What changed in this filing

/stocks — the workspaceLOADING

Item 3. Quantitative and Qualitative Disclosures About Market Risk

2021-11-08 compared with 2021-08-06 · 220 added, 207 removed, 1202 unchanged (26% of the section changed)

7 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

23 unchanged sentences

Preferred stock dividends and other 120 83 364 171

148 50 244 88

Net Income Available to Common Stockholders $ 1,406 $ 615 $ 3,911 $ 1,993

5 unchanged sentences

Diluted $ .74 $ .48 $ 2.06 $ 1.54

(1) Certain prior year amounts have been reclassified to conform to the current year presentation.

See Note 1 for additional information.

(2) Includes fee waivers of $ 85 million and $ 163 million for the second quarter and first six months of 2021, respectively, and $ 15 million for the second quarter and first six months of 2020.

(3) Includes preferred stock dividends and undistributed earnings and dividends allocated to non-vested restricted stock units.

(4) For the three and six months ended June 30, 2021, the Company had voting and nonvoting common stock outstanding.

(1) Includes fee waivers of $ 83 million and $ 246 million for the third quarter and first nine months of 2021, respectively, and $ 44 million and $ 59 million for the third quarter and first nine months of 2020, respectively.

(2) For the three and nine months ended September 30, 2021, the Company had voting and nonvoting common stock outstanding.

As the participation rights, including dividend and liquidation rights, are identical between the voting and nonvoting stock classes, basic and diluted earnings per share are the same for each class.

5 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

13 unchanged sentences

(In Millions, Except Per Share and Share Amounts)

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

Cash and cash equivalents $ 34,323 $ 40,348

Cash and investments segregated and on deposit for regulatory purposes (including resale

agreements of $ 12,974 at June 30, 2021 and $ 14,904 at December 31, 2020)

agreements of $ 13,625 at September 30, 2021 and $ 14,904 at December 31, 2020)

42,300 50,399

Receivables from brokerage clients — net 86,553 64,440

Available for sale securities (amortized cost of $ 356,439 at June 30, 2021 and

Available for sale securities (amortized cost of $ 375,305 at September 30, 2021 and

$ 330,248 at December 31, 2020)

15 unchanged sentences

Preferred stock — $ .01 par value per share;

aggregate liquidation preference of $ 10,100 and

$ 7,850 at June 30, 2021 and December 31, 2020, respectively

aggregate liquidation preference of $ 10,100

and $ 7,850 at September 30, 2021 and December 31, 2020, respectively

Common stock — 3 billion shares authorized;

$ .01 par value per share;

1,994,895,180 shares

issued at June 30, 2021 and December 31, 2020

1,994,895,180 shares issued at September 30, 2021 and December 31, 2020

Nonvoting common stock — 300 million shares authorized;

$ .01 par value per share;

79,293,695 shares issued at June 30, 2021 and December 31, 2020

79,293,695 shares issued at September 30, 2021 and December 31, 2020

Additional paid-in capital 26,755 26,515

Retained earnings 24,880 21,975

Treasury stock, at cost — 186,389,044 shares at June 30, 2021 and 193,577,648

Treasury stock, at cost — 185,198,080 shares at September 30, 2021 and 193,577,648

shares at December 31, 2020

8 unchanged sentences

Accumulated Other Comprehensive Income (Loss)

Preferred Stock Common Stock Common Stock — Nonvoting Additional Paid-in Capital Retained Earnings Treasury Stock,

Preferred Stock Common Stock Nonvoting

Common Stock Additional Paid-in Capital Retained Earnings Treasury Stock,

at cost Total

Shares Amount Shares Amount

Balance at March 31, 2020 $ 2,793 1,488 $ 15 — $ — $ 4,714 $ 20,487 $ ( 5,734 ) $ 3,995 $ 26,270

Balance at June 30, 2020 $ 5,263 1,488 $ 15 — $ — $ 4,760 $ 20,876 $ ( 5,710 ) $ 5,611 $ 30,815

Net income — — — — — — 698 — — 698

Other comprehensive income (loss), net of tax — — — — — — — — 75 75

Issuance of preferred stock, net 2,470 — — — — — — — — 2,470

Dividends declared on preferred stock — — — — — — ( 79 ) — — ( 79 )

4 unchanged sentences

Other — — — — — 8 — 10 — 18

Balance at September 30, 2020 $ 5,263 1,488 $ 15 — $ — $ 4,797 $ 21,261 $ ( 5,691 ) $ 5,686 $ 31,331

Balance at June 30, 2021 $ 9,954 1,995 $ 20 79 $ 1 $ 26,708 $ 23,809 $ ( 5,450 ) $ 2,408 $ 57,450

Balance at March 31, 2021 $ 10,539 1,995 $ 20 79 $ 1 $ 26,629 $ 23,029 $ ( 5,502 ) $ 878 $ 55,594

Net income — — — — — — 1,526 — — 1,526

Other comprehensive income (loss), net of tax — — — — — — — — ( 1,155 ) ( 1,155 )

Redemption of preferred stock ( 585 ) — — — — — ( 15 ) — — ( 600 )

Dividends declared on preferred stock — — — — — — ( 113 ) — — ( 113 )

4 unchanged sentences

Other — — — — — 17 — ( 2 ) — 15

Balance at June 30, 2021 $ 9,954 1,995 $ 20 79 $ 1 $ 26,708 $ 23,809 $ ( 5,450 ) $ 2,408 $ 57,450

Balance at September 30, 2021 $ 9,954 1,995 $ 20 79 $ 1 $ 26,755 $ 24,880 $ ( 5,421 ) $ 1,253 $ 57,442

Accumulated Other Comprehensive Income (Loss)

Preferred Stock Common Stock Nonvoting Common Stock Additional Paid-in Capital Retained Earnings Treasury Stock,

Preferred Stock Common Stock Nonvoting

Common Stock Additional Paid-in Capital Retained Earnings Treasury Stock,

at cost Total

10 unchanged sentences

Other — — — — — 31 ( 3 ) 28 — 56

Balance at June 30, 2020 $ 5,263 1,488 $ 15 — $ — $ 4,760 $ 20,876 $ ( 5,710 ) $ 5,611 $ 30,815

Balance at September 30, 2020 $ 5,263 1,488 $ 15 — $ — $ 4,797 $ 21,261 $ ( 5,691 ) $ 5,686 $ 31,331

Balance at December 31, 2020 $ 7,733 1,995 $ 20 79 $ 1 $ 26,515 $ 21,975 $ ( 5,578 ) $ 5,394 $ 56,060

9 unchanged sentences

Other — — — — — 57 — ( 10 ) — 47

Balance at June 30, 2021 $ 9,954 1,995 $ 20 79 $ 1 $ 26,708 $ 23,809 $ ( 5,450 ) $ 2,408 $ 57,450

Balance at September 30, 2021 $ 9,954 1,995 $ 20 79 $ 1 $ 26,755 $ 24,880 $ ( 5,421 ) $ 1,253 $ 57,442

See Notes to the Condensed Consolidated Financial Statements .

2 unchanged sentences

(in Millions)

Six Months Ended

Nine Months Ended

September 30,

Cash Flows from Operating Activities

27 unchanged sentences

Net change in bank deposits 37,253 100,623

Net change in short-term borrowings 3,500 —

Proceeds from secured lines of credit 2,000 —

Repayment of secured lines of credit ( 500 ) —

Net change in other short-term borrowings 1,500 —

Issuance of long-term debt 7,036 1,089

14 unchanged sentences

Continued from previous page.

Six Months Ended

Nine Months Ended

September 30,

Supplemental Cash Flow Information

10 unchanged sentences

Leased assets obtained in exchange for new finance lease liabilities $ 108 $ —

June 30, 2021 June 30, 2020

September 30, 2021 September 30, 2020

Reconciliation of cash, cash equivalents and amounts reported within the balance sheet (1)

4 unchanged sentences

statement of cash flows $ 60,101 $ 38,362

(1) Certain prior year amounts have been reclassified to conform to the current year presentation.

See Note 1 for additional information.

(1) For more information on the nature of restrictions on restricted cash and cash equivalents, see Note 17.

21 unchanged sentences

These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto, included in Schwab’s 2020 Form 10-K.

Effective October 6, 2020, the Company completed its acquisition of TD Ameritrade Holding Corporation and its consolidated subsidiaries (collectively referred to as “TD Ameritrade” or “TDA”).

Effective October 6, 2020, the Company completed its acquisition of TD Ameritrade Holding Corporation (TDA Holding) and its consolidated subsidiaries (collectively referred to as “TD Ameritrade” or “TDA”).

TD Ameritrade provides securities brokerage services, including trade execution, clearing services, and margin lending, through its broker-dealer subsidiaries;

2 unchanged sentences

See Note 3 for additional information on our acquisition of TD Ameritrade.

Reclassifications:

Certain prior period amounts have been reclassified to conform to the current period presentation.

Beginning in the third quarter of 2020, amortization of acquired intangible assets was reclassified from depreciation and amortization and presented separately in the condensed consolidated statements of income.

Prior period amounts have been reclassified to reflect this change.

A corresponding presentation change has been made to the condensed consolidated statements of cash flows.

The significant accounting policies are included in Note 2 in the 2020 Form 10-K.

There have been no significant changes to these accounting policies during the first six months of 2021.

There have been no significant changes to these accounting policies during the first nine months of 2021.

New Accounting Standards

The Company did not adopt any material new accounting standards during the six months ended June 30, 2021.

In addition, there are no new accounting standards not yet adopted that are material to the Company as of June 30, 2021.

The Company did not adopt any material new accounting standards during the nine months ended September 30, 2021.

In addition, there are no new accounting standards not yet adopted that are material to the Company as of September 30, 2021.

THE CHARLES SCHWAB CORPORATION

7 unchanged sentences

In connection with the transaction, Schwab issued approximately 586 million common shares to TD Ameritrade stockholders consisting of approximately 509 million shares of common stock and approximately 77 million shares of nonvoting common stock.

Subsequently, TD Bank and its affiliates exchanged common stock for nonvoting common stock and held approximately 79 million shares of nonvoting common stock as of June 30, 2021.

Subsequently, TD Bank and its affiliates exchanged common stock for nonvoting common stock and held approximately 79 million shares of nonvoting common stock as of September 30, 2021.

For further details on the new class of nonvoting common stock, see Note 19 in the 2020 Form 10-K.

There have been no adjustments to the provisional purchase price and fair value estimates presented in Note 3 of the 2020 Form 10-K, and such amounts are now final with the exception of estimates related to certain acquired assets classified as other assets and certain assumed liabilities classified as accrued expenses and other liabilities within the Company’s condensed consolidated balance sheet.

These estimates are considered provisional and are based on currently available information.

The Company believes that the information available provides a reasonable basis for estimating the fair values of such assets acquired and liabilities assumed;

however, these provisional estimates may be adjusted upon the availability of new information regarding facts and circumstances which existed at the acquisition date.

The Company expects to finalize the valuation of these assets and liabilities as soon as practicable, but not later than one year from the acquisition date.

Any adjustments to the initial estimates of the fair values of the acquired assets and assumed liabilities will be recorded as adjustments to the respective assets and liabilities, with the residual amounts allocated to goodwill.

There have been no adjustments to the provisional purchase price and fair value estimates presented in Note 3 of the 2020 Form 10-K and those amounts are now final.

Pro Forma Financial Information (Unaudited)

1 unchanged sentence

The unaudited pro forma results reflect after-tax adjustments for acquisition costs, amortization and depreciation of acquired intangible and tangible assets, the impact of the amended IDA agreement which reduced the service fee on client cash deposits held at the TD Depository Institutions to 15 basis points from the 25 basis points paid by TD Ameritrade under its previous IDA agreement, and other immaterial adjustments for the effects of purchase accounting.

Pro forma net income for the three and six months ended June 30, 2020 excludes $ 24 million and $ 38 million, respectively, of after-tax acquisition costs incurred by Schwab and TD Ameritrade as these costs were included in pro forma net income for the year ended December 31, 2019.

Pro forma net income for the three and nine months ended September 30, 2020 excludes $ 13 million and $ 51 million, respectively, of after-tax acquisition costs incurred by Schwab and TD Ameritrade as these costs were included in pro forma net income for the year ended December 31, 2019.

The unaudited pro forma results do not reflect potential revenue growth or cost savings that may be realized as a result of the acquisition.

1 unchanged sentence

Three Months Ended

June 30, 2020 Six Months Ended

June 30, 2020

September 30, 2020 Nine Months Ended

September 30, 2020

Total net revenues $ 4,107 $ 12,257

6 unchanged sentences

The unaudited pro forma results reflect after-tax adjustments for acquisition costs and amortization of acquired intangible assets, and do not reflect potential revenue growth or cost savings that may be realized as a result of the acquisition.

Pro forma net income for the three and six months ended June 30, 2020 excludes $ 30 million and $ 41 million, respectively, of

THE CHARLES SCHWAB CORPORATION

Notes to Condensed Consolidated Financial Statements

(Tabular Amounts in Millions, Except Per Share Data, Ratios, or as Noted)

after-tax acquisition costs as these costs were included in pro forma net income for the year ended December 31, 2019.

Pro forma net income for the nine months ended September 30, 2020 excludes after-tax acquisition costs of $ 39 million.

These costs were included in pro forma net income for the year ended December 31, 2019.

The unaudited pro forma financial information is presented for informational purposes only, and is not necessarily indicative of future operations or results had the USAA-IMCO acquisition been completed as of January 1, 2019.

Three Months Ended

June 30, 2020 Six Months Ended

June 30, 2020

September 30, 2020 Nine Months Ended

September 30, 2020

Total net revenues $ 2,448 $ 7,618

Net income 613 1,949

THE CHARLES SCHWAB CORPORATION

Notes to Condensed Consolidated Financial Statements

(Tabular Amounts in Millions, Except Per Share Data, Ratios, or as Noted)

Revenue Recognition

2 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

19 unchanged sentences

Contract balances

Receivables from contracts with customers within the scope of ASC 606, Revenue From Contracts With Customers (ASC 606) were $ 621 million at June 30, 2021 and $ 579 million at December 31, 2020 and were recorded in other assets on the condensed consolidated balance sheets.

Schwab does not have any other significant contract assets or contract liability balances as of June 30, 2021 or December 31, 2020.

Receivables from contracts with customers within the scope of ASC 606, Revenue From Contracts With Customers (ASC 606) were $ 651 million at September 30, 2021 and $ 579 million at December 31, 2020 and were recorded in other assets on the condensed consolidated balance sheets.

Schwab does not have any other significant contract assets or contract liability balances as of September 30, 2021 or December 31, 2020.

Unsatisfied performance obligations

6 unchanged sentences

The amortized cost, gross unrealized gains and losses, and fair value of the Company’s AFS investment securities are as follows:

June 30, 2021 Amortized

September 30, 2021 Amortized

agency mortgage-backed securities $ 329,953 $ 4,228 $ 2,867 $ 331,314

5 unchanged sentences

state and municipal securities 1,617 87 2 1,702

Foreign government agency securities 1,408 1 1 1,408

Non-agency commercial mortgage-backed securities 1,192 31 — 1,223

15 unchanged sentences

Total available for sale securities $ 330,248 $ 7,799 $ 647 $ 337,400

(1) Approximately 58 % and 51 % of asset-backed securities held as of June 30, 2021 and December 31, 2020, respectively, were Federal Family Education Loan Program Asset-Backed Securities.

Asset-backed securities collateralized by credit card receivables represented approximately 32 % and 36 % of the asset-backed securities held as of June 30, 2021 and December 31, 2020, respectively.

(2) As of June 30, 2021 and December 31, 2020, approximately 39 % and 46 %, respectively of the total AFS in corporate debt securities were issued by institutions in the financial services industry.

At June 30, 2021, our banking subsidiaries had pledged securities with a fair value of $ 43.6 billion as collateral to secure borrowing capacity on secured credit facilities with the Federal Home Loan Bank (FHLB) (see Note 9).

Our banking subsidiaries also pledge investment securities as collateral to secure borrowing capacity at the Federal Reserve discount window, and had pledged securities with a fair value of $ 9.5 billion as collateral for this facility at June 30, 2021.

(1) Approximately 58 % and 51 % of asset-backed securities held as of September 30, 2021 and December 31, 2020, respectively, were Federal Family Education Loan Program Asset-Backed Securities.

Asset-backed securities collateralized by credit card receivables represented approximately 33 % and 36 % of the asset-backed securities held as of September 30, 2021 and December 31, 2020, respectively.

(2) As of September 30, 2021 and December 31, 2020, approximately 33 % and 46 %, respectively of the total AFS in corporate debt securities were issued by institutions in the financial services industry.

At September 30, 2021, our banking subsidiaries had pledged securities with a fair value of $ 51.0 billion as collateral to secure borrowing capacity on secured credit facilities with the Federal Home Loan Bank (FHLB) (see Note 9).

Our banking subsidiaries also pledge investment securities as collateral to secure borrowing capacity at the Federal Reserve discount window, and had pledged securities with a fair value of $ 9.9 billion as collateral for this facility at September 30, 2021.

The Company also pledges securities issued by federal agencies to secure certain trust deposits.

The fair value of these pledged securities was $ 1.5 billion at June 30, 2021.

The fair value of these pledged securities was $ 1.3 billion at September 30, 2021.

THE CHARLES SCHWAB CORPORATION

3 unchanged sentences

Less than 12 months 12 months or longer Total

June 30, 2021 Fair

September 30, 2021 Fair

Value Unrealized

7 unchanged sentences

state and municipal securities 96 2 5 — 101 2

Foreign government agency securities 705 1 — — 705 1

Certificates of deposit 499 1 — — 499 1

Total $ 181,738 $ 2,581 $ 21,252 $ 467 $ 202,990 $ 3,048

3 unchanged sentences

Total $ 63,104 $ 564 $ 10,596 $ 83 $ 73,700 $ 647

At June 30, 2021, substantially all rated securities in the investment portfolios were investment grade.

At September 30, 2021, substantially all rated securities in the investment portfolios were investment grade.

agency mortgage-backed securities do not have explicit credit ratings;

3 unchanged sentences

For a description of management’s quarterly evaluation of AFS securities in unrealized loss positions see Item 8 – Note 2 in the 2020 Form 10-K.

No amounts were recognized as credit loss expense and no securities were written down to fair value through earnings for the six months ended June 30, 2021 and the year ended December 31, 2020.

None of the Company’s AFS securities held as of June 30, 2021 and December 31, 2020 had an allowance for credit losses.

The Company had $ 635 million and $ 634 million of accrued interest receivable as of June 30, 2021 and December 31, 2020, respectively, for AFS securities.

No amounts were recognized as credit loss expense and no securities were written down to fair value through earnings for the nine months ended September 30, 2021 and the year ended December 31, 2020.

None of the Company’s AFS securities held as of September 30, 2021 and December 31, 2020 had an allowance for credit losses.

The Company had $ 646 million and $ 634 million of accrued interest receivable as of September 30, 2021 and December 31, 2020, respectively, for AFS securities.

These amounts are excluded from the amortized cost basis and fair market value of AFS securities and included in other assets on the condensed consolidated balance sheets.

There were no write-offs of accrued interest receivable on AFS securities during the six months ended June 30, 2021, or the year ended December 31, 2020.

There were no write-offs of accrued interest receivable on AFS securities during the nine months ended September 30, 2021, or the year ended December 31, 2020.

THE CHARLES SCHWAB CORPORATION

4 unchanged sentences

The maturities of AFS investment securities are as follows:

June 30, 2021 Within

September 30, 2021 Within

1 year After 1 year

7 unchanged sentences

state and municipal securities 23 125 970 584 1,702

Foreign government agency securities 553 855 — — 1,408

Non-agency commercial mortgage-backed securities — — — 1,223 1,223

5 unchanged sentences

Three Months Ended

June 30, Six Months Ended June 30,

September 30, Nine Months Ended September 30,

2021 2020 2021 2020

7 unchanged sentences

The composition of bank loans and delinquency analysis by portfolio segment and class of financing receivable is as follows:

June 30, 2021 Current 30-59 days

September 30, 2021 Current 30-59 days

past due 60-89 days

22 unchanged sentences

Total bank loans $ 23,709 $ 38 $ 7 $ 89 $ 134 $ 23,843 $ 30 $ 23,813

(1) First Mortgages and HELOCs include unamortized premiums and discounts and direct origination costs of $ 79 million and $ 72 million at June 30, 2021 and December 31, 2020, respectively.

(2) At June 30, 2021 and December 31, 2020, 46 % and 45 %, respectively, of the First Mortgage and HELOC portfolios were concentrated in California.

(1) First Mortgages and HELOCs include unamortized premiums and discounts and direct origination costs of $ 85 million and $ 72 million at September 30, 2021 and December 31, 2020, respectively.

(2) At September 30, 2021 and December 31, 2020, 45 % of the First Mortgage and HELOC portfolios were concentrated in California.

These loans have performed in a manner consistent with the portfolio as a whole.

(3) There were no loans accruing interest that were contractually 90 days or more past due at June 30, 2021 or December 31, 2020.

At June 30, 2021, CSB had pledged the full balance of First Mortgages and HELOCs pursuant to a blanket lien status collateral arrangement to secure borrowing capacity on a secured credit facility with the FHLB (see Note 9).

(3) There were no loans accruing interest that were contractually 90 days or more past due at September 30, 2021 or December 31, 2020.

At September 30, 2021, CSB had pledged the full balance of First Mortgages and HELOCs pursuant to a blanket lien status collateral arrangement to secure borrowing capacity on a secured credit facility with the FHLB (see Note 9).

Changes in the allowance for credit losses on bank loans were as follows:

June 30, 2021 June 30, 2020

September 30, 2021 September 30, 2020

Three Months Ended First Mortgages HELOCs Total residential real estate Other Total First Mortgages HELOCs Total residential real estate Other Total

1 unchanged sentence

period $ 8 $ 2 $ 10 $ 3 $ 13 $ 22 $ 4 $ 26 $ 4 $ 30

Charge-offs — — — ( 1 ) ( 1 ) — — — — —

Recoveries — 1 1 — 1 — — — — —

5 unchanged sentences

(Tabular Amounts in Millions, Except Per Share Data, Ratios, or as Noted)

June 30, 2021 June 30, 2020

Six Months Ended First Mortgages HELOCs Total residential real estate Other Total First Mortgages HELOCs Total residential real estate Other Total

September 30, 2021 September 30, 2020

Nine Months Ended First Mortgages HELOCs Total residential real estate Other Total First Mortgages HELOCs Total residential real estate Other Total

Balance at beginning of

2 unchanged sentences

2016-13 — — — — — 1 — 1 — 1

Charge-offs — — — ( 1 ) ( 1 ) — — — — —

Recoveries — 1 1 — 1 1 — 1 — 1

3 unchanged sentences

As discussed in Item 8 – Note 2 in our 2020 Form 10-K, PALs are subject to the collateral maintenance practical expedient under ASC 326.

All PALs were fully collateralized by securities with fair values in excess of borrowings as of June 30, 2021 and December 31, 2020.

All PALs were fully collateralized by securities with fair values in excess of borrowings as of September 30, 2021 and December 31, 2020.

Therefore, no allowance for credit losses for PALs as of those dates was required.

The economy continues to improve as vaccinations appear to limit the spread of COVID-19 in the United States, though some risks to the economy remain.

Management’s macroeconomic outlook reflects continued growth in home prices and lower unemployment anticipated over the near term.

The economy continued to strengthen throughout 2021, with sectors most adversely affected by the pandemic improving in recent months.

However, COVID-19 has continued to affect the pace of the recovery.

Management’s macroeconomic outlook reflects continued moderate growth in home prices and lower unemployment anticipated over the near term.

This macroeconomic outlook, along with the continued strong credit quality metrics in the bank loans portfolio, result in a lower modeled projection of loss rates compared to December 31, 2020.

A summary of bank loan-related nonperforming assets and troubled debt restructurings is as follows:

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

Nonaccrual loans (1)

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First Mortgages Amortized Cost Basis by Origination Year

June 30, 2021 2021 2020 2019 2018 2017 pre-2017 Total First Mortgages Revolving HELOCs amortized cost basis HELOCs converted to term loans Total HELOCs

September 30, 2021 2021 2020 2019 2018 2017 pre-2017 Total First Mortgages Revolving HELOCs amortized cost basis HELOCs converted to term loans Total HELOCs

Origination FICO

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(1) Represents the LTV for the full line of credit (drawn and undrawn) for revolving HELOCs.

June 30, 2021 Balance Weighted Average Updated FICO Percent of Loans on Nonaccrual Status

September 30, 2021 Balance Weighted Average Updated FICO Percent of Loans on Nonaccrual Status

Pledged Asset Lines

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(1) Represents the LTV for the full line of credit (drawn and undrawn).

At June 30, 2021, First Mortgage loans of $ 14.6 billion had adjustable interest rates.

At September 30, 2021, First Mortgage loans of $ 15.8 billion had adjustable interest rates.

Substantially all of these mortgages have initial fixed interest rates for three to ten years and interest rates that adjust annually thereafter.

2 unchanged sentences

Schwab’s mortgage loans do not include interest terms described as temporary introductory rates below current market rates.

At June 30, 2021 and December 31, 2020, Schwab had $ 50 million and $ 43 million, respectively, of accrued interest on bank loans, which is excluded from the amortized cost basis of bank loans and included in other assets on the condensed consolidated balance sheets.

At September 30, 2021 and December 31, 2020, Schwab had $ 54 million and $ 43 million, respectively, of accrued interest on bank loans, which is excluded from the amortized cost basis of bank loans and included in other assets on the condensed consolidated balance sheets.

THE CHARLES SCHWAB CORPORATION

6 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

1 unchanged sentence

The following table presents when current outstanding HELOCs will convert to amortizing loans:

June 30, 2021 Balance

September 30, 2021 Balance

Converted to an amortizing loan by period end $ 300

3 unchanged sentences

> 5 years 224

At June 30, 2021, $ 563 million of the HELOC portfolio was secured by second liens on the associated properties.

At September 30, 2021, $ 530 million of the HELOC portfolio was secured by second liens on the associated properties.

Second lien mortgage loans typically possess a higher degree of credit risk given the subordination to the first lien holder in the event of default.

In addition to the credit monitoring activities described previously, Schwab also monitors credit risk by reviewing the delinquency status of the first lien loan on the associated property.

At June 30, 2021, the borrowers on approximately 52 % of HELOC loan balances outstanding only paid the minimum amount due.

At September 30, 2021, the borrowers on approximately 55 % of HELOC loan balances outstanding only paid the minimum amount due.

Variable Interest Entities

As of June 30, 2021 and December 31, 2020, all of Schwab’s involvement with variable interest entities (VIEs) is through CSB’s Community Reinvestment Act (CRA)-related investments and most of those are related to LIHTC investments.

As of September 30, 2021 and December 31, 2020, all of Schwab’s involvement with variable interest entities (VIEs) is through CSB’s Community Reinvestment Act (CRA)-related investments and most of these are related to LIHTC investments.

As part of CSB’s community reinvestment initiatives, CSB invests in funds that make equity investments in multifamily affordable housing properties and receives tax credits and other tax benefits for these investments.

1 unchanged sentence

The aggregate assets, liabilities, and maximum exposure to loss from those VIEs in which Schwab holds a variable interest, but is not the primary beneficiary, are summarized in the table below:

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

assets Aggregate

13 unchanged sentences

CSB’s funding of these remaining commitments is dependent upon the occurrence of certain conditions, and CSB expects to pay substantially all of these commitments between 2021 and 2024.

During the six months ended June 30, 2021 and year ended

During the nine months ended September 30, 2021 and year

THE CHARLES SCHWAB CORPORATION

1 unchanged sentence

(Tabular Amounts in Millions, Except Per Share Data, Ratios, or as Noted)

December 31, 2020, Schwab did not provide or intend to provide financial or other support to the VIEs that it was not contractually required to provide.

ended December 31, 2020, Schwab did not provide or intend to provide financial or other support to the VIEs that it was not contractually required to provide.

Bank Deposits

Bank deposits consist of interest-bearing and non-interest-bearing deposits as follows:

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

Interest-bearing deposits:

9 unchanged sentences

Interest is payable semi-annually for the fixed-rate Senior Notes and quarterly for the floating-rate Senior Notes.

TDA Senior Notes

TDA’s Senior Notes are unsecured obligations.

TDA Holding may redeem some or all of the TDA Senior Notes of each series prior to their maturity, subject to certain restrictions, and the payment of an applicable make-whole premium in certain instances.

Interest is payable semi-annually for the fixed-rate TDA Senior Notes and quarterly for the floating-rate TDA Senior Notes.

TDA Holding Senior Notes

TDA Holding’s Senior Notes are unsecured obligations.

TDA Holding may redeem some or all of the Senior Notes of each series prior to their maturity, subject to certain restrictions, and the payment of an applicable make-whole premium in certain instances.

Interest is payable semi-annually for the fixed-rate Senior Notes and quarterly for the floating-rate Senior Notes.

THE CHARLES SCHWAB CORPORATION

1 unchanged sentence

(Tabular Amounts in Millions, Except Per Share Data, Ratios, or as Noted)

The following table lists long-term debt by instrument outstanding as of June 30, 2021 and December 31, 2020.

The following table lists long-term debt by instrument outstanding as of September 30, 2021 and December 31, 2020.

Date of Issuance Principal Amount Outstanding

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

CSC Fixed-rate Senior Notes:

9 unchanged sentences

03/18/21 1,500 —

3.750 % due April 1, 2024 (1)

09/24/21 350 —

3.000 % due March 10, 2025

2 unchanged sentences

03/24/20 600 600

3.625 % due April 1, 2025 (1)

09/24/21 418 —

3.850 % due May 21, 2025

8 unchanged sentences

03/02/17 650 650

3.300 % due April 1, 2027 (1)

09/24/21 744 —

3.200 % due January 25, 2028

6 unchanged sentences

05/22/19 600 600

2.750 % due October 1, 2029 (1)

09/24/21 475 —

4.625 % due March 22, 2030

4 unchanged sentences

05/13/21 750 —

1.950 % due December 1, 2031

08/26/21 850 —

CSC Floating-rate Senior Notes:

6 unchanged sentences

Total CSC Senior Notes 17,768 9,881

TDA Fixed-rate Senior Notes:

TDA Holding Fixed-rate Senior Notes:

2.950 % due April 1, 2022

8 unchanged sentences

08/16/19 25 500

TDA Floating-rate Senior Notes:

TDA Holding Floating-rate Senior Notes:

Three-month LIBOR + 0.43 % due November 1, 2021

11/01/18 600 600

Total TDA Senior Notes 3,550 3,550

Total TDA Holding Senior Notes 1,563 3,550

Other financing 101 6

2 unchanged sentences

Total long-term debt $ 19,530 $ 13,632

(1) In the third quarter of 2021, we completed an offer to exchange certain senior notes issued by TDA Holding for senior notes issued by CSC.

Of the approximately $ 2.2 billion in aggregate principal amount of TDA Holding’s senior notes offered in the exchange, 90 %, or approximately $ 2.0 billion, were tendered and accepted.

The new senior notes issued by CSC have the same interest rates and maturity dates as the TDA Holding senior notes.

The $ 213 million not exchanged remained outstanding across four series of senior notes issued by TDA Holding.

The debt exchange was treated as a debt modification for accounting purposes.

THE CHARLES SCHWAB CORPORATION

1 unchanged sentence

(Tabular Amounts in Millions, Except Per Share Data, Ratios, or as Noted)

Annual maturities on all long-term debt outstanding at June 30, 2021 are as follows:

Annual maturities on all long-term debt outstanding at September 30, 2021 are as follows:

Thereafter 11,050

Total maturities 19,432

Unamortized premium — net 211

Unamortized discount— net 195

Debt issuance costs ( 97 )

3 unchanged sentences

Amounts available under these facilities are dependent on the amount of our First Mortgages, HELOCs, and the fair value of certain of their investment securities that are pledged as collateral.

As of June 30, 2021 and December 31, 2020, the collateral pledged provided a total borrowing capacity of $ 55.0 billion and $ 55.1 billion, respectively, of which no amounts were outstanding at the end of either period.

As of September 30, 2021 and December 31, 2020, the collateral pledged provided a total borrowing capacity of $ 63.6 billion and $ 55.1 billion, respectively, of which no amounts were outstanding at the end of either period.

As a condition of the FHLB borrowings, we are required to hold FHLB stock, which was recorded in other assets on the condensed consolidated balance sheets.

The investment in FHLB was $ 29 million at June 30, 2021 and December 31, 2020.

Our investment in FHLB stock was $ 29 million at September 30, 2021 and December 31, 2020.

Additionally, our banking subsidiaries have access to funding through the Federal Reserve discount window.

Amounts available are dependent upon the fair value of certain investment securities that are pledged as collateral.

As of June 30, 2021 and December 31, 2020, the collateral pledged provided total borrowing capacity of $ 9.5 billion and $ 7.9 billion, respectively, of which no amounts were outstanding at the end of either period.

CSC has the ability to issue commercial paper notes with maturities up to 270 days, and had $ 1.5 billion outstanding at June 30, 2021 and none at December 31, 2020.

As of September 30, 2021 and December 31, 2020, our collateral pledged provided total borrowing capacity of $ 9.9 billion and $ 7.9 billion, respectively, of which no amounts were outstanding at the end of either period.

CSC has the ability to issue commercial paper notes with maturities up to 270 days, and had $ 1.5 billion outstanding at September 30, 2021 and none at December 31, 2020.

CSB and Charles Schwab Premier Bank, SSB (CSPB) are members of the Federal Reserve.

As a condition of our Federal Reserve membership, we are required to hold Federal Reserve stock, which totaled $ 310 million and $ 191 million at June 30, 2021 and December 31, 2020, respectively.

TD Ameritrade Lines of Credit and Revolving Credit Facilities

As a condition of our Federal Reserve membership, we are required to hold Federal Reserve stock, which totaled $ 415 million and $ 191 million at September 30, 2021 and December 31, 2020, respectively.

TDAC Lines of Credit and Revolving Credit Facilities

TDAC maintains secured uncommitted lines of credit, under which TDAC borrows on either a demand or short-term basis and pledges client margin securities as collateral.

There was $ 2.0 billion outstanding under the secured uncommitted lines of credit as of June 30, 2021.

There was $ 1.5 billion outstanding under the secured uncommitted lines of credit as of September 30, 2021.

There were no borrowings outstanding under the secured uncommitted lines of credit as of December 31, 2020.

See Note 12 for additional information.

TDAC maintains one senior unsecured committed revolving credit facility as of June 30, 2021 with an aggregate borrowing capacity of $ 600 million which matures in April 2022.

Additionally, at December 31, 2020, TDAC maintained a $ 850 million unsecured committed revolving credit facility which matured on April 20, 2021 and was not renewed.

There were no borrowings outstanding under the TDAC senior revolving facilities as of June 30, 2021 and December 31, 2020.

TDAC maintains one senior unsecured committed revolving credit facility as of September 30, 2021 with an aggregate borrowing capacity of $ 600 million which matures in April 2022.

Additionally, at December 31, 2020, TDAC maintained an $ 850 million unsecured committed revolving credit facility which matured on April 20, 2021 and was not renewed.

There were no borrowings outstanding under the TDAC senior revolving facilities as of September 30, 2021 or December 31, 2020.

THE CHARLES SCHWAB CORPORATION

6 unchanged sentences

Under the Program, CSB purchases certain First Mortgages and HELOCs that are originated by Rocket Mortgage.

CSB purchased First Mortgages of $ 4.0 billion and $ 2.7 billion during the second quarters of 2021 and 2020, respectively, and $ 6.8 billion and $ 4.9 billion during the first six months of 2021 and 2020, respectively.

CSB purchased HELOCs with commitments of $ 114 million and $ 133 million during the second quarters of 2021 and 2020, respectively, and $ 213 million and $ 240 million during the first six months of 2021 and 2020, respectively.

CSB purchased First Mortgages of $ 3.6 billion and $ 1.6 billion during the third quarters of 2021 and 2020, respectively, and $ 10.4 billion and $ 6.5 billion during the first nine months of 2021 and 2020, respectively.

CSB purchased HELOCs with commitments of $ 112 million and $ 122 million during the third quarters of 2021 and 2020, respectively, and $ 325 million and $ 362 million during the first nine months of 2021 and 2020, respectively.

The Company’s commitments to extend credit on bank lines of credit and to purchase First Mortgages are as follows:

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

Commitments to extend credit related to unused HELOCs, PALs, and other lines of credit $ 6,559 $ 8,141

4 unchanged sentences

We partially satisfy the margin requirements by arranging unsecured standby letter of credit agreements (LOCs), in favor of the Options Clearing Corporation, which are issued by several banks.

At June 30, 2021, the aggregate face amount of these LOCs totaled $ 15 million.

There were no funds drawn under any of these LOCs at June 30, 2021.

At September 30, 2021, the aggregate face amount of these LOCs totaled $ 15 million.

There were no funds drawn under any of these LOCs at September 30, 2021.

In connection with its securities lending activities, Schwab is required to provide collateral to certain brokerage clients.

14 unchanged sentences

The IDA agreement creates responsibilities of the Company and certain contingent obligations.

Pursuant to the IDA agreement, cash held in eligible brokerage client accounts must be swept off-balance sheet to money market deposit accounts at the TD Depository Institutions.

Pursuant to the IDA agreement, cash held in eligible brokerage client accounts are swept off-balance sheet to money market deposit accounts at the TD Depository Institutions.

Schwab provides marketing, recordkeeping and support services to the TD Depository Institutions with respect to the money market deposit accounts for which Schwab receives an aggregate monthly fee, determined by reference to certain yields, less a service fee on client cash deposits held at the TD Depository Institutions, FDIC insurance assessments, and interest on deposits paid to clients.

Though unlikely, in the event the sweep arrangement fee computation were to result in a negative amount in any given month, Schwab would be required to pay the TD Depository Institutions.

Pursuant to the IDA agreement, Schwab moved $ 8.7 billion of uninsured IDA balances out of the IDA sweep program in July 2021.

The IDA agreement also provides that, starting July 1, 2021, Schwab has the option to migrate up to $ 10 billion of IDA balances every 12 months to Schwab’s balance sheet, subject to certain limitations and adjustments.

Inclusive of the uninsured balances and transfers relating to certain international accounts, IDA balances moved to Schwab’s balance sheet totaled $ 9.9 billion through July 31, 2021.

The Company’s ability to migrate IDA balances to its balance sheet is dependent upon

The IDA agreement provides that, as of July 1, 2021, Schwab has the option to migrate up to $ 10 billion of IDA balances every 12 months to Schwab’s balance sheet, subject to certain limitations and adjustments.

The Company’s ability to migrate IDA balances to its balance sheet is dependent upon multiple factors including having sufficient capital levels to sustain these incremental deposits and certain binding limitations specified in the IDA agreement, including the requirement that Schwab can only move IDA balances designated as floating-rate obligations.

In addition, Schwab also must maintain a minimum $ 50 billion

THE CHARLES SCHWAB CORPORATION

1 unchanged sentence

(Tabular Amounts in Millions, Except Per Share Data, Ratios, or as Noted)

multiple factors including having sufficient capital levels to sustain these incremental deposits and certain binding limitations specified in the IDA agreement, including the requirement that Schwab can only move IDA balances designated as floating-rate obligations.

In addition, Schwab also must maintain a minimum $ 50 billion IDA balance through June 2031, and at least 80 % of the IDA balances must be designated as fixed-rate obligations through June 2026.

The total ending IDA balance was $ 150.0 billion as of June 30, 2021, $ 154.1 billion as of December 31, 2020, and $ 144.6 billion as of October 5, 2020.

IDA balance through June 2031, and at least 80 % of the IDA balances must be designated as fixed-rate obligations through June 2026.

The total ending IDA balance was $ 142.0 billion as of September 30, 2021 and $ 154.1 billion as of December 31, 2020.

If IDA balances were to decline below the required IDA balance minimum, Schwab could be required to direct additional sweep cash from its balance sheet to the IDA program.

Through September 30, 2021, Schwab had moved $ 10.0 billion of IDA balances to its balance sheet, which included uninsured balances and certain international account balances.

Legal contingencies:

17 unchanged sentences

As disclosed on July 1, 2021, the Company has been responding to an enforcement investigation by the SEC arising from a compliance examination and concerning historic disclosures related to the Schwab Intelligent Portfolios digital advisory solution.

In connection with a tentative agreement reached with SEC staff to resolve the matter, second quarter 2021 financial results included a liability and related non-deductible charge of $ 200 million.

In connection with a tentative agreement reached with SEC staff to resolve the matter, financial results for the first nine months of 2021 included a liability and related non-deductible charge of approximately $ 200 million.

Completion of any settlement is always contingent on a vote of the Commission.

9 unchanged sentences

Schwab and the other defendants consider the allegations to be entirely without merit and on April 29, 2021, filed motions to dismiss the remaining claims in the lawsuit.

THE CHARLES SCHWAB CORPORATION

Notes to Condensed Consolidated Financial Statements

(Tabular Amounts in Millions, Except Per Share Data, Ratios, or as Noted)

Crago Order Routing Litigation :

1 unchanged sentence

District Court for the Northern District of California on behalf of a putative class of customers executing equity orders through CS&Co.

The lawsuit names CS&Co and CSC as defendants and alleges that an agreement under which CS&Co routed orders to UBS Securities LLC between July 13, 2011 and December 31, 2014 violated CS&Co’s duty to seek best execution.

THE CHARLES SCHWAB CORPORATION

Notes to Condensed Consolidated Financial Statements

(Tabular Amounts in Millions, Except Per Share Data, Ratios, or as Noted)

names CS&Co and CSC as defendants and alleges that an agreement under which CS&Co routed orders to UBS Securities LLC between July 13, 2011 and December 31, 2014 violated CS&Co’s duty to seek best execution.

Plaintiffs seek unspecified damages, interest, injunctive and equitable relief, and attorneys’ fees and costs.

Defendants consider the allegations to be entirely without merit and have been vigorously contesting the lawsuit.

After a first amended complaint was dismissed with leave to amend, plaintiffs filed a second amended complaint on August 14, 2017.

Defendants again moved to dismiss, and in a decision issued December 5, 2017, the court denied the motion.

Defendants have answered the complaint to deny all allegations, and are vigorously contesting the lawsuit.

Plaintiffs filed a motion for class certification on April 30, 2021, which defendants are opposing.

Plaintiffs filed a motion for class certification on April 30, 2021, and in a decision on October 27, 2021, the court denied the motion and held that certification of a class action is inappropriate.

Ford Order Routing Litigation :

4 unchanged sentences

Plaintiffs seek unspecified damages and injunctive and other relief.

On September 14, 2018, the District Court granted plaintiff’s motion for class certification, and defendants petitioned for an immediate appeal of the District Court’s class certification decision.

Defendants consider the allegations to be entirely without merit and have been vigorously contesting the lawsuit.

On September 14, 2018, the District Court granted plaintiffs’ motion for class certification, and defendants petitioned for an immediate appeal of the District Court’s class certification decision.

On April 23, 2021, the U.S.

Court of Appeals, 8th Circuit, issued a decision reversing the District Court’s certification on a class and remanding the case back to the District Court for further proceedings.

Defendants are vigorously contesting the lawsuit, and the Company is unable to predict the outcome or any potential loss that could result.

Court of Appeals, 8th Circuit, issued a decision reversing the District Court’s certification of a class and remanding the case back to the District Court for further proceedings.

Plaintiffs have renewed their motion for class certification, and a motion by defendants to compel the case to arbitration is pending with the District Court.

Exit and Other Related Liabilities

8 unchanged sentences

More specifically, factors that could cause variability in our expected acquisition and integration-related costs include the level of employee attrition, workforce redeployment from eliminated positions into open roles, changes in the levels of client activity, and increased real estate-related exit cost variability due to the effects of the COVID-19 pandemic.

Inclusive of costs recognized through June 30, 2021, Schwab currently expects to incur total exit and other related costs for the integration of TD Ameritrade ranging from $ 650 million to $ 1 billion, consisting of employee compensation and benefits, facility exit costs, and certain other costs.

During the three and six months ended June 30, 2021, the Company incurred pre-tax charges of $ 47 million and $ 90 million for acquisition-related exit costs, respectively.

Inclusive of costs recognized through September 30, 2021, Schwab currently expects to incur total exit and other related costs for the integration of TD Ameritrade ranging from $ 650 million to $ 1 billion, consisting of employee compensation and benefits, facility exit costs, and certain other costs.

During the three and nine months ended September 30, 2021, the Company recognized $ 9 million and $ 99 million of acquisition-related exit costs, respectively.

The Company expects the remaining exit and other related costs will be incurred and charged to expense over the next 24 to 36 months;

4 unchanged sentences

(Tabular Amounts in Millions, Except Per Share Data, Ratios, or as Noted)

The following is a summary of the activity in the Company’s exit and other related liabilities for the three and six months ended June 30, 2021:

The following is a summary of the activity in the Company’s exit and other related liabilities for the three and nine months ended September 30, 2021:

Investor Services

1 unchanged sentence

Employee Compensation and Benefits Total

Balance at March 31, 2021 $ 56 $ 15 $ 71

Costs incurred and charged to expense (1)

Costs paid or otherwise settled ( 35 ) ( 9 ) ( 44 )

Balance at June 30, 2021 $ 56 $ 15 $ 71

Amounts recognized in expense (1)

Costs paid or otherwise settled ( 15 ) ( 3 ) ( 18 )

Balance at September 30, 2021 (2)

$ 47 $ 13 $ 60

Balance at December 31, 2020 $ 86 $ 24 $ 110

Costs incurred and charged to expense (1)

Amounts recognized in expense (1)

Costs paid or otherwise settled ( 102 ) ( 27 ) ( 129 )

Balance at June 30, 2021 (2)

Balance at September 30, 2021 (2)

$ 47 $ 13 $ 60

(1) Costs incurred for severance pay and other termination benefits, as well as retention costs, are included in employee compensation and benefits on the condensed consolidated statements of income.

(1) Amounts recognized in expense for severance pay and other termination benefits, as well as retention costs, are included in compensation and benefits on the condensed consolidated statements of income.

The three months ended September 30, 2021 includes a reduction of the liability resulting from changes in estimates of $ 7 million and $ 2 million in Investor Services and Advisor Services, respectively.

(2) Included in accrued expenses and other liabilities on the condensed consolidated balance sheets.

The following table summarizes the exit and other related costs incurred for the three and six months ended June 30, 2021:

The following table summarizes the exit and other related costs recognized in expense for the three and nine months ended September 30, 2021:

Investor Services Advisor Services

Three Months Ended June 30, Employee Compensation and Benefits Facility Exit Costs (1)

Three Months Ended September 30, Employee Compensation and Benefits Facility Exit Costs (1)

Investor Services Total Employee Compensation and Benefits Facility Exit Costs (1)

4 unchanged sentences

Investor Services Advisor Services

Six Months Ended June 30, Employee Compensation and Benefits Facility Exit Costs (1)

Nine Months Ended September 30, Employee Compensation and Benefits Facility Exit Costs (1)

Investor Services Total Employee Compensation and Benefits Facility Exit Costs (1)

10 unchanged sentences

(Tabular Amounts in Millions, Except Per Share Data, Ratios, or as Noted)

The following table summarizes the cumulative exit and other related costs incurred from October 6, 2020 through June 30, 2021:

The following table summarizes the cumulative exit and other related costs incurred from October 6, 2020 through September 30, 2021:

Investor Services Advisor Services

17 unchanged sentences

For Schwab to repledge or sell this collateral, we would be required to deposit cash and/or securities of an equal amount into our segregated reserve bank accounts in order to meet our segregated cash and investment requirement.

Schwab’s resale agreements as of June 30, 2021 and December 31, 2020 were not subject to master netting arrangements.

Schwab’s resale agreements as of September 30, 2021 and December 31, 2020 were not subject to master netting arrangements.

Securities lending:

5 unchanged sentences

We also borrow securities from other broker-dealers to fulfill short sales by brokerage clients and deliver cash to the lender in exchange for the securities.

The fair value of these borrowed securities was $ 1.1 billion and $ 852 million at June 30, 2021 and December 31, 2020, respectively.

The fair value of these borrowed securities was $ 867 million and $ 852 million at September 30, 2021 and December 31, 2020, respectively.

Our securities lending transactions are subject to enforceable master netting arrangements with other broker-dealers;

13 unchanged sentences

Offsetting Collateral

June 30, 2021

September 30, 2021

Resale agreements (1)

19 unchanged sentences

(2) Actual collateral was greater than or equal to the value of the related assets.

At June 30, 2021 and December 31, 2020, the fair value of collateral received in connection with resale agreements that are available to be repledged or sold was $ 13.3 billion and $ 15.2 billion, respectively.

At September 30, 2021 and December 31, 2020, the fair value of collateral received in connection with resale agreements that are available to be repledged or sold was $ 13.9 billion and $ 15.2 billion, respectively.

(3) Included in other assets in the condensed consolidated balance sheets.

(4) Included in accrued expenses and other liabilities in the condensed consolidated balance sheets.

The cash collateral received from counterparties under securities lending transactions was equal to or greater than the market value of the securities loaned at June 30, 2021 and December 31, 2020.

The cash collateral received from counterparties under securities lending transactions was equal to or greater than the market value of the securities loaned at September 30, 2021 and December 31, 2020.

(5) Securities loaned are predominantly comprised of equity securities held in client brokerage accounts with overnight and continuous remaining contractual maturities.

4 unchanged sentences

The following table summarizes the fair value of client securities that were available, under such regulations, that could have been used as collateral, as well as the fair value of securities that we had pledged under such regulations and from securities borrowed transactions:

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

Fair value of client securities available to be pledged $ 114,171 $ 84,006

5 unchanged sentences

Collateral for short-term borrowings 1,680 —

Total collateral pledged $ 32,565 $ 23,018

Total collateral pledged to third parties $ 32,362 $ 23,018

Excludes amounts available and pledged for securities lending from fully-paid client securities.

The fair value of fully-paid client securities available and pledged was $ 207 million as of June 30, 2021 and $ 183 million as of December 31, 2020.

The fair value of fully-paid client securities available and pledged was $ 167 million as of September 30, 2021 and $ 183 million as of December 31, 2020.

(1) Securities pledged to fulfill client margin requirements for open option contracts established with the Options Clearing Corporation.

25 unchanged sentences

For a description of the fair value hierarchy and Schwab’s fair value methodologies, see Item 8 – Note 2 in the 2020 Form 10-K.

The Company did not adjust prices received from the primary independent third-party pricing service at June 30, 2021 or December 31, 2020.

The Company did not adjust prices received from the primary independent third-party pricing service at September 30, 2021 or December 31, 2020.

THE CHARLES SCHWAB CORPORATION

4 unchanged sentences

Liabilities recorded at fair value were not material, and therefore are not included in the following tables:

June 30, 2021 Level 1 Level 2 Level 3 Balance at

September 30, 2021 Level 1 Level 2 Level 3 Balance at

Cash equivalents:

12 unchanged sentences

state and municipal securities — 1,702 — 1,702

Foreign government agency securities — 1,408 — 1,408

Non-agency commercial mortgage-backed securities — 1,223 — 1,223

43 unchanged sentences

The following tables present the fair value hierarchy for other financial instruments:

June 30, 2021 Carrying

September 30, 2021 Carrying

Amount Level 1 Level 2 Level 3 Balance at

44 unchanged sentences

The share repurchase authorization does not have an expiration date.

There were no repurchases of CSC’s common stock under this authorization during the six months ended June 30, 2021 and 2020.

There were no repurchases of CSC’s common stock under this authorization during the nine months ended September 30, 2021 and 2020.

The Company’s preferred stock issued and outstanding is as follows:

Liquidation Preference Per Share Dividend Rate in Effect at June 30, 2021 Earliest Redemption Date Date at Which Dividend Rate Resets or Becomes Floating Reset / Floating Rate Margin Over Reset / Floating Rate

Liquidation Preference Per Share Dividend Rate in Effect at September 30, 2021 Earliest Redemption Date Date at Which Dividend Rate Resets or Becomes Floating Reset / Floating Rate Margin Over Reset / Floating Rate

Shares Issued and Outstanding (in thousands) at Carrying Value at

September 30,

December 31, 2020 (1)

June 30, 2021 December 31, 2020 Issue Date

September 30, 2021 December 31, 2020 Issue Date

— 600 $ 1,000 $ — $ 585 08/03/15 — — N/A N/A N/A

20 unchanged sentences

Dividends declared on the Company’s preferred stock are as follows:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

28 unchanged sentences

The components of other comprehensive income (loss) are as follows:

Three Months Ended June 30, Before

Three Months Ended September 30, Before

Effect Net of

3 unchanged sentences

Other reclassifications included in other revenue — — — ( 3 ) 1 ( 2 )

Other — — — 1 — 1

Other comprehensive income (loss) $ ( 1,519 ) $ 364 $ ( 1,155 ) $ 94 $ ( 19 ) $ 75

Six Months Ended June 30, Before

Nine Months Ended September 30, Before

Effect Net of

6 unchanged sentences

AOCI balances are as follows:

Balance at March 31, 2020 $ 3,995

Balance at June 30, 2020 $ 5,611

Available for sale securities:

Net unrealized gain (loss), excluding transfers to available for sale from held to maturity 77

Other reclassifications included in other revenue ( 2 )

Balance at September 30, 2020 $ 5,686

Balance at June 30, 2021 $ 2,408

Balance at March 31, 2021 $ 878

Available for sale securities:

Net unrealized gain (loss) ( 1,155 )

Other reclassifications included in other revenue ( 2 )

Balance at June 30, 2021 $ 2,408

Balance at September 30, 2021 $ 1,253

THE CHARLES SCHWAB CORPORATION

5 unchanged sentences

Net unrealized gain on securities transferred to available for sale from held to maturity (1)

Balance at June 30, 2020 $ 5,611

Other reclassifications included in other revenue ( 2 )

Balance at September 30, 2020 $ 5,686

Balance at December 31, 2020 $ 5,394

2 unchanged sentences

Other reclassifications included in other revenue ( 10 )

Balance at June 30, 2021 $ 2,408

Balance at September 30, 2021 $ 1,253

(1) On January 1, 2020, the Company transferred all of its investment securities designated as HTM to the AFS category.

5 unchanged sentences

Earnings Per Common Share

For the three and six months ended June 30, 2021, the Company had voting and nonvoting common stock outstanding.

For the three and nine months ended September 30, 2021, the Company had voting and nonvoting common stock outstanding.

Since the rights of the voting and nonvoting common stock are identical, except with respect to voting, the net income of the Company has been allocated on a proportionate basis to the two classes.

3 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

Stock Common Stock – Nonvoting (1)

Stock Nonvoting

Common Stock (1)

Stock Nonvoting

Common Stock (1)

Stock Nonvoting

Common Stock (1)

Stock Nonvoting

Common Stock (1)

Basic earnings per share:

21 unchanged sentences

(1) Nonvoting common stock was issued in conjunction with the October 6, 2020 acquisition of TD Ameritrade.

As such, nonvoting common stock is not applicable for the basic and diluted EPS computations for the three and six months ended June 30, 2020.

As such, nonvoting common stock is not applicable for the basic and diluted EPS computations for the three and nine months ended September 30, 2020.

(2) Includes preferred stock dividends and undistributed earnings and dividends allocated to non-vested restricted stock units.

(3) Antidilutive stock options and restricted stock units excluded from the calculation of diluted EPS totaled 14 million and 15 million for the three and six months ended June 30, 2021, respectively, and 19 million for the three and six months ended June 30, 2020.

(3) Antidilutive stock options and restricted stock units excluded from the calculation of diluted EPS totaled 13 million and 15 million for the three and nine months ended September 30, 2021, respectively, and 19 million and 20 million for the three and nine months ended September 30, 2020, respectively.

N/A Not applicable.

3 unchanged sentences

Regulatory Requirements

At June 30, 2021, CSC and CSB met all of their respective capital requirements.

At September 30, 2021, CSC and CSB met all of their respective capital requirements.

The regulatory capital and ratios for CSC (consolidated) and CSB are as follows:

1 unchanged sentence

Well Capitalized Minimum Capital Requirement

June 30, 2021 Amount Ratio Amount Ratio Amount Ratio (1)

September 30, 2021 Amount Ratio Amount Ratio Amount Ratio (1)

Common Equity Tier 1 Risk-Based Capital $ 26,616 19.6 % N/A $ 6,117 4.5 %

7 unchanged sentences

Tier 1 Leverage 26,498 7.1 % 18,700 5.0 % 14,960 4.0 %

Supplementary Leverage Ratio 25,184 7.0 % N/A N/A 10,858 3.0 %

Supplementary Leverage Ratio 26,498 7.0 % N/A 11,384 3.0 %

December 31, 2020

8 unchanged sentences

Tier 1 Leverage 17,526 5.5 % 15,979 5.0 % 12,783 4.0 %

Supplementary Leverage Ratio 17,526 5.4 % N/A N/A 9,763 3.0 %

Supplementary Leverage Ratio 17,526 5.4 % N/A 9,763 3.0 %

(1) Under the Basel III capital rule, CSC and CSB are also required to maintain a capital conservation buffer and a countercyclical capital buffer above the regulatory minimum risk-based capital ratios.

1 unchanged sentence

If either buffer falls below the minimum requirement, the Company would be subject to limits on capital distributions and discretionary bonus payments to executive officers.

At June 30, 2021, the minimum capital requirement plus capital conservation buffer and countercyclical capital buffer for Common Equity Tier 1 Risk-Based Capital, Tier 1 Risk-Based Capital, and Total Risk-Based Capital ratios were 7.0%, 8.5%, and 10.5%, respectively.

At September 30, 2021, the minimum capital requirement plus capital conservation buffer and countercyclical capital buffer for Common Equity Tier 1 Risk-Based Capital, Tier 1 Risk-Based Capital, and Total Risk-Based Capital ratios were 7.0%, 8.5%, and 10.5%, respectively.

N/A Not applicable.

Based on its regulatory capital ratios at June 30, 2021, CSB is considered well capitalized (the highest category) under its respective regulatory capital rules.

There are no conditions or events since June 30, 2021 that management believes have changed CSB’s capital category.

At June 30, 2021, the balance sheets of CSPB and Charles Schwab Trust Bank (Trust Bank) consisted primarily of investment securities, and the entities held total assets of $ 33.6 billion and $ 11.9 billion, respectively.

Based on their regulatory capital ratios, at June 30, 2021, CSPB and Trust Bank are considered well capitalized under their respective regulatory capital rules.

Based on its regulatory capital ratios at September 30, 2021, CSB is considered well capitalized (the highest category) under its respective regulatory capital rules.

There are no conditions or events since September 30, 2021 that management believes have changed CSB’s capital category.

At September 30, 2021, the balance sheets of CSPB and Charles Schwab Trust Bank (Trust Bank) consisted primarily of investment securities, and the entities held total assets of $ 35.6 billion and $ 14.7 billion, respectively.

Based on their regulatory capital ratios, at September 30, 2021, CSPB and Trust Bank are considered well capitalized under their respective regulatory capital rules.

THE CHARLES SCHWAB CORPORATION

2 unchanged sentences

Net capital and net capital requirements for CS&Co, TDAC, and TD Ameritrade, Inc., are as follows:

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

Net capital $ 4,281 $ 3,117

11 unchanged sentences

Net capital in excess of required net capital $ 675 $ 350

Pursuant to the SEC’s Customer Protection Rule and other applicable regulations, Schwab had cash and investments segregated for the exclusive benefit of clients at June 30, 2021.

Pursuant to the SEC’s Customer Protection Rule and other applicable regulations, Schwab had cash and investments segregated for the exclusive benefit of clients at September 30, 2021.

The SEC’s Customer Protection Rule requires broker-dealers to segregate client fully-paid securities and cash balances not collateralizing margin positions and not swept to money market funds or bank deposit accounts.

15 unchanged sentences

Investor Services Advisor Services Total

Three Months Ended June 30, 2021 2020 2021 2020 2021 2020

Three Months Ended September 30, 2021 2020 2021 2020 2021 2020

Net interest revenue $ 1,530 $ 948 $ 500 $ 395 $ 2,030 $ 1,343

7 unchanged sentences

Investor Services Advisor Services Total

Six Months Ended June 30, 2021 2020 2021 2020 2021 2020

Nine Months Ended September 30, 2021 2020 2021 2020 2021 2020

Net interest revenue $ 4,462 $ 3,028 $ 1,426 $ 1,276 $ 5,888 $ 4,304

8 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 3. Quantitative and Qualitative Disclosures About Market Risk