Schwab Reports Record Quarterly Earnings Per Share

The Charles Schwab Corporation announced today that its net income for the third quarter of 2021 was a record $1.5 billion compared with $1.3 billion for the second quarter of 2021, and $698 million for the third quarter of 2020. Net income for the nine months ended September 30, 2021 was $4.3 billion, compared with $2.2 billion for the year-earlier period. The company’s financial results include TD Ameritrade from October 6, 2020 forward, as well as certain acquisition and integration-related costs and the amortization of acquired intangibles. For the third quarter and first nine months of 2021, these transaction-related expenses totaled $257 million and $828 million, respectively, on a pre-tax basis. In addition, the company’s results for the first nine months of 2021 included a non-deductible charge of approximately $200 million regarding a previously disclosed regulatory matter.

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		Three Months Ended September 30,								%			Nine Months Ended September 30,								%
Financial Highlights (1)		2021				2020				Change			2021				2020				Change
Net revenues (in millions)		$	4,570			$	2,448			87	%		$	13,812			$	7,515			84	%
Net income (in millions)
GAAP		$	1,526			$	698			119	%		$	4,275			$	2,164			98	%
Adjusted (1)		$	1,722			$	749			130	%		$	4,895			$	2,318			111	%
Diluted earnings per common share
GAAP		$	.74			$	.48			54	%		$	2.06			$	1.54			34	%
Adjusted (1)		$	.84			$	.51			65	%		$	2.39			$	1.66			44	%
Pre-tax profit margin
GAAP		44.0		%		36.3		%					41.2		%		37.6		%
Adjusted (1)		49.6		%		39.1		%					47.2		%		40.3		%
Return on average common stockholders’ equity (annualized)		12		%		10		%					11		%		12		%
Return on tangible common equity (annualized) (1)		23		%		12		%					21		%		14		%

Note: All per-share results are rounded to the nearest cent, based on weighted-average diluted common shares outstanding.
(1)		Further details on non-GAAP financial measures and a reconciliation of such measures to GAAP reported results are included on pages 10-11 of this release.

CEO Walt Bettinger said, “Guided by our "Through Clients’ Eyes" strategy, Schwab continues to drive robust business momentum as we support investors through an uneven economic recovery. While bullish sentiment largely persisted throughout the third quarter, debates regarding the overall pace of economic growth, the potential path of inflation, and the ultimate impact of certain global market disruptions weighed on this optimism – contributing to the S&P 500 ending September essentially flat versus June 30. Through it all, investors consistently turned to Schwab as a trusted financial partner, opening over a million new brokerage accounts for the fourth consecutive quarter – bringing year-to-date new brokerage accounts to 6.0 million. We generated core net new assets of $139.0 billion in the quarter, pushing asset gathering for the first nine months of the year to $396.0 billion, representing an 8% annualized organic growth rate. Total client assets ended September at $7.61 trillion, up from $6.69 trillion at year-end 2020. In addition, while the third quarter is often viewed as a slower period for client activity, engagement levels showed persistent strength through the summer months – daily average trade volumes softened only modestly versus the prior quarter to 5.5 million.”

Mr. Bettinger continued, “We believe our ‘no trade-offs’ approach to combining value, service, transparency and trust has enabled us to continue meeting the needs of the expanding population of individual investors and independent investment advisors who look to Schwab for support. Clients remained highly engaged with our banking services during the third quarter, as demonstrated by a 21% increase in mortgage originations and 66% growth in Pledged Asset Line balances on a year-over-year basis. Additionally, investor interest in low-cost investing solutions elevated our Schwab-managed ETFs to a record $251.6 billion in assets, up 49% year-over-year. Retail clients also sought out our help and guidance; over $437 billion of assets were enrolled in one of our advisory offerings at month-end September, representing an increase of 24% from a year ago. Finally, in support of our independent investment advisors we further enhanced the digital onboarding experience for new accounts to include integrated funding, end-client editing capabilities, and detailed status tracking, among other improvements. This streamlined and collaborative functionality minimizes the potential for errors and delays, saving advisors time to focus on creating and building relationships.”

“I am incredibly proud of all the great work our team of talented employees have poured into serving our clients and each other this year and throughout the pandemic,” Mr. Bettinger concluded. “Their unwavering focus has kept the TD Ameritrade integration on track, helped advance our other key strategic initiatives, and yielded outstanding operating and financial performance for our company. As such, we rewarded them by implementing a special 5% pay increase, effective at the end of September. Additionally, to better reflect the changing ways our employees live and work, we introduced a hybrid workplace program designed to provide greater flexibility while still maintaining our strong, interconnected culture. Investing in our talent, alongside other platform and service investments, allows us to continue building the future of modern wealth management.”

CFO Peter Crawford added, “Consistent execution of our strategy and sustained business momentum, in combination with our diversified revenue model, helped produce impressive financial performance in the third quarter. Net interest revenue grew 4% versus the second quarter of 2021, driven by further expansion of our interest-earning asset base, including strength in lending activity and rising investment portfolio balances. This expansion more than offset a decline in securities lending revenue as well as a lower average yield on outstanding margin loans. Asset management and administration fees increased 5% sequentially, driven by rising balances in both proprietary and third-party mutual fund and ETF offerings and advisory solutions. Trading revenue edged up 1% as a higher proportion of derivatives bolstered revenue per trade in the third quarter, offsetting the impact of an 8% slowdown in activity overall. Turning to expenses, our total GAAP spending declined 9% sequentially to $2.6 billion, which included $104 million in acquisition and integration-related costs and $153 million in amortization of acquired intangibles. Exclusive of these items ⁽¹⁾, adjusted total expenses were down 8% quarter-over-quarter. The sequential declines in GAAP and adjusted expenses largely reflect lower Other expenses due to the non-recurring nature of the regulatory charge in the second quarter. The combination of our revenue growth and steady expense discipline enabled us to produce a 44.0% pre-tax profit margin – 49.6% on an adjusted basis ⁽¹⁾ – our highest quarterly level since late 2019.”

Mr. Crawford concluded, “As we navigated the third quarter’s mixed macroeconomic environment, we worked to further enhance our liquidity position and streamline our capital structure. In August, we issued $850 million in long-term senior notes, marking our third debt issuance in 2021. We also completed a tender offer to exchange nearly $2 billion of TD Ameritrade Holding Corporation debt for an equal amount of equivalent Charles Schwab Corporation debt. Both organic client activity and the previously announced bank deposit account migrations helped our consolidated balance sheet reach $607.5 billion as of September 30, and the company’s preliminary Tier 1 Leverage Ratio was 6.3%. Our ongoing ability to maintain a healthy balance sheet and strong capital base enabled us to deliver a 12% return on equity and 23% ROTCE ⁽¹⁾ for the quarter. Supported by the outstanding work of the entire Schwab team, we continue to operate from a position of strength, leveraging our sustained business momentum to keep building long-term stockholder value.”

(1)		Further details on non-GAAP financial measures and a reconciliation of such measures to GAAP reported results are included on pages 10-11 of this release.

Commentary from the CFO
Periodically, our Chief Financial Officer provides insight and commentary regarding Schwab’s financial picture at: https://www.aboutschwab.com/cfo-commentary. The most recent commentary, which provides perspective on recent account activity, was posted on May 14, 2021.

Forward-Looking Statements
This press release contains forward-looking statements relating to business momentum; growth in the client base, accounts and assets; integration of TD Ameritrade; strategic initiatives; investments to attract and retain talent, improve service and the client experience, expand products, services and offerings to meet client needs, diversify revenues, and drive scale and efficiency; balance sheet and capital base strength; and stockholder value. 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 include, but are not limited to, the company’s ability to attract and retain clients and independent investment advisors and grow those relationships and client assets; develop and launch new and enhanced products, services, and capabilities, as well as enhance its infrastructure and capacity, in a timely and successful manner; hire and retain talent; support client activity levels; successfully implement integration strategies and plans; monetize client assets; and manage expenses. Other important factors include general market conditions, including equity valuations, trading activity, the level of interest rates – which can impact money market fund fee waivers, and credit spreads; market volatility; client use of the company’s advisory solutions and other products and services; client sensitivity to rates; level of client assets, including cash balances; capital and liquidity needs and management; the migration of bank deposit account balances; balance sheet cash; the scope and duration of the COVID-19 pandemic and actions taken by governmental authorities to contain the spread of the virus and the economic impact; adverse developments in the resolution and settlement amount of the pending regulatory matter; and other factors set forth in the company’s most recent reports on Form 10-K and Form 10-Q.

About Charles Schwab
The Charles Schwab Corporation (NYSE: SCHW) is a leading provider of financial services, with 32.7 million active brokerage accounts, 2.2 million corporate retirement plan participants, 1.6 million banking accounts, and approximately $7.61 trillion in client assets. Through its operating subsidiaries, the company provides a full range of wealth management, securities brokerage, banking, asset management, custody, and financial advisory services to individual investors and independent investment advisors. Its broker-dealer subsidiaries, Charles Schwab & Co., Inc., TD Ameritrade, Inc., and TD Ameritrade Clearing, Inc., (members SIPC, https://www.sipc.org), and their affiliates offer a complete range of investment services and products including an extensive selection of mutual funds; financial planning and investment advice; retirement plan and equity compensation plan services; referrals to independent, fee-based investment advisors; and custodial, operational and trading support for independent, fee-based investment advisors through Schwab Advisor Services. Its primary banking subsidiary, Charles Schwab Bank, SSB (member FDIC and an Equal Housing Lender), provides banking and lending services and products. More information is available at https://www.aboutschwab.com.

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

THE CHARLES SCHWAB CORPORATION
Consolidated Statements of Income
(In millions, except per share amounts)
(Unaudited)
		Three Months Ended September 30,								Nine Months Ended September 30,
		2021				2020				2021				2020
Net Revenues
Interest revenue		$	2,153			$	1,432			$	6,236			$	4,626
Interest expense		(123		)		(89		)		(348		)		(322		)
Net interest revenue		2,030				1,343				5,888				4,304
Asset management and administration fees (1)		1,101				860				3,164				2,488
Trading revenue		964				181				3,135				562
Bank deposit account fees		323				—				1,011				—
Other		152				64				614				161
Total net revenues		4,570				2,448				13,812				7,515
Expenses Excluding Interest
Compensation and benefits		1,303				840				4,051				2,556
Professional services		250				194				723				574
Occupancy and equipment		246				155				722				449
Advertising and market development		119				66				363				203
Communications		144				73				457				226
Depreciation and amortization		140				97				404				284
Amortization of acquired intangible assets		153				25				461				43
Regulatory fees and assessments		64				36				208				106
Other		140				73				733				250
Total expenses excluding interest		2,559				1,559				8,122				4,691
Income before taxes on income		2,011				889				5,690				2,824
Taxes on income		485				191				1,415				660
Net Income		1,526				698				4,275				2,164
Preferred stock dividends and other		120				83				364				171
Net Income Available to Common Stockholders		$	1,406			$	615			$	3,911			$	1,993
Weighted-Average Common Shares Outstanding:
Basic		1,888				1,289				1,885				1,288
Diluted		1,898				1,294				1,895				1,294
Earnings Per Common Shares Outstanding (2):
Basic		$	.74			$	.48			$	2.07			$	1.55
Diluted		$	.74			$	.48			$	2.06			$	1.54

(1)		Includes fee waivers of $83 million and $246 million for the three and nine months ended September 30, 2021, respectively, and $44 million and $59 million for the three and nine months ended September 30, 2020, respectively.
(2)		For the three and nine months ended September 30, 2021, the Company had 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.

THE CHARLES SCHWAB CORPORATION
Financial and Operating Highlights
(Unaudited)
		Q3-21 % change						2021												2020
		vs.			vs.			Third				Second				First				Fourth				Third
(In millions, except per share amounts and as noted)		Q3-20			Q2-21			Quarter				Quarter				Quarter				Quarter				Quarter
Net Revenues
Net interest revenue		51	%		4	%		$	2,030			$	1,947			$	1,911			$	1,809			$	1,343
Asset management and administration fees		28	%		5	%		1,101				1,047				1,016				987				860
Trading revenue		N/M			1	%		964				955				1,216				854				181
Bank deposit account fees		N/M			(4	)%		323				337				351				355				—
Other		138	%		(37	)%		152				241				221				171				64
Total net revenues		87	%		1	%		4,570				4,527				4,715				4,176				2,448
Expenses Excluding Interest
Compensation and benefits		55	%		(1	)%		1,303				1,318				1,430				1,398				840
Professional services		29	%		1	%		250				247				226				269				194
Occupancy and equipment		59	%		3	%		246				239				237				254				155
Advertising and market development		80	%		(7	)%		119				128				116				123				66
Communications		97	%		(13	)%		144				166				147				127				73
Depreciation and amortization		44	%		4	%		140				135				129				130				97
Amortization of acquired intangible assets		N/M			(1	)%		153				154				154				147				25
Regulatory fees and assessments		78	%		(3	)%		64				66				78				57				36
Other		92	%		(61	)%		140				355				238				195				73
Total expenses excluding interest		64	%		(9	)%		2,559				2,808				2,755				2,700				1,559
Income before taxes on income		126	%		17	%		2,011				1,719				1,960				1,476				889
Taxes on income		154	%		7	%		485				454				476				341				191
Net Income		119	%		21	%		$	1,526			$	1,265			$	1,484			$	1,135			$	698
Preferred stock dividends and other		45	%		(19	)%		120				148				96				85				83
Net Income Available to Common Stockholders		129	%		26	%		$	1,406			$	1,117			$	1,388			$	1,050			$	615
Earnings per common share (1):
Basic		54	%		25	%		$	.74			$	.59			$	.74			$	.57			$	.48
Diluted		54	%		25	%		$	.74			$	.59			$	.73			$	.57			$	.48
Dividends declared per common share		—			—			$	.18			$	.18			$	.18			$	.18			$	.18
Weighted-average common shares outstanding:
Basic		46	%		—			1,888				1,886				1,882				1,848				1,289
Diluted		47	%		—			1,898				1,896				1,892				1,855				1,294
Performance Measures
Pre-tax profit margin								44.0		%		38.0		%		41.6		%		35.3		%		36.3		%
Return on average common stockholders’ equity (annualized) (2)								12		%		10		%		12		%		11		%		10		%
Financial Condition (at quarter end, in billions)
Cash and cash equivalents		25	%		13	%		$	34.3			$	30.3			$	48.6			$	40.3			$	27.5
Cash and investments segregated		43	%		6	%		42.3				39.9				40.4				50.4				29.6
Receivables from brokerage clients — net		N/M			5	%		86.6				82.2				74.7				64.4				25.4
Available for sale securities		24	%		5	%		377.0				359.6				341.6				337.4				303.8
Bank loans — net		42	%		9	%		31.6				28.9				25.4				23.8				22.3
Total assets		45	%		6	%		607.5				574.5				563.5				549.0				419.4
Bank deposits		23	%		7	%		395.3				368.6				369.9				358.0				320.7
Payables to brokerage clients		118	%		8	%		113.1				105.0				101.3				104.2				52.0
Short-term borrowings		N/M			(14	)%		3.0				3.5				2.5				—				—
Long-term debt		150	%		4	%		19.5				18.7				17.7				13.6				7.8
Stockholders’ equity		83	%		—			57.4				57.5				55.6				56.1				31.3
Other
Full-time equivalent employees (at quarter end, in thousands)		47	%		—			32.4				32.5				32.0				32.0				22.1
Capital expenditures — purchases of equipment, office facilities, and property, net (in millions)		44	%		(22	)%		$	176			$	225			$	209			$	200			$	122
Expenses excluding interest as a percentage of average client assets (annualized)								0.13		%		0.15		%		0.16		%		0.17		%		0.14		%
Clients’ Daily Average Trades (DATs) (in thousands)		N/M			(8	)%		5,549				6,042				8,414				5,796				1,460
Number of Trading Days		—			2	%		64.0				63.0				61.0				63.0				64.0
Revenue Per Trade (3)		40	%		8	%		$	2.71			$	2.51			$	2.37			$	2.34			$	1.94

Note: The above table reflects the recognition of TD Ameritrade’s assets acquired and liabilities assumed at fair value as of October 6, 2020. Results of operations and metrics are inclusive of TD Ameritrade beginning October 6, 2020.
(1)		Beginning in the fourth quarter of 2020, the Company had 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.
(2)		Return on average common stockholders’ equity is calculated using net income available to common stockholders divided by average common stockholders’ equity.
(3)		Revenue per trade is calculated as trading revenue divided by DATs multiplied by the number of trading days.
N/M Not meaningful. Percentage changes greater than 200% are presented as not meaningful.

THE CHARLES SCHWAB CORPORATION
Net Interest Revenue Information
(In millions, except ratios or as noted)
(Unaudited)
		Three Months Ended September 30,																					Nine Months Ended September 30,
		2021										2020											2021											2020
		Average Balance			Interest Revenue/ Expense			Average Yield/ Rate				Average Balance			Interest Revenue/ Expense				Average Yield/ Rate				Average Balance			Interest Revenue/ Expense				Average Yield/ Rate				Average Balance			Interest Revenue/ Expense				Average Yield/ Rate
Interest-earning assets
Cash and cash equivalents		$	38,732		$	11		0.12	%			$	32,628		$	8			0.10	%			$	39,848		$	27			0.09	%			$	40,410		$	112			0.37	%
Cash and investments segregated		42,617			5			0.04	%			33,214			14				0.16	%			43,914			19				0.06	%			30,162			128				0.56	%
Receivables from brokerage clients		80,873			628			3.04	%			21,242			125				2.31	%			74,831			1,800				3.17	%			19,442			404				2.73	%
Available for sale securities (1)		362,204			1,187			1.30	%			276,081			1,103				1.59	%			348,477			3,381				1.29	%			236,204			3,434				1.93	%
Bank loans		30,235			161			2.12	%			21,668			134				2.46	%			27,336			448				2.18	%			20,248			411				2.70	%
Total interest-earning assets		554,661			1,992			1.42	%			384,833			1,384				1.43	%			534,406			5,675				1.41	%			346,466			4,489				1.72	%
Securities lending revenue (2)					159										47											557											133
Other interest revenue (2)					2										1											4											4
Total interest-earning assets (3)		$	554,661		$	2,153		1.54	%			$	384,833		$	1,432			1.47	%			$	534,406		$	6,236			1.55	%			$	346,466		$	4,626			1.77	%
Funding sources
Bank deposits		$	384,561		$	14		0.01	%			$	310,685		$	12			0.02	%			$	371,974		$	40			0.01	%			$	275,860		$	81			0.04	%
Payables to brokerage clients		92,498			3			0.01	%			40,169			1				0.01	%			89,087			7				0.01	%			36,001			10				0.04	%
Short-term borrowings (4)		3,485			3			0.34	%			5			—				0.12	%			2,617			6				0.32	%			16			—				0.29	%
Long-term debt		19,030			99			2.10	%			7,992			69				3.46	%			17,225			281				2.18	%			8,014			212				3.53	%
Total interest-bearing liabilities		499,574			119			0.09	%			358,851			82				0.09	%			480,903			334				0.09	%			319,891			303				0.13	%
Non-interest-bearing funding sources (3)		55,087										25,982											53,503											26,575
Securities lending expense (2)					4										10											16											26
Other interest expense (2)					—										(3		)									(2		)									(7		)
Total funding sources (3)		$	554,661		$	123		0.09	%			$	384,833		$	89			0.09	%			$	534,406		$	348			0.09	%			$	346,466		$	322			0.13	%
Net interest revenue					$	2,030		1.45	%						$	1,343			1.38	%						$	5,888			1.46	%						$	4,304			1.64	%

(1)		Amounts have been calculated based on amortized cost.
(2)		Beginning in the fourth quarter of 2020, securities lending revenue has been reclassified from broker-related receivables and other revenue. Securities lending expense has been reclassified from other expense. Prior period amounts have been reclassified to reflect this change.
(3)		Beginning in the fourth quarter of 2020, broker-related receivables were removed from total interest-earning assets and netted against non-interest-bearing funding sources, resulting in an immaterial reduction to total interest-earning assets and total funding sources. Prior period amounts have been reclassified to reflect this change.
(4)		Interest revenue or expense was less than $500 thousand in the period or periods presented.

THE CHARLES SCHWAB CORPORATION
Asset Management and Administration Fees Information
(In millions, except ratios or as noted)
(Unaudited)
		Three Months Ended September 30,																						Nine Months Ended September 30,
		2021											2020											2021											2020
		Average Client Assets			Revenue				Average Fee				Average Client Assets			Revenue				Average Fee				Average Client Assets			Revenue				Average Fee				Average Client Assets			Revenue				Average Fee
Schwab money market funds before fee waivers		$	149,508		$	112			0.30	%			$	199,822		$	153			0.30	%			$	158,749		$	348			0.29	%			$	205,544		$	469			0.30	%
Fee waivers					(83		)									(44		)									(246		)									(59		)
Schwab money market funds		149,508			29				0.08	%			199,822			109				0.22	%			158,749			102				0.09	%			205,544			410				0.27	%
Schwab equity and bond funds, ETFs, and collective trust funds (CTFs)		441,344			99				0.09	%			306,899			75				0.10	%			411,312			279				0.09	%			290,759			219				0.10	%
Mutual Fund OneSource and other non-transaction fee funds		234,582			188				0.32	%			197,809			154				0.31	%			228,643			540				0.32	%			187,153			436				0.31	%
Other third-party mutual funds and ETFs (1)		918,363			187				0.08	%			469,822			85				0.07	%			888,003			533				0.08	%			446,007			235				0.07	%
Total mutual funds, ETFs, and CTFs (2)		$	1,743,797		503				0.11	%			$	1,174,352		423				0.14	%			$	1,686,707		1,454				0.12	%			$	1,129,463		1,300				0.15	%
Advice solutions (2)
Fee-based		$	463,827		511				0.44	%			$	307,983		373				0.48	%			$	445,521		1,469				0.44	%			$	277,297		999				0.48	%
Non-fee-based		90,649			—				—				73,850			—				—				87,758			—				—				71,438			—				—
Total advice solutions		$	554,476		511				0.37	%			$	381,833		373				0.39	%			$	533,279		1,469				0.37	%			$	348,735		999				0.38	%
Other balance-based fees (3)		632,806			68				0.04	%			443,929			51				0.05	%			604,995			195				0.04	%			428,191			150				0.05	%
Other (4)					19											13											46											39
Total asset management and administration fees					$	1,101										$	860										$	3,164										$	2,488

(1)		Beginning in the fourth quarter of 2020, includes third-party money funds related to the acquisition of TD Ameritrade.
(2)		Advice solutions include managed portfolios, specialized strategies, and customized investment advice such as Schwab Private Client, Schwab Managed Portfolios, Managed Account Select, Schwab Advisor Network, Windhaven Strategies, ThomasPartners Strategies, Schwab Index Advantage advised retirement plan balances, Schwab Intelligent Portfolios, Institutional Intelligent Portfolios, Schwab Intelligent Portfolios Premium, TD Ameritrade 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.
(3)		Includes various asset-related fees, such as trust fees, 401(k) recordkeeping fees, and mutual fund clearing fees and other service fees.
(4)		Includes miscellaneous service and transaction fees relating to mutual funds and ETFs that are not balance-based.

THE CHARLES SCHWAB CORPORATION
Growth in Client Assets and Accounts
(Unaudited)
		Q3-21 % Change						2021												2020
		vs.			vs.			Third				Second				First				Fourth				Third
(In billions, at quarter end, except as noted)		Q3-20			Q2-21			Quarter				Quarter				Quarter				Quarter				Quarter
Assets in client accounts
Schwab One, certain cash equivalents and bank deposits		36	%		7	%		$	503.9			$	469.5			$	467.3			$	458.4			$	370.3
Bank deposit account balances		N/M			(5	)%		153.3				161.9				164.2				165.9				—
Proprietary mutual funds (Schwab Funds and Laudus Funds) and CTFs
Money market funds (1)		(22	)%		(3	)%		147.7				151.9				163.6				176.1				190.3
Equity and bond funds and CTFs (2)		33	%		1	%		167.4				165.9				152.9				142.9				125.5
Total proprietary mutual funds and CTFs		—			(1	)%		315.1				317.8				316.5				319.0				315.8
Mutual Fund Marketplace (3)
Mutual Fund OneSource and other non-transaction fee funds		15	%		(2	)%		234.7				240.2				227.3				223.9				203.6
Mutual fund clearing services		19	%		—			271.9				271.3				248.7				252.9				228.4
Other third-party mutual funds (4)		71	%		1	%		1,450.1				1,441.5				1,375.8				1,304.6				848.1
Total Mutual Fund Marketplace		53	%		—			1,956.7				1,953.0				1,851.8				1,781.4				1,280.1
Total mutual fund assets		42	%		—			2,271.8				2,270.8				2,168.3				2,100.4				1,595.9
Exchange-traded funds (ETFs)
Proprietary ETFs (2)		49	%		3	%		251.6				245.2				220.9				198.8				168.9
Other third-party ETFs		131	%		2	%		1,183.7				1,158.8				1,035.1				947.3				512.6
Total ETF assets		111	%		2	%		1,435.3				1,404.0				1,256.0				1,146.1				681.5
Equity and other securities		105	%		—			2,976.7				2,988.8				2,721.0				2,504.7				1,453.2
Fixed income securities		12	%		(1	)%		356.8				359.6				364.5				377.1				318.0
Margin loans outstanding		N/M			5	%		(83.8		)		(79.8		)		(72.2		)		(60.9		)		(23.6		)
Total client assets		73	%		1	%		$	7,614.0			$	7,574.8			$	7,069.1			$	6,691.7			$	4,395.3
Client assets by business
Investor Services		74	%		—			$	4,137.7			$	4,146.2			$	3,865.9			$	3,667.9			$	2,377.7
Advisor Services		72	%		1	%		3,476.3				3,428.6				3,203.2				3,023.8				2,017.6
Total client assets		73	%		1	%		$	7,614.0			$	7,574.8			$	7,069.1			$	6,691.7			$	4,395.3
Net growth in assets in client accounts (for the quarter ended)
Net new assets by business
Investor Services (5)		N/M			30	%		$	57.9			$	44.5			$	65.1			$	939.2			$	18.9
Advisor Services (6)		151	%		26	%		81.1				64.3				68.7				751.5				32.3
Total net new assets		171	%		28	%		$	139.0			$	108.8			$	133.8			$	1,690.7			$	51.2
Net market (losses) gains		N/M			N/M			(99.8		)		396.9				243.6				605.7				234.0
Net growth (decline)		(86	)%		(92	)%		$	39.2			$	505.7			$	377.4			$	2,296.4			$	285.2
New brokerage accounts (in thousands, for the quarter ended) (7)		99	%		(29	)%		1,178				1,657				3,153				15,774				592
Client accounts (in thousands)
Active brokerage accounts		127	%		1	%		32,675				32,265				31,902				29,629				14,393
Banking accounts		6	%		—			1,580				1,574				1,608				1,499				1,486
Corporate retirement plan participants		28	%		3	%		2,207				2,149				2,105				2,054				1,722

(1)		Total client assets in purchased money market funds are located at: https://www.aboutschwab.com/investor-relations.
(2)		Includes balances held on and off the Schwab platform. As of September 30, 2021, off-platform equity and bond funds, CTFs, and ETFs were $21.0 billion, $6.0 billion, and $87.5 billion, respectively.
(3)		Excludes all proprietary mutual funds and ETFs.
(4)		As of September 30, 2021, third-party money funds were $14.2 billion.
(5)		First quarter of 2021 includes an outflow of $14.4 billion from a mutual fund clearing services client. Fourth quarter of 2020 includes inflows of $890.7 billion related to the acquisition of TD Ameritrade.
(6)		Fourth quarter of 2020 includes inflows of $680.6 billion related to the acquisition of TD Ameritrade. Third quarter of 2020 includes an inflow of $8.5 billion related to the acquisition of Wasmer, Schroeder & Company, LLC.
(7)		Fourth quarter of 2020 includes 14.5 million new brokerage accounts related to the acquisition of TD Ameritrade.
N/M Not meaningful. Percentage changes greater than 200% are presented as not meaningful.

The Charles Schwab Corporation Monthly Activity Report For September 2021
		2020												2021																											Change
		Sep			Oct			Nov			Dec			Jan			Feb			Mar			Apr			May			Jun			Jul			Aug			Sep			Mo.			Yr.
Market Indices (at month end)
Dow Jones Industrial Average		27,782			26,502			29,639			30,606			29,983			30,932			32,982			33,875			34,529			34,503			34,935			35,361			33,844			(4	)%		22	%
Nasdaq Composite		11,168			10,912			12,199			12,888			13,071			13,192			13,247			13,963			13,749			14,504			14,673			15,259			14,449			(5	)%		29	%
Standard & Poor’s 500		3,363			3,270			3,622			3,756			3,714			3,811			3,973			4,181			4,204			4,298			4,395			4,523			4,308			(5	)%		28	%
Client Assets (in billions of dollars)
Beginning Client Assets		4,489.7			4,395.3			5,878.5			6,421.0			6,691.7			6,759.6			6,900.5			7,069.1			7,336.1			7,395.7			7,574.8			7,642.7			7,838.2
Net New Assets (1)		20.0			1,596.9			32.1			61.7			34.2			37.0			62.6			37.2			28.1			43.5			44.3			51.8			42.9			(17	)%		115	%
Net Market (Losses) Gains		(114.4	)		(113.7	)		510.4			209.0			33.7			103.9			106.0			229.8			31.5			135.6			23.6			143.7			(267.1	)
Total Client Assets (at month end)		4,395.3			5,878.5			6,421.0			6,691.7			6,759.6			6,900.5			7,069.1			7,336.1			7,395.7			7,574.8			7,642.7			7,838.2			7,614.0			(3	)%		73	%
Core Net New Assets (2)		20.0			25.6			32.1			61.7			34.2			51.4			62.6			37.2			28.1			43.5			44.3			51.8			42.9			(17	)%		115	%
Receiving Ongoing Advisory Services (at month end) (3)
Investor Services		361.2			425.3			457.1			471.8			472.4			481.3			495.2			511.1			517.8			525.1			531.9			542.5			530.1			(2	)%		47	%
Advisor Services (4)		1,870.1			2,505.5			2,715.7			2,828.3			2,840.6			2,913.3			2,997.9			3,112.5			3,150.4			3,209.3			3,256.5			3,333.4			3,253.2			(2	)%		74	%
Client Accounts (at month end, in thousands)
Active Brokerage Accounts		14,393			29,013			29,202			29,629			30,534			31,523			31,902			31,877			32,110			32,265			32,386			32,513			32,675			—			127	%
Banking Accounts		1,486			1,496			1,504			1,499			1,518			1,542			1,608			1,562			1,584			1,574			1,578			1,594			1,580			(1	)%		6	%
Corporate Retirement Plan Participants		1,722			2,072			2,045			2,054			2,069			2,093			2,105			2,116			2,130			2,149			2,159			2,188			2,207			1	%		28	%
Client Activity
New Brokerage Accounts (in thousands) (5)		184			14,718			430			626			1,095			1,211			847			609			549			499			402			402			374			(7	)%		103	%
Client Cash as a Percentage of Client Assets (6)		12.8	%		13.4	%		12.4	%		12.3	%		12.2	%		11.8	%		11.5	%		10.9	%		10.8	%		10.5	%		10.4	%		10.3	%		10.8	%		50 bp			(200) bp
Derivative Trades as a Percentage of Total Trades		14.5	%		20.5	%		19.4	%		18.9	%		17.4	%		16.6	%		18.5	%		20.4	%		20.9	%		20.6	%		22.2	%		23.1	%		23.1	%		—			860 bp
Selected Average Balances (in millions of dollars)
Average Interest-Earning Assets (7,8)		392,784			442,119			466,677			482,394			517,306			514,885			520,074			527,194			528,642			536,146			546,579			552,372			565,379			2	%		44	%
Average Margin Balances (8)		22,780			48,095			53,916			59,142			62,999			69,064			71,266			72,863			75,921			78,410			79,910			81,021			81,705			1	%		N/M
Average Bank Deposits Account Balances (8,9)		—			132,030			162,315			163,463			167,980			167,433			164,866			162,392			160,459			161,377			151,275			150,896			152,330			1	%		N/M
Mutual Fund and Exchange-Traded Fund
Net Buys (Sells) (10,11) (in millions of dollars)
Equities		(1,372	)		(1,305	)		10,980			13,875			8,234			14,246			16,301			13,422			9,854			10,873			7,418			8,808			7,596
Hybrid		(12	)		(553	)		(402	)		359			407			832			1,133			877			1			390			666			569			335
Bonds		6,857			6,765			5,956			12,169			13,601			9,334			8,237			8,940			5,906			10,101			6,917			8,044			6,232
Net Buy (Sell) Activity (in millions of dollars)
Mutual Funds (10)		757			(2,260	)		2,832			6,336			5,713			6,273			6,190			5,754			2,022			5,872			2,644			3,876			(308	)
Exchange-Traded Funds (11)		4,716			7,167			13,702			20,067			16,529			18,139			19,481			17,485			13,739			15,492			12,357			13,545			14,471
Money Market Funds		(6,627	)		(4,021	)		(5,908	)		(7,332	)		(5,248	)		(4,405	)		(4,528	)		(5,153	)		(3,988	)		(3,806	)		(2,501	)		(1,372	)		(1,512	)

Note: Certain supplemental details related to the information above can be found at: https://www.aboutschwab.com/financial-reports.
(1)		February 2021 includes an outflow of $14.4 billion from a mutual fund clearing services client. October 2020 includes an inflow of $1.6 trillion related to the acquisition of TD Ameritrade.
(2)		Net new assets before significant one-time inflows or outflows, such as acquisitions/divestitures or extraordinary flows (generally greater than $10 billion) relating to a specific client. These flows may span multiple reporting periods.
(3)		Beginning in December 2020, AdvisorDirect assets are presented as Investor Services. In December 2020, $46.5 billion and $50.4 billion for October and November, respectively, were reclassified from Advisor Services to Investor Services.
(4)		Excludes Retirement Business Services.
(5)		October 2020 includes 14.5 million new brokerage accounts related to the acquisition of TD Ameritrade.
(6)		Schwab One, certain cash equivalents, bank deposits, third-party bank deposit accounts, and money market fund balances as a percentage of total client assets.
(7)		Represents average total interest-earning assets on the company’s balance sheet.
(8)		October 2020 averages reflect a full month of Schwab balances and 26 days of TD Ameritrade balances following the acquisition closing on October 6, 2020. Calculating the consolidated daily average from the closing date onwards would result in Average Interest- Earning Assets, Average Margin Balances, and Average Bank Deposit Account Balances of $450,004 million, $52,744 million, and $157,414 million, respectively.
(9)		Represents average TD Ameritrade clients’ uninvested cash sweep account balances held in deposit accounts at third-party financial institutions.
(10)		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.
(11)		Represents the principal value of client ETF transactions handled by Schwab, including transactions in proprietary ETFs.
N/M Not meaningful. Percentage changes greater than 200% are presented as not meaningful.

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

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

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

Non-GAAP Adjustment or Measure		Definition		Usefulness to Investors and Uses by Management
Acquisition and integration-related costs and amortization of acquired intangible assets		Schwab adjusts certain GAAP financial measures to exclude the impact of acquisition and integration-related costs incurred as a result of the Company’s acquisitions, amortization of acquired intangible assets, and, where applicable, the income tax effect of these expenses.   Adjustments made to exclude amortization of acquired intangible assets are reflective of all acquired intangible assets, which were recorded as part of purchase accounting. These acquired intangible assets contribute to the Company’s revenue generation. Amortization of acquired intangible assets will continue in future periods over their remaining useful lives.		We exclude acquisition and integration-related costs and amortization of acquired intangible assets for the purpose of calculating certain non-GAAP measures because we believe doing so provides additional transparency of Schwab’s ongoing operations, and is useful in both evaluating the operating performance of the business and facilitating comparison of results with prior and future periods.   Acquisition and integration-related costs fluctuate based on the timing of acquisitions and integration activities, thereby limiting comparability of results among periods, and are not representative of the costs of running the Company’s 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.

Beginning in 2021, 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.

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 September 30,																Nine Months Ended September 30,
		2021								2020								2021								2020
		Total Expenses Excluding Interest				Net Income				Total Expenses Excluding Interest				Net Income				Total Expenses Excluding Interest				Net Income				Total Expenses Excluding Interest				Net Income
Total expenses excluding interest (GAAP), Net income (GAAP)		$	2,559			$	1,526			$	1,559			$	698			$	8,122			$	4,275			$	4,691			$	2,164
Acquisition and integration-related costs (1)		(104		)		104				(42		)		42				(367		)		367				(160		)		160
Amortization of acquired intangible assets		(153		)		153				(25		)		25				(461		)		461				(43		)		43
Income tax effects (2)		N/A				(61		)		N/A				(16		)		N/A				(208		)		N/A				(49		)
Adjusted total expenses (non-GAAP), Adjusted net income (non-GAAP)		$	2,302			$	1,722			$	1,492			$	749			$	7,294			$	4,895			$	4,488			$	2,318

(1)		Acquisition and integration-related costs for the three and nine months ended September 30, 2021 primarily consist of $58 million and $227 million of compensation and benefits, $35 million and $99 million of professional services, and $7 million and $30 million of occupancy and equipment. Acquisition and integration-related costs for the three and nine months ended September 30, 2020 primarily consist of professional services and compensation and benefits.
(2)		The income tax effects of the non-GAAP adjustments is determined using an effective tax rate reflecting the exclusion of non-deductible acquisition costs and is used to present the acquisition and integration-related costs and amortization of acquired intangible assets on an after-tax basis.
N/A Not applicable.

		Three Months Ended September 30,												Nine Months Ended September 30,
		2021						2020						2021						2020
		Amount			% of Total Net Revenues			Amount			% of Total Net Revenues			Amount			% of Total Net Revenues			Amount			% of Total Net Revenues
Income before taxes on income (GAAP), Pre-tax profit margin (GAAP)		$	2,011		44.0	%		$	889		36.3	%		$	5,690		41.2	%		$	2,824		37.6	%
Acquisition and integration-related costs		104			2.3	%		42			1.7	%		367			2.7	%		160			2.1	%
Amortization of acquired intangible assets		153			3.3	%		25			1.1	%		461			3.3	%		43			0.6	%
Adjusted income before taxes on income (non-GAAP), Adjusted pre-tax profit margin (non-GAAP)		$	2,268		49.6	%		$	956		39.1	%		$	6,518		47.2	%		$	3,027		40.3	%

		Three Months Ended September 30,																Nine Months Ended September 30,
		2021								2020								2021								2020
		Amount				Diluted EPS				Amount				Diluted EPS				Amount				Diluted EPS				Amount				Diluted EPS
Net income available to common stockholders (GAAP), Earnings per common share — diluted (GAAP)		$	1,406			$	.74			$	615			$	.48			$	3,911			$	2.06			$	1,993			$	1.54
Acquisition and integration-related costs		104				.05				42				.03				367				.19				160				.12
Amortization of acquired intangible assets		153				.08				25				.02				461				.24				43				.03
Income tax effects		(61		)		(.03		)		(16		)		(.02		)		(208		)		(.10		)		(49		)		(.03		)
Adjusted net income available to common stockholders (non-GAAP), Adjusted diluted EPS (non-GAAP)		$	1,602			$	.84			$	666			$	.51			$	4,531			$	2.39			$	2,147			$	1.66

		Three Months Ended September 30,								Nine Months Ended September 30,
		2021				2020				2021				2020
Return on average common stockholders’ equity (GAAP)		12		%		10		%		11		%		12		%
Average common stockholders’ equity		$	47,492			$	25,810			$	47,908			$	22,511
Less: Average goodwill		(11,952		)		(1,735		)		(11,952		)		(1,482		)
Less: Average acquired intangible assets — net		(9,609		)		(1,268		)		(9,762		)		(693		)
Plus: Average deferred tax liabilities related to goodwill and acquired intangible assets — net		1,895				67				1,913				67
Average tangible common equity		$	27,826			$	22,874			$	28,107			$	20,403
Adjusted net income available to common stockholders (1)		$	1,602			$	666			$	4,531			$	2,147
Return on tangible common equity (non-GAAP)		23		%		12		%		21		%		14		%

(1)

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

 

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