What changed in this filing

/stocks — the workspaceLOADING

Item 3. Quantitative and Qualitative Disclosures About Market Risk

2022-08-08 compared with 2022-05-09 · 256 added, 170 removed, 1166 unchanged (27% of the section changed)

7 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2022 2021 2022 2021

Interest revenue $ 2,710 $ 2,068 $ 5,029 $ 4,083

2 unchanged sentences

Asset management and administration fees (1)

1,052 1,047 2,120 2,063

Trading revenue 885 955 1,848 2,171

24 unchanged sentences

Diluted $ .87 $ .59 $ 1.54 $ 1.32

(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.

(1) Includes fee waivers of $ 3 million and $ 57 million for the three and six months ended June 30, 2022, respectively, and $ 85 million and $ 163 million for the three and six months ended June 30, 2021, respectively.

(2) The Company has voting and nonvoting common stock outstanding.

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

5 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2022 2021 2022 2021

Net income $ 1,793 $ 1,265 $ 3,195 $ 2,749

16 unchanged sentences

(In Millions, Except Per Share and Share Amounts)

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

Cash and cash equivalents $ 64,550 $ 62,975

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

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

agreements of $ 17,614 at June 30, 2022 and $ 13,096 at December 31, 2021)

53,466 53,949

Receivables from brokerage clients — net 76,130 90,565

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

Available for sale securities (amortized cost of $ 284,096 at June 30, 2022 and

$ 391,482 at December 31, 2021)

17 unchanged sentences

aggregate liquidation preference of $ 10,850

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

and $ 10,100 at June 30, 2022 and December 31, 2021, respectively

Common stock — 3 billion shares authorized;

$ .01 par value per share;

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

1,994,895,180 shares issued at June 30, 2022 and December 31, 2021

Nonvoting common stock — 300 million shares authorized;

$ .01 par value per share;

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

79,293,695 shares issued at June 30, 2022 and December 31, 2021

Additional paid-in capital 26,918 26,741

Retained earnings 28,174 25,992

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

Treasury stock, at cost — 177,643,231 shares at June 30, 2022 and 180,959,274

shares at December 31, 2021

12 unchanged sentences

Shares Amount Shares Amount

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

Net income — — — — — — 1,265 — — 1,265

Other comprehensive income (loss), net of tax — — — — — — — — 1,530 1,530

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

Dividends declared on preferred stock — — — — — — ( 128 ) — — ( 128 )

Dividends declared on common stock — $ .18

— — — — — — ( 342 ) — — ( 342 )

Stock option exercises and other — — — — — — — 47 — 47

Share-based compensation — — — — — 47 — — — 47

Other — — — — — 32 — 5 — 37

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

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

Net income — — — — — — 1,793 — — 1,793

Other comprehensive income (loss), net of tax — — — — — — — — ( 4,977 ) ( 4,977 )

Dividends declared on preferred stock — — — — — — ( 133 ) — — ( 133 )

Dividends declared on common stock — $ .20

— — — — — — ( 381 ) — — ( 381 )

Stock option exercises and other — — — — — ( 5 ) — 8 — 3

Share-based compensation — — — — — 53 — — — 53

Other — — — — — 44 — 13 — 57

Balance at June 30, 2022 $ 10,694 1,995 $ 20 79 $ 1 $ 26,918 $ 28,174 $ ( 5,272 ) $ ( 16,022 ) $ 44,513

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

2 unchanged sentences

Issuance of preferred stock, net 2,806 — — — — — — — — 2,806

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

Dividends declared on preferred stock — — — — — — ( 218 ) — — ( 218 )

4 unchanged sentences

Other — — — — — 40 — ( 8 ) — 32

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

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

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

8 unchanged sentences

Other — — — — — 68 — ( 23 ) — 45

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

Balance at June 30, 2022 $ 10,694 1,995 $ 20 79 $ 1 $ 26,918 $ 28,174 $ ( 5,272 ) $ ( 16,022 ) $ 44,513

See Notes to the Condensed Consolidated Financial Statements .

2 unchanged sentences

(in Millions)

Three Months Ended

Six Months Ended

Cash Flows from Operating Activities

6 unchanged sentences

Premium amortization, net, on available for sale and held to maturity securities 868 1,224

Other 187 148

Net change in:

12 unchanged sentences

Purchases of equipment, office facilities, and property ( 537 ) ( 425 )

Proceeds from sales of Federal Reserve stock 4 —

Purchases of Federal Reserve stock ( 85 ) ( 119 )

4 unchanged sentences

Proceeds from commercial paper and secured lines of credit 1,153 5,750

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

Repayments of commercial paper and secured lines of credit ( 4,661 ) ( 2,250 )

Issuance of long-term debt 2,971 6,197

Repayment of long-term debt ( 765 ) ( 1,208 )

Net proceeds from preferred stock offerings 740 2,806

Redemption of preferred stock — ( 600 )

Dividends paid ( 1,020 ) ( 900 )

10 unchanged sentences

Continued from previous page.

Three Months Ended

Six Months Ended

Supplemental Cash Flow Information

10 unchanged sentences

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

March 31, 2022 March 31, 2021

June 30, 2022 June 30, 2021

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

28 unchanged sentences

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 three months of 2022.

THE CHARLES SCHWAB CORPORATION

Notes to Condensed Consolidated Financial Statements

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

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

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.

The Company did not adopt any material new accounting standards during the six months ended June 30, 2022.

New Accounting Standards Not Yet Adopted

6 unchanged sentences

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.

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.

7 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2022 2021 2022 2021

Net interest revenue

19 unchanged sentences

Advice solutions 461 490 957 958

Other 76 76 159 154

Asset management and administration fees 1,052 1,047 2,120 2,063

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

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.

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 $ 606 million and $ 637 million at June 30, 2022 and December 31, 2021, respectively.

Schwab did not have any other significant contract assets or contract liability balances as of June 30, 2022 or December 31, 2021.

Unsatisfied performance obligations

6 unchanged sentences

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

June 30, 2022 Amortized

Available for sale securities

9 unchanged sentences

Foreign government agency securities 1,132 — 46 1,086

Commercial paper (3)

Other 322 — 6 316

Total available for sale securities (3)

$ 284,096 $ 23 $ 18,842 $ 265,277

Held to maturity securities

16 unchanged sentences

Total available for sale securities (3)

(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.

$ 391,482 $ 3,481 $ 4,909 $ 390,054

(1) Approximately 46 % and 58 % of asset-backed securities held as of June 30, 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 30 % of the asset-backed securities held as of June 30, 2022 and December 31, 2021.

(2) As of June 30, 2022 and December 31, 2021, approximately 38 % 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 $ 2.3 billion of AFS commercial paper as of June 30, 2022 ( none as of December 31, 2021).

These holdings have maturities of three months or less and have gross unrealized losses of $ 3 million as of June 30, 2022 ( none as of December 31, 2021).

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

6 unchanged sentences

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.

At June 30, 2022, our banking subsidiaries had pledged securities with a fair value of $ 48.9 billion as collateral to secure borrowing capacity on secured credit facilities with the Federal Home Loan Bank (FHLB) (see Note 8).

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.

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 $ 9.7 billion as collateral for this facility at June 30, 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.

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

March 31, 2022 Fair

June 30, 2022 Fair

Value Unrealized

13 unchanged sentences

December 31, 2021

Available for sale securities

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

5 unchanged sentences

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

At March 31, 2022, substantially all rated securities in the investment portfolios were investment grade.

At June 30, 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 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.

No amounts were recognized as credit loss expense and no securities were written down to fair value through earnings for the six months ended June 30, 2022 and the year ended December 31, 2021.

None of the Company’s AFS securities held as of June 30, 2022 and December 31, 2021 had an allowance for credit losses.

All HTM securities as of June 30, 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.

The Company had $ 689 million of accrued interest for AFS and HTM securities as of June 30, 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.

There were no writeoffs of accrued interest receivable on AFS and HTM securities during the six months ended June 30, 2022, or for AFS securities for the year ended December 31, 2021.

THE CHARLES SCHWAB CORPORATION

4 unchanged sentences

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

March 31, 2022 Within

June 30, 2022 Within

1 year After 1 year

2 unchanged sentences

10 years Total

Available for sale securities

agency mortgage-backed securities $ 2,588 $ 15,473 $ 36,507 $ 130,118 $ 184,686

6 unchanged sentences

Foreign government agency securities 100 986 — — 1,086

Commercial paper 200 — — — 200

Other 198 98 — 20 316

7 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2022 2021 2022 2021

Proceeds $ 3,949 $ 3,037 $ 13,470 $ 9,642

6 unchanged sentences

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

March 31, 2022 Current 30-59 days

June 30, 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 $ 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.

(1) First Mortgages and HELOCs include unamortized premiums and discounts and direct origination costs of $ 96 million and $ 91 million at June 30, 2022 and December 31, 2021, respectively.

(2) First Mortgage and HELOC portfolios concentrated in California as of June 30, 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 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).

(3) There were no loans accruing interest that were contractually 90 days or more past due at June 30, 2022 or December 31, 2021.

At June 30, 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:

March 31, 2022 March 31, 2021

June 30, 2022 June 30, 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 $ 31 $ 3 $ 34 $ 3 $ 37 $ 8 $ 2 $ 10 $ 3 $ 13

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

June 30, 2022 June 30, 2021

Six 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 $ 13 $ 2 $ 15 $ 3 18 $ 22 $ 5 $ 27 $ 3 30

Charge-offs — — — — — — — — — —

Recoveries — — — — — — — — — —

Provision for credit

losses 18 1 19 — 19 ( 14 ) ( 3 ) ( 17 ) — ( 17 )

Balance at end of period $ 31 $ 3 $ 34 $ 3 $ 37 $ 8 $ 2 $ 10 $ 3 $ 13

THE CHARLES SCHWAB CORPORATION

1 unchanged sentence

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

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 .

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 June 30, 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.

economy continues to be challenged by rising inflation, tightening monetary policy, and geopolitical unrest.

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

however, increases in Treasury yields and mortgage rates, as seen in the first six months of 2022, have extended the expected life of the portfolio and may reduce borrower affordability.

These changes to the macroeconomic outlook resulted in higher modeled projections of loss rates at June 30, 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:

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

Nonaccrual loans (1)

20 unchanged sentences

First Mortgages Amortized Cost Basis by Origination Year

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

June 30, 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

53 unchanged sentences

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

At March 31, 2022, First Mortgage loans of $ 18.3 billion had adjustable interest rates.

At June 30, 2022, First Mortgage loans of $ 19.2 billion had adjustable interest rates.

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

2 unchanged sentences

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

At 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.

At June 30, 2022 and December 31, 2021, Schwab had $ 83 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.

6 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2022 2021 2022 2021

HELOCs converted to amortizing loans $ 2 $ 7 $ 4 $ 14

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

March 31, 2022 Balance

June 30, 2022 Balance

Converted to an amortizing loan by period end $ 241

3 unchanged sentences

> 5 years 228

At March 31, 2022, $ 469 million of the HELOC portfolio was secured by second liens on the associated properties.

At June 30, 2022, $ 475 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 March 31, 2022, the borrowers on approximately 53 % of HELOC loan balances outstanding only paid the minimum amount due.

At June 30, 2022, the borrowers on approximately 44 % of HELOC loan balances outstanding only paid the minimum amount due.

Variable Interest Entities

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 of June 30, 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.

1 unchanged sentence

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

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

assets Aggregate

13 unchanged sentences

CSB’s funding of these remaining commitments is dependent upon the occurrence of certain conditions, and CSB expects to pay substantially all of these commitments between 2022 and 2025.

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.

During the six months ended June 30, 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

3 unchanged sentences

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

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

Interest-bearing deposits:

16 unchanged sentences

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

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

The following table lists long-term debt by instrument outstanding as of June 30, 2022 and December 31, 2021.

Date of Issuance Principal Amount Outstanding

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

CSC Fixed-rate Senior Notes:

76 unchanged sentences

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

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

Annual maturities on all long-term debt outstanding at June 30, 2022 are as follows:

Thereafter 10,950

4 unchanged sentences

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

and had $ 600 million outstanding at June 30, 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.

no amounts were outstanding as of June 30, 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 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.

Amounts available under these facilities are dependent on the amount of bank loans and the fair value of certain investment securities that are pledged as collateral.

As of June 30, 2022 and December 31, 2021, the collateral pledged provided a total borrowing capacity of $ 64.7 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 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.

As of June 30, 2022 and December 31, 2021, our collateral pledged provided total borrowing capacity of $ 9.7 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.

The Company had no borrowings outstanding pursuant to such repurchase agreements at June 30, 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 $ 1.9 billion outstanding under the secured uncommitted lines of credit as of March 31, 2022 and December 31, 2021.

There was $ 750 million and $ 1.9 billion outstanding under the secured uncommitted lines of credit as of June 30, 2022 and December 31, 2021, respectively.

See Note 11 for additional information.

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.

TDAC maintained one senior unsecured committed revolving credit facility as of December 31, 2021 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 facility as of December 31, 2021.

THE CHARLES SCHWAB CORPORATION

3 unchanged sentences

Loan Portfolio:

CSB provides a co-branded loan origination program for CSB clients (the Program) with Rocket Mortgage, LLC (Rocket Mortgage ® ), formerly known as Quicken Loans, LLC.

CSB provides a co-branded loan origination program for CSB clients (the Program) with Rocket Mortgage, LLC (Rocket Mortgage ® ).

Pursuant to the Program, Rocket Mortgage originates and services First Mortgages and HELOCs for CSB clients.

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

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.

CSB purchased First Mortgages of $ 2.0 billion and $ 4.0 billion during the second quarters of 2022 and 2021, respectively, and $ 4.7 billion and $ 6.8 billion during the first six months of 2022 and 2021, respectively.

CSB purchased HELOCs with commitments of $ 70 million and $ 114 million during the second quarters of 2022 and 2021, respectively, and $ 160 million and $ 213 million during the first six months 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:

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

Commitments to extend credit related to unused HELOCs, PALs, and other lines of credit $ 5,271 $ 6,193

4 unchanged sentences

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

At 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.

At June 30, 2022, the aggregate face amount of these LOCs totaled $ 15 million.

There were no funds drawn under any of these LOCs at June 30, 2022.

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

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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.

The total ending IDA balance was $ 144.3 billion as of June 30, 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.

During the first six months of 2022, Schwab moved $ 14.6 billion of IDA balances to its balance sheet.

THE CHARLES SCHWAB CORPORATION

19 unchanged sentences

Schwab Intelligent Portfolios ® SEC Investigation :

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 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.

The Company continues to cooperate with SEC staff with the goal of fully resolving the matter.

As disclosed on July 1, 2021, Schwab’s second quarter 2021 financial results included a liability and related charge of approximately $ 200 million in connection with a tentative agreement reached with SEC staff to resolve an enforcement investigation into past disclosures for the Schwab Intelligent Portfolios digital advisory solution.

On June 13, 2022, the SEC announced the settlement under which CS&Co, Charles Schwab Investment Advisory, Inc., and Schwab Wealth Investment Advisory, Inc., without admitting or denying the SEC’s findings, resolved the matter and agreed to pay $ 186.5 million for deposit into a Fair Fund account for distribution to affected investors.

TD Ameritrade Acquisition Litigation :

2 unchanged sentences

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.

The amended complaint asserts separate claims for breach of fiduciary duty by the TD Ameritrade officer, certain members of the TD Ameritrade board and TD Bank, and against Schwab for aiding and abetting such breaches, the allegation being that the amendment of the Insured Deposit Account Agreement TD Bank negotiated directly with Schwab allowed TD Bank to divert merger consideration from TD Ameritrade’s minority public stockholders.

The amended complaint asserts separate claims for breach of fiduciary duty by the TD Ameritrade officer, certain members of the TD Ameritrade board and TD Bank, and against Schwab for aiding and abetting such breaches, the allegation being that the amendment of the IDA agreement TD Bank negotiated directly with Schwab allowed TD Bank to divert merger consideration from TD Ameritrade’s minority public stockholders.

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

1 unchanged sentence

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.

A settlement hearing has been rescheduled for September 28, 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.

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Exit and Other Related Liabilities

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.

The Company completed its acquisition of TD Ameritrade effective October 6, 2020 and integration work continued during the first six months 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 over the course of 2023, ending in the fourth quarter.

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

2 unchanged sentences

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 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.

More specifically, factors that could cause variability in our expected acquisition and integration-related costs include the level of employee attrition and availability of third-party labor, workforce redeployment from eliminated positions into open roles, changes in the levels of client activity, as well as changes in the scope and cost of technology and real estate-related exit cost variability due to the effects of changes in remote working trends.

Inclusive of costs recognized through June 30, 2022, Schwab currently expects to incur total exit and other related costs for the integration of TD Ameritrade ranging from $ 500 million to $ 700 million, consisting of employee compensation and benefits, facility exit costs, and certain other costs.

During the three months ended June 30, 2022 and 2021, the Company recognized $ 8 million and $ 47 million of acquisition-related exit costs, respectively.

During the six months ended June 30, 2022 and 2021, the Company recognized $ 20 million and $ 90 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 15 to 27 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 months ended March 31, 2022:

The following is a summary of the Company’s exit and other related liabilities as of June 30, 2022 and activity for the six months ended June 30, 2022:

Investor Services

2 unchanged sentences

Balance at December 31, 2021 (1)

Amounts recognized in expense (1)

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

Balance at March 31, 2022 (2)

$ 28 $ 7 $ 35

(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

Amounts recognized in expense (2)

Costs paid or otherwise settled ( 10 ) ( 3 ) ( 13 )

Balance at March 31, 2021 (2)

Balance at June 30, 2022 (1)

$ 31 $ 8 $ 39

(1) 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 months ended March 31, 2022:

(2) 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.

The following table summarizes the exit and other related costs recognized in expense for the three and six months ended June 30, 2022:

Investor Services Advisor Services

Employee Compensation and Benefits Facility Exit Costs (1)

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

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

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Total $ 5 $ 1 $ 6 $ 2 $ — $ 2 $ 8

Investor Services Advisor Services

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

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

Advisor Services Total Total

Compensation and benefits $ 13 $ — $ 13 $ 4 $ — $ 4 $ 17

Occupancy and equipment — 2 2 — 1 1 3

Total $ 13 $ 2 $ 15 $ 4 $ 1 $ 5 $ 20

(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:

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

Investor Services Advisor Services

Employee Compensation and Benefits Facility Exit Costs (1)

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

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

2 unchanged sentences

Occupancy and equipment — 3 3 — — — 3

Total $ 35 $ 3 $ 38 $ 9 $ — $ 9 $ 47

Investor Services Advisor Services

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

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

Advisor Services Total Total

Compensation and benefits $ 57 $ — $ 57 $ 15 $ — $ 15 $ 72

Occupancy and equipment — 13 13 — 3 3 16

Professional services — 1 1 — — — 1

2 unchanged sentences

(1) Costs related to facility closures.

These costs, which are primarily comprised of accelerated amortization of 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 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 exit and other related costs incurred from October 6, 2020 through March 31, 2022:

The following table summarizes the exit and other related costs incurred from October 6, 2020 through June 30, 2022:

Investor Services Advisor Services

16 unchanged sentences

The collateral provided under these resale agreements is utilized to meet obligations under broker-dealer client protection rules, which place limitations on our ability to access such segregated securities.

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 March 31, 2022 and December 31, 2021 were not subject to master netting arrangements.

Schwab’s resale agreements as of June 30, 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 $ 549 million and $ 566 million at March 31, 2022 and December 31, 2021, respectively.

The fair value of these borrowed securities was $ 851 million and $ 566 million at June 30, 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

March 31, 2022

June 30, 2022

Resale agreements (1)

21 unchanged sentences

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

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.

At June 30, 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 $ 18.1 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 March 31, 2022 and December 31, 2021.

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

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

March 31, 2022 December 31, 2021

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

June 30, 2022 December 31, 2021

Fair value of client securities available to be pledged $ 100,679 $ 120,306

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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 $ 242 million as of March 31, 2022 and $ 118 million as of December 31, 2021.

The fair value of fully-paid client securities available and pledged was $ 249 million as of June 30, 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.

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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.

Gains and losses on client-held fractional shares offset the 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.

1 unchanged sentence

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 March 31, 2022 or December 31, 2021.

The Company did not adjust prices received from the primary independent third-party pricing service at June 30, 2022 or December 31, 2021.

THE CHARLES SCHWAB CORPORATION

3 unchanged sentences

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

June 30, 2022 Level 1 Level 2 Level 3 Balance at

Cash equivalents:

15 unchanged sentences

Foreign government agency securities — 1,086 — 1,086

Commercial paper — 200 — 200

Other — 316 — 316

46 unchanged sentences

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

March 31, 2022 Carrying

June 30, 2022 Carrying

Amount Level 1 Level 2 Level 3 Balance at

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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 three months ended March 31, 2022 and 2021.

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

There were no repurchases of CSC’s common stock under this authorization during the six months ended June 30, 2022 and 2021.

As of June 30, 2022, $ 1.8 billion remained on the authorization.

Subsequent to June 30, 2022, on July 27, 2022, CSC publicly announced that its Board of Directors terminated the existing share repurchase authorization and replaced it with a new authorization to repurchase up to $ 15.0 billion of common stock.

The authorization does not have an expiration date.

On August 1, 2022, CSC purchased, directly from an affiliate of TD Bank, 15 million shares of nonvoting common stock for a total of $ 1.0 billion, or approximately $ 66.53 per share.

The shares of nonvoting common stock automatically converted into common stock and were purchased under CSC’s new share repurchase authorization.

The purchase price paid by CSC was equal to the lowest price per share that the affiliate of TD Bank received in a contemporaneous share sale facilitated by a third-party market maker, which resulted in a purchase price lower than the closing price on August 1, 2022.

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

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

Liquidation Preference Per Share Dividend Rate in Effect at June 30, 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)

March 31, 2022 December 31, 2021 Issue Date

June 30, 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

11 unchanged sentences

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

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

(2) The dividend rate for Series G and Series 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.

(4) The dividend rate for Series K 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.

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

Three Months Ended March 31,

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

2022 2021 2022 2021

Declared Per Share

Series A $ 6.2 $ 15.60 $ 14.0 $ 35.00 $ 11.2 $ 28.30 $ 14.0 $ 35.00

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6.7 11.13 4.5 7.54 13.4 22.26 4.5 7.54

9.1 1,208.33 — — 9.1 1,208.33 — —

Total $ 132.6 $ 127.9 $ 250.5 $ 217.8

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

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

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

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

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

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

(3) Series J Preferred Stock was issued on March 30, 2021.

(3) Series J was issued on March 30, 2021.

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.

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

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

THE CHARLES SCHWAB CORPORATION

4 unchanged sentences

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

Balance at December 31, 2020 $ 5,394

Balance at March 31, 2021 $ 878

Available for sale securities:

1 unchanged sentence

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

Balance at June 30, 2021 $ 2,408

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

Available for sale securities:

Net unrealized gain (loss), net of tax expense (benefit) of $( 1,604 )

Other reclassifications included in other revenue, net of tax expense (benefit) of $( 1 )

Held to maturity securities:

Amortization of amounts previously recorded upon transfer from available for sale, net of tax expense (benefit) of $ 28

Balance at June 30, 2022 $ ( 16,022 )

Balance at December 31, 2020 $ 5,394

Available for sale securities:

Net unrealized gain (loss), net of tax expense (benefit) of $( 925 )

Other reclassifications included in other revenue, net of tax expense (benefit) of $( 4 )

Balance at June 30, 2021 $ 2,408

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

Available for sale securities:

Net unrealized gain (loss), excluding transfers to held to maturity, net of tax expense (benefit) of $( 4,741 )

4 unchanged sentences

Amortization of amounts previously recorded upon transfer from available for sale, net of tax expense (benefit) of $ 49

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

Balance at June 30, 2022 $ ( 16,022 )

(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.

3 unchanged sentences

Earnings Per Common Share

For the three months ended March 31, 2022 and 2021, the Company had voting and nonvoting common stock outstanding.

For the three and six months ended June 30, 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

June 30, Six Months Ended

2022 2021 2022 2021

Stock Nonvoting

1 unchanged sentence

Stock Nonvoting

Common Stock Common

Stock Nonvoting

Common Stock Common

Stock Nonvoting

Basic earnings per share:

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Net income available to common stockholders $ 1,583 $ 69 $ 1,070 $ 47 $ 2,808 $ 122 $ 2,400 $ 105

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

voting shares 53 — 58 —

Reallocation of net income available to common stockholders as a result of conversion of nonvoting to voting shares 69 — 47 — 122 — 105 —

Allocation of net income available to common stockholders:

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

(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.

(2) Antidilutive stock options and restricted stock units excluded from the calculation of diluted EPS totaled 13 million and 14 million for the three and six months ended June 30, 2022, respectively, and 14 million and 15 million for the three and six months ended June 30, 2021, respectively.

THE CHARLES SCHWAB CORPORATION

2 unchanged sentences

Regulatory Requirements

At March 31, 2022, CSC and CSB met all of their respective capital requirements.

At June 30, 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

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

June 30, 2022 Amount Ratio Amount Ratio Amount Ratio (1)

Common Equity Tier 1 Risk-Based Capital $ 30,641 20.9 % N/A $ 6,601 4.5 %

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(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%.

As of June 30, 2022, CSC was subject to a stress capital buffer of 2.5%.

In June 2022, CSC received its 2022 stress capital buffer requirement from the Federal Reserve of 2.5%, which will become effective beginning October 1, 2022.

In addition, 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.

At June 30, 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 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.

Based on its regulatory capital ratios at June 30, 2022, CSB is considered well capitalized (the highest category) under its respective regulatory capital rules.

There are no conditions or events since June 30, 2022 that management believes have changed CSB’s capital category.

At June 30, 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 $ 39.6 billion and $ 15.5 billion, respectively.

Based on their regulatory capital ratios, at June 30, 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:

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

Net capital $ 5,171 $ 5,231

11 unchanged sentences

Net capital in excess of required net capital $ 687 $ 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 March 31, 2022.

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

10 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 March 31, 2022 2021 2022 2021 2022 2021

Three Months Ended June 30, 2022 2021 2022 2021 2022 2021

Net interest revenue $ 1,834 $ 1,478 $ 710 $ 469 $ 2,544 $ 1,947

6 unchanged sentences

Income before taxes on income $ 1,663 $ 1,339 $ 611 $ 380 $ 2,274 $ 1,719

Investor Services Advisor Services Total

Six Months Ended June 30, 2022 2021 2022 2021 2022 2021

Net interest revenue $ 3,408 $ 2,932 $ 1,319 $ 926 $ 4,727 $ 3,858

Asset management and administration fees 1,544 1,511 576 552 2,120 2,063

Trading revenue 1,607 1,958 241 213 1,848 2,171

Bank deposit account fees 427 503 219 185 646 688

Other 314 348 110 114 424 462

Total net revenues 7,300 7,252 2,465 1,990 9,765 9,242

Expenses Excluding Interest 4,242 4,297 1,410 1,266 5,652 5,563

Income before taxes on income $ 3,058 $ 2,955 $ 1,055 $ 724 $ 4,113 $ 3,679

THE CHARLES SCHWAB CORPORATION

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