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Press release from Business Wire

Schwab Reports Growth in Third Quarter Revenue and Income

<p> Core Net New Assets Rise 23% Year-Over-Year </p> <p> Diversified Revenues and Operating Discipline Continue to Drive Financial Performance </p>

Monday, October 15, 2012

Schwab Reports Growth in Third Quarter Revenue and Income08:45 EDT Monday, October 15, 2012 SAN FRANCISCO (Business Wire) -- The Charles Schwab Corporation announced today that its net income for the third quarter of 2012 was $247 million, down 10% from $275 million for the second quarter of 2012, and up 12% from $220 million for the third quarter of 2011. Net income for the nine months ended September 30, 2012 was $717 million, up 2% year-over-year. The company's third quarter and year-to-date financial results include a non-recurring state tax benefit of approximately $20 million. Schwab's year-to-date results also include an after-tax gain of approximately $44 million relating to the resolution of a vendor dispute, which was recorded in the second quarter.         Three Months Ended Nine Months Ended --September 30,-- % --September 30,-- % Financial Highlights   2012   2011   Change   2012   2011   Change     Net revenues (in millions) $ 1,196 $ 1,181 1 % $ 3,668 $ 3,578 3 % Net income (in millions) $ 247 $ 220 12 % $ 717 $ 701 2 % Diluted earnings per common share $ .19 $ .18 6 % $ .54 $ .57 (5 %) Pre-tax profit margin 30.2 % 30.5 % 30.2 % 31.9 % Return on average common stockholders' equity (annualized) 11 % 12 % 11 % 13 %                                   CEO and President Walt Bettinger commented, “Our clients remain resilient yet cautious in this challenging economic environment. They continue to be net purchasers of securities; their cash holdings at Schwab remain at pre-crisis levels; and while their trading activity this summer was muted, it's been consistent with our experience in prior presidential election years. The company's third quarter metrics were solid, including 198,000 new brokerage accounts, $2.8 billion in net new enrollments in our retail advisory offerings, and $21.7 billion in core net new assets. We ended the quarter with 8.7 million active brokerage accounts, and 844,000 banking accounts, up 3% and 10%, respectively, year-over-year. Also, retail advised balances and total client assets grew to $123.8 billion and a record $1.89 trillion at month-end September, increasing by 20% each.” “We know that this environment continues to impact our clients' confidence in making investment decisions, reinforcing the importance of sustained investment in our full-service model,” Mr. Bettinger continued. “We came into 2012 expecting to complete and deliver a number of significant improvements in our client service capabilities during the year. We remain on track with every one of those initiatives, including the launches of our index-based 401(k) offering and independent branch model, the bolstering of our mortgage lending program, expanding and improving our global investing capabilities, adding to our mobile and tablet solutions, offering an integrated technology platform for independent advisors, and leveraging the strengths of optionsXpress® and Compliance11® in our trading and designated brokerage services. We believe Schwab's demonstrated commitment to finding a better way to serve investors is an important element of building client trust – trust that is reflected in our improved loyalty scores from individual investors, as well as our industry-leading scores from independent advisors.” CFO Joe Martinetto said, “Our third quarter financial performance once again demonstrated the combined power of our growing client base, diversified revenue streams and ongoing expense discipline. Both trading and net interest revenues declined sequentially due to environmental factors, yet asset management and administration fees rose by 6% due to improved net money market fund yields, along with growth in other mutual fund balances and our advice programs. Additionally, by keeping our expenses within planned levels, we were able to maintain our pre-tax profit margin at approximately 30% while sustaining our investments in the client experience.” “We took two additional steps to strengthen our balance sheet during the third quarter,” Mr. Martinetto added. “We redeemed all of our outstanding Trust Preferred Securities and the underlying 7.50% Junior Subordinated Notes, which totaled $202 million, following the Federal Reserve's issuance of proposed rules that will phase out those securities' eligibility for regulatory capital treatment. We also completed a debt exchange offer that effectively replaced $256 million of our outstanding 4.95% Senior Notes due in 2014 for new 10-year Senior Notes at a reduced cost. We remain committed to sustaining the financial strength and flexibility needed to pursue profitable growth in all environments.” Business highlights for the third quarter (data as of quarter-end unless otherwise noted): Investor Services Net new accounts for the quarter totaled approximately 14,000, down 22% year-over-year. Total accounts reached 6.1 million as of September 30, 2012, up 7% year-over-year. Extended the company's integrated mobile brokerage and banking capabilities to iPad® users, enabling Schwab clients to deposit checks remotely by taking a picture of a check with their iPad camera. Launched the Schwab Global Account™, a platform providing investors direct, 24/7 online access to 12 foreign equity markets with the ability to trade in their local currencies whenever the markets are open. Launched two products for optionsXpress users: Idea Hub™, which provides actionable trade ideas, grouped into trading themes; and Walk Limit™, which can “walk” or adjust an option order's limit price automatically to help optimize execution. Institutional Services Advisor Services Expanded the company's ‘Insight to Action' practice management consulting program, offering registered investment advisors (RIAs) hands-on support and guidance on practice management challenges. The curriculum covers strategic planning, managing profitability, driving productivity through technology, and succession planning. Other Institutional Services 401(k) plans that converted to Schwab Index Advantage™ thus far in 2012 have experienced, on average: lower fund operating expenses, from $68 to $16 per $10,000 invested; and higher advice usage, rising from 10% to 92% of participants. Introduced a suite of support tools and programs to help retirement plan advisors increase productivity and build their skills in this highly regulated industry. The suite combines sophisticated investment management tools, as well as advanced fiduciary and plan design training. Products and Infrastructure For Charles Schwab Bank: Balance sheet assets = $75.3 billion, up 28% year-over-year. Outstanding mortgage and home equity loans = $9.3 billion, up 3% year-over-year. First mortgage originations by Quicken Loans and Schwab during the quarter = $1.5 billion. Delinquency, nonaccrual, and loss reserve ratios for Schwab Bank's loan portfolio = 0.90%, 0.45% and 0.56%, respectively, at month-end September. Schwab Bank High Yield Investor Checking® accounts = 652,000, with $11.0 billion in balances. Reduced the operating expense ratios (OERs) for each of the 15 Schwab ETFs™, giving them the lowest OERs in their respective Lipper categories. Client assets managed by Windhaven® = $12.5 billion, up 13% from the second quarter of 2012. Total assets under management in Schwab ETFs™ = $7.6 billion. Total assets in Schwab Managed Portfolios-ETFs = $2.5 billion. iPad is a trademark of Apple Inc., registered in the U.S. and other countries. Supporting schedules are either attached or located at: www.aboutschwab.com/investor_relations/financial_reports. Interim Business Update The company also announced today that it has scheduled an Interim Business Update for institutional investors on Monday, November 5, 2012. This Update, which will be held via webcast, is part of an ongoing series designed to help the investment community keep abreast of recent developments and management's strategic focus. The program is scheduled to run from 8:00 a.m. – 9:00 a.m. PT, 11:00 a.m. – 12:00 p.m. ET. Mr. Bettinger and Mr. Martinetto will participate. The Update will be accessible at: schwabevents.com/corporation. About Charles Schwab The Charles Schwab Corporation (NYSE: SCHW) is a leading provider of financial services, with more than 300 offices and 8.7 million active brokerage accounts, 1.5 million corporate retirement plan participants, 844,000 banking accounts, and $1.89 trillion in client assets. Through its operating subsidiaries, the company provides a full range of securities brokerage, banking, money management and financial advisory services to individual investors and independent investment advisors. Its broker-dealer subsidiary, Charles Schwab & Co., Inc. (member SIPC, www.sipc.org), and affiliates offer a complete range of investment services and products including an extensive selection of mutual funds; financial planning and investment advice; retirement plan and equity compensation plan services; referrals to independent fee-based investment advisors; and custodial, operational and trading support for independent, fee-based investment advisors through Schwab Advisor Services. Its banking subsidiary, Charles Schwab Bank (member FDIC and an Equal Housing Lender), provides banking and mortgage services and products. More information is available at www.schwab.com and www.aboutschwab.com.   THE CHARLES SCHWAB CORPORATION Consolidated Statements of Income (In millions, except per share amounts) (Unaudited)                     Three Months Ended   Nine Months Ended September 30, September 30,     2012   2011   2012   2011     Net Revenues Asset management and administration fees $ 524 $ 466 $ 1,504 $ 1,470   Interest revenue 478 487 1,447 1,464 Interest expense   (39 )   (44 )   (116 )   (134 ) Net interest revenue 439 443 1,331 1,330   Trading revenue 204 248 666 694 Other 42 45 209 119 Provision for loan losses (10 ) (8 ) (14 ) (13 ) Net impairment losses on securities (1) (3 ) (13 ) (28 ) (22 )                   Total net revenues     1,196       1,181       3,668       3,578     Expenses Excluding Interest Compensation and benefits 442 423 1,353 1,290 Professional services 98 104 287 288 Occupancy and equipment 77 78 233 222 Advertising and market development 49 48 173 159 Communications 53 56 166 166 Depreciation and amortization 50 39 146 107 Class action litigation and regulatory reserve - - - 7 Other     66       73       204       199   Total expenses excluding interest     835       821       2,562       2,438     Income before taxes on income 361 360 1,106 1,140 Taxes on income     114       140       389       439     Net Income     247       220       717       701     Preferred stock dividends     9       -       23       -     Net Income Available to Common Stockholders   $ 238     $ 220     $ 694     $ 701     Weighted-Average Common Shares Outstanding — Diluted     1,275       1,229       1,274       1,216     Earnings Per Common Share — Basic $ .19 $ .18 $ .54 $ .58   Earnings Per Common Share — Diluted   $ .19     $ .18     $ .54     $ .57   (1)   Net impairment losses on securities include total other-than-temporary impairment losses of $1 million and $2 million, net of $(2) million and $(11) million recognized in other comprehensive income, for the three months ended September 30, 2012 and 2011, respectively. Net impairment losses on securities include total other-than-temporary impairment losses of $15 million and $13 million, net of $(13) million and $(9) million recognized in other comprehensive income, for the nine months ended September 30, 2012 and 2011, respectively.   See Note to Consolidated Statements of Income, Financial and Operating Highlights, and Net Interest Revenue Information.               THE CHARLES SCHWAB CORPORATION Financial and Operating Highlights (Unaudited)         Q3-12 % change 2012   2011   vs. vs. Third Second First Fourth Third (In millions, except per share amounts and as noted) Q3-11 Q2-12 Quarter   Quarter   Quarter   Quarter   Quarter Net Revenues Asset management and administration fees 12 % 6 % $ 524 $ 496 $ 484 $ 458 $ 466 Net interest revenue (1 %) (4 %) 439 458 434 395 443 Trading revenue (18 %) (7 %) 204 219 243 233 248 Other (1) (7 %) (65 %) 42 121 46 41 45 Provision for loan losses 25 % 150 % (10 ) (4 ) - (5 ) (8 ) Net impairment losses on securities (77 %) (57 %)   (3 )     (7 )     (18 )     (9 )     (13 ) Total net revenues 1 % (7 %)   1,196       1,283       1,189       1,113       1,181   Expenses Excluding Interest Compensation and benefits 4 % (1 %) 442 446 465 442 423 Professional services (6 %) 5 % 98 93 96 99 104 Occupancy and equipment (1 %) (4 %) 77 80 76 79 78 Advertising and market development 2 % (14 %) 49 57 67 69 48 Communications (5 %) (4 %) 53 55 58 54 56 Depreciation and amortization 28 % 4 % 50 48 48 48 39 Other (10 %) (8 %)   66       72       66       70       73   Total expenses excluding interest 2 % (2 %)   835       851       876       861       821   Income before taxes on income - (16 %) 361 432 313 252 360 Taxes on income (2) (19 %) (27 %)   114       157       118       89       140   Net Income 12 % (10 %) $ 247     $ 275     $ 195     $ 163     $ 220   Preferred stock dividends N/M (36 %)   9       14       -       -       -   Net Income Available to Common Stockholders 8 % (9 %) $ 238     $ 261     $ 195     $ 163     $ 220   Basic earnings per common share 6 % (5 %) $ .19 $ .20 $ .15 $ .13 $ .18 Diluted earnings per common share 6 % (5 %) $ .19 $ .20 $ .15 $ .13 $ .18 Dividends declared per common share - - $ .06 $ .06 $ .06 $ .06 $ .06 Weighted-average common shares outstanding - diluted 4 % -   1,275       1,274       1,273       1,271       1,229   Performance Measures Pre-tax profit margin 30.2 % 33.7 % 26.3 % 22.6 % 30.5 % Return on average common stockholders' equity (annualized) (3)   11 %     13 %     10 %     8 %     12 % Financial Condition (at quarter end, in billions) Cash and investments segregated (7 %) 10 % $ 25.0 $ 22.7 $ 26.9 $ 26.0 $ 27.0 Receivables from brokerage clients 7 % (1 %) $ 11.9 $ 12.0 $ 11.2 $ 11.1 $ 11.1 Loans to banking clients 4 % 3 % $ 10.1 $ 9.8 $ 9.8 $ 9.8 $ 9.7 Total assets 14 % 5 % $ 117.7 $ 111.8 $ 111.5 $ 108.6 $ 102.9 Deposits from banking clients 27 % 4 % $ 68.8 $ 66.3 $ 62.3 $ 60.9 $ 54.1 Payables to brokerage clients (5 %) 9 % $ 34.8 $ 31.8 $ 36.4 $ 35.5 $ 36.6 Long-term debt (10 %) (10 %) $ 1.8 $ 2.0 $ 2.0 $ 2.0 $ 2.0 Stockholders' equity (4) 23 % 4 % $ 9.5     $ 9.1     $ 8.3     $ 7.7     $ 7.7   Other Full-time equivalent employees (at quarter end, in thousands) (2 %) (1 %) 13.6 13.7 14.0 14.1 13.9 Annualized net revenues per average full-time equivalent employee (in thousands) 1 % (5 %) $ 352 $ 372 $ 340 $ 316 $ 350 Capital expenditures - cash purchases of equipment, office facilities, and property, net (in millions) (39 %) 6 % $ 33     $ 31     $ 34     $ 55     $ 54   Clients' Daily Average Trades (in thousands) Revenue trades (5) (19 %) (8 %) 261.5 285.2 318.4 307.4 323.1 Asset-based trades (6) (11 %) (11 %) 45.2 50.6 53.7 45.9 50.6 Other trades (7) (6 %) (4 %)   95.7       99.8       104.1       106.3       101.7   Total (15 %) (8 %)   402.4       435.6       476.2       459.6       475.4   Average Revenue Per Revenue Trade(5) 3 % 2 % $ 12.44     $ 12.15     $ 12.35     $ 12.21     $ 12.04         (1)   Includes a pre-tax gain of $70 million relating to a confidential resolution of a vendor dispute in the second quarter of 2012. (2) Includes a non-recurring state tax benefit of $20 million in the third quarter of 2012. (3) Return on average common stockholders' equity is calculated using net income available to common stockholders divided by average common stockholders' equity. (4) In the second quarter and first quarter of 2012, the Company issued non-cumulative perpetual preferred stock, Series B, for a total liquidation preference of $485 million and non-cumulative perpetual preferred stock, Series A, with a total liquidation preference of $400 million, respectively. (5) Includes all client trades that generate either commission revenue or revenue from principal markups (i.e., fixed income); also known as DART. (6) Includes eligible trades executed by clients who participate in one or more of the Company's asset-based pricing relationships. (7) Includes all commission free trades, including Schwab Mutual Fund OneSource® funds and ETFs, and other proprietary products. N/M Not meaningful.   See Note to Consolidated Statements of Income, Financial and Operating Highlights, and Net Interest Revenue Information.                   THE CHARLES SCHWAB CORPORATION Net Interest Revenue Information (In millions) (Unaudited)                                                   Three Months EndedSeptember 30, Nine Months EndedSeptember 30, 2012   2011   2012   2011       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 $ 7,942 $ 4 0.20 % $ 6,025 $ 3 0.20 % $ 6,741 $ 12 0.24 % $ 5,496 $ 9 0.22 % Cash and investments segregated 23,516 12 0.20 % 26,597 7 0.10 % 25,259 33 0.17 % 25,120 30 0.16 % Broker-related receivables (1) 414 - - 300 - 0.03 % 345 - 0.02 % 346 - 0.05 % Receivables from brokerage clients 10,956 112 4.07 % 10,749 117 4.32 % 10,750 333 4.14 % 10,784 356 4.41 % Securities available for sale (2) 40,701 146 1.43 % 27,947 116 1.65 % 38,443 443 1.54 % 26,373 332 1.68 % Securities held to maturity 15,311 95 2.47 % 15,469 128 3.28 % 15,175 302 2.66 % 16,313 413 3.38 % Loans to banking clients 10,014 77 3.06 % 9,646 79 3.25 % 9,921 233 3.14 % 9,343 231 3.31 % Loans held for sale (1)     1     -   4.06 %   49     1   4.27 %   24     1   4.12 %   63     2   4.11 % Total interest-earning assets     108,855     446   1.63 %   96,782     451   1.85 %   106,658     1,357   1.70 %   93,838     1,373   1.96 % Other interest revenue         32           36           90           91     Total interest-earning assets   $ 108,855   $ 478   1.74 % $ 96,782   $ 487   2.00 % $ 106,658   $ 1,447   1.81 % $ 93,838   $ 1,464   2.08 % Funding sources: Deposits from banking clients $ 67,027 $ 11 0.07 % $ 53,247 $ 16 0.12 % $ 63,577 $ 31 0.07 % $ 51,649 $ 49 0.13 % Payables to brokerage clients (1) 28,435 1 0.01 % 30,962 1 0.01 % 29,651 2 0.01 % 29,288 2 0.01 % Long-term debt     1,923     27   5.59 %   2,003     27   5.35 %   1,974     81   5.48 %   2,004     81   5.40 % Total interest-bearing liabilities     97,385     39   0.16 %   86,212     44   0.20 %   95,202     114   0.16 %   82,941     132   0.21 % Non-interest-bearing funding sources 11,470 10,570 11,456 10,897 Other interest expense         -           -           2           2     Total funding sources   $ 108,855   $ 39   0.14 % $ 96,782   $ 44   0.18 % $ 106,658   $ 116   0.14 % $ 93,838   $ 134   0.19 % Net interest revenue       $439   1.60%     $443   1.82%     $1,331   1.67%     $1,330   1.89% (1)   Interest revenue or expense was less than $500,000 in the period or periods presented. (2) Amounts have been calculated based on amortized cost.   See Note to Consolidated Statements of Income, Financial and Operating Highlights, and Net Interest Revenue Information.   Note to Consolidated Statements of Income, Financial and Operating Highlights, and Net Interest Revenue Information (Unaudited)   The Company The consolidated statements of income, financial and operating highlights, and net interest revenue information include The Charles Schwab Corporation (CSC) and its majority-owned subsidiaries (collectively referred to as the Company), including Charles Schwab & Co., Inc. and Charles Schwab Bank. Certain prior period amounts have been reclassified to conform to the 2012 presentation. The consolidated statements of income, financial and operating highlights, and net interest revenue information should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2011.                         THE CHARLES SCHWAB CORPORATION Asset Management and Administration Fees Information (In millions) (Unaudited)                                                 Three Months EndedSeptember 30, Nine Months EndedSeptember 30, 2012 2011 2012 2011     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 $ 154,977 $ 221 0.57 % $ 154,459 $ 220 0.57 % $ 154,682 $ 663 0.57 % $ 152,171 $ 639 0.56 % Fee waivers         (136 )           (160 )           (445 )           (400 )     Schwab money market funds 154,977 85 0.22 % 154,459 60 0.15 % 154,682 218 0.19 % 152,171 239 0.21 % Equity and bond funds (1) 48,557 32 0.26 % 40,865 29 0.28 % 46,851 95 0.27 % 41,550 89 0.29 % Mutual Fund OneSource ®     217,540     171     0.31 %   202,862     168     0.33 %   214,972     501     0.31 %   214,284     520     0.32 % Total mutual funds (2)   $ 421,074     288     0.27 % $ 398,186     257     0.26 % $ 416,505     814     0.26 % $ 408,005     848     0.28 % Advice solutions (2) $ 120,112 148 0.49 % $ 108,699 129 0.47 % $ 117,536 427 0.49 % $ 110,254 392 0.48 % Other (3)         88             80             263             230       Total asset management and administration fees       $524           $466           $1,504           $1,470       (1)   Includes Schwab ETFs. (2) Advice solutions include separately managed accounts, customized personal advice for tailored portfolios, and specialized planning and full-time portfolio management offered through the Company's Schwab Private Client, Schwab Managed Portfolio and Managed Account Select programs. Advice solutions also includes Schwab Advisor Network, Schwab Advisor Source, and Windhaven. Average client assets for advice solutions may also include the asset balances contained in the three categories of mutual funds listed above. (3) Includes various asset based fees, such as trust fees, 401k record keeping fees, and mutual fund clearing and other service fees.               THE CHARLES SCHWAB CORPORATION Growth in Client Assets and Accounts (Unaudited)         Q3-12 % Change 2012 2011 vs. vs. Third Second First Fourth Third (In billions, at quarter end, except as noted) Q3-11   Q2-12 Quarter   Quarter   Quarter   Quarter   Quarter Assets in client accounts Schwab One®, other cash equivalents and deposits from banking clients 14 % 6 % $ 103.7 $ 98.2 $ 98.8 $ 96.4 $ 90.9 Proprietary funds (Schwab Funds® and Laudus Funds®): Money market funds - 2 % 155.7 152.9 154.4 159.8 155.5 Equity and bond funds 41 % 7 %   48.4       45.3       45.8       38.2       34.3   Total proprietary funds 8 % 3 %   204.1       198.2       200.2       198.0       189.8   Mutual Fund Marketplace®(1) Mutual Fund OneSource® 18 % 5 % 222.1 211.2 219.5 198.6 187.9 Mutual fund clearing services 36 % 6 % 134.4 126.4 127.0 104.2 98.6 Other third-party mutual funds 21 % 6 %   350.0       328.7       334.1       305.9       290.4   Total Mutual Fund Marketplace 22 % 6 %   706.5       666.3       680.6       608.7       576.9   Total mutual fund assets 19 % 5 %   910.6       864.5       880.8       806.7       766.7   Equity and other securities (1) 28 % 5 % 705.5 670.4 685.0 607.9 552.9 Fixed income securities 3 % 1 % 181.8 180.5 179.4 176.9 176.4 Margin loans outstanding 7 % -   (11.2 )     (11.2 )     (10.5 )     (10.2 )     (10.5 ) Total client assets 20 % 5 % $1,890.4     $1,802.4     $1,833.5     $1,677.7     $1,576.4     Client assets by business Investor Services 18 % 5 % $ 770.4 $ 737.0 $ 753.3 $ 697.9 $ 655.4 Advisor Services 19 % 5 % 762.3 727.6 735.9 679.0 640.1 Other Institutional Services 27 % 6 %   357.7       337.8       344.3       300.8       280.9   Total client assets by business 20 % 5 % $1,890.4     $1,802.4     $1,833.5     $1,677.7     $1,576.4     Net growth in assets in client accounts (for the quarter ended) Net new assets Investor Services (2) (63 %) 48 % $ 4.3 $ 2.9 $ 5.9 $ 5.3 $ 11.6 Advisor Services (10 %) (4 %) 9.5 9.9 12.6 9.2 10.6 Other Institutional Services (3) (90 %) 106 %   6.6       3.2       20.4       7.0       63.8   Total net new assets (76 %) 28 %   20.4       16.0       38.9       21.5       86.0   Net market gains (losses) (141 %) N/M   67.6       (47.1 )     116.9       79.8       (165.1 ) Net growth (decline) N/M N/M $88.0     $(31.1)   $155.8     $101.3     $(79.1)   New brokerage accounts (in thousands, for the quarter ended) (4) (61 %) (10 %) 198221240203506Clients (in thousands) Active Brokerage Account(s) (5) 3 % - 8,7368,7208,6398,5528,510 Banking Accounts 10 % 3 % 844822801780769 Corporate Retirement Plan Participants 6 % 2 %   1,547       1,524       1,516       1,492       1,462         (1)   Excludes all proprietary money market, equity, and bond funds. (2) Includes outflows of approximately $100 million as a result of the sale of Open E Cry, LLC, in the third quarter of 2012. Includes inflows of $7.5 billion from the acquisition of optionsXpress Holdings, Inc. in the third quarter of 2011. (3) Includes outflows of $1.2 billion as a result of the closure of brokersXpress LLC in the third quarter of 2012. Includes inflows of $12.0 billion and $60.9 billion from mutual fund clearing services clients in the first quarter of 2012 and third quarter of 2011, respectively. (4) Includes 315,000 new brokerage accounts from the acquisition of optionsXpress Holdings, Inc. in the third quarter of 2011. (5) Active brokerage accounts were reduced by 19,000 as a result of the sale of Open E Cry, LLC, and the closure of brokersXpress LLC in the third quarter of 2012. N/M Not meaningful Charles SchwabAlison Wertheim, 415-667-0475 (Media)Rich Fowler, 415-667-1841 (Investors/Analysts)