Charles Schwab 2013 Annual Report Download - page 98

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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21. Earnings Per Common Share
Basic EPS is computed 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 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, 2013 2012 2011
N
et income $ 1,071 $ 928 $ 864
Preferred stock dividends (61) (45) -
N
et income available to common stockholders $ 1,010 $ 883 $ 864
Weighted-average common shares outstanding — basic 1,285 1,274 1,227
Common stock equivalent shares related to stock incentive plans 8 1 2
Weighted-average common shares outstanding — diluted (1) 1,293 1,275 1,229
Basic EPS $ .78 $ .69 $ .70
Diluted EPS $ .78 $ .69 $ .70
(1) Antidilutive stock options and restricted stock awards excluded from the calculation of diluted EPS totaled 34 million,
74 million, and 63 million shares in 2013, 2012, and 2011, respectively.
22. 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 supervision and regulation by the Board of Governors of the Federal Reserve System (the Federal
Reserve) and Schwab Bank is subject to supervision and regulation by the Office of the Comptroller of the Currency (the
OCC). CSC is currently not subject to specific statutory capital requirements, however CSC is required to serve as a source
of strength for Schwab Bank. Under the “Dodd-Frank Wall Street Reform and Consumer Protection Act,” CSC will be
subject to new minimum leverage and minimum risk-based capital ratio requirements that will be set by the Federal Reserve
that are at least as stringent as the current requirements generally applicable to insured depository institutions.
Schwab Bank is subject to regulation and supervision and to various requirements and restrictions under federal and state
laws, including regulatory capital guidelines. Among other things, these requirements also restrict and govern the terms of
affiliate transactions, such as extensions of credit and repayment of loans between Schwab Bank and CSC or CSC’s other
subsidiaries. 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. Schwab Bank is required to
maintain minimum capital levels as specified in federal banking laws and 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 Schwab Bank. At December 31, 2013, CSC and Schwab Bank met the capital level
requirements.