What changed in this filing

/stocks — the workspaceLOADING

Item 3. Quantitative and Qualitative Disclosures About Market Risk

2022-05-09 compared with 2021-11-08 · 340 added, 426 removed, 996 unchanged (43% of the section changed)

7 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

Interest revenue $ 2,319 $ 2,015

2 unchanged sentences

Asset management and administration fees (1)

1,101 860 3,164 2,488

Trading revenue 963 1,216

24 unchanged sentences

Diluted $ .67 $ .73

(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.

(1) Includes fee waivers of $ 54 million and $ 78 million for the three months ended March 31, 2022 and 2021, respectively.

(2) 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

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

Net income $ 1,402 $ 1,484

1 unchanged sentence

Change in net unrealized gain (loss) on available for sale securities:

Net unrealized gain (loss) ( 1,519 ) 97 ( 5,420 ) 7,361

Net unrealized gain (loss) excluding transfers to held to maturity ( 13,135 ) ( 5,917 )

Reclassification of net unrealized loss transferred to held to maturity 2,429 —

Other reclassifications included in other revenue ( 12 ) ( 10 )

Other — — — 1

Change in net unrealized gain (loss) on held to maturity securities:

Reclassification of net unrealized loss transferred from available for sale ( 2,429 ) —

Amortization of amounts previously recorded upon transfer to held to maturity

from available for sale 92 —

Other comprehensive income (loss), before tax ( 13,055 ) ( 5,927 )

6 unchanged sentences

(In Millions, Except Per Share and Share Amounts)

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

Cash and cash equivalents $ 91,126 $ 62,975

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

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

agreements of $ 14,011 at March 31, 2022 and $ 13,096 at December 31, 2021)

54,445 53,949

Receivables from brokerage clients — net 84,070 90,565

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

Available for sale securities (amortized cost of $ 284,195 at March 31, 2022 and

$ 391,482 at December 31, 2021)

272,049 390,054

Held to maturity securities 105,286 —

Bank loans — net 37,207 34,636

14 unchanged sentences

aggregate liquidation preference of $ 10,850

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

and $ 10,100 at March 31, 2022 and December 31, 2021, respectively

Common stock — 3 billion shares authorized;

$ .01 par value per share;

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

1,994,895,180 shares issued at March 31, 2022 and December 31, 2021

Nonvoting common stock — 300 million shares authorized;

$ .01 par value per share;

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

79,293,695 shares issued at March 31, 2022 and December 31, 2021

Additional paid-in capital 26,826 26,741

Retained earnings 26,895 25,992

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

Treasury stock, at cost — 178,779,573 shares at March 31, 2022 and 180,959,274

shares at December 31, 2021

12 unchanged sentences

Shares Amount Shares Amount

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

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

Dividends declared on common stock — $ .18

— — — — — — ( 234 ) — — ( 234 )

Stock option exercises and other — — — — — ( 3 ) — 9 — 6

Share-based compensation — — — — — 32 — — — 32

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

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

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

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

Dividends declared on common stock — $ .18

— — — — — — ( 342 ) — — ( 342 )

Stock option exercises and other — — — — — ( 13 ) — 31 — 18

Share-based compensation — — — — — 43 — — — 43

Other — — — — — 17 — ( 2 ) — 15

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,

at cost Total

Shares Amount Shares Amount

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

8 unchanged sentences

Other — — — — — 8 — ( 13 ) — ( 5 )

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

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

Balance at December 31, 2021 $ 9,954 1,995 $ 20 79 $ 1 $ 26,741 $ 25,992 $ ( 5,338 ) $ ( 1,109 ) $ 56,261

2 unchanged sentences

Issuance of preferred stock, net 740 — — — — — — — — 740

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

Dividends declared on preferred stock — — — — — — ( 118 ) — — ( 118 )

4 unchanged sentences

Other — — — — — 24 — ( 36 ) — ( 12 )

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

Balance at March 31, 2022 $ 10,694 1,995 $ 20 79 $ 1 $ 26,826 $ 26,895 $ ( 5,293 ) $ ( 11,045 ) $ 48,098

See Notes to the Condensed Consolidated Financial Statements .

2 unchanged sentences

(in Millions)

Nine Months Ended

September 30,

Three Months Ended

Cash Flows from Operating Activities

5 unchanged sentences

Provision (benefit) for deferred income taxes ( 19 ) ( 16 )

Premium amortization, net, on available for sale securities 1,784 1,012

Other 246 250

Premium amortization, net, on available for sale and held to maturity securities 486 624

Net change in:

9 unchanged sentences

Principal payments on available for sale securities 16,892 23,909

Principal payments on held to maturity securities 3,505 —

Net change in bank loans ( 2,493 ) ( 1,780 )

Cash acquired in acquisitions, net of cash paid — 2,756

Purchases of equipment, office facilities, and property ( 296 ) ( 186 )

Purchases of Federal Home Loan Bank stock — ( 12 )

Purchases of Federal Reserve stock ( 27 ) ( 10 )

3 unchanged sentences

Net change in bank deposits 22,049 11,876

Proceeds from secured lines of credit 2,000 —

Repayment of secured lines of credit ( 500 ) —

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

Proceeds from commercial paper and secured lines of credit 1,148 3,250

Repayment of commercial paper and secured lines of credit ( 1,771 ) ( 750 )

Issuance of long-term debt 2,971 3,970

Repayment of long-term debt ( 1,215 ) ( 700 )

Net proceeds from preferred stock offerings 740 2,806

Redemption of preferred stock ( 600 ) —

Dividends paid ( 509 ) ( 445 )

10 unchanged sentences

Continued from previous page.

Nine Months Ended

September 30,

Three Months Ended

Supplemental Cash Flow Information

Non-cash investing activity:

Securities transferred from held to maturity to available for sale, at fair value $ — $ 136,099

Securities transferred from available for sale to held to maturity, at fair value $ 108,805 $ —

Securities purchased during the period but settled after period end $ 15 $ —

Additions of equipment, office facilities, and property $ 7 $ 76

Changes in accrued equipment, office facilities, and property purchases $ ( 87 ) $ 23

Other Supplemental Cash Flow Information:

5 unchanged sentences

Leased assets obtained in exchange for new finance lease liabilities $ 5 $ 108

September 30, 2021 September 30, 2020

March 31, 2022 March 31, 2021

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

11 unchanged sentences

The Charles Schwab Corporation (CSC) is a savings and loan holding company.

Incorporated in 1986, CSC engages, through its subsidiaries, in wealth management, securities brokerage, banking, asset management, custody, and financial advisory services.

CSC engages, through its subsidiaries (collectively referred to as Schwab or the Company), in wealth management, securities brokerage, banking, asset management, custody, and financial advisory services.

Principal business subsidiaries of CSC include the following:

13 unchanged sentences

These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto, included in Schwab’s 2021 Form 10-K.

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;

and futures and foreign exchange trade execution services through its futures commission merchant (FCM) and forex dealer member (FDM) subsidiary.

Our consolidated financial statements include the results of operations and financial condition of TD Ameritrade beginning on October 6, 2020.

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

The significant accounting policies are included in Note 2 in the 2021 Form 10-K.

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 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.

There have been no significant changes to these accounting policies during the first three months of 2022.

THE CHARLES SCHWAB CORPORATION

1 unchanged sentence

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

Business Acquisitions

TD Ameritrade

On October 6, 2020, Schwab completed its previously announced acquisition of TD Ameritrade for $ 21.8 billion in stock.

As a result of the acquisition, TDA Holding became a wholly-owned subsidiary of CSC.

In exchange for each share of TD Ameritrade common stock, TD Ameritrade stockholders received 1.0837 shares of CSC common stock, except for TD Bank and its affiliates which received a portion in nonvoting common stock.

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 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 those amounts are now final.

Pro Forma Financial Information (Unaudited)

The following table presents unaudited pro forma financial information as if the TD Ameritrade acquisition had occurred on January 1, 2019.

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 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.

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

Three Months Ended

September 30, 2020 Nine Months Ended

September 30, 2020

Total net revenues $ 4,107 $ 12,257

Net income 1,224 3,589

On May 26, 2020, the Company completed its acquisition of the assets of USAA-IMCO for $ 1.6 billion in cash.

The Company finalized the valuation of the assets acquired and liabilities assumed in the acquisition in 2020.

For details surrounding the Company’s purchase accounting for USAA-IMCO, see Note 3 of the 2020 Form 10-K.

Pro Forma Financial Information (Unaudited)

The following table presents unaudited pro forma financial information as if the USAA-IMCO acquisition had occurred on January 1, 2019.

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 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

September 30, 2020 Nine Months Ended

September 30, 2020

Total net revenues $ 2,448 $ 7,618

Net income 613 1,949

New Accounting Standards

Adoption of New Accounting Standards

The Company did not adopt any material new accounting standards during the three months ended March 31, 2022.

New Accounting Standards Not Yet Adopted

Standard Description Required Date of Adoption Effects on the Financial Statements or Other Significant Matters

Accounting Standards Update (ASU) 2022-02, “Financial Instruments—Credit Losses (Topic 326):

Troubled Debt Restructurings and Vintage Disclosures” Troubled Debt Restructurings (TDRs)

Eliminates the accounting guidance for TDRs.

Rather than applying the specific guidance for TDRs, creditors will apply the recognition and measurement guidance for loan refinancings and restructurings to determine whether a modification results in a new loan or a continuation of an existing loan.

The guidance requires enhanced disclosures for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty.

Vintage Disclosures

Requires that an entity disclose current-period gross writeoffs by year of origination for financing receivables and net investments in leases within the scope of Subtopic 326-20,

Financial Instruments—Credit Losses—Measured at Amortized Cost.

Adoption provides for prospective application, with an option to apply the modified retrospective transition method for the change in recognition and measurement of TDRs.

January 1, 2023 The Company is evaluating the impact of this guidance on its financial statements.

THE CHARLES SCHWAB CORPORATION

5 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

Net interest revenue

Cash and cash equivalents $ 34 $ 7

Cash and investments segregated 15 10

Receivables from brokerage clients 626 563

Available for sale securities 947 1,091

Held to maturity securities 378 —

Bank loans 187 139

Securities lending revenue 129 204

Other interest revenue 3 1

Interest revenue 2,319 2,015

Bank deposits ( 16 ) ( 13 )

Payables to brokerage clients ( 2 ) ( 2 )

Short-term borrowings ( 4 ) —

Long-term debt ( 108 ) ( 85 )

Securities lending expense ( 7 ) ( 5 )

Other interest expense 1 1

Interest expense ( 136 ) ( 104 )

3 unchanged sentences

Advice solutions 496 468

Other 87 64 241 189

Asset management and administration fees 1,068 1,016

9 unchanged sentences

The recognition of revenue is not impacted by the operating segment in which revenue is generated.

THE CHARLES SCHWAB CORPORATION

Notes to Condensed Consolidated Financial Statements

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

Contract balances

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.

Substantially all receivables from contracts with customers within the scope of ASC 606, Revenue From Contracts With Customers (ASC 606), are included in other assets on the condensed consolidated balance sheets, and totaled $ 652 million and $ 637 million at March 31, 2022 and December 31, 2021, respectively.

Schwab did not have any other significant contract assets or contract liability balances as of March 31, 2022 or December 31, 2021.

Unsatisfied performance obligations

5 unchanged sentences

Investment Securities

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

September 30, 2021 Amortized

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

March 31, 2022 Amortized

Available for sale securities

agency mortgage-backed securities $ 211,648 $ 279 $ 10,393 $ 201,534

Treasury securities 32,839 1 1,007 31,833

Asset-backed securities (1)

2 unchanged sentences

15,241 15 648 14,608

Treasury securities 11,518 14 55 11,477

state and municipal securities 1,604 10 38 1,576

1 unchanged sentence

Certificates of deposit 1,300 — 4 1,296

Foreign government agency securities 1,132 — 36 1,096

Commercial paper (3)

Other 323 — 1 322

Total available for sale securities $ 284,195 $ 328 $ 12,474 $ 272,049

Held to maturity securities

agency mortgage-backed securities $ 105,286 $ — $ 6,137 $ 99,149

Total held to maturity securities $ 105,286 $ — $ 6,137 $ 99,149

December 31, 2021 Amortized

Available for sale securities

agency mortgage-backed securities $ 335,803 $ 3,141 $ 4,589 $ 334,355

Treasury securities 21,394 13 125 21,282

Asset-backed securities (1)

2 unchanged sentences

12,310 143 109 12,344

Treasury securities 10,631 25 — 10,656

state and municipal securities 1,611 81 5 1,687

Foreign government agency securities 1,411 2 — 1,413

Non-agency commercial mortgage-backed securities 1,170 20 — 1,190

Certificates of deposit 1,000 — 1 999

Foreign government agency securities 425 — — 425

Commercial paper (3)

Other 22 4 — 26

Total available for sale securities $ 391,482 $ 3,481 $ 4,909 $ 390,054

(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 $ 1.3 billion at September 30, 2021.

(1) Approximately 51 % and 58 % of asset-backed securities held as of March 31, 2022 and December 31, 2021, respectively, were Federal Family Education Loan Program Asset-Backed Securities.

Asset-backed securities collateralized by credit card receivables represented approximately 28 % and 30 % of the asset-backed securities held as of March 31, 2022 and December 31, 2021, respectively.

(2) As of March 31, 2022 and December 31, 2021, approximately 37 % and 31 %, respectively, of the total AFS in corporate debt securities were issued by institutions in the financial services industry.

(3) Included in cash and cash equivalents on the condensed consolidated balance sheets, but excluded from this table is $ 4.6 billion of AFS commercial paper as of March 31, 2022 ( none as of December 31, 2021).

These holdings have maturities of three months or less and an aggregate market value equal to amortized cost.

In January 2022, the Company transferred $ 108.8 billion of U.S.

agency mortgage-backed securities with a total net unrealized loss at the time of transfer of $ 2.4 billion from the AFS category to the HTM category.

HTM securities, which the Company has the intent and ability to hold until maturity, are carried at amortized cost, net of any allowance for credit losses.

The allowance for credit losses represents expected credit losses over the remaining expected life of HTM securities.

The Company measures credit losses as the difference between the securities amortized cost basis and the net amount expected to be collected.

The Company’s accounting policy excludes accrued interest when estimating any allowance for credit losses on HTM securities.

HTM securities are placed on nonaccrual status on a timely basis and any accrued interest receivable is reversed through interest income.

For certain securities, the Company is not required to estimate an allowance for credit losses because expected nonpayment of the amortized cost basis is zero based on historical credit loss information adjusted for current conditions and reasonable and supportable forecasts.

THE CHARLES SCHWAB CORPORATION

1 unchanged sentence

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

At March 31, 2022, our banking subsidiaries had pledged securities with a fair value of $ 53.0 billion as collateral to secure borrowing capacity on secured credit facilities with the Federal Home Loan Bank (FHLB) (see Note 8).

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 $ 10.3 billion as collateral for this facility at March 31, 2022.

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

The fair value of these pledged securities was $ 1.6 billion at March 31, 2022.

Securities with unrealized losses, aggregated by category and period of continuous unrealized loss, of AFS investment securities are as follows:

Less than 12 months 12 months or longer Total

September 30, 2021 Fair

March 31, 2022 Fair

Value Unrealized

3 unchanged sentences

agency mortgage-backed securities $ 122,317 $ 5,606 $ 52,554 $ 4,787 $ 174,871 $ 10,393

Corporate debt securities 3,462 76 52 3 3,514 79

Asset-backed securities 2,893 21 2,848 23 5,741 44

Treasury securities 30,157 988 202 19 30,359 1,007

Asset-backed securities 11,869 282 2,984 57 14,853 339

Corporate debt securities 10,535 429 1,804 219 12,339 648

state and municipal securities 761 33 38 5 799 38

Non-agency commercial mortgage-backed securities 281 8 — — 281 8

Certificates of deposit 1,296 4 — — 1,296 4

Foreign government agency securities 1,096 36 — — 1,096 36

Other 299 1 — — 299 1

Total $ 178,611 $ 7,387 $ 57,582 $ 5,087 $ 236,193 $ 12,474

1 unchanged sentence

agency mortgage-backed securities $ 186,955 $ 3,216 $ 38,007 $ 1,373 $ 224,962 $ 4,589

Treasury securities 16,658 125 21 — 16,679 125

Asset-backed securities 6,093 58 2,708 22 8,801 80

Corporate debt securities 4,713 99 197 10 4,910 109

Certificates of deposit 799 1 — — 799 1

state and municipal securities 191 4 5 1 196 5

Total $ 215,409 $ 3,503 $ 40,938 $ 1,406 $ 256,347 $ 4,909

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

At March 31, 2022, 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 2021 Form 10-K.

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 nine months ended September 30, 2021, or the year ended December 31, 2020.

No amounts were recognized as credit loss expense and no securities were written down to fair value through earnings for the three months ended March 31, 2022 and the year ended December 31, 2021.

None of the Company’s AFS securities held as of March 31, 2022 and December 31, 2021 had an allowance for credit losses.

All HTM securities as of March 31, 2022 were U.S.

agency mortgage-backed securities and therefore had no allowance for credit losses because expected nonpayment of the amortized cost basis is zero.

The Company had $ 674 million of accrued interest for AFS and HTM securities as of March 31, 2022 and $ 683 million of accrued interest receivable for AFS securities as of December 31, 2021.

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

There were no writeoffs of accrued interest receivable on AFS and HTM securities during the three months ended March 31, 2022, or for AFS securities for the year ended December 31, 2021.

THE CHARLES SCHWAB CORPORATION

3 unchanged sentences

As borrowers may have the right to call or prepay certain obligations underlying our investment securities, actual maturities may differ from the scheduled contractual maturities presented below.

The maturities of AFS investment securities are as follows:

September 30, 2021 Within

The maturities of AFS and HTM investment securities are as follows:

March 31, 2022 Within

1 year After 1 year

3 unchanged sentences

agency mortgage-backed securities $ 2,728 $ 15,269 $ 40,423 $ 143,114 $ 201,534

Treasury securities 5,250 24,070 2,513 — 31,833

Asset-backed securities — 6,647 2,906 8,870 18,423

Corporate debt securities 1,157 9,705 3,746 — 14,608

Treasury securities 4,051 2,576 4,850 — 11,477

state and municipal securities 54 117 955 450 1,576

1 unchanged sentence

Certificates of deposit 500 796 — — 1,296

Foreign government agency securities 100 996 — — 1,096

Commercial paper 200 — — — 200

Other 100 199 — 23 322

1 unchanged sentence

Total amortized cost $ 10,094 $ 59,019 $ 53,598 $ 161,484 $ 284,195

Held to maturity securities

agency mortgage-backed securities $ 653 $ 5,099 $ 20,215 $ 73,182 $ 99,149

Total fair value $ 653 $ 5,099 $ 20,215 $ 73,182 $ 99,149

Total amortized cost $ 655 $ 5,282 $ 21,473 $ 77,876 $ 105,286

Proceeds and gross realized gains and losses from sales of AFS investment securities are as follows:

Three Months Ended

September 30, Nine Months Ended September 30,

2021 2020 2021 2020

Proceeds $ 9,521 $ 6,605

6 unchanged sentences

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

September 30, 2021 Current 30-59 days

March 31, 2022 Current 30-59 days

past due 60-89 days

22 unchanged sentences

Total bank loans $ 34,564 $ 46 $ 9 $ 35 $ 90 $ 34,654 $ 18 $ 34,636

(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.

(1) First Mortgages and HELOCs include unamortized premiums and discounts and direct origination costs of $ 94 million and $ 91 million at March 31, 2022 and December 31, 2021, respectively.

(2) First Mortgage and HELOC portfolios concentrated in California as of March 31, 2022 and December 31, 2021 were 45 % and 46 %, respectively.

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 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).

(3) There were no loans accruing interest that were contractually 90 days or more past due at March 31, 2022 or December 31, 2021.

At March 31, 2022, 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 8).

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

September 30, 2021 September 30, 2020

March 31, 2022 March 31, 2021

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

6 unchanged sentences

Balance at end of period $ 23 $ 2 $ 25 $ 3 $ 28 $ 12 $ 3 $ 15 $ 3 $ 18

PALs are subject to the collateral maintenance practical expedient under ASC 326 Financial Instruments – Credit Losses .

All PALs were fully collateralized by securities with fair values in excess of borrowings as of March 31, 2022 and December 31, 2021.

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

For further details on Schwab’s application of ASC 326 see Item 8 – Note 2 in the 2021 Form 10-K.

Indicators of economic activity and employment continue to strengthen despite the recent Omicron wave, which dampened growth in some COVID-sensitive sectors of the economy.

Management’s macroeconomic outlook reflects continued moderate

THE CHARLES SCHWAB CORPORATION

1 unchanged sentence

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

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

period $ 22 $ 5 $ 27 $ 3 $ 30 $ 11 $ 4 $ 15 $ 3 $ 18

Adoption of ASU

2016-13 — — — — — 1 — 1 — 1

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

Recoveries — 1 1 — 1 1 — 1 — 1

Provision for credit

losses ( 14 ) ( 4 ) ( 18 ) 1 ( 17 ) 8 2 10 — 10

Balance at end of period $ 8 $ 2 $ 10 $ 3 $ 13 $ 21 $ 6 $ 27 $ 3 $ 30

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 September 30, 2021 and December 31, 2020.

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

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.

growth in home prices and lower unemployment anticipated over the near term, however recent increases in treasury yields and mortgage rates may reduce borrower affordability and extend the expected life of the portfolio.

These changes in the macroeconomic outlook resulted in higher modeled projections of loss rates at March 31, 2022 compared to December 31, 2021, even as credit quality metrics continue to be strong in the Company’s bank loans portfolio .

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

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

Nonaccrual loans (1)

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First Mortgages Amortized Cost Basis by Origination Year

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

March 31, 2022 2022 2021 2020 2019 2018 pre-2018 Total First Mortgages Revolving HELOCs amortized cost basis HELOCs converted to term loans Total HELOCs

Origination FICO

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Total $ 2,380 $ 12,944 $ 4,648 $ 1,054 $ 178 $ 1,487 $ 22,691 $ 356 $ 260 $ 616

Weighted Average

<620 $ — $ 11 $ 11 $ 1 $ 1 $ 13 $ 37 $ 1 $ 6 $ 7

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

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

Pledged Asset Lines

Weighted-Average LTV (1)

=70% $ 11,412 768 —

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

THE CHARLES SCHWAB CORPORATION

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Total $ 12,990 $ 5,004 $ 1,200 $ 207 $ 1,689 $ 21,090 $ 369 $ 279 $ 648

Weighted Average

<620 $ 5 $ 2 $ 1 $ — $ 14 $ 22 $ 2 $ 6 $ 8

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

December 31, 2020 Balance Weighted Average Updated FICO Percent of Loans on Nonaccrual Status

Pledged Asset Lines

Weighted-Average LTV (1)

=70% $ 7,916 770 —

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

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

At March 31, 2022, First Mortgage loans of $ 18.3 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.

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

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

Notes to Condensed Consolidated Financial Statements

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

At March 31, 2022 and December 31, 2021, Schwab had $ 64 million and $ 57 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 HELOC product has a 30 -year loan term with an initial draw period of ten years from the date of origination.

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The interest rate during the initial draw period and the 20 -year amortizing period is a floating rate based on the prime rate plus a margin.

THE CHARLES SCHWAB CORPORATION

Notes to Condensed Consolidated Financial Statements

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

The following table presents HELOCs converted to amortizing loans during each period presented:

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

HELOCs converted to amortizing loans $ 2 $ 9

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

September 30, 2021 Balance

March 31, 2022 Balance

Converted to an amortizing loan by period end $ 260

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> 5 years 212

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

At March 31, 2022, $ 469 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 September 30, 2021, the borrowers on approximately 55 % of HELOC loan balances outstanding only paid the minimum amount due.

At March 31, 2022, the borrowers on approximately 53 % of HELOC loan balances outstanding only paid the minimum amount due.

Variable Interest Entities

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 of March 31, 2022 and December 31, 2021, 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.

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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:

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

assets Aggregate

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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 2022 and 2025.

During the nine months ended September 30, 2021 and year

During the three months ended March 31, 2022 and year ended December 31, 2021, Schwab did not provide or intend to provide financial or other support to the VIEs that it was not contractually required to provide.

THE CHARLES SCHWAB CORPORATION

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

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:

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

Interest-bearing deposits:

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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.

Interest is payable semi-annually for the fixed-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 September 30, 2021 and December 31, 2020.

The following table lists long-term debt by instrument outstanding as of March 31, 2022 and December 31, 2021.

Date of Issuance Principal Amount Outstanding

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

CSC Fixed-rate Senior Notes:

3.250 % due May 21, 2021

05/22/18 $ — $ 600

3.225 % due September 1, 2022

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03/02/17 650 650

2.450 % due March 3, 2027

03/03/22 1,500 —

3.300 % due April 1, 2027

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08/26/21 850 850

CSC Floating-rate Senior Notes:

Three-month LIBOR + 0.32 % due May 21, 2021

2.900 % due March 3, 2032

03/03/22 1,000 —

CSC Floating-rate Senior Notes:

SOFR + 0.500 % due March 18, 2024

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05/13/21 500 500

SOFR + 1.050 % due March 3, 2027

03/03/22 500 —

Total CSC Senior Notes 20,768 17,768

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08/16/19 25 25

TDA Holding Floating-rate Senior Notes:

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

11/01/18 600 600

Total TDA Holding Senior Notes 963 963

Other financing 101 6

Finance lease liabilities 91 94

Unamortized premium — net 162 180

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Total long-term debt $ 21,873 $ 18,914

(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

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

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

Annual maturities on all long-term debt outstanding at March 31, 2022 are as follows:

Thereafter 10,950

Total maturities 21,822

Unamortized discount— net 195

Unamortized premium— net 162

Debt issuance costs ( 111 )

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Short-term borrowings:

CSC has the ability to issue up to $ 5.0 billion of commercial paper notes with maturities up to 270 days;

and had $ 2.4 billion outstanding at March 31, 2022 and $ 3.0 billion at December 31, 2021.

CSC and CS&Co also have access to uncommitted lines of credit with external banks with total borrowing capacity of $ 1.5 billion;

no amounts were outstanding as of March 31, 2022 or December 31, 2021.

Our banking subsidiaries maintain secured credit facilities with the FHLB.

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 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.

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.

As of March 31, 2022 and December 31, 2021, the collateral pledged provided a total borrowing capacity of $ 68.2 billion and $ 63.5 billion, respectively, of which no amounts were outstanding at the end of either period.

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 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 $ 415 million and $ 191 million at September 30, 2021 and December 31, 2020, respectively.

TDAC Lines of Credit and Revolving Credit Facilities

As of March 31, 2022 and December 31, 2021, our collateral pledged provided total borrowing capacity of $ 10.3 billion and $ 12.0 billion, respectively, of which no amounts were outstanding at the end of either period.

Our banking subsidiaries may engage with external banks in repurchase agreements collateralized by investment securities as another source of short-term liquidity.

The Company had no borrowings outstanding pursuant to such repurchase agreements at March 31, 2022 or December 31, 2021.

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 $ 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.

There was $ 1.9 billion outstanding under the secured uncommitted lines of credit as of March 31, 2022 and December 31, 2021.

See Note 11 for additional information.

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.

TDAC maintained one senior unsecured committed revolving credit facility as of March 31, 2022 with an aggregate borrowing capacity of $ 600 million which matured in April 2022 and was not renewed.

There were no borrowings outstanding under the TDAC senior revolving facilities as of March 31, 2022 or December 31, 2021.

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 $ 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.

CSB purchased First Mortgages of $ 2.7 billion and $ 2.8 billion during the first quarters of 2022 and 2021, respectively.

CSB purchased HELOCs with commitments of $ 90 million and $ 99 million during the first quarters of 2022 and 2021, respectively.

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

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

Commitments to extend credit related to unused HELOCs, PALs, and other lines of credit $ 5,898 $ 6,193

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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 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.

At March 31, 2022, the aggregate face amount of these LOCs totaled $ 15 million.

There were no funds drawn under any of these LOCs at March 31, 2022.

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

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The Company’s liability under these arrangements is not quantifiable and may exceed the amounts it has posted as collateral.

The potential requirement for the Company to make payments under these arrangements is remote.

Accordingly, no liability has been recognized for these guarantees.

The TD Ameritrade broker-dealer and FCM/FDM subsidiaries’ operations include the execution, settlement, and financing of various client securities, options, futures and foreign exchange transactions.

These activities may expose the Company to credit risk and losses in the event the clients are unable to fulfill their contractual obligations.

TD Ameritrade is a member of and provides guarantees to securities clearing houses and exchanges under standard membership agreements.

TD Ameritrade also engages third-party firms to clear clients’ futures and options on futures transactions and to facilitate clients’ foreign exchange trading, and has agreed to indemnify these firms for any loss that they may incur from the client transactions introduced to them by TD Ameritrade.

The Company also engages third-party firms to clear clients’ futures and options on futures transactions and to facilitate clients’ foreign exchange trading, and has agreed to indemnify these firms for any losses that they may incur from the client transactions introduced to them by the Company.

The potential requirement for the Company to make payments under these arrangements is remote.

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

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.

Pursuant to the IDA agreement, uninvested cash within eligible brokerage client accounts is swept off-balance sheet to deposit accounts at the TD Depository Institutions.

Schwab provides recordkeeping and support services to the TD Depository Institutions with respect to the deposit accounts for which Schwab receives an aggregate monthly fee.

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.

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 Company’s ability to migrate these 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 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 $ 143.5 billion as of March 31, 2022 and $ 147.2 billion as of December 31, 2021.

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.

During the first quarter of 2022, Schwab moved $ 12.7 billion of IDA balances to its balance sheet.

THE CHARLES SCHWAB CORPORATION

1 unchanged sentence

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

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, financial results for the first nine months of 2021 included a liability and related non-deductible charge of approximately $ 200 million.

In connection with a tentative agreement reached with SEC staff to resolve the matter, financial results for 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.

1 unchanged sentence

TD Ameritrade Acquisition Litigation :

As disclosed previously, Schwab and TD Ameritrade have been responding to a lawsuit challenging the acquisition which was filed on May 12, 2020 in the Delaware Court of Chancery (Hawkes v.

As disclosed previously, on May 12, 2020, a putative class action lawsuit related to the acquisition was filed in the Delaware Court of Chancery (Hawkes v.

Bettino et al.) on behalf of a proposed class of TD Ameritrade’s stockholders, excluding, among others, TD Bank.

The initial complaint named as defendants each member of the TD Ameritrade board of directors at the time the acquisition was approved, as well as TD Bank and Schwab.

On June 11, 2020, plaintiff dismissed a claim that had sought to enjoin voting on or consummation of the acquisition.

On February 5, 2021, plaintiff filed an amended complaint naming an officer and certain directors of TD Ameritrade at the time the acquisition was approved, as well as TD Bank, certain TD Bank related entities, and Schwab.

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Plaintiff seeks to recover monetary damages, costs and attorneys’ fees.

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.

Schwab and the other defendants consider the allegations to be entirely without merit and on April 29, 2021, the defendants filed motions to dismiss the amended complaint.

On March 25, 2022, the parties filed a joint stipulation proposing a settlement of the lawsuit on a class basis.

A settlement hearing is scheduled for July 11, 2022.

If the settlement is approved, Schwab will pay an immaterial amount on behalf of the former TD Ameritrade officer and director defendants pursuant to indemnification obligations.

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 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.

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.

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

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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.

Plaintiffs sought review of the order denying class certification by the Ninth Circuit Court of Appeals, which was denied, and on February 3, 2022, plaintiffs filed a motion for reconsideration of that denial, which is pending.

THE CHARLES SCHWAB CORPORATION

Notes to Condensed Consolidated Financial Statements

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

Ford Order Routing Litigation :

1 unchanged sentence

and its former CEO, Frederick J.

Tomczyk, were sued on behalf of a putative class of TD Ameritrade, Inc.

Tomczyk, were sued in the U.S.

District Court for the District of Nebraska on behalf of a putative class of TD Ameritrade, Inc.

clients alleging that defendants failed to seek best execution and made misrepresentations and omissions regarding its order routing practices.

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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.

Plaintiff has renewed his motion for class certification with the District Court, and a motion by defendants to compel the case to arbitration is pending with the District Court as premature.

Exit and Other Related Liabilities

As a result of the significant growth seen in recent quarters across key client volume metrics, including the number of active brokerage accounts, DATs, and peak daily trades, the Company has increased the scope of technology work related to the integration of TD Ameritrade.

We have commenced greater technology build-out to support the expanded volumes of our combined client base.

Based on our current integration plans and expanded scope of technology work, the Company expects to complete client conversion within 30 to 36 months from the October 6, 2020 date of acquisition.

The Company completed its acquisition of TD Ameritrade effective October 6, 2020 and integration work continued during the first quarter of 2022.

Based on our current integration plans and expanded scope of technology work, the Company continues to expect to complete client conversions across multiple groups within approximately 30 to 36 months from the October 6, 2020 acquisition date, ending in the fourth quarter of 2023.

To achieve our integration objectives, the Company expects to recognize significant additional acquisition and integration-related costs and capital expenditures throughout the integration process.

Such acquisition and integration-related costs have included and are expected to continue to include professional fees, such as legal, advisory, and accounting fees, costs for technology enhancements, and compensation and benefits expenses for employees and contractors involved in the integration work.

The Company’s acquisition and integration-related spending also includes exit and other related costs, such as severance and other employee termination benefits, retention costs, as well as costs related to facility closures, including accelerated amortization and depreciation or impairments of assets in those locations.

Such acquisition and integration-related costs have included, and are expected to continue to include professional fees, such as legal, advisory, and accounting fees, compensation and benefits expenses for employees and contractors involved in the integration work, and costs for technology enhancements.

The Company’s acquisition and integration-related spending also includes exit and other related costs, which are primarily comprised of employee compensation and benefits such as severance pay, other termination benefits, and retention costs, as well as costs related to facility closures, such as accelerated amortization and depreciation or impairments of assets in those locations.

Exit and other related costs are a component of the Company’s overall acquisition and integration-related spending, and support the Company’s ability to achieve integration objectives including expected synergies.

Our estimates of the nature, amounts, and timing of recognition of acquisition and integration-related costs are subject to change based on a number of factors, including the expected duration and complexity of the integration process and the heightened uncertainty of the current economic environment.

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 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.

Our estimates of the nature, amounts, and timing of recognition of acquisition and integration-related costs remain subject to change based on a number of factors, including the expected duration and complexity of the integration process and the continued uncertainty of the current economic environment.

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, as well as increased real estate-related exit cost variability due to the effects of the COVID-19 pandemic including changes in remote working trends.

Inclusive of costs recognized through March 31, 2022, 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 months ended March 31, 2022 and 2021, the Company recognized $ 12 million and $ 43 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 18 to 30 months;

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(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 nine months ended September 30, 2021:

The following is a summary of the activity in the Company’s exit and other related liabilities for the three months ended March 31, 2022:

Investor Services

1 unchanged sentence

Employee Compensation and Benefits Total

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

Balance at December 31, 2021 $ 28 $ 7 $ 35

Amounts recognized in expense (1)

Costs paid or otherwise settled ( 4 ) ( 1 ) ( 5 )

Balance at September 30, 2021 (2)

Balance at March 31, 2022 (2)

$ 32 $ 8 $ 40

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

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

The following is a summary of the activity in the Company’s exit and other related liabilities for the three months ended March 31, 2021:

Investor Services

Employee Compensation and Benefits Advisor Services

Employee Compensation and Benefits Total

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

1 unchanged sentence

Costs paid or otherwise settled ( 52 ) ( 15 ) ( 67 )

Balance at September 30, 2021 (2)

Balance at March 31, 2021 (2)

$ 56 $ 15 $ 71

(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 recognized in expense for the three and nine months ended September 30, 2021:

The following table summarizes the exit and other related costs recognized in expense for the three months ended March 31, 2022:

Investor Services Advisor Services

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

Employee Compensation and Benefits Facility Exit Costs (1)

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

3 unchanged sentences

Total $ 8 $ 1 $ 9 $ 2 $ 1 $ 3 $ 12

(1) Costs related to facility closures.

These costs, which are comprised of accelerated amortization of right-of-use (ROU) assets, relate to the impact of abandoning leased properties.

The following table summarizes the exit and other related costs recognized in expense for the three months ended March 31, 2021:

Investor Services Advisor Services

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

Employee Compensation and Benefits Facility Exit Costs (1)

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

6 unchanged sentences

(1) Costs related to facility closures.

These costs, which are primarily comprised of accelerated amortization of right-of-use (ROU) assets, relate to the impact of abandoning leased and other properties.

These costs, which are primarily comprised of accelerated amortization of ROU assets, relate to the impact of abandoning leased and other properties.

THE CHARLES SCHWAB CORPORATION

1 unchanged sentence

(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 September 30, 2021:

The following table summarizes the exit and other related costs incurred from October 6, 2020 through March 31, 2022:

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 September 30, 2021 and December 31, 2020 were not subject to master netting arrangements.

Schwab’s resale agreements as of March 31, 2022 and December 31, 2021 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 $ 867 million and $ 852 million at September 30, 2021 and December 31, 2020, respectively.

The fair value of these borrowed securities was $ 549 million and $ 566 million at March 31, 2022 and December 31, 2021, respectively.

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

13 unchanged sentences

Offsetting Collateral

September 30, 2021

March 31, 2022

Resale agreements (1)

16 unchanged sentences

$ 7,158 $ — $ 7,158 $ ( 383 ) $ ( 6,015 ) $ 760

Secured short-term borrowings (6)

1,850 — 1,850 — ( 1,850 ) —

Total $ 9,008 $ — $ 9,008 $ ( 383 ) $ ( 7,865 ) $ 760

1 unchanged sentence

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

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.

At March 31, 2022 and December 31, 2021, the fair value of collateral received in connection with resale agreements that are available to be repledged or sold was $ 14.4 billion and $ 13.4 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 September 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 March 31, 2022 and December 31, 2021.

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

3 unchanged sentences

Clients with margin loans have agreed to allow Schwab to pledge collateralized securities in their brokerage accounts in accordance with federal regulations.

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:

September 30, 2021 December 31, 2020

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 to third parties under such regulations and from securities borrowed transactions:

March 31, 2022 December 31, 2021

Fair value of client securities available to be pledged $ 111,343 $ 120,306

7 unchanged sentences

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 $ 167 million as of September 30, 2021 and $ 183 million as of December 31, 2020.

The fair value of fully-paid client securities available and pledged was $ 242 million as of March 31, 2022 and $ 118 million as of December 31, 2021.

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

5 unchanged sentences

Schwab’s assets and liabilities measured at fair value on a recurring basis include:

certain cash equivalents, certain investments segregated and on deposit for regulatory purposes, AFS securities, and certain other assets.

certain cash equivalents, certain investments segregated and on deposit for regulatory purposes, AFS securities, and certain other assets and accrued expenses and other liabilities.

The Company uses the market approach to determine the fair value of assets and liabilities.

16 unchanged sentences

Schwab does not adjust the prices received from independent third-party pricing services unless such prices are inconsistent with the definition of fair value and result in material differences in the amounts recorded.

Liabilities measured at fair value on a recurring basis include repurchase liabilities related to client-held fractional shares of equities, ETFs, and other securities, which are included in other assets on the condensed consolidated balance sheets.

The Company has elected the fair value option pursuant to ASC 825 Financial Instruments for the repurchase liabilities to match the measurement and accounting of the related client-held fractional shares.

The fair values of the repurchase liabilities are based on quoted market prices or other observable market data consistent with the related client-held fractional shares.

Unrealized gains and losses on client-held fractional shares offset the unrealized gains and losses on the corresponding repurchase liabilities, resulting in no impact to the consolidated statements of income.

The Company’s liabilities to repurchase client-held fractional shares do not have credit risk, and, as a result, the Company has not recognized any gains or losses in the condensed consolidated statements of income or comprehensive income attributable to instrument-specific credit risk for these repurchase liabilities.

The repurchase liabilities are included in accrued expenses and other liabilities on the condensed consolidated balance sheets.

For a description of the fair value hierarchy and Schwab’s fair value methodologies, see Item 8 – Note 2 in the 2021 Form 10-K.

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

The Company did not adjust prices received from the primary independent third-party pricing service at March 31, 2022 or December 31, 2021.

THE CHARLES SCHWAB CORPORATION

2 unchanged sentences

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following tables present the fair value hierarchy for assets measured at fair value on a recurring basis.

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

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

The following tables present the fair value hierarchy for assets and liabilities measured at fair value on a recurring basis:

March 31, 2022 Level 1 Level 2 Level 3 Balance at

Cash equivalents:

Money market funds $ 15,112 $ — $ — $ 15,112

Treasury securities — 1 — 1

Commercial paper — 4,587 — 4,587

Total cash equivalents 15,112 4,587 — 19,699

5 unchanged sentences

agency mortgage-backed securities — 201,534 — 201,534

Treasury securities — 31,833 — 31,833

Asset-backed securities — 18,423 — 18,423

Corporate debt securities — 14,608 — 14,608

Treasury securities — 11,477 — 11,477

state and municipal securities — 1,576 — 1,576

1 unchanged sentence

Certificates of deposit — 1,296 — 1,296

Foreign government agency securities — 1,096 — 1,096

Commercial paper — 200 — 200

Other — 322 — 322

1 unchanged sentence

Other assets:

Equity and bond mutual funds 114 — — 114

Government securities — 8 — 8

State and municipal debt obligations — 16 — 16

Equity, corporate debt, and other securities 865 59 — 924

Mutual funds and ETFs 603 — — 603

State and municipal debt obligations — 7 — 7

Government securities — 4 — 4

Total other assets 1,468 70 — 1,538

Total $ 10,472 $ 401,706 $ — $ 412,178

Total assets $ 16,580 $ 312,762 $ — $ 329,342

Accrued expenses and other liabilities $ 1,331 $ 48 $ — $ 1,379

Total liabilities $ 1,331 $ 48 $ — $ 1,379

THE CHARLES SCHWAB CORPORATION

11 unchanged sentences

agency mortgage-backed securities — 334,355 — 334,355

Treasury securities — 21,282 — 21,282

Asset-backed securities — 17,546 — 17,546

Corporate debt securities — 12,344 — 12,344

Treasury securities — 10,656 — 10,656

state and municipal securities — 1,687 — 1,687

Foreign government agency securities — 1,413 — 1,413

Non-agency commercial mortgage-backed securities — 1,190 — 1,190

Certificates of deposit — 999 — 999

Foreign government agency securities — 425 — 425

Commercial paper — 200 — 200

Other — 26 — 26

1 unchanged sentence

Other assets:

Equity and bond mutual funds 361 — — 361

Government securities — 253 — 253

State and municipal debt obligations — 37 — 37

Equity, corporate debt, and other securities 854 59 — 913

Mutual funds and ETFs 636 — — 636

State and municipal debt obligations — 32 — 32

Government securities — 3 — 3

Total other assets 1,490 94 — 1,584

Total $ 11,527 $ 368,967 $ — $ 380,494

Total assets $ 13,209 $ 426,847 $ — $ 440,056

Accrued expenses and other liabilities $ 1,354 $ 45 $ — $ 1,399

Total liabilities $ 1,354 $ 45 $ — $ 1,399

THE CHARLES SCHWAB CORPORATION

3 unchanged sentences

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

September 30, 2021 Carrying

March 31, 2022 Carrying

Amount Level 1 Level 2 Level 3 Balance at

3 unchanged sentences

Receivables from brokerage clients — net 84,065 — 84,065 — 84,065

Held to maturity securities:

agency mortgage-backed securities 105,286 — 99,149 — 99,149

Total held to maturity securities 105,286 — 99,149 — 99,149

Bank loans — net:

26 unchanged sentences

Accrued expenses and other liabilities 8,327 — 8,327 — 8,327

Short-term borrowings 4,855 — 4,855 — 4,855

Long-term debt 18,820 — 19,383 — 19,383

3 unchanged sentences

Stockholders’ Equity

On June 1, 2021, the Company redeemed all of the 600,000 outstanding shares of its 6.00 % non-cumulative perpetual preferred stock, Series C, and the corresponding 24,000,000 depositary shares, each representing a 1/40th interest in a share of the Series C Preferred Stock.

The depositary shares were redeemed at a redemption price of $ 25 per depositary share for a total of $ 600 million.

On March 30, 2021, the Company issued and sold 24,000,000 depositary shares, each representing a 1/40th ownership interest in a share of 4.450 % fixed-rate non-cumulative perpetual preferred stock, Series J, $ 0.01 par value, with a liquidation preference of $ 1,000 per share (equivalent of $ 25 per Depositary Share).

On March 4, 2022, the Company issued and sold 750,000 depositary shares, each representing a 1/100th ownership interest in a share of 5.000 % fixed-rate reset non-cumulative perpetual preferred stock, Series K, $ .01 par value, with a liquidation preference of $ 100,000 per share (equivalent of $ 1,000 per depositary share).

The net proceeds of the offering were $ 740 million, after deducting the underwriting discount and offering expenses

On March 18, 2021, the Company issued and sold 2,250,000 depositary shares, each representing a 1/100th ownership interest in a share of 4.000 % fixed-rate reset non-cumulative perpetual preferred stock, Series I, $ 0.01 par value per share, with a liquidation preference of $ 100,000 per share (equivalent of $ 1,000 per Depositary Share).

The net proceeds of the offering were $ 2.2 billion, after deducting the underwriting discount and offering expenses.

On January 30, 2019, CSC publicly announced that its Board of Directors authorized a share repurchase program to repurchase up to $ 4.0 billion of common stock.

The share repurchase authorization does not have an expiration date.

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

There were no repurchases of CSC’s common stock under this authorization during the three months ended March 31, 2022 and 2021.

As of March 31, 2022, $ 1.8 billion remained on the authorization.

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

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,

Liquidation Preference Per Share Dividend Rate in Effect at March 31, 2022 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 ones) at Carrying Value at

December 31, 2021 (1)

September 30, 2021 December 31, 2020 Issue Date

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

March 31, 2022 December 31, 2021 Issue Date

Series D 750,000 750,000 $ 1,000 $ 728 $ 728 03/07/16 5.950 % 06/01/21 N/A N/A N/A

4 unchanged sentences

Series F 5,000 5,000 100,000 492 492 10/31/17 5.000 % 12/01/27 12/01/27 3M LIBOR 2.575 %

Series G 25 25 100,000 2,470 2,470 04/30/20 5.375 % 06/01/25 06/01/25 5 -Year Treasury

Series H 25 25 100,000 2,470 2,470 12/11/20 4.000 % 12/01/30 12/01/30 10 -Year Treasury

25,000 25,000 100,000 2,470 2,470 04/30/20 5.375 % 06/01/25 06/01/25 5 -Year Treasury

25,000 25,000 100,000 2,470 2,470 12/11/20 4.000 % 12/01/30 12/01/30 10 -Year Treasury

22,500 22,500 100,000 2,222 2,222 03/18/21 4.000 % 06/01/26 06/01/26 5 -Year Treasury

7,500 — 100,000 740 — 03/04/22 5.000 % 06/01/27 06/01/27 5 -Year Treasury

Total preferred

1 unchanged sentence

(1) Represented by depositary shares, except for Series A.

(2) Series C Preferred Stock was redeemed on June 1, 2021.

(3) The Series I dividend rate resets on each five-year anniversary beginning on June 1, 2026 based on a five-year treasury rate, representing the average of the yields on actively traded U.S.

(2) The dividend rate for Series G and I resets on each five-year anniversary from the first reset date.

(3) The dividend rate for Series H resets on each ten-year anniversary from the first reset date.

(4) The Series K dividend rate resets on each five-year anniversary beginning on June 1, 2027 based on a five-year treasury rate, representing the average of the yields on actively traded U.S.

treasury securities adjusted to constant maturity for five-year maturities.

Series I is only redeemable on dividend payment dates on or after the first reset date.

Series K is only redeemable on dividend payment dates on or after the first reset date.

N/A Not applicable.

3 unchanged sentences

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

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

2021 2020 2021 2020

Declared Per Share

Three Months Ended March 31,

Declared Per Share

5 unchanged sentences

Series F — — — —

33.6 1,343.75 45.2 1,806.60 100.8 4,031.25 45.2 1,806.60

25.0 1,000.00 — — 72.2 2,888.89 — —

Series G 33.6 1,343.75 33.6 1,343.75

Series H 25.0 1,000.00 22.2 888.89

22.5 1,000.00 — —

3 unchanged sentences

Prior to redemption, dividends were paid quarterly and the final dividend was paid on June 1, 2021.

(2) Series G Preferred Stock was issued on April 30, 2020.

Dividends are paid quarterly, and the first dividend was paid on September 1, 2020.

(3) Series H Preferred Stock was issued on December 11, 2020.

Dividends are paid quarterly, and the first dividend was paid on March 1, 2021.

(2) Series I Preferred Stock was issued on March 18, 2021.

2 unchanged sentences

Dividends are paid quarterly, and the first dividend was paid on June 1, 2021.

(4) Series K Preferred Stock was issued on March 4, 2022.

Dividends are paid quarterly, and the first dividend will be paid on June 1, 2022.

THE CHARLES SCHWAB CORPORATION

2 unchanged sentences

Accumulated Other Comprehensive Income

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

Three Months Ended September 30, Before

Effect Net of

Change in net unrealized gain (loss) on available for sale securities:

Net unrealized gain (loss) $ ( 1,519 ) $ 364 $ ( 1,155 ) $ 97 $ ( 20 ) $ 77

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

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

Nine Months Ended September 30, Before

Effect Net of

Change in net unrealized gain (loss) on available for sale securities:

Net unrealized gain (loss) $ ( 5,420 ) $ 1,289 $ ( 4,131 ) $ 7,361 $ ( 1,762 ) $ 5,599

Other reclassifications included in other revenue ( 14 ) 4 ( 10 ) ( 3 ) 1 ( 2 )

Other — — — 1 — 1

Other comprehensive income (loss) $ ( 5,434 ) $ 1,293 $ ( 4,141 ) $ 7,359 $ ( 1,761 ) $ 5,598

AOCI balances are as follows:

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

Available for sale securities:

Net unrealized gain (loss) ( 1,155 )

Balance at September 30, 2021 $ 1,253

THE CHARLES SCHWAB CORPORATION

Notes to Condensed Consolidated Financial Statements

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

AOCI represents cumulative gains and losses that are not reflected in earnings.

AOCI balances and the components of other comprehensive income (loss) are as follows:

Balance at December 31, 2020 $ 5,394

Available for sale securities:

Net unrealized gain (loss), excluding transfers to available for sale from held to maturity 4,542

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

Other reclassifications included in other revenue ( 2 )

Balance at September 30, 2020 $ 5,686

Net unrealized gain (loss), net of tax expense (benefit) of $( 1,409 )

Other reclassifications included in other revenue, net of tax expense (benefit) of $( 2 )

Balance at March 31, 2021 $ 878

Balance at December 31, 2021 $ ( 1,109 )

Available for sale securities:

Net unrealized gain (loss) ( 4,131 )

Other reclassifications included in other revenue ( 10 )

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.

The transfer resulted in a net of tax increase to AOCI of $ 1.1 billion.

See Note 6 in the 2020 Form 10-K for additional discussion on the 2020 transfer of HTM securities to AFS.

Net unrealized gain (loss), excluding transfers to held to maturity, net of tax expense (benefit) of $( 3,137 )

Net unrealized loss on securities transferred to held to maturity, net of tax expense (benefit) of $ 579 (1)

Other reclassifications included in other revenue, net of tax expense (benefit) of $( 3 )

Held to maturity securities:

Net unrealized loss on securities transferred from available for sale, net of tax expense (benefit) of $( 579 ) (1)

Amortization of amounts previously recorded upon transfer from available for sale, net of tax expense (benefit) of $ 21

Balance at March 31, 2022 $ ( 11,045 )

(1) In January 2022, the Company transferred a portion of its AFS securities to the HTM category.

The transfer resulted in no net impact to AOCI.

See Note 4 for additional discussion on the transfer of AFS securities to HTM.

THE CHARLES SCHWAB CORPORATION

2 unchanged sentences

Earnings Per Common Share

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

For the three months ended March 31, 2022 and 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

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

Stock Nonvoting

Common Stock (1)

Stock Nonvoting

Common Stock (1)

Stock Nonvoting

Common Stock (1)

Common Stock Common

Stock Nonvoting

Common Stock (1)

Basic earnings per share:

Net income $ 1,462 $ 64 $ 698 N/A $ 4,096 $ 179 $ 2,164 N/A

Net income $ 1,344 $ 58 $ 1,422 $ 62

Preferred stock dividends and other (1)

( 115 ) ( 5 ) ( 83 ) N/A ( 349 ) ( 15 ) ( 171 ) N/A

Net income available to common stockholders $ 1,347 $ 59 $ 615 N/A $ 3,747 $ 164 $ 1,993 N/A

Weighted-average common shares outstanding — basic 1,809 79 1,289 N/A 1,806 79 1,288 N/A

Basic earnings per share $ .74 $ .74 $ .48 N/A $ 2.07 $ 2.07 $ 1.55 N/A

( 119 ) ( 5 ) ( 92 ) ( 4 )

Net income available to common stockholders $ 1,225 $ 53 $ 1,330 $ 58

Weighted-average common shares outstanding — basic 1,815 79 1,803 79

Basic earnings per share $ .67 $ .67 $ .74 $ .74

Diluted earnings per share:

Net income available to common stockholders $ 1,347 $ 59 $ 615 N/A $ 3,747 $ 164 $ 1,993 N/A

Reallocation of net income available to common

stockholders as a result of conversion of nonvoting to

voting shares 59 — N/A N/A 164 — N/A N/A

Allocation of net income available to common

stockholders:

$ 1,406 $ 59 $ 615 N/A $ 3,911 $ 164 $ 1,993 N/A

Weighted-average common shares outstanding — basic 1,809 79 1,289 N/A 1,806 79 1,288 N/A

Conversion of nonvoting shares to voting shares 79 — N/A N/A 79 — N/A N/A

Common stock equivalent shares related to stock

incentive plans 10 — 5 N/A 10 — 6 N/A

Weighted-average common shares outstanding —

1,898 79 1,294 N/A 1,895 79 1,294 N/A

Diluted earnings per share $ .74 $ .74 $ .48 N/A $ 2.06 $ 2.06 $ 1.54 N/A

(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 nine months ended September 30, 2020.

Net income available to common stockholders $ 1,225 $ 53 $ 1,330 $ 58

Reallocation of net income available to common stockholders as a result of conversion of nonvoting to

voting shares 53 — 58 —

Allocation of net income available to common stockholders:

$ 1,278 $ 53 $ 1,388 $ 58

Weighted-average common shares outstanding — basic 1,815 79 1,803 79

Conversion of nonvoting shares to voting shares 79 — 79 —

Common stock equivalent shares related to stock incentive plans 11 — 10 —

Weighted-average common shares outstanding — diluted (2)

1,905 79 1,892 79

Diluted earnings per share $ .67 $ .67 $ .73 $ .73

(1) 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 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.

(2) Antidilutive stock options and restricted stock units excluded from the calculation of diluted EPS totaled 14 million and 15 million for the three months ended March 31, 2022 and 2021, respectively.

THE CHARLES SCHWAB CORPORATION

2 unchanged sentences

Regulatory Requirements

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

At March 31, 2022, 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

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

March 31, 2022 Amount Ratio Amount Ratio Amount Ratio (1)

Common Equity Tier 1 Risk-Based Capital $ 29,119 18.9 % N/A $ 6,946 4.5 %

19 unchanged sentences

Supplementary Leverage Ratio 28,014 7.0 % N/A 12,016 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.

The capital conservation buffer and countercyclical capital buffer were 2.5% and zero percent, respectively, for both periods presented.

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 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.

(1) Under risk-based capital rules, CSC and CSB are also required to maintain additional capital buffers above the regulatory minimum risk-based capital ratios.

Beginning in 2022, CSC will become subject to a stress capital buffer requirement once the Federal Reserve provides CSC with its final stress capital buffer requirement and it becomes effective on October 1, 2022.

A firm that has not yet received a stress capital buffer but that is subject to capital planning requirements, such as CSC, is subject to a stress capital buffer requirement of 2.5% under regulatory requirements.

CSB is required to maintain a capital conservation buffer of 2.5%.

CSC and CSB are also required to maintain a countercyclical capital buffer above the regulatory minimum risk-based capital ratios, which was zero for both periods presented.

If a buffer falls below the minimum requirement, CSC and CSB would be subject to increasingly strict limits on capital distributions and discretionary bonus payments to executive officers.

At March 31, 2022, the minimum capital ratio requirements for both CSC and CSB, inclusive of their respective buffers, were 7.0%, 8.5%, and 10.5% for Common Equity Tier 1 Risk-Based Capital, Tier 1 Risk-Based Capital, and Total Risk-Based Capital, respectively.

N/A Not applicable.

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.

Based on its regulatory capital ratios at March 31, 2022, CSB is considered well capitalized (the highest category) under its respective regulatory capital rules.

There are no conditions or events since March 31, 2022 that management believes have changed CSB’s capital category.

At March 31, 2022, the balance sheets of Charles Schwab Premier Bank, SSB (CSPB) and Charles Schwab Trust Bank (Trust Bank) consisted primarily of investment securities, and the entities held total assets of $ 40.7 billion and $ 15.6 billion, respectively.

Based on their regulatory capital ratios, at March 31, 2022, 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:

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

Net capital $ 5,156 $ 5,231

11 unchanged sentences

Net capital in excess of required net capital $ 679 $ 711

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.

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 March 31, 2022.

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.

4 unchanged sentences

Schwab structures the operating segments according to its clients and the services provided to those clients.

The Investor Services segment provides retail brokerage and banking services to individual investors, and retirement plan services, as well as other corporate brokerage services, to businesses and their employees.

The Advisor Services segment provides custodial, trading, banking, and support services, as well as retirement business services, to independent RIAs, independent retirement advisors, and recordkeepers.

The Investor Services segment provides retail brokerage, investment advisory, and banking and trust services to individual investors, and retirement plan services, as well as other corporate brokerage services, to businesses and their employees.

The Advisor Services segment provides custodial, trading, banking and trust, and support services, as well as retirement business services, to independent RIAs, independent retirement advisors, and recordkeepers.

Revenues and expenses are attributed to the two segments based on which segment services the client.

2 unchanged sentences

There are no revenues from transactions between the segments.

THE CHARLES SCHWAB CORPORATION

Notes to Condensed Consolidated Financial Statements

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

Financial information for the segments is presented in the following table:

Investor Services Advisor Services Total

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

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

Asset management and administration fees 805 643 296 217 1,101 860

Trading revenue 873 139 91 42 964 181

Bank deposit account fees 239 — 84 — 323 —

Other 114 51 38 13 152 64

Total net revenues 3,561 1,781 1,009 667 4,570 2,448

Expenses Excluding Interest 1,956 1,167 603 392 2,559 1,559

Income before taxes on income $ 1,605 $ 614 $ 406 $ 275 $ 2,011 $ 889

Investor Services Advisor Services Total

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

Three Months Ended March 31, 2022 2021 2022 2021 2022 2021

Net interest revenue $ 1,574 $ 1,454 $ 609 $ 457 $ 2,183 $ 1,911

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