Schwab Reports Fourth Quarter Net Income Up 29% Year-Over-Year

Supporting schedules are either attached or located at: www.aboutschwab.com/investor_relations/financial_reports

Forward Looking Statements

This press release contains forward looking statements relating to enrollment and participation in the company’s new index-based 401(k) offering, growth of the company’s business, revenues, earnings and expense discipline. Achievement of these expectations 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 enrollment rate in the company’s index-based 401(k) offering, general market conditions, including the level of interest rates, equity valuations and trading activity; net interest margin; level of expenses; the company’s ability to attract and retain clients and grow client assets/relationships; competitive pressures on rates and fees; the level of client assets, including cash balances; the company’s ability to monetize client assets; the company’s ability to develop and launch new products, services and capabilities in a timely and successful manner; capital needs and management; the impact of changes in market conditions on money market fund fee waivers, revenues, expenses and pre-tax margins; the effect of adverse developments in litigation or regulatory matters and the extent of any charges associated with legal matters; any adverse impact of financial reform legislation and related regulations; and other factors set forth in the company’s Form 10-Q for the period ended September 30, 2012.

About Charles Schwab

The Charles Schwab Corporation (NYSE: SCHW) is a leading provider of financial services, with more than 300 offices and 8.8 million active brokerage accounts, 1.6 million corporate retirement plan participants, 865,000 banking accounts, and $1.95 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; compliance and trade monitoring solutions; referrals to independent fee-based investment advisors; and custodial, operational and trading support for independent, fee-based investment advisors through Schwab Advisor Services. Its banking subsidiary, Charles Schwab Bank (member FDIC and an Equal Housing Lender), provides banking and lending services and products. More information is available at www.schwab.com and www.aboutschwab.com.

THE CHARLES SCHWAB CORPORATION
Consolidated Statements of Income
(In millions, except per share amounts)
(Unaudited)
		Three Months Ended								Twelve Months Ended
		December 31,								December 31,
		2012				2011				2012				2011
Net Revenues
Asset management and administration fees		$	539			$	458			$	2,043			$	1,928
Interest revenue			467				436				1,914				1,900
Interest expense			(34	)			(41	)			(150	)			(175	)
Net interest revenue			433				395				1,764				1,725
Trading revenue			202				233				868				927
Other			47				41				256				160
Provision for loan losses			(2	)			(5	)			(16	)			(18	)
Net impairment losses on securities (1)			(4	)			(9	)			(32	)			(31	)
Total net revenues			1,215				1,113				4,883				4,691
Expenses Excluding Interest
Compensation and benefits			450				442				1,803				1,732
Professional services			101				99				388				387
Occupancy and equipment			78				79				311				301
Advertising and market development			68				69				241				228
Communications			54				54				220				220
Depreciation and amortization			50				48				196				155
Class action litigation and regulatory reserve			-				-				-				7
Other			70				70				274				269
Total expenses excluding interest			871				861				3,433				3,299
Income before taxes on income			344				252				1,450				1,392
Taxes on income			133				89				522				528
Net Income			211				163				928				864
Preferred stock dividends			22				-				45				-
Net Income Available to Common Stockholders		$	189			$	163			$	883			$	864
Weighted-Average Common Shares Outstanding — Diluted			1,278				1,271				1,275				1,229
Earnings Per Common Share — Basic		$	.15			$	.13			$	.69			$	.70
Earnings Per Common Share — Diluted		$	.15			$	.13			$	.69			$	.70

(1)		Net impairment losses on securities include total other-than-temporary impairment losses of $0 million and $5 million, net of $(4) million and $(4) million recognized in other comprehensive income, for the three months ended December 31, 2012 and 2011, respectively. Net impairment losses on securities include total other-than-temporary impairment losses of $15 million and $18 million, net of $(17) million and $(13) million recognized in other comprehensive income, for the twelve months ended December 31, 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)
		Q4-12 % change						2012																2011
		vs.			vs.			Fourth				Third				Second				First				Fourth
(In millions, except per share amounts and as noted)		Q4-11			Q3-12			Quarter				Quarter				Quarter				Quarter				Quarter
Net Revenues
Asset management and administration fees		18	%		3	%		$	539			$	524			$	496			$	484			$	458
Net interest revenue		10	%		(1	%)			433				439				458				434				395
Trading revenue		(13	%)		(1	%)			202				204				219				243				233
Other (1)		15	%		12	%			47				42				121				46				41
Provision for loan losses		(60	%)		(80	%)			(2	)			(10	)			(4	)			-				(5	)
Net impairment losses on securities		(56	%)		33	%			(4	)			(3	)			(7	)			(18	)			(9	)
Total net revenues		9	%		2	%			1,215				1,196				1,283				1,189				1,113
Expenses Excluding Interest
Compensation and benefits		2	%		2	%			450				442				446				465				442
Professional services		2	%		3	%			101				98				93				96				99
Occupancy and equipment		(1	%)		1	%			78				77				80				76				79
Advertising and market development		(1	%)		39	%			68				49				57				67				69
Communications		-			2	%			54				53				55				58				54
Depreciation and amortization		4	%		-				50				50				48				48				48
Other		-			6	%			70				66				72				66				70
Total expenses excluding interest		1	%		4	%			871				835				851				876				861
Income before taxes on income		37	%		(5	%)			344				361				432				313				252
Taxes on income (2)		49	%		17	%			133				114				157				118				89
Net Income		29	%		(15	%)		$	211			$	247			$	275			$	195			$	163
Preferred stock dividends		N/M			144	%			22				9				14				-				-
Net Income Available to Common Stockholders		16	%		(21	%)		$	189			$	238			$	261			$	195			$	163
Basic earnings per common share		15	%		(21	%)		$	.15			$	.19			$	.20			$	.15			$	.13
Diluted earnings per common share		15	%		(21	%)		$	.15			$	.19			$	.20			$	.15			$	.13
Dividends declared per common share		-			-			$	.06			$	.06			$	.06			$	.06			$	.06
Weighted-average common shares outstanding - diluted		1	%		-				1,278				1,275				1,274				1,273				1,271
Performance Measures
Pre-tax profit margin									28.3	%			30.2	%			33.7	%			26.3	%			22.6	%
Return on average common stockholders’ equity (annualized) (3)									9	%			11	%			13	%			10	%			8	%
Financial Condition (at quarter end, in billions)
Cash and investments segregated		10	%		14	%		$	28.5			$	25.0			$	22.7			$	26.9			$	26.0
Receivables from brokerage clients		22	%		13	%		$	13.5			$	11.9			$	12.0			$	11.2			$	11.1
Loans to banking clients		9	%		6	%		$	10.7			$	10.1			$	9.8			$	9.8			$	9.8
Total assets		23	%		14	%		$	133.6			$	117.7			$	111.8			$	111.5			$	108.6
Deposits from banking clients		30	%		15	%		$	79.4			$	68.8			$	66.3			$	62.3			$	60.9
Payables to brokerage clients		14	%		16	%		$	40.3			$	34.8			$	31.8			$	36.4			$	35.5
Long-term debt		(20	%)		(11	%)		$	1.6			$	1.8			$	2.0			$	2.0			$	2.0
Stockholders' equity (4)		25	%		1	%		$	9.6			$	9.5			$	9.1			$	8.3			$	7.7
Other
Full-time equivalent employees (at quarter end, in thousands)		(2	%)		1	%			13.8				13.6				13.7				14.0				14.1
Annualized net revenues per average full-time equivalent employee (in thousands)		12	%		1	%		$	355			$	352			$	372			$	340			$	316
Capital expenditures - cash purchases of equipment, office facilities, and property, net (in millions)		(27	%)		21	%		$	40			$	33			$	31			$	34			$	55
Clients’ Daily Average Trades (in thousands) (5)
Revenue trades (6)		(14	%)		2	%			265.7				261.5				285.2				318.4				307.4
Asset-based trades (7)		30	%		32	%			59.6				45.2				50.6				53.7				45.9
Other trades (8)		17	%		30	%			124.7				95.7				99.8				104.1				106.3
Total		(2	%)		12	%			450.0				402.4				435.6				476.2				459.6
Average Revenue Per Revenue Trade (5,6)		2	%		-			$	12.49			$	12.44			$	12.15			$	12.35			$	12.21

(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)		The fourth quarter of 2012 does not include two trading days due to weather-related market closures on October 29 and 30, 2012.
(6)		Includes all client trades that generate either commission revenue or revenue from principal markups (i.e., fixed income); also known as DART.
(7)		Includes eligible trades executed by clients who participate in one or more of the Company's asset-based pricing relationships.
(8)		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 Ended																		Twelve Months Ended
		December 31,																		December 31,
		2012									2011									2012									2011
					Interest			Average						Interest			Average						Interest			Average						Interest			Average
		Average			Revenue/			Yield/			Average			Revenue/			Yield/			Average			Revenue/			Yield/			Average			Revenue/			Yield/
		Balance			Expense			Rate			Balance			Expense			Rate			Balance			Expense			Rate			Balance			Expense			Rate
Interest-earning assets:
Cash and cash equivalents		$	8,287		$	6		0.29	%		$	5,736		$	4		0.28	%		$	7,130		$	18		0.25	%		$	5,554		$	13		0.23	%
Cash and investments segregated			25,284			13		0.20	%			27,912			9		0.13	%			25,263			46		0.18	%			25,831			39		0.15	%
Broker-related receivables (1)			366			-		0.11	%			203			-		0.04	%			351			-		0.04	%			310			-		0.05	%
Receivables from brokerage clients			11,460			113		3.92	%			10,225			111		4.31	%			10,928			446		4.08	%			10,637			467		4.39	%
Securities available for sale (2)			43,624			140		1.28	%			30,789			124		1.60	%			39,745			583		1.47	%			27,486			456		1.66	%
Securities held to maturity			15,954			95		2.37	%			15,268			79		2.05	%			15,371			397		2.58	%			16,050			492		3.07	%
Loans to banking clients			10,447			76		2.89	%			9,857			79		3.18	%			10,053			309		3.07	%			9,472			310		3.27	%
Loans held for sale			-			-		-				74			1		3.99	%			18			1		4.12	%			65			3		4.62	%
Total interest-earning assets			115,422			443		1.53	%			100,064			407		1.61	%			108,859			1,800		1.65	%			95,405			1,780		1.87	%
Other interest revenue						24									29									114									120
Total interest-earning assets		$	115,422		$	467		1.61	%		$	100,064		$	436		1.73	%		$	108,859		$	1,914		1.76	%		$	95,405		$	1,900		1.99	%
Funding sources:
Deposits from banking clients		$	71,411		$	11		0.06	%		$	55,822		$	13		0.09	%		$	65,546		$	42		0.06	%		$	52,701		$	62		0.12	%
Payables to brokerage clients			30,368			1		0.01	%			32,079			1		0.01	%			29,831			3		0.01	%			29,992			3		0.01	%
Long-term debt			1,815			22		4.82	%			2,002			27		5.35	%			1,934			103		5.33	%			2,004			108		5.39	%
Total interest-bearing liabilities			103,594			34		0.13	%			89,903			41		0.18	%			97,311			148		0.15	%			84,697			173		0.20	%
Non-interest-bearing funding sources			11,828									10,161									11,548									10,708
Other interest expense						-									-									2									2
Total funding sources		$	115,422		$	34		0.12	%		$	100,064		$	41		0.16	%		$	108,859		$	150		0.14	%		$	95,405		$	175		0.18	%
Net interest revenue					$	433		1.49	%					$	395		1.57	%					$	1,764		1.62	%					$	1,725		1.81	%

(1)		Interest revenue 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 Ended																				Twelve Months Ended
		December 31,																				December 31,
		2012										2011										2012										2011
		Average										Average										Average										Average
		Client							Average			Client							Average			Client							Average			Client							Average
		Assets			Revenue				Fee			Assets			Revenue				Fee			Assets			Revenue				Fee			Assets			Revenue				Fee
Schwab money market funds before fee waivers		$	159,421		$	228			0.57	%		$	157,863		$	226			0.57	%		$	155,866		$	891			0.57	%		$	153,478		$	865			0.56	%
Fee waivers						(142	)									(168	)									(587	)									(568	)
Schwab money market funds			159,421			86			0.21	%			157,863			58			0.15	%			155,866			304			0.20	%			153,478			297			0.19	%
Equity and bond funds (1)			50,559			30			0.24	%			40,711			29			0.28	%			47,778			125			0.26	%			41,347			118			0.29	%
Mutual Fund OneSource ®			221,338			179			0.32	%			200,779			160			0.32	%			216,564			680			0.31	%			210,907			680			0.32	%
Total mutual funds (2)		$	431,318			295			0.27	%		$	399,353			247			0.25	%		$	420,208			1,109			0.26	%		$	405,732			1,095			0.27	%
Advice solutions (2)		$	125,589			153			0.48	%		$	108,048			130			0.48	%		$	119,850			580			0.48	%		$	109,703			522			0.48	%
Other (3)						91										81										354										311
Total asset management and administration fees					$	539									$	458									$	2,043									$	1,928

(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)
		Q4-12 % Change					2012																2011
		vs.		vs.			Fourth				Third				Second				First				Fourth
(In billions, at quarter end, except as noted)		Q4-11		Q3-12			Quarter				Quarter				Quarter				Quarter				Quarter
Assets in client accounts
Schwab One ®, other cash equivalents and deposits from banking clients		23	%	15	%		$	119.0			$	103.7			$	98.2			$	98.8			$	96.4
Proprietary funds (Schwab Funds ® and Laudus Funds ®):
Money market funds		5	%	8	%			167.9				155.7				152.9				154.4				159.8
Equity and bond funds		30	%	2	%			49.6				48.4				45.3				45.8				38.2
Total proprietary funds		10	%	7	%			217.5				204.1				198.2				200.2				198.0
Mutual Fund Marketplace ® (1)
Mutual Fund OneSource ®		12	%	-				223.2				222.1				211.2				219.5				198.6
Mutual fund clearing services		53	%	18	%			159.1				134.4				126.4				127.0				104.2
Other third-party mutual funds		18	%	3	%			360.1				350.0				328.7				334.1				305.9
Total Mutual Fund Marketplace		22	%	5	%			742.4				706.5				666.3				680.6				608.7
Total mutual fund assets		19	%	5	%			959.9				910.6				864.5				880.8				806.7
Equity and other securities (1)		16	%	-				702.4				705.5				670.4				685.0				607.9
Fixed income securities		3	%	-				181.8				181.8				180.5				179.4				176.9
Margin loans outstanding		13	%	3	%			(11.5	)			(11.2	)			(11.2	)			(10.5	)			(10.2	)
Total client assets		16	%	3	%		$	1,951.6			$	1,890.4			$	1,802.4			$	1,833.5			$	1,677.7
Client assets by business
Investor Services		11	%	1	%		$	775.4			$	770.4			$	737.0			$	753.3			$	697.9
Advisor Services		16	%	3	%			788.5				762.3				727.6				735.9				679.0
Other Institutional Services		29	%	8	%			387.7				357.7				337.8				344.3				300.8
Total client assets by business		16	%	3	%		$	1,951.6			$	1,890.4			$	1,802.4			$	1,833.5			$	1,677.7
Net growth in assets in client accounts (for the quarter ended)
Net new assets
Investor Services (2)		98	%	144	%		$	10.5			$	4.3			$	2.9			$	5.9			$	5.3
Advisor Services (3)		165	%	157	%			24.4				9.5				9.9				12.6				9.2
Other Institutional Services (4)		N/M		N/M				29.5				6.6				3.2				20.4				7.0
Total net new assets		N/M		N/M				64.4				20.4				16.0				38.9				21.5
Net market (losses) gains		(104	%)	(105	%)			(3.2	)			67.6				(47.1	)			116.9				79.8
Net growth (decline)		(40	%)	(30	%)		$	61.2			$	88.0			$	(31.1	)		$	155.8			$	101.3
New brokerage accounts (in thousands, for the quarter ended)		19	%	22	%			241				198				221				240				203
Clients (in thousands)
Active Brokerage Accounts (5)		3	%	1	%			8,787				8,736				8,720				8,639				8,552
Banking Accounts		11	%	2	%			865				844				822				801				780
Corporate Retirement Plan Participants		5	%	2	%			1,571				1,547				1,524				1,516				1,492

(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.
(3)		Includes inflows of approximately $900 million as a result of the acquisition of ThomasPartners, Inc., in the fourth quarter of 2012.
(4)		Includes inflows of $21.1 billion from mutual fund clearing services clients and outflows of $900 million related to a planned transfer from Corporate Brokerage Services in the fourth quarter of 2012. 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 from a mutual fund clearing services client in the first quarter of 2012.
(5)		Removed approximately 30,000 due to escheatment and other factors in the fourth quarter of 2012. 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

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