Charles Schwab 2014 Annual Report Download - page 105

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, 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, 2014 2013 2012
N
et income $ 1,321 $ 1,071 $ 928
Preferred stock dividends (60) (61) (45)
N
et income available to common stockholders $ 1,261 $ 1,010 $ 883
Weighted-average common shares outstanding — basic 1,303 1,285 1,274
Common stock equivalent shares related to stock incentive plans 12 8 1
Weighted-average common shares outstanding — diluted (1) 1,315 1,293 1,275
Basic EPS $ .96 $ .78 $ .69
Diluted EPS $ .95 $ .78 $ .69
(1) Antidilutive stock options and restricted stock awards excluded from the calculation of diluted EPS totaled 24 million,
34 million, and 74 million shares in 2014, 2013, and 2012, 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). Schwab Bank is subject to supervision and regulation by the Office of the Comptroller of the Currency (the OCC),
as its primary regulator, the Federal Deposit Insurance Corporation, as its deposit insurer, and the Consumer Financial
Protection Bureau. CSC is required to serve as a source of strength for Schwab Bank. Prior to January 1, 2015, CSC, as a
savings and loan holding company, was not subject to specific statutory capital requirements. Beginning on January 1, 2015,
CSC is subject to new capital requirements set by the Federal Reserve.
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. CSC and Schwab Bank are
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 CSC and Schwab Bank. At December 31, 2014, Schwab Bank met the
capital level requirements.