What changed in this filing

/stocks — the workspaceLOADING

Item 3. Quantitative and Qualitative Disclosures About Market Risk

2022-11-08 compared with 2022-08-08 · 227 added, 175 removed, 1247 unchanged (24% of the section changed)

7 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

30 unchanged sentences

Diluted $ .99 $ .74 $ 2.53 $ 2.06

(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.

(1) No fee waivers were recognized for the three months ended September 30, 2022.

Includes fee waivers of $ 57 million for the nine months ended September 30, 2022, and $ 83 million and $ 246 million for the three and nine months ended September 30, 2021, respectively.

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

6 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

17 unchanged sentences

(In Millions, Except Per Share and Share Amounts)

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

Cash and cash equivalents $ 46,486 $ 62,975

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

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

agreements of $ 13,644 and $ 13,096 at September 30, 2022 and December 31, 2021,

respectively)

44,118 53,949

Receivables from brokerage clients — net 73,859 90,565

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

Available for sale securities (amortized cost of $ 264,816 at September 30, 2022 and

$ 391,482 at December 31, 2021)

17 unchanged sentences

aggregate liquidation preference of $ 10,450

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

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

2,023,295,180 and 1,994,895,180 shares issued at September 30, 2022 and

December 31, 2021, respectively

Nonvoting common stock — 300 million shares authorized;

$ .01 par value per share;

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

50,893,695 and 79,293,695 shares issued at September 30, 2022 and December 31, 2021,

Additional paid-in capital 26,975 26,741

Retained earnings 29,651 25,992

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

shares at December 31, 2021

Treasury stock, at cost — 198,092,107 and 180,959,274 shares at September 30, 2022

and December 31, 2021, respectively

( 6,751 ) ( 5,338 )

11 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

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 )

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

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

4 unchanged sentences

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

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

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

Net income — — — — — — 2,020 — — 2,020

Other comprehensive income (loss), net of tax — — — — — — — — ( 7,130 ) ( 7,130 )

Call of preferred stock ( 397 ) — — — — — ( 3 ) — — ( 400 )

Dividends declared on preferred stock — — — — — — ( 123 ) — — ( 123 )

1 unchanged sentence

— — — — — — ( 417 ) — — ( 417 )

Repurchase of common stock — — — — — — — ( 500 ) — ( 500 )

Repurchase of nonvoting common stock — 15 — ( 15 ) — — — ( 1,000 ) — ( 1,000 )

Conversion of nonvoting common stock to

common stock — 13 — ( 13 ) — — — — — —

Stock option exercises and other — — — — — ( 12 ) — 21 — 9

1 unchanged sentence

Other — — — — — 19 — — — 19

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

Balance at September 30, 2022 $ 10,297 2,023 $ 20 51 $ 1 $ 26,975 $ 29,651 $ ( 6,751 ) $ ( 23,152 ) $ 37,041

Continued on following page.

THE CHARLES SCHWAB CORPORATION

Condensed Consolidated Statements of Stockholders ’ Equity

(In Millions)

Continued from previous page.

Accumulated Other Comprehensive Income (Loss)

14 unchanged sentences

Other — — — — — 57 — ( 10 ) — 47

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

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

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

Call of preferred stock ( 397 ) — — — — — ( 3 ) — — ( 400 )

Dividends declared on preferred stock — — — — — — ( 374 ) — — ( 374 )

1 unchanged sentence

— — — — — — ( 1,179 ) — — ( 1,179 )

Repurchase of common stock — — — — — — — ( 500 ) — ( 500 )

Repurchase of nonvoting common stock — 15 — ( 15 ) — — — ( 1,000 ) — ( 1,000 )

Conversion of nonvoting common stock to common stock — 13 — ( 13 ) — — — — — —

Stock option exercises and other — — — — — ( 68 ) — 110 — 42

1 unchanged sentence

Other — — — — — 87 — ( 23 ) — 64

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

Balance at September 30, 2022 $ 10,297 2,023 $ 20 51 $ 1 $ 26,975 $ 29,651 $ ( 6,751 ) $ ( 23,152 ) $ 37,041

See Notes to the Condensed Consolidated Financial Statements .

2 unchanged sentences

(in Millions)

Six Months Ended

Nine Months Ended

September 30,

Cash Flows from Operating Activities

35 unchanged sentences

Proceeds from stock options exercised 42 162

Repurchases of common stock and nonvoting common stock ( 1,455 ) —

Other financing activities ( 53 ) ( 41 )

8 unchanged sentences

Continued from previous page.

Six Months Ended

Nine Months Ended

September 30,

Supplemental Cash Flow Information

3 unchanged sentences

Changes in accrued equipment, office facilities, and property purchases $ ( 28 ) $ 7

Non-cash financing activity:

Common stock repurchased during the period but settled after period end $ 45 $ —

Call of preferred stock $ 400 $ —

Other Supplemental Cash Flow Information:

5 unchanged sentences

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

June 30, 2022 June 30, 2021

September 30, 2022 September 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 six months of 2022.

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

New Accounting Standards

Adoption of New Accounting Standards

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

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

New Accounting Standards Not Yet Adopted

8 unchanged sentences

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.

January 1, 2023 The Company does not expect this guidance will have a material impact on its financial statements, including EPS.

THE CHARLES SCHWAB CORPORATION

5 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

33 unchanged sentences

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 $ 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.

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 $ 581 million and $ 637 million at September 30, 2022 and December 31, 2021, respectively.

Schwab did not have any other significant contract assets or contract liability balances as of September 30, 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 and HTM investment securities are as follows:

June 30, 2022 Amortized

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

September 30, 2022 Amortized

Available for sale securities

31 unchanged sentences

$ 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).

(1) Approximately 55 % and 58 % of asset-backed securities held as of September 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 18 % and 30 % of the asset-backed securities held as of September 30, 2022 and December 31, 2021, respectively.

(2) As of September 30, 2022 and December 31, 2021, approximately 39 % 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 $ 287 million of AFS commercial paper as of September 30, 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.

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)

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.

Subsequent to September 30, 2022, on November 2, 2022, the Company transferred approximately $ 80 billion of U.S.

agency mortgage-backed securities with a total pre-tax net unrealized loss at the time of transfer of approximately $ 16 billion from the AFS category to the HTM category.

At September 30, 2022, our banking subsidiaries had pledged securities with a fair value of $ 65.9 billion as collateral to secure borrowing capacity on secured credit facilities with the 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 $ 8.8 billion as collateral for this facility at September 30, 2022.

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

The fair value of these pledged securities was $ 1.5 billion at June 30, 2022.

The fair value of these pledged securities was $ 1.4 billion at September 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

June 30, 2022 Fair

September 30, 2022 Fair

Value Unrealized

21 unchanged sentences

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

At June 30, 2022, substantially all rated securities in the investment portfolios were investment grade.

At September 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 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.

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, 2022 and the year ended December 31, 2021.

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

All HTM securities as of September 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 $ 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 six months ended June 30, 2022, or for AFS securities for the year ended December 31, 2021.

THE CHARLES SCHWAB CORPORATION

1 unchanged sentence

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

The Company had $ 645 million of accrued interest for AFS and HTM securities as of September 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 nine months ended September 30, 2022, or for AFS securities for the year ended December 31, 2021.

In the table below, mortgage-backed securities and other asset-backed securities have been allocated to maturity groupings based on final contractual maturities.

1 unchanged sentence

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

June 30, 2022 Within

September 30, 2022 Within

1 year After 1 year

20 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

7 unchanged sentences

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

June 30, 2022 Current 30-59 days

September 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 $ 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.

(1) First Mortgages and HELOCs include unamortized premiums and discounts and direct origination costs of $ 97 million and $ 91 million at September 30, 2022 and December 31, 2021, respectively.

(2) First Mortgage and HELOC portfolios concentrated in California as of September 30, 2022 and December 31, 2021 were 44 % 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 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).

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

At September 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:

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

Balance at beginning of

period $ 23 $ 2 $ 25 $ 3 $ 28 $ 12 $ 3 $ 15 $ 3 $ 18

Charge-offs — — — — — — — — — —

Recoveries — — — — — — — — — —

Provision for credit

losses 8 1 9 — 9 ( 4 ) ( 1 ) ( 5 ) — ( 5 )

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

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

September 30, 2022 September 30, 2021

Three Months Ended First Mortgages HELOCs Total residential real estate Pledged asset lines Other Total First Mortgages HELOCs Total residential real estate Pledged asset lines Other Total

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

Charge-offs — — — ( 4 ) — ( 4 ) — — — — ( 1 ) ( 1 )

Recoveries — 1 1 — — 1 — 1 1 — — 1

Provision for credit

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

Provision for credit losses 11 — 11 4 — 15 — ( 1 ) ( 1 ) — 1 —

Balance at end of period $ 42 $ 4 $ 46 $ — $ 3 $ 49 $ 8 $ 2 $ 10 $ — $ 3 $ 13

2 unchanged sentences

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

September 30, 2022 September 30, 2021

Nine Months Ended First Mortgages HELOCs Total residential real estate Pledged asset lines Other Total First Mortgages HELOCs Total residential real estate Pledged asset lines Other Total

Balance at beginning of period $ 13 $ 2 $ 15 $ — $ 3 $ 18 $ 22 $ 5 $ 27 $ — $ 3 $ 30

Charge-offs — — — ( 4 ) — ( 4 ) — — — — ( 1 ) ( 1 )

Recoveries — 1 1 — — 1 — 1 1 — — 1

Provision for credit losses 29 1 30 4 — 34 ( 14 ) ( 4 ) ( 18 ) — 1 ( 17 )

Balance at end of period $ 42 $ 4 $ 46 $ — $ 3 $ 49 $ 8 $ 2 $ 10 $ — $ 3 $ 13

Consistent with Schwab’s loan charge off policy as disclosed in Item 8 – Note 2 of the 2021 Form 10-K, the Company charges off any delinquent PALs no later than 90-days past due.

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.

All PALs were fully collateralized by securities with fair values in excess of borrowings as of September 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.

Management’s macroeconomic outlook reflects slower 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 nine 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 September 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:

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

Nonaccrual loans (1)

20 unchanged sentences

First Mortgages Amortized Cost Basis by Origination Year

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

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

At September 30, 2022, First Mortgage loans of $ 19.9 billion had adjustable interest rates.

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

2 unchanged sentences

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

At June 30, 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.

At September 30, 2022 and December 31, 2021, Schwab had $ 107 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

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

1 unchanged sentence

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

June 30, 2022 Balance

September 30, 2022 Balance

Converted to an amortizing loan by period end $ 226

3 unchanged sentences

> 5 years 236

At June 30, 2022, $ 475 million of the HELOC portfolio was secured by second liens on the associated properties.

At September 30, 2022, $ 468 million of the HELOC portfolio was secured by second liens on the associated properties.

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

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

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

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

Variable Interest Entities

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 of September 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 Low-Income Housing Tax Credit (LIHTC) investments.

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

1 unchanged sentence

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

June 30, 2022 December 31, 2021

September 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 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.

During the nine months ended September 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:

June 30, 2022 December 31, 2021

September 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 June 30, 2022 and December 31, 2021.

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

Date of Issuance Principal Amount Outstanding

June 30, 2022 December 31, 2021

September 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 June 30, 2022 are as follows:

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

Thereafter 10,950

5 unchanged sentences

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.

and had $ 500 million outstanding at September 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 June 30, 2022 or December 31, 2021.

no amounts were outstanding as of September 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 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.

As of September 30, 2022 and December 31, 2021, the collateral pledged provided a total borrowing capacity of $ 82.6 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 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.

As of September 30, 2022 and December 31, 2021, our collateral pledged provided total borrowing capacity of $ 8.8 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 June 30, 2022 or December 31, 2021.

The Company had no borrowings outstanding pursuant to such repurchase agreements at September 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 $ 750 million and $ 1.9 billion outstanding under the secured uncommitted lines of credit as of June 30, 2022 and December 31, 2021, respectively.

There was no balance outstanding at September 30, 2022 and $ 1.9 billion outstanding under the secured uncommitted lines of credit as of December 31, 2021.

See Note 11 for additional information.

9 unchanged sentences

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

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.

CSB purchased First Mortgages of $ 1.3 billion and $ 3.6 billion during the third quarters of 2022 and 2021, respectively, and $ 6.0 billion and $ 10.4 billion during the first nine months of 2022 and 2021, respectively.

CSB purchased HELOCs with commitments of $ 92 million and $ 112 million during the third quarters of 2022 and 2021, respectively, and $ 252 million and $ 325 million during the first nine 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:

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

Commitments to extend credit related to unused HELOCs, PALs, and other lines of credit $ 4,829 $ 6,193

2 unchanged sentences

Guarantees and indemnifications:

Schwab has clients that sell (i.e., write) listed option contracts that are cleared by the Options Clearing Corporation – a clearing house that establishes margin requirements on these transactions.

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

At June 30, 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.

Schwab has clients that sell (i.e., write) listed option contracts that are cleared by the Options Clearing Corporation (OCC) – a clearing house that establishes margin requirements on these transactions.

We satisfy the margin requirements of these transactions through the pledging of certain client securities.

For additional information on these pledged securities refer to Note 11.

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

15 unchanged sentences

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 $ 144.3 billion as of June 30, 2022 and $ 147.2 billion as of December 31, 2021.

The total ending IDA balance was $ 133.8 billion as of September 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 six months of 2022, Schwab moved $ 14.6 billion of IDA balances to its balance sheet.

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

THE CHARLES SCHWAB CORPORATION

18 unchanged sentences

With respect to all other pending matters, based on current information and consultation with counsel, it does not appear reasonably possible that the outcome of any such matter would be material to the financial condition, operating results, or cash flows of the Company.

Corrente Antitrust Litigation :

On June 6, 2022, the Company was sued in the U.S.

District Court for the Eastern District of Texas on behalf of a putative class of customers who purchased or sold securities through CS&Co or TD Ameritrade, Inc.

from October 26, 2020 to the present.

The lawsuit alleges that the Company’s acquisition of TD Ameritrade violated Section 7 of the Clayton Act because it has resulted in an anticompetitive market for the execution of retail customer orders.

Plaintiffs seek unspecified damages, as well as injunctive and other relief.

The Company is vigorously contesting the lawsuit and on August 29, 2022 filed a motion to dismiss the complaint, which plaintiffs have opposed.

Schwab Intelligent Portfolios ® SEC Investigation :

9 unchanged sentences

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

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.

On September 21, 2022, the court entered final judgment and approved the terms of the settlement, under which 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 :

2 unchanged sentences

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.

Plaintiffs seek unspecified

THE CHARLES SCHWAB CORPORATION

Notes to Condensed Consolidated Financial Statements

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

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

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

2 unchanged sentences

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)

Plaintiffs sought review of the order denying class certification by the Ninth Circuit Court of Appeals, which was denied.

On September 23, 2022, plaintiffs filed a renewed motion for class action.

Ford Order Routing Litigation :

9 unchanged sentences

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.

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.

Plaintiff renewed his motion for class certification, which the District Court granted on September 20, 2022.

On October 26, 2022, the U.S.

Court of Appeals, 8th Circuit, granted defendants’ petition for an immediate appeal of the District Court’s ruling.

Exit and Other Related Liabilities

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.

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

Based on our current integration plans and expanded scope of technology work, the Company now expects to complete most client conversions across multiple groups over the course of 2023, with certain client groups to be completed in early 2024.

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

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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;

Inclusive of costs recognized through September 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 each of the three months ended September 30, 2022 and 2021, the Company recognized $ 9 million of acquisition-related exit costs.

During the nine months ended September 30, 2022 and 2021, the Company recognized $ 29 million and $ 99 million of acquisition-related exit costs, respectively.

The Company expects that remaining exit and other related costs will be incurred and charged to expense over the next 12 to 24 months;

some costs are expected to be incurred after client conversion.

3 unchanged sentences

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

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:

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

Investor Services

5 unchanged sentences

Costs paid or otherwise settled ( 11 ) ( 3 ) ( 14 )

Balance at June 30, 2022 (1)

Balance at September 30, 2022 (1)

$ 35 $ 9 $ 44

1 unchanged sentence

(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:

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

Investor Services Advisor Services

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

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

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

4 unchanged sentences

Investor Services Advisor Services

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

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

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

5 unchanged sentences

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 and six months ended June 30, 2021:

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

Investor Services Advisor Services

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

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

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

4 unchanged sentences

Investor Services Advisor Services

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

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

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

10 unchanged sentences

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

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

The following table summarizes the exit and other related costs incurred from October 6, 2020 through September 30, 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 investments requirement.

Schwab’s resale agreements as of June 30, 2022 and December 31, 2021 were not subject to master netting arrangements.

Schwab’s resale agreements as of September 30, 2022 and December 31, 2021 were not subject to master netting arrangements.

Securities lending:

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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 $ 851 million and $ 566 million at June 30, 2022 and December 31, 2021, respectively.

The fair value of these borrowed securities was $ 514 million and $ 566 million at September 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

June 30, 2022

September 30, 2022

Resale agreements (1)

5 unchanged sentences

$ 5,084 $ — $ 5,084 $ ( 99 ) $ ( 4,406 ) $ 579

Secured short-term borrowings (6)

750 — 750 — ( 750 ) —

Total $ 5,084 $ — $ 5,084 $ ( 99 ) $ ( 4,406 ) $ 579

12 unchanged sentences

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

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.

At September 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 $ 13.8 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 June 30, 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 September 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.

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:

June 30, 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 to third parties under such regulations and from securities borrowed transactions:

September 30, 2022 December 31, 2021

Fair value of client securities available to be pledged $ 98,176 $ 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 $ 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.

The fair value of fully-paid client securities available and pledged was $ 192 million as of September 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 OCC.

THE CHARLES SCHWAB CORPORATION

30 unchanged sentences

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 June 30, 2022 or December 31, 2021.

The Company did not adjust prices received from the primary independent third-party pricing service at September 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:

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

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

Cash equivalents:

63 unchanged sentences

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

June 30, 2022 Carrying

September 30, 2022 Carrying

Amount Level 1 Level 2 Level 3 Balance at

39 unchanged sentences

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

Stockholders’ Equity and Mandatorily Redeemable Preferred Stock

Stockholders’ Equity

1 unchanged sentence

The net proceeds of the offering were $ 740 million, 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.

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 July 27, 2022, CSC publicly announced that its Board of Directors terminated the existing share repurchase authorization of up to $ 4.0 billion of common stock and replaced it with a new authorization to repurchase up to $ 15.0 billion of common stock.

The new share repurchase 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.

1 unchanged sentence

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.

CSC repurchased an additional $ 500 million of common stock under the new authorization during the three months ended September 30, 2022.

There were no repurchases of CSC’s common stock under the terminated authorization during the three and nine months ended September 30, 2022 and 2021.

As of September 30, 2022, $ 13.5 billion remained on the new authorization.

On August 1, 2022, an affiliate of TD Bank executed a permitted outside transfer, as defined in the certificate of incorporation, of 13 million shares of CSC nonvoting common stock.

Shares of nonvoting common stock transferred in a permitted outside transfer are automatically converted to shares of common stock.

Subsequent to September 30, 2022, on October 20, 2022, the Company announced that it will redeem on December 1, 2022 all of the 6,000 outstanding shares of its fixed-to-floating rate non-cumulative perpetual preferred stock, Series E, and the corresponding

600,000 depositary shares, each representing a 1/100th interest in a share of the Series E preferred stock.

The depositary shares will be redeemed at a redemption price of $ 1,000 per depositary share for a total of $ 600 million.

The redemption price does not include the regular quarterly dividend that was declared on October 26, 2022 and will be paid separately on December 1, 2022.

Mandatorily Redeemable Preferred Stock

On November 1, 2022, the Company redeemed all of the 400,000 outstanding shares of its fixed-to-floating rate non-cumulative perpetual preferred stock, Series A at a redemption price of $ 1,000 per share for a total of $ 400 million.

The redemption price does not include the regular quarterly dividend that was declared on September 30, 2022 at a rate of 7.602 % and paid separately on November 1, 2022.

The Company notified stockholders of its redemption of the Series A preferred stock on September 22, 2022, upon which it met the definition of a mandatorily redeemable financial instrument and the criteria for liability classification in accordance with ASC 480, Distinguishing Liabilities from Equity .

The Series A preferred stock fair value of $ 400 million is included in accrued expenses and other liabilities on the condensed consolidated balance sheet as of September 30, 2022.

The difference between the total redemption price and the prior carrying value of the Series A preferred stock resulted in a $ 3 million deemed dividend that was included in the calculation of EPS.

THE CHARLES SCHWAB CORPORATION

Notes to Condensed Consolidated Financial Statements

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

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

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

Liquidation Preference Per Share Dividend Rate in Effect at September 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

September 30,

December 31, 2021 (1)

June 30, 2022 December 31, 2021 Issue Date

September 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

1 unchanged sentence

Fixed-to-floating-rate/Fixed-rate reset:

Series A 400,000 400,000 1,000 397 397 01/26/12 6.106 % 02/01/22 02/01/22 3M LIBOR 4.820 %

Series E 6,000 6,000 100,000 591 591 10/31/16 4.913 % 03/01/22 03/01/22 3M LIBOR 3.315 %

— 400,000 — — 397 01/26/12 — 02/01/22 02/01/22 3M LIBOR 4.820 %

6,000 6,000 100,000 591 591 10/31/16 6.397 % 03/01/22 03/01/22 3M LIBOR 3.315 %

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 %

6 unchanged sentences

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

(2) Subsequent to September 30, 2022, Series A was redeemed on November 1, 2022.

The Series A preferred stock fair value is included in accrued expenses and other liabilities on the condensed consolidated balance sheet as of September 30, 2022.

(3) Subsequent to September 30, 2022, the Company announced the redemption of Series E effective December 1, 2022.

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

4 unchanged sentences

N/A Not applicable.

THE CHARLES SCHWAB CORPORATION

Notes to Condensed Consolidated Financial Statements

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

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

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

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

2022 2021 2022 2021

3 unchanged sentences

Declared Per Share

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

$ 7.7 $ 19.43 $ — $ — $ 18.9 $ 47.73 $ 14.0 $ 35.00

— — — — — — 18.0 30.00

Series D 11.2 14.88 11.2 14.88 33.5 44.64 33.5 44.64

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Total $ 123.4 $ 112.9 $ 373.9 $ 330.7

(1) Series A was redeemed on November 1, 2022.

Prior to redemption, dividends were paid semi-annually until February 1, 2022 and quarterly thereafter.

The final dividend was paid on November 1, 2022.

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

12 unchanged sentences

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

Balance at March 31, 2021 $ 878

Balance at June 30, 2021 $ 2,408

Available for sale securities:

Net unrealized gain (loss), net of tax expense (benefit) of $( 364 )

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

Balance at September 30, 2021 $ 1,253

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

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

Available for sale securities:

3 unchanged sentences

Amortization of amounts previously recorded upon transfer from available for sale, net of tax expense (benefit) of $ 18

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

Balance at September 30, 2022 $ ( 23,152 )

Balance at December 31, 2020 $ 5,394

2 unchanged sentences

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

Balance at June 30, 2021 $ 2,408

Balance at September 30, 2021 $ 1,253

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

6 unchanged sentences

Amortization of amounts previously recorded upon transfer from available for sale, net of tax expense (benefit) of $ 67

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

Balance at September 30, 2022 $ ( 23,152 )

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

4 unchanged sentences

Earnings Per Common Share

For the three and six months ended June 30, 2022 and 2021, the Company had voting and nonvoting common stock outstanding.

For the three and nine months ended September 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

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

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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 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.

(2) 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, 2022 and 2021, respectively.

THE CHARLES SCHWAB CORPORATION

2 unchanged sentences

Regulatory 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:

At September 30, 2022, CSC and CSB met all of their respective capital requirements.

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

Actual Minimum to be

Well Capitalized Minimum Capital Requirement

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

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

Common Equity Tier 1 Risk-Based Capital $ 30,828 21.2 % N/A $ 6,544 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.

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.

As of September 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 became effective beginning October 1, 2022.

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

1 unchanged sentence

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 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.

At September 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 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.

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

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

At September 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 $ 33.5 billion and $ 14.2 billion, respectively.

Based on their regulatory capital ratios, at September 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:

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

Net capital $ 4,787 $ 5,231

11 unchanged sentences

Net capital in excess of required net capital $ 837 $ 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 June 30, 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 September 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.

15 unchanged sentences

Investor Services Advisor Services Total

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

Three Months Ended September 30, 2022 2021 2022 2021 2022 2021

Net interest revenue $ 2,143 $ 1,530 $ 783 $ 500 $ 2,926 $ 2,030

7 unchanged sentences

Investor Services Advisor Services Total

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

Nine Months Ended September 30, 2022 2021 2022 2021 2022 2021

Net interest revenue $ 5,551 $ 4,462 $ 2,102 $ 1,426 $ 7,653 $ 5,888

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