Company Quick10K Filing
TD Ameritrade Holding
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$0.00 560 $27,244
10-Q 2020-01-31 Quarter: 2019-12-31
10-K 2019-11-15 Annual: 2019-09-30
10-Q 2019-08-01 Quarter: 2019-06-30
10-Q 2019-04-29 Quarter: 2019-03-31
10-Q 2019-01-31 Quarter: 2018-12-31
10-K 2018-11-16 Annual: 2018-09-30
10-Q 2018-08-07 Quarter: 2018-06-30
10-Q 2018-05-08 Quarter: 2018-03-31
10-Q 2018-02-08 Quarter: 2017-12-31
10-K 2017-11-17 Annual: 2017-09-30
10-Q 2017-07-24 Quarter: 2017-06-30
10-Q 2017-05-08 Quarter: 2017-03-31
10-Q 2017-02-06 Quarter: 2016-12-31
10-K 2016-11-18 Annual: 2016-09-30
10-Q 2016-08-05 Quarter: 2016-06-30
10-Q 2016-05-05 Quarter: 2016-03-31
10-Q 2016-02-04 Quarter: 2015-12-31
10-K 2015-11-20 Annual: 2015-09-30
10-Q 2015-08-07 Quarter: 2015-06-30
10-Q 2015-05-07 Quarter: 2015-03-31
10-Q 2015-02-05 Quarter: 2014-12-31
10-K 2014-11-21 Annual: 2014-09-30
10-Q 2014-08-05 Quarter: 2014-06-30
10-Q 2014-05-09 Quarter: 2014-03-31
10-Q 2014-02-05 Quarter: 2013-12-31
10-K 2013-11-22 Annual: 2013-09-30
10-Q 2013-08-07 Quarter: 2013-06-30
10-Q 2013-05-06 Quarter: 2013-03-31
10-K 2012-11-26 Annual: 2012-09-30
10-Q 2012-08-08 Quarter: 2012-06-30
10-Q 2012-05-07 Quarter: 2012-03-31
10-Q 2012-02-08 Quarter: 2011-12-31
10-K 2011-11-18 Annual: 2011-09-30
10-Q 2011-08-08 Quarter: 2011-06-30
10-Q 2011-05-06 Quarter: 2011-03-31
10-Q 2011-02-04 Quarter: 2010-12-31
10-K 2010-11-19 Annual: 2010-09-30
10-Q 2010-08-09 Quarter: 2010-06-30
10-Q 2010-05-06 Quarter: 2010-03-31
10-Q 2010-02-05 Quarter: 2009-12-31
8-K 2020-02-04 Officers
8-K 2020-01-29 Other Events
8-K 2019-11-25 Officers, Other Events, Exhibits
8-K 2019-11-24 Enter Agreement, Officers, Exhibits
8-K 2019-10-21 Earnings, Exhibits
8-K 2019-08-13 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2019-07-22 Earnings, Officers, Exhibits
8-K 2019-05-15 Enter Agreement, Leave Agreement, Off-BS Arrangement, Officers, Exhibits
8-K 2019-04-23 Earnings, Exhibits
8-K 2019-02-19 Shareholder Vote
8-K 2019-01-22 Earnings, Exhibits
8-K 2018-11-21 Officers
8-K 2018-10-30 Enter Agreement, Off-BS Arrangement, Other Events, Exhibits
8-K 2018-10-22 Earnings, Exhibits
8-K 2018-07-23 Earnings, Exhibits
8-K 2018-05-17 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2018-04-23 Earnings, Exhibits
8-K 2018-02-23 Shareholder Vote
8-K 2018-02-16 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2018-01-22 Earnings, Exhibits
AMTD 2019-12-31
Part I - Financial Information
Item 1. - Financial Statements
Item 2. - Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. - Quantitative and Qualitative Disclosures About Market Risk
Item 4. - Controls and Procedures
Part II - Other Information
Item 1. - Legal Proceedings
Item 1A. - Risk Factors
Item 2. - Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities
Item 6. - Exhibits
EX-15.1 amtd20191231ex151.htm
EX-31.1 amtd20191231ex311.htm
EX-31.2 amtd20191231ex312.htm
EX-32.1 amtd20191231ex321.htm

TD Ameritrade Holding Earnings 2019-12-31

AMTD 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

Comparables ($MM TTM)
Ticker M Cap Assets Liab Rev G Profit Net Inc EBITDA EV G Margin EV/EBITDA ROA
AMTD 27,244 41,119 32,626 0 0 2,265 3,142 21,533 6.9 6%
TROW 25,357 8,912 1,321 5,422 0 2,045 2,712 23,555 0% 8.7 23%
NDAQ 15,804 14,132 8,581 4,200 2,501 540 1,137 18,463 60% 16.2 4%
NMR 12,061 40,969,439 38,288,646 0 0 0 0 5,240,698 0%
MKTX 11,853 812 150 464 0 185 256 11,566 0% 45.1 23%
RJF 11,606 38,677 32,113 7,900 0 1,032 1,723 5,654 0% 3.3 3%
YIN 8,783 3,253 628 0 0 0 0 8,452 0%
EEFT 8,764 4,333 2,935 2,633 1,102 265 523 7,888 42% 15.1 6%
SEIC 8,419 1,953 318 1,624 510 485 643 7,733 31% 12.0 25%
LPLA 6,740 5,364 4,339 5,409 0 529 919 7,953 0% 8.6 10%

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Table of Contents

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
(Mark One)
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
for the quarterly period ended December 31, 2019
OR
Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
for the transition period from
 
 to
 
Commission file number: 1-35509
 
TD Ameritrade Holding Corporation
(Exact name of registrant as specified in its charter)
 
Delaware
 
82-0543156
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
200 South 108th Avenue, Omaha, Nebraska, 68154
(Address of principal executive offices) (Zip Code)
(800) 669-3900
(Registrant's telephone number, including area code)
 
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading Symbol(s)
 
Name of each exchange on which registered
Common stock – $0.01 par value
 
AMTD
 
The Nasdaq Stock Market LLC
Nasdaq Global Select Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes        No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     Yes       No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
 
 
Accelerated filer
 
 
 
 
 
 
 
 
Non-accelerated filer
 
 
Smaller reporting company
 
 
 
 
 
 
 
 
 
 
 
 
Emerging growth company
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes      No  
As of January 24, 2020, there were 540,646,962 outstanding shares of the registrant's common stock.
 

1

Table of Contents

TD AMERITRADE HOLDING CORPORATION
INDEX
 
 
 
Page No.
 
 
 
 
 
 
 
 
Item 1.
 
 
 
 
 
 
 
 
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
 
 
 
 
 
 
 
Item 1.
 
 
 
Item 1A.
 
 
 
Item 2.
 
 
 
Item 6.
 
 
 
 


2

Table of Contents

PART I – FINANCIAL INFORMATION
Item 1. – Financial Statements
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors of TD Ameritrade Holding Corporation
Results of Review of Interim Financial Statements
We have reviewed the accompanying condensed consolidated balance sheet of TD Ameritrade Holding Corporation and subsidiaries (the Company) as of December 31, 2019, the related condensed consolidated statements of income, comprehensive income, stockholders' equity and cash flows for the three-month periods ended December 31, 2019 and 2018, and the related notes (collectively referred to as the "condensed consolidated interim financial statements"). Based on our reviews, we are not aware of any material modifications that should be made to the condensed consolidated interim financial statements for them to be in conformity with U.S. generally accepted accounting principles.
We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of the Company as of September 30, 2019, the related consolidated statements of income, comprehensive income, stockholders' equity and cash flows for the year then ended, and the related notes (not presented herein); and in our report dated November 15, 2019, we expressed an unqualified audit opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of September 30, 2019, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.
Basis for Review Results
These financial statements are the responsibility of the Company's management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the SEC and the PCAOB. We conducted our review in accordance with the standards of the PCAOB. A review of interim financial statements consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

/s/ ERNST & YOUNG LLP
New York, New York
January 31, 2020


3

Table of Contents

TD AMERITRADE HOLDING CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
 
 
December 31,
2019
 
September 30,
2019
 
 
(In millions)
ASSETS
 
 
 
 
Cash and cash equivalents
 
$
2,551

 
$
2,852

Cash and investments segregated and on deposit for regulatory purposes
 
8,536

 
8,684

Receivable from brokers, dealers and clearing organizations
 
1,728

 
2,439

Receivable from clients, net
 
21,187

 
20,618

Receivable from affiliates
 
121

 
112

Other receivables, net
 
277

 
305

Securities owned, at fair value
 
520

 
532

Investments available-for-sale, at fair value
 
1,636

 
1,668

Property and equipment at cost, net
 
895

 
837

Goodwill
 
4,227

 
4,227

Acquired intangible assets, net
 
1,174

 
1,204

Other assets
 
629

 
308

Total assets
 
$
43,481

 
$
43,786

LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
 
Liabilities:
 
 
 
 
Payable to brokers, dealers and clearing organizations
 
$
2,482

 
$
3,308

Payable to clients
 
27,351

 
27,067

Accounts payable and other liabilities
 
1,087

 
884

Payable to affiliates
 
3

 
5

Long-term debt
 
3,555

 
3,594

Deferred income taxes
 
256

 
228

Total liabilities
 
34,734

 
35,086

Stockholders' equity:
 
 
 
 
Preferred stock, $0.01 par value; 100 million shares authorized, none issued
 

 

Common stock, $0.01 par value; one billion shares authorized; 670 million shares issued; December 31, 2019 – 541 million shares outstanding; September 30, 2019 – 544 million shares outstanding
 
7

 
7

Additional paid-in capital
 
3,459

 
3,452

Retained earnings
 
8,790

 
8,580

Treasury stock, common, at cost: December 31, 2019 – 129 million shares;
   September 30, 2019 – 126 million shares
 
(3,527
)
 
(3,380
)
Accumulated other comprehensive income
 
18

 
41

Total stockholders' equity
 
8,747

 
8,700

Total liabilities and stockholders' equity
 
$
43,481

 
$
43,786

See notes to condensed consolidated financial statements.


4

Table of Contents

TD AMERITRADE HOLDING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
 
 
Three Months Ended December 31,
 
 
2019
 
2018
 
 
(In millions, except per share amounts)
Revenues:
 
 
 
 
Asset-based revenues:
 
 
 
 
Bank deposit account fees
 
$
454

 
$
428

Net interest revenue
 
359

 
376

Investment product fees
 
145

 
143

Total asset-based revenues
 
958

 
947

Transaction-based revenues:
 
 
 
 
Transaction fees and commissions
 
305

 
537

Other revenues
 
28

 
32

Net revenues
 
1,291

 
1,516

Operating expenses:
 
 
 
 
Employee compensation and benefits
 
331

 
317

Clearing and execution costs
 
50

 
49

Communications
 
38

 
42

Occupancy and equipment costs
 
65

 
68

Depreciation and amortization
 
42

 
35

Amortization of acquired intangible assets
 
30

 
31

Professional services
 
97

 
74

Advertising
 
80

 
58

Other
 
37

 
46

Total operating expenses
 
770

 
720

Operating income
 
521

 
796

Other expense (income):
 
 
 
 
Interest on borrowings
 
32

 
32

Other income, net
 
(2
)
 
(14
)
Total other expense, net
 
30

 
18

Pre-tax income
 
491

 
778

Provision for income taxes
 
112

 
174

Net income
 
$
379

 
$
604

Earnings per share — basic
 
$
0.70

 
$
1.07

Earnings per share — diluted
 
$
0.70

 
$
1.07

Weighted average shares outstanding — basic
 
541

 
562

Weighted average shares outstanding — diluted
 
543

 
564

See notes to condensed consolidated financial statements.

5

Table of Contents

TD AMERITRADE HOLDING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
 
 
 
Three Months Ended
December 31,
 
 
2019
 
2018
 
 
(In millions)
Net income
 
$
379

 
$
604

Other comprehensive income (loss), before tax:
 
 
 
 
Investments available-for-sale:
 
 
 
 
Unrealized gain (loss)
 
(32
)
 
16

Cash flow hedging instruments:
 
 
 
 
Reclassification adjustment for portion of realized loss amortized to net income
 
1

 
1

Total other comprehensive income (loss), before tax
 
(31
)
 
17

Income tax effect
 
8

 
(4
)
Total other comprehensive income (loss), net of tax
 
(23
)
 
13

Comprehensive income
 
$
356

 
$
617

See notes to condensed consolidated financial statements.


6

Table of Contents

TD AMERITRADE HOLDING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
 
 
Three Months Ended December 31, 2019
 
 
Total Common
Shares Outstanding
 
Total Stockholders' Equity
 
Common Stock
 
Additional Paid-In Capital
 
Retained Earnings
 
Treasury Stock
 
Accumulated Other
Comprehensive Income
 
 
(In Millions)
Balance, September 30, 2019
 
544

 
$
8,700

 
$
7

 
$
3,452

 
$
8,580

 
$
(3,380
)
 
$
41

Net income
 

 
379

 

 

 
379

 

 

Other comprehensive loss, net of tax
 

 
(23
)
 

 

 

 

 
(23
)
Common stock dividends ($0.31 per share)
 

 
(168
)
 

 

 
(168
)
 

 

Repurchases of common stock
 
(4
)
 
(143
)
 

 

 

 
(143
)
 

Repurchases of common stock for income tax withholding on stock-based compensation
 

 
(12
)
 

 

 

 
(12
)
 

Common stock issued for stock-based compensation, including tax effects
 
1

 

 

 
(8
)
 

 
8

 

Stock-based compensation
 

 
15

 

 
15

 

 

 

Adoption of Accounting Standards Update 2016-02 (Note 6)
 

 
(1
)
 

 

 
(1
)
 

 

Balance, December 31, 2019
 
541

 
$
8,747

 
$
7

 
$
3,459

 
$
8,790

 
$
(3,527
)
 
$
18

 
 
Three Months Ended December 31, 2018
 
 
Total Common
Shares Outstanding
 
Total Stockholders' Equity
 
Common Stock
 
Additional Paid-In Capital
 
Retained Earnings
 
Treasury Stock
 
Deferred Compensation
 
Accumulated Other
Comprehensive Loss
 
 
(In Millions)
Balance, September 30, 2018
 
563

 
$
8,003

 
$
7

 
$
3,379

 
$
7,011

 
$
(2,371
)
 
$
4

 
$
(27
)
Net income
 

 
604

 

 

 
604

 

 

 

Other comprehensive income, net of tax
 

 
13

 

 

 

 

 

 
13

Common stock dividends ($0.30 per share)
 

 
(168
)
 

 

 
(168
)
 

 

 

Repurchases of common stock
 
(3
)
 
(114
)
 

 
31

 

 
(145
)
 

 

Future treasury stock purchases under accelerated stock repurchase agreement
 

 
(12
)
 

 
(12
)
 

 

 

 

Repurchases of common stock for income tax withholding on stock-based compensation
 

 
(8
)
 

 

 

 
(8
)
 

 

Common stock issued for stock-based compensation, including tax effects
 
1

 

 

 
(9
)
 

 
9

 

 

Stock-based compensation
 

 
11

 

 
11

 

 

 

 

Adoption of Accounting Standards Update 2014-09
 

 
28

 

 

 
28

 

 

 

Balance, December 31, 2018
 
561

 
$
8,357

 
$
7

 
$
3,400

 
$
7,475

 
$
(2,515
)
 
$
4

 
$
(14
)
See notes to condensed consolidated financial statements.









7

Table of Contents

TD AMERITRADE HOLDING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) 
 
 
Three Months Ended December 31,
 
 
2019
 
2018
 
 
(In millions)
Cash flows from operating activities:
 
 
 
 
Net income
 
$
379

 
$
604

Adjustments to reconcile net income to net cash provided by (used in) operating activities:
 
 
 
 
Depreciation and amortization
 
42

 
35

Amortization of acquired intangible assets
 
30

 
31

Non-cash lease expense
 
15

 

Deferred income taxes
 
36

 
25

Stock-based compensation
 
15

 
11

Provision for doubtful accounts on client and other receivables
 
4

 
5

Other, net
 
4

 
7

Changes in operating assets and liabilities:
 
 
 
 
Investments segregated and on deposit for regulatory purposes
 
(453
)
 
503

Receivable from brokers, dealers and clearing organizations
 
711

 
(24
)
Receivable from clients, net
 
(573
)
 
3,172

Receivable from/payable to affiliates, net
 
(11
)
 
(79
)
Other receivables, net
 
28

 
18

Securities owned, at fair value
 
12

 
47

Other assets
 
(9
)
 
(16
)
Payable to brokers, dealers and clearing organizations
 
(826
)
 
(682
)
Payable to clients
 
284

 
(785
)
Accounts payable and other liabilities
 
(161
)
 
(110
)
Net cash provided by (used in) operating activities
 
(473
)
 
2,762

Cash flows from investing activities:
 
 
 
 
Purchase of property and equipment
 
(102
)
 
(44
)
Proceeds from sale of property and equipment
 

 
11

Purchase of investments available-for-sale, at fair value
 

 
(383
)
Purchase of other investments
 
(4
)
 
(11
)
Proceeds from sale of other investments
 

 
1

Net cash used in investing activities
 
(106
)
 
(426
)
 See notes to condensed consolidated financial statements.
















8

Table of Contents

TD AMERITRADE HOLDING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS — (Continued)
(Unaudited)
 
 
Three Months Ended December 31,
 
 
2019
 
2018
 
 
(In millions)
Cash flows from financing activities:
 
 
 
 
Proceeds from issuance of long-term debt
 
$

 
$
999

Payment of debt issuance costs
 

 
(7
)
Net payments on securities sold under agreements to repurchase
 

 
(96
)
Proceeds from senior revolving credit facilities
 
200

 

Principal payments on senior revolving credit facilities
 
(200
)
 

Payment of cash dividends
 
(168
)
 
(168
)
Purchase of treasury stock
 
(143
)
 
(114
)
Purchase of treasury stock for income tax withholding on stock-based compensation
 
(12
)
 
(8
)
Payment for future treasury stock purchases under accelerated stock repurchase agreement
 

 
(12
)
Net cash provided by (used in) financing activities
 
(323
)
 
594

Net increase (decrease) in cash, cash equivalents, restricted cash and restricted cash equivalents
 
(902
)
 
2,930

Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of period
 
10,193

 
4,548

Cash, cash equivalents, restricted cash and restricted cash equivalents at end of period
 
$
9,291

 
$
7,478

Supplemental cash flow information:
 
 
 
 
Interest paid
 
$
41

 
$
31

Income taxes paid
 
$
113

 
$
139

 See notes to condensed consolidated financial statements.


9

Table of Contents

TD AMERITRADE HOLDING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the Three Month Periods Ended December 31, 2019 and 2018
(Unaudited)
1. Basis of Presentation, Organization and Recent Accounting Pronouncements
Basis of Presentation
The condensed consolidated financial statements include the accounts of TD Ameritrade Holding Corporation (the "Parent") and its wholly-owned subsidiaries (collectively, the "Company"). Intercompany balances and transactions have been eliminated.
These financial statements have been prepared pursuant to the rules and regulations of the SEC and, in the opinion of management, reflect all adjustments, which are all of a normal recurring nature, necessary to present fairly the financial position, results of operations and cash flows for the periods presented in conformity with U.S. generally accepted accounting principles ("GAAP"). These financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's annual report filed on Form 10-K for the fiscal year ended September 30, 2019.
Organization
The Company provides securities brokerage services, including trade execution, clearing services and margin lending, through its broker-dealer subsidiaries; futures and foreign exchange trade execution services through its futures commission merchant ("FCM") and forex dealer member ("FDM") subsidiary; and bundled retirement plan solutions to plan sponsors and their advisors through its state-chartered trust company subsidiary. The Company also provides cash sweep and deposit account products through third-party relationships, including relationships with affiliates.
On November 24, 2019, the Company entered into an Agreement and Plan of Merger (the "Merger Agreement") with The Charles Schwab Corporation ("Schwab") and Americano Acquisition Corp., a wholly-owned subsidiary of Schwab. The Merger Agreement was included as Exhibit 2.1 to the Company's Form 8-K filed with the Securities and Exchange Commission ("SEC") on November 27, 2019. Upon the terms and subject to the conditions of the Merger Agreement, Americano Acquisition Corp. will merge with and into the Company (the "Merger"), with the Company surviving as a wholly-owned subsidiary of Schwab. Pursuant to and subject to the terms of the Merger Agreement, at the effective time of the Merger, each share of the Company's common stock, $0.01 par value, issued and outstanding immediately prior to the effective time of the Merger (other than treasury shares held by the Company and certain shares held by Schwab), will be converted into the right to receive 1.0837 shares of Schwab's voting common stock, $0.01 par value (the "Merger Consideration"); however, if the Merger Consideration issuable to The Toronto-Dominion Bank ("TD") and its affiliates, together with any other shares of Schwab common stock then owned by TD and its affiliates, would equal a number of shares of Schwab common stock exceeding 9.9% (or such lower percentage of shares of Schwab common stock as the Federal Reserve Board permits TD to acquire in the Merger consistent with a determination that TD does not control Schwab for purposes of the Bank Holding Company Act of 1956, as amended, or the Home Owners' Loan Act of 1933, as amended) of the issued and outstanding shares of Schwab common stock as of immediately following the closing of the Merger, then TD will receive one share of nonvoting common stock of Schwab in lieu of each such excess share of Schwab common stock. Completion of the Merger is subject to certain conditions, including obtaining the necessary approvals from stockholders of both the Company and Schwab, the satisfaction of certain regulatory approvals and other customary closing conditions. The parties expect the transaction to close during the second half of calendar year 2020.
For the three months ended December 31, 2019, the Company has incurred $25 million of costs related to the proposed Merger, which are included in professional services on the Condensed Consolidated Statements of Income.
Recently Adopted Accounting Pronouncements
ASU 2016-02 — On October 1, 2019, the Company adopted Accounting Standards Update ("ASU") 2016-02, Leases, by applying the standard at the adoption date, recognizing a cumulative-effect adjustment to the opening balance of retained earnings. As a result, restated financial information and the additional disclosures required under the new standard will not be provided for the comparative periods presented. The new guidance requires quantitative and qualitative disclosures that provide information about the amounts related to leasing arrangements recorded in the condensed consolidated financial statements. The Company elected a package of practical expedients available under the new guidance, which allows an entity to not reassess prior conclusions related to existing contracts containing leases, lease classification and initial direct costs. In addition, the Company has elected to apply the short-term lease exception for lease arrangements with a maximum term of 12 months or less. Upon the adoption of the lease standard, the Company recognized a right-of-use ("ROU") asset and a lease liability on the Condensed Consolidated Balance Sheet related to non-cancelable operating leases.

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The cumulative effect of the changes made to the Company's Condensed Consolidated Balance Sheet as of October 1, 2019 for the adoption of ASU 2016-02 were as follows (dollars in millions):
 
 
Balance at September 30, 2019
 
Adjustments from Adoption of
ASU 2016-02
 
Balance at
October 1, 2019
Assets:
 
 
 
 
 
 
Other assets
 
$
308

 
$
341

(1 
) 
$
649

Liabilities:
 
 
 
 
 
 
Accounts payable and other liabilities
 
884

 
342

(2 
) 
1,226

Stockholders' Equity:
 
 
 
 
 
 
Retained earnings
 
8,580

 
(1
)
(3 
) 
8,579

 
(1) Adjustments include the following: (a) an increase of $347 million for the recognition of the ROU asset and (b) a decrease of $6 million for lease payments made to lessors at or before the commencement date, which were reclassified to the ROU lease liability upon the adoption of the lease standard.
(2) Adjustments include the following: (a) an increase of $379 million for the recognition of the ROU lease liability and (b) decreases of $30 million for deferred rent and $7 million related to the early termination of lease obligations, which were reclassified to the ROU asset upon the adoption of the lease standard.
(3)
Represents the impact of a lease obligation which had no future benefit upon the adoption of the lease standard.
The adoption of this standard did not have a material impact on the Company's results of operations or cash flows. See Note 6 for additional information regarding the Company's operating leases.
Recently Issued Accounting Pronouncements
ASU 2019-12 — In December 2019, the Financial Accounting Standards Board ("FASB") issued ASU 2019-12, Simplifying the Accounting for Income Taxes. The amendments in ASU 2019-12 simplify the accounting for income taxes by removing certain exceptions to the general principles in Accounting Standards Codification ("ASC") Topic 740, Income Taxes. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. ASU 2019-12 will be effective for the Company's fiscal year beginning October 1, 2021, with early adoption permitted. The transition requirements are dependent upon each amendment within this update and will be applied either prospectively or retrospectively. The Company does not expect this ASU to have a material impact on its condensed consolidated financial statements.
ASU 2016-13 — In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments. The main objective of ASU 2016-13 is to provide financial statement users with more decision-useful information about an entity's expected credit losses on financial instruments and other commitments to extend credit at each reporting date. To achieve this objective, the amendments in this update replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to develop credit loss estimates. Subsequent to issuing ASU 2016-13, the FASB has issued additional standards for the purpose of clarifying certain aspects of ASU 2016-13, as well as providing codification improvements and targeted transition relief under the standard. The subsequently issued ASUs have the same effective date and transition requirements as ASU 2016-13. ASU 2016-13 will be effective for the Company's fiscal year beginning October 1, 2020, using a modified retrospective approach. Early adoption is permitted. The Company is currently assessing the impact this ASU will have on its condensed consolidated financial statements.

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2. Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents
The Company's cash and cash equivalents is summarized in the following table (dollars in millions):
 
 
December 31,
2019
 
September 30,
2019
Broker-dealer subsidiaries
 
$
2,051

 
$
2,260

Corporate
 
267

 
366

Futures commission merchant and forex dealer member subsidiary
 
108

 
94

Trust company subsidiary
 
98

 
124

Investment advisory subsidiaries
 
27

 
8

Total cash and cash equivalents
 
$
2,551

 
$
2,852


Capital requirements may limit the amount of cash available for dividend from the broker-dealer, FCM/FDM and trust company subsidiaries to the Parent.
The following table provides a reconciliation of cash, cash equivalents, restricted cash and restricted cash equivalents reported within the Condensed Consolidated Balance Sheets to the total of the same amounts shown in the Condensed Consolidated Statements of Cash Flows (dollars in millions):
 
 
December 31,
2019
 
September 30,
2019
Cash and cash equivalents
 
$
2,551

 
$
2,852

Restricted cash and restricted cash equivalents included in cash and investments segregated and on deposit for regulatory purposes
 
6,740

 
7,341

Total cash, cash equivalents, restricted cash and restricted cash equivalents shown in the Condensed Consolidated Statements of Cash Flows
 
$
9,291

 
$
10,193


Amounts included in restricted cash and restricted cash equivalents consist primarily of qualified deposits in special reserve bank accounts for the exclusive benefit of clients under Rule 15c3-3 of the Securities Exchange Act of 1934 (the "Exchange Act") and other regulations. Restricted cash equivalents consists of highly-liquid investments with an original maturity of three months or less.
3. Cash and Investments Segregated and on Deposit for Regulatory Purposes
Cash and investments segregated and on deposit for regulatory purposes consists of the following (dollars in millions):
 
 
December 31,
2019
 
September 30,
2019
U.S. government debt securities
 
$
3,747

 
$
4,369

Cash in demand deposit accounts
 
2,300

 
2,304

U.S. government agency mortgage-backed securities
 
1,771

 
1,318

Reverse repurchase agreements (collateralized by U.S. government debt securities)
 
500

 
500

Cash on deposit with futures commission merchants
 
193

 
168

U.S. government debt securities on deposit with futures commission merchant
 
25

 
25

Total
 
$
8,536

 
$
8,684


4. Investments Available-for-Sale
The following tables present the amortized cost and fair value of available-for-sale securities (dollars in millions):
December 31, 2019
 
Amortized Cost
 
Gross Unrealized Gains
 
Gross Unrealized Losses
 
Fair Value
Available-for-sale securities:
 
 
 
 
 
 
 
 
U.S. Treasury securities
 
$
1,591

 
$
45

 
$

 
$
1,636


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September 30, 2019
 
Amortized Cost
 
Gross Unrealized Gains
 
Gross Unrealized Losses
 
Fair Value
Available-for-sale securities:
 
 
 
 
 
 
 
 
U.S. Treasury securities
 
$
1,591

 
$
77

 
$

 
$
1,668


The following table presents the contractual maturities of available-for-sale securities as of December 31, 2019 (dollars in millions):
 
 
Amortized Cost
 
Fair Value
Available-for-sale U.S. Treasury securities:
 
 
 
 
Due within one to five years
 
$
582

 
$
612

Due within five to ten years
 
618

 
626

Due after ten years
 
391

 
398

Total available-for-sale U.S. Treasury securities
 
$
1,591

 
$
1,636


5. Income Taxes
The Company's effective income tax rate for the three months ended December 31, 2019 and 2018 was 22.8% and 22.4%, respectively. The provision for income taxes for the three months ended December 31, 2019 included $9 million of favorable adjustments related to state income tax matters. These items had a favorable impact on the Company's earnings for the three months ended December 31, 2019 of approximately $0.02 per share. The provision for income taxes for the three months ended December 31, 2018 included $18 million of favorable adjustments related to state income tax matters. This item had a favorable impact on the Company's earnings for the three months ended December 31, 2018 of approximately $0.03 per share.
6. Leases
The Company enters into various non-cancelable operating leases for certain facilities, including corporate offices, retail branches and data centers. The Company determines if an arrangement is a lease at inception. Operating leases with an initial term of 12 months or less are not recorded on the balance sheet and the related lease expense is recognized on a straight-line basis over the lease term. ROU assets represent the right to use an underlying asset for the lease term and lease liabilities represent an obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the commencement or remeasurement date of a lease based on the present value of lease payments over the lease term. The Company utilizes an incremental borrowing rate to determine the present value of lease payments for each lease, as the lease agreements do not provide an implicit rate. The estimated incremental borrowing rate reflects a secured rate and is based on the term of the lease and the interest rate environment at the lease commencement or remeasurement date. Operating lease ROU assets include (1) lease payments made at or before the commencement date and (2) initial indirect costs; and exclude lease incentives. The Company's lease terms may include options to extend or terminate the lease. Only those renewal and termination options which the Company is reasonably certain of exercising are included in the calculation of the lease liability.
The following tables present balance sheet and supplemental operating lease information (dollars in millions):
 
 
December 31, 2019
Balance Sheet Information:
 
 
Assets:
 
 
Other assets:
 
 
Operating lease right-of-use assets, net
 
$
340

Liabilities:
 
 
Accounts payable and other liabilities:
 
 
Operating lease liabilities
 
$
373

Supplemental Information:
 
 
Weighted-average remaining lease term (years)
 
8.3

Weighted-average discount rate
 
2.49
%

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Three Months Ended
December 31, 2019
Supplemental Cash Flow Information:
 
 
Cash paid for amounts included in the measurement of lease liabilities
 
$
17

Lease liabilities arising from obtaining right-of-use assets
 
$
8

The following table summarizes the amount and classification of operating lease expense (dollars in millions):
Description
 
Condensed Consolidated
 Statements of Income Classification
 
Three Months Ended
December 31, 2019
Operating lease costs, net (1)
 
Occupancy and equipment costs
 
$
18

 
(1)
Includes short-term lease costs and is net of sublease income. The short-term lease costs and sublease income are not material for the period presented. Operating lease costs and sublease income include transactions with related parties, which are not material for the period presented.
Operating lease expense is recognized on a straight-line basis over the lease term. The Company’s lease agreements do not contain any material residual value guarantees or restrictive covenants.
The following table presents the maturities of lease liabilities as of December 31, 2019 (dollars in millions):
Fiscal Year
 
Operating Leases 
2020 Remaining
 
$
25

2021
 
61

2022
 
54

2023
 
47

2024
 
44

Thereafter (to 2033)
 
192

Total lease payments
 
423

Amount representing interest
 
(50
)
Present value of lease liabilities
 
$
373


In accordance with the disclosure requirements for the adoption of ASU 2016-02, the Company is presenting its operating lease commitment table as of September 30, 2019, which was previously disclosed in Note 16 of the Company's annual report on Form 10-K for the fiscal year ended September 30, 2019 (dollars in millions):
Fiscal Year
 
Minimum Lease Payments
 
Sublease Income
 
Net Lease Commitments
2020
 
$
72

 
$
(2
)
 
$
70

2021
 
64

 
(1
)
 
63

2022
 
55

 

 
55

2023
 
49

 

 
49

2024
 
45

 

 
45

Thereafter (to 2033)
 
191

 

 
191

Total
 
$
476

 
$
(3
)
 
$
473



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7. Long-term Debt and Other Borrowings
Long-term debt and other borrowings consist of the following (dollars in millions):
December 31, 2019
 
Face
Value
 
Unamortized Discounts and Debt Issuance Costs
 
Fair Value
Adjustment (1)
 
Net Carrying
Value
Senior Notes:
 
 
 
 
 
 
 
 
Variable-rate Notes due 2021
 
$
600

 
$
(2
)
 
$

 
$
598

2.950% Notes due 2022
 
750

 
(3
)
 
4

 
751

3.750% Notes due 2024
 
400

 
(3
)
 

 
397

3.625% Notes due 2025
 
500

 
(2
)
 
18

 
516

3.300% Notes due 2027
 
800

 
(8
)
 
23

 
815

2.750% Notes due 2029
 
500

 
(5
)
 
(17
)
 
478

Total long-term debt
 
$
3,550

 
$
(23
)
 
$
28

 
$
3,555

September 30, 2019
 
Face
Value
 
Unamortized Discounts and Debt Issuance Costs
 
Fair Value
Adjustment (1)
 
Net Carrying
Value
Senior Notes:
 
 
 
 
 
 
 
 
Variable-rate Notes due 2021
 
$
600

 
$
(2
)
 
$

 
$
598

2.950% Notes due 2022
 
750

 
(3
)
 
6

 
753

3.750% Notes due 2024
 
400

 
(3
)
 

 
397

3.625% Notes due 2025
 
500

 
(3
)
 
25

 
522

3.300% Notes due 2027
 
800

 
(8
)
 
40

 
832

2.750% Notes due 2029
 
500

 
(5
)
 
(3
)
 
492

Total long-term debt
 
$
3,550

 
$
(24
)
 
$
68

 
$
3,594

 
(1)
Fair value adjustments relate to changes in the fair value of the debt while in a fair value hedging relationship. See "Fair Value Hedging" below.
Senior Notes — As of December 31, 2019 and September 30, 2019, the Company had $3.55 billion aggregate principal amount of unsecured Senior Notes (together, the "Senior Notes"). The fixed rate and variable rate Senior Notes pay interest semi-annually and quarterly, respectively, in arrears. Key information about the Senior Notes outstanding is summarized in the following table (dollars in millions):
Description
 
Date Issued
 
Maturity Date
 
Aggregate Principal
 
Interest Rate
2021 Notes