Charles Schwab 2015 Annual Report Download - page 114

THE CHARLES SCHWAB CORPORATION
Notes to Consolidated Financial Statements
(Tabular Amounts in Millions, Except Per Share Data, Option Price Amounts, Ratios, or as Noted)
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22. Earnings Per Common Share
EPS is computed using the two-class method. Preferred stock dividends, and undistributed earnings and dividends allocated
to participating securities are subtracted from net income in determining net income available to common stockholders. Basic
EPS is calculated by dividing net income available to common stockholders 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 include, if dilutive, the effect of outstanding
stock options and unvested restricted stock awards and units. EPS under the basic and diluted computations is as follows:
Year Ended December 31, 2015 2014 2013
N
et income $ 1,447 $ 1,321 $ 1,071
Preferred stock dividends and other (1) (83) (60) (61)
N
et income available to common stockholders $ 1,364 $ 1,261 $ 1,010
Weighted-average common shares outstanding — basic 1,315 1,303 1,285
Common stock equivalent shares related to stock incentive plans 12 12 8
Weighted-average common shares outstanding — diluted (2) 1,327 1,315 1,293
Basic EPS $ 1.04 $ .96 $ .78
Diluted EPS $ 1.03 $ .95 $ .78
(1) Includes preferred stock dividends and undistributed earnings and dividends allocated to non-vested restricted stock
units.
(2) Antidilutive stock options and restricted stock awards excluded from the calculation of diluted EPS totaled 23 million,
24 million, and 34 million shares in 2015, 2014, and 2013, respectively.
23. Regulatory Requirements
CSC is a savings and loan holding company and Schwab Bank, CSC’s depository institution subsidiary, is a federal savings
bank. CSC is subject to examination, supervision, and regulation by the Federal Reserve. Schwab Bank is subject to
examination, supervision, and regulation by the OCC, as its primary regulator, the FDIC as its deposit insurer, and the CFPB,
as its conduct regulator. CSC is required to serve as a source of strength for Schwab Bank. On January 1, 2015, CSC became
subject to regulatory capital requirements adopted by the Federal Reserve.
Schwab Bank is subject to various requirements and restrictions under federal and state laws, including regulatory capital
requirements and requirements that restrict and govern the terms of affiliate transactions, such as extensions of credit to, or
asset purchases from CSC or its other subsidiaries by Schwab Bank. In addition, Schwab Bank is required to provide notice
to and may be required to obtain approval of the OCC and the Federal Reserve to declare dividends to CSC. 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. CSC and Schwab Bank are required to maintain minimum capital levels as specified in federal banking
regulations. Failure to meet the minimum levels could result in certain mandatory, and possibly additional discretionary
actions by the regulators that, if undertaken, could have a direct material effect on CSC and Schwab Bank. At December 31,
2015, both CSC and Schwab Bank met all of their respective capital requirements. Certain events, such as growth in bank
deposits and regulatory discretion, could adversely affect CSC’s or Schwab Bank’s ability to meet future capital
requirements.