SCHWAB CHARLES CORP 10-Q

Item 3. Quantitative and Qualitative Disclosures About Market Risk For discussion of the quantitative and qualitative disclosures about market risk, see Risk Management in Item 2. - 25 - Part I - FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements THE CHARLES SCHWAB CORPORATION Condensed Consolidated Statements of Income (In Millions, Except Per Share Amounts) (Unaudited) Three Months Ended March 31, 2024 2023 Net Revenues Interest revenue $ 3,941 $ 4,016 Interest expense ( 1,708 ) ( 1,246 ) Net interest revenue 2,233 2,770 Asset management and administration fees 1,348 1,118 Trading revenue 817 892 Bank deposit account fees 183 151 Other 159 185 Total net revenues 4,740 5,116 Expenses Excluding Interest Compensation and benefits 1,538 1,638 Professional services 241 258 Occupancy and equipment 265 299 Advertising and market development 88 88 Communications 141 146 Depreciation and amortization 228 177 Amortization of acquired intangible assets 130 135 Regulatory fees and assessments 125 83 Other 186 182 Total expenses excluding interest 2,942 3,006 Income before taxes on income 1,798 2,110 Taxes on income 436 507 Net Income 1,362 1,603 Preferred stock dividends and other 111 70 Net Income Available to Common Stockholders $ 1,251 $ 1,533 Weighted-Average Common Shares Outstanding: Basic 1,825 1,834 Diluted 1,831 1,842 Earnings Per Common Shares Outstanding (1) : Basic $ .69 $ .84 Diluted $ .68 $ .83 (1) The Company has voting and nonvoting common stock outstanding. As the participation rights, including dividend and liquidation rights, are identical between the voting and nonvoting stock classes, basic and diluted earnings per share are the same for each class. See Note 16 for additional information. See Notes to Condensed Consolidated Financial Statements. - 26 - THE CHARLES SCHWAB CORPORATION Condensed Consolidated Statements of Comprehensive Income (In Millions) (Unaudited) Three Months Ended March 31, 2024 2023 Net income $ 1,362 $ 1,603 Other comprehensive income (loss), before tax: Change in net unrealized gain (loss) on available for sale securities: 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: Amortization of amounts previously recorded upon transfer to held to maturity from available for sale 564 609 Other ( 8 ) ( 8 ) Other comprehensive income (loss), before tax 705 2,459 Income tax effect ( 150 ) ( 528 ) Other comprehensive income (loss), net of tax 555 1,931 Comprehensive Income (Loss) $ 1,917 $ 3,534 See Notes to Condensed Consolidated Financial Statements. - 27 - THE CHARLES SCHWAB CORPORATION Condensed Consolidated Balance Sheets (In Millions, Except Per Share and Share Amounts) (Unaudited) March 31, 2024 December 31, 2023 Assets Cash and cash equivalents $ 31,752 $ 43,337 Cash and investments segregated and on deposit for regulatory purposes (including resale agreements of $ 9,384 and $ 8,844 at March 31, 2024 and December 31, 2023, respectively) 25,905 31,836 Receivables from brokerage clients — net 71,169 68,667 Available for sale securities (amortized cost of $ 109,627 at March 31, 2024 and $ 116,336 at December 31, 2023; including assets pledged of $ 1,688 and $ 1,733 , respectively) 101,086 107,646 Held to maturity securities (including assets pledged of $ 6,745 at March 31, 2024 and $ 3,703 at December 31, 2023) 156,371 159,452 Bank loans — net 40,783 40,439 Equipment, office facilities, and property — net 3,584 3,690 Goodwill 11,951 11,951 Acquired intangible assets — net 8,131 8,260 Other assets 18,052 17,900 Total assets $ 468,784 $ 493,178 Liabilities and Stockholders’ Equity Bank deposits $ 269,460 $ 289,953 Payables to brokerage clients 84,005 84,786 Accrued expenses and other liabilities 17,637 18,400 Other short-term borrowings 8,405 6,553 Federal Home Loan Bank borrowings 24,000 26,400 Long-term debt 22,865 26,128 Total liabilities 426,372 452,220 Stockholders’ equity: Preferred stock — $ .01 par value per share; aggregate liquidation preference of $ 9,329 at March 31, 2024 and December 31, 2023 9,191 9,191 Common stock — 3 billion shares authorized; $ .01 par value per share; 2,023,295,180 shares issued at March 31, 2024 and December 31, 2023 20 20 Nonvoting common stock — 300 million shares authorized; $ .01 par value per share; 50,893,695 shares issued at March 31, 2024 and December 31, 2023 1 1 Additional paid-in capital 27,358 27,330 Retained earnings 34,701 33,901 Treasury stock, at cost — 247,203,220 and 250,678,452 shares at March 31, 2024 and December 31, 2023, respectively ( 11,283 ) ( 11,354 ) Accumulated other comprehensive income (loss) ( 17,576 ) ( 18,131 ) Total stockholders’ equity 42,412 40,958 Total liabilities and stockholders’ equity $ 468,784 $ 493,178 See Notes to Condensed Consolidated Financial Statements. - 28 - THE CHARLES SCHWAB CORPORATION Condensed Consolidated Statements of Stockholders ’ Equity (In Millions) (Unaudited) 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 Net income — — — — — — 1,603 — — 1,603 Other comprehensive income (loss), net of tax — — — — — — — — 1,931 1,931 Redemption and repurchase of preferred stock, inclusive of tax ( 515 ) — — — — — 44 — — ( 471 ) Dividends declared on preferred stock — — — — — — ( 105 ) — — ( 105 ) Dividends declared on common stock — $ .25 per share — — — — — — ( 464 ) — — ( 464 ) Repurchase of common stock, inclusive of tax — — — — — — — ( 2,869 ) — ( 2,869 ) Stock option exercises and other — — — — — ( 92 ) — 111 — 19 Share-based compensation — — — — — 129 — — — 129 Other — — — — — 24 — ( 58 ) — ( 34 ) 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 Net income — — — — — — 1,362 — — 1,362 Other comprehensive income (loss), net of tax — — — — — — — — 555 555 Dividends declared on preferred stock — — — — — — ( 103 ) — — ( 103 ) Dividends declared on common stock — $ .25 per share — — — — — — ( 459 ) — — ( 459 ) Stock option exercises and other — — — — — ( 120 ) — 142 — 22 Share-based compensation — — — — — 125 — — — 125 Other — — — — — 23 — ( 71 ) — ( 48 ) 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. - 29 - THE CHARLES SCHWAB CORPORATION Condensed Consolidated Statements of Cash Flows (in Millions) (Unaudited) Three Months Ended March 31, 2024 2023 Cash Flows from Operating Activities Net income $ 1,362 $ 1,603 Adjustments to reconcile net income to net cash provided by (used for) operating activities: Share-based compensation 131 134 Depreciation and amortization 228 177 Amortization of acquired intangible assets 130 135 Provision (benefit) for deferred income taxes ( 49 ) 3 Premium amortization, net, on available for sale and held to maturity securities 205 185 Other 116 132 Net change in: Investments segregated and on deposit for regulatory purposes 716 13,690 Receivables from brokerage clients ( 2,515 ) 3,395 Other assets ( 95 ) 212 Payables to brokerage clients ( 782 ) ( 9,885 ) Accrued expenses and other liabilities ( 796 ) ( 4 ) Net cash provided by (used for) operating activities ( 1,349 ) 9,777 Cash Flows from Investing Activities Purchases of available for sale securities ( 523 ) — Proceeds from sales of available for sale securities 1,189 1,051 Principal payments on available for sale securities 5,809 7,312 Principal payments on held to maturity securities 3,509 3,613 Net change in bank loans ( 349 ) 521 Purchases of equipment, office facilities, and property ( 149 ) ( 159 ) Purchases of FHLB stock ( 180 ) ( 1,439 ) Proceeds from sales of FHLB stock 324 82 Purchases of Federal Reserve stock ( 82 ) — Proceeds from sales of Federal Reserve stock — 98 Other investing activities ( 73 ) ( 50 ) Net cash provided by (used for) investing activities 9,475 11,029 Cash Flows from Financing Activities Net change in bank deposits ( 20,493 ) ( 40,979 ) Proceeds from FHLB borrowings 5,000 36,200 Repayments of FHLB borrowings ( 7,400 ) ( 3,000 ) Proceeds from other short-term borrowings 4,050 3,657 Repayments of other short-term borrowings ( 2,198 ) ( 1,241 ) Repayments of long-term debt ( 3,260 ) ( 808 ) Redemption and repurchase of preferred stock — ( 467 ) Dividends paid ( 562 ) ( 568 ) Proceeds from stock options exercised 22 19 Repurchases of common stock and nonvoting common stock — ( 2,842 ) Other financing activities ( 85 ) ( 67 ) Net cash provided by (used for) financing activities ( 24,926 ) ( 10,096 ) Increase (Decrease) in Cash and Cash Equivalents, including Amounts Restricted ( 16,800 ) 10,710 Cash and Cash Equivalents, including Amounts Restricted at Beginning of Year 74,473 58,720 Cash and Cash Equivalents, including Amounts Restricted at End of Period $ 57,673 $ 69,430 Continued on following page. - 30 - THE CHARLES SCHWAB CORPORATION Condensed Consolidated Statements of Cash Flows (in Millions) (Unaudited) Continued from previous page. Three Months Ended March 31, 2024 2023 Supplemental Cash Flow Information Non-cash investing activity: Changes in accrued equipment, office facilities, and property purchases $ ( 27 ) $ 28 Other Supplemental Cash Flow Information: Cash paid during the period for: Interest $ 1,957 $ 923 Income taxes $ 41 $ 40 Amounts included in the measurement of lease liabilities $ 61 $ 63 Leased assets obtained in exchange for new operating lease liabilities $ 20 $ 12 March 31, 2024 March 31, 2023 Reconciliation of cash, cash equivalents and amounts reported within the balance sheet (1) Cash and cash equivalents $ 31,752 $ 49,162 Restricted cash and cash equivalents amounts included in cash and investments segregated and on deposit for regulatory purposes 25,921 20,268 Total cash and cash equivalents, including amounts restricted shown in the statement of cash flows $ 57,673 $ 69,430 (1) For more information on the nature of restrictions on restricted cash and cash equivalents, see Note 17. See Notes to Condensed Consolidated Financial Statements. - 31 - THE CHARLES SCHWAB CORPORATION Notes to Condensed Consolidated Financial Statements (Tabular Amounts in Millions, Except Per Share Data, Ratios, or as Noted) (Unaudited) 1. Introduction and Basis of Presentation The Charles Schwab Corporation (CSC) is a savings and loan holding company. CSC engages, through its subsidiaries (collectively referred to as Schwab or the Company), in wealth management, securities brokerage, banking, asset management, custody, and financial advisory services. Principal business subsidiaries of CSC include the following: • Charles Schwab & Co., Inc. (CS&Co), incorporated in 1971, a securities broker-dealer; • TD Ameritrade, Inc., an introducing securities broker-dealer; • TD Ameritrade Clearing, Inc. (TDAC), a securities broker-dealer that provides trade execution and clearing services to TD Ameritrade, Inc.; • Charles Schwab Bank, SSB (CSB), our principal banking entity; and • Charles Schwab Investment Management, Inc. (CSIM), the investment advisor for Schwab’s proprietary mutual funds (Schwab Funds ® ) and for Schwab’s exchange-traded funds (Schwab ETFs ™ ). Unless otherwise indicated, the terms “Schwab,” “the Company,” “we,” “us,” or “our” mean CSC together with its consolidated subsidiaries. These unaudited condensed consolidated financial statements have been prepared in conformity with GAAP, which require management to make certain estimates and assumptions that affect the reported amounts in the accompanying financial statements and in the related disclosures. These estimates are based on information available as of the date of the condensed consolidated financial statements. While management makes its best judgment, actual amounts or results could differ from these estimates. In the opinion of management, all normal, recurring adjustments have been included for a fair statement of this interim financial information. 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. 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 three months of 2024. 2. 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) 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. - 32 - THE CHARLES SCHWAB CORPORATION Notes to Condensed Consolidated Financial Statements (Tabular Amounts in Millions, Except Per Share Data, Ratios, or as Noted) (Unaudited) 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. 3. Revenue Recognition Disaggregation of Schwab’s revenue by major source is as follows: Three Months Ended March 31, 2024 2023 Net interest revenue Cash and cash equivalents $ 454 $ 413 Cash and investments segregated 388 432 Receivables from brokerage clients 1,260 1,084 Available for sale securities 594 825 Held to maturity securities 690 746 Bank loans 440 391 Securities lending revenue 76 112 Other interest revenue 39 13 Interest revenue 3,941 4,016 Bank deposits ( 921 ) ( 618 ) Payables to brokerage clients ( 73 ) ( 75 ) Other short-term borrowings ( 103 ) ( 86 ) Federal Home Loan Bank borrowings ( 330 ) ( 304 ) Long-term debt ( 224 ) ( 139 ) Securities lending expense ( 55 ) ( 22 ) Other interest expense ( 2 ) ( 2 ) Interest expense ( 1,708 ) ( 1,246 ) Net interest revenue 2,233 2,770 Asset management and administration fees Mutual funds, ETFs, and CTFs 758 585 Advice solutions 503 453 Other 87 80 Asset management and administration fees 1,348 1,118 Trading revenue Commissions 413 422 Order flow revenue 352 414 Principal transactions 52 56 Trading revenue 817 892 Bank deposit account fees 183 151 Other 159 185 Total net revenues $ 4,740 $ 5,116 Note: For a summary of revenue provided by our reportable segments, see Note 18. The recognition of revenue is not impacted by the operating segment in which revenue is generated. - 33 - THE CHARLES SCHWAB CORPORATION Notes to Condensed Consolidated Financial Statements (Tabular Amounts in Millions, Except Per Share Data, Ratios, or as Noted) (Unaudited) Contract balances: 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. Unsatisfied performance obligations: We do not have any unsatisfied performance obligations other than those that are subject to an elective practical expedient under ASC 606. The practical expedient applies to and is elected for contracts where we recognize revenue at the amount to which we have the right to invoice for services performed. - 34 - THE CHARLES SCHWAB CORPORATION Notes to Condensed Consolidated Financial Statements (Tabular Amounts in Millions, Except Per Share Data, Ratios, or as Noted) (Unaudited) 4. Investment Securities The amortized cost, gross unrealized gains and losses, and fair value of the Company’s AFS and HTM investment securities are as follows: March 31, 2024 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Available for sale securities U.S. agency mortgage-backed securities $ 66,573 $ — $ 6,402 $ 60,171 U.S. Treasury securities 21,095 — 902 20,193 Corporate debt securities (1) 12,232 — 864 11,368 Asset-backed securities (2) 8,166 — 319 7,847 Foreign government agency securities 831 — 28 803 U.S. state and municipal securities 632 — 57 575 Non-agency commercial mortgage-backed securities 123 — 13 110 Other 22 — 3 19 Unallocated portfolio layer method fair value basis adjustments (3) ( 47 ) — ( 47 ) — Total available for sale securities $ 109,627 $ — $ 8,541 $ 101,086 Held to maturity securities U.S. agency mortgage-backed securities $ 156,371 $ 402 $ 14,433 $ 142,340 Total held to maturity securities $ 156,371 $ 402 $ 14,433 $ 142,340 December 31, 2023 Available for sale securities U.S. agency mortgage-backed securities $ 69,173 $ — $ 6,378 $ 62,795 U.S. Treasury securities 22,459 1 989 21,471 Corporate debt securities (1) 13,344 — 860 12,484 Asset-backed securities (2) 9,465 — 378 9,087 Foreign government agency securities 1,035 — 33 1,002 U.S. state and municipal securities 634 — 55 579 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 $ 116,336 $ 1 $ 8,691 $ 107,646 Held to maturity securities U.S. agency mortgage-backed securities $ 159,452 $ 1,435 $ 13,796 $ 147,091 Total held to maturity securities $ 159,452 $ 1,435 $ 13,796 $ 147,091 (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 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 - 35 - THE CHARLES SCHWAB CORPORATION Notes to Condensed Consolidated Financial Statements (Tabular Amounts in Millions, Except Per Share Data, Ratios, or as Noted) (Unaudited) 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 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 March 31, 2024 Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses Available for sale securities U.S. agency mortgage-backed securities (1) $ 1 $ — $ 60,171 $ 6,402 $ 60,172 $ 6,402 U.S. Treasury securities 754 1 18,447 901 19,201 902 Corporate debt securities — — 11,193 864 11,193 864 Asset-backed securities (1) 22 — 7,676 319 7,698 319 Foreign government agency securities — — 803 28 803 28 U.S. state and municipal securities — — 575 57 575 57 Non-agency commercial mortgage-backed securities — — 110 13 110 13 Other — — 19 3 19 3 Total (2) $ 777 $ 1 $ 98,994 $ 8,587 $ 99,771 $ 8,588 December 31, 2023 Available for sale securities U.S. agency mortgage-backed securities (1) $ 1 $ — $ 62,794 $ 6,378 $ 62,795 $ 6,378 U.S. Treasury securities — — 19,450 989 19,450 989 Corporate debt securities — — 12,484 860 12,484 860 Asset-backed securities (1) 29 — 9,058 378 9,087 378 Foreign government agency securities — — 1,002 33 1,002 33 U.S. state and municipal securities — — 579 55 579 55 Non-agency commercial mortgage-backed securities — — 109 14 109 14 Other — — 19 3 19 3 Total (2) $ 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. U.S. agency mortgage-backed securities do not have explicit credit ratings; however, management considers these to be of the highest credit quality and rating given the guarantee of principal and interest by the U.S. government or U.S. government-sponsored enterprises. 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 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 $ 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 three months ended March 31, 2024, or for the year ended December 31, 2023. - 36 - THE CHARLES SCHWAB CORPORATION Notes to Condensed Consolidated Financial Statements (Tabular Amounts in Millions, Except Per Share Data, Ratios, or as Noted) (Unaudited) The following table presents the Company’s estimated effective duration, which reflects anticipated future payments, by category at March 31, 2024: In years Estimated effective duration, exclusive of derivatives: AFS investment securities portfolio 2.4 AFS and HTM investment securities portfolio 3.9 Estimated effective duration, inclusive of derivatives (1) : AFS investment securities portfolio 2.1 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. The maturities of AFS and HTM investment securities are as follows: March 31, 2024 Within 1 year After 1 year through 5 years After 5 years through 10 years After 10 years Total Available for sale securities U.S. agency mortgage-backed securities $ 1,263 $ 10,067 $ 10,252 $ 38,589 $ 60,171 U.S. Treasury securities 9,982 10,211 — — 20,193 Corporate debt securities 4,406 5,514 1,448 — 11,368 Asset-backed securities 10 2,444 1,229 4,164 7,847 Foreign government agency securities 492 311 — — 803 U.S. state and municipal securities — 97 386 92 575 Non-agency commercial mortgage-backed securities — — — 110 110 Other — — — 19 19 Total fair value $ 16,153 $ 28,644 $ 13,315 $ 42,974 $ 101,086 Total amortized cost (1) $ 16,423 $ 30,576 $ 14,883 $ 47,792 $ 109,674 Held to maturity securities U.S. agency mortgage-backed securities $ 1,076 $ 8,012 $ 36,508 $ 96,744 $ 142,340 Total fair value $ 1,076 $ 8,012 $ 36,508 $ 96,744 $ 142,340 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 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 March 31, 2024 2023 Proceeds $ 1,189 $ 1,051 Gross realized gains — — Gross realized losses 10 9 - 37 - THE CHARLES SCHWAB CORPORATION Notes to Condensed Consolidated Financial Statements (Tabular Amounts in Millions, Except Per Share Data, Ratios, or as Noted) (Unaudited) 5. Bank Loans and Related Allowance for Credit Losses The composition of bank loans and delinquency analysis by portfolio segment and class of financing receivable is as follows: March 31, 2024 Current 30-59 days past due 60-89 days past due > 90 days past due and other nonaccrual loans (3) Total past due and other nonaccrual loans Total loans Allowance for credit losses Total bank loans – net Residential real estate: First Mortgages (1,2) $ 26,157 $ 29 $ 4 $ 11 $ 44 $ 26,201 $ 27 $ 26,174 HELOCs (1,2) 450 1 — 4 5 455 1 454 Total residential real estate 26,607 30 4 15 49 26,656 28 26,628 Pledged asset lines 13,833 4 4 — 8 13,841 — 13,841 Other 318 — — — — 318 4 314 Total bank loans $ 40,758 $ 34 $ 8 $ 15 $ 57 $ 40,815 $ 32 $ 40,783 December 31, 2023 Residential real estate: First Mortgages (1,2) $ 26,111 $ 33 $ 2 $ 7 $ 42 $ 26,153 $ 32 $ 26,121 HELOCs (1,2) 473 1 1 4 6 479 2 477 Total residential real estate 26,584 34 3 11 48 26,632 34 26,598 Pledged asset lines 13,533 11 — 4 15 13,548 — 13,548 Other 297 — — — — 297 4 293 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 $ 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 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 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 Charge-offs — — — — — — Recoveries — — — — — — Provision for credit losses ( 5 ) ( 1 ) ( 6 ) — — ( 6 ) Balance at end of period $ 27 $ 1 $ 28 $ — $ 4 $ 32 March 31, 2023 Balance at beginning of period $ 66 $ 4 $ 70 $ — $ 3 $ 73 Charge-offs — — — — — — Recoveries — — — — — — Provision for credit losses 1 — 1 — — 1 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. - 38 - THE CHARLES SCHWAB CORPORATION Notes to Condensed Consolidated Financial Statements (Tabular Amounts in Millions, Except Per Share Data, Ratios, or as Noted) (Unaudited) The U.S. 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 In addition to monitoring delinquency, Schwab monitors the credit quality of First Mortgages and HELOCs by stratifying the portfolios by the following: • Year of origination; • Borrower FICO scores at origination (Origination FICO); • Updated borrower FICO scores (Updated FICO); • Loan-to-value (LTV) ratios at origination (Origination LTV); and • Estimated Current LTV ratios (Estimated Current LTV). Borrowers’ FICO scores are provided by an independent third-party credit reporting service and generally updated quarterly. The Origination LTV and Estimated Current LTV for a HELOC include any first lien mortgage outstanding on the same property at the time of the HELOC’s origination. The Estimated Current LTV for each loan is updated on a monthly basis by reference to a home price appreciation index. - 39 - THE CHARLES SCHWAB CORPORATION Notes to Condensed Consolidated Financial Statements (Tabular Amounts in Millions, Except Per Share Data, Ratios, or as Noted) (Unaudited) The credit quality indicators of the Company’s First Mortgages and HELOCs are detailed below: First Mortgages Amortized Cost Basis by Origination Year 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 <620 $ — $ — $ 3 $ — $ 1 $ 1 $ 5 $ — $ — $ — 620 – 679 5 5 26 30 19 15 100 — 2 2 680 – 739 67 280 773 1,147 390 278 2,935 49 35 84 ≥740 559 2,205 5,185 10,304 3,505 1,403 23,161 250 119 369 Total $ 631 $ 2,490 $ 5,987 $ 11,481 $ 3,915 $ 1,697 $ 26,201 $ 299 $ 156 $ 455 Origination LTV ≤70% $ 453 $ 1,673 $ 4,434 $ 9,954 $ 3,257 $ 1,314 $ 21,085 $ 271 $ 109 $ 380 >70% – ≤90% 178 817 1,553 1,527 658 381 5,114 28 46 74 >90% – ≤100% — — — — — 2 2 — 1 1 Total $ 631 $ 2,490 $ 5,987 $ 11,481 $ 3,915 $ 1,697 $ 26,201 $ 299 $ 156 $ 455 Updated FICO <620 $ — $ 10 $ 15 $ 15 $ 16 $ 17 $ 73 $ 2 $ 6 $ 8 620 – 679 8 37 83 106 34 47 315 7 9 16 680 – 739 61 227 533 922 299 160 2,202 45 24 69 ≥740 562 2,216 5,356 10,438 3,566 1,473 23,611 245 117 362 Total $ 631 $ 2,490 $ 5,987 $ 11,481 $ 3,915 $ 1,697 $ 26,201 $ 299 $ 156 $ 455 Estimated Current LTV (1) ≤70% $ 457 $ 1,732 $ 4,838 $ 11,239 $ 3,894 $ 1,691 $ 23,851 $ 296 $ 155 $ 451 >70% – ≤90% 174 758 1,124 240 20 6 2,322 3 1 4 >90% – ≤100% — — 20 2 1 — 23 — — — >100% — — 5 — — — 5 — — — Total $ 631 $ 2,490 $ 5,987 $ 11,481 $ 3,915 $ 1,697 $ 26,201 $ 299 $ 156 $ 455 Gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ — $ — Percent of Loans on Nonaccrual Status 0.01 % 0.01 % 0.02 % 0.01 % 0.01 % 0.39 % 0.04 % 0.13 % 2.36 % 0.88 % (1) Represents the LTV for the full line of credit (drawn and undrawn) for revolving HELOCs. - 40 - THE CHARLES SCHWAB CORPORATION Notes to Condensed Consolidated Financial Statements (Tabular Amounts in Millions, Except Per Share Data, Ratios, or as Noted) (Unaudited) First Mortgages Amortized Cost Basis by Origination Year December 31, 2023 2023 2022 2021 2020 pre-2020 Total First Mortgages Revolving HELOCs amortized cost basis HELOCs converted to term loans Total HELOCs Origination FICO <620 $ — $ 2 $ 1 $ 1 $ 1 $ 5 $ — $ — $ — 620 – 679 4 27 30 20 15 96 — 1 1 680 – 739 299 782 1,160 395 294 2,930 50 38 88 ≥740 2,391 5,258 10,439 3,558 1,476 23,122 261 129 390 Total $ 2,694 $ 6,069 $ 11,630 $ 3,974 $ 1,786 $ 26,153 $ 311 $ 168 $ 479 Origination LTV ≤70% $ 1,818 $ 4,492 $ 10,078 $ 3,306 $ 1,382 $ 21,076 $ 279 $ 117 $ 396 >70% – ≤90% 876 1,577 1,552 668 402 5,075 32 50 82 >90% – ≤100% — — — — 2 2 — 1 1 Total $ 2,694 $ 6,069 $ 11,630 $ 3,974 $ 1,786 $ 26,153 $ 311 $ 168 $ 479 Updated FICO <620 $ 4 $ 15 $ 19 $ 8 $ 17 $ 63 $ 2 $ 5 $ 7 620 – 679 46 77 87 38 50 298 6 10 16 680 – 739 265 575 984 316 169 2,309 48 26 74 ≥740 2,379 5,402 10,540 3,612 1,550 23,483 255 127 382 Total $ 2,694 $ 6,069 $ 11,630 $ 3,974 $ 1,786 $ 26,153 $ 311 $ 168 $ 479 Estimated Current LTV (1) ≤70% $ 1,853 $ 4,855 $ 11,341 $ 3,960 $ 1,781 $ 23,790 $ 308 $ 167 $ 475 >70% – ≤90% 841 1,185 289 14 5 2,334 3 1 4 >90% – ≤100% — 28 — — — 28 — — — >100% — 1 — — — 1 — — — Total $ 2,694 $ 6,069 $ 11,630 $ 3,974 $ 1,786 $ 26,153 $ 311 $ 168 $ 479 Gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ — Percent of Loans on Nonaccrual Status 0.01 % 0.02 % 0.01 % 0.01 % 0.19 % 0.03 % 0.07 % 2.40 % 0.84 % (1) Represents the LTV for the full line of credit (drawn and undrawn) for revolving HELOCs. 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. Approximately 27 % of the balance of these mortgages consisted of loans with interest-only payment terms. The interest rates on approximately 84 % of the balance of these interest-only loans are not scheduled to reset for three or more years. Schwab’s mortgage loans do not include interest terms described as temporary introductory rates below current market rates. 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. After the initial draw period, the balance outstanding at such time is converted to a 20-year amortizing loan. The interest rate during the initial draw period and the 20-year amortizing period is a floating rate based on the prime rate plus a margin. - 41 - THE CHARLES SCHWAB CORPORATION Notes to Condensed Consolidated Financial Statements (Tabular Amounts in Millions, Except Per Share Data, Ratios, or as Noted) (Unaudited) The following table presents when current outstanding HELOCs will convert to amortizing loans: March 31, 2024 Balance Converted to an amortizing loan by period end (1) $ 156 Within 1 year 17 > 1 year – 3 years 38 > 3 years – 5 years 44 > 5 years 200 Total $ 455 (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 March 31, 2024, the borrowers on approximately 59 % of HELOC loan balances outstanding only paid the minimum amount due. 6. Variable Interest Entities 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: March 31, 2024 December 31, 2023 Aggregate assets Aggregate liabilities Maximum exposure to loss Aggregate assets Aggregate liabilities Maximum exposure to loss LIHTC investments (1) $ 1,467 $ 791 $ 1,467 $ 1,407 $ 759 $ 1,407 Other investments (2) 183 — 230 179 — 231 Total $ 1,650 $ 791 $ 1,697 $ 1,586 $ 759 $ 1,638 (1) Aggregate assets and aggregate liabilities are included in other assets and accrued expenses and other liabilities, respectively, on the condensed consolidated balance sheets. (2) Other investments include non-LIHTC CRA investments that are accounted for as loans at amortized cost, equity method investments, AFS securities, or using the adjusted cost method. Aggregate assets are included in AFS securities, bank loans – net, or other assets on the condensed consolidated balance sheets. Schwab’s maximum exposure to loss would result from the loss of the investments, including any committed amounts. 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 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. - 42 - THE CHARLES SCHWAB CORPORATION Notes to Condensed Consolidated Financial Statements (Tabular Amounts in Millions, Except Per Share Data, Ratios, or as Noted) (Unaudited) 7. Bank Deposits Bank deposits consist of interest-bearing and non-interest-bearing deposits as follows: March 31, 2024 December 31, 2023 Interest-bearing deposits: Deposits swept from brokerage accounts $ 208,903 $ 220,274 Time certificates of deposit (1) 39,128 48,297 Checking 15,642 15,691 Savings and other 4,268 4,461 Total interest-bearing deposits 267,941 288,723 Non-interest-bearing deposits 1,519 1,230 Total bank deposits $ 269,460 $ 289,953 (1) Time certificates of deposit consist of brokered CDs. 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: Balance 2024 $ 32,584 2025 6,544 Total $ 39,128 8. Borrowings CSC Senior Notes CSC’s Senior Notes are unsecured obligations. CSC 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 and quarterly for the floating-rate Senior Notes. Interest for the fixed-to-floating rate Senior Notes is payable semi-annually during the fixed rate period of the notes and quarterly during the floating rate period of the notes. 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. - 43 - THE CHARLES SCHWAB CORPORATION Notes to Condensed Consolidated Financial Statements (Tabular Amounts in Millions, Except Per Share Data, Ratios, or as Noted) (Unaudited) 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 March 31, 2024 December 31, 2023 CSC Fixed-rate Senior Notes: 3.550 % due February 1, 2024 10/31/18 $ — $ 500 0.750 % due March 18, 2024 03/18/21 — 1,500 3.750 % due April 1, 2024 09/24/21 350 350 3.000 % due March 10, 2025 03/10/15 375 375 4.200 % due March 24, 2025 03/24/20 600 600 3.625 % due April 1, 2025 09/24/21 418 418 3.850 % due May 21, 2025 05/22/18 750 750 3.450 % due February 13, 2026 11/13/15 350 350 0.900 % due March 11, 2026 12/11/20 1,250 1,250 1.150 % due May 13, 2026 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 03/02/17 650 650 2.450 % due March 3, 2027 03/03/22 1,500 1,500 3.300 % due April 1, 2027 09/24/21 744 744 3.200 % due January 25, 2028 12/07/17 700 700 2.000 % due March 20, 2028 03/18/21 1,250 1,250 4.000 % due February 1, 2029 10/31/18 600 600 3.250 % due May 22, 2029 05/22/19 600 600 2.750 % due October 1, 2029 09/24/21 475 475 4.625 % due March 22, 2030 03/24/20 500 500 1.650 % due March 11, 2031 12/11/20 750 750 2.300 % due May 13, 2031 05/13/21 750 750 1.950 % due December 1, 2031 08/26/21 850 850 2.900 % due March 3, 2032 03/03/22 1,000 1,000 CSC Floating-rate Senior Notes: SOFR + 0.500 % due March 18, 2024 03/18/21 — 1,250 SOFR + 0.520 % due May 13, 2026 05/13/21 500 500 SOFR + 1.050 % due March 3, 2027 03/03/22 500 500 CSC Fixed-to-Floating rate Senior Notes: 5.643 % due May 19, 2029 (1) 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) 05/19/23 1,300 1,300 6.136 % due August 24, 2034 (4) 08/24/23 1,350 1,350 Total CSC Senior Notes 22,612 25,862 Ameritrade Holding Fixed-rate Senior Notes: 3.750 % due April 1, 2024 11/01/18 50 50 3.625 % due April 1, 2025 10/22/14 82 82 3.300 % due April 1, 2027 04/27/17 56 56 2.750 % due October 1, 2029 08/16/19 25 25 Total Ameritrade Holding Senior Notes 213 213 Finance lease liabilities 75 85 Unamortized premium — net 77 87 Debt issuance costs ( 112 ) ( 119 ) Total long-term debt $ 22,865 $ 26,128 (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 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 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. - 44 - THE CHARLES SCHWAB CORPORATION Notes to Condensed Consolidated Financial Statements (Tabular Amounts in Millions, Except Per Share Data, Ratios, or as Noted) (Unaudited) Annual maturities on all long-term debt outstanding at March 31, 2024 are as follows: Maturities 2024 $ 426 2025 2,249 2026 4,112 2027 3,463 2028 1,950 Thereafter 10,700 Total maturities 22,900 Unamortized premium — net 77 Debt issuance costs ( 112 ) Total long-term debt $ 22,865 FHLB borrowings: Our banking subsidiaries maintain secured credit facilities with the FHLB. Amounts available under these facilities are dependent on the amount of bank loans and the 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 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. 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 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. - 45 - THE CHARLES SCHWAB CORPORATION Notes to Condensed Consolidated Financial Statements (Tabular Amounts in Millions, Except Per Share Data, Ratios, or as Noted) (Unaudited) Annual maturities on FHLB borrowings and other short-term borrowings outstanding at March 31, 2024 are as follows: 2024 2025 Total FHLB borrowings $ 22,000 $ 2,000 $ 24,000 Other short-term borrowings 8,405 — 8,405 Total $ 30,405 $ 2,000 $ 32,405 9. Commitments and Contingencies Loan Portfolio: CSB provides a co-branded loan origination program for CSB clients (the Program) with Rocket Mortgage, LLC (Rocket Mortgage ® ). Pursuant to the Program, Rocket Mortgage originates and services First Mortgages and HELOCs for CSB clients. Under the Program, CSB purchases certain First Mortgages and HELOCs that are originated by Rocket Mortgage. CSB purchased First Mortgages of $ 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: March 31, 2024 December 31, 2023 Commitments to extend credit related to unused HELOCs, PALs, and other lines of credit $ 2,567 $ 2,996 Commitments to purchase First Mortgage loans 443 351 Total $ 3,010 $ 3,347 Guarantees and indemnifications: Schwab has clients that sell (i.e., write) listed option contracts that are cleared by the Options Clearing Corporation – a clearing house that establishes margin requirements on these transactions. We satisfy the margin requirements of these transactions through pledging certain client securities. For additional information on these pledged securities, refer to Note 12. In connection with its securities lending activities, Schwab is required to provide collateral to certain brokerage clients. The Company satisfies the collateral requirements by providing cash as collateral. The Company also provides guarantees to securities clearing houses and exchanges under standard membership agreements, which require members to guarantee the performance of other members. Under the agreements, if another member becomes unable to satisfy its obligations to the clearing houses and exchanges, other members would be required to meet shortfalls. The Company’s liability under these arrangements is not quantifiable and may exceed the amounts it has posted as collateral. The Company also engages third-party firms to clear clients’ futures and options on futures transactions and to facilitate clients’ foreign exchange trading, and has agreed to indemnify these firms for any losses that they may incur from the client transactions introduced to them by the Company. The potential requirement for the Company to make payments under these arrangements is remote. Accordingly, no liability has been recognized for these guarantees. IDA agreement: 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. 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: • Through September 10, 2025, Schwab must maintain minimum balances above the total of then-outstanding unmatured fixed-rate obligation amounts, with a maximum of $ 30 billion above this total amount. During this period, withdrawals of IDA balances by Schwab are generally permitted only to the extent of withdrawals initiated by Schwab customers, with limited exceptions, except to the extent necessary for Schwab to maintain balances below the applicable maximum. • After September 10, 2025, withdrawals of IDA balances are permitted at Schwab’s discretion, subject to an obligation to maintain IDA balances above a minimum of $ 60 billion, with a maximum of $ 90 billion. - 46 - THE CHARLES SCHWAB CORPORATION Notes to Condensed Consolidated Financial Statements (Tabular Amounts in Millions, Except Per Share Data, Ratios, or as Noted) (Unaudited) 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. 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 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. Legal contingencies: Schwab is subject to claims and lawsuits in the ordinary course of business, including arbitrations, class actions and other litigation, some of which include claims for substantial or unspecified damages. The Company is also the subject of inquiries, investigations, and proceedings by regulatory and other governmental agencies. Predicting the outcome of a litigation or regulatory matter is inherently difficult, requiring significant judgment and evaluation of various factors, including the procedural status of the matter and any recent developments; prior experience and the experience of others in similar cases; available defenses, including potential opportunities to dispose of a case on the merits or procedural grounds before trial (e.g., motions to dismiss or for summary judgment); the progress of fact discovery; the opinions of counsel and experts regarding potential damages; and potential opportunities for settlement and the status of any settlement discussions. It may not be reasonably possible to estimate a range of potential liability until the matter is closer to resolution – pending, for example, further proceedings, the outcome of key motions or appeals, or discussions among the parties. Numerous issues may have to be developed, such as discovery of important factual matters and determination of threshold legal issues, which may include novel or unsettled questions of law. Reserves are established or adjusted or further disclosure and estimates of potential loss are provided as the matter progresses and more information becomes available. Schwab believes it has strong defenses in all significant matters currently pending and is contesting liability and any damages claimed. Nevertheless, some of these matters may result in adverse judgments or awards, including penalties, injunctions or other relief, and the Company may also determine to settle a matter because of the uncertainty and risks of litigation. Described below are matters in which there is a reasonable possibility that a material loss could be incurred or where the matter may otherwise be of significant interest to stockholders. Unless otherwise noted, the Company is unable to provide a reasonable estimate of any potential liability given the stage of proceedings in the matter. With respect to all other pending matters, based on current information and consultation with counsel, it does not appear reasonably possible that the outcome of any such matter would be material to the financial condition, operating results, or cash flows of the Company. Corrente Antitrust Litigation : On June 6, 2022, CSC was sued in the U.S. District Court for the Eastern District of Texas on behalf of a putative class of customers who purchased or sold securities through CS&Co or TD Ameritrade, Inc. from October 26, 2020 to the present. The lawsuit alleges that 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. Ford Order Routing Litigation : On September 15, 2014, Ameritrade Holding, TD Ameritrade, Inc. and its former CEO, Frederick J. Tomczyk, were sued in the U.S. District Court for the District of Nebraska on behalf of a putative class of TD Ameritrade, Inc. clients alleging that defendants failed to seek best execution and made misrepresentations and omissions regarding its order routing practices. 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. Court of Appeals, 8th Circuit, issued a decision reversing the District Court’s certification of a class and remanding the case back to the District Court for further proceedings. Plaintiff renewed his motion for class certification, which the District Court granted on September 20, 2022. Defendants are appealing the District Court’s ruling before the U.S. Court of Appeals, 8th Circuit. - 47 - THE CHARLES SCHWAB CORPORATION Notes to Condensed Consolidated Financial Statements (Tabular Amounts in Millions, Except Per Share Data, Ratios, or as Noted) (Unaudited) 10. Exit and Other Related Liabilities 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. Such costs have included, and are expected to continue to include, professional fees, such as legal, advisory, and accounting fees, compensation and benefits expenses for employees and contractors involved in the integration work, and costs for technology enhancements. The Company has also incurred exit and other related costs to attain anticipated synergies, which are primarily comprised of employee compensation and benefits such as severance pay, other termination benefits, and retention costs, as well as costs related to facility closures, such as accelerated amortization and depreciation or impairments of assets in those locations. Exit and other related costs are a component of the Company’s overall acquisition and integration-related spending, and support the Company’s ability to achieve integration objectives including expected synergies. 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. 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 Employee Compensation and Benefits Advisor Services Employee Compensation and Benefits Total Balance at December 31, 2023 (1) $ 42 $ 12 $ 54 Costs paid or otherwise settled ( 9 ) ( 2 ) ( 11 ) Balance at March 31, 2024 (1) $ 33 $ 10 $ 43 (1) Included in accrued expenses and other liabilities on the condensed consolidated balance sheets. 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 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 Occupancy and equipment $ — $ 1 $ 1 $ — $ — $ — $ 1 Other — 2 2 — — — 2 Total $ — $ 3 $ 3 $ — $ — $ — $ 3 (1) Costs related to facility closures. 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. - 48 - THE CHARLES SCHWAB CORPORATION Notes to Condensed Consolidated Financial Statements (Tabular Amounts in Millions, Except Per Share Data, Ratios, or as Noted) (Unaudited) 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 Three Months Ended March 31, Employee Compensation and Benefits Facility Exit Costs Investor Services Total Employee Compensation and Benefits Facility Exit Costs Advisor Services Total Total Compensation and benefits $ 8 $ — $ 8 $ 2 $ — $ 2 $ 10 Total $ 8 $ — $ 8 $ 2 $ — $ 2 $ 10 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 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 $ 243 $ — $ 243 $ 65 $ — $ 65 $ 308 Occupancy and equipment — 41 41 — 9 9 50 Depreciation and amortization — 2 2 — 1 1 3 Professional services — 1 1 — — — 1 Other — 22 22 — 7 7 29 Total $ 243 $ 66 $ 309 $ 65 $ 17 $ 82 $ 391 (1) Costs related to facility closures. 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. 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. Other 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 March 31, 2024 and activity for the three months ended March 31, 2024: Investor Services Employee Compensation and Benefits Advisor Services Employee Compensation and Benefits Total Balance at December 31, 2023 (1) $ 171 $ 63 $ 234 Amounts recognized in expense (2) ( 23 ) ( 8 ) ( 31 ) Costs paid or otherwise settled ( 146 ) ( 54 ) ( 200 ) Balance at March 31, 2024 (1) $ 2 $ 1 $ 3 (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 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. - 49 - THE CHARLES SCHWAB CORPORATION Notes to Condensed Consolidated Financial Statements (Tabular Amounts in Millions, Except Per Share Data, Ratios, or as Noted) (Unaudited) 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 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 $ ( 23 ) $ — $ ( 23 ) $ ( 8 ) $ — $ ( 8 ) $ ( 31 ) Occupancy and equipment — 1 1 — 1 1 2 Other — 1 1 — — — 1 Total $ ( 23 ) $ 2 $ ( 21 ) $ ( 8 ) $ 1 $ ( 7 ) $ ( 28 ) (1) Costs related to facility closures. These costs, which are primarily comprised of accelerated amortization of ROU assets, relate to the impact of abandoning leased properties. The 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. 11. Derivative Instruments and Hedging Activities Risk Management Objective of Using Derivatives 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 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 The Company is exposed to changes in the fair value of its fixed-rate AFS securities due to changes in benchmark interest rates. The Company uses cleared interest rate swaps to manage its exposure to changes in fair value on these instruments attributable to changes in the designated benchmark interest rate. Cleared interest rate swaps designated as fair value hedges involve the payment of fixed-rate amounts to a CCP in exchange for the Company receiving floating-rate payments over the life of the agreements without the exchange of the underlying notional amount. The Company had outstanding interest rate swaps with aggregate notional amounts of $ 8.9 billion at March 31, 2024 and December 31, 2023 that were designated as fair value hedges of interest rate risk. - 50 - THE CHARLES SCHWAB CORPORATION Notes to Condensed Consolidated Financial Statements (Tabular Amounts in Millions, Except Per Share Data, Ratios, or as Noted) (Unaudited) 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 sheets: March 31, 2024 December 31, 2023 Assets Liabilities Assets Liabilities Interest rate swaps (1,2) $ 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 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. 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 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 March 31, 2024 2023 Gain (loss) on fair value hedging relationships recognized in interest revenue: Hedged items $ ( 157 ) $ 4 Derivatives designated as hedging instruments (1) 157 ( 4 ) (1) Excludes net income from periodic interest accruals and receipts of $ 3 million for the three months ended March 31, 2024 . 12. Financial Instruments Subject to Off-Balance Sheet Credit Risk Interest rate swaps: 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 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; however, we do not net these positions. Therefore, interest rate swaps are presented gross in the condensed consolidated balance sheets. See Note 11 for additional information on the Company’s interest rate swaps. Resale agreements: Schwab enters into collateralized resale agreements principally with other broker-dealers, which could result in losses in the event the counterparty fails to purchase the securities held as collateral for the cash advanced and the fair value of the securities declines. To mitigate this risk, Schwab requires that the counterparty deliver securities to a custodian, to be held as collateral, with a fair value at or in excess of the resale price. 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 - 51 - THE CHARLES SCHWAB CORPORATION Notes to Condensed Consolidated Financial Statements (Tabular Amounts in Millions, Except Per Share Data, Ratios, or as Noted) (Unaudited) 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 March 31, 2024 and December 31, 2023 were not subject to master netting arrangements. Securities lending: 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 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. In addition, most of our securities lending transactions are through a program with a clearing organization, which guarantees the return of cash to us. We also borrow securities from other broker-dealers to fulfill short sales by brokerage clients and deliver cash to the lender in exchange for the securities. The fair value of these borrowed securities was $ 1.8 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; however, we do not net securities lending transactions. Therefore, the securities loaned and securities borrowed are presented gross in the condensed consolidated balance sheets. Repurchase agreements: Schwab enters into collateralized repurchase agreements with external financial institutions in which the Company sells securities and agrees to repurchase these securities on a specified future date at a stated repurchase price. These repurchase agreements are collateralized by investment securities with a fair value equal to or in excess of the secured borrowing liability. Decreases in security prices posted as collateral for repurchase agreements may require Schwab to transfer cash or additional securities deemed acceptable by the counterparty. To mitigate this risk, Schwab monitors the fair value of underlying securities pledged as collateral compared to the related liability. Our collateralized repurchase agreements with each external financial institution are considered to be enforceable master netting arrangements. However, we do not net these arrangements. As such, the secured short-term borrowings associated with these collateralized repurchase agreements are presented gross in the condensed consolidated balance sheets. - 52 - THE CHARLES SCHWAB CORPORATION Notes to Condensed Consolidated Financial Statements (Tabular Amounts in Millions, Except Per Share Data, Ratios, or as Noted) (Unaudited) 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. Gross Assets/ Liabilities Gross Amounts Offset in the Condensed Consolidated Balance Sheets Net Amounts Presented in the Condensed Consolidated Balance Sheets Gross Amounts Not Offset in the Condensed Consolidated Balance Sheets Net Amount Counterparty Offsetting Collateral March 31, 2024 Assets Resale agreements (1) $ 9,384 $ — $ 9,384 $ — $ ( 9,384 ) (2) $ — Securities borrowed (3) 1,870 — 1,870 ( 1,704 ) ( 164 ) 2 Interest rate swaps (4) 1 — 1 — — (5) 1 Total $ 11,255 $ — $ 11,255 $ ( 1,704 ) $ ( 9,548 ) $ 3 Liabilities Repurchase agreements (6) $ 7,705 $ — $ 7,705 $ — $ ( 7,705 ) $ — Securities loaned (7) 5,776 — 5,776 ( 1,704 ) ( 3,613 ) 459 Secured short-term borrowings (8) 700 — 700 — ( 700 ) — Interest rate swaps (4) — — — — — (5) — Total $ 14,181 $ — $ 14,181 $ ( 1,704 ) $ ( 12,018 ) $ 459 December 31, 2023 Assets Resale agreements (1) $ 8,844 $ — $ 8,844 $ — $ ( 8,844 ) (2) $ — Securities borrowed (3) 1,563 — 1,563 ( 1,307 ) ( 253 ) 3 Interest rate swaps (4) — — — — — (5) — Total $ 10,407 $ — $ 10,407 $ ( 1,307 ) $ ( 9,097 ) $ 3 Liabilities Repurchase agreements (6) $ 4,903 $ — $ 4,903 $ — $ ( 4,903 ) $ — Securities loaned (7) 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) Included in cash and investments segregated and on deposit for regulatory purposes in the condensed consolidated balance sheets. (2) Actual collateral was greater than or equal to the value of the related assets. 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 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 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. (7) Included in accrued expenses and other liabilities in the condensed consolidated balance sheets. Securities loaned are predominantly comprised of equity securities held in client brokerage accounts with overnight and continuous remaining contractual maturities. The cash collateral received from counterparties under securities lending transactions was equal to or greater than the market value of the securities loaned at March 31, 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. - 53 - THE CHARLES SCHWAB CORPORATION Notes to Condensed Consolidated Financial Statements (Tabular Amounts in Millions, Except Per Share Data, Ratios, or as Noted) (Unaudited) 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: March 31, 2024 December 31, 2023 Fair value of client securities available to be pledged $ 94,483 $ 86,911 Fair value of securities pledged for: Fulfillment of requirements with the Options Clearing Corporation (1) $ 16,803 $ 13,355 Fulfillment of client short sales 5,987 7,009 Securities lending to other broker-dealers 5,029 4,688 Collateral for secured short-term borrowings 934 1,991 Total collateral pledged to third parties $ 28,753 $ 27,043 Note: 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 $ 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. 13. Fair Values of Assets and Liabilities Assets and liabilities measured at fair value on a recurring basis Schwab’s assets and liabilities measured at fair value on a recurring basis include: certain cash equivalents, certain investments segregated and on deposit for regulatory purposes, AFS securities, certain other assets, interest rate swaps and certain accrued expenses and other liabilities. The Company uses the market approach to determine the fair value of assets and liabilities. When available, the Company uses quoted prices in active markets to measure the fair value of assets and liabilities. Quoted prices for investments in exchange-traded securities represent end-of-day close prices published by exchanges. Quoted prices for money market funds and other mutual funds represent reported net asset values. When utilizing market data and bid-ask spread, the Company uses the price within the bid-ask spread that best represents fair value. When quoted prices in active markets do not exist, the Company uses prices obtained from independent third-party pricing services to measure the fair value of investment assets, and we generally obtain prices from three independent third-party pricing sources for such assets recorded at fair value. Our primary independent pricing service provides prices for our fixed income investments such as commercial paper; certificates of deposits; U.S. government and agency securities; state and municipal securities; corporate debt securities; asset-backed securities; foreign government agency securities; and non-agency commercial mortgage-backed securities. Such prices are based on observable trades, broker/dealer quotes, and discounted cash flows that incorporate observable information such as yields for similar types of securities (a benchmark interest rate plus observable spreads) and weighted-average maturity for the same or similar “to-be-issued” securities. We compare the prices obtained from the primary independent pricing service to the prices obtained from the additional independent pricing services to determine if the price obtained from the primary independent pricing service is reasonable. 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, 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. The fair values of the repurchase liabilities are based on quoted market prices or other observable market data consistent with the related client-held fractional shares. Unrealized gains and losses on client-held fractional shares offset the unrealized gains and losses on the corresponding repurchase liabilities, resulting in no impact to the condensed consolidated statements of income. The Company’s liabilities to repurchase client-held fractional shares do not have credit risk, and, as a result, the Company has not recognized any gains or losses in the condensed consolidated statements of income or comprehensive income attributable to instrument-specific credit risk for these repurchase liabilities. The repurchase liabilities are included in accrued expenses and other liabilities on the condensed consolidated balance sheets. - 54 - THE CHARLES SCHWAB CORPORATION Notes to Condensed Consolidated Financial Statements (Tabular Amounts in Millions, Except Per Share Data, Ratios, or as Noted) (Unaudited) The fair values of interest rate swaps are based on market observable interest rate yield curves. Fair value measurements are priced considering the coupon rate of the fixed leg of the contract and the variable coupon rate on the floating leg of the contract. Valuation is based on both spot and forward rates on the swap yield curve. The Company validates its valuations with counterparty quotations from CCPs. See Note 11 for additional information on the Company’s interest rate swaps. For a description of the fair value hierarchy and Schwab’s fair value methodologies, see Item 8 – Note 2 in the 2023 Form 10-K. 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: March 31, 2024 Level 1 Level 2 Level 3 Balance at Fair Value Cash equivalents: Money market funds $ 12,807 $ — $ — $ 12,807 Total cash equivalents 12,807 — — 12,807 Investments segregated and on deposit for regulatory purposes: U.S. Government securities — 13,780 — 13,780 Total investments segregated and on deposit for regulatory purposes — 13,780 — 13,780 Available for sale securities: U.S. agency mortgage-backed securities — 60,171 — 60,171 U.S. Treasury securities — 20,193 — 20,193 Corporate debt securities — 11,368 — 11,368 Asset-backed securities — 7,847 — 7,847 Foreign government agency securities — 803 — 803 U.S. state and municipal securities — 575 — 575 Non-agency commercial mortgage-backed securities — 110 — 110 Other — 19 — 19 Total available for sale securities — 101,086 — 101,086 Other assets: Other securities owned: Equity, corporate debt, and other securities 1,165 63 — 1,228 Mutual funds and ETFs 865 — — 865 State and municipal debt obligations — 31 — 31 U.S. Government securities — 2 — 2 Total other securities owned 2,030 96 — 2,126 Interest rate swaps — 1 — 1 Total other assets 2,030 97 — 2,127 Total assets $ 14,837 $ 114,963 $ — $ 129,800 Accrued expenses and other liabilities: Other $ 1,860 $ 34 $ — $ 1,894 Total accrued expenses and other liabilities 1,860 34 — 1,894 Total liabilities $ 1,860 $ 34 $ — $ 1,894 - 55 - THE CHARLES SCHWAB CORPORATION Notes to Condensed Consolidated Financial Statements (Tabular Amounts in Millions, Except Per Share Data, Ratios, or as Noted) (Unaudited) December 31, 2023 Level 1 Level 2 Level 3 Balance at Fair Value Cash equivalents: Money market funds $ 14,573 $ — $ — $ 14,573 Total cash equivalents 14,573 — — 14,573 Investments segregated and on deposit for regulatory purposes: U.S. Government securities — 20,358 — 20,358 Total investments segregated and on deposit for regulatory purposes — 20,358 — 20,358 Available for sale securities: U.S. agency mortgage-backed securities — 62,795 — 62,795 U.S. Treasury securities — 21,471 — 21,471 Corporate debt securities — 12,484 — 12,484 Asset-backed securities — 9,087 — 9,087 Foreign government agency securities — 1,002 — 1,002 U.S. state and municipal securities — 579 — 579 Non-agency commercial mortgage-backed securities — 109 — 109 Certificates of deposit — 100 — 100 Other — 19 — 19 Total available for sale securities — 107,646 — 107,646 Other assets: Other securities owned: Equity, corporate debt, and other securities 992 73 — 1,065 Mutual funds and ETFs 795 — — 795 State and municipal debt obligations — 27 — 27 U.S. Government securities — 26 — 26 Total other securities owned 1,787 126 — 1,913 Total other assets 1,787 126 — 1,913 Total assets $ 16,360 $ 128,130 $ — $ 144,490 Accrued expenses and other liabilities: Other $ 1,644 $ 89 $ — $ 1,733 Total accrued expenses and other liabilities 1,644 89 — 1,733 Total liabilities $ 1,644 $ 89 $ — $ 1,733 - 56 - THE CHARLES SCHWAB CORPORATION Notes to Condensed Consolidated Financial Statements (Tabular Amounts in Millions, Except Per Share Data, Ratios, or as Noted) (Unaudited) Fair Value of Other Financial Instruments The following tables present the fair value hierarchy for other financial instruments: March 31, 2024 Carrying Amount Level 1 Level 2 Level 3 Balance at Fair Value Assets Cash and cash equivalents $ 18,945 $ 18,945 $ — $ — $ 18,945 Cash and investments segregated and on deposit for regulatory purposes 12,080 2,735 9,345 — 12,080 Receivables from brokerage clients — net 71,118 — 71,118 — 71,118 Held to maturity securities: U.S. agency mortgage-backed securities 156,371 — 142,340 — 142,340 Total held to maturity securities 156,371 — 142,340 — 142,340 Bank loans — net: First Mortgages 26,174 — 23,198 — 23,198 HELOCs 454 — 484 — 484 Pledged asset lines 13,841 — 13,841 — 13,841 Other 314 — 314 — 314 Total bank loans — net 40,783 — 37,837 — 37,837 Other assets 5,706 — 5,706 — 5,706 Liabilities Bank deposits $ 269,460 $ — $ 269,460 $ — $ 269,460 Payables to brokerage clients 84,005 — 84,005 — 84,005 Accrued expenses and other liabilities 7,750 — 7,750 — 7,750 Other short-term borrowings 8,405 — 8,405 — 8,405 Federal Home Loan Bank borrowings 24,000 — 24,000 — 24,000 Long-term debt 22,790 — 21,727 — 21,727 December 31, 2023 Carrying Amount Level 1 Level 2 Level 3 Balance at Fair Value Assets Cash and cash equivalents $ 28,764 $ 28,764 $ — $ — $ 28,764 Cash and investments segregated and on deposit for regulatory purposes 11,438 2,628 8,810 — 11,438 Receivables from brokerage clients — net 68,629 — 68,629 — 68,629 Held to maturity securities: U.S. agency mortgage-backed securities 159,452 — 147,091 — 147,091 Total held to maturity securities 159,452 — 147,091 — 147,091 Bank loans — net: First Mortgages 26,121 — 23,226 — 23,226 HELOCs 477 — 508 — 508 Pledged asset lines 13,548 — 13,548 — 13,548 Other 293 — 293 — 293 Total bank loans — net 40,439 — 37,575 — 37,575 Other assets 4,960 — 4,960 — 4,960 Liabilities Bank deposits $ 289,953 $ — $ 289,953 $ — $ 289,953 Payables to brokerage clients 84,786 — 84,786 — 84,786 Accrued expenses and other liabilities 7,609 — 7,609 — 7,609 Other short-term borrowings 6,553 — 6,553 — 6,553 Federal Home Loan Bank borrowings 26,400 — 26,400 — 26,400 Long-term debt 26,043 — 25,000 — 25,000 - 57 - THE CHARLES SCHWAB CORPORATION Notes to Condensed Consolidated Financial Statements (Tabular Amounts in Millions, Except Per Share Data, Ratios, or as Noted) (Unaudited) 14. Stockholders’ Equity 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 Company repurchased 11,620 depositary shares representing interests in Series F preferred stock for $ 11 million, 42,036 depositary shares representing interests in Series G preferred stock for $ 42 million, 273,251 depositary shares representing interests in Series H preferred stock for $ 235 million, and 194,567 depositary shares representing interests in Series I preferred stock for $ 179 million on the open market during the three months ended March 31, 2023 . The repurchase prices are inclusive of $ 3 million of dividends accrued by the stockholders as of the repurchase date. 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 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 March 31, 2024 (1) December 31, 2023 (1) March 31, 2024 December 31, 2023 Issue Date Fixed-rate: Series D 750,000 750,000 $ 1,000 $ 728 $ 728 03/07/16 5.950 % 06/01/21 N/A N/A N/A Series J 600,000 600,000 1,000 584 584 03/30/21 4.450 % 06/01/26 N/A N/A N/A Fixed-to-floating rate/Fixed-rate reset: Series F 4,884 4,884 100,000 481 481 10/31/17 5.000 % 12/01/27 12/01/27 3 M LIBOR (4) 2.575 % Series G (2) 24,580 24,580 100,000 2,428 2,428 04/30/20 5.375 % 06/01/25 06/01/25 5 -Year Treasury 4.971 % Series H (3) 22,267 22,267 100,000 2,200 2,200 12/11/20 4.000 % 12/01/30 12/01/30 10 -Year Treasury 3.079 % Series I (2) 20,554 20,554 100,000 2,030 2,030 03/18/21 4.000 % 06/01/26 06/01/26 5 -Year Treasury 3.168 % Series K (2) 7,500 7,500 100,000 740 740 03/04/22 5.000 % 06/01/27 06/01/27 5 -Year Treasury 3.256 % Total preferred stock 1,429,785 1,429,785 $ 9,191 $ 9,191 (1) Represented by depositary shares. (2) The dividend rate for Series G, Series I, and Series K resets on each five-year anniversary from the first reset date. (3) The dividend rate for Series H resets on each ten-year anniversary from the first reset date. (4) The reset/floating rate for Series F will be determined by the calculation agent prior to the commencement of the floating rate period using what the calculation agent determines to be the industry-accepted substitute or successor base rate to LIBOR. N/A Not applicable. - 58 - THE CHARLES SCHWAB CORPORATION Notes to Condensed Consolidated Financial Statements (Tabular Amounts in Millions, Except Per Share Data, Ratios, or as Noted) (Unaudited) Dividends declared on the Company’s preferred stock are as follows: Three Months Ended March 31, 2024 2023 Total Declared Per Share Amount Total Declared (1) Per Share Amount Series D (2) $ 11.2 $ 14.88 $ 11.2 $ 14.88 Series F (3) — — — — Series G (2) 33.0 1,343.75 33.2 1,343.75 Series H (2) 22.3 1,000.00 23.7 1,000.00 Series I (2) 20.6 1,000.00 21.3 1,000.00 Series J (2) 6.7 11.13 6.7 11.13 Series K (2) 9.3 1,250.00 9.3 1,250.00 Total $ 103.1 $ 105.4 (1) Excludes $ 3 million of dividends declared on Series G, H and I, and accrued by stockholders as of the repurchase date. 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. (3) Dividends paid semi-annually until December 1, 2027 and quarterly thereafter. 15. Accumulated Other Comprehensive Income AOCI represents cumulative gains and losses that are not reflected in earnings. AOCI balances and the components of other comprehensive income (loss) are as follows: Total AOCI Balance at December 31, 2022 $ ( 22,621 ) Available for sale securities: Net unrealized gain (loss), net of tax expense (benefit) of $ 421 1,428 Other reclassifications included in other revenue, net of tax expense (benefit) of $ 2 7 Held to maturity securities: Amortization of amounts previously recorded upon transfer from available for sale, net of tax expense (benefit) of $ 107 502 Other, net of tax expense (benefit) of $( 2 ) ( 6 ) Balance at March 31, 2023 $ ( 20,690 ) Balance at December 31, 2023 $ ( 18,131 ) Available for sale securities: Net unrealized gain (loss), net of tax expense (benefit) of $ 26 113 Other reclassifications included in other revenue, net of tax expense (benefit) of $ 2 8 Held to maturity securities: Amortization of amounts previously recorded upon transfer from available for sale, net of tax expense (benefit) of $ 122 442 Other (1) ( 8 ) 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. 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 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). - 59 - THE CHARLES SCHWAB CORPORATION Notes to Condensed Consolidated Financial Statements (Tabular Amounts in Millions, Except Per Share Data, Ratios, or as Noted) (Unaudited) 16. Earnings Per Common Share 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. The if-converted method assumes conversion of all nonvoting common stock to common stock. For further details surrounding the EPS computation, see Item 8 – Note 25 in the 2023 Form 10-K. EPS under the basic and diluted computations for both common stock and nonvoting common stock are as follows: Three Months Ended March 31, 2024 2023 Common Stock Nonvoting Common Stock Common Stock Nonvoting Common Stock Basic earnings per share: Numerator Net income $ 1,324 $ 38 $ 1,559 $ 44 Preferred stock dividends and other (1) ( 108 ) ( 3 ) ( 68 ) ( 2 ) Net income available to common stockholders $ 1,216 $ 35 $ 1,491 $ 42 Denominator Weighted-average common shares outstanding — basic 1,774 51 1,783 51 Basic earnings per share $ .69 $ .69 $ .84 $ .84 Diluted earnings per share: Numerator Net income available to common stockholders $ 1,216 $ 35 $ 1,491 $ 42 Reallocation of net income available to common stockholders as a result of conversion of nonvoting to voting shares 35 — 42 — Allocation of net income available to common stockholders: $ 1,251 $ 35 $ 1,533 $ 42 Denominator Weighted-average common shares outstanding — basic 1,774 51 1,783 51 Conversion of nonvoting shares to voting shares 51 — 51 — Common stock equivalent shares related to stock incentive plans 6 — 8 — Weighted-average common shares outstanding — diluted (2) 1,831 51 1,842 51 Diluted earnings per share $ .68 $ .68 $ .83 $ .83 (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 18 million and 16 million for the three months ended March 31, 2024 and 2023, respectively. - 60 - THE CHARLES SCHWAB CORPORATION Notes to Condensed Consolidated Financial Statements (Tabular Amounts in Millions, Except Per Share Data, Ratios, or as Noted) (Unaudited) 17. Regulatory 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: Actual Minimum to be Well Capitalized Minimum Capital Requirement March 31, 2024 Amount Ratio Amount Ratio Amount Ratio (1) CSC Common Equity Tier 1 Risk-Based Capital $ 32,407 26.7 % N/A $ 5,460 4.5 % Tier 1 Risk-Based Capital 41,598 34.3 % N/A 7,280 6.0 % Total Risk-Based Capital 41,635 34.3 % N/A 9,706 8.0 % Tier 1 Leverage 41,598 8.8 % N/A 18,845 4.0 % Supplementary Leverage Ratio 41,598 8.8 % N/A 14,231 3.0 % CSB Common Equity Tier 1 Risk-Based Capital $ 31,944 39.3 % $ 5,282 6.5 % $ 3,657 4.5 % Tier 1 Risk-Based Capital 31,944 39.3 % 6,501 8.0 % 4,876 6.0 % Total Risk-Based Capital 31,977 39.4 % 8,126 10.0 % 6,501 8.0 % Tier 1 Leverage 31,944 10.4 % 15,343 5.0 % 12,275 4.0 % Supplementary Leverage Ratio 31,944 10.3 % N/A 9,270 3.0 % December 31, 2023 CSC Common Equity Tier 1 Risk-Based Capital $ 31,411 24.5 % N/A $ 5,770 4.5 % Tier 1 Risk-Based Capital 40,602 31.7 % N/A 7,694 6.0 % Total Risk-Based Capital 40,645 31.7 % N/A 10,258 8.0 % Tier 1 Leverage 40,602 8.5 % N/A 19,043 4.0 % Supplementary Leverage Ratio 40,602 8.5 % N/A 14,379 3.0 % CSB Common Equity Tier 1 Risk-Based Capital $ 31,777 37.9 % $ 5,448 6.5 % $ 3,771 4.5 % Tier 1 Risk-Based Capital 31,777 37.9 % 6,705 8.0 % 5,029 6.0 % Total Risk-Based Capital 31,816 38.0 % 8,381 10.0 % 6,705 8.0 % Tier 1 Leverage 31,777 10.1 % 15,793 5.0 % 12,634 4.0 % Supplementary Leverage Ratio 31,777 10.0 % N/A 9,540 3.0 % (1) Under risk-based capital rules, CSC and CSB are also required to maintain additional capital buffers above the regulatory minimum risk-based capital ratios. As of March 31, 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%. CSC and CSB are also required to maintain a countercyclical capital buffer above the regulatory minimum risk-based capital ratios, which was zero for both periods presented. If a buffer falls below the minimum requirement, CSC and CSB would be subject to increasingly strict limits on capital distributions and discretionary bonus payments to executive officers. At March 31, 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 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. - 61 - THE CHARLES SCHWAB CORPORATION Notes to Condensed Consolidated Financial Statements (Tabular Amounts in Millions, Except Per Share Data, Ratios, or as Noted) (Unaudited) Net capital and net capital requirements for CS&Co, TDAC, and TD Ameritrade, Inc., are as follows: March 31, 2024 December 31, 2023 CS&Co Net capital $ 6,227 $ 5,629 Minimum dollar requirement 0.250 0.250 2% of aggregate debit balances 1,146 1,069 Net capital in excess of required net capital $ 5,081 $ 4,560 TDAC Net capital $ 3,144 $ 3,634 Minimum dollar requirement 1.500 1.500 2% of aggregate debit balances 506 440 Net capital in excess of required net capital $ 2,638 $ 3,194 TD Ameritrade, Inc. Net capital $ 566 $ 444 Minimum dollar requirement 0.250 0.250 2% of aggregate debit balances — — 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 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. Amounts included in cash and investments segregated and on deposit for regulatory purposes represent actual balances on deposit. Cash and cash equivalents included in cash and investments segregated and on deposit for regulatory purposes are presented as part of Schwab’s cash balances in the condensed consolidated statements of cash flows. 18. Segment Information Schwab’s two reportable segments are Investor Services and Advisor Services. Schwab structures the operating segments according to its clients and the services provided to those clients. The Investor Services segment provides retail brokerage, investment advisory, and banking and trust services to individual investors, and retirement plan services, as well as other corporate brokerage services, to businesses and their employees. The Advisor Services segment provides custodial, trading, banking and trust, and support services, as well as retirement business services, to independent RIAs, independent retirement advisors, and recordkeepers. Revenues and expenses are attributed to the two segments based on which segment services the client. Management evaluates the performance of the segments on a pre-tax basis. Segment assets and liabilities are not used for evaluating segment performance or in deciding how to allocate resources to segments. There are no revenues from transactions between the segments. Financial information for the segments is presented in the following table: Investor Services Advisor Services Total Three Months Ended March 31, 2024 2023 2024 2023 2024 2023 Net Revenues Net interest revenue $ 1,742 $ 2,033 $ 491 $ 737 $ 2,233 $ 2,770 Asset management and administration fees 947 805 401 313 1,348 1,118 Trading revenue 713 775 104 117 817 892 Bank deposit account fees 135 99 48 52 183 151 Other 135 151 24 34 159 185 Total net revenues 3,672 3,863 1,068 1,253 4,740 5,116 Expenses Excluding Interest 2,265 2,233 677 773 2,942 3,006 Income before taxes on income $ 1,407 $ 1,630 $ 391 $ 480 $ 1,798 $ 2,110 - 62 - THE CHARLES SCHWAB CORPORATION