Charles Schwab 2013 Annual Report Download - page 37

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THE CHARLES SCHWAB CORPORATION
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Tabular Amounts in Millions, Except Ratios, or as Noted)
- 26 -
Net Impairment Losses on Securities
Net impairment losses on securities were $10 million, $32 million, and $31 million in 2013, 2012, and 2011, respectively.
These charges were lower in 2013 compared to 2012, reflecting a stabilization of the credit characteristics of certain non-
agency residential mortgage-backed securities’ underlying loans. For further discussion, see “Item 8 – Financial Statements
and Supplementary Data – Notes to Consolidated Financial Statements – 5. Securities Available for Sale and Securities Held
to Maturity.”
Expenses Excluding Interest
As shown in the table below, expenses excluding interest were higher in 2013 compared to 2012 primarily due to increases in
compensation and benefits, professional services, advertising and market development, and other expense. Expenses
excluding interest were higher in 2012 compared to 2011, which was primarily due to the inclusion of a full year of
optionsXpress’ expenses and amortization of intangible assets relating to the optionsXpress acquisition.
Growth Rate
Year Ended December 31, 2012-2013 2013 2012 2011
Compensation and benefits 12 % $ 2,027 $ 1,803 $ 1,732
Professional services 7 % 415 388 387
Occupancy and equipment (1)% 309 311 301
Advertising and market development 7 % 257 241 228
Communications - 220 220 220
Depreciation and amortization 3 % 202 196 155
Class action litigation and regulatory reserve (1) - - - 7
Other 9 % 300 274 269
Total expenses excluding interest 9 % $ 3,730 $ 3,433 $ 3,299
Ex
p
enses as a
p
ercenta
g
e of total net revenues:
Total expenses excluding interest 69 % 70 % 70 %
Advertising and market development 5 % 5 % 5 %
(1)
Relates to Schwab YieldPlus Fund®.
Compensation and Benefits
Compensation and benefits expense includes salaries and wages, incentive compensation, and related employee benefits and
taxes. Incentive compensation includes variable compensation, discretionary bonuses, and stock-based compensation.
Variable compensation includes payments to certain individuals based on their sales performance. Discretionary bonuses are
based on the Company’s overall performance as measured by earnings per common share, and therefore will fluctuate with
this measure. Stock-based compensation primarily includes employee and board of director stock options, restricted stock
units, and restricted stock awards.