What changed in this filing

/stocks — the workspaceLOADING

Item 3. Quantitative and Qualitative Disclosures About Market Risk

2023-05-08 compared with 2022-11-08 · 428 added, 415 removed, 1059 unchanged (44% of the section changed)

7 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Interest revenue $ 4,016 $ 2,319

2 unchanged sentences

Asset management and administration fees (1)

1,047 1,101 3,167 3,164

Trading revenue 892 963

24 unchanged sentences

Diluted $ .83 $ .67

(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.

(1) No fee waivers were recognized for the three months ended March 31, 2023.

Includes fee waivers of $ 54 million for the three months ended March 31, 2022.

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

6 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Net income $ 1,603 $ 1,402

8 unchanged sentences

from available for sale 609 92

Other ( 8 ) —

Other comprehensive income (loss), before tax 2,459 ( 13,055 )

6 unchanged sentences

(In Millions, Except Per Share and Share Amounts)

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

Cash and cash equivalents $ 49,162 $ 40,195

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

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

agreements of $ 4,920 and $ 12,159 at March 31, 2023 and December 31, 2022,

respectively)

1 unchanged sentence

Receivables from brokerage clients — net 63,187 66,591

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

Available for sale securities (amortized cost of $ 151,767 at March 31, 2023 and

$ 160,162 at December 31, 2022;

including assets pledged of $ 279 and $ 41 , respectively)

141,334 147,871

Held to maturity securities 96,323 —

Held to maturity securities (including assets pledged of $ 6,821 at March 31, 2023

and $ 4,522 at December 31, 2022)

169,911 173,074

Bank loans — net 39,964 40,505

8 unchanged sentences

Accrued expenses and other liabilities 13,220 13,124

Short-term borrowings 500 4,855

Other short-term borrowings 7,071 4,650

Federal Home Loan Bank borrowings 45,600 12,400

Long-term debt 20,016 20,828

3 unchanged sentences

aggregate liquidation preference of $ 9,502

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

and $ 9,850 at March 31, 2023 and December 31, 2022, respectively

Common stock — 3 billion shares authorized;

$ .01 par value per share;

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

December 31, 2021, respectively

2,023,295,180 shares issued at March 31, 2023 and December 31, 2022

Nonvoting common stock — 300 million shares authorized;

$ .01 par value per share;

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

50,893,695 shares issued at March 31, 2023 and December 31, 2022

Additional paid-in capital 27,136 27,075

Retained earnings 32,144 31,066

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

Treasury stock, at cost — 255,459,169 and 221,033,042 shares at March 31, 2023

and December 31, 2022, respectively

3 unchanged sentences

Total liabilities and stockholders’ equity $ 535,552 $ 551,772

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

See Note 1 for additional information.

See Notes to Condensed Consolidated Financial Statements.

7 unchanged sentences

Shares Amount Shares Amount

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

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

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

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

Dividends declared on common stock — $ .18

— — — — — — ( 342 ) — — ( 342 )

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

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

Other — — — — — 17 — ( 2 ) — 15

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

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

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 )

Dividends declared on common stock — $ .22

— — — — — — ( 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

Share-based compensation — — — — — 50 — — — 50

Other — — — — — 19 — — — 19

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)

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

2 unchanged sentences

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

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

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

4 unchanged sentences

Other — — — — — 24 — ( 36 ) — ( 12 )

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

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

Balance at December 31, 2022 $ 9,706 2,023 $ 20 51 $ 1 $ 27,075 $ 31,066 $ ( 8,639 ) $ ( 22,621 ) $ 36,608

1 unchanged sentence

Other comprehensive income (loss), net of tax — — — — — — — — 1,931 1,931

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

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

Redemption and repurchase of preferred stock, inclusive of tax ( 515 ) — — — — — 44 — — ( 471 )

Dividends declared on preferred stock — — — — — — ( 105 ) — — ( 105 )

1 unchanged sentence

— — — — — — ( 464 ) — — ( 464 )

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 ) — — — — — —

Repurchase of common stock, inclusive of tax — — — — — — — ( 2,869 ) — ( 2,869 )

Stock option exercises and other — — — — — ( 92 ) — 111 — 19

1 unchanged sentence

Other — — — — — 24 — ( 58 ) — ( 34 )

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

Balance at March 31, 2023 $ 9,191 2,023 $ 20 51 $ 1 $ 27,136 $ 32,144 $ ( 11,455 ) $ ( 20,690 ) $ 36,347

See Notes to the Condensed Consolidated Financial Statements .

2 unchanged sentences

(in Millions)

Nine Months Ended

September 30,

Three Months Ended

Cash Flows from Operating Activities

6 unchanged sentences

Premium amortization, net, on available for sale and held to maturity securities 185 486

Other 339 246

Net change in:

12 unchanged sentences

Purchases of equipment, office facilities, and property ( 159 ) ( 296 )

Proceeds from sales of Federal Reserve stock 16 —

Purchases of FHLB stock ( 1,439 ) —

Proceeds from sales of FHLB stock 82 —

Purchases of Federal Reserve stock — ( 27 )

Proceeds from sales of Federal Reserve stock 98 —

Other investing activities ( 50 ) ( 34 )

2 unchanged sentences

Net change in bank deposits ( 40,979 ) 22,049

Proceeds from commercial paper and secured lines of credit 1,653 7,250

Repayments of commercial paper and secured lines of credit ( 6,011 ) ( 4,250 )

Issuance of long-term debt 2,971 7,036

Repayment of long-term debt ( 1,029 ) ( 1,215 )

Proceeds from FHLB borrowings 36,200 3

Repayments of FHLB borrowings ( 3,000 ) ( 3 )

Proceeds from other short-term borrowings 3,657 2,467

Repayments of other short-term borrowings ( 1,241 ) ( 3,090 )

Issuances of long-term debt — 2,971

Repayments of long-term debt ( 808 ) ( 7 )

Net proceeds from preferred stock offerings — 740

Redemption of preferred stock — ( 600 )

Redemption and repurchase of preferred stock ( 467 ) —

Dividends paid ( 568 ) ( 509 )

4 unchanged sentences

Increase (Decrease) in Cash and Cash Equivalents, including Amounts Restricted 10,710 24,020

Cash and Cash Equivalents, including Amounts Restricted at Beginning of Period 93,338 70,560

Cash and Cash Equivalents, including Amounts Restricted at Beginning of Year 58,720 93,338

Cash and Cash Equivalents, including Amounts Restricted at End of Period $ 69,430 $ 117,358

4 unchanged sentences

Continued from previous page.

Nine Months Ended

September 30,

Three Months Ended

Supplemental Cash Flow Information

3 unchanged sentences

Changes in accrued equipment, office facilities, and property purchases $ 28 $ ( 87 )

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

September 30, 2022 September 30, 2021

March 31, 2023 March 31, 2022

Reconciliation of cash, cash equivalents and amounts reported within the balance sheet (2)

4 unchanged sentences

statement of cash flows $ 69,430 $ 117,358

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

See Note 1 for additional information.

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

21 unchanged sentences

These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto, included in Schwab’s 2022 Form 10-K.

Reclassifications:

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

Beginning in 2023, Federal Home Loan Bank borrowings are presented separately from other short-term borrowings in the condensed consolidated balance sheets.

Prior period amounts have been reclassified to reflect these changes.

Corresponding presentation changes have been made to the condensed consolidated statements of cash flows and related notes.

The significant accounting policies are included in Note 2 in the 2022 Form 10-K.

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

New Accounting Standards

There have been no significant changes to these accounting policies during the first three months of 2023, except as described in Note 2 below.

Summary of Significant Accounting Policies and New Accounting Standards

Derivative Instruments and Hedging Activities

As discussed further in Note 11, beginning in 2023, the Company utilizes derivative instruments as part of its interest rate risk management.

The Company records all derivatives on the balance sheet at fair value.

Accounting for the changes in the fair values of derivatives depends on the nature of the hedging relationship, and whether we qualify for and elect to apply hedge accounting.

Hedge accounting generally matches the timing of gain or loss recognition on the derivatives with the recognition of the changes in the fair values or cash flows attributable to the risk being hedged of the hedged asset or liability in a fair value hedge or the earnings effect of the hedged forecasted transactions in a cash flow hedge, respectively .

Schwab’s policy is to designate all eligible derivatives in hedge accounting relationships.

To qualify for hedge accounting, among other requirements, a derivative must be highly effective at reducing exposure to the hedged risk.

The assessment of effectiveness is done at inception and on an ongoing basis for hedging relationships and, depending on certain criteria, may be qualitative or quantitative.

Schwab applies the “shortcut method” of hedge accounting for a portion of its fair value hedges, which assumes perfect effectiveness.

Alternatively, when quantitative effectiveness assessments are required, the Company uses regression analysis, which is the method employed for the rest of our hedging relationships.

THE CHARLES SCHWAB CORPORATION

Notes to Condensed Consolidated Financial Statements

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

For derivatives the Company has designated and that qualify as fair value hedges of interest rate risk, the gain or loss on the derivatives and the changes in fair values of the hedged assets attributable to benchmark interest rates (basis adjustments) are both recorded in interest revenue on the condensed consolidated statement of income.

If the hedging relationship is terminated, the basis adjustment remaining on the hedged asset continues to be reported as part of the amortized cost of that asset and is amortized to interest revenue over the remaining life of the asset as a yield adjustment using the effective interest method.

The Company does not amortize basis adjustments prior to termination of the hedging relationship.

Certain fair value hedges may be designated under the portfolio layer method (PLM) of hedge accounting, which allows the Company to hedge the interest rate risk of prepayable and non-prepayable financial assets by designating a stated amount of a closed portfolio that is expected to be outstanding for the designated hedge period (a hedged layer) as the hedged item.

A PLM hedging relationship may include multiple hedged layers.

If at any point during the hedge period the aggregate amount of the hedged layers exceeds the amount of the closed portfolio (i.e., a breach of the hedged layer(s) has occurred), the PLM hedge must be fully or partially terminated to cure the breach.

Basis adjustments for active PLM hedges are maintained at the closed portfolio level and are only allocated to individual assets remaining in the closed portfolio when the hedge is terminated, except for the portion of the basis adjustment related to the breach of the hedged layer(s), if any, which is recognized in interest revenue immediately.

Allocated PLM basis adjustments are reported as part of the amortized cost of the assets and are amortized to interest revenue over the assets’ respective remaining lives as a yield adjustment using the effective interest method.

For derivatives the Company has designated and that qualify as cash flow hedges of interest rate risk, the gain or loss on the derivatives is recorded in AOCI and subsequently reclassified into interest revenue or interest expense, depending on where the hedged cash flows are recognized, on the condensed consolidated statement of income in the same period during which the hedged transactions affect earnings.

Amounts reported in AOCI for cash flow hedges of AFS investment securities or other recognized financial assets are reclassified into interest revenue as interest payments on the securities or financial assets are accrued or received.

If the hedging relationship is terminated and transactions that were hedged are no longer probable of occurring, the gain or loss on the derivative(s) recorded in AOCI prior to termination is reclassified into interest revenue immediately.

Otherwise, the derivative gain or loss in AOCI will continue to be reclassified into interest revenue or interest expense in the periods during which the transactions that were hedged affect earnings.

Cash flows associated with derivative instruments are reflected as cash flows from operating activities in the statement of cash flows consistent with the treatment and nature of the items being hedged.

Adoption of New Accounting Standards

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

New Accounting Standards Not Yet Adopted

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

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

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

6 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 does not expect this guidance will have a material impact on its financial statements, including EPS.

January 1, 2023 The Company adopted this guidance on January 1, 2023 using the prospective transition method.

The adoption of this guidance did not have a material impact on the Company’s financial statements.

New Accounting Standards Not Yet Adopted

There are currently no new accounting standards not yet adopted that are material to the Company.

THE CHARLES SCHWAB CORPORATION

5 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Net interest revenue

10 unchanged sentences

Payables to brokerage clients ( 75 ) ( 2 )

Short-term borrowings ( 4 ) ( 3 ) ( 12 ) ( 6 )

Other short-term borrowings (1)

Federal Home Loan Bank borrowings (1)

Long-term debt ( 139 ) ( 108 )

6 unchanged sentences

Advice solutions 453 496

Other 75 87 234 241

Asset management and administration fees 1,118 1,068

7 unchanged sentences

Total net revenues $ 5,116 $ 4,672

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

See Note 1 for additional information.

For a summary of revenue provided by our reportable segments, see Note 18.

1 unchanged sentence

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 $ 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.

Substantially all receivables from contracts with customers within the scope of Accounting Standards Codification (ASC) 606 Revenue From Contracts With Customers (ASC 606), are included in other assets on the condensed consolidated balance sheets, and totaled $ 616 million and $ 560 million at March 31, 2023 and December 31, 2022, respectively.

Schwab did not have any other significant contract assets or contract liability balances as of March 31, 2023 or December 31, 2022.

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 held to maturity (HTM) investment securities are as follows:

September 30, 2022 Amortized

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

March 31, 2023 Amortized

Available for sale securities

5 unchanged sentences

13,615 — 1,076 12,539

state and municipal securities 747 — 85 662

Non-agency commercial mortgage-backed securities 802 — 25 777

Certificates of deposit 1,445 — 7 1,438

Foreign government agency securities 1,033 — 51 982

state and municipal securities 646 — 58 588

Non-agency commercial mortgage-backed securities 341 — 20 321

Other 222 — 4 218

12 unchanged sentences

13,830 — 1,275 12,555

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

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

Certificates of deposit 2,245 — 14 2,231

Foreign government agency securities 1,033 — 64 969

Commercial paper 200 — — 200

state and municipal securities 713 — 75 638

Non-agency commercial mortgage-backed securities 473 — 23 450

Other 323 — 8 315

1 unchanged sentence

$ 160,162 $ — $ 12,291 $ 147,871

(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).

Held to maturity securities

agency mortgage-backed securities $ 173,074 $ 1,442 $ 15,580 $ 158,936

Total held to maturity securities $ 173,074 $ 1,442 $ 15,580 $ 158,936

(1) Approximately 59 % and 57 % of asset-backed securities held as of March 31, 2023 and December 31, 2022, respectively, were Federal Family Education Loan Program Asset-Backed Securities.

Asset-backed securities collateralized by credit card receivables represented approximately 18 % of the asset-backed securities held at both March 31, 2023 and December 31, 2022.

(2) As of March 31, 2023 and December 31, 2022, approximately 36 % and 37 %, 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 $ 48 million of AFS commercial paper as of December 31, 2022 ( none as of March 31, 2023).

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

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

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

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

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

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

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

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

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

During 2022, the Company transferred a total of $ 188.6 billion of U.S.

agency mortgage-backed securities with a total net pretax unrealized loss at the times of transfer of $ 18.2 billion from the AFS category to the HTM category.

The transfer of these securities to the HTM category reduces the Company’s exposure to fluctuations in AOCI that can result from unrealized losses on AFS securities due to changes in market interest rates.

The unrealized loss at the time of transfer is amortized over the remaining life of the security, offsetting the amortization of the security’s premium or discount, and resulting in no impact to

THE CHARLES SCHWAB CORPORATION

1 unchanged sentence

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

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 $ 1.4 billion at September 30, 2022.

As of March 31, 2023, the total remaining unamortized loss on these securities transferred to HTM included in AOCI was $ 12.8 billion net of tax effect ($ 16.9 billion pretax).

At March 31, 2023, our banking subsidiaries had pledged investment securities with a value of $ 62.7 billion as collateral to secure borrowing capacity on secured credit facilities with the FHLB (see Note 8).

Our banking subsidiaries pledge investment securities as collateral to secure borrowing capacity at the Federal Reserve discount window, and had pledged securities with a fair value of $ 9.4 billion as collateral for this facility at March 31, 2023.

Beginning in 2023, our banking subsidiaries pledge investment securities as collateral to secure borrowing capacity at the Federal Reserve through the Bank Term Funding Program, and had pledged securities with a par value of $ 42.7 billion as collateral for this facility at March 31, 2023.

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

The fair value of these pledged securities was $ 1.7 billion at March 31, 2023.

At March 31, 2023, our banking subsidiaries had pledged HTM and AFS securities as collateral under repurchase agreements with external financial institutions.

HTM securities pledged were U.S.

agency mortgage-backed securities with an aggregate amortized cost of $ 6.8 billion, and AFS securities pledged were U.S.

Treasury securities with an aggregate fair value of $ 279 million.

Securities pledged as collateral under these repurchase agreements may be sold, repledged, or otherwise used by the counterparties.

See Notes 8 and 12 for additional information on these repurchase agreements.

At March 31, 2023, our banking subsidiaries had pledged AFS securities with an aggregate fair value of $ 85 million as initial margin on interest rate swaps (see Note 11).

All of Schwab’s interest rate swaps are cleared through central counterparty (CCP) clearing houses which require the Company to post initial margin as collateral against potential losses.

THE CHARLES SCHWAB CORPORATION

Notes to Condensed Consolidated Financial Statements

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

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

Less than 12 months 12 months or longer Total

September 30, 2022 Fair

March 31, 2023 Fair

Value Unrealized

6 unchanged sentences

Corporate debt securities 1,170 29 11,369 1,047 12,539 1,076

state and municipal securities 582 62 80 23 662 85

Non-agency commercial mortgage-backed securities 777 25 — — 777 25

Certificates of deposit 843 2 595 5 1,438 7

Foreign government agency securities — — 982 51 982 51

state and municipal securities 56 1 525 57 581 58

Non-agency commercial mortgage-backed securities 227 3 94 17 321 20

Other 20 2 198 2 218 4

7 unchanged sentences

Certificates of deposit 2,033 10 196 4 2,229 14

Foreign government agency securities 756 50 214 14 970 64

state and municipal securities 482 31 157 44 639 75

Non-agency commercial mortgage-backed securities 443 23 — — 443 23

Other 315 8 — — 315 8

Total $ 81,299 $ 3,622 $ 65,941 $ 8,669 $ 147,240 $ 12,291

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

At March 31, 2023, 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 2022 Form 10-K.

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

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, 2023 and the year ended December 31, 2022.

None of the Company’s AFS securities held as of March 31, 2023 and December 31, 2022 had an allowance for credit losses.

All HTM securities as of March 31, 2023 and December 31, 2022 were U.S.

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

The Company had $ 621 million and $ 685 million of accrued interest for AFS and HTM securities as of March 31, 2023 and December 31, 2022, respectively.

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, 2023, or for the year ended December 31, 2022.

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.

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

As of March 31, 2023, the estimated effective duration, which reflects anticipated future payments, of our total AFS and HTM investment securities portfolio is approximately 4.0 years.

The estimated effective duration of our AFS investment securities portfolio is approximately 2.4 years as of March 31, 2023.

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

September 30, 2022 Within

March 31, 2023 Within

1 year After 1 year

7 unchanged sentences

Corporate debt securities 1,331 8,592 2,616 — 12,539

state and municipal securities 37 56 402 167 662

Non-agency commercial mortgage-backed securities — — — 777 777

Certificates of deposit 1,438 — — — 1,438

Foreign government agency securities 200 782 — — 982

state and municipal securities 6 38 409 135 588

Non-agency commercial mortgage-backed securities — — — 321 321

Other 198 — — 20 218

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Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Proceeds $ 1,051 $ 9,521

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

September 30, 2022 Current 30-59 days

March 31, 2023 Current 30-59 days

past due 60-89 days

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Total bank loans $ 40,522 $ 31 $ 2 $ 23 $ 56 $ 40,578 $ 73 $ 40,505

(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.

(1) First Mortgages and HELOCs include unamortized premiums and discounts and direct origination costs of $ 99 million and $ 98 million at March 31, 2023 and December 31, 2022, respectively.

(2) At March 31, 2023 and December 31, 2022, 43 % of the First Mortgage and HELOC portfolios were concentrated in California.

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

(3) There were no loans accruing interest that were contractually 90 days or more past due at 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).

(3) There were no loans accruing interest that were contractually 90 days or more past due at March 31, 2023 or December 31, 2022.

At March 31, 2023, CSB had pledged the full balance of First Mortgages and HELOCs pursuant to a blanket lien status collateral arrangement to secure borrowing capacity on a secured credit facility with the FHLB (see Note 8).

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

September 30, 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

Three Months Ended

March 31, 2023 First Mortgages HELOCs Total residential real estate Pledged asset lines Other Total

Balance at beginning of period $ 66 $ 4 $ 70 $ — $ 3 $ 73

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Balance at end of period $ 67 $ 4 $ 71 $ — $ 3 $ 74

THE CHARLES SCHWAB CORPORATION

Notes to Condensed Consolidated Financial Statements

(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

March 31, 2022

Balance at beginning of period $ 13 $ 2 $ 15 $ — $ 3 $ 18

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Balance at end of period $ 23 $ 2 $ 25 $ — $ 3 $ 28

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 September 30, 2022 and December 31, 2021.

THE CHARLES SCHWAB CORPORATION

Notes to Condensed Consolidated Financial Statements

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

Consistent with Schwab’s loan charge off policy for pledged asset lines (PALs) as disclosed in Item 8 – Note 2 of the 2022 Form 10-K, the Company charges off any unsecured balances no later than 90-days past due.

PALs are also 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, 2023 and December 31, 2022.

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

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

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:

September 30, 2022 December 31, 2021

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

Management’s macroeconomic outlook reflects a near term increase in unemployment coupled with home price depreciation, which combined with rising mortgage rates, have softened demand and reduced borrower affordability.

Despite these changes to the macroeconomic outlook, projections of loss rates have remained relatively stable at March 31, 2023, compared to December 31, 2022, due to strong credit quality characteristics of the Company’s bank loans portfolio.

A summary of bank loan-related nonperforming assets is as follows:

March 31, 2023 December 31, 2022

Nonaccrual loans (1)

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Total nonperforming assets $ 18 $ 25

Troubled debt restructurings — —

Total nonperforming assets and troubled debt restructurings $ 20 $ 36

(1) Nonaccrual loans include nonaccrual troubled debt restructurings.

(1) Nonaccrual loans include nonaccrual troubled debt restructurings recorded prior to the adoption of ASU 2022-02.

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

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First Mortgages Amortized Cost Basis by Origination Year

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

March 31, 2023 2023 2022 2021 2020 2019 pre-2019 Total First Mortgages Revolving HELOCs amortized cost basis HELOCs converted to term loans Total HELOCs

Origination FICO

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Total $ 679 $ 6,367 $ 12,139 $ 4,201 $ 912 $ 1,173 $ 25,471 $ 355 $ 203 $ 558

Gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ — $ —

Percent of Loans on

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

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

At March 31, 2023, First Mortgage loans of $ 20.8 billion had adjustable interest rates.

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

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

At September 30, 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.

At March 31, 2023 and December 31, 2022, Schwab had $ 139 million and $ 134 million, respectively, of accrued interest on bank loans, which is excluded from the amortized cost basis of bank loans and included in other assets on the condensed consolidated balance sheets.

The HELOC product has a 30 -year loan term with an initial draw period of ten years from the date of origination.

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Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

HELOCs converted to amortizing loans $ 7 $ 2

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

September 30, 2022 Balance

March 31, 2023 Balance

Converted to an amortizing loan by period end $ 203

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> 5 years 224

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

At March 31, 2023, $ 435 million of the HELOC portfolio was secured by second liens on the associated properties.

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

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

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

At March 31, 2023, the borrowers on approximately 57 % of HELOC loan balances outstanding only paid the minimum amount due.

Variable Interest Entities

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 of March 31, 2023 and December 31, 2022, substantially all of Schwab’s involvement with variable interest entities (VIEs) is through CSB’s 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.

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

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

assets Aggregate

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$ 1,092 $ 614 $ 1,092 $ 1,094 $ 619 $ 1,094

Other CRA investments (2)

Other investments (2)

181 — 216 167 — 215

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(1) Aggregate assets and aggregate liabilities are included in other assets and accrued expenses and other liabilities, respectively, on the condensed consolidated balance sheets.

(2) Other CRA investments are accounted for as loans at amortized cost, equity method investments, AFS securities, or using the adjusted cost method.

(2) Other investments include non-LIHTC CRA investments that are accounted for as loans at amortized cost, equity method investments, AFS securities, or using the adjusted cost method.

Aggregate assets are included in AFS securities, bank loans – net, or other assets on the condensed consolidated balance sheets.

Schwab’s maximum exposure to loss would result from the loss of the investments, including any committed amounts.

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

During the nine months ended September 30, 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.

Schwab’s funding of these remaining commitments is dependent upon the occurrence of certain conditions, and Schwab expects to pay substantially all of these commitments between 2023 and 2026.

During the three months ended March 31, 2023 and year ended December 31, 2022, Schwab did not provide or intend to provide financial or other support to the VIEs that it was not contractually required to provide.

THE CHARLES SCHWAB CORPORATION

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

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

Interest-bearing deposits:

Deposits swept from brokerage accounts $ 270,049 $ 333,754

Time certificates of deposit (1)

Checking 18,218 19,719

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Total bank deposits $ 325,745 $ 366,724

(1) Time certificates of deposit consist of brokered CDs.

As of March 31, 2023, uninsured time CDs totaled $ 338 million.

As of December 31, 2022, there were no time deposits that were in excess of FDIC insurance limits or otherwise uninsured.

Annual maturities on time certificates of deposit outstanding at March 31, 2023 are as follows:

Total $ 30,745

Subsequent to March 31, 2023, the Company issued an additional $ 6.8 billion of brokered CDs.

CSC Senior Notes

9 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 September 30, 2022 and December 31, 2021.

The following table lists long-term debt by instrument outstanding as of March 31, 2023 and December 31, 2022:

Date of Issuance Principal Amount Outstanding

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

CSC Fixed-rate Senior Notes:

3.225 % due September 1, 2022

08/29/12 $ — $ 256

2.650 % due January 25, 2023

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04/27/17 56 56

3.300 % due April 1, 2027

04/27/17 56 56

2.750 % due October 1, 2029

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

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

Annual maturities on all long-term debt outstanding at March 31, 2023 are as follows:

Thereafter 7,500

3 unchanged sentences

Total long-term debt $ 20,016

Short-term borrowings:

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

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 September 30, 2022 or December 31, 2021.

FHLB borrowings:

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 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.

There was $ 45.6 billion and $ 12.4 billion outstanding under these facilities as of March 31, 2023 and December 31, 2022, respectively, and these borrowings had a weighted-average interest rate of 5.16 % and 4.88 %, respectively.

As of March 31, 2023 and December 31, 2022, the collateral pledged provided additional borrowing capacity of $ 35.5 billion and $ 68.6 billion, respectively.

Other short-term borrowings:

Total other short-term borrowings outstanding at March 31, 2023 and December 31, 2022 were $ 7.1 billion and $ 4.7 billion, respectively, and had a weighted-average interest rate of 4.99 % and 4.97 %, respectively.

Additional information regarding our other short-term borrowings facilities is described below.

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

CSC had $ 250 million outstanding at both March 31, 2023 and December 31, 2022.

CSC and CS&Co also have access to uncommitted lines of credit with external banks with total borrowing capacity of $ 1.6 billion;

no amounts were outstanding as of March 31, 2023 or December 31, 2022.

Our banking subsidiaries have access to funding through the Federal Reserve discount window.

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

As of September 30, 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 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 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.

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.

As of March 31, 2023 and December 31, 2022, our collateral pledged provided total borrowing capacity of $ 9.4 billion and $ 7.8 billion, respectively, of which no amounts were outstanding at the end of either period.

Beginning in the first quarter of 2023, our banking subsidiaries now have access to funding through the Federal Reserve Bank Term Funding Program.

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

As of March 31, 2023, our collateral pledged provided total borrowing capacity of $ 42.7 billion.

There were no borrowings outstanding at March 31, 2023.

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

The Company had $ 6.8 billion and $ 4.4 billion outstanding pursuant to such repurchase agreements at March 31, 2023 and December 31, 2022, respectively.

Repurchase agreements outstanding at March 31, 2023 mature between August 2023 and January 2024.

TDAC maintains senior 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 no balance outstanding at March 31, 2023 or December 31, 2022.

Annual maturities on FHLB borrowings and other short-term borrowings outstanding at March 31, 2023 are as follows:

2023 2024 Total

FHLB borrowings $ 31,800 $ 13,800 $ 45,600

Other short-term borrowings 6,875 196 7,071

Total $ 38,675 $ 13,996 $ 52,671

THE CHARLES SCHWAB CORPORATION

1 unchanged sentence

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

Subsequent to March 31, 2023, the Company’s banking subsidiaries had drawn an additional $ 3.0 billion of FHLB advances and borrowed an additional $ 1.0 billion under repurchase agreements with external financial institutions.

Commitments and Contingencies

3 unchanged sentences

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

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:

September 30, 2022 December 31, 2021

CSB purchased First Mortgages of $ 723 million and $ 2.7 billion during the first quarters of 2023 and 2022, respectively.

CSB purchased HELOCs with commitments of $ 43 million and $ 90 million during the first quarters of 2023 and 2022, respectively.

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

March 31, 2023 December 31, 2022

Commitments to extend credit related to unused HELOCs, PALs, and other lines of credit $ 4,041 $ 4,533

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Guarantees and indemnifications:

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.

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

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IDA agreement:

The Company’s IDA agreement with the TD Depository Institutions became effective on October 6, 2020.

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

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

The 2019 IDA agreement with the TD Depository Institutions became effective on October 6, 2020 and created responsibilities of the Company and certain contingent obligations.

On May 4, 2023, the 2019 IDA agreement was replaced and superseded by the 2023 IDA agreement, which specifies responsibilities, including certain contingent obligations, of the Company going forward.

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

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

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

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

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

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

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

The Company’s ability to migrate these balances to its balance sheet is dependent on multiple factors including having sufficient capital levels to sustain these incremental deposits and certain binding limitations specified in the 2023 IDA agreement, and, prior to May 4, 2023, the 2019 IDA agreement.

The 2019 IDA agreement provided that, as of July 1, 2021, Schwab had the option to migrate up to $ 10 billion of IDA balances every 12 months to Schwab’s balance sheet, subject to certain limitations and adjustments.

The Company migrated balances to the balance sheet in 2021 and 2022, subject to the terms of the 2019 IDA agreement.

During the first quarter of 2023, Schwab did not move IDA balances to its balance sheet.

The 2023 IDA agreement extends the agreement term to sweep balances to the TD Depository Institutions through July 1, 2034, and requires that Schwab maintain minimum and maximum IDA balances as follows:

• Through September 10, 2025, withdrawals of IDA balances by Schwab are generally permitted only to the extent of withdrawals initiated by Schwab customers, with limited exceptions, except to the extent necessary for Schwab to maintain balances below the applicable maximum.

During this period, Schwab must maintain minimum balances

THE CHARLES SCHWAB CORPORATION

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

above the total of then-outstanding unmatured fixed-rate obligation amounts, with a maximum of $ 30 billion above this total amount.

• After September 10, 2025, withdrawals of IDA balances are permitted at Schwab’s discretion, subject to an obligation to maintain IDA balances above a minimum of $ 60 billion, with a maximum of $ 90 billion.

The 2023 IDA agreement eliminates the requirement of the 2019 IDA agreement that at least 80 % of the IDA balances be designated as fixed-rate obligation amounts.

Designation of deposit balances for investment in fixed- or floating-rate instruments under the 2023 IDA agreement is now at Schwab’s sole discretion with certain limitations on the amount of fixed-rate obligation amounts.

Pursuant to the 2023 IDA agreement, Schwab has the option to buy down up to $ 5 billion of fixed-rate obligation amounts by paying a market-based fee during the agreement term, subject to certain limits.

If IDA balances decline below the required IDA balance minimum as described above, Schwab would be required to make a nonperformance payment to the TD Depository Institutions pursuant to the terms of the 2023 IDA agreement.

As of March 31, 2023, the total ending IDA balance was $ 106.5 billion, of which $ 104.3 billion was fixed-rate obligation amounts and $ 2.2 billion was floating-rate obligation amounts.

As of December 31, 2022, the total ending IDA balance was $ 122.6 billion, of which $ 108.5 billion was fixed-rate obligation amounts and $ 14.1 billion was floating-rate obligation amounts.

Legal contingencies:

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Corrente Antitrust Litigation :

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

On June 6, 2022, CSC 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.

The lawsuit alleges that CSC’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 :

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 :

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

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

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 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.

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

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

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.

A motion by the Company to dismiss the lawsuit was denied by the court on February 24, 2023, and discovery is proceeding.

The Company considers the claims to be without merit and is vigorously contesting the lawsuit.

Crago Order Routing Litigation :

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

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

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

Plaintiffs sought review of the order denying class certification by the U.S.

Court of Appeals, 9th Circuit, which was denied.

On September 23, 2022, plaintiffs filed a renewed motion for class certification and defendants moved to compel plaintiffs’ case to arbitration.

On February 2, 2023, the court granted defendants’ motion, stayed the case pending the outcome of arbitration, and denied plaintiffs’ renewed motion for class certification as moot.

Ford Order Routing Litigation :

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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.

Defendants are appealing the District Court’s ruling before the U.S.

Court of Appeals, 8th Circuit.

Exit and Other Related Liabilities

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.

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

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

The Company completed its acquisition of TD Ameritrade effective October 6, 2020 and integration work continued during the first three months of 2023, including completion of the first client transition group in February 2023.

The Company expects to complete most remaining client transitions from TD Ameritrade to Schwab across multiple groups over the course of 2023, with the transition of a small client group in the first half of 2024.

The Company expects to continue to incur significant acquisition and integration-related costs and integration-related capital expenditures throughout the remaining integration process.

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

The Company has also incurred exit and other related costs to attain anticipated synergies, which are primarily comprised of employee compensation and benefits such as severance pay, other termination benefits, and retention costs, as well as costs related to facility closures, such as accelerated amortization and depreciation or impairments of assets in those locations.

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

1 unchanged sentence

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 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.

Inclusive of costs recognized through March 31, 2023, 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 March 31, 2023 and 2022, the Company recognized $ 10 million and $ 12 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 21 months, with some costs expected to be incurred after client transition to decommission duplicative platforms and complete integration work.

In addition to ASC 420 Exit or Disposal Cost Obligations , certain of the costs associated with these activities are accounted for in accordance with ASC 360 Property, Plant and Equipment , ASC 712 Compensation — Nonretirement Post Employment Benefits , ASC 718 Compensation — Stock Compensation , and ASC 842 Leases .

2 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 September 30, 2022 and activity for the nine months ended September 30, 2022:

The following is a summary of the activity in the Company’s exit and other related liabilities as of March 31, 2023 and activity for the three months ended March 31, 2023:

Investor Services

5 unchanged sentences

Costs paid or otherwise settled ( 2 ) — ( 2 )

Balance at September 30, 2022 (1)

Balance at March 31, 2023 (1)

$ 42 $ 12 $ 54

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

(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 nine months ended September 30, 2022:

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

The following table summarizes the exit and other related costs recognized in expense for the three months ended March 31, 2023:

Investor Services Advisor Services

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

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

Advisor Services Total Total

Three Months Ended March 31 Employee Compensation and Benefits Facility Exit Costs Investor Services Total Employee Compensation and Benefits Facility Exit Costs Advisor Services Total Total

Compensation and benefits $ 8 $ — $ 8 $ 2 $ — $ 2 $ 10

Occupancy and equipment — 2 2 — 1 1 3

Total $ 8 $ — $ 8 $ 2 $ — $ 2 $ 10

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

Investor Services Advisor Services

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

Three Months Ended March 31 Employee Compensation and Benefits Facility Exit Costs (1)

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

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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 nine months ended September 30, 2021:

Investor Services Advisor Services

Three Months Ended September 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 $ 6 $ — $ 6 $ 1 $ — $ 1 $ 7

Occupancy and equipment — 2 2 — — — 2

Total $ 6 $ 2 $ 8 $ 1 $ — $ 1 $ 9

Investor Services Advisor Services

Nine Months Ended September 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 $ 63 $ — $ 63 $ 16 $ — $ 16 $ 79

Occupancy and equipment — 15 15 — 3 3 18

Professional services — 1 1 — — — 1

Other — 1 1 — — — 1

Total $ 63 $ 17 $ 80 $ 16 $ 3 $ 19 $ 99

(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 properties.

THE CHARLES SCHWAB CORPORATION

Notes to Condensed Consolidated Financial Statements

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

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

The following table summarizes the exit and other related costs incurred from October 6, 2020 through March 31, 2023:

Investor Services Advisor Services

10 unchanged sentences

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

THE CHARLES SCHWAB CORPORATION

Notes to Condensed Consolidated Financial Statements

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

Derivative Instruments and Hedging Activities

Risk Management Objective of Using Derivatives

Beginning in 2023, the Company utilizes derivative instruments to manage interest rate risk exposures that arise from business activities related to changes in fair values or the receipt of future known and uncertain cash amounts due to changes in interest rates.

The Company uses derivative instruments to manage changes in the fair values of, as well as changes in the amounts and/or timing of known or expected cash receipts related to, our AFS investment portfolio.

For a description of how the Company accounts for derivative instruments, see Note 2.

For additional information on the basis of presentation for derivative instruments on the Company’s condensed consolidated balance sheets and related offsetting considerations, see Note 12.

Fair Value Hedges of Interest Rate Risk

The Company is exposed to changes in the fair value of its fixed-rate AFS securities due to changes in benchmark interest rates.

The Company uses cleared interest rate swaps to manage its exposure to changes in fair value on these instruments attributable to changes in the designated benchmark interest rate.

Cleared interest rate swaps designated as fair value hedges involve the payment of fixed-rate amounts to a CCP in exchange for the Company receiving floating-rate payments over the life of the agreements without the exchange of the underlying notional amount.

The Company had outstanding interest rate swaps with aggregate notional amounts of $ 3.9 billion at March 31, 2023 that were designated as fair value hedges of interest rate risk.

Fair Values of Derivative Instruments

The table below presents the gross fair values of the Company’s interest rate swaps designated as hedging instruments on the condensed consolidated balance sheet:

March 31, 2023

Assets Liabilities

Interest rate swaps (1,2)

(1) Derivative assets are included in other assets and derivative liabilities are included in accrued expenses and other liabilities on the condensed consolidated balance sheet.

(2) Includes a $ 5 million and $ 7 million reduction of derivative assets and derivative liabilities, respectively, related to variation margin settlements on derivatives cleared through CCPs.

Settlements on derivative positions cleared through CCPs are reflected as reductions to the associated derivative asset and liability balances.

Effects of Fair Value Hedge Accounting

The following amounts were recorded in AFS securities on the condensed consolidated balance sheet related to fair value hedges:

March 31, 2023

Carrying amount of hedged AFS securities (1)

Cumulative fair value hedging adjustment included in the carrying amount of hedged AFS securities (1)

(1) Excludes the carrying amount and fair value hedging adjustment of AFS securities for which hedge accounting has been discontinued.

The cumulative amount of fair value hedging adjustments remaining for these securities is an unrealized loss of less than $ 500 thousand, which is recorded in AFS securities on the condensed consolidated balance sheet.

The table below presents the effect of the Company’s interest rate swaps designated as fair value hedges on the condensed consolidated statement of income:

Three Months Ended March 31,

Gain (loss) on fair value hedging relationships recognized in interest revenue:

Hedged items $ 4

Derivatives designated as hedging instruments ( 4 )

THE CHARLES SCHWAB CORPORATION

Notes to Condensed Consolidated Financial Statements

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

Financial Instruments Subject to Off-Balance Sheet Credit Risk

Interest rate swaps:

Beginning in 2023, Schwab uses interest rate swaps to manage certain interest rate risk exposures.

Schwab’s interest rate swaps are cleared through CCPs which require the Company to post initial margin as collateral against potential losses.

Schwab pledges investment securities as collateral in order to meet the CCP’s initial margin requirements.

Initial margin is posted through futures commission merchants (FCM) which serve as the intermediary between CCPs and Schwab.

Our interest rate swaps are subject to enforceable master netting arrangements allowing a right of setoff within each FCM-CCP relationship;

however, we do not net these positions.

Therefore, interest rate swaps are presented gross in the condensed consolidated balance sheets.

See Note 11 for additional information on the Company’s interest rate swaps.

Resale agreements:

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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 September 30, 2022 and December 31, 2021 were not subject to master netting arrangements.

Schwab’s resale agreements as of March 31, 2023 and December 31, 2022 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 $ 514 million and $ 566 million at September 30, 2022 and December 31, 2021, respectively.

The fair value of these borrowed securities was $ 1.1 billion and $ 685 million at March 31, 2023 and December 31, 2022, respectively.

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

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Therefore, the securities loaned and securities borrowed are presented gross in the condensed consolidated balance sheets.

Repurchase agreements:

Schwab enters into collateralized repurchase agreements with external financial institutions in which the Company’s banking subsidiaries sell securities and agree to repurchase these securities on a specified future date at a stated repurchase price.

These repurchase agreements are collateralized by investment securities with a fair value equal to or in excess of the secured borrowing liability.

Decreases in security prices posted as collateral for repurchase agreements may require Schwab to transfer cash or additional securities deemed acceptable by the counterparty.

To mitigate this risk, Schwab monitors the fair value of underlying securities pledged as collateral compared to the related liability.

Our collateralized repurchase agreements with each external financial institution are considered to be enforceable master netting arrangements.

However, we do not net these arrangements.

As such, the secured short-term borrowings associated with these collateralized repurchase agreements are presented gross in the condensed consolidated balance sheets.

THE CHARLES SCHWAB CORPORATION

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

The following table presents information about our resale agreements, securities lending, and other activity depicting the potential effect of rights of setoff between these recognized assets and recognized liabilities.

The following table presents information about our interest rate swaps, resale agreements, securities lending, and other activity depicting the potential effect of rights of setoff between these recognized assets and recognized liabilities.

Liabilities Gross Amounts

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Offsetting Collateral

September 30, 2022

March 31, 2023

Resale agreements (1)

3 unchanged sentences

Total $ 6,018 $ — $ 6,018 $ ( 674 ) $ ( 5,344 ) $ —

Interest rate swaps (4)

$ 1 $ — $ 1 $ — $ ( 1 ) (5)

Repurchase agreements (6)

6,822 — 6,822 — ( 6,822 ) —

Securities loaned (7)

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Total $ 12,864 $ — $ 12,864 $ ( 331 ) $ ( 12,525 ) $ 8

Securities loaned (4,5)

Repurchase agreements (6)

$ 4,402 $ — $ 4,402 $ — $ ( 4,402 ) $ —

Secured short-term borrowings (6)

Securities loaned (7)

4,200 — 4,200 ( 331 ) ( 3,313 ) 556

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

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.

At March 31, 2023 and December 31, 2022, the fair value of collateral received in connection with resale agreements that are available to be repledged or sold was $ 5.0 billion and $ 12.3 billion, respectively.

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

(4) Derivative assets are included in other assets and derivative liabilities are included in accrued expenses and other liabilities on the condensed consolidated balance sheets.

Derivative asset and liability positions are inclusive of variation margin settlements cleared through CCPs which are reflected as reductions to the associated derivative asset and liability balances.

See Note 11 for additional information.

(5) Actual collateral was greater than or equal to the value of the related liabilities.

At March 31, 2023, the fair value of initial margin pledged as collateral related to interest rate swaps was $ 85 million.

See Notes 4 and 11 for additional information.

(6) Included in other short-term borrowings in the condensed consolidated balance sheets.

Actual collateral was greater than or equal to the value of the related liabilities.

At March 31, 2023 and December 31, 2022, the fair value of collateral pledged in connection with repurchase agreements was $ 7.3 billion and $ 4.6 billion, respectively.

See Note 8 for additional information.

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

The cash collateral received from counterparties under securities lending transactions was equal to or greater than the market value of the securities loaned at September 30, 2022 and December 31, 2021.

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

(6) Included in short-term borrowings in the condensed consolidated balance sheets.

See below for collateral pledged and Note 8 for additional information.

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, 2023 and December 31, 2022.

THE CHARLES SCHWAB CORPORATION

Notes to Condensed Consolidated Financial Statements

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

Margin lending:

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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

March 31, 2023 December 31, 2022

Fair value of client securities available to be pledged $ 83,771 $ 86,775

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Securities lending to other broker-dealers 3,486 3,472

Collateral for short-term borrowings — 2,390

Total collateral pledged to third parties $ 23,098 $ 19,939

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 $ 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

Notes to Condensed Consolidated Financial Statements

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

The fair value of fully-paid client securities available and pledged was $ 178 million and $ 160 million at March 31, 2023 and December 31, 2022, respectively.

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

Fair Values of Assets and Liabilities

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

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

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

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

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When utilizing market data and bid-ask spread, the Company uses the price within the bid-ask spread that best represents fair value.

When quoted prices in active markets do not exist, the Company uses prices obtained from independent third-party pricing services to measure the fair value of investment assets.

We generally obtain prices from three independent third-party pricing sources for assets recorded at fair value.

When quoted prices in active markets do not exist, the Company uses prices obtained from independent third-party pricing services to measure the fair value of investment assets, and we generally obtain prices from three independent third-party pricing sources for such assets recorded at fair value.

Our primary independent pricing service provides prices for our fixed income investments such as commercial paper;

certificates of deposit;

certificates of deposits;

government and agency securities;

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

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

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

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

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

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.

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 condensed consolidated statements of income.

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

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

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

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

The fair values of interest rate swaps are based on market observable interest rate yield curves.

Fair value measurements are priced considering the coupon rate of the fixed leg of the contract and the variable coupon rate on the floating leg of the contract.

THE CHARLES SCHWAB CORPORATION

1 unchanged sentence

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

Valuation is based on both spot and forward rates on the swap yield curve.

The Company validates its valuations with counterparty quotations from CCPs.

See Note 11 for additional information on the Company’s interest rate swaps.

For a description of the fair value hierarchy and Schwab’s fair value methodologies, see Item 8 – Note 2 in the 2022 Form 10-K.

The Company did not adjust prices received from the primary independent third-party pricing service at March 31, 2023 or December 31, 2022.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

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

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

March 31, 2023 Level 1 Level 2 Level 3 Balance at

Cash equivalents:

Money market funds $ 15,027 $ — $ — $ 15,027

Commercial paper — 287 — 287

Total cash equivalents 15,027 — — 15,027

Investments segregated and on deposit for regulatory purposes:

Certificates of deposit — 350 — 350

Government securities — 19,519 — 19,519

Certificates of deposit — 1,100 — 1,100

Total investments segregated and on deposit for regulatory purposes — 20,619 — 20,619

4 unchanged sentences

Corporate debt securities — 12,539 — 12,539

state and municipal securities — 662 — 662

Non-agency commercial mortgage-backed securities — 777 — 777

Certificates of deposit — 1,438 — 1,438

Foreign government agency securities — 982 — 982

state and municipal securities — 588 — 588

Non-agency commercial mortgage-backed securities — 321 — 321

Other — 218 — 218

1 unchanged sentence

Other assets:

Other securities owned at fair value:

Equity, corporate debt, and other securities 809 64 — 873

2 unchanged sentences

Government securities — 2 — 2

Total other securities owned at fair value 1,459 85 — 1,544

Total other assets 1,459 85 — 1,544

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Accrued expenses and other liabilities:

Interest rate swaps $ — $ 1 $ — $ 1

Other 1,318 45 — 1,363

Total accrued expenses and other liabilities 1,318 46 — 1,364

Total liabilities $ 1,318 $ 46 $ — $ 1,364

5 unchanged sentences

Money market funds $ 14,007 $ — $ — $ 14,007

Commercial paper — 48 — 48

Total cash equivalents 14,007 48 — 14,055

Investments segregated and on deposit for regulatory purposes:

Certificates of deposit — 350 — 350

Government securities — 23,645 — 23,645

Certificates of deposit — 1,000 — 1,000

Total investments segregated and on deposit for regulatory purposes — 24,645 — 24,645

4 unchanged sentences

Corporate debt securities — 12,555 — 12,555

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

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

Certificates of deposit — 2,231 — 2,231

Foreign government agency securities — 969 — 969

Commercial paper — 200 — 200

state and municipal securities — 638 — 638

Non-agency commercial mortgage-backed securities — 450 — 450

Other — 315 — 315

1 unchanged sentence

Other assets:

Other securities owned at fair value:

Equity, corporate debt, and other securities 755 55 — 810

2 unchanged sentences

Government securities — 1 — 1

Total other securities owned at fair value 1,351 81 — 1,432

Total other assets 1,351 81 — 1,432

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

September 30, 2022 Carrying

March 31, 2023 Carrying

Amount Level 1 Level 2 Level 3 Balance at

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Accrued expenses and other liabilities 5,760 — 5,760 — 5,760

Short-term borrowings 500 — 500 — 500

Other short-term borrowings 7,071 — 7,071 — 7,071

Federal Home Loan Bank borrowings 45,600 — 45,600 — 45,600

Long-term debt 19,956 — 18,035 — 18,035

THE CHARLES SCHWAB CORPORATION

Notes to Condensed Consolidated Financial Statements

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

December 31, 2022 Carrying

4 unchanged sentences

Receivables from brokerage clients — net 66,573 — 66,573 — 66,573

Held to maturity securities:

agency mortgage-backed securities 173,074 — 158,936 — 158,936

Total held to maturity securities 173,074 — 158,936 — 158,936

Bank loans — net:

8 unchanged sentences

Accrued expenses and other liabilities 5,584 — 5,584 — 5,584

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

Other short-term borrowings 4,650 — 4,650 — 4,650

Federal Home Loan Bank borrowings 12,400 — 12,400 — 12,400

Long-term debt 20,760 — 19,108 — 19,108

2 unchanged sentences

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

Stockholders’ Equity and Mandatorily Redeemable Preferred Stock

Stockholders’ Equity

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

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

On 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.

On July 27, 2022, CSC publicly announced that its Board of Directors approved a new share repurchase authorization to repurchase up to $ 15.0 billion of common stock, replacing the previous and now terminated share repurchase authorization of up to $ 4.0 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.

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.

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)

CSC repurchased 37 million shares of its common stock for $ 2.8 billion during the three months ended March 31, 2023.

As of March 31, 2023, approximately $ 8.7 billion remained on the new authorization.

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

The Company repurchased 11,620 depositary shares representing interests in Series F preferred stock for $ 11 million, 42,036 depositary shares representing interests in Series G preferred stock for $ 42 million, 273,251 depositary shares representing interests in Series H preferred stock for $ 235 million, and 194,567 depositary shares representing interests in Series I preferred stock for $ 179 million on the open market during the three months ended March 31, 2023.

The repurchase prices are inclusive of $ 3 million of dividends accrued by the stockholders as of the repurchase date.

Beginning in 2023, share repurchases, net of issuances, are subject to a nondeductible excise tax which was recognized as a direct and incremental cost associated with these transactions.

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

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

Liquidation Preference Per Share Dividend Rate in Effect at March 31, 2023 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,

March 31, 2023 (1,2)

December 31, 2022 (1)

September 30, 2022 December 31, 2021 Issue Date

March 31, 2023 December 31, 2022 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:

— 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 4,958 5,000 100,000 481 492 10/31/17 5.000 % 12/01/27 12/01/27 3M LIBOR 2.575 %

5 unchanged sentences

stock 1,431,521 1,435,000 $ 9,191 $ 9,706

(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.

(1) Represented by depositary shares.

(2) Includes depositary shares repurchased and in-process of transfer with the Company’s transfer agent.

As of March 31, 2023, the Company had 7,500 depositary shares of Series F, 15,000 depositary shares of Series G, 106,829 depositary shares of Series H, and 44,228 depositary shares of Series I repurchased and in-process of transfer.

These depositary shares were transferred on April 4, 2023.

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

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

(6) 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.

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

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 September 30, Nine Months Ended September 30,

2022 2021 2022 2021

Declared Per Share

Three Months Ended March 31,

Declared Per Share

N/A N/A $ 5.0 $ 12.70

$ 11.2 $ 14.88 11.2 14.88

N/A N/A 13.9 2,312.50

33.2 1,343.75 33.6 1,343.75

Series D 11.2 14.88 11.2 14.88 33.5 44.64 33.5 44.64

Series E 7.4 1,251.05 13.8 2,312.50 27.2 4,544.37 27.7 4,625.00

Series F — — — — 12.5 2,500.00 12.5 2,500.00

Series G 33.6 1,343.75 33.6 1,343.75 100.8 4,031.25 100.8 4,031.25

Series H 25.0 1,000.00 25.0 1,000.00 75.0 3,000.00 72.2 2,888.89

23.7 1,000.00 25.0 1,000.00

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6.7 11.13 6.7 11.13

9.3 1,250.00 N/A N/A

Total $ 105.4 $ 117.9

(1) Excludes $ 3 million of dividends declared on Series G, H and I, and accrued by stockholders as of the repurchase date.

Such dividends are part of the consideration paid upon repurchase of the depositary shares.

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

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The final dividend was paid on November 1, 2022.

(2) 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.

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

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

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

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

(3) Dividends paid quarterly.

(4) Series E was redeemed on December 1, 2022.

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

The final dividend was paid on December 1, 2022.

(5) Dividends paid semi-annually until December 1, 2027 and quarterly thereafter.

(6) 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

Notes to Condensed Consolidated Financial Statements

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

N/A Not applicable.

Accumulated Other Comprehensive Income

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

Balance at June 30, 2021 $ 2,408

Available for sale securities:

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

Balance at September 30, 2021 $ 1,253

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

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

Available for sale securities:

Net unrealized gain (loss), net of tax expense (benefit) of $( 2,286 )

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

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

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

Held to maturity securities:

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

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

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

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

Balance at December 31, 2022 $ ( 22,621 )

2 unchanged sentences

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

Balance at September 30, 2021 $ 1,253

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 $( 7,027 )

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

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

Held to maturity securities:

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

Amortization of amounts previously recorded upon transfer from available for sale, net of tax expense (benefit) of $ 107

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

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

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

Other, net of tax expense (benefit) of $( 2 )

Balance at March 31, 2023 $ ( 20,690 )

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

As of March 31, 2023, the total remaining unamortized loss on these securities transferred to HTM included in AOCI was $ 12.8 billion net of tax effect ($ 16.9 billion pretax).

See Note 4 for additional discussion on the 2022 transfers of AFS securities to HTM.

THE CHARLES SCHWAB CORPORATION

2 unchanged sentences

Earnings Per Common Share

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

For the three months ended March 31, 2023 and 2022, 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.

Diluted earnings per share is calculated using the treasury stock method for outstanding stock options and non-vested restricted stock units and the if-converted method for nonvoting common stock.

The if-converted method assumes conversion of all nonvoting common stock to common stock.

For further details surrounding the EPS computation, see Note 25 in the 2022 Form 10-K.

1 unchanged sentence

Three Months Ended

September 30, Nine Months Ended

September 30,

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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(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 15 million for the three and nine months ended September 30, 2022 and 2021, respectively.

(2) Antidilutive stock options and restricted stock units excluded from the calculation of diluted EPS totaled 16 million and 14 million for the three months ended March 31, 2023 and 2022, respectively.

THE CHARLES SCHWAB CORPORATION

2 unchanged sentences

Regulatory Requirements

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

At March 31, 2023, CSC and its banking subsidiaries met all of their respective capital requirements.

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

1 unchanged sentence

Well Capitalized Minimum Capital Requirement

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

March 31, 2023 Amount Ratio Amount Ratio Amount Ratio (1)

Common Equity Tier 1 Risk-Based Capital $ 29,026 21.4 % N/A $ 6,114 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 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.

As of March 31, 2023, CSC was subject to a stress capital buffer of 2.5%.

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

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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 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.

At March 31, 2023, the minimum capital ratio requirements for both CSC and CSB, inclusive of their respective buffers, were 7.0%, 8.5%, and 10.5% for Common Equity Tier 1 Risk-Based Capital, Tier 1 Risk-Based Capital, and Total Risk-Based Capital, respectively.

N/A Not applicable.

Based on its regulatory capital ratios at September 30, 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.

Based on its regulatory capital ratios at March 31, 2023, CSB is considered well capitalized (the highest category) under its respective regulatory capital rules.

There are no conditions or events since March 31, 2023 that management believes have changed CSB’s capital category.

At March 31, 2023, 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 $ 32.1 billion and $ 11.8 billion, respectively.

Based on their regulatory capital ratios, at March 31, 2023, CSPB and Trust Bank are considered well capitalized under their respective regulatory capital rules.

THE CHARLES SCHWAB CORPORATION

2 unchanged sentences

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

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

Net capital $ 5,422 $ 5,386

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Net capital in excess of required net capital $ 792 $ 806

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.

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, 2023.

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 September 30, 2022 2021 2022 2021 2022 2021

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

Asset management and administration fees 755 805 292 296 1,047 1,101

Trading revenue 800 873 130 91 930 964

Bank deposit account fees 263 239 150 84 413 323

Other 151 114 33 38 184 152

Total net revenues 4,112 3,561 1,388 1,009 5,500 4,570

Expenses Excluding Interest 2,117 1,956 706 603 2,823 2,559

Income before taxes on income $ 1,995 $ 1,605 $ 682 $ 406 $ 2,677 $ 2,011

Investor Services Advisor Services Total

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

Three Months Ended March 31, 2023 2022 2023 2022 2023 2022

Net interest revenue $ 2,033 $ 1,574 $ 737 $ 609 $ 2,770 $ 2,183

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