What changed in this filing

/stocks — the workspaceLOADING

Item 3. Quantitative and Qualitative Disclosures About Market Risk

2024-05-09 compared with 2023-11-08 · 357 added, 525 removed, 1163 unchanged (43% of the section changed)

7 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

Interest revenue $ 3,941 $ 4,016

2 unchanged sentences

Asset management and administration fees

1,224 1,047 3,515 3,167

Trading revenue 817 892

24 unchanged sentences

Diluted $ .68 $ .83

(1) No fee waivers were recognized for the three and nine months ended September 30, 2023, or for the three months ended September 30, 2022.

Includes fee waivers of $ 57 million for the nine months ended September 30, 2022.

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

6 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

Net income $ 1,362 $ 1,603

1 unchanged sentence

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

Net unrealized gain (loss) excluding transfers to held to maturity ( 720 ) ( 9,493 ) 446 ( 29,299 )

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

Net unrealized gain (loss) 139 1,849

Other reclassifications included in other revenue 10 9

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

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

Amortization of amounts previously recorded upon transfer to held to maturity

9 unchanged sentences

(In Millions, Except Per Share and Share Amounts)

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

Cash and cash equivalents $ 31,752 $ 43,337

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

agreements of $ 3,010 and $ 12,159 at September 30, 2023 and December 31, 2022,

agreements of $ 9,384 and $ 8,844 at March 31, 2024 and December 31, 2023,

respectively)

1 unchanged sentence

Receivables from brokerage clients — net 71,169 68,667

Available for sale securities (amortized cost of $ 122,072 at September 30, 2023 and

Available for sale securities (amortized cost of $ 109,627 at March 31, 2024 and $ 116,336

at December 31, 2023;

1 unchanged sentence

101,086 107,646

Held to maturity securities (including assets pledged of $ 5,346 at September 30, 2023

Held to maturity securities (including assets pledged of $ 6,745 at March 31, 2024

and $ 3,703 at December 31, 2023)

17 unchanged sentences

aggregate liquidation preference of $ 9,329

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

at March 31, 2024 and December 31, 2023

Common stock — 3 billion shares authorized;

$ .01 par value per share;

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

2,023,295,180 shares issued at March 31, 2024 and December 31, 2023

Nonvoting common stock — 300 million shares authorized;

$ .01 par value per share;

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

50,893,695 shares issued at March 31, 2024 and December 31, 2023

Additional paid-in capital 27,358 27,330

Retained earnings 34,701 33,901

Treasury stock, at cost — 252,889,055 and 221,033,042 shares at September 30, 2023

Treasury stock, at cost — 247,203,220 and 250,678,452 shares at March 31, 2024

and December 31, 2023, respectively

3 unchanged sentences

Total liabilities and stockholders’ equity $ 468,784 $ 493,178

(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, 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 per share

— — — — — — ( 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

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

Net income — — — — — — 1,125 — — 1,125

Other comprehensive income (loss), net of tax — — — — — — — — ( 22 ) ( 22 )

Dividends declared on preferred stock — — — — — — ( 103 ) — — ( 103 )

Dividends declared on common stock — $ .25 per share

— — — — — — ( 458 ) — — ( 458 )

Stock option exercises and other — — — — — ( 9 ) — 18 — 9

Share-based compensation — — — — — 60 — — — 60

Other — — — — — 22 — 4 — 26

Balance at September 30, 2023 $ 9,191 2,023 $ 20 51 $ 1 $ 27,293 $ 33,429 $ ( 11,398 ) $ ( 20,752 ) $ 37,784

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, 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

Balance at December 31, 2023 $ 9,191 2,023 $ 20 51 $ 1 $ 27,330 $ 33,901 $ ( 11,354 ) $ ( 18,131 ) $ 40,958

1 unchanged sentence

Other comprehensive income (loss), net of tax — — — — — — — — 555 555

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

Dividends declared on preferred stock — — — — — — ( 103 ) — — ( 103 )

Dividends declared on common stock — $ .75

Dividends declared on common stock — $ .25 per share

— — — — — — ( 459 ) — — ( 459 )

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

Stock option exercises and other — — — — — ( 120 ) — 142 — 22

1 unchanged sentence

Other — — — — — 23 — ( 71 ) — ( 48 )

Balance at September 30, 2023 $ 9,191 2,023 $ 20 51 $ 1 $ 27,293 $ 33,429 $ ( 11,398 ) $ ( 20,752 ) $ 37,784

See Notes to the Condensed Consolidated Financial Statements .

Balance at March 31, 2024 $ 9,191 2,023 $ 20 51 $ 1 $ 27,358 $ 34,701 $ ( 11,283 ) $ ( 17,576 ) $ 42,412

See Notes to Condensed Consolidated Financial Statements.

THE CHARLES SCHWAB CORPORATION

1 unchanged sentence

(in Millions)

Nine Months Ended

September 30,

Three Months Ended

Cash Flows from Operating Activities

33 unchanged sentences

Repayments of other short-term borrowings ( 2,198 ) ( 1,241 )

Issuances of long-term debt 4,809 2,971

Repayments of long-term debt ( 3,260 ) ( 808 )

Net proceeds from preferred stock offerings — 740

Redemption and repurchase of preferred stock — ( 467 )

12 unchanged sentences

Continued from previous page.

Nine Months Ended

September 30,

Three Months Ended

Supplemental Cash Flow Information

Non-cash investing activity:

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

Securities matured during the period but settled after period end $ 415 $ —

Changes in accrued equipment, office facilities, and property purchases $ ( 27 ) $ 28

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:

4 unchanged sentences

Leased assets obtained in exchange for new operating lease liabilities $ 20 $ 12

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

September 30, 2023 September 30, 2022

March 31, 2024 March 31, 2023

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

4 unchanged sentences

statement of cash flows $ 57,673 $ 69,430

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

See Note 1 for additional information.

(1) 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 2023 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 Item 8 – Note 2 in the 2023 Form 10-K.

There have been no significant changes to these accounting policies during the first nine 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 whether we qualify for and elect to apply hedge accounting and the type of hedging accounting relationship applied.

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.

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

Notes to Condensed Consolidated Financial Statements

(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.

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) or is expected to exceed the amount of the closed portfolio at a future date during the hedge period (i.e., a breach of the hedged layer is anticipated), the PLM hedge must be fully or partially terminated to cure the breach or anticipated 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) that has occurred, 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 recognized financial assets and liabilities are reclassified into interest revenue or interest expense as interest payments are accrued or made.

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 or interest expense 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.

There have been no significant changes to these accounting policies during the first three months of 2024.

New Accounting Standards

Adoption of New Accounting Standards

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):

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

Eliminates the accounting guidance for TDRs.

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

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

Vintage Disclosures

Requires that an entity disclose current-period gross writeoffs by year of origination for financing receivables and net investments in leases within the scope of Subtopic 326-20, Financial Instruments—Credit Losses—Measured at Amortized Cost.

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

January 1, 2023 The Company 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.

Accounting Standards Update (ASU) 2023-07, “Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures”

Requires annual and interim disclosure of significant segment expenses that are provided to the chief operating decision maker (CODM) and included in segment profit or loss.

Also requires disclosure of the CODM’s title and position and how the CODM uses reported segment profit or loss information in assessing segment performance and allocating resources.

All required segment disclosures will be presented both on an interim and annual basis.

Adoption requires retrospective application as of the earliest comparative period presented in the financial statements.

January 1, 2024 (applies to the annual financial statements for 2024 and interim periods thereafter)

The Company does not expect this guidance will have a material impact on its financial statements or disclosures.

THE CHARLES SCHWAB CORPORATION

1 unchanged sentence

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

New Accounting Standards Not Yet Adopted

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

ASU 2023-09, “Income Taxes (Topic 740):

Improvements to Income Tax Disclosures”

Expands income tax disclosures, primarily by enhancing the rate reconciliation table and requiring additional disaggregated information about income taxes paid.

Adoption allows retrospective or prospective application, with early adoption permitted.

January 1, 2025 The Company does not expect this guidance will have a material impact on its financial statements or disclosures.

Revenue Recognition

1 unchanged sentence

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

Net interest revenue

22 unchanged sentences

Advice solutions 503 453

Other 82 75 241 234

Asset management and administration fees 1,348 1,118

9 unchanged sentences

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.

THE CHARLES SCHWAB CORPORATION

Notes to Condensed Consolidated Financial Statements

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

Contract balances:

Substantially all receivables from contracts with customers within the scope of 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 $ 563 million and $ 560 million at September 30, 2023 and December 31, 2022, respectively.

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

At September 30, 2023, the Company also had net contract assets of $ 221 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.

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 $ 640 million and $ 599 million at March 31, 2024 and December 31, 2023, respectively.

The Company had net contract assets of $ 233 million and $ 239 million at March 31, 2024 and December 31, 2023, respectively, related to the buy down of fixed-rate obligation amounts pursuant to the 2023 IDA agreement.

These amounts are included in other assets on the condensed consolidated balance sheets and are amortized on a straight-line basis over the remaining contractual 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 September 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:

September 30, 2023 Amortized

March 31, 2024 Amortized

Available for sale securities

1 unchanged sentence

Treasury securities 21,095 — 902 20,193

Asset-backed securities (1)

10,111 — 487 9,624

Corporate debt securities (1)

12,232 — 864 11,368

Certificates of deposit 100 — 1 99

Asset-backed securities (2)

8,166 — 319 7,847

Foreign government agency securities 831 — 28 803

9 unchanged sentences

Total held to maturity securities $ 156,371 $ 402 $ 14,433 $ 142,340

December 31, 2022 Amortized

December 31, 2023

Available for sale securities

1 unchanged sentence

Treasury securities 22,459 1 989 21,471

Asset-backed securities (1)

13,672 — 649 13,023

Corporate debt securities (1)

13,344 — 860 12,484

Certificates of deposit 2,245 — 14 2,231

Asset-backed securities (2)

9,465 — 378 9,087

Foreign government agency securities 1,035 — 33 1,002

1 unchanged sentence

Non-agency commercial mortgage-backed securities 123 — 14 109

Certificates of deposit 100 — — 100

Other 22 — 3 19

Unallocated portfolio layer method fair value basis adjustments (3)

( 19 ) — ( 19 ) —

Total available for sale securities

3 unchanged sentences

Total held to maturity securities $ 159,452 $ 1,435 $ 13,796 $ 147,091

(1) Approximately 61 % and 57 % of asset-backed securities held as of September 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 22 % and 18 % of the asset-backed securities held as of September 30, 2023 and December 31, 2022, respectively.

(2) As of both September 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.

See Notes 2 and 11 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 September 30, 2023).

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

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

agency mortgage-backed securities with a total net pre-tax 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 net income.

As of September 30, 2023, the total remaining unamortized loss on these securities transferred to HTM included in AOCI was $ 11.8 billion net of tax effect ($ 15.6 billion pre-tax).

THE CHARLES SCHWAB CORPORATION

Notes to Condensed Consolidated Financial Statements

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

At September 30, 2023, our banking subsidiaries had pledged investment securities with a value of $ 68.2 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 $ 7.2 billion as collateral for this facility at September 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 $ 40.2 billion as collateral for this facility at September 30, 2023.

(1) As of March 31, 2024 and December 31, 2023, approximately 34 % and 36 %, respectively, of the total AFS in corporate debt securities were issued by institutions in the financial services industry.

(2) Approximately 57 % and 61 % of asset-backed securities held as of March 31, 2024 and December 31, 2023, respectively, were Federal Family Education Loan Program Asset-Backed Securities.

Asset-backed securities collateralized by credit card receivables represented approximately 27 % and 24 % of the asset-backed securities held as of March 31, 2024 and December 31, 2023, respectively.

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

See Note 11 for more information on PLM hedge accounting.

At March 31, 2024, our banking subsidiaries had pledged investment securities with a value of $ 68.2 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 value of $ 32.9 billion as collateral for this facility at March 31, 2024.

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

The fair value of these pledged securities was $ 1.5 billion at September 30, 2023.

At September 30, 2023, our banking subsidiaries had pledged HTM and AFS securities as collateral under repurchase agreements with external financial institutions.

The value of these pledged securities was $ 1.6 billion at March 31, 2024.

At March 31, 2024, 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 $ 6.7 billion, and AFS securities pledged were U.S.

agency mortgage-backed securities with an aggregate fair value of $ 1.8 billion.

agency mortgage-backed securities with an aggregate fair

THE CHARLES SCHWAB CORPORATION

Notes to Condensed Consolidated Financial Statements

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

value of $ 1.5 billion.

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 September 30, 2023, our banking subsidiaries had pledged AFS securities with an aggregate fair value of $ 180 million as initial margin on interest rate swaps (see Note 11).

At March 31, 2024, our banking subsidiaries had pledged AFS securities consisting of U.S.

Treasury securities with an aggregate fair value of $ 191 million as initial margin on interest rate swaps (see Notes 11 and 12).

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.

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

The FCM agreements governing our swaps allow for securities pledged as initial margin to be sold, repledged, or otherwise used by the FCM.

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, 2023 Fair

March 31, 2024 Fair

Value Unrealized

3 unchanged sentences

agency mortgage-backed securities (1)

$ 1 $ — $ 60,171 $ 6,402 $ 60,172 $ 6,402

Treasury securities 754 1 18,447 901 19,201 902

Asset-backed securities 32 — 9,580 487 9,612 487

Corporate debt securities — — 11,193 864 11,193 864

Certificates of deposit — — 99 1 99 1

Asset-backed securities (1)

22 — 7,676 319 7,698 319

Foreign government agency securities — — 803 28 803 28

6 unchanged sentences

agency mortgage-backed securities (1)

$ 1 $ — $ 62,794 $ 6,378 $ 62,795 $ 6,378

Treasury securities — — 19,450 989 19,450 989

Asset-backed securities 6,717 217 6,299 432 13,016 649

Corporate debt securities — — 12,484 860 12,484 860

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

Asset-backed securities (1)

29 — 9,058 378 9,087 378

Foreign government agency securities — — 1,002 33 1,002 33

2 unchanged sentences

Other — — 19 3 19 3

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

(1) For purposes of this table, unrealized losses on AFS securities excludes the PLM fair value hedge basis adjustments of $ 57 million at September 30, 2023.

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

$ 30 $ — $ 105,495 $ 8,710 $ 105,525 $ 8,710

(1) Unrealized losses less than 12 months amounts were less than $ 500 thousand.

(2) For purposes of this table, unrealized losses on AFS securities excludes the unallocated PLM fair value hedge basis adjustments of $ 47 million and

$ 19 million at March 31, 2024, and December 31, 2023, respectively.

At March 31, 2024, substantially all rated securities in the investment portfolios were investment grade.

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

2 unchanged sentences

government-sponsored enterprises.

THE CHARLES SCHWAB CORPORATION

Notes to Condensed Consolidated Financial Statements

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

For a description of management’s quarterly evaluation of AFS securities in unrealized loss positions, see Item 8 – Note 2 in the 2023 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, 2023 and the year ended December 31, 2022.

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

All HTM securities as of September 30, 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 three months ended March 31, 2024 and the year ended December 31, 2023.

None of the Company’s AFS securities held as of March 31, 2024 and December 31, 2023 had an allowance for credit losses.

All HTM securities as of March 31, 2024 and December 31, 2023 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 $ 566 million and $ 685 million of accrued interest for AFS and HTM securities as of September 30, 2023 and December 31, 2022, respectively.

The Company had $ 531 million and $ 565 million of accrued interest for AFS and HTM securities as of March 31, 2024 and December 31, 2023, 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 nine months ended September 30, 2023, or for the year ended December 31, 2022.

There were no writeoffs of accrued interest receivable on AFS and HTM securities during the three months ended March 31, 2024, or for the year ended December 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 presents the Company’s estimated effective duration, which reflects anticipated future payments, by category at March 31, 2024:

Estimated effective duration, exclusive of derivatives:

AFS investment securities portfolio

AFS and HTM investment securities portfolio 3.9

Estimated effective duration, inclusive of derivatives (1) :

AFS investment securities portfolio

AFS and HTM investment securities portfolio 3.8

(1) See Note 11 for additional discussion on the Company’s derivatives.

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 September 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 2.5 years as of September 30, 2023.

Including the impact of the Company’s use of derivative instruments to manage changes in the fair values of our AFS investment portfolio, the effective duration of our total AFS and HTM investments securities as of September 30, 2023 is approximately 3.9 years and for our AFS investment securities is approximately 2.2 years (see Note 11).

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

September 30, 2023 Within

March 31, 2024 Within

1 year After 1 year

5 unchanged sentences

Treasury securities 9,982 10,211 — — 20,193

Asset-backed securities — 2,755 1,209 5,660 9,624

Corporate debt securities 4,406 5,514 1,448 — 11,368

Certificates of deposit 99 — — — 99

Asset-backed securities 10 2,444 1,229 4,164 7,847

Foreign government agency securities 492 311 — — 803

9 unchanged sentences

Total amortized cost $ 1,099 $ 8,522 $ 39,472 $ 107,278 $ 156,371

(1) For purposes of this table, the amortized cost of AFS securities excludes the PLM fair value hedge basis adjustments of $ 57 million at September 30, 2023.

(1) For purposes of this table, the amortized cost of AFS securities excludes the unallocated PLM fair value hedge basis adjustments of $ 47 million at March 31, 2024.

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

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

Proceeds $ 1,189 $ 1,051

6 unchanged sentences

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

September 30, 2023 Current 30-59 days

March 31, 2024 Current 30-59 days

past due 60-89 days

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Total bank loans $ 40,414 $ 45 $ 3 $ 15 $ 63 $ 40,477 $ 38 $ 40,439

(1) First Mortgages and HELOCs include unamortized premiums and discounts and direct origination costs of $ 100 million and $ 98 million at September 30, 2023 and December 31, 2022, respectively.

(2) At both September 30, 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 $ 101 million and $ 100 million at March 31, 2024 and December 31, 2023, respectively.

(2) At March 31, 2024 and December 31, 2023, 42 % and 43 %, respectively, 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, 2023 or December 31, 2022.

At September 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).

(3) There were no loans accruing interest that were contractually 90 days or more past due at March 31, 2024 or December 31, 2023.

At March 31, 2024, 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

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

March 31, 2024 First Mortgages HELOCs Total residential real estate Pledged asset lines Other Total

Balance at beginning of period $ 32 $ 2 $ 34 $ — $ 4 $ 38

3 unchanged sentences

Balance at end of period $ 27 $ 1 $ 28 $ — $ 4 $ 32

September 30, 2022

March 31, 2023

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

3 unchanged sentences

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

Consistent with Schwab’s loan charge-off policy for pledged asset lines (PALs) as disclosed in Item 8 – Note 2 of the 2023 Form 10-K, the Company charges off any unsecured balances no later than 90-days past due.

As of March 31, 2024, substantially all 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, 2024 and December 31, 2023 and no allowance for credit losses for PALs as of those dates was required.

THE CHARLES SCHWAB CORPORATION

1 unchanged sentence

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

Nine Months Ended

September 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 ( 19 ) ( 2 ) ( 21 ) — 2 ( 19 )

Balance at end of period $ 47 $ 2 $ 49 $ — $ 5 $ 54

September 30, 2022

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

Charge-offs — — — ( 4 ) — ( 4 )

Recoveries — 1 1 — — 1

Provision for credit losses 29 1 30 4 — 34

Balance at end of period $ 42 $ 4 $ 46 $ — $ 3 $ 49

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 September 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.

Despite these challenges, management’s macroeconomic outlook reflects a near term continuation of higher interest rates with only a slight increase in unemployment and modest home price depreciation.

While higher mortgage rates are softening demand and reducing borrower affordability, constrained housing supply will keep home prices relatively stable.

Furthermore, credit quality metrics in the Company’s bank loans portfolio have improved in recent years and remain very strong.

As a result of these factors, we decreased projected loss rates at September 30, 2023, as compared to December 31, 2022.

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

September 30, 2023 December 31, 2022

Nonaccrual loans (1)

Other real estate owned (2)

Total nonperforming assets $ 14 $ 25

(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.

economy continued to be challenged by elevated inflation, tight monetary policy, and geopolitical unrest.

However, amid sustained economic growth, supply and demand moved to a more balanced state.

While the Federal Reserve held the policy rate steady during the first quarter of the year, management’s macroeconomic outlook reflects a near term continuation of elevated interest rates, with only a slight increase in unemployment and modest home price appreciation.

Though higher mortgage rates are softening demand and reducing borrower affordability, we expect constrained housing supply will keep home prices relatively stable.

Furthermore, credit quality metrics in the Company’s bank loans portfolio remain very strong and have improved in recent quarters.

As a result of these factors, we decreased projected loss rates at March 31, 2024, as compared to December 31, 2023.

Bank loan-related nonperforming assets consisted of nonaccrual loans of $ 15 million at both March 31, 2024 and

December 31, 2023.

Nonaccrual loans include nonaccrual troubled debt restructurings recorded prior to the adoption of ASU 2022-02, “ Financial Instruments — Credit Losses:

Troubled Debt Restructurings and Vintage Disclosures” on January 1, 2023.

Credit Quality

11 unchanged sentences

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

The credit quality indicators of the Company’s bank loan portfolio are detailed below:

The credit quality indicators of the Company’s First Mortgages and HELOCs are detailed below:

First Mortgages Amortized Cost Basis by Origination Year

September 30, 2023 2023 2022 2021 2020 2019 pre-2019 Total First Mortgages Revolving HELOCs amortized cost basis HELOCs converted to term loans Total HELOCs

March 31, 2024 2024 2023 2022 2021 2020 pre-2020 Total First Mortgages Revolving HELOCs amortized cost basis HELOCs converted to term loans Total HELOCs

Origination FICO

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Total $ 2,694 $ 6,069 $ 11,630 $ 3,974 $ 1,786 $ 26,153 $ 311 $ 168 $ 479

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, 2023, First Mortgage loans of $ 21.4 billion had adjustable interest rates.

At March 31, 2024, First Mortgage loans of $ 21.6 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 September 30, 2023 and December 31, 2022, Schwab had $ 152 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 March 31, 2024 and December 31, 2023, Schwab had $ 161 million and $ 157 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.

5 unchanged sentences

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

September 30, 2023 Balance

March 31, 2024 Balance

Converted to an amortizing loan by period end (1)

3 unchanged sentences

> 5 years 200

(1) Includes $ 6 million and $ 15 million of HELOCs converted to amortizing loans during the three and nine months ended September 30, 2023, respectively.

At September 30, 2023, $ 389 million of the HELOC portfolio was secured by second liens on the associated properties.

(1) Includes $ 3 million of HELOCs converted to amortizing loans during the three months ended March 31, 2024.

At March 31, 2024, $ 360 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, 2023, the borrowers on approximately 59 % of HELOC loan balances outstanding only paid the minimum amount due.

At March 31, 2024, the borrowers on approximately 59 % of HELOC loan balances outstanding only paid the minimum amount due.

Variable Interest Entities

As of September 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 of March 31, 2024 and December 31, 2023, substantially all of Schwab’s involvement with variable interest entities (VIEs) was 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.

During the first quarters of 2024 and 2023, CSB recorded amortization of $ 42 million and $ 41 million, respectively, and recognized tax credits and other tax benefits of $ 53 million and $ 54 million, respectively, associated with these investments.

The amortization, as well as the tax credits and other tax benefits, are included in taxes on income on the condensed consolidated statements of income.

Tax credits and other tax benefits are reflected as cash flows from operating activities on the condensed consolidated statements of cash flows.

Aggregate assets, liabilities, and maximum exposure to loss

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, 2023 December 31, 2022

March 31, 2024 December 31, 2023

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 2024 and 2027.

During the nine months ended September 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.

During the three months ended March 31, 2024 and year ended December 31, 2023, 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:

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

Interest-bearing deposits:

1 unchanged sentence

Time certificates of deposit (1)

39,128 48,297

Checking 15,642 15,691

4 unchanged sentences

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

As of September 30, 2023 and 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 September 30, 2023 are as follows:

The weighted-average interest rates on outstanding time certificates of deposit at March 31, 2024 and December 31, 2023 were 5.22 % and 5.15 %, respectively.

As of March 31, 2024 and December 31, 2023, 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, 2024 are as follows:

2024 $ 32,584

Total $ 39,128

4 unchanged sentences

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

TDA Holding’s Senior Notes are unsecured obligations.

TDA Holding may redeem some or all of the Senior Notes of each series prior to their maturity, subject to certain restrictions, and the payment of an applicable make-whole premium in certain instances.

Ameritrade Holding Senior Notes

Ameritrade Holding’s Senior Notes are unsecured obligations.

Ameritrade Holding may redeem some or all of the Senior Notes of each series prior to their maturity, subject to certain restrictions, and the payment of an applicable make-whole premium in certain instances.

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

2 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, 2023 and December 31, 2022:

The following table lists long-term debt by instrument outstanding as of March 31, 2024 and December 31, 2023:

Date of Issuance Principal Amount Outstanding

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

CSC Fixed-rate Senior Notes:

2.650 % due January 25, 2023

12/07/17 $ — $ 800

3.550 % due February 1, 2024

18 unchanged sentences

05/13/21 1,000 1,000

5.875 % due August 24, 2026

08/24/23 1,000 1,000

3.200 % due March 2, 2027

24 unchanged sentences

03/03/22 1,000 1,000

5.875 % due August 24, 2026

08/24/23 1,000 —

CSC Floating-rate Senior Notes:

8 unchanged sentences

05/19/23 1,200 1,200

6.196 % due November 17, 2029 (2)

11/17/23 1,300 1,300

5.853 % due May 19, 2034 (3)

3 unchanged sentences

Total CSC Senior Notes 22,612 25,862

TDA Holding Fixed-rate Senior Notes:

Ameritrade Holding Fixed-rate Senior Notes:

3.750 % due April 1, 2024

6 unchanged sentences

08/16/19 25 25

Total TDA Holding Senior Notes 213 213

Total Ameritrade Holding Senior Notes 213 213

Finance lease liabilities 75 85

2 unchanged sentences

Total long-term debt $ 22,865 $ 26,128

(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.

(1) The May 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.

(2) The November 2029 fixed-to-floating rate Senior Notes bear interest at a fixed rate of 6.196 %, payable semi-annually, until the interest reset date on November 17, 2028.

On and after this date, these notes will bear interest at an annual floating rate of SOFR plus 1.878 %, payable quarterly.

(3) The 2034 fixed-to-floating rate Senior Notes bear interest at a fixed rate of 6.136 %, payable semi-annually, until the interest reset date on August 24, 2033.

(3) The May 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.

(4) The August 2034 fixed-to-floating rate Senior Notes bear interest at a fixed rate of 6.136 %, payable semi-annually, until the interest reset date on August 24, 2033.

On and after this date, these notes will bear interest at an annual floating rate of SOFR plus 2.010 %, 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 September 30, 2023 are as follows:

Annual maturities on all long-term debt outstanding at March 31, 2024 are as follows:

Thereafter 10,700

5 unchanged sentences

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.

There was $ 31.8 billion and $ 12.4 billion outstanding under these facilities as of September 30, 2023 and December 31, 2022, respectively, and these borrowings had a weighted-average interest rate of 5.17 % and 4.88 %, respectively.

As of September 30, 2023 and December 31, 2022, the collateral pledged provided additional borrowing capacity of $ 55.6 billion and $ 68.6 billion, respectively.

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

There was $ 24.0 billion and $ 26.4 billion outstanding under these facilities as of March 31, 2024 and December 31, 2023, respectively, and these borrowings had a weighted-average interest rate of 5.33 % and 5.34 %, respectively.

As of March 31, 2024 and December 31, 2023, the collateral pledged provided additional borrowing capacity of $ 63.4 billion and $ 63.1 billion, respectively.

Other short-term borrowings:

Total other short-term borrowings outstanding at September 30, 2023 and December 31, 2022 were $ 7.6 billion and $ 4.7 billion, respectively, and had a weighted-average interest rate of 5.39 % and 4.97 %, respectively.

Total other short-term borrowings outstanding at March 31, 2024 and December 31, 2023 were $ 8.4 billion and $ 6.6 billion, respectively, and had a weighted-average interest rate of 5.48 % and 5.57 %, respectively.

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

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 $ 7.7 billion and $ 4.9 billion outstanding pursuant to such repurchase agreements at March 31, 2024 and December 31, 2023, respectively.

Repurchase agreements outstanding at March 31, 2024 mature between April 2024 and December 2024.

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

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

As of March 31, 2024 and December 31, 2023, our collateral pledged provided total borrowing capacity of $ 32.9 billion and $ 6.2 billion, respectively, of which no amounts were outstanding at the end of either period.

During the first quarter of 2024 and the year ended December 31, 2023, our banking subsidiaries had access to funding through the Federal Reserve Bank Term Funding Program.

This program offered loans through March 11, 2024 of up to one year in length, and amounts available were dependent upon the par value of certain investment securities pledged as collateral.

This facility was not used during the first quarter of 2024.

As of December 31, 2023, our collateral pledged provided total borrowing capacity of $ 39.2 billion.

There were no borrowings outstanding at December 31, 2023.

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

CSC had $ 85 million and $ 250 million outstanding at September 30, 2023 and December 31, 2022, respectively.

There were no amounts outstanding at March 31, 2024 or December 31, 2023.

Beginning in the first quarter of 2024, CSC has access to an unsecured, committed revolving line of credit with various external banks with a total borrowing capacity of $ 2.1 billion.

There were no amounts outstanding as of March 31, 2024.

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 September 30, 2023 or December 31, 2022.

CS&Co also maintains secured, uncommitted lines of credit, under which CS&Co may borrow on a short-term basis and pledge either client margin securities or firm securities as collateral, based on the terms of the agreements, under which there was $ 950 million outstanding at September 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 September 30, 2023 and December 31, 2022, our collateral pledged provided total borrowing capacity of $ 7.2 billion and $ 7.8 billion, respectively, of which no amounts were outstanding at the end of either period.

Beginning in 2023, our banking subsidiaries 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 September 30, 2023, our collateral pledged provided total borrowing capacity of $ 40.2 billion.

There were no borrowings outstanding at September 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 $ 6.5 billion and $ 4.4 billion outstanding pursuant to such repurchase agreements at September 30, 2023 and December 31, 2022, respectively.

Repurchase agreements outstanding at September 30, 2023 mature between October 2023 and July 2024.

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, 2023 or December 31, 2022.

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

no amounts were outstanding as of March 31, 2024 or December 31, 2023.

CS&Co maintains secured, uncommitted lines of credit, under which CS&Co may borrow on a short-term basis and pledge either client margin securities or firm securities as collateral, based on the terms of the agreements, under which there were no borrowings at March 31, 2024 and $ 950 million outstanding as of December 31, 2023.

TDAC also 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 $ 700 million outstanding at March 31, 2024 and December 31, 2023.

THE CHARLES SCHWAB CORPORATION

Notes to Condensed Consolidated Financial Statements

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

Annual maturities on FHLB borrowings and other short-term borrowings outstanding at March 31, 2024 are as follows:

2024 2025 Total

2 unchanged sentences

Total $ 30,405 $ 2,000 $ 32,405

THE CHARLES SCHWAB CORPORATION

Notes to Condensed Consolidated Financial Statements

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

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 $ 765 million and $ 1.3 billion during the third quarters of 2023 and 2022, respectively, and $ 2.4 billion and $ 6.0 billion during the first nine months of 2023 and 2022, respectively.

CSB purchased HELOCs with commitments of $ 49 million and $ 92 million during the third quarters of 2023 and 2022, respectively, and $ 144 million and $ 252 million during the first nine months of 2023 and 2022, respectively.

CSB purchased First Mortgages of $ 680 million and $ 723 million during the first quarters of 2024 and 2023, respectively.

CSB purchased HELOCs with commitments of $ 36 million and $ 43 million during the first quarters of 2024 and 2023, respectively.

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

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

Commitments to extend credit related to unused HELOCs, PALs, and other lines of credit $ 2,567 $ 2,996

3 unchanged sentences

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.

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

For additional information on these pledged securities, refer to Note 12.

8 unchanged sentences

IDA agreement:

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.

On May 4, 2023, the Company executed the 2023 IDA agreement with the TD Depository Institutions that replaced and superseded the previous agreement dated November 24, 2019, as amended.

The 2023 IDA agreement specifies responsibilities, including certain contingent obligations, of the Company going forward.

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.

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 nine months of 2023, Schwab did not move IDA balances to its balance sheet.

During the first three months of 2024, 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:

5 unchanged sentences

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

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.

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

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.

In May and August 2023, Schwab opted to buy down $ 2.4 billion and $ 2.1 billion of fixed-rate obligation amounts, respectively, incurring market-based fees of $ 112 million and $ 115 million, respectively, which were capitalized as contract assets and included in other assets on the condensed consolidated balance sheet.

Pursuant to the 2023 IDA agreement, in 2023, Schwab opted to buy down $ 5.0 billion of fixed-rate obligation amounts, incurring market-based fees of $ 249 million, which were capitalized as contract assets and included in other assets on the condensed consolidated balance sheet.

For additional information on these contract assets, see Note 3.

As of September 30, 2023, the total ending IDA balance was $ 99.6 billion, of which $ 88.7 billion was fixed-rate obligation amounts and $ 10.9 billion was floating-rate obligation amounts.

As of March 31, 2024, the total ending IDA balance was $ 90.3 billion, of which $ 79.2 billion was fixed-rate obligation amounts and $ 11.1 billion was floating-rate obligation amounts.

As of December 31, 2023, the total ending IDA balance was $ 97.5 billion, of which $ 83.7 billion was fixed-rate obligation amounts and $ 13.8 billion was floating-rate obligation amounts.

20 unchanged sentences

from October 26, 2020 to the present.

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.

The lawsuit alleges that CSC’s acquisition of 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.

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 :

On July 13, 2016, a securities class action lawsuit was filed in the U.S.

District Court for the Northern District of California on behalf of a putative class of customers executing equity orders through CS&Co.

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

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

Defendants consider the allegations to be

THE CHARLES SCHWAB CORPORATION

Notes to Condensed Consolidated Financial Statements

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

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.

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

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 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 :

On September 15, 2014, TDA Holding, TD Ameritrade, Inc.

On September 15, 2014, Ameritrade Holding, TD Ameritrade, Inc.

and its former CEO, Frederick J.

2 unchanged sentences

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

Plaintiffs seek unspecified damages and injunctive and other relief.

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

On September 14, 2018, the District Court granted plaintiffs’ motion for class certification, and defendants petitioned for an immediate appeal of the District Court’s class certification decision.

Plaintiff seeks unspecified damages and injunctive and other relief.

On September 14, 2018, the District Court granted plaintiff’s motion for class certification, and defendants petitioned for an immediate appeal of the District Court’s class certification decision.

On April 23, 2021, the U.S.

3 unchanged sentences

Court of Appeals, 8th Circuit.

THE CHARLES SCHWAB CORPORATION

Notes to Condensed Consolidated Financial Statements

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

Exit and Other Related Liabilities

Integration of TD Ameritrade

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

The Company completed its fourth conversion of 2023 in November and expects to complete the remaining client transitions from TD Ameritrade to Schwab in a final transition group in the first half of 2024.

Integration of Ameritrade

The Company completed its acquisition of Ameritrade effective October 6, 2020 and integration work continued during the first three months of 2024.

The Company expects to complete the remaining client transitions from Ameritrade to Schwab in a final transition group in May 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.

2 unchanged sentences

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

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

More specifically, factors that could cause variability in our expected acquisition and integration-related costs include the level of employee attrition, changes in the scope and cost of technology, the timeline to wind-down the TD Ameritrade broker-dealers, and real estate-related exit cost variability.

Many of these factors may continue to cause variability in our expected acquisition and integration-related costs through the remainder of the integration process.

Inclusive of costs recognized through September 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 September 30, 2023 and 2022, the Company recognized $ 16 million and $ 9 million of acquisition-related exit costs, respectively.

During the nine months ended September 30, 2023 and 2022, the Company recognized $ 56 million and $ 29 million of acquisition-related exit costs, respectively.

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

More specifically, factors that could cause variability in our expected acquisition and integration-related costs as we prepare for the last transition group and remaining integration work include the level of employee attrition, the complexity to wind-down the operations of the Ameritrade broker-dealers and related technology, and real estate-related exit cost variability.

Inclusive of costs recognized through March 31, 2024, Schwab currently expects to incur total exit and other related costs for the integration of Ameritrade ranging from $ 500 million to $ 600 million, consisting of employee compensation and benefits, facility exit costs, and certain other costs.

During the three months ended March 31, 2024 and 2023, the Company recognized $ 3 million and $ 10 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 9 months, with some costs expected to be incurred after client transition to decommission duplicative platforms and complete integration work.

THE CHARLES SCHWAB CORPORATION

Notes to Condensed Consolidated Financial Statements

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

Compensation — Nonretirement Post Employment Benefits (ASC 712), ASC 718 Compensation — Stock Compensation (ASC 718), and ASC 842 Leases (ASC 842).

The following is a summary of the TD Ameritrade integration activity in the Company’s exit and other related liabilities as of September 30, 2023 and activity for the nine months ended September 30, 2023:

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

The following is a summary of the Ameritrade integration activity in the Company’s exit and other related liabilities as of March 31, 2024 and activity for the three months ended March 31, 2024:

Investor Services

3 unchanged sentences

$ 42 $ 12 $ 54

Amounts recognized in expense (2)

Costs paid or otherwise settled ( 9 ) ( 2 ) ( 11 )

Balance at September 30, 2023 (1)

Balance at March 31, 2024 (1)

$ 33 $ 10 $ 43

(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 included in compensation and benefits on the condensed consolidated statements of income.

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

Compensation and benefits $ 9 $ — $ 9 $ — $ — $ — $ 9

Occupancy and equipment — 3 3 — — — 3

Other — 4 4 — — — 4

Total $ 9 $ 7 $ 16 $ — $ — $ — $ 16

The following table summarizes the Ameritrade integration exit and other related costs recognized in expense for the three months ended March 31, 2024:

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)

Advisor Services Total Total

Compensation and benefits $ 20 $ — $ 20 $ 3 $ — $ 3 $ 23

Occupancy and equipment $ — $ 1 $ 1 $ — $ — $ — $ 1

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(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 TD Ameritrade integration exit and other related costs recognized in expense for the three and nine months ended September 30, 2022:

Investor Services Advisor Services

Three Months Ended 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 $ 5 $ — $ 5 $ 1 $ — $ 1 $ 6

Occupancy and equipment — 2 2 — 1 1 3

Total $ 5 $ 2 $ 7 $ 1 $ 1 $ 2 $ 9

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

Impairment charges are included in other expense, while accelerated amortization of ROU assets are included in occupancy and equipment on the condensed consolidated statements of income.

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 Ameritrade integration exit and other related costs recognized in expense for the three months ended March 31, 2023:

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

Investor Services Total Employee Compensation and Benefits Facility Exit Costs

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

Occupancy and equipment — 4 4 — 2 2 6

Total $ 8 $ — $ 8 $ 2 $ — $ 2 $ 10

(1) Costs related to facility closures.

These costs, which are 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 TD Ameritrade integration exit and other related costs incurred from October 6, 2020 through September 30, 2023:

The following table summarizes the Ameritrade integration exit and other related costs incurred from October 6, 2020 through March 31, 2024:

Investor Services Advisor Services

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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 has begun to take incremental actions to streamline its operations to prepare for post-integration, including through position eliminations and decreasing its real estate footprint.

In order to achieve anticipated cost savings through these actions, the Company expects to incur exit and related costs, primarily related to employee compensation and benefits and facility exit costs, of approximately $ 400 million to $ 500 million inclusive of costs recognized through September 30, 2023.

During the three and nine months ended September 30, 2023, the Company recognized $ 279 million of restructuring-related exit costs.

The Company anticipates the remaining costs related to position eliminations will be incurred in the fourth quarter of 2023, and costs related to real estate will be incurred in the fourth quarter of 2023 and during 2024.

Impairment charges are included in other expense, while accelerated amortization of ROU assets are included in occupancy and equipment on the condensed consolidated statements of income.

With significant progress made in the integration of Ameritrade, the Company took incremental actions in 2023 to streamline its operations to prepare for post-integration, including through position eliminations and decreasing its real estate footprint.

In order to achieve anticipated cost savings through these actions, the Company expects to incur exit and related costs, primarily related to employee compensation and benefits and facility exit costs, of approximately $ 500 million inclusive of costs recognized through March 31, 2024 as described below.

The Company anticipates the remaining costs, primarily related to real estate, will be incurred during 2024.

In addition to ASC 420, certain of the costs associated with these activities are accounted for in accordance with ASC 360, ASC 712, ASC 718, and ASC 842.

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

The following is a summary of the restructuring activity in the Company’s exit and other related liabilities as of March 31, 2024 and activity for the three months ended March 31, 2024:

Investor Services

2 unchanged sentences

Balance at December 31, 2023 (1)

$ 171 $ 63 $ 234

Amounts recognized in expense (2)

Costs paid or otherwise settled — — —

Balance at September 30, 2023 (1)

( 23 ) ( 8 ) ( 31 )

Costs paid or otherwise settled ( 146 ) ( 54 ) ( 200 )

Balance at March 31, 2024 (1)

(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 are included in compensation and benefits on the condensed consolidated statements of income.

The following table summarizes the restructuring exit and other related costs recognized in expense for the three and nine months ended September 30, 2023, which represents cumulative costs incurred to date:

The three months ended March 31, 2024 includes a reduction of the liability resulting from changes in estimates of $ 25 million and $ 8 million in Investor Services and Advisor Services, respectively.

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 restructuring exit and other related costs (benefits) recognized in expense for the three months ended March 31, 2024:

Investor Services Advisor Services

8 unchanged sentences

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 restructuring exit and other related costs incurred from July 1, 2023 through March 31, 2024:

Investor Services Advisor Services

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 $ 191 $ — $ 191 $ 70 $ — $ 70 $ 261

Occupancy and equipment — 14 14 — 5 5 19

Professional services — 4 4 — 1 1 5

Other — 135 135 — 47 47 182

Total $ 191 $ 153 $ 344 $ 70 $ 53 $ 123 $ 467

(1) Costs related to facility closures.

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

Impairment charges are included in other expense, while accelerated amortization of ROU assets are included in occupancy and equipment on the condensed consolidated statements of income.

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 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 a description of how the Company accounts for derivative instruments, see Item 8 – Note 2 in the 2023 Form 10-K.

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.

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

Fair Value Hedges of Interest Rate Risk

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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 $ 8.9 billion at September 30, 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 March 31, 2024 and December 31, 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:

September 30, 2023

Assets Liabilities

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

March 31, 2024 December 31, 2023

Assets Liabilities 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 $ 301 million reduction of derivative assets related to variation margin settlements on derivatives cleared through CCPs.

$ 1 $ — $ — $ —

(1) 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 assets and liabilities as of December 31, 2023 were less than $ 500 thousand.

(2) Includes reductions related to variation margin settlements.

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

As of March 31, 2024, there was a $ 241 million reduction of derivative assets related to variation margin settlements.

As of December 31, 2023, there was an $ 87 million reduction of derivative assets and a $ 2 million reduction of derivative liabilities related to variation margin settlements.

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:

September 30, 2023

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

March 31, 2024 December 31, 2023

Amortized cost of hedged AFS securities (1,2)

$ 8,747 $ 8,765

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

( 242 ) ( 85 )

(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 $ 2.1 billion, of which $ 1.6 billion is designated in a portfolio layer hedging relationship.

The cumulative basis adjustments associated with these hedging relationships are a reduction of the amortized cost basis of the closed portfolios of $ 57 million.

At March 31, 2024 and December 31, 2023 , t he amortized cost basis of the closed portfolios used in these hedging relationships was $ 2.1 billion, of which $ 1.6 billion was designated in a portfolio layer hedging relationship.

The cumulative basis adjustments associated with these hedging relationships were a reduction of the amortized cost basis of the closed portfolios of $ 47 million and $ 19 million, respectively, at March 31, 2024 and December 31, 2023.

(2) Excludes the amortized cost 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 a reduction of the amortized cost basis of less than $ 500 thousand, which is recorded in AFS securities on the condensed consolidated balance sheet and amortized to interest revenue as a yield adjustment over the lives of the securities.

THE CHARLES SCHWAB CORPORATION

Notes to Condensed Consolidated Financial Statements

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

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:

The cumulative amount of fair value hedging adjustments remaining for these securities was a reduction of the amortized cost basis of less than $ 500 thousand, which is recorded in AFS securities on the condensed consolidated balance sheets and amortized to interest revenue as a yield adjustment over the lives of the securities.

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

Three Months Ended

September 30, Nine Months Ended

September 30,

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

1 unchanged sentence

Derivatives designated as hedging instruments (1)

(1) Excludes net income from periodic interest accruals and receipts of $ 3 million for the three months ended March 31, 2024 .

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 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.

Initial margin is posted through FCMs 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;

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Schwab also sets standards for the credit quality of the counterparty, monitors the fair value of the underlying securities as compared to the related receivable, including accrued interest, and requires additional collateral where deemed appropriate.

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

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

THE CHARLES SCHWAB CORPORATION

Notes to Condensed Consolidated Financial Statements

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

segregated securities.

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

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

Schwab’s resale agreements as of March 31, 2024 and December 31, 2023 were not subject to master netting arrangements.

Securities lending:

Schwab loans brokerage client securities temporarily to other brokers and clearing houses in connection with its securities lending activities and receives cash as collateral for the securities loaned.

Schwab loans brokerage client securities temporarily to other broker-dealers and clearing houses in connection with its securities lending activities and receives cash as collateral for the securities loaned.

Increases in security prices may cause the fair value of the securities loaned to exceed the amount of cash received as collateral.

In the event the counterparty to these transactions does not return the loaned securities or provide additional cash collateral, we may be exposed to the risk of acquiring the securities at prevailing market prices in order to satisfy our client obligations.

In the event a counterparty to these transactions does not return the loaned securities or provide additional cash collateral, we may be exposed to the risk of acquiring the securities at prevailing market prices in order to satisfy our client obligations.

Schwab mitigates this risk by requiring credit approvals for counterparties, monitoring the fair value of securities loaned, and requiring additional cash as collateral when necessary.

1 unchanged sentence

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 $ 853 million and $ 685 million at September 30, 2023 and December 31, 2022, respectively.

The fair value of these borrowed securities was $ 1.8 billion and $ 1.5 billion at March 31, 2024 and December 31, 2023, respectively.

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

12 unchanged sentences

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

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.

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

Liabilities Gross Amounts

6 unchanged sentences

Offsetting Collateral

September 30, 2023

March 31, 2024

Resale agreements (1)

11 unchanged sentences

700 — 700 — ( 700 ) —

Interest rate swaps (4)

— — — — — (5)

Total $ 14,181 $ — $ 14,181 $ ( 1,704 ) $ ( 12,018 ) $ 459

4 unchanged sentences

1,563 — 1,563 ( 1,307 ) ( 253 ) 3

Interest rate swaps (4)

— — — — — (5)

Total $ 10,407 $ — $ 10,407 $ ( 1,307 ) $ ( 9,097 ) $ 3

3 unchanged sentences

5,397 — 5,397 ( 1,307 ) ( 3,619 ) 471

Secured short-term borrowings (8)

1,650 — 1,650 — ( 1,650 ) —

Interest rate swaps (4)

— — — — — (5)

Total $ 11,950 $ — $ 11,950 $ ( 1,307 ) $ ( 10,172 ) $ 471

1 unchanged sentence

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

At September 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 $ 3.1 billion and $ 12.3 billion, respectively.

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

At March 31, 2024 and December 31, 2023, the fair value of collateral received in connection with resale agreements that are available to be repledged or sold was $ 9.6 billion and $ 9.0 billion, respectively.

(3) Included in other assets in 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) At September 30, 2023, the fair value of initial margin pledged as collateral related to interest rate swaps was $ 180 million.

Derivative assets and liabilities as of December 31, 2023 were less than $ 500 thousand.

(5) At March 31, 2024 and December 31, 2023, the fair value of initial margin pledged as collateral related to interest rate swaps was $ 191 million and $ 195 million, respectively.

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 September 30, 2023 and December 31, 2022, the fair value of collateral pledged in connection with repurchase agreements was $ 7.0 billion and $ 4.6 billion, respectively.

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

At March 31, 2024 and December 31, 2023, the fair value of collateral pledged in connection with repurchase agreements was $ 8.3 billion and $ 5.3 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 September 30, 2023 and December 31, 2022.

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, 2024 and December 31, 2023.

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

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

Margin lending:

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

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

THE CHARLES SCHWAB CORPORATION

1 unchanged sentence

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

September 30, 2023 December 31, 2022

Margin lending:

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

March 31, 2024 December 31, 2023

Fair value of client securities available to be pledged $ 94,483 $ 86,911

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

The fair value of fully-paid client securities available and pledged was $ 140 million and $ 160 million at September 30, 2023 and December 31, 2022, respectively.

The fair value of fully-paid client securities available and pledged was $ 229 million and $ 179 million at March 31, 2024 and December 31, 2023, respectively.

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

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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 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.

Liabilities measured at fair value on a recurring basis include interest rate swaps, securities sold but not yet purchased, 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 fair values of securities sold but not yet purchased are based on quoted market prices or other observable market data.

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.

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

THE CHARLES SCHWAB CORPORATION

Notes to Condensed Consolidated Financial Statements

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

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

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

THE CHARLES SCHWAB CORPORATION

Notes to Condensed Consolidated Financial Statements

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

For a description of the fair value hierarchy and Schwab’s fair value methodologies, see Item 8 – Note 2 in the 2023 Form 10-K.

The Company did not adjust prices received from the primary independent third-party pricing service at September 30, 2023 or December 31, 2022.

The Company did not adjust prices received from the primary independent third-party pricing service at March 31, 2024 or December 31, 2023.

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, 2023 Level 1 Level 2 Level 3 Balance at

March 31, 2024 Level 1 Level 2 Level 3 Balance at

Cash equivalents:

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Government securities — 13,780 — 13,780

Certificates of deposit — 950 — 950

Total investments segregated and on deposit for regulatory purposes — 13,780 — 13,780

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Treasury securities — 20,193 — 20,193

Asset-backed securities — 9,624 — 9,624

Corporate debt securities — 11,368 — 11,368

Certificates of deposit — 99 — 99

Asset-backed securities — 7,847 — 7,847

Foreign government agency securities — 803 — 803

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Other assets:

Other securities owned at fair value:

Other securities owned:

Equity, corporate debt, and other securities 1,165 63 — 1,228

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Government securities — 2 — 2

Total other securities owned at fair value 1,554 72 — 1,626

Total other securities owned 2,030 96 — 2,126

Interest rate swaps — 1 — 1

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Money market funds $ 14,573 $ — $ — $ 14,573

Commercial paper — 48 — 48

Total cash equivalents 14,573 — — 14,573

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Government securities — 20,358 — 20,358

Certificates of deposit — 1,000 — 1,000

Total investments segregated and on deposit for regulatory purposes — 20,358 — 20,358

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Treasury securities — 21,471 — 21,471

Asset-backed securities — 13,023 — 13,023

Corporate debt securities — 12,484 — 12,484

Certificates of deposit — 2,231 — 2,231

Asset-backed securities — 9,087 — 9,087

Foreign government agency securities — 1,002 — 1,002

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Non-agency commercial mortgage-backed securities — 109 — 109

Certificates of deposit — 100 — 100

Other — 19 — 19

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Other assets:

Other securities owned at fair value:

Other securities owned:

Equity, corporate debt, and other securities 992 73 — 1,065

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Government securities — 26 — 26

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

Total other securities owned 1,787 126 — 1,913

Total other assets 1,787 126 — 1,913

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

September 30, 2023 Carrying

March 31, 2024 Carrying

Amount Level 1 Level 2 Level 3 Balance at

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Stockholders’ Equity

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.

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

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

As of September 30, 2023, approximately $ 8.7 billion remained on the new authorization.

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

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 nine months ended September 30, 2023 .

On July 27, 2022, CSC publicly announced that its Board of Directors approved a 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 share repurchase authorization does not have an expiration date.

There were no repurchases of CSC’s common stock during the three months ended March 31, 2024.

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, 2024, approximately $ 8.7 billion remained on the authorization.

There were no repurchases of CSC’s preferred stock during the three months ended March 31, 2024.

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.

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, 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 March 31, 2024 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, 2023 (1)

March 31, 2024 (1)

December 31, 2023 (1)

September 30, 2023 December 31, 2022 Issue Date

March 31, 2024 December 31, 2023 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

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

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

2023 2022 2023 2022

Declared Per Share

Three Months Ended March 31,

Declared Per Share

N/A N/A $ 7.7 $ 19.43 N/A N/A $ 18.9 $ 47.73

$ 11.2 $ 14.88 11.2 14.88 $ 33.5 $ 44.64 33.5 44.64

N/A N/A 7.4 1,251.05 N/A N/A 27.2 4,544.37

Amount Total Declared (1)

$ 11.2 $ 14.88 $ 11.2 $ 14.88

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(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 during the nine months ended September 30, 2023.

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

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

The final dividend was paid on November 1, 2022.

Such dividends were part of the consideration paid upon repurchase of the depositary shares during the three months ended March 31, 2023.

(2) 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.

(3) 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.

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)

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, 2022 $ ( 16,022 )

Available for sale securities:

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

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

Held to maturity securities:

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

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

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

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

Available for sale securities:

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

Balance at September 30, 2023 $ ( 20,752 )

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 benefit of $ 579

Other reclassifications included in other revenue (1)

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 $ 67

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

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

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

Balance at December 31, 2023 $ ( 18,131 )

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Amortization of amounts previously recorded upon transfer from available for sale, net of tax expense (benefit) of $ 122

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

Balance at September 30, 2023 $ ( 20,752 )

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

Balance at March 31, 2024 $ ( 17,576 )

(1) Tax expense (benefit) was less than $ 500 thousand.

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

As of September 30, 2023, the total remaining unamortized loss on these securities transferred to HTM included in AOCI was $ 11.8 billion net of tax effect ($ 15.6 billion pre-tax).

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

As of March 31, 2024, the total remaining unamortized loss on these securities transferred to HTM included in AOCI was $ 11.0 billion net of tax effect ($ 14.5 billion pre-tax).

THE CHARLES SCHWAB CORPORATION

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Earnings Per Common Share

For the three and nine months ended September 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.

The Company has voting and nonvoting common stock outstanding.

As 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.

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Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

Stock Nonvoting

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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 15 million and 18 million for the three and nine months ended September 30, 2023, respectively, and 13 million and 15 million for the three and nine months ended September 30, 2022, respectively.

(2) Antidilutive stock options and restricted stock units excluded from the calculation of diluted EPS totaled 18 million and 16 million for the three months ended March 31, 2024 and 2023, respectively.

THE CHARLES SCHWAB CORPORATION

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Regulatory Requirements

At September 30, 2023, CSC and its banking subsidiaries met all of their respective capital requirements.

At March 31, 2024, CSC and its banking subsidiaries met all of their respective capital requirements.

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

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Well Capitalized Minimum Capital Requirement

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

March 31, 2024 Amount Ratio Amount Ratio Amount Ratio (1)

Common Equity Tier 1 Risk-Based Capital $ 32,407 26.7 % N/A $ 5,460 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, 2023, CSC was subject to a stress capital buffer of 2.5%.

As of March 31, 2024, 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, 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 March 31, 2024, 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, 2023, CSB is considered well capitalized (the highest category) under its respective regulatory capital rules.

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

At September 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 $ 27.6 billion and $ 11.4 billion, respectively.

Based on their regulatory capital ratios, at September 30, 2023, CSPB and Trust Bank are considered well capitalized under their respective regulatory capital rules.

Based on its regulatory capital ratios at March 31, 2024, CSB is considered well capitalized (the highest category) under its respective regulatory capital rules.

There are no conditions or events since March 31, 2024 that management believes have changed CSB’s capital category.

At March 31, 2024, 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 $ 26.0 billion and $ 10.2 billion, respectively.

Based on their regulatory capital ratios, at March 31, 2024, CSPB and Trust Bank are considered well capitalized under their respective regulatory capital rules.

THE CHARLES SCHWAB CORPORATION

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

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

Net capital $ 6,227 $ 5,629

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Net capital in excess of required net capital $ 566 $ 444

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, 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 March 31, 2024.

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.

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Investor Services Advisor Services Total

Three Months Ended September 30, 2023 2022 2023 2022 2023 2022

Net interest revenue $ 1,710 $ 2,143 $ 527 $ 783 $ 2,237 $ 2,926

Asset management and administration fees 877 755 347 292 1,224 1,047

Trading revenue 672 800 96 130 768 930

Bank deposit account fees 157 263 48 150 205 413

Other 144 151 28 33 172 184

Total net revenues 3,560 4,112 1,046 1,388 4,606 5,500

Expenses Excluding Interest 2,356 2,117 867 706 3,223 2,823

Income before taxes on income $ 1,204 $ 1,995 $ 179 $ 682 $ 1,383 $ 2,677

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

Nine Months Ended September 30, 2023 2022 2023 2022 2023 2022

Three Months Ended March 31, 2024 2023 2024 2023 2024 2023

Net interest revenue $ 1,742 $ 2,033 $ 491 $ 737 $ 2,233 $ 2,770

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