What changed in this filing

/stocks — the workspaceLOADING

Item 3. Quantitative and Qualitative Disclosures About Market Risk

2023-08-08 compared with 2023-05-08 · 340 added, 196 removed, 1291 unchanged (29% of the section changed)

7 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2023 2022 2023 2022

Interest revenue $ 4,104 $ 2,710 $ 8,120 $ 5,029

2 unchanged sentences

Asset management and administration fees (1)

1,173 1,052 2,291 2,120

Trading revenue 803 885 1,695 1,848

24 unchanged sentences

Diluted $ .64 $ .87 $ 1.48 $ 1.54

(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.

(1) No fee waivers were recognized for the three and six months ended June 30, 2023.

Includes fee waivers of $ 3 million and $ 57 million for the three and six months ended June 30, 2022, respectively.

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

6 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2023 2022 2023 2022

Net income $ 1,294 $ 1,793 $ 2,897 $ 3,195

17 unchanged sentences

(In Millions, Except Per Share and Share Amounts)

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

Cash and cash equivalents $ 47,651 $ 40,195

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

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

agreements of $ 5,405 and $ 12,159 at June 30, 2023 and December 31, 2022,

respectively)

1 unchanged sentence

Receivables from brokerage clients — net 65,162 66,591

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

Available for sale securities (amortized cost of $ 136,874 at June 30, 2023 and

$ 160,162 at December 31, 2022;

1 unchanged sentence

125,769 147,871

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

Held to maturity securities (including assets pledged of $ 8,365 at June 30, 2023

and $ 4,522 at December 31, 2022)

17 unchanged sentences

aggregate liquidation preference of $ 9,328

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

and $ 9,850 at June 30, 2023 and December 31, 2022, respectively

Common stock — 3 billion shares authorized;

$ .01 par value per share;

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

2,023,295,180 shares issued at June 30, 2023 and December 31, 2022

Nonvoting common stock — 300 million shares authorized;

$ .01 par value per share;

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

50,893,695 shares issued at June 30, 2023 and December 31, 2022

Additional paid-in capital 27,220 27,075

Retained earnings 32,865 31,066

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

Treasury stock, at cost — 253,803,819 and 221,033,042 shares at June 30, 2023

and December 31, 2022, respectively

14 unchanged sentences

Shares Amount Shares Amount

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

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

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

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

Dividends declared on common stock — $ .20 per share

— — — — — — ( 381 ) — — ( 381 )

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

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

Other — — — — — 44 — 13 — 57

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

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

Net income — — — — — — 1,294 — — 1,294

Other comprehensive income (loss), net of tax — — — — — — — — ( 40 ) ( 40 )

Dividends declared on preferred stock — — — — — — ( 116 ) — — ( 116 )

Dividends declared on common stock — $ .25 per share

— — — — — — ( 457 ) — — ( 457 )

Stock option exercises and other — — — — — ( 9 ) — 14 — 5

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

Other — — — — — 40 — 21 — 61

Balance at June 30, 2023 $ 9,191 2,023 $ 20 51 $ 1 $ 27,220 $ 32,865 $ ( 11,420 ) $ ( 20,730 ) $ 37,147

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

8 unchanged sentences

Other — — — — — 68 — ( 23 ) — 45

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

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

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

9 unchanged sentences

Other — — — — — 64 — ( 37 ) — 27

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

Balance at June 30, 2023 $ 9,191 2,023 $ 20 51 $ 1 $ 27,220 $ 32,865 $ ( 11,420 ) $ ( 20,730 ) $ 37,147

See Notes to the Condensed Consolidated Financial Statements .

2 unchanged sentences

(in Millions)

Three Months Ended

Six Months Ended

Cash Flows from Operating Activities

6 unchanged sentences

Premium amortization, net, on available for sale and held to maturity securities 392 868

Other 278 187

Net change in:

41 unchanged sentences

Continued from previous page.

Three Months Ended

Six Months Ended

Supplemental Cash Flow Information

1 unchanged sentence

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

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

Changes in accrued equipment, office facilities, and property purchases $ ( 43 ) $ 11

6 unchanged sentences

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

March 31, 2023 March 31, 2022

June 30, 2023 June 30, 2022

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

34 unchanged sentences

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 three months of 2023, except as described in Note 2 below.

The significant accounting policies are included in Item 8 – Note 2 in the 2022 Form 10-K.

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

Summary of Significant Accounting Policies and New Accounting Standards

9 unchanged sentences

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

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

THE CHARLES SCHWAB CORPORATION

1 unchanged sentence

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

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.

28 unchanged sentences

Revenue Recognition

Disaggregated Revenue

Disaggregation of Schwab’s revenue by major source is as follows:

Three Months Ended

June 30, Six Months Ended

2023 2022 2023 2022

Net interest revenue

11 unchanged sentences

Other short-term borrowings (1)

( 97 ) ( 4 ) ( 183 ) ( 8 )

Federal Home Loan Bank borrowings (1)

( 606 ) — ( 910 ) —

Long-term debt ( 157 ) ( 124 ) ( 296 ) ( 232 )

6 unchanged sentences

Advice solutions 464 461 917 957

Other 79 76 159 159

Asset management and administration fees 1,173 1,052 2,291 2,120

7 unchanged sentences

Total net revenues $ 4,656 $ 5,093 $ 9,772 $ 9,765

(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.

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

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

See Note 1 for additional information.

Contract balances:

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.

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 $ 634 million and $ 560 million at June 30, 2023 and December 31, 2022, respectively.

Schwab did not have any other significant contract assets as of December 31, 2022.

At June 30, 2023, the Company also had net contract assets of $ 111 million related to the buy down of fixed-rate obligation amounts pursuant to the 2023 IDA agreement.

This balance is included in other assets on the condensed consolidated balance sheet, and is amortized on a straight-line basis over the remaining contract term as a reduction to bank deposit account fee revenue.

For additional discussion of the 2023 IDA agreement, see Note 9.

Schwab did not have any significant contract liability balances as of June 30, 2023 or December 31, 2022.

Unsatisfied performance obligations:

6 unchanged sentences

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

March 31, 2023 Amortized

June 30, 2023 Amortized

Available for sale securities

10 unchanged sentences

Other 122 — 4 118

Unallocated portfolio layer method fair value basis adjustments (3)

( 26 ) — ( 26 ) —

Total available for sale securities (4)

21 unchanged sentences

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).

(1) Approximately 61 % and 57 % of asset-backed securities held as of June 30, 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 19 % and 18 % of the asset-backed securities held as of June 30, 2023 and December 31, 2022, respectively.

(2) As of both June 30, 2023 and December 31, 2022, approximately 37 % of the total AFS in corporate debt securities were issued by institutions in the financial services industry.

(3) Beginning in 2023, this represents the amount of PLM basis adjustments related to AFS securities hedged in a closed portfolio.

These amounts are not allocated to individual securities, however the amounts impact the unrealized gains or losses for the individual securities being hedged.

See Note 2 for more information on PLM hedge accounting.

(4) 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 June 30, 2023).

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

6 unchanged sentences

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

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.

As of June 30, 2023, the total remaining unamortized loss on these securities transferred to HTM included in AOCI was $ 12.3 billion net of tax effect ($ 16.3 billion pretax).

At June 30, 2023, our banking subsidiaries had pledged investment securities with a value of $ 61.4 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 $ 8.8 billion as collateral for this facility at June 30, 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 $ 41.6 billion as collateral for this facility at June 30, 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.

The fair value of these pledged securities was $ 1.6 billion at June 30, 2023.

At June 30, 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 $ 8.4 billion, and AFS securities pledged were U.S.

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

agency mortgage-backed securities with an aggregate fair value of $ 28 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).

At June 30, 2023, our banking subsidiaries had pledged AFS securities with an aggregate fair value of $ 178 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

March 31, 2023 Fair

June 30, 2023 Fair

Value Unrealized

11 unchanged sentences

Other — — 118 4 118 4

Total $ 26,733 $ 404 $ 114,347 $ 10,030 $ 141,080 $ 10,434

$ 5,905 $ 126 $ 119,610 $ 11,006 $ 125,515 $ 11,132

December 31, 2022

10 unchanged sentences

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

At March 31, 2023, substantially all rated securities in the investment portfolios were investment grade.

(1) For purposes of this table, unrealized losses on AFS securities excludes the PLM fair value hedge basis adjustments of $ 26 million at June 30, 2023.

At June 30, 2023, substantially all rated securities in the investment portfolios were investment grade.

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

however, management considers these to be of the highest credit quality and rating given the guarantee of principal and interest by the U.S.

however, management considers these to be of the highest credit quality

THE CHARLES SCHWAB CORPORATION

Notes to Condensed Consolidated Financial Statements

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

and rating given the guarantee of principal and interest by the U.S.

government or U.S.

1 unchanged sentence

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 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.

No amounts were recognized as credit loss expense and no securities were written down to fair value through earnings for the six months ended June 30, 2023 and the year ended December 31, 2022.

None of the Company’s AFS securities held as of June 30, 2023 and December 31, 2022 had an allowance for credit losses.

All HTM securities as of June 30, 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.

The Company had $ 607 million and $ 685 million of accrued interest for AFS and HTM securities as of June 30, 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

Notes to Condensed Consolidated Financial Statements

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

There were no writeoffs of accrued interest receivable on AFS and HTM securities during the six months ended June 30, 2023, or for the year ended December 31, 2022.

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.

As of June 30, 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 June 30, 2023.

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

March 31, 2023 Within

June 30, 2023 Within

1 year After 1 year

14 unchanged sentences

Total amortized cost (1)

$ 17,276 $ 44,216 $ 19,887 $ 55,521 $ 136,900

Held to maturity securities

2 unchanged sentences

Total amortized cost $ 716 $ 6,808 $ 41,871 $ 116,933 $ 166,328

(1) For purposes of this table, the amortized cost of AFS securities excludes the PLM fair value hedge basis adjustments of $ 26 million at June 30, 2023.

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

Three Months Ended

June 30, Six Months Ended

2023 2022 2023 2022

Proceeds $ 1,849 $ 3,949 $ 2,900 $ 13,470

6 unchanged sentences

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

March 31, 2023 Current 30-59 days

June 30, 2023 Current 30-59 days

past due 60-89 days

22 unchanged sentences

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 $ 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.

(1) First Mortgages and HELOCs include unamortized premiums and discounts and direct origination costs of $ 99 million and $ 98 million at June 30, 2023 and December 31, 2022, respectively.

(2) At both June 30, 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 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).

(3) There were no loans accruing interest that were contractually 90 days or more past due at June 30, 2023 or December 31, 2022.

At June 30, 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:

Three Months Ended

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

June 30, 2023 First Mortgages HELOCs Total residential real estate Pledged asset lines Other Total

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

3 unchanged sentences

Balance at end of period $ 68 $ 3 $ 71 $ — $ 4 $ 75

March 31, 2022

June 30, 2022

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

6 unchanged sentences

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

Six Months Ended

June 30, 2023 First Mortgages HELOCs Total residential real estate Pledged asset lines Other Total

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

Charge-offs — — — — — —

Recoveries — — — — — —

Provision for credit losses 2 ( 1 ) 1 — 1 2

Balance at end of period $ 68 $ 3 $ 71 $ — $ 4 $ 75

June 30, 2022

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

Charge-offs — — — — — —

Recoveries — — — — — —

Provision for credit losses 18 1 19 — — 19

Balance at end of period $ 31 $ 3 $ 34 $ — $ 3 $ 37

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.

All PALs were fully collateralized by securities with fair values in excess of borrowings as of June 30, 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 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.

Although some of the headwinds show signs of moderation, management’s macroeconomic outlook reflects a near term increase in unemployment coupled with home price depreciation, which combined with rising Treasury yields and mortgage rates, have softened demand and reduced borrower affordability.

This macroeconomic outlook, combined with continued strong credit quality metrics in the Company’s bank loans portfolio, resulted in relatively stable projections of loss rates at June 30, 2023, as compared to December 31, 2022.

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

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

Nonaccrual loans (1)

18 unchanged sentences

First Mortgages Amortized Cost Basis by Origination Year

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

June 30, 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

54 unchanged sentences

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

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

At June 30, 2023, First Mortgage loans of $ 21.1 billion had adjustable interest rates.

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

2 unchanged sentences

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

At March 31, 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.

At June 30, 2023 and December 31, 2022, Schwab had $ 144 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.

4 unchanged sentences

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

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

Three Months Ended

HELOCs converted to amortizing loans $ 7 $ 2

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

March 31, 2023 Balance

June 30, 2023 Balance

Converted to an amortizing loan by period end (1)

3 unchanged sentences

> 5 years 208

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

(1) Includes $ 5 million and $ 11 million of HELOCs converted to amortizing loans during the three and six months ended June 30, 2023, respectively.

At June 30, 2023, $ 404 million of the HELOC portfolio was secured by second liens on the associated properties.

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

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

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

At June 30, 2023, the borrowers on approximately 57 % of HELOC loan balances outstanding only paid the minimum amount due.

Variable Interest Entities

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 of June 30, 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.

1 unchanged sentence

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

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

assets Aggregate

13 unchanged sentences

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.

During the six months ended June 30, 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

3 unchanged sentences

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

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

Interest-bearing deposits:

7 unchanged sentences

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

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

As of June 30, 2023, uninsured time CDs totaled $ 178 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:

Annual maturities on time certificates of deposit outstanding at June 30, 2023 are as follows:

Total $ 41,368

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

CSC Senior Notes

2 unchanged sentences

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

Interest for the fixed-to-floating rate Senior Notes is payable semi-annually during the fixed rate period of the notes and quarterly during the floating rate period of the notes.

TDA Holding Senior Notes

5 unchanged sentences

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

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

The following table lists long-term debt by instrument outstanding as of June 30, 2023 and December 31, 2022:

Date of Issuance Principal Amount Outstanding

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

CSC Fixed-rate Senior Notes:

54 unchanged sentences

03/03/22 500 500

CSC Fixed-to-Floating rate Senior Notes:

5.643 % due May 19, 2029 (1)

05/19/23 1,200 —

5.853 % due May 19, 2034 (2)

05/19/23 1,300 —

Total CSC Senior Notes 22,212 20,512

13 unchanged sentences

Total long-term debt $ 22,482 $ 20,828

(1) The 2029 fixed-to-floating rate Senior Notes bear interest at a fixed rate of 5.643 %, payable semi-annually, until the interest reset date on May 19, 2028.

On and after this date, these notes will bear interest at an annual floating rate of SOFR plus 2.210 %, payable quarterly.

(2) The 2034 fixed-to-floating rate Senior Notes bear interest at a fixed rate of 5.853 %, payable semi-annually, until the interest reset date on May 19, 2033.

On and after this date, these notes will bear interest at an annual floating rate of SOFR plus 2.500 %, payable quarterly.

THE CHARLES SCHWAB CORPORATION

1 unchanged sentence

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

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

Annual maturities on all long-term debt outstanding at June 30, 2023 are as follows:

Thereafter 10,000

6 unchanged sentences

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.

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.

There was $ 41.0 billion and $ 12.4 billion outstanding under these facilities as of June 30, 2023 and December 31, 2022, respectively, and these borrowings had a weighted-average interest rate of 5.14 % and 4.88 %, respectively.

As of June 30, 2023 and December 31, 2022, the collateral pledged provided additional borrowing capacity of $ 38.3 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.

Total other short-term borrowings outstanding at June 30, 2023 and December 31, 2022 were $ 7.8 billion and $ 4.7 billion, respectively, and had a weighted-average interest rate of 5.01 % 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.

There were no commercial paper notes outstanding at June 30, 2023 and CSC had $ 250 million outstanding at December 31, 2022.

CSC and CS&Co also have access to uncommitted lines of credit with external banks with total borrowing capacity of $ 1.8 billion;

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

no amounts were outstanding as of June 30, 2023 or December 31, 2022.

Beginning in the second quarter of 2023, CS&Co maintains a secured, uncommitted line of credit, under which CS&Co may borrow on a short-term basis and pledge either client margin securities or firm securities as collateral.

There was no balance outstanding at June 30, 2023.

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

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

As of March 31, 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.

As of June 30, 2023 and December 31, 2022, our collateral pledged provided total borrowing capacity of $ 8.8 billion and $ 7.8 billion, respectively, of which no amounts were outstanding at the end of either period.

Beginning in 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.

As of June 30, 2023, our collateral pledged provided total borrowing capacity of $ 41.6 billion.

There were no borrowings outstanding at June 30, 2023.

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

The Company had $ 7.8 billion and $ 4.4 billion outstanding pursuant to such repurchase agreements at June 30, 2023 and December 31, 2022, respectively.

Repurchase agreements outstanding at June 30, 2023 mature between August 2023 and April 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:

There was no balance outstanding at June 30, 2023 or December 31, 2022.

Annual maturities on FHLB borrowings and other short-term borrowings outstanding at June 30, 2023 are as follows:

2023 2024 Total

5 unchanged sentences

(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 $ 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.

CSB purchased First Mortgages of $ 854 million and $ 2.0 billion during the second quarters of 2023 and 2022, respectively, and $ 1.6 billion and $ 4.7 billion during the first six months of 2023 and 2022, respectively.

CSB purchased HELOCs with commitments of $ 52 million and $ 70 million during the second quarters of 2023 and 2022, respectively, and $ 95 million and $ 160 million during the first six months 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

June 30, 2023 December 31, 2022

Commitments to extend credit related to unused HELOCs, PALs, and other lines of credit $ 3,674 $ 4,533

16 unchanged sentences

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.

Pursuant to the 2023 IDA agreement, uninvested cash within eligible brokerage client accounts is swept off-balance sheet to deposit accounts at the TD Depository Institutions.

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

2 unchanged sentences

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.

During the first six months 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

• Through September 10, 2025, Schwab must maintain minimum balances above the total of then-outstanding unmatured fixed-rate obligation amounts, with a maximum of $ 30 billion above this total amount.

During this period, 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.

• 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 CHARLES SCHWAB CORPORATION

1 unchanged sentence

(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.

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.

2 unchanged sentences

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.

In May 2023, Schwab opted to buy down $ 2.4 billion of fixed-rate obligation amounts, incurring a market-based fee of $ 112 million, which was capitalized as a contract asset and included in other assets on the condensed consolidated balance sheet.

For additional information on the contract asset, see Note 3.

As of June 30, 2023, the total ending IDA balance was $ 102.7 billion, of which $ 96.4 billion was fixed-rate obligation amounts and $ 6.3 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.

28 unchanged sentences

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

Plaintiffs seek unspecified

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

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

After a first amended complaint was dismissed with

THE CHARLES SCHWAB CORPORATION

1 unchanged sentence

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

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

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

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

leave to amend, plaintiffs filed a second amended complaint on August 14, 2017.

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

19 unchanged sentences

Exit and Other Related Liabilities

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.

Integration of TD Ameritrade

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

The Company expects to complete most remaining client transitions from TD Ameritrade to Schwab across two groups over the remainder 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.

4 unchanged sentences

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 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.

Inclusive of costs recognized through June 30, 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 June 30, 2023 and 2022, the Company recognized $ 30 million and $ 8 million of acquisition-related exit costs, respectively.

During the six months ended June 30, 2023 and 2022, the Company recognized $ 40 million and $ 20 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 18 months, with some costs expected to be incurred after client transition to decommission duplicative platforms and complete integration work.

3 unchanged sentences

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

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

The following is a summary of the activity in the Company’s exit and other related liabilities as of June 30, 2023 and activity for the six months ended June 30, 2023:

Investor Services

5 unchanged sentences

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

Balance at March 31, 2023 (1)

Balance at June 30, 2023 (1)

$ 43 $ 12 $ 55

1 unchanged sentence

(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:

The following table summarizes the exit and other related costs recognized in expense for the three and six months ended June 30, 2023:

Investor Services Advisor Services

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

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

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

Advisor Services Total Total

Compensation and benefits $ 3 $ — $ 3 $ 1 $ — $ 1 $ 4

Occupancy and equipment — 3 3 — 2 2 5

Other — 14 14 — 7 7 21

Total $ 3 $ 17 $ 20 $ 1 $ 9 $ 10 $ 30

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

Investor Services Advisor Services

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

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

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

2 unchanged sentences

Occupancy and equipment — 3 3 — 2 2 5

Other — 14 14 — 7 7 21

Total $ 11 $ 17 $ 28 $ 3 $ 9 $ 12 $ 40

(1) Costs related to facility closures.

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

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

Investor Services Advisor Services

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

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

Advisor Services Total Total

Compensation and benefits $ 5 $ — $ 5 $ 2 $ — $ 2 $ 7

Occupancy and equipment — 1 1 — — — 1

Total $ 5 $ 1 $ 6 $ 2 $ — $ 2 $ 8

Investor Services Advisor Services

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

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

Advisor Services Total Total

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

Occupancy and equipment — 2 2 — 1 1 3

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

(1) Costs related to facility closures.

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

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

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 June 30, 2023:

Investor Services Advisor Services

9 unchanged sentences

(1) Costs related to facility closures.

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)

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

With significant progress now made in the integration of TD Ameritrade, the Company is planning incremental actions to streamline its operations to prepare for post-integration.

Schwab is currently assessing its real estate footprint, and plans to close or downsize certain corporate offices.

In addition, the Company plans to streamline its operational design, including through position eliminations.

Through these actions, the Company expects to realize incremental run-rate cost savings in addition to integration synergies.

In order to achieve these cost savings, the Company will incur exit and related costs, which could be significant, primarily related to employee compensation and benefits and facility exit costs.

The Company is still evaluating both its real estate locations and its organizational headcount and associated exit and related costs are not yet estimable.

Derivative Instruments and Hedging Activities

8 unchanged sentences

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.

The Company had outstanding interest rate swaps with aggregate notional amounts of $ 8.9 billion at June 30, 2023 that were designated as fair value hedges of interest rate risk.

THE CHARLES SCHWAB CORPORATION

Notes to Condensed Consolidated Financial Statements

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

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

June 30, 2023

Assets Liabilities

1 unchanged sentence

(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.

(2) Includes a $ 121 million reduction of derivative assets 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.

1 unchanged sentence

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

March 31, 2023

June 30, 2023

Carrying amount of hedged AFS securities (1,2)

Cumulative fair value hedging adjustment included in the carrying amount of hedged AFS securities (1,2)

(1) Includes the amortized cost basis of closed portfolios of AFS securities used to designate hedging relationships in which the hedged item is the stated amount of assets in the closed portfolios anticipated to be outstanding for the designated hedge period.

The amortized cost basis of the closed portfolios used in these hedging relationships is $ 1.6 billion and the notional amount of the designated hedged items is $ 1.6 billion.

The cumulative basis adjustments associated with these hedges is an unrealized loss of $ 26 million.

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

1 unchanged sentence

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,

Three Months Ended

June 30, Six Months Ended

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

1 unchanged sentence

Derivatives designated as hedging instruments 126 122

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

14 unchanged sentences

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

Schwab’s resale agreements as of March 31, 2023 and December 31, 2022 were not subject to master netting arrangements.

Schwab’s resale agreements as of June 30, 2023 and December 31, 2022 were not subject to master netting arrangements.

THE CHARLES SCHWAB CORPORATION

Notes to Condensed Consolidated Financial Statements

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

Securities lending:

5 unchanged sentences

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

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

The fair value of these borrowed securities was $ 1.3 billion and $ 685 million at June 30, 2023 and December 31, 2022, respectively.

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

2 unchanged sentences

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.

Schwab enters into collateralized repurchase agreements with external financial institutions in which the Company sells securities and agrees 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.

16 unchanged sentences

Offsetting Collateral

March 31, 2023

June 30, 2023

Interest rate swaps (1,3)

$ 1 $ — $ 1 $ — $ — (5)

Resale agreements (1)

3 unchanged sentences

Total $ 6,755 $ — $ 6,755 $ ( 907 ) $ ( 5,844 ) $ 4

Interest rate swaps (4)

$ 1 $ — $ 1 $ — $ ( 1 ) (5)

Repurchase agreements (6)

16 unchanged sentences

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

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.

At June 30, 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 $ 5.5 billion and $ 12.3 billion, respectively.

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

1 unchanged sentence

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.

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

(5) At June 30, 2023, the fair value of initial margin pledged as collateral related to interest rate swaps was $ 178 million.

See Notes 4 and 11 for additional information.

1 unchanged sentence

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.

At June 30, 2023 and December 31, 2022, the fair value of collateral pledged in connection with repurchase agreements was $ 8.4 billion and $ 4.6 billion, respectively.

See Note 8 for additional information.

1 unchanged sentence

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

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)

The cash collateral received from counterparties under securities lending transactions was equal to or greater than the market value of the securities loaned at June 30, 2023 and December 31, 2022.

Margin lending:

1 unchanged sentence

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

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

Fair value of client securities available to be pledged $ 86,977 $ 86,775

6 unchanged sentences

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

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

The fair value of fully-paid client securities available and pledged was $ 195 million and $ 160 million at June 30, 2023 and December 31, 2022, respectively.

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

THE CHARLES SCHWAB CORPORATION

Notes to Condensed Consolidated Financial Statements

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

Fair Values of Assets and Liabilities

27 unchanged sentences

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

Notes to Condensed Consolidated Financial Statements

(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.

2 unchanged sentences

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.

The Company did not adjust prices received from the primary independent third-party pricing service at June 30, 2023 or 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)

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:

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

June 30, 2023 Level 1 Level 2 Level 3 Balance at

Cash equivalents:

23 unchanged sentences

Total other securities owned at fair value 1,575 92 — 1,667

Interest rate swaps — 1 — 1

Total other assets 1,575 93 — 1,668

1 unchanged sentence

Accrued expenses and other liabilities:

Interest rate swaps $ — $ 1 $ — $ 1

Other $ 1,428 $ 46 $ — $ 1,474

34 unchanged sentences

Accrued expenses and other liabilities:

Other $ 1,218 $ 43 $ — $ 1,261

Total accrued expenses and other liabilities 1,218 43 — 1,261

Total liabilities $ 1,218 $ 43 $ — $ 1,261

4 unchanged sentences

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

March 31, 2023 Carrying

June 30, 2023 Carrying

Amount Level 1 Level 2 Level 3 Balance at

19 unchanged sentences

Long-term debt 22,430 — 20,553 — 20,553

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

26 unchanged sentences

The new share repurchase authorization does not have an expiration date.

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.

There were no repurchases of CSC’s common stock during the three months ended June 30, 2023.

CSC repurchased 37 million shares of its common stock for $ 2.8 billion during the six months ended June 30, 2023.

As of June 30, 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 six months ended June 30, 2022.

There were no repurchases of CSC’s preferred stock during the three months ended June 30, 2023.

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

1 unchanged sentence

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

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

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

March 31, 2023 (1,2)

June 30, 2023 (1)

December 31, 2022 (1)

March 31, 2023 December 31, 2022 Issue Date

June 30, 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

9 unchanged sentences

(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.

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

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

(4) The reset/floating rate for Series F will be determined by the calculation agent prior to the commencement of the floating rate period using what the calculation agent determines to be the industry-accepted substitute or successor base rate to LIBOR.

N/A Not applicable.

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

Three Months Ended March 31,

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

2023 2022 2023 2022

Declared Per Share

N/A N/A $ 5.0 $ 12.70

Declared Per Share

N/A N/A $ 6.2 $ 15.60 N/A N/A $ 11.2 $ 28.30

$ 11.1 $ 14.88 11.1 14.88 $ 22.3 $ 29.76 22.3 29.76

N/A N/A 13.9 2,312.50

N/A N/A 5.9 980.82 N/A N/A 19.8 3,293.32

12.2 2,500.00 12.5 2,500.00 12.2 2,500.00 12.5 2,500.00

2 unchanged sentences

20.6 1,000.00 22.5 1,000.00 41.9 2,000.00 45.0 2,000.00

9.3 1,250.00 N/A N/A

6.7 11.13 6.7 11.13 13.4 22.26 13.4 22.26

9.5 1,250.00 9.1 1,208.33 18.8 2,500.00 9.1 1,208.33

Total $ 115.5 $ 132.6 $ 220.9 $ 250.5

(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.

Such dividends are part of the consideration paid upon repurchase of the depositary shares during the six months ended June 30, 2023.

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

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

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

Available for sale securities:

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

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

Held to maturity securities:

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

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

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

Available for sale securities:

Net unrealized gain (loss), net of tax expense (benefit) of $( 160 )

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

Held to maturity securities:

Amortization of amounts previously recorded upon transfer from available for sale, net of tax expense (benefit) of $ 166

Balance at June 30, 2023 $ ( 20,730 )

THE CHARLES SCHWAB CORPORATION

Notes to Condensed Consolidated Financial Statements

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

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

6 unchanged sentences

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

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

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

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

5 unchanged sentences

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

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

Balance at June 30, 2023 $ ( 20,730 )

(1) Tax expense (benefit) was less than $ 1 million.

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).

As of June 30, 2023, the total remaining unamortized loss on these securities transferred to HTM included in AOCI was $ 12.3 billion net of tax effect ($ 16.3 billion pretax).

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

3 unchanged sentences

Earnings Per Common Share

For the three months ended March 31, 2023 and 2022, the Company had voting and nonvoting common stock outstanding.

For the three and six months ended June 30, 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.

1 unchanged sentence

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.

For further details surrounding the EPS computation, see Item 8 – Note 25 in the 2022 Form 10-K.

EPS under the basic and diluted computations for both common stock and nonvoting common stock are as follows:

Three Months Ended

June 30, Six Months Ended

2023 2022 2023 2022

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 16 million and 14 million for the three months ended March 31, 2023 and 2022, respectively.

(2) Antidilutive stock options and restricted stock units excluded from the calculation of diluted EPS totaled 15 million and 18 million for the three and six months ended June 30, 2023, respectively, and 13 million and 14 million for the three and six months ended June 30, 2022, respectively.

THE CHARLES SCHWAB CORPORATION

2 unchanged sentences

Regulatory Requirements

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

At June 30, 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

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

June 30, 2023 Amount Ratio Amount Ratio Amount Ratio (1)

Common Equity Tier 1 Risk-Based Capital $ 29,999 22.6 % N/A $ 5,976 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 March 31, 2023, CSC was subject to a stress capital buffer of 2.5%.

As of June 30, 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%.

1 unchanged sentence

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

At 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.

At June 30, 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 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.

Based on its regulatory capital ratios at June 30, 2023, CSB is considered well capitalized (the highest category) under its respective regulatory capital rules.

There are no conditions or events since June 30, 2023 that management believes have changed CSB’s capital category.

At June 30, 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 $ 29.9 billion and $ 11.8 billion, respectively.

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

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

Net capital $ 5,432 $ 5,386

11 unchanged sentences

Net capital in excess of required net capital $ 689 $ 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 March 31, 2023.

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

12 unchanged sentences

Investor Services Advisor Services Total

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

Three Months Ended June 30, 2023 2022 2023 2022 2023 2022

Net interest revenue $ 1,705 $ 1,834 $ 585 $ 710 $ 2,290 $ 2,544

7 unchanged sentences

THE CHARLES SCHWAB CORPORATION

Notes to Condensed Consolidated Financial Statements

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

Investor Services Advisor Services Total

Six Months Ended June 30, 2023 2022 2023 2022 2023 2022

Net interest revenue $ 3,738 $ 3,408 $ 1,322 $ 1,319 $ 5,060 $ 4,727

Asset management and administration fees 1,646 1,544 645 576 2,291 2,120

Trading revenue 1,476 1,607 219 241 1,695 1,848

Bank deposit account fees 239 427 87 219 326 646

Other 307 314 93 110 400 424

Total net revenues 7,406 7,300 2,366 2,465 9,772 9,765

Expenses Excluding Interest 4,424 4,242 1,547 1,410 5,971 5,652

Income before taxes on income $ 2,982 $ 3,058 $ 819 $ 1,055 $ 3,801 $ 4,113

THE CHARLES SCHWAB CORPORATION

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

What changed 10-Q

Item 3. Quantitative and Qualitative Disclosures About Market Risk