||||
Net unrealized gain on securities available for sale-OTTI securities | 35 | 35 | ||||
Dividends declared on common stock | (279) | (279) | ||||
Stock option exercises and other | 52 | 52 | ||||
Stock-based compensation expense | 72 | 72 | ||||
Excess tax benefits from stock-based compensation | 8 | 8 | ||||
Restricted shares withheld for tax | (7) | (7) | ||||
Employee stock purchase plan purchases | 4 | 13 | 17 | |||
Ending Balance (in shares) at Dec. 31, 2009 | 1,392 | |||||
Ending Balance at Dec. 31, 2009 | $14 | $2,298 | $7,243 | ($4,291) | ($191) | $5,073 |
Introduction and Basis of Prese
Introduction and Basis of Presentation | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
Introduction and Basis of Presentation | 1. Introduction and Basis of Presentation The Charles Schwab Corporation (CSC) is a savings and loan holding company engaged, through its subsidiaries, in securities brokerage, banking, and related financial services. Charles Schwab Co., Inc. (Schwab) is a securities broker-dealer with 304 domestic branch offices in 45 states, as well as a branch in each of the Commonwealth of Puerto Rico and London, U.K. In addition, Schwab serves clients in Hong Kong through one of CSCs subsidiaries. Other subsidiaries include Charles Schwab Bank (Schwab Bank), a federal savings bank, and Charles Schwab Investment Management, Inc. (CSIM), the investment advisor for Schwabs proprietary mutual funds, which are referred to as the Schwab Funds. The accompanying consolidated financial statements include CSC and its majority-owned subsidiaries (collectively referred to as the Company). All material intercompany balances and transactions have been eliminated. These consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States (GAAP), which require management to make certain estimates and assumptions that affect the reported amounts in the accompanying financial statements. Certain estimates include other-than-temporary impairment of securities available for sale and securities held to maturity, the valuation of goodwill, the allowance for credit losses, and legal reserves. Actual results could differ from those estimates. Certain prior-period amounts have been reclassified to conform to the current period presentation. Management has evaluated subsequent events through the date the consolidated financial statements were issued, which was February24, 2010. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
Summary of Significant Accounting Policies | 2. Summary of Significant Accounting Policies Asset management and administration fees: Asset management and administration fees, which include mutual fund service fees and fees for other asset-based financial services provided to individual and institutional clients, are recognized as revenue over the period that the related service is provided, based upon average net asset balances. The Company earns mutual fund service fees for shareholder services, administration, investment management, and transfer agent services (through July 2009) provided to its proprietary funds, and recordkeeping and shareholder services provided to third-party funds. Mutual fund service fees are based upon the daily balances of client assets invested in third-party funds and the Companys proprietary funds. The Company also earns asset management fees for advisory and managed account services, which are based on the daily balances of client assets subject to the specific fee for service. The fair values of client assets included in proprietary and third-party mutual funds are based on quoted market prices and other observable market data. In 2009, the Company waived a portion of its asset management fees earned from certain Schwab-sponsored money market mutual funds in order to provide a positive return to clients. Under agreements with these funds, the Company may recover such fee waivers depending on the future performance of the funds and approval by the boards of the respective funds. Recoveries of previously-waived asset management fees are recognized as revenue when substantially all uncertainties about timing and amount of realization are resolved. The Company did not recognize any revenue for recoveries of previously-waived asset management fees in 2009. Interest revenue: Interest revenue represents interest earned on certain assets, which include cash and cash equivalents, cash and investments segregated, broker-related receivables, receivables from brokerage clients, other securities owned, securities available for sale, securities held to maturity, loans to banking clients, and loans held for sale. Interest revenue is recognized in the period earned based upon average asset balances and respective interest rates. Securities transactions: Trading revenue includes commission and principal transaction revenues. Clients securities transactions are recorded on the date that they settle, while the related commission revenues and expenses are recorded on the date that the trade occurs. Principal transaction revenues are primarily comprised of revenues from client fixed income securities trading activity, which are recorded on a trade date basis. Cash and cash equivalents: The Company considers all highly liquid investments with original maturities of three months or less that are not segregated and on deposit for regulatory purposes to be cash equivalents. Cash and cash equivalents include money market funds, deposits with banks, certificates of deposit, federal funds sold, commercial paper, and treasury securities. Cash and cash equivalents also include balances that Schwab Bank maintains at the Federal Reserve Bank. Cash and investment |
Receivables from Brokerage Clie
Receivables from Brokerage Clients | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
Receivables from Brokerage Clients | 3. Receivables from Brokerage Clients Receivables from brokerage clients are stated net of allowance for doubtful accounts of $2million and $4million at December31, 2009 and 2008, respectively. Receivables from brokerage clients consist primarily of margin loans to brokerage clients of $7.9billion and $6.2billion at December31, 2009 and 2008, respectively. Securities owned by brokerage clients are held as collateral for margin loans. Such collateral is not reflected in the consolidated financial statements. Charge-offs related to margin loans were not material in 2009, 2008 and 2007. The average yield earned on margin loans was 5.20% and 5.95% in 2009 and 2008, respectively. |
Other Securities Owned
Other Securities Owned | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
Other Securities Owned | 4. Other Securities Owned A summary of other securities owned is as follows: December31, 2009 2008 Schwab Funds money market funds $ 321 $ 440 Commercial paper 220 Certificates of deposit 200 Equity and bond mutual funds 103 135 State and municipal debt obligations 49 37 Equity, U.S. Government and corporate debt, and other securities 23 14 Total other securities owned (1) $ 916 $ 626 (1) Amounts include securities pledged of $3million and $7million at December31, 2009 and 2008, respectively. The Companys positions in Schwab Funds money market funds arise from certain overnight funding of clients redemption, check-writing, and debit card activities. Equity and bond mutual funds include investments made by the Company relating to its deferred compensation plan, mutual fund investments held at CSC, and inventory maintained to facilitate certain Schwab Funds and third-party mutual fund clients transactions. State and municipal debt obligations, equity, U.S. Government and corporate debt, and other securities include securities held to meet clients trading activities. Securities sold, but not yet purchased were not material at December31, 2009 and 2008. |
Securities Available for Sale a
Securities Available for Sale and Securities Held to Maturity | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
Securities Available for Sale and Securities Held to Maturity | 5. Securities Available for Sale and Securities Held to Maturity The amortized cost, gross unrealized gains and losses, and fair value of securities available for sale and securities held to maturity are as follows: December31, 2009 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Securities available for sale: U.S. agency residential mortgage-backed securities $ 11,601 $ 199 $ 21 $ 11,779 Non-agency residential mortgage-backed securities 2,460 519 1,941 U.S. agency notes 2,975 4 1 2,978 Corporate debt securities 2,368 13 1 2,380 Certificates of deposit 1,950 3 1,953 Asset-backed securities 1,077 12 1,089 Total securities available for sale $ 22,431 $ 231 $ 542 $ 22,120 Securities held to maturity: U.S. agency residential mortgage-backed securities $ 5,105 $ 36 $ 27 $ 5,114 Asset-backed securities 1,389 25 1,414 Corporate debt securities 345 7 352 Total securities held to maturity $ 6,839 $ 68 $ 27 $ 6,880 December31, 2008 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Securities available for sale: U.S. agency residential mortgage-backed securities $ 8,203 $ 108 $ 82 $ 8,229 Non-agency residential mortgage-backed securities 3,085 862 2,223 U.S. agency notes 515 2 517 Corporate debt securities 1,762 2 31 1,733 Certificates of deposit 925 3 922 Asset-backed securities 866 44 822 Total securities available for sale $ 15,356 $ 112 $ 1,022 $ 14,446 Securities held to maturity: Asset-backed securities $ 243 $ 1 $ $ 244 Total securities held to maturity $ 243 $ 1 $ $ 244 A summary of securities with unrealized losses, aggregated by category and period of continuous unrealized loss, is as follows: Less than 12 months 12 months or longer Total December31, 2009 Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses Securities available for sale: U.S. agency residential mortgage-backed securities $ 3,801 $ 11 $ 1,994 $ 10 $ 5,795 $ 21 Non-agency residential mortgage-backed securities 171 10 1,770 509 1,941 519 U.S. agency notes 864 1 864 1 Corporate debt securities 374 1 374 1 Total $ 5,210 $ 23 $ 3,764 $ 519 $ 8,974 $ 542 Securities held to maturity: |
Loans to Banking Clients and Re
Loans to Banking Clients and Related Allowance for Credit Losses | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
Loans to Banking Clients and Related Allowance for Credit Losses | 6. Loans to Banking Clients and Related Allowance for Credit Losses The composition of the loan portfolio is as follows: December31, 2009 2008 Residential real estate mortgages $ 3,710 $ 3,195 Home equity lines of credit 3,304 2,662 Secured personal loans 366 187 Other 13 20 Total loans to banking clients 7,393 6,064 Allowance for credit losses (45 ) (20 ) Total loans to banking clients net $ 7,348 $ 6,044 Included in the loan portfolio are nonaccrual loans totaling $34million and $8million at December31, 2009 and 2008, respectively. Nonperforming assets, which include nonaccrual loans and other real estate owned, totaled $37million and $9million at December31, 2009 and 2008, respectively. There were no loans accruing interest that were contractually 90 days or more past due at December31, 2009 and 2008. The amount of interest revenue that would have been earned on nonaccrual loans, versus interest revenue recognized on these loans, was not material to the Companys results of operations for2009 and2008. Changes in the allowance for credit losses were as follows: December31, 2009 2008 2007 Balance at beginning of year $ 20 $ 7 $ 4 Charge-offs (13 ) (4 ) Recoveries Provision for credit losses 38 17 3 Balance at end of year $ 45 $ 20 $ 7 |
Equipment, Office Facilities, a
Equipment, Office Facilities, and Property | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
Equipment, Office Facilities, and Property | 7. Equipment, Office Facilities, and Property Equipment, office facilities, and property are detailed below: December31, 2009 2008 Software $ 854 $ 846 Buildings 428 414 Information technology equipment 392 392 Leasehold improvements 296 251 Furniture and equipment 128 123 Telecommunications equipment 100 97 Land 57 57 Construction in progress 4 14 Total equipment, office facilities, and property 2,259 2,194 Accumulated depreciation and amortization (1,618 ) (1,533 ) Total equipment, office facilities, and property net $ 641 $ 661 |
Other Assets
Other Assets | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
Other Assets | 8. Other Assets The components of other assets are as follows: December31, 2009 2008 Accounts receivable (1) $ 327 $ 216 Deferred tax asset net 249 502 Prepaid expenses 224 66 Interest and dividends receivable 141 92 Other investments 59 45 Intangible assets net 23 24 Other 111 126 Total other assets $ 1,134 $ 1,071 (1) Accounts receivable includes accrued service fee income and receivable from loan servicer. |
Deposits from Banking Clients
Deposits from Banking Clients | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
Deposits from Banking Clients | 9. Deposits from Banking Clients Deposits from banking clients consist of interest-bearing deposits as follows: December31, 2009 2008 Deposits swept from brokerage accounts $ 22,955 $ 18,439 Savings 8,257 Checking 7,608 5,402 Total deposits from banking clients $ 38,820 $ 23,841 Demand deposit overdrafts included as other loans within loans to banking clients were not material at December31, 2009 and 2008. |
Payables to Brokers, Dealers, a
Payables to Brokers, Dealers, and Clearing Organizations | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
Payables to Brokers, Dealers, and Clearing Organizations | 10.Payables to Brokers, Dealers, and Clearing Organizations Payables to brokers, dealers, and clearing organizations include securities loaned of $996million and $883million at December31, 2009 and 2008, respectively. The cash collateral received from counterparties under securities lending transactions was equal to or greater than the market value of the securities loaned. Payables to brokers, dealers, and clearing organizations at December31, 2009, also included unsettled purchases of securities held to maturity of $1.3billion. |
Payables to Brokerage Clients
Payables to Brokerage Clients | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
Payables to Brokerage Clients | 11.Payables to Brokerage Clients The principal source of funding for Schwabs margin lending is cash balances in brokerage client accounts, which are included in payables to brokerage clients. Cash balances in interest-bearing brokerage client accounts were $20.8billion and $15.8billion at December31, 2009 and 2008, respectively. The average rate paid on cash balances in interest-bearing brokerage client accounts was 0.02% and 0.36% in 2009 and 2008, respectively. |
Borrowings
Borrowings | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
Borrowings | 12.Borrowings Long-term debt net of unamortized debt discounts, where applicable, consists of the following: December31, 2009 2008 Senior Notes $ 747 $ Senior Medium-Term Notes, Series A 450 458 Junior Subordinated Notes 202 300 Finance lease obligation 111 116 Fair value adjustment 2 9 Total long-term debt $ 1,512 $ 883 CSC has a universal automatic shelf registration statement on file with the SEC which enables CSC to issue debt, equity and other securities. In June2009, the Company issued $750million of Senior Notes that mature in2014 under this registration statement. The Senior Notes have a fixed interest rate of4.950% with interest payable semiannually. The aggregate principal amount of Senior Medium-Term Notes, Series A (Medium-Term Notes) outstanding at December31, 2009, had maturities ranging from 2010 to 2017. At December31, 2009 and 2008, the aggregate principal amount of Medium-Term Notes outstanding had fixed interest rates ranging from 6.375% to 8.05% with interest payable semiannually. At December31, 2009 and 2008, the Medium-Term Notes carried a weighted-average interest rate of 7.12% and 7.13%, respectively. A portion of the Medium-Term Notes is subject to fair value hedging instruments as described in note 14 Financial Instruments Subject to Off-Balance Sheet Risk, Credit Risk, or Market Risk. In October 2007, CSC and Schwab Capital Trust I, a statutory trust formed under the laws of the State of Delaware (Trust), closed a public offering of $300million of the Trusts fixed to floating rate trust preferred securities. The proceeds from the sale of the trust preferred securities were invested by the Trust in fixed to floating rate Junior Subordinated Notes issued by CSC. The Junior Subordinated Notes have a fixed interest rate of 7.50% until November15, 2017, and a floating rate thereafter. The Junior Subordinated Notes may be redeemed at a redemption price of principal plus accrued but unpaid interest on November15, 2017, on or after November15, 2037, or following the occurrence of certain events, and at a make-whole redemption price at any other time. CSC has contractually agreed, pursuant to a replacement capital covenant, for the benefit of certain holders of the Companys long-term indebtedness ranking senior to the Junior Subordinated Notes, not to redeem, repay or purchase the Junior Subordinated Notes or the trust preferred securities prior to November15, 2047, unless it has received proceeds of the issuance of certain replacement capital securities, among other conditions. At December31, 2009, the Companys 6.375% Senior Medium-Term Notes due 2017 is the series of long-term indebtedness whose holders are entitled to the benefits of the replacement capital covenant. In2009, the Company repurchased $98million of trust preferred securities related to its Junior Subordinated Notes for a cash payment of $67million. The repurchase of the trust preferred securities is considered an extinguishment of a portion of the Junior Subordinated Notes and resulted in a gain of $31million. In 2004, the Company s |
Commitments and Contingent Liab
Commitments and Contingent Liabilities | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
Commitments and Contingent Liabilities | 13. Commitments and Contingent Liabilities Operating leases and other commitments: The Company has non-cancelable operating leases for office space and equipment. Future minimum rental commitments under these leases, net of contractual subleases, at December31, 2009, are as follows: Operating Leases Subleases Net 2010 $ 157 $ 41 $ 116 2011 128 35 93 2012 84 30 54 2013 67 25 42 2014 58 22 36 Thereafter 179 64 115 Total $ 673 $ 217 $ 456 Certain leases contain provisions for renewal options, purchase options, and rent escalations based on increases in certain costs incurred by the lessor. Rent expense was $213million, $186million, and $180million in 2009, 2008, and 2007, respectively. Rent expense in 2009 included charges of $37million relating to the Companys cost reduction measures. Purchase obligations: The Company has purchase obligations for services such as advertising and marketing, telecommunications, professional services, and hardware- and software-related agreements. At December31, 2009, the Company has purchase obligations as follows: 2010 $ 130 2011 50 2012 11 2013 1 2014 Thereafter Total $ 192 Guarantees and indemnifications: In the normal course of business, the Company provides certain indemnifications (i.e., protection against damage or loss) to counterparties in connection with the disposition of certain of its assets. Such indemnifications are generally standard contractual terms with various expiration dates and typically relate to title to the assets transferred, ownership of intellectual property rights (e.g., patents), accuracy of financial statements, compliance with laws and regulations, failure to pay, satisfy or discharge any liability, or to defend claims, as well as errors, omissions, and misrepresentations. The maximum potential future liability under these indemnifications cannot be estimated. The Company has not recorded a liability for these indemnifications and believes that the occurrence of events that would trigger payments under these agreements is remote. Separately, the Company has guaranteed certain payments in the event of a termination of certain mutual fund sub-advisor agreements, related to the adoption of AXA Rosenberg LLCs U.S. family of mutual funds, known as the Laudus Funds. Additionally, the Company has provided indemnifications related to facility leases to a counterparty in connection with the disposition of certain of its assets. At December31, 2009, the Companys maximum potential future liability under these agreements was approximately $120million. At December31, 2009, the Company has a recorded liability of approximately $15million reflecting the estimated fair value of these guarantees and indemnifications. The fair value of these guarantees and indemnifications is not necessarily indicative of amounts that would be paid in the event a payment was required. The Company has clients that sell (i.e., write) listed opti |
Financial Instruments Subject t
Financial Instruments Subject to Off-Balance Sheet Risk, Credit Risk, or Market Risk | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
Financial Instruments Subject to Off-Balance Sheet Risk, Credit Risk, or Market Risk | 14. Financial Instruments Subject to Off-Balance Sheet Risk, Credit Risk, or Market Risk Securities lending: Through Schwab, the Company loans client securities temporarily to other brokers in connection with its securities lending activities. The Company receives cash as collateral for the securities loaned. Increases in security prices may cause the fair value of the securities loaned to exceed the amount of cash received as collateral. In the event the counterparty to these transactions does not return the loaned securities or provide additional cash collateral, the Company may be exposed to the risk of acquiring the securities at prevailing market prices in order to satisfy its client obligations. The Company mitigates this risk by requiring credit approvals for counterparties, by monitoring the fair value of securities loaned, and by requiring additional cash as collateral when necessary. The fair value of Schwabs client securities pledged in securities lending transactions to other broker-dealers was $871million and $760million at December31, 2009 and 2008, respectively. Additionally, Schwab borrows securities from other broker-dealers to fulfill short sales of its clients. The fair value of these borrowed securities was $274million and $259million at December31, 2009 and 2008, respectively. Client trade settlement: The Company is obligated to settle transactions with brokers and other financial institutions even if its clients fail to meet their obligations to the Company. Clients are required to complete their transactions on settlement date, generally three business days after trade date. If clients do not fulfill their contractual obligations, the Company may incur losses. The Company has established procedures to reduce this risk by requiring deposits from clients in excess of amounts prescribed by regulatory requirements for certain types of trades, and therefore the potential for Schwab to make payments under these client transactions is remote. Accordingly, no liability has been recognized for these transactions. Margin lending: Schwab provides margin loans to its clients which are collateralized by securities in their brokerage accounts. Schwab may be liable for the margin requirement of its client margin securities transactions. As clients write options or sell securities short, the Company may incur losses if the clients do not fulfill their obligations and the collateral in client accounts is not sufficient to fully cover losses which clients may incur from these strategies. To mitigate this risk, the Company monitors required margin levels and clients are required to deposit additional collateral, or reduce positions to meet minimum collateral requirements. Clients with margin loans have agreed to allow Schwab to pledge collateralized securities in their brokerage accounts in accordance with federal regulations. Schwab was allowed, under such regulations, to pledge securities with a fair value of $11.4billion and $9.2billion at December31, 2009 and 2008, respectively. The fair value of Schwabs client securities pledged to fulfill the short sales of its clients was $1.2billion and $591million at December31, 2 |
Fair Values of Assets and Liabi
Fair Values of Assets and Liabilities | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
Fair Values of Assets and Liabilities | 15. Fair Values of Assets and Liabilities Fair value is defined as the price that would be received to sell an asset or the price paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurement accounting guidance describes the fair value hierarchy for disclosing assets and liabilities measured at fair value based on the inputs used to value them. The fair value hierarchy maximizes the use of observable inputs and minimizes the use of unobservable inputs. Observable inputs are based on market pricing data obtained from sources independent of the Company. A quoted price in an active market provides the most reliable evidence of fair value and is generally used to measure fair value whenever available. Unobservable inputs reflect managements judgment about the assumptions market participants would use in pricing the asset or liability. Where inputs used to measure fair value of an asset or liability are from different levels of the hierarchy, the asset or liability is categorized based on the lowest level input that is significant to the fair value measurement in its entirety. Assessing the significance of a particular input requires judgment. The fair value hierarchy includes three levels based on the objectivity of the inputs as follows: Level1 inputs are quoted prices in active markets as of the measurement date for identical assets or liabilities that the Company has the ability to access. This category includes active exchange-traded money market funds, mutual funds, and equity securities. Level2 inputs are inputs other than quoted prices included in Level1 that are observable for the asset or liability, either directly or indirectly. Level2 inputs include quoted prices for similar assets and liabilities in active markets, and inputs other than quoted prices that are observable for the asset or liability, such as interest rates, benchmark yields, issuer spreads, new issue data, and collateral performance. This category includes residential mortgage-backed securities, asset-backed securities, corporate debt securities, certificates of deposit, commercial paper, U.S. agency and municipal debt securities, U.S. Treasury securities, and derivative contracts. Level3 inputs are unobservable inputs for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability. The Company did not have any financial assets or liabilities utilizing Level3 inputs as of December31, 2009 or 2008. Assets and Liabilities Recorded at Fair Value The Companys assets recorded at fair value include certain investments segregated and on deposit for regulatory purposes, other securities owned, and securities available for sale. The Company uses prices obtained from an independent third-party pricing service to measure the fair value of certain investment securities. The Company validates prices received from the pricing service using various methods including comparison to prices received from additional pricing services, comparison to quoted market prices, where available, comparison to internal va |
Accumulated Other Comprehensive
Accumulated Other Comprehensive Loss | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
Accumulated Other Comprehensive Loss | 16. Accumulated Other Comprehensive Loss Accumulated other comprehensive loss represents cumulative gains and losses that are not reflected in earnings. The components of other comprehensive income (loss) are as follows: 2009 2008 2007 Year Ended December31, Before tax Tax effect Net of tax Before tax Tax effect Net of tax Before tax Tax effect Net of tax Securities available for sale: Net unrealized gain (loss) arising during the year for Non-OTTI securities $ 539 $ (214 ) $ 325 $ (955 ) $ 374 $ (581 ) $ (29 ) $ 12 $ (17 ) Net unrealized loss arising during the year for OTTI securities (3 ) 2 (1 ) OTTI charges recognized in earnings 60 (24 ) 36 44 (17 ) 27 Reclassification of realized losses to earnings 3 (1 ) 2 31 (12 ) 19 59 (25 ) 34 Net unrealized gain (loss) on securities available for sale 599 (237 ) 362 (880 ) 345 (535 ) 30 (13 ) 17 Net unrealized loss on cash flow hedging instruments (6 ) 3 (3 ) Minimum pension liability adjustment 9 (4 ) 5 Foreign currency translation adjustment (1 ) (1 ) Other comprehensive income (loss) $ 599 $ (237 ) $ 362 $ (881 ) $ 345 $ (536 ) $ 33 $ (14 ) $ 19 Net unrealized loss onsecuritiesavailableforsale Netunrealized gainoncash flow hedging instruments Foreign currency translation adjustment Minimum pensionliability adjustment Total accumulated other comprehensive loss Portion of unrealizedloss on Non-OTTI securities Portion of unrealizedloss on OTTI securities Balance at December31, 2006 $ (35 ) $ $ 3 $ 1 $ (5 ) $ (36 ) Net change 17 (3 ) 5 19 Balance at December31, 2007 (18 ) 1 (17 ) Net change (535 ) (1 ) (536 ) Balance at December31, 2008 (553 ) (553 ) Reclassification of OTTI securities 149 (149 ) Other net change 327 35 362 Balance at December31, 2009 $ (77 ) $ (114 ) $ $ $ $ (191 ) |
Employee Incentive, Deferred Co
Employee Incentive, Deferred Compensation, and Retirement Plans | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
Employee Incentive, Deferred Compensation, and Retirement Plans | 17. Employee Incentive, Deferred Compensation, and Retirement Plans A summary of the Companys stock-based compensation expense and related income tax benefit is as follows: Year Ended December31, 2009 2008 2007 Stock option expense $ 44 $ 28 $ 18 Restricted stock award expense 27 38 38 Restricted stock unit expense 1 Employee stock purchase plan expense 3 3 2 Total stock-based compensation expense (1) $ 75 $ 69 $ 58 Income tax benefit on stock-based compensation expense $ (29 ) $ (27 ) $ (23 ) (1) Total stock-based compensation expense including discontinued operations was $80million in 2007. The Company issues shares for stock options and restricted stock awards from treasury stock. At December31, 2009, the Company was authorized to grant up to 25million common shares under its existing stock incentive plans. As of December31, 2009, there was $172million of total unrecognized compensation cost, net of forfeitures, related to outstanding stock options, restricted stock awards, and restricted stock units, which is expected to be recognized through 2013 with a remaining weighted-average period of 2.8 years. Stock Option Plans The Companys stock incentive plans provide for granting options to employees, officers, and directors. Options are granted for the purchase of shares of common stock at an exercise price not less than market value on the date of grant, and expire within seven or ten years from the date of grant. Options generally vest annually over a three- to four-year period from the date of grant. Certain options are granted at an exercise price above the market value of common stock on the date of grant (i.e., premium-priced options). The Companys stock option activity (including options held by employees of discontinued operations) is summarized below: Number ofOptions Weighted- Average ExercisePrice per Share Weighted- Average Remaining Contractual Life (inyears) Aggregate Intrinsic Value Outstanding at December31, 2008 56 $ 18.48 Granted 14 $ 14.98 Exercised (5 ) $ 11.62 Forfeited (2 ) $ 18.79 Expired (6 ) $ 26.09 Outstanding at December31, 2009 57 $ 17.30 5.01 $ 171 Vested and expected to vest at December31, 2009 53 $ 17.30 4.74 $ 161 Vested and exercisable at December31, 2009 34 $ 17.11 2.71 $ 120 The aggregate intrinsic value in the table above represents the difference between CSCs closing stock price and the exercise price of each in-the-money option on the last trading day of the period presented. Information on stock options granted and exercised is presented below: Year Ended December31, 2009 2008 2007 Weighted-average fair value of options granted per share $ 6.42 $ 7.94 $ 7.06 Cash |
Taxes on Income
Taxes on Income | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
Taxes on Income | 18. Taxes on Income Income tax expense on income from continuing operations is as follows: Year Ended December31, 2009 2008 2007 Current: Federal $ 400 $ 584 $ 441 State 73 117 117 Total current 473 701 558 Deferred: Federal 12 79 144 State 4 18 31 Total deferred 16 97 175 Taxes on income $ 489 $ 798 $ 733 The excess tax benefits from the exercise of stock options and the vesting of restricted stock awards, which for accounting purposes are recorded in additional paid-in capital, were $8million, $50million, and $108million in 2009, 2008, and 2007, respectively. Income tax expense from discontinued operations was $18million in 2008 and related to the determination of the final income tax gain on the sale of U.S.Trust. The net income tax expense from discontinued operations was $691million in 2007, which included $763million of income tax expense related to income from discontinued operations and the gain on sale of U.S.Trust, offset by a $72million income tax benefit related to the excess of the tax basis of U.S.Trust stock over book basis. The temporary differences that created deferred tax assets and liabilities are detailed below: December31, 2009 2008 Deferred tax assets: Employee compensation, severance, and benefits $ 91 $ 97 Facilities lease commitments 69 70 State and local taxes 15 30 Reserves and allowances 36 36 Unrealized loss on securities available for sale net 144 357 Other 4 6 Total deferred tax assets 359 596 Deferred tax liabilities: Capitalized internal-use software development costs (42 ) (52 ) Depreciation and amortization (33 ) (21 ) Deferred cancellation of debt income (11 ) Deferred loan costs (20 ) (21 ) Other (4 ) Total deferred tax liabilities (110 ) (94 ) Deferred tax asset net $ 249 $ 502 The Company determined that no valuation allowance against deferred tax assets at December31, 2009 and 2008 was necessary. The effective income tax rate on income from continuing operations before taxes differs from the amount computed by applying the federal statutory income tax rate as follows: Year Ended December31, 2009 2008 2007 Federal statutory income tax rate 35.0 % 35.0 % 35.0 % State income taxes, net of federal tax benefit 3.7 4.4 5.3 Other (0.4 ) (0.1 ) (0.7 ) Effective income tax rate 38.3 % 39.3 % 39.6 % The effective income tax rate including discontinued operatio |
Earnings Per Share
Earnings Per Share | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
Earnings Per Share | 19. Earnings Per Share Basic EPS is computed by dividing net income available to common shareholders by the weighted-average number of common shares outstanding during the period. The computation of diluted EPS is similar to the computation of basic EPS except that the denominator is increased to include the number of additional common shares that would have been outstanding if dilutive potential common shares had been issued. Dilutive potential common shares are determined using the treasury stock method, and include outstanding stock options and unvested restricted stock awards and units. EPS under the basic and diluted computations are as follows: Year Ended December31, 2009 2008 2007 Net income available to common shareholders (1) $ 787 $ 1,212 $ 2,407 Weighted-average common shares outstanding basic 1,156 1,148 1,208 Common stock equivalent shares related to stock incentive plans 4 9 14 Weighted-average common shares outstanding diluted (2) 1,160 1,157 1,222 Basic EPS: Income from continuing operations $ .68 $ 1.07 $ .93 (Loss) income from discontinued operations, net of tax $ $ (.01 ) $ 1.05 Net income $ .68 $ 1.06 $ 1.98 Diluted EPS: Income from continuing operations $ .68 $ 1.06 $ .92 (Loss) income from discontinued operations, net of tax $ $ (.01 ) $ 1.04 Net income $ .68 $ 1.05 $ 1.96 (1) Net income available to participating securities (unvested restricted shares) was not material for the years ended December31, 2009, 2008, and 2007. (2) Total antidilutive stock options and restricted stock awards excluded from the calculation of diluted EPS were 53million, 33million, and 39million shares for the years ended December31, 2009, 2008, and 2007, respectively. |
Regulatory Requirements
Regulatory Requirements | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
Regulatory Requirements | 20. Regulatory Requirements CSC is a savings and loan holding company and Schwab Bank, CSCs depository institution subsidiary, is a federal savings bank. CSC and Schwab Bank are both subject to supervision and regulation by the Office of Thrift Supervision. As a savings and loan holding company, CSC is not subject to specific statutory capital requirements. However, CSC is required to maintain capital that is sufficient to support the holding company and its subsidiaries business activities, and the risks inherent in those activities. Schwab Bank is subject to regulation and supervision and to various requirements and restrictions under federal and state laws, including regulatory capital guidelines. Among other things, these requirements govern transactions with CSC and its non-depository institution subsidiaries, including loans and other extensions of credit, investments or asset purchases, dividends and investments. The federal banking agencies have broad powers to enforce these regulations, including the power to terminate deposit insurance, impose substantial fines and other civil and criminal penalties, and appoint a conservator or receiver. Under the Federal Deposit Insurance Act, Schwab Bank could be subject to restrictive actions if it were to fall within one of the lowest three of five capital categories. Schwab Bank is required to maintain a capital level that at least equals minimum capital levels specified in federal banking laws and regulations. Failure to meet the minimum levels will result in certain mandatory and possibly additional discretionary actions by the regulators that, if undertaken, could have a direct material effect on Schwab Bank. At December31, 2009, CSC and Schwab Bank met the capital level requirements. The regulatory capital and ratios for Schwab Bank are as follows: Actual MinimumCapital Requirement Minimum to be WellCapitalized December 31, 2009 Amount Ratio Amount Ratio Amount Ratio Tier 1 Capital $ 2,724 18.3 % $ 595 4.0 % $ 893 6.0 % Total Capital $ 2,770 18.6 % $ 1,191 8.0 % $ 1,488 10.0 % Tier 1 Leverage $ 2,724 6.3 % $ 1,737 4.0 % $ 2,171 5.0 % Tangible Equity $ 2,724 6.3 % $ 868 2.0 % N/A December 31, 2008 Tier 1 Capital $ 1,650 15.3 % $ 432 4.0 % $ 647 6.0 % Total Capital $ 1,671 15.5 % $ 863 8.0 % $ 1,079 10.0 % Tier 1 Leverage $ 1,650 6.4 % $ 1,037 4.0 % $ 1,296 5.0 % Tangible Equity $ 1,650 6.4 % $ 518 2.0 % N/A N/A Not applicable. Based on its regulatory capital ratios at December31, 2009 and 2008, Schwab Bank is considered well capitalized (the highest category) pursuant to banking regulatory guidelines. There are no conditions or events since December31, 2009, that management believes have changed Schwab Banks capital category. The Board of Governors of the Federal Reserve System requires Schwab Bank to maintain reserve balances at the Federal Reserve Bank based on certain deposit le |
Segment Information
Segment Information | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
Segment Information | 21. Segment Information Operating segments are defined as components of a company in which separate financial information is evaluated regularly by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The Company structures its operating segments according to its various types of clients and the services provided to those clients. The Companys two reportable segments are Investor Services and Institutional Services. The Investor Services segment includes the Companys retail brokerage and banking operations. The Institutional Services segment provides custodial, trading, and support services to independent investment advisors, as well as retirement plan services, plan administrator services, equity compensation plan services, and mutual fund clearing services. In addition, the Institutional Services segment supports the availability of Schwab proprietary mutual funds and collective trust funds on third-party platforms. The accounting policies of the segments are the same as those described in note 2 Summary of Significant Accounting Policies. Financial information for the Companys reportable segments is presented in the following table. For the computation of its segment information, the Company utilizes an activity-based costing model to allocate traditional income statement line item expenses (e.g., compensation and benefits, depreciation and amortization, and professional services) to the business activities driving segment expenses (e.g., client service, opening new accounts, or business development) and a funds transfer pricing methodology to allocate certain revenues. The Company evaluates the performance of its segments on a pre-tax basis, excluding items such as impairment charges on non-financial assets, discontinued operations, extraordinary items, and other significant restructuring charges. Segment assets and liabilities are not disclosed because the balances are not used for evaluating segment performance and deciding how to allocate resources to segments. However, capital expenditures are used in resource allocation and are therefore disclosed. There are no revenues from transactions with other segments within the Company. Capital expenditures are reported gross, and are not net of proceeds from the sale of fixed assets. Selected financial information for the Companys reportable segments is presented in the following table: Year Ended December31, 2009 2008 2007 Net revenues: Investor Services $ 2,710 $ 3,385 $ 3,352 Institutional Services 1,483 1,754 1,627 Unallocated 11 15 Total net revenues $ 4,193 $ 5,150 $ 4,994 Net interest revenue: Investor Services $ 1,024 $ 1,383 $ 1,337 Institutional Services 183 281 315 Unallocated 1 (5 ) Total net interest revenue $ 1,207 $ 1,665 $ 1,647 Income from continuing operatio |
Discontinued Operations
Discontinued Operations | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
Discontinued Operations | 22.Discontinued Operations In July2007, the Company sold all of the outstanding common stock of U.S.Trust for $3.3billion in cash. The components of (loss) income from discontinued operations related to U.S.Trust are as follows: Year Ended December31, 2008 2007 Net revenues $ $ 446 Income from discontinued operations, before taxes $ $ 116 Gain on sale of U.S. Trust, before taxes 1,862 Taxes on income (18 ) (691 ) (Loss) income from discontinued operations, net of tax $ (18 ) $ 1,287 When calculating the Companys gain on the sale of U.S. Trust for income tax purposes, the acquisition date tax basis is the basis of U.S.Trusts prior stockholders in their shares as of the date U.S.Trust was acquired by the Company, since the transaction qualified as a tax-free exchange. In 2006, the Company recorded a $205million income tax benefit related to the estimated difference between the tax and book bases of the Companys U.S.Trust stock. This amount was included in income from discontinued operations, net of tax, on the Companys consolidated statements of income. This initial estimate of the tax benefit was based on publicly available information, including information on the composition of U.S. Trusts stockholders at the acquisition date and the market price of U.S.Trust stock during relevant periods, and was subject to adjustment following a survey of former U.S.Trust stockholders. The Company completed the survey in the third quarter of 2007. Based upon the results of this survey, the Company recorded an additional $72million income tax benefit in 2007. The IRS completed their examination of the acquisition date tax basis under a pre-filing agreement in the second quarter of 2008. In connection with the determination of the final income tax gain on the sale of U.S.Trust, the Company recorded additional tax expense of $18million in the second quarter of 2008. This amount was recorded in loss from discontinued operations. |
Subsequent Event
Subsequent Event | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
Subsequent Event | 23. Subsequent Event On January26, 2010, the Company completed the sale of 29,670,300 shares of its common stock, $.01 par value, at a public offering price of $19.00 per share. Net proceeds received from the offering were $543 million and will be used to support the Companys balance sheet growth, including expansion of its deposit base and potential migration of certain client balances from money market funds into Schwab Bank. |
The Charles Schwab Corporation
The Charles Schwab Corporation - Parent Company Only Financial Statements | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
The Charles Schwab Corporation - Parent Company Only Financial Statements | 24. The Charles Schwab Corporation Parent Company Only Financial Statements Condensed Statements of Income Year Ended December31, 2009 2008 2007 Interest revenue $ 8 $ 27 $ 68 Interest expense (66 ) (54 ) (34 ) Net interest revenue (58 ) (27 ) 34 Other revenues 33 9 13 Other expenses (15 ) 7 (20 ) (Loss) income before income tax benefit (expense) and equity in earnings of subsidiaries (40 ) (11 ) 27 Income tax benefit (expense) 16 2 (9 ) (Loss) income from continuing operations before equity in earnings of subsidiaries (24 ) (9 ) 18 Equity in earnings of subsidiaries: Equity in undistributed earnings of subsidiaries 228 251 548 Dividends from Schwab Bank 65 Dividends from non-banking subsidiaries 583 988 489 Income from continuing operations 787 1,230 1,120 Equity in undistributed earnings of subsidiaries discontinued operations 32 Dividends from discontinued operations 40 Tax expense from discontinued operations (18 ) (657 ) Income from discontinued operations 1,872 Net Income $ 787 $ 1,212 $ 2,407 Condensed Balance Sheets December31, 2009 2008 Assets Cash and cash equivalents $ 875 $ 755 Receivables from brokers, dealers, and clearing organizations 11 34 Receivables from subsidiaries 74 81 Other securities owned at fair value 513 109 Loans to non-banking subsidiaries 220 373 Investment in non-banking subsidiaries 2,319 2,437 Investment in Schwab Bank 2,549 1,096 Equipment, office facilities, and property net 5 6 Other assets 130 133 Total $ 6,696 $ 5,024 Liabilities and Stockholders Equity Accrued expenses and other liabilities $ 177 $ 178 Payables to subsidiaries 45 19 Long-term debt 1,401 766 Total liabilities 1,623 963 Stockholders equity 5,073 4,061 Total $ 6,696 $ 5,024 Condensed Statements of Cash Flows Year Ended December31, 2009 2008 2007 Cash Flows from Operating Activities Net income $ 787 $ 1,212 $ 2,407 Adjustments to reconcile net income to net cash provided by operating activities: Loss (gain) from discontinued operations, net of tax 19 (1,215 ) Equity in undistributed earnings of subsidiaries (253 ) (251 ) (548 ) Equity in undistributed earnings of subsidiaries discontinued operations (32 ) Excess tax |
Quarterly Financial Information
Quarterly Financial Information (Unaudited) | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
Quarterly Financial Information (Unaudited) | 25. Quarterly Financial Information (Unaudited) Fourth Quarter Third Quarter Second Quarter First Quarter Year Ended December31, 2009: Net Revenues $ 986 $ 1,011 $ 1,085 $ 1,111 Expenses Excluding Interest $ 720 $ 691 $ 750 $ 756 Net Income $ 164 $ 200 $ 205 $ 218 Weighted Average Common Shares Diluted 1,163 1,163 1,160 1,156 Basic Earnings Per Share $ .14 $ .17 $ .18 $ .19 Diluted Earnings Per Share $ .14 $ .17 $ .18 $ .19 Dividends Declared Per Common Share $ .06 $ .06 $ .06 $ .06 Range of Common Stock Price Per Share: High $ 19.49 $ 19.45 $ 18.92 $ 16.63 Low $ 16.94 $ 16.47 $ 15.31 $ 11.34 Range of Price/Earnings Ratio (1): High 29 24 21 17 Low 25 20 17 12 Year Ended December31, 2008: Net Revenues $ 1,284 $ 1,251 $ 1,308 $ 1,307 Expenses Excluding Interest $ 777 $ 752 $ 794 $ 799 Net Income $ 308 $ 304 $ 295 $ 305 Weighted Average Common Shares Diluted 1,158 1,158 1,154 1,159 Basic Earnings Per Share (2) $ .27 $ .26 $ .26 $ .27 Diluted Earnings Per Share (2) $ .27 $ .26 $ .26 $ .26 Dividends Declared Per Common Share $ .06 $ .06 $ .05 $ .05 Range of Common Stock Price Per Share: High $ 24.37 $ 26.00 $ 22.78 $ 24.78 Low $ 14.59 $ 18.78 $ 18.31 $ 18.04 Range of Price/Earnings Ratio (1): High 23 25 11 12 Low 14 18 9 9 (1) Price/earnings ratio is computed by dividing the high and low market prices by diluted earnings per share for the preceding 12-month period ending on the last day of the quarter presented. (2) In the second quarter of 2008, both basic and diluted earnings per share include loss from discontinued operations. |
Valuation and Qualifying Accoun
Valuation and Qualifying Accounts | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
Valuation and Qualifying Accounts | SCHEDULE II Valuation and Qualifying Accounts (In millions) Balanceat Additions Balanceat Description Beginningof Year Charged toExpense Other(1) Writtenoff End ofYear For the year ended December31, 2009: Allowance for doubtful accounts of brokerage clients (2) $ 4 $ 3 $ 2 $ (7 ) $ 2 For the year ended December31, 2008: Allowance for doubtful accounts of brokerage clients (2) $ 1 $ 13 $ 1 $ (11 ) $ 4 For the year ended December31, 2007: Allowance for doubtful accounts of brokerage clients (2) $ 2 $ 6 $ 1 $ (8 ) $ 1 (1) Represents collections of previously written-off accounts. (2) Excludes banking-related valuation and qualifying accounts. See Item 8-Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements - 6. Loans to Banking Clients and Related Allowance for Credit Losses. |
Document Information
Document Information | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
Document Type | 10-K |
Amendment Flag | false |
Document Period End Date | 2009-12-31 |
Entity Information
Entity Information (USD $) | |||
12 Months Ended
Dec. 31, 2009 | Jan. 29, 2010
| Jun. 30, 2009
| |
Trading Symbol | SCHW | ||
Entity Registrant Name | SCHWAB CHARLES CORP | ||
Entity Central Index Key | 0000316709 | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Well-known Seasoned Issuer | Yes | ||
Entity Current Reporting Status | Yes | ||
Entity Voluntary Filers | No | ||
Entity Filer Category | Large Accelerated Filer | ||
Entity Common Stock, Shares Outstanding | 1,192,216,294 | ||
Entity Public Float | $16,900,000,000 |