What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-02-26 compared with 2024-02-23 · 518 added, 533 removed, 943 unchanged (53% of the section changed)

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• Maximizing our market valuation and stockholder returns over time;

our belief that developing trusted relationships will translate into more client assets which drives revenue and, along with expense discipline and thoughtful capital management, generates earnings growth and builds stockholder value;

and maintaining our competitive position (see Business Strategy and Competitive Environment, and Products and Services in Part I – Item 1);

• The impact from adjustments related to the Market Risk Rule (see Regulation in Part I – Item 1);

• Expected benefits from the TD Ameritrade acquisition;

expected timing for the TD Ameritrade client transitions;

deal-related asset attrition;

and cost estimates and timing, including acquisition and integration-related costs, capital expenditures, cost synergies, and exit and other related costs (see Business Acquisition in Part I – Item 1;

Overview –Integration of TD Ameritrade in Part II – Item 7;

and Exit and Other Related Liabilities in Part II – Item 8 – Note 15);

• Actions to streamline our operations and our expectation of incremental run-rate cost savings and the timing and amount of associated exit and related costs (see Overview – Other in Part II – Item 7;

and Exit and Other Related Liabilities in Part II – Item 8 – Note 15);

• The outcome and impact of legal proceedings and regulatory matters (see Legal Proceedings in Part I – Item 3;

and Commitments and Contingencies in Part II – Item 8 – Note 14);

• Anticipated expenses and investments to support business growth and growth in our client base (see Overview and Results of Operations – Total Expenses Excluding Interest in Part II – Item 7);

• The expected impact of proposed and final rules (see Regulation in Part I – Item 1;

and Current Regulatory and Other Developments in Part II – Item 7);

• Net interest revenue;

the adjustment of rates paid on client-related liabilities;

and outstanding balances and the use of supplemental funding (see Results of Operations – Net Interest Revenue in Part II – Item 7);

• Capital expenditures (see Results of Operations – Total Expenses Excluding Interest in Part II – Item 7);

• Impact from the phase-out of LIBOR (see Risk Management – Phase-out of LIBOR in Part II – Item 7);

• Capital expenditures and expense management (see Results of Operations in Overview and Results of Operations – Total Expenses Excluding Interest in Part II – Item 7);

• Net interest revenue, the adjustment of rates paid on client-related liabilities, and client cash realignment activity (see Results of Operations – Net Interest Revenue in Part II – Item 7);

• Utilization of bank supplemental funding and expectations for repayment of outstanding balances (see Results of Operations in Part II – Item 7, and Liquidity Risk in Part II – Item 7);

• Management of interest rate risk;

the impact of changes in interest rates on net interest margin and revenue, bank deposit account fee revenue, economic value of equity, and liability and asset duration (see Risk Management in Part II – Item 7);

• Sources and uses of liquidity and capital;

and Tier 1 Leverage Ratio operating objective (see Liquidity Risk, Capital Management, Regulatory Capital Requirements, and Dividends in Part II – Item 7);

modeling and assumptions, the impact of changes in interest rates on net interest margin and revenue, bank deposit account fee revenue, economic value of equity, and liability and asset duration (see Risk Management in Part II – Item 7);

• Sources and uses of liquidity (see Liquidity Risk in Part II – Item 7);

• Capital management;

the return of capital to stockholders;

the migration of IDA balances to our balance sheet;

expectations about capital requirements, including AOCI, and meeting those requirements;

and plans regarding capital and dividends (see Capital Management – Regulatory Capital Requirements in Part II – Item 7;

potential migration of IDA balances to our balance sheet;

capital accretion;

expectations about capital requirements, including AOCI;

long-term operating objective;

and uses of capital and return of excess capital to stockholders, including dividends and repurchases (see Capital Management – Regulatory Capital Requirements in Part II – Item 7;

and Commitments and Contingencies in Part II – Item 8 – Note 15);

• The expected impact of proposed and final rules (see Current Regulatory and Other Developments in Part II – Item 7);

• The expected impact of new accounting standards not yet adopted (see Summary of Significant Accounting Policies in Part II – Item 8 – Note 2);

• The likelihood of indemnification and guarantee payment obligations and clients failing to fulfill contractual obligations (see Commitments and Contingencies in Part II – Item 8 – Note 15, and Financial Instruments Subject to Off-Balance Sheet Credit Risk – Client Trade Settlement in Note 18);

• The outcome and impact of legal proceedings and regulatory matters (see Commitments and Contingencies in Part II – Item 8 – Note 15, and Legal Proceedings in Part I – Item 3).

Achievement of the expressed beliefs, objectives and expectations described in these statements is subject to certain risks and uncertainties that could cause actual results to differ materially from the expressed beliefs, objectives, and expectations.

Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Annual Report on Form 10-K or, in the case of documents incorporated by reference, as of the date of those documents.

THE CHARLES SCHWAB CORPORATION

Management’s Discussion and Analysis of Financial Condition and Results of Operations

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

Important factors that may cause actual results to differ include, but are not limited to:

• General market conditions, including the level of interest rates and equity market valuations;

• General market conditions, including the level of interest rates, equity market valuations and volatility;

• Our ability to attract and retain clients, develop trusted relationships, and grow client assets;

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• The level of client assets, including cash balances;

• Client sensitivity to deposit rates;

• Competitive pressure on pricing, including deposit rates;

• Client cash allocations and sensitivity to deposit rates;

• The level and mix of client trading activity, including daily average trades, margin balances, and balance sheet cash;

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• Capital and liquidity needs and management;

THE CHARLES SCHWAB CORPORATION

Management’s Discussion and Analysis of Financial Condition and Results of Operations

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

• Our ability to manage expenses;

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• Our ability to support client activity levels;

• The risk that expected cost synergies and other benefits from the TD Ameritrade acquisition may not be fully realized or may take longer to realize than expected and that integration-related expenses may be higher than expected;

• Increased compensation and other costs due to inflationary pressures;

• The ability to successfully implement integration strategies and plans relating to TD Ameritrade, including client account transitions;

• The timing and scope of integration-related and other technology projects;

• Increased compensation and other costs;

• Real estate and workforce decisions;

• Client cash allocations;

• Migrations of bank deposit account balances (BDA balances);

• The timing and scope of technology projects;

• Balance sheet positioning relative to changes in interest rates;

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• Prepayment levels for mortgage-backed securities;

• Migrations of bank deposit account balances (BDA balances);

• Balance sheet positioning relative to changes in interest rates;

• Regulatory and legislative developments;

• Adverse developments in litigation or regulatory matters and any related charges;

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Assets receiving ongoing advisory services:

Market value of all client assets custodied at the Company under the guidance of an independent advisor or enrolled in one of Schwab’s advice solutions at the end of the reporting period.

Market value of all client assets custodied at the Company under the guidance of an independent advisor or enrolled in one of Schwab’s managed investing solutions at the end of the reporting period.

Bank deposit account balances (BDA balances):

Clients’ uninvested cash balances held off-balance sheet in deposit accounts at unconsolidated third-party financial institutions, pursuant to the IDA agreement and agreements formerly in effect with other third-party financial institutions.

Clients’ uninvested cash balances held off-balance sheet in deposit accounts at unconsolidated third-party financial institutions, pursuant to the IDA agreement or agreements with other third-party financial institutions.

Average BDA balances represent the daily average balance for the reporting period.

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One basis point equals 1/100 th of 1%, or 0.01%.

THE CHARLES SCHWAB CORPORATION

Management’s Discussion and Analysis of Financial Condition and Results of Operations

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

Client assets:

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The sum of common stock and related surplus net of treasury stock, retained earnings, AOCI, and qualifying minority interests, less applicable regulatory adjustments and deductions.

As a Category III banking organization, CSC has elected to exclude AOCI from CET1 Capital.

As a Category III banking organization, CSC has elected to exclude most components of AOCI from CET1 Capital.

THE CHARLES SCHWAB CORPORATION

Management’s Discussion and Analysis of Financial Condition and Results of Operations

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

Common Equity Tier 1 Risk-Based Capital Ratio:

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Core net new client assets:

Net new client assets before significant one-time inflows or outflows, such as acquisitions/divestitures or extraordinary flows (generally greater than $10 billion) relating to a specific client, and activity from off-platform brokered CDs issued by CSB.

Net new client assets before significant one-time inflows or outflows, such as acquisitions/divestitures or extraordinary flows (generally greater than $10 billion ($25 billion beginning in 2025)) relating to a specific client, and activity from off-platform brokered CDs issued by CSB.

These flows may span multiple reporting periods.

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Daily Average Trades (DATs):

Includes daily average revenue trades by clients, trades by clients in asset-based pricing relationships, and all commission-free trades.

Includes daily average revenue trades by clients, trades by clients in asset-based pricing relationships, commission-free trades, and allocated trades by investment advisors.

Delinquency roll rates:

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HQLA is defined by the Federal Reserve, but includes assets that are actively traded and readily convertible to cash in times of stress.

Industry Fees:

Includes fees collected from clients for certain securities transactions to offset, as applicable, charges assessed on the Company by SROs and foreign governments.

Such charges include Section 31 fees, FINRA trading activity fees, options regulatory fees, proprietary index options fees, and foreign transaction tax on American Depositary Receipts.

Interest-bearing liabilities:

Primarily includes bank deposits, payables to brokerage clients, Federal Home Loan Bank borrowings, other short-term borrowings, and long-term debt on which Schwab pays interest.

Primarily includes bank deposits, payables to brokerage clients, payables to brokers, dealers, and clearing organizations, Federal Home Loan Bank borrowings, other short-term borrowings, and long-term debt on which Schwab pays interest.

Interest-earning assets:

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Calculated as the principal amount of a loan divided by the value of the collateral securing the loan.

THE CHARLES SCHWAB CORPORATION

Management’s Discussion and Analysis of Financial Condition and Results of Operations

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

Margin loans:

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A type of asset-backed security that is secured by a mortgage or group of mortgages.

THE CHARLES SCHWAB CORPORATION

Management’s Discussion and Analysis of Financial Condition and Results of Operations

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

Net interest margin:

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Order flow revenue:

Payments received from trade execution venues to which our broker-dealer subsidiaries send equity and option orders.

Payments received from trade execution venues to which our broker-dealer subsidiary sends equity and option orders.

Pledged Asset Line ® (PAL):

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Return on tangible common equity 35 % 54 % 42 %

(1) 2024 includes net outflows of $14.6 billion from off-platform brokered CDs issued by CSB and an inflow of $10.3 billion from a mutual fund clearing services client and an outflow of $1.0 billion from an international relationship.

2023 includes net inflows of $32.5 billion from off-platform brokered CDs issued by CSB and $12.0 billion from a mutual fund clearing services client and outflows of $13.0 billion from an international relationship.

2022 includes outflows of $20.8 billion from certain mutual fund clearing services clients.

2021 includes outflows of $42.0 billion from certain mutual fund clearing services clients.

(2) Beginning in 2023, client cash as a percentage of client assets excludes brokered CDs issued by CSB.

Prior periods have been recast to reflect this change.

(2) Beginning in 2023, adjustments made to GAAP financial measures also include restructuring costs.

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See Non-GAAP Financial Measures.

THE CHARLES SCHWAB CORPORATION

Management’s Discussion and Analysis of Financial Condition and Results of Operations

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

2024 Compared to 2023

Through an uneven environment in 2023, with shifting views on the trajectory of the U.S.

economy, persistent geopolitical unrest, and turmoil beginning early in the year within the banking sector, our “no trade-offs” value proposition continued to

Through an evolving macroeconomic landscape in 2024, Schwab continued its “Through Clients’ Eyes” strategy, striving to meet the needs of our diverse client base, while driving growth across multiple fronts and successfully completing the integration of Ameritrade.

Amid easing inflation, the Federal Reserve began in September to cut interest rates for the first time in over four years, reducing the federal funds overnight rate by a total of 100 basis points in the third and fourth quarters.

Equity markets were positive for the year in 2024, with the S&P 500 ® and the NASDAQ Composite ® finishing the year higher by 23% and 29%, respectively.

Reflecting the strength of equity markets and organic asset gathering, total client assets rose to $10.10 trillion as of year-end 2024, up 19% from year-end 2023.

Core net new assets totaled $366.9 billion in 2024, up 20% from 2023, and representing an annualized growth rate of 4.3%.

Following the successful completion of our final Ameritrade client conversion in May, our organic growth trends strengthened, and core net new assets for the fourth quarter of 2024 were $114.8 billion, up 51% from the fourth quarter of 2023.

We saw strong client engagement in the markets throughout 2024, with acceleration in the fourth quarter;

clients’ DATs were 5.9 million in full-year 2024 and 6.3 million in the fourth quarter, increasing 9% and 22%, respectively, from the same periods in 2023.

Clients opened 4.2 million new brokerage accounts in 2024, a year-over-year increase of 10%, and active brokerage accounts ended 2024 at 36.5 million, up 5% on the year.

The Company’s financial results in 2024 reflected the impact of positive equity markets, solid asset gathering, sustained client engagement, and improvement in client cash trends.

Net income totaled $5.9 billion in 2024, up 17% year-over-year, and diluted EPS was $2.99, an increase of 18% over the prior year.

Adjusted diluted EPS (1) was $3.25 in 2024, up 4% from $3.13 in 2023.

Total net revenues rose 4% year-over-year to $19.6 billion in 2024.

Net interest revenue was $9.1 billion in 2024, down 3% from 2023, which reflected lower average interest-earning assets and higher rates on funding sources, partially offset by growth in margin and bank lending and lower bank supplemental funding.

Client cash realignment activity continued to decelerate in 2024, and principal and interest payments on the AFS and HTM investment securities portfolios supported reductions in bank supplemental funding balances.

Asset management and administration fees were $5.7 billion in 2024, increasing 20% from the prior year primarily as a result of growth in money market funds, equity market gains, and growth in managed investing solutions.

Trading revenue was $3.3 billion in 2024, up 1% from the prior year, reflecting higher volume and changes in mix of client trading activity.

Bank deposit account fee revenue totaled $729 million in 2024, up 3% year-over-year, due primarily to $97 million in breakage fees recognized in 2023, partially offset by lower average BDA balances.

BDA balances totaled $87.6 billion at December 31, 2024, down 10% from year-end 2023 primarily resulting from lower client cash allocations.

Total expenses excluding interest were $11.9 billion in 2024, down 4% from 2023.

This decrease reflected lower restructuring costs, lower acquisition and integration-related costs, and lower regulatory fees and assessments due primarily to a $172 million FDIC special assessment recognized in the fourth quarter of 2023 (see Current Regulatory and Other Developments).

These lower expenses were partially offset by higher incentive compensation, higher depreciation and amortization due to continued investment to support growth of the business, and higher other expense.

Other expense reflected higher industry fees resulting from the SEC’s May 2024 fee rate increase.

Adjusted total expenses (1) were $11.3 billion in 2024, up 2% from 2023.

Acquisition and integration-related costs, amortization of acquired intangible assets, and restructuring costs totaled $645 million in 2024, down 55% from 2023, as substantially all of the Company’s costs related to its restructuring were incurred in 2023, and spending for the Ameritrade integration decreased in 2024 as we completed the final integration activities.

Return on average common stockholders’ equity was 15% in 2024, down from 16% in 2023, and return on tangible common equity (1) (ROTCE) was 35% in 2024, down from 54% in 2023.

These changes reflect the benefit of higher net income in 2024 offset by higher average common stockholders’ equity.

Average common stockholders’ equity was higher year-over-year due to higher retained earnings as well as higher average AOCI.

The increase in average AOCI was driven by lower unrealized losses on our AFS investment securities portfolio and securities transferred in 2022 from AFS to HTM (see Item 8 – Note 21).

Employing our diligent approach to managing the balance sheet, Schwab supported client-driven growth in margin and bank lending, while reducing our bank supplemental funding in 2024.

Total balance sheet assets decreased 3% during the year, though margin lending grew to $83.8 billion at year-end 2024, up 34%, and bank loans increased to $45.2 billion, rising 12% during the year.

Principal and interest from our AFS and HTM securities portfolios, along with deceleration of client cash realignment from sweep products to higher-yielding investment solutions, supported a reduction in bank supplemental funding, which includes brokered CDs, FHLB borrowings, and borrowings under repurchase agreements at our banks.

Total bank supplemental funding ended 2024 at $49.9 billion, down $29.7 billion, or 37%, from year-end 2023, and down 49% from peak

THE CHARLES SCHWAB CORPORATION

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

resonate with investors.

The Federal Reserve raised the Federal Funds rate four times in the first three quarters of 2023 for a total of 100 basis points before holding rates unchanged since July.

Although equity markets were volatile during 2023,

ultimate returns were strong with the S&P 500 ® rising 24% and the NASDAQ Composite ® increasing 43%.

levels in May 2023.

Supported by strength of net income, our consolidated Tier 1 Leverage Ratio increased to 9.9% as of December 31, 2024, and our consolidated adjusted Tier 1 Leverage Ratio (1) , which includes AOCI in the ratio, rose to 6.8%, ending the year within our long-term operating objective of 6.75% - 7.00%.

(1) Adjusted diluted EPS, adjusted total expenses, return on tangible common equity, and adjusted Tier 1 Leverage Ratio are non-GAAP financial measures.

See Non-GAAP Financial Measures for further details and a reconciliation of such measures to GAAP reported results.

2023 Compared to 2022

Through an uneven environment in 2023, with shifting views on the trajectory of the U.S.

economy, persistent geopolitical unrest, and turmoil beginning early in the year within the banking sector, our “no trade-offs” value proposition continued to resonate with investors.

The Federal Reserve raised the Federal Funds rate four times in the first three quarters of 2023 for a total of 100 basis points before holding rates unchanged from July through the end of 2023.

Although equity markets were volatile during 2023, ultimate returns were strong with the S&P 500 ® rising 24% and the NASDAQ Composite ® increasing 43%.

Investor sentiment was also volatile throughout 2023;

strongly bearish in the first quarter before recovering in the second, then declining again in the third quarter.

Investor sentiment recovered significantly in the fourth quarter to end the year with a solid bullish viewpoint.

Investor sentiment recovered significantly in the fourth quarter to end 2023 with a solid bullish viewpoint.

Despite this mixed sentiment, our clients remained engaged with the markets and with Schwab.

Clients entrusted us with $305.7 billion in core net new assets in 2023.

Total client assets reached $8.52 trillion as of December 31, 2023, rising 21% from year-end 2022 as a result of asset gathering and market gains, partially offset by some expected deal-related attrition from clients originating at TD Ameritrade.

Trading volume declined somewhat from the prior year, as DATs were 5.4 million in 2023, down 9% from 2022.

Clients opened 3.8 million new brokerage accounts, bringing active brokerage accounts to 34.8 million at year-end, up 3% year-over-year.

Clients opened 3.8 million new brokerage accounts in 2023, bringing active brokerage accounts to 34.8 million at year-end, up 3% year-over-year.

Clients sought to take advantage of higher market interest rates in 2023, and we saw significant client cash reallocation from our sweep products into higher-yielding alternatives offered by Schwab.

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Total expenses excluding interest were $12.5 billion in 2023, increasing 10% from 2022.

This increase was due primarily to restructuring charges incurred in the second half of 2023, higher regulatory fees and assessments due primarily to an increase in FDIC assessments including the recognition of a $172 million special assessment in the fourth quarter, as well as higher expenses for compensation and benefits and depreciation and amortization, due primarily to growth in average headcount and investment in technology to support growth in our client base and the TD Ameritrade integration.

Adjusted total expenses (1) were $11.0 billion in 2023, higher by 6% from 2022.

Acquisition and integration-related costs were $401 million in 2023, up 2% from 2022, and amortization of acquired intangibles was $534 million, down 10% from 2022 as certain assets from the TD Ameritrade acquisition were fully amortized beginning in the fourth quarter of 2022.

Beginning in the third quarter of 2023, adjusted total expenses (1) also excludes restructuring costs, which totaled $495 million in 2023, related to efforts to achieve run-rate cost savings in preparation for post-integration of TD Ameritrade.

Acquisition and integration-related costs were $401 million in 2023, up 2% from 2022, and amortization of acquired intangibles was $534 million, down 10% from 2022 as certain assets from the Ameritrade acquisition were fully amortized beginning in the fourth quarter of 2022.

Return on average common stockholders’ equity was 16% for 2023, down from 18% in 2022.

Return on tangible common equity (1) (ROTCE) was 54% in 2023, up from 42% in 2022.

These changes primarily reflected lower average stockholders’ equity and lower net income in 2023.

Average stockholders’ equity was lower in 2023 due to a year-over-year decrease in average AOCI driven by unrealized losses on our AFS investment securities portfolio and securities transferred from AFS to HTM in 2022 (see Item 8 – Note 5).

Throughout 2023, the Company continued its diligent approach to balance sheet management and sought to prioritize flexibility.

During 2023, we issued $6.2 billion in senior notes to prepare for upcoming maturities as well as provide additional liquidity during the larger TD Ameritrade conversion weekends.

Total balance sheet assets decreased 11% from year-end 2022 to $493.2 billion at December 31, 2023, due primarily to client cash realignment amid the higher interest rate environment.

To assist in facilitating these client cash movements from sweep products to high-yielding cash and fixed income alternatives, the

(1) Adjusted diluted EPS, adjusted total expenses, and return on tangible common equity are non-GAAP financial measures.

See Non-GAAP Financial Measures for further details and a reconciliation of such measures to GAAP reported results.

These changes primarily reflected lower average stockholders’

THE CHARLES SCHWAB CORPORATION

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

Company utilized supplemental funding sources, including FHLB borrowings and issuances of brokered CDs.

equity and lower net income in 2023.

Throughout 2023, the Company continued its diligent approach to balance sheet management and sought to prioritize flexibility.

During 2023, we issued $6.2 billion in Senior Notes to prepare for upcoming maturities as well as provide additional liquidity during the larger Ameritrade conversion weekends.

Total balance sheet assets decreased 11% from year-end 2022 to $493.2 billion at December 31, 2023, due primarily to client cash realignment amid the higher interest rate environment.

To assist in facilitating these client cash movements from sweep products to high-yielding cash and fixed income alternatives, the Company utilized bank supplemental funding sources, including FHLB borrowings and issuances of brokered CDs.

As realignment activity significantly decreased in the second half of the year, by year-end 2023, we reduced the total outstanding balance of such supplemental sources by approximately 18% from the peak balances reached in May 2023.

Driven by a combination of the Company’s net income and also a smaller balance sheet in 2023, our consolidated Tier 1 Leverage Ratio increased to 8.5% as of year-end 2023.

2022 Compared to 2021

Schwab’s 2022 financial results reflected strong performance against a challenging economic backdrop.

Our clients faced a very difficult environment throughout the year, encountering inflation and global economic concerns, with Russia’s invasion of Ukraine exacerbating the impact.

Equity markets suffered their worst year since 2008, with the S&P 500 ® and NASDAQ Composite ® contracting 19% and 33%, respectively, in 2022, while investor sentiment remained bearish throughout the year.

At the same time, the Federal Reserve raised short-term rates at the fastest pace in 40 years, ultimately increasing the Fed Funds rate seven times to reach an upper bound of 4.50% in December.

Additionally, uncertainty around future macroeconomic growth increased in the second half of the year, weighing on longer-term rates and leading to an inverted yield curve.

Through these challenges, clients continued to turn to Schwab for help in achieving their financial goals.

Core net new assets in 2022 totaled $427.7 billion, representing an organic growth rate of 5%, which included significant tax-related outflows in April.

Total client assets were $7.05 trillion at December 31, 2022, down 13% from year-end 2021, as market value declines of approximately $1.5 trillion in client assets more than offset the Company’s continued asset gathering during the year.

DATs in 2022 were 5.9 million, down 9% from the prior year, as trading volume subsided from the extraordinary levels seen in 2021.

New brokerage accounts were also down from the prior year, as clients opened 4.0 million new brokerage accounts in 2022;

active brokerage accounts totaled 33.8 million at December 31, 2022, up 2% from year-end 2021.

Schwab’s financial performance in 2022 reflected the resiliency of our diversified financial model in a challenging macroeconomic environment and impacts from higher market interest rates.

Net income totaled $7.2 billion in 2022 and diluted EPS was $3.50, representing year-over-year growth of 23% and 24%, respectively.

Adjusted diluted EPS (1) was $3.90 in 2022, up from $3.25 in 2021.

Total net revenues rose 12% year-over-year to $20.8 billion in 2022.

Net interest revenue increased to $10.7 billion, rising 33% from 2021 as significantly higher market rates more than offset the impact of balance sheet contraction due to client cash allocation decisions.

Asset management and administration fees totaled $4.2 billion in 2022, down 1% year-over-year as lower market valuations throughout the year offset the benefit of lower money market fund fee waivers.

Trading revenue declined by 12% to $3.7 billion in 2022, due to lower DATs relative to the extraordinary trading volume seen in 2021 and changes in mix of client trading activity.

Bank deposit account fee revenue was $1.4 billion in 2022, up 7% from 2021 as higher average net yields more than offset lower average BDA balances.

BDA balances totaled $126.6 billion at December 31, 2022, down 20% from year-end 2021, reflecting client cash allocation decisions and migrations to our balance sheet.

Total expenses excluding interest amounted to $11.4 billion in 2022, increasing 5% from 2021, and adjusted total expenses (1) were $10.4 billion, up 7% from the prior year.

These increases reflected higher compensation and benefits expense and higher occupancy and equipment expense, as we continued to invest in our people and technology to support ongoing growth in our client base.

These increases were partially offset by lower other expense, which included a charge of approximately $200 million in 2021 for a regulatory matter settled in 2022.

Acquisition and integration-related costs and amortization of acquired intangibles were $392 million and $596 million, respectively, in 2022, compared with $468 million and $615 million, respectively, in 2021.

Return on average common stockholders’ equity grew to 18% in 2022 from 11% in 2021, while ROTCE (1) increased to 42% in 2022 compared with 22% in 2021.

The increases in both return on average common stockholders’ equity and ROTCE were due primarily to lower stockholders’ equity and growth in net income.

Stockholders’ equity declined in 2022 primarily due to a significant decrease in AOCI, as higher market interest rates resulted in larger unrealized losses on our AFS investment securities portfolio.

In January and November 2022, the Company transferred $108.8 billion and $79.8 billion, respectively, of investment securities from the AFS category to the HTM category (see Capital Management and Item 8 – Note 5).

(1) Adjusted diluted EPS, adjusted total expenses, and return on tangible common equity are non-GAAP financial measures.

(1) Adjusted diluted EPS, adjusted total expenses, return on tangible common equity, and adjusted Tier 1 Leverage Ratio are non-GAAP financial measures.

See Non-GAAP Financial Measures for further details and a reconciliation of such measures to GAAP reported results.

THE CHARLES SCHWAB CORPORATION

Management’s Discussion and Analysis of Financial Condition and Results of Operations

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

The Company continued its diligent approach to balance sheet management in 2022, maintaining appropriate capital and liquidity to support client activity and returning excess capital to stockholders.

As market rates rose from near-zero levels at the

beginning of the year, clients allocated a growing portion of their assets to higher-yielding cash and fixed income alternatives.

Total balance sheet assets decreased 17% year-over-year to $551.8 billion at December 31, 2022 as a result of these client cash allocation decisions and unrealized losses on AFS securities, both resulting primarily from higher market interest rates.

To facilitate these client cash movements, we took steps to enhance our liquidity by limiting new portfolio investments to help build available cash and utilizing supplemental funding sources including FHLB advances and brokered CDs.

We increased our common stock dividend by 22% during 2022, and implemented a $15 billion share repurchase authorization in July.

Repurchases under this new authorization totaled 47 million shares for $3.4 billion in 2022.

The Company issued $750 million in preferred stock in the first quarter of 2022, and redeemed a total of $1.0 billion of preferred stock during the second half of the year.

Inclusive of these actions, the Company’s Tier 1 Leverage Ratio finished the year at 7.2%.

Integration of TD Ameritrade

The Company has made significant progress in its integration of TD Ameritrade.

Over the course of 2023, the Company transitioned approximately $1.6 trillion in client assets across more than 15 million client accounts, including 7,000 RIAs, from TD Ameritrade to the Schwab platform across four transition groups.

The Company has now completed the transition of RIAs and approximately 90% of all TD Ameritrade client accounts.

In connection with the completed 2023 transitions, we have experienced some deal-related attrition of client assets from retail accounts and RIAs, which have been below our initial estimates when we announced the acquisition.

The Company expects to complete the remaining client transitions from TD Ameritrade to Schwab in a final transition group in May 2024.

The Company continues to expect total acquisition and integration-related costs and capital expenditures will be between $2.4 billion and $2.5 billion.

The Company’s 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 TD Ameritrade broker-dealers and related technology, and real estate-related exit cost variability.

Acquisition and integration-related costs, which are inclusive of related exit costs, totaled $401 million, $392 million, and $468 million in 2023, 2022, and 2021, respectively, and the Company expects to incur acquisition and integration-related costs of approximately $200 million in 2024.

Over the course of the integration, we continue to expect to realize annualized cost synergies of between $1.8 billion and $2.0 billion, and, through December 31, 2023, we have achieved approximately 80% of this amount on an annualized run-rate basis.

The Company expects to achieve the vast majority of the remaining estimated cost synergies by the end of 2024, with anticipated full year synergy realization beginning in 2025.

The estimated timing and amounts of synergy realization remain subject to change as we progress through the remaining stages of the integration.

Integration of Ameritrade

Over the course of five client transition groups in 2023 and 2024, we converted approximately $1.9 trillion in client assets across more than 17 million client accounts, including 7,000 RIAs, from Ameritrade to Schwab.

In May 2024, the Company completed the conversion of the final client transition group from Ameritrade to the Schwab platform.

In connection with these transitions, we experienced some expected attrition of client assets from retail accounts and RIAs, though such attrition was below our initial estimates when we announced the acquisition.

The integration of Ameritrade is now complete.

Throughout the integration, the Company incurred total acquisition and integration-related costs and capital expenditures of approximately $2.5 billion.

Acquisition and integration-related costs, which are inclusive of related exit costs, totaled $117 million, $401 million, and $392 million in 2024, 2023, and 2022, respectively.

Over the course of the integration, we realized annualized run-rate cost synergies of approximately $2.0 billion, with anticipated full-year synergy realization beginning in 2025.

See also Results of Operations – Total Expenses Excluding Interest, Non-GAAP Financial Measures, and Item 8 – Note 16.

In addition to cost synergies directly related to the integration of TD Ameritrade, the Company has taken incremental actions to streamline its operations to prepare for post-integration, including through position eliminations and decreasing its real estate footprint.

Through these actions, the Company expects to realize at least $500 million of incremental run-rate cost savings in addition to integration synergies.

In order to achieve these cost savings, the Company expects to incur total exit and related costs, primarily related to employee compensation and benefits and facility exit costs of approximately $500 million, inclusive of costs recognized through December 31, 2023 of $495 million.

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

Refer to Results of Operations – Total Expenses Excluding Interest and Item 8 – Note 15 for additional information.

In addition to cost synergies directly related to the integration of Ameritrade, the Company began taking incremental actions in 2023 to streamline its operations to prepare for post-integration, including through position eliminations and decreasing its real estate footprint.

Through these actions, the Company has realized approximately $500 million of incremental run-rate cost savings in addition to integration synergies.

In order to achieve these cost savings, the Company incurred total exit and related costs, primarily related to employee compensation and benefits and facility exit costs, of approximately $500 million.

Actions under the plan have been completed as of December 31, 2024.

Refer to Results of Operations – Total Expenses Excluding Interest, Non-GAAP Financial Measures, and Item 8 – Note 16 for additional information.

Subsequent Events

On February 12, 2025, the Company completed a secondary public offering of common shares through which TD Group US Holdings LLC, an affiliate of The Toronto-Dominion Bank (TD Bank), sold 133.8 million shares of the Company’s common stock and 31.7 million shares of the Company’s nonvoting common stock, which automatically converted into common stock, for an aggregate amount of $13.1 billion.

The Company did not receive any of the proceeds from the sale of shares.

Subsequent to the completion of the secondary offering, the Company repurchased directly from TD Group US Holdings LLC 19.2 million shares of nonvoting common stock, which automatically converted into common stock, for an aggregate repurchase of $1.5 billion.

The repurchase was completed under CSC’s share repurchase authorization.

Through the completion of the secondary offering and the Company’s repurchase of nonvoting common stock, TD Bank disposed of all of its common shares of CSC.

See Item 8 – Note 28 for additional information.

THE CHARLES SCHWAB CORPORATION

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CURRENT REGULATORY AND OTHER DEVELOPMENTS

In November 2023, the FDIC approved a final special assessment to recover losses incurred by the DIF to protect uninsured depositors due to the March 2023 closures of two banks.

The pre-tax impact of the final rule was $172 million.

This special assessment is tax deductible and was recognized fully in earnings in the fourth quarter of 2023.

The special assessment will be paid over eight quarters beginning in the first quarter of 2024, subject to potential extension and a potential one-time final special assessment for any shortfall in the DIF.

In October 2023, following previous attempts to expand fiduciary regulation for broker-dealers, the U.S.

Department of Labor released another proposed rule to significantly broaden the definition of “fiduciary” under the Employee Retirement Income Security Act of 1974.

Among other requirements, the rule would subject broker-dealers who provide non-discretionary investment advice to retirement plans and accounts to a “best interest” standard.

The rule could significantly impact the products, services, and support that firms can make available to retirement investors, and the Company continues to evaluate such impacts and the related implementation and operational issues, pending final adoption.

In October 2023, the U.S.

federal banking agencies issued a final rule that makes extensive revisions to the regulations implementing the CRA.

These revisions include the delineation of assessment areas, the overall evaluation framework and performance standards and metrics, the definition of community development activities and data collection and reporting, and requires significant new lending by banks to low-and-moderate income communities.

The new rule generally becomes effective on January 1, 2026, with its additional data collection and reporting requirements effective January 1, 2027.

The Company has begun to prepare for complying with the requirements included in the new rule by the applicable effective dates.

We do not expect the new rule will have a material impact on the Company’s business, financial condition, or results of operations.

In September 2024, the SEC adopted amendments to Rules 610 and 612 of Regulation National Market System (NMS) to (i) establish an additional minimum price increment, or “tick size,” for the quoting and trading of certain NMS stocks, (ii) reduce the exchange access fee caps, and (iii) require transparency of odd-lots.

In March 2024, the SEC adopted amendments to Rule 605 of Regulation NMS requiring enhanced disclosures of order execution quality for large broker-dealers that handle retail orders.

We do not expect the new rules to have a material impact on the Company’s business, financial condition, or results of operations.

The following two related equity market structure rule proposals released in December 2022 by the SEC remain pending:

• The “Order Competition Rule” would require that, before most individual investors’ orders could be executed internally by a trading center (like wholesaler market makers), those orders must first be exposed to a qualifying order-by-order auction in which both market makers and institutional investors can participate.

• “Regulation Best Execution” would establish an SEC-level best execution standard (in addition to the existing FINRA and MSRB best execution rules) for broker-dealers and require them to establish, maintain, and enforce written policies and procedures addressing how the broker-dealer will comply with the best execution standard and make routing or execution decisions for customer orders.

Regulation Best Execution would apply not only to equities, but to all securities.

The comment periods for the proposed rules ended on March 31, 2023.

While the impacts to Schwab of the proposed rules cannot be fully assessed until final rules are released, as proposed, the rules would have a significant impact to numerous aspects of critical equity market structure and the execution of orders for retail investors.

Among other impacts, the proposed rules would likely result in increased transaction costs for retail investors which could affect client investment and trading decisions, and would require substantial operational changes for financial intermediaries including the Company.

In July 2024, the FDIC issued a notice of proposed rulemaking to amend the brokered deposits framework effective since 2021 (2021 framework) setting forth its conditions for when broker-dealers such as CS&Co that place deposits with depository institutions through brokerage sweep arrangements qualify for the primary purpose exception (PPE) from the definition of a deposit broker, and from attendant restrictions for brokered deposits, under Section 29 of the Federal Deposit Insurance Act.

Under the 2021 framework, a broker-dealer qualifies for the PPE if less than 25 percent of its customer assets under administration for a particular business line are placed at depository institutions.

Among other changes, the FDIC is proposing a new framework that would revert back to the 10 percent threshold it applied to broker-dealers prior to 2021.

The proposed new framework, certain alternatives, and other amendments described in the notice were subject to a public comment period that ended on November 21, 2024.

The impacts to Schwab from any ultimate changes will depend on further clarification of definitions and requirements in any final rule.

In April 2024, the U.S.

Department of Labor adopted a final rule to significantly broaden the definition of “fiduciary” under the Employee Retirement Income Security Act of 1974.

Among other requirements, the rule, in conjunction with associated prohibited transaction exemptions (PTEs), subjects broker-dealers who provide non-discretionary investment advice to retirement plans and accounts to a “best interest” standard.

The rule was scheduled to take effect September 23, 2024, with a one-year transition period for certain PTE provisions.

On July 25 and 26, 2024, in two separate industry lawsuits seeking to vacate the rule, federal district court judges stayed effectiveness of the rule pending resolution of litigation.

In November 2023, the FDIC approved a final special assessment to recover losses incurred by the Deposit Insurance Fund (DIF) to protect uninsured depositors due to the March 2023 closures of two banks, which was subject to potential extension and a potential one-time final special assessment for any shortfall in the DIF.

The pre-tax impact of the final rule’s initial assessment to the Company was $172 million, which was tax deductible and was recognized in earnings in the fourth quarter of 2023.

In late February 2024, the FDIC notified banks, including the Company’s banking subsidiaries, that the estimated assessed losses to the DIF increased.

Accordingly, the Company recognized additional pre-tax charges totaling $30 million during 2024, which are tax deductible.

The Company paid its first amount on the special assessment in the second quarter of 2024 and expects the remaining collection period to be the next 18 months.

The FDIC has indicated that its special assessments and related collection period remain subject to further refinement.

In August 2023, the U.S.

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Among other things, the proposed rule would require CSC to maintain outstanding minimum levels of eligible long-term debt, as defined by the proposed rule, issued externally.

The proposed rule would also require our banking subsidiaries to maintain outstanding minimum levels of eligible long-term debt, which our banking subsidiaries would be required to issue internally to CSC.

The proposed rule would also require our banking subsidiaries to maintain outstanding minimum levels of eligible long-term debt, which our banking subsidiaries would

THE CHARLES SCHWAB CORPORATION

Management’s Discussion and Analysis of Financial Condition and Results of Operations

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

be required to issue internally to CSC.

The proposed rule would be phased-in over a three-year transition period.

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See Capital Management for additional information.

In December 2022, the SEC proposed a set of four related equity market structure rules that would make significant changes to how national market system (NMS) stock orders are priced, executed and reported.

The four proposed rules are described below.

Regulation Best Execution would apply not only to equities, but to all securities.

• Amendments to Rule 605 of Regulation NMS requiring enhanced disclosures of order execution quality for large brokers that handle retail orders.

• A rule to (i) amend minimum pricing increments (or tick sizes) that would apply to both the quoting and trading of NMS stocks, (ii) reduce the exchange access fee caps, and (iii) require transparency of odd-lots.

THE CHARLES SCHWAB CORPORATION

Management’s Discussion and Analysis of Financial Condition and Results of Operations

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

The comment periods for the proposed rules ended on March 31, 2023.

Among other impacts, certain of the proposed rules would likely result in increased transaction costs for retail investors which could affect client investment and trading decisions, and would require substantial operational changes for financial intermediaries including the Company.

In November 2022, the SEC proposed a rule that would require substantial changes to the liquidity risk management programs for open-end mutual funds other than money market funds (funds) and require them to implement “swing pricing” and impose a “hard close” on the acceptance of purchase and redemption orders.

Swing pricing would require funds that are not exchange-traded funds or money market funds to adjust the fund’s current net asset value (NAV) per share by a “swing factor” if the fund has either (i) net redemptions (no threshold) or (ii) net purchases that exceed a specified threshold (2% of the fund’s net assets).

To implement the swing pricing requirements, the proposed rule also would require that a fund, its transfer agent, or a registered clearing agency receive purchase and redemption orders prior to the time the fund has established for determining the NAV, typically market close, in order to receive a given day’s NAV (a “hard close”).

Current practices permit fund orders received by a financial intermediary prior to the fund cut-off time to be transmitted to the fund after the fund cut-off time and still receive that day’s NAV.

Under the proposed rule, orders received by the fund, its transfer agent or registered clearing agency after the fund cut-off time would receive the next day’s NAV.

The comment period for the proposed rule ended on February 14, 2023.

While the impacts to Schwab of the proposed rule cannot be fully assessed until the final rule is released, we believe the proposed rule could impact investor interest in mutual funds, which could lead to changes in investor behavior.

In addition, implementation of the proposed rule would require that financial intermediaries, including the Company, modify order entry systems and operational workflow to comply with the requirements.

In November 2022, the SEC proposed a rule which, among other provisions, would have required substantial changes to the liquidity risk management programs for open-end mutual funds other than money market funds (funds), including implementation of “swing pricing” adjustments to net asset value (NAV) upon exceeding a 2% redemption threshold;

and a daily “hard close” on the acceptance of purchase and redemption orders for pricing at that day’s NAV.

In August 2024, the SEC adopted portions of the proposed rule but declined to adopt the requirements for swing pricing and a hard close.

We do not expect the rule as adopted to have a material impact to the Company’s business, financial condition, or results of operations.

RESULTS OF OPERATIONS

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Interest revenue (4) % $ 15,537 79 % $ 16,111 86 % $ 12,227 59 %

Interest expense N/M (6,684) (36) % (1,545) (8) % (476) (3) %

Interest expense (4) % (6,393) (32) % (6,684) (36) % (1,545) (8) %

Net interest revenue (3) % 9,144 47 % 9,427 50 % 10,682 51 %

Asset management and administration fees

Mutual funds, ETFs, and collective trust funds (CTFs)

Mutual funds, ETFs, and CTFs

26 % 3,221 16 % 2,563 13 % 2,055 10 %

Advice solutions 1 % 1,868 10 % 1,854 9 % 1,993 11 %

Managed investing solutions (1)

14 % 2,129 11 % 1,868 10 % 1,854 9 %

Other 13 % 366 2 % 325 2 % 307 1 %

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Total net revenues 4 % $ 19,606 100 % $ 18,837 100 % $ 20,762 100 %

N/M Not meaningful.

Percentage changes greater than 200% are presented as not meaningful.

(1) Managed investing solutions was formerly referred to as “Advice solutions”.

THE CHARLES SCHWAB CORPORATION

Management’s Discussion and Analysis of Financial Condition and Results of Operations

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

Net Interest Revenue

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and bank loans.

Fees earned and expenses incurred on securities lending and borrowing activities are conducted by our broker-dealer subsidiaries using assets held in client brokerage accounts.

Schwab’s interest-bearing liabilities are comprised of bank deposits, which include brokered

THE CHARLES SCHWAB CORPORATION

Management’s Discussion and Analysis of Financial Condition and Results of Operations

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

CDs issued by CSB;

Schwab’s interest-bearing liabilities are comprised of bank deposits, which include brokered CDs issued by CSB;

payables to brokerage clients;

payables to brokers, dealers, and clearing organizations;

FHLB borrowings, other short-term borrowings (e.g., commercial paper, repurchase agreements, other secured borrowings);

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Schwab deploys the funds from these sources into the assets outlined above.

Net interest revenue also includes amounts earned and expenses incurred on securities lending and borrowing activities conducted by our broker-dealer subsidiary using assets held in client brokerage accounts.

As Schwab builds its client base, we attract new client sweep cash, which is a primary driver of funding balance sheet growth.

We do not use short-term, wholesale borrowings to support our long-term investment activity, but may use such funding for short-term liquidity purposes or to provide temporary funding as we have in 2022 and 2023.

Non-interest-bearing funding sources include stockholders’ equity, certain client cash balances, and other miscellaneous liabilities.

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Interest rates increased significantly beginning late in the first quarter of 2022 through the third quarter of 2023.

Short-term rates were near zero until the Federal Reserve began an aggressive tightening cycle in March 2022 in response to rising inflation, ultimately increasing the federal funds target overnight rate eleven times between March 2022 and July 2023 for a total increase of 525 basis points and maintaining the upper bound of the target overnight rate at 5.50% through year-end 2023.

Short-term rates were near zero until the Federal Reserve began an aggressive tightening cycle in March 2022, ultimately increasing the federal funds target overnight rate eleven times between March 2022 and July 2023 for a total increase of 525 basis points.

The Federal Reserve maintained the upper bound of the target overnight rate at 5.50% through most of 2024 before reducing the rate by 50 basis points during the third quarter and another 50 basis points across two cuts during the fourth quarter of 2024.

Long-term rates increased throughout 2022 and 2023, generally at a slower pace, thus leading to an inverted yield curve.

Long-term rates continued to increase during 2024, primarily in the fourth quarter of 2024 while short-term rates declined, resulting in an upward sloping yield curve as of year-end 2024.

Average interest-earning assets decreased $45.6 billion in 2024 from 2023;

however, Schwab saw strong client demand for margin and bank lending, which grew by 34% and 12%, respectively.

Even as higher interest rates continued for much of the year, the pace of clients’ reallocation of cash from sweep products to higher-yielding investment solutions further decelerated in 2024, particularly in the second half of the year.

Bank sweep deposits and payables to brokerage clients increased by a total of $9.8 billion, or 4%, during the third quarter, and $30.1 billion, or 11%, in the fourth quarter of 2024, inclusive of typical seasonal cash inflows near year-end.

Deceleration of client cash reallocation activity, along with principal and interest payments on the AFS and HTM securities portfolios, supported a reduction in bank supplemental funding of $14.9 billion, or 23%, during the fourth quarter and $29.7 billion, or 37%, for the full year ended December 31, 2024.

Schwab’s average interest-earning assets in 2023 were lower compared with 2022, primarily due to clients’ reallocation of cash from sweep products to higher-yielding investment solutions in the second half of 2022 and during 2023, which resulted primarily from the rapid increases to the federal funds overnight rate.

These changes in client cash allocations reduced average balances of bank deposits and payables to brokerage clients.

To support this client cash allocation activity, the Company has been utilizing temporary supplemental funding beginning in the fourth quarter of 2022 and throughout 2023, including drawing upon FHLB secured lending facilities and issuing brokered CDs.

To support this client cash allocation activity, the Company utilized bank supplemental funding beginning in the fourth quarter of 2022 and throughout 2023, including drawing upon FHLB secured lending facilities, engaging with external financial institutions in repurchase agreements at its banking subsidiaries, and issuing brokered CDs.

The average pace of client cash allocation out of sweep products into higher-yielding investment solutions decreased significantly beginning in the second quarter of 2023, and, apart from an increase in August following the Federal Reserve’s July rate increase, continued to decline during the second half of 2023.

In the fourth quarter of 2023, the Company saw bank deposits and payables to brokerage clients increase by a total of $17.5 billion, or 5%, due in part to typical seasonal cash inflows near year-end.

Schwab saw strength in net new client assets during 2022, which, along with transfers of BDA balances to the Company’s balance sheet (see Bank Deposit Account Fees), drove growth in Schwab’s average interest-earning assets in 2022 relative to 2021.

Partially offsetting this growth, we experienced significant seasonal tax outflows in the second quarter of 2022, and, due to the rapid increases to the federal funds overnight rate, changes in client cash allocations increased in the second half of 2022 which resulted in a total decrease in bank deposits and payables to brokerage clients of 18% since year-end 2021.

During 2022, the Company increased its cash holdings and reduced the duration of incremental investment securities purchases to provide flexibility to help support such changes in client cash allocations associated with higher short-term interest rates.

THE CHARLES SCHWAB CORPORATION

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$ 256,212 $ 3,152 1.23 % $ 306,505 $ 3,363 1.10 % $ 424,168 $ 723 0.17 %

Payables to brokers, dealers, and clearing

organizations (3)

8,522 372 4.30 % 4,477 147 3.23 % 5,884 48 0.81 %

Payables to brokerage clients 72,776 272 0.37 % 66,842 271 0.41 % 97,825 123 0.13 %

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Total interest-bearing liabilities (3)

392,841 6,391 1.62 % 442,425 6,681 1.51 % 553,584 1,546 0.28 %

Non-interest-bearing funding sources (3)

Securities lending expense 147 48 24

32,576 28,640 40,188

Other interest expense 2 3 (1)

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Interest revenue on investment securities is presented net of related premium amortization.

(2) During 2022, the Company transferred a portion of its investment securities designated as AFS to the HTM category, as described in Item 8 – Note 5.

(3) Average balance includes $36.0 billion and $437 million of brokered CDs in 2023 and 2022, respectively.

(4) Average balance and interest revenue/expense was less than $500 thousand in the period or periods presented.

(5) Beginning in 2023, FHLB borrowings are presented separately from other short-term borrowings.

(2) Average balance includes $37.4 billion, $36.0 billion, and $437 million of brokered CDs in 2024, 2023 and 2022, respectively.

(3) Beginning in 2024, payables to brokers, dealers, and clearing organizations is presented separately from non-interest-bearing funding sources and included in total interest-bearing liabilities.

This line item includes securities loaned and related interest expense.

Prior period amounts have been reclassified to reflect this change.

Net interest revenue decreased $1.3 billion, or 12%, in 2023 from 2022 primarily due to increased utilization of higher-cost supplemental funding sources to support client cash allocations in the rising rate environment, and lower average interest-earning assets, which more than offset the benefits of higher average yields on interest-earning assets.

Net premium amortization of investment securities decreased to $830 million in 2023 from $1.4 billion in 2022 as a result of increases in market interest rates and a smaller investment securities portfolio.

Average interest-earning assets for 2023 were lower by 21% compared to 2022, which was primarily due to lower bank deposits and payables to brokerage clients as a result of clients allocating cash out of sweep products into higher-yielding investment solutions due to higher market interest rates.

Net interest margin increased to 1.98% in 2023, from 1.78% in 2022, as higher market interest rates improved yields on interest-earning assets, which more than offset the higher rates paid across interest-bearing funding sources.

The Company’s higher average balances in 2023 relative to 2022 of FHLB borrowings, repurchase agreements, and brokered CDs resulted in higher funding costs.

The Company prioritizes repayment of the outstanding balances of its supplemental funding sources, and during the second half of 2023, the total outstanding balance of these funding sources decreased by $17.5 billion.

Our use and the financial impacts of such supplemental funding is dependent on several factors, including the volume and pace of clients’ cash allocation activity, which is driven primarily by changes in market interest rates, as well as asset gathering.

While client cash realignment activity has slowed significantly since the second quarter of 2023, continued uncertainty remains, including in regard to the path of market interest rates and client behavior, which will significantly impact our utilization of supplemental funding sources.

The impacts to net interest revenue of using supplemental funding sources also depend on the type of funding source used and levels of interest rates.

The Company currently expects its outstanding balances of supplemental funding sources to decrease over time.

Certain amounts outstanding at December 31, 2023 will require rollover into new borrowings, the amount and costs of which will depend on the above noted factors.

See also Risk

THE CHARLES SCHWAB CORPORATION

1 unchanged sentence

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

Liquidity Risk, Item 8 – Note 11 Bank Deposits, and Item 8 – Note 12 Borrowings for additional information on these and other funding sources.

Net interest revenue increased $2.7 billion, or 33%, in 2022 from 2021 primarily due to higher average yields on interest-earning assets as a result of higher market interest rates.

Net premium amortization of investment securities decreased to $1.4 billion in 2022 from $2.3 billion in 2021.

These benefits were partially offset by higher rates paid on funding sources, higher average FHLB borrowings and long-term debt outstanding, and lower balances of margin loans and lower securities lending revenue due to decreased market demand.

Average interest-earning assets for 2022 were higher by 8%, compared to 2021.

This increase was primarily due to higher average balances of bank deposits and payables to brokerage clients, which resulted from net new client asset inflows as well as transfers of BDA balances to our balance sheet during 2022.

These year-over-year increases in average balances were offset by client cash allocation decisions in response to higher short-term market interest rates during 2022, as clients moved certain cash balances out of bank deposits and payables to brokerage clients.

Net interest margin increased to 1.78% in 2022, from 1.45% in 2021.

Higher market interest rates improved yields on interest-earning assets, which more than offset the higher rates paid across interest-bearing funding sources.

Management – Liquidity Risk, Capital Management, Item 8 – Note 12, Note 13, and Note 18 for additional information on these and other funding sources.

Net interest revenue decreased $1.3 billion, or 12%, in 2023 from 2022 primarily due to increased utilization of higher-cost bank supplemental funding sources to support client cash allocations in the rising rate environment, and lower average interest-earning assets, which more than offset the benefits of higher average yields on interest-earning assets.

Asset Management and Administration Fees

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The fair values of client assets included in proprietary and third-party mutual funds, ETFs, and CTFs are based on quoted market prices and other observable market data.

We also earn asset management fees for advice solutions, which include managed portfolios, specialized strategies, and customized investment advice.

We also earn asset management fees for managed investing solutions (formerly referred to as advice solutions), which include managed portfolios, specialized strategies, and customized investment advice.

Other asset management and administration fees include various asset-based fees, such as trust fees, 401(k) recordkeeping fees, mutual fund clearing fees, and non-balance based service and transaction fees.

Asset management and administration fees vary with changes in the balances of client assets due to market fluctuations and client activity.

THE CHARLES SCHWAB CORPORATION

Management’s Discussion and Analysis of Financial Condition and Results of Operations

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

The following table presents asset management and administration fees, average client assets, and average fee yields:

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$ 2,082,726 $ 3,221 0.15 % $ 1,753,516 $ 2,563 0.15 % $ 1,583,682 $ 2,055 0.13 %

Advice solutions (2)

Managed investing solutions (2)

Fee-based $ 542,253 $ 2,129 0.39 % $ 458,114 $ 1,868 0.41 % $ 441,336 $ 1,854 0.42 %

Non-fee-based 111,571 — — 96,633 — — 89,525 — —

Total advice solutions $ 554,747 1,868 0.34 % $ 530,861 1,854 0.35 % $ 542,414 1,993 0.37 %

Total managed investing solutions

$ 653,824 $ 2,129 0.33 % $ 554,747 $ 1,868 0.34 % $ 530,861 $ 1,854 0.35 %

Other balance-based fees (3)

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(1) In 2023 and 2022, includes transfers from other third-party mutual funds and ETFs to Mutual Fund OneSource ® and other NTF funds.

(2) Average client assets for advice solutions may also include the asset balances contained in the mutual fund and/or ETF categories listed above.

(2) Average client assets for managed investing solutions may also include the asset balances contained in the mutual fund and/or ETF categories listed above.

(3) Includes various asset-related fees, such as trust fees, 401(k) recordkeeping fees, and mutual fund clearing fees and other service fees.

(4) Includes miscellaneous service and transaction fees relating to mutual funds and ETFs that are not balance-based.

THE CHARLES SCHWAB CORPORATION

Management’s Discussion and Analysis of Financial Condition and Results of Operations

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

Asset management and administration fees increased by $960 million, or 20%, in 2024 from 2023, primarily as a result of higher balances in Schwab money market funds as clients shifted their cash allocations to higher-yielding investment solutions.

The increase in asset management and administration fees in 2024 was also due to growth in balances in fee-based managed investing solutions and Mutual Fund OneSource ® , as a result of strong equity markets and, for managed investing solutions, net inflows of client assets.

Asset management and administration fees increased by $540 million, or 13%, in 2023 from 2022, primarily as a result of higher balances in Schwab money market funds and the elimination of fee waivers on those funds as well as higher average client asset balances due to stronger equity markets.

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The increases in asset management and administration fees in 2023 were also due to growth in Schwab equity and bond funds, ETFs, and CTFs, partially offset by lower balances of certain third-party mutual funds and ETFs.

Asset management and administration fees declined by $58 million, or 1%, in 2022 from 2021, due to lower balances in Mutual Fund OneSource ® and other third-party mutual funds, as well as advice solutions, relative to 2021.

Balances declined primarily due to equity market weakness during 2022, which negatively impacted client asset valuations.

These decreases offset the benefit of lower money market fund fee waivers, which were eliminated during the second quarter of 2022 as a result of the Federal Reserve’s increases to the federal funds target overnight rate.

The following table presents a roll forward of client assets for the Schwab money market funds, Schwab equity and bond funds, ETFs, and CTFs, and Mutual Fund OneSource and other NTF funds.

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Trading Revenue

Trading revenue includes commissions, order flow revenue, and principal transaction revenues.

Trading revenue includes commissions, order flow revenue, and principal transactions revenue.

Commission revenue is affected by volume and mix of trades executed.

Order flow revenue is comprised of payments received from trade execution venues to which our broker-dealer subsidiaries send equity and option orders.

Order flow revenue is comprised of payments received from trade execution venues to which our broker-dealer subsidiary sends equity and option orders.

Order flow revenue is affected by volume and mix of client trades, as well as pricing received from trade execution venues.

Principal transactions revenue is recognized primarily as a result of accommodating clients’ fixed income trading activity, and includes adjustments to the fair value of securities positions

THE CHARLES SCHWAB CORPORATION

Management’s Discussion and Analysis of Financial Condition and Results of Operations

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

held to facilitate such client trading activity.

Principal transactions revenue is recognized primarily as a result of accommodating clients’ fixed income trading activity, and includes adjustments to the fair value of securities positions held to facilitate such client trading activity.

Principal transactions revenue also includes unrealized gains and losses on cash and investments segregated for regulatory purposes.

The following tables present trading revenue, trade details, and related information:

The following tables present trading revenue, client trading activity, and related information:

Year Ended December 31, Percent Change

7 unchanged sentences

Total trading revenue 1 % $ 3,264 $ 3,230 $ 3,673

THE CHARLES SCHWAB CORPORATION

Management’s Discussion and Analysis of Financial Condition and Results of Operations

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

Year Ended December 31, Percent Change 2024-2023

10 unchanged sentences

(8) % $ 2.22 $ 2.41 $ 2.47

(1) Revenue per trade is calculated as trading revenue divided by DATs multiplied by the number of trading days.

(1) Revenue per trade is calculated as trading revenue divided by the product of DATs multiplied by the number of trading days.

Trading revenue increased $34 million, or 1%, in 2024 compared to 2023, driven by an increase in order flow revenue reflecting higher volume and changes in the mix of client trading activity.

This increase was offset by a decrease in principal transactions revenue due to lower volume in fixed income trading and lower market interest rates.

Commission revenue was relatively flat due to higher volume offset by changes in the mix of client trading activity.

Trading revenue decreased $443 million, or 12%, in 2023 compared to 2022, primarily due to lower options order flow revenue from changes in the mix of client trading activity and narrower quoted spreads in the options market, and lower equity order flow revenue reflecting a shift toward more low-price securities and lower equity trading activity overall.

1 unchanged sentence

Partially offsetting the decrease in 2023 compared to 2022, principal transactions revenue increased as a result of higher volume in clients’ fixed income trading and higher market interest rates.

Trading revenue decreased $479 million, or 12%, in 2022 compared to 2021, primarily due to lower client trading activity in 2022 relative to 2021, driven by the extraordinary trading volume experienced during the first quarter of 2021, as well as changes in the mix of client trading activity toward more ETFs and fewer single stocks, and toward more index options and futures and fewer single stock options.

These factors drove lower commissions and order flow revenue in 2022 relative to 2021.

Partially offsetting these decreases, principal transactions revenue increased as a result of higher volume in clients’ fixed income trading and higher market interest rates.

Bank Deposit Account Fees

1 unchanged sentence

These fees are affected by changes in interest rates and the composition of balances designated as fixed- and floating-rate obligation amounts.

THE CHARLES SCHWAB CORPORATION

Management’s Discussion and Analysis of Financial Condition and Results of Operations

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

The following table presents bank deposit account fee revenue, average BDA balances, average net yield, and average balances earning fixed- and floating-rate yields:

The following table presents bank deposit account fee revenue and related information:

Year Ended December 31, Percent Change

6 unchanged sentences

Floating-rate balances 14 % 8 % 21 %

In January 2023, the Company ended its arrangements with other third-party banks to simplify bank sweep operations ahead of the first TD Ameritrade client transition group in February 2023.

In addition, the FDIC implemented a 2-basis-point increase to the initial base deposit insurance assessment rate, which became effective for the first quarterly assessment period in 2023.

This increase in the FDIC’s deposit insurance assessment results in a decrease to bank deposit account fee revenue, dependent on BDA balance levels.

Bank deposit account fees decreased $704 million, or 50%, in 2023 compared to 2022.

The decrease was primarily due to lower average BDA balances, an increase in the amount paid to clients due to higher interest rates, and breakage fees of $97 million incurred during the first quarter of 2023 as a result of ending the other third-party bank arrangements.

These factors also contributed to the decrease in average net yield in 2023 compared to 2022.

Bank deposit account fees increased $24 million, or 3%, in 2024 compared to 2023.

This increase reflected the impact of breakage fees of $97 million incurred in 2023 as a result of ending other third-party bank arrangements and a decrease in the amount paid to clients due to interest rates declining in the third and fourth quarters of 2024, partially offset by lower average BDA balances.

The decrease in average BDA balances in 2024 compared to 2023 was primarily due to client cash allocation decisions in response to higher short-term market interest rates.

Average net yield increased in 2024 compared to 2023 due to the breakage fees incurred in 2023 and an increase in the average amount of and average net yield on floating-rate BDA balances, which was partially offset by a decrease in average net yield on fixed-rate BDA balances.

The percentages of BDA balances designated as fixed-rate and floating-rate obligation amounts as of December 31, 2024 were 76% and 24%, respectively.

Bank deposit account fees decreased by $704 million, or 50%, in 2023 compared to 2022.

The decrease was primarily due to lower average BDA balances, an increase in the amount paid to clients due to higher interest rates, and the breakage fees incurred in 2023.

These factors contributed to the decrease in average net yield in 2023 compared to 2022.

The decrease in average BDA balances in 2023 compared to 2022 was primarily due to client cash allocation decisions in response to rising short-term market interest rates throughout 2022 and through the first three quarters of 2023.

The percentages of BDA balances designated as fixed-rate and floating-rate obligation amounts as of December 31, 2023 were 86% and 14%, respectively.

Bank deposit account fees increased $94 million, or 7%, in 2022 compared to 2021.

This was primarily due to higher market interest rates, which helped to increase the average net yield in 2022.

The Company transferred net amounts of $21.0 billion and $10.6 billion of BDA balances to its balance sheet from the TD Depository Institutions and other third-party banks during 2022 and 2021, respectively.

The transfer of these balances to our balance sheet, as well as client cash allocation decisions in response to higher short-term market interest rates in 2022, led to the decrease in average BDA balances in 2022 compared to 2021.

The percentages of BDA balances designated as fixed-rate and floating-rate obligations as of December 31, 2022 were 87% and 13%, respectively.

THE CHARLES SCHWAB CORPORATION

Management’s Discussion and Analysis of Financial Condition and Results of Operations

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

Other Revenue

Other revenue includes exchange processing fees, certain service fees, other gains and losses from the sale of assets, and the provision for credit losses on bank loans.

Other revenue decreased $63 million, or 8%, in 2023 compared to 2022 primarily due to lower exchange processing fees, net losses on sales of AFS securities, and certain lower service fees, partially offset by lower provision for credit losses on bank loans.

Exchange processing fees decreased primarily due to a decrease in the SEC fee rate which became effective in the first quarter of 2023 and lower year-to-date options volume.

Other revenue includes industry fees (formerly referred to as exchange processing fees), certain service fees, other gains and losses from the sale of assets, and the provision for credit losses on bank loans.

Other revenue increased $34 million, or 5%, in 2024 compared to 2023 primarily due to higher industry fees and lower losses recognized on sales of AFS securities, partially offset by certain lower service and other fees and a smaller release from the provision for credit losses on bank loans.

Industry fees increased in 2024 due to higher average SEC fee rates in effect during 2024 compared to 2023.

Effective May 22, 2024, the SEC increased its fee rate applicable to most securities transactions from the rate in effect since late February 2023.

Other revenue decreased $63 million, or 8%, in 2023 compared to 2022 primarily due to lower industry fees, net losses on sales of AFS securities, and certain lower service and other fees, partially offset by lower provision for credit losses on bank loans.

Industry fees decreased primarily due to a decrease in the SEC fee rate which became effective in the first quarter of 2023 and lower year-to-date options volume.

The provision for credit losses on bank loans was lower as loan loss factors decreased while the total balance of First Mortgages increased slightly compared to year-end 2022.

2 unchanged sentences

and certain investments.

Other revenue increased $33 million, or 4%, in 2022 compared to 2021 primarily due to these gains and higher exchange processing fees, partially offset by a higher provision for credit losses on bank loans, certain lower service fees due to lower trading volume, and net losses on sales of AFS securities in 2022.

Exchange processing fees had increased in 2022 as a result of an SEC fee rate increase which became effective in the second quarter of 2022.

THE CHARLES SCHWAB CORPORATION

Management’s Discussion and Analysis of Financial Condition and Results of Operations

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

Total Expenses Excluding Interest

21 unchanged sentences

Average (9) % 32.3 35.4 34.7

Total expenses excluding interest increased $1.1 billion, or 10%, in 2023 from 2022, and $567 million, or 5%, in 2022 from 2021.

Total expenses excluding interest decreased $545 million, or 4%, in 2024 from 2023, and increased $1.1 billion, or 10%, in 2023 from 2022.

Adjusted total expenses, which excludes acquisition and integration-related costs, amortization of acquired intangible assets, and, beginning in the third quarter of 2023, restructuring costs, increased $240 million, or 2%, in 2024 from 2023 and $643 million, or 6%, in 2023 from 2022.

See Non-GAAP Financial Measures for further details and a reconciliation of such measures to GAAP reported results.

The Company began incurring restructuring costs in the third quarter of 2023 in connection with actions to streamline its operations to prepare for post-integration of TD Ameritrade (see below and Overview – Other for additional information).

The Company currently anticipates total expenses excluding interest in full-year 2024 will be generally consistent with full-year 2023 levels, except in regard to acquisition and integration-related costs and restructuring costs.

See Overview for additional information regarding these costs, and below for discussion of current and prior year results.

Total compensation and benefits increased in 2023 from 2022 due to restructuring costs recognized during the second half of 2023 related to position eliminations, higher average employee headcount to support TDA client account transitions, and annual merit increases, partially offset by lower incentive compensation.

The 2022 increase was a result of growth in employee headcount to support our expanding client base, annual merit increases, as well as a 5% employee salary increase and other targeted compensation adjustments that went into effect in late 2021.

Compensation and benefits included acquisition and integration-related costs of $187 million, $220 million, and $283 million in 2023, 2022, and 2021, respectively.

Compensation and benefits also included restructuring costs of $292 million in 2023.

Professional services expense slightly increased in 2023 from 2022, primarily due to increased utilization of professional services to support overall growth of the business.

The increase in 2022 from 2021 was primarily due to increased utilization of technology-related and other professional services to support overall growth of the business and enhancement to technological infrastructure to support our expanding client base, as well as the integration of TD Ameritrade.

Professional services included acquisition and integration-related costs of $135 million, $140 million, and $132 million in 2023, 2022, and 2021, respectively.

Occupancy and equipment expense increased in 2023 from 2022, and in 2022 from 2021, primarily due to an increase in software maintenance and other agreements as well as other technology equipment costs to support growth of the business and the integration of TD Ameritrade.

Occupancy and equipment included acquisition and integration-related costs of $28 million, $21 million, and $39 million in 2023, 2022, and 2021, respectively.

Occupancy and equipment also included restructuring costs of $17 million in 2023.

The overall decrease in expenses in 2024 reflected lower restructuring costs and lower acquisition and integration-related costs, as substantially all costs related to the Company’s restructuring were incurred in 2023, and spending for the Ameritrade integration decreased in 2024 as we completed final integration activities.

We currently anticipate total expenses excluding interest in full-year 2025 will increase approximately 3.5% to 4.5% from 2024, and adjusted total expenses in full-year 2025 will increase approximately 4.5% to 5.5%.

See Non-GAAP Financial Measures.

THE CHARLES SCHWAB CORPORATION

1 unchanged sentence

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

Advertising and market development expense decreased in 2023 from 2022, primarily as a result of lower advertising costs and lower client promotional spending for TD Ameritrade.

The decrease in 2022 from 2021 was also primarily due to lower spending for marketing communications for TD Ameritrade.

Communications expense increased in 2023 compared to 2022, primarily as a result of client communications related to TDA account transitions completed during 2023.

Communications expense was flat in 2022 compared to 2021.

Depreciation and amortization expense increased in 2023 from 2022, and in 2022 from 2021, primarily as a result of higher amortization of purchased and internally developed software and higher depreciation of hardware, driven by capital expenditures to support the TDA integration and enhance our technological infrastructure to support growth of the business.

Amortization of acquired intangible assets decreased in 2023 from 2022, and in 2022 from 2021, as certain assets from the TDA acquisition were fully amortized by the beginning of the fourth quarter of 2022.

Regulatory fees and assessments increased in 2023 from 2022, primarily as a result of an FDIC special assessment of $172 million recorded during the fourth quarter of 2023 and higher FDIC deposit insurance assessments during 2023, reflecting greater use of brokered CDs and a 2-basis point increase to the FDIC deposit insurance assessment rate, which became effective for the first quarterly assessment period in 2023.

Total compensation and benefits decreased in 2024 from 2023 primarily due to restructuring costs recognized in 2023, as well as lower headcount as a result of position eliminations from the restructuring and Ameritrade integration.

These decreases were partially offset by higher incentive compensation and annual merit increases.

The 2023 increase was a result of restructuring costs recognized during the second half of 2023 related to position eliminations, higher average employee headcount to support Ameritrade client account transitions, and annual merit increases, partially offset by lower incentive compensation.

Compensation and benefits included acquisition and integration-related costs of $54 million, $187 million, and $220 million in 2024, 2023, and 2022, respectively.

Compensation and benefits also included a $34 million benefit in 2024, due to a change in estimated restructuring costs, and included restructuring costs of $292 million in 2023 .

Professional services expense remained consistent in 2024 compared to 2023.

The increase in 2023 from 2022 was primarily due to increased utilization of professional services to support overall growth of the business.

Professional services included acquisition and integration-related costs of $36 million, $135 million, and $140 million in 2024, 2023, and 2022, respectively.

Occupancy and equipment expense decreased in 2024 from 2023, due to lower technology equipment and software costs, lower property tax expense, and lower occupancy costs as a result of facility closures in 2023 related to restructuring and the Ameritrade integration.

The increase in 2023 from 2022 was primarily due to an increase in software maintenance and other agreements as well as other technology equipment costs to support growth of the business and the integration of Ameritrade.

Occupancy and equipment included restructuring costs of $5 million and $17 million in 2024 and 2023, respectively, and acquisition and integration-related costs of $28 million and $21 million in 2023 and 2022, respectively.

Advertising and market development expense remained consistent in 2024 compared to 2023, as higher client promotional spending was offset by lower spending on digital advertising.

The decrease in 2023 from 2022 was primarily a result of lower advertising costs and lower client promotional spending for Ameritrade.

Communications expense decreased in 2024 compared to 2023, due to lower exchange quotation services expenses.

The increase in 2023 compared to 2022 was primarily as a result of client communications related to Ameritrade account transitions completed during 2023.

Depreciation and amortization expense increased in 2024 from 2023, and in 2023 from 2022, primarily as a result of higher amortization of purchased and internally developed software and higher depreciation of hardware, driven by capital expenditures to support growth of the business and, in 2023, to support the Ameritrade integration.

Amortization of acquired intangible assets decreased in 2024 from 2023, and in 2023 from 2022, primarily as certain assets from the Ameritrade acquisition were fully amortized during 2023 and 2022.

Regulatory fees and assessments decreased in 2024 from 2023, primarily due to a $172 million FDIC special assessment recorded during the fourth quarter of 2023, partially offset by $30 million of incremental FDIC special assessments in 2024.

The increase in 2023 from 2022 was primarily as a result of the FDIC special assessment described above and higher FDIC deposit insurance assessments during 2023, reflecting greater use of brokered CDs and a 2-basis point increase to the FDIC deposit insurance assessment rate, which became effective for the first quarterly assessment period in 2023.

These increases were partially offset by a lower assessment base.

See Current Regulatory and Other Developments for discussion of the FDIC special assessment.

The decrease in 2022 from 2021 was primarily due to lower client trading activity, partially offset by higher FDIC assessments and other regulatory assessments due to year-over-year average asset growth and overall growth of the business.

Other expense increased in 2023 from 2022, primarily due to impairment charges in 2023 related to closing certain leased corporate offices for restructuring and TDA integration.

The decrease in 2022 from 2021 was primarily due to the recognition of a charge of approximately $200 million in 2021 for a regulatory matter settled in 2022, partially offset by higher exchange processing fees as a result of fee rate increases beginning in the second quarter of 2022 and also higher clearing charges.

Other expense included acquisition and integration-related costs of $27 million and restructuring costs of $181 million in 2023.

See Current Regulatory and Other Developments for discussion of the FDIC special assessments.

Other expense increased in 2024 from 2023, primarily due to higher industry fees, partially offset by impairment charges recorded in 2023 related to restructuring.

Industry fees increased primarily due to higher average SEC fee rates in effect during 2024 compared to 2023.

Effective May 22, 2024, the SEC increased its fee rate applicable to most securities transactions from the rate in effect since late February 2023.

The increase in other expense in 2023 from 2022 was primarily due to impairment charges in 2023 related to closing certain leased corporate offices for restructuring and Ameritrade integration.

Other expense included restructuring costs of $37 million and $181 million in 2024 and 2023, respectively, and acquisition and integration-related costs of $27 million in 2023.

Capital expenditures primarily include capitalized software costs, information technology and telecommunications equipment, and buildings.

Total capital expenditures were $607 million, $804 million, and $952 million in 2024, 2023, and 2022, respectively.

Capital expenditures decreased 16% in 2023 compared to 2022, as lower capitalized information technology equipment and buildings more than offset an increase in capitalized software costs.

We continued to invest in our technological infrastructure in 2023 to support the TDA integration as well as greater capacity for our expanding client base.

Capital expenditures decreased in 2022 compared to 2021, as higher capitalized software costs were offset by lower building expansion and capitalized information technology equipment.

Capital expenditures were 4.3% of total net revenues in 2023, slightly above our estimated range for the year.

As we complete the TDA client transitions and the rest of the integration in 2024, we anticipate capital expenditures for the year to be within our longer term expectation of 3-5% of total net revenues.

Capital expenditures decreased 25% in 2024 compared to 2023, primarily due to lower purchased and internally developed software as we completed Ameritrade client account transitions in the second quarter of 2024 and completed the Ameritrade integration, partially offset by higher investment in buildings.

Capital expenditures decreased in 2023 compared to 2022, as lower capitalized information technology equipment and buildings more than offset an increase in capitalized software

THE CHARLES SCHWAB CORPORATION

Management’s Discussion and Analysis of Financial Condition and Results of Operations

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

We continued to invest in our technological infrastructure in 2023 to support the Ameritrade integration as well as greater capacity for our expanding client base.

Capital expenditures were 3.1% of total net revenues in 2024, within our estimated range for the year.

We anticipate capital expenditures for 2025 to be within our longer term expectation of 3-5% of total net revenues.

Taxes on Income

Schwab’s effective income tax rate on income before taxes was 22.8% in 2024, 20.6% in 2023, and 23.5% in 2022.

The decrease in the effective tax rate in 2023 from 2022 was primarily related to a decrease in state tax expense and the recognition of certain tax credits in 2023, partially offset by an increase in non-deductible FDIC deposit insurance assessments and a decrease in equity compensation tax deduction benefits.

The decrease in the effective tax rate in 2022 from 2021 was primarily related to reversal of tax reserves in 2022 due to the resolution of certain state tax matters and tax benefits recognized on the portion of the 2021 charge for a regulatory matter settled in 2022 that was determined upon final settlement to be deductible.

Partially offsetting the decreases in the effective tax rate from these items was a decrease in equity compensation tax deduction benefits, higher state income tax rates, and an increase in non-deductible compensation in 2022.

The increase in the effective tax rate in 2024 from 2023 was primarily due to an increase in state tax expense and the recognition of certain tax credits during 2023, partially offset by additional tax credits recognized and the reversal of tax reserves due to the resolution of certain state tax matters during 2024.

The decrease in the effective tax rate in 2023 from 2022 was primarily due to a decrease in state tax expense and the recognition of certain tax credits in 2023, partially offset by an increase in non-deductible FDIC deposit insurance assessments and a decrease in equity compensation tax deduction benefits.

Segment Information

3 unchanged sentences

Net revenues in both segments are generated from the underlying client assets and trading activity;

differences in the composition of net revenues between the segments are based on

differences in the composition of net revenues between the segments are based on the composition of client assets, client trading frequency, and pricing unique to each.

While both segments leverage the scale and efficiency of our platforms, segment expenses reflect the dynamics of serving millions of clients in Investor Services versus the thousands of RIAs on the Advisor Services platform.

See Item 8 – Note 25 for additional segment information.

THE CHARLES SCHWAB CORPORATION

1 unchanged sentence

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

the composition of client assets, client trading frequency, and pricing unique to each.

Financial information for our segments is presented in the following table (1) :

9 unchanged sentences

Trading revenue 3% 2,895 2,821 3,196 (10)% 369 409 477 1% 3,264 3,230 3,673

Bank deposit account

fees (43)% 524 916 964 (63)% 181 493 351 (50)% 705 1,409 1,315

Bank deposit account fees

4% 568 546 952 1% 161 159 457 3% 729 705 1,409

Other 6% 632 598 621 — 121 121 161 5% 753 719 782

Total net revenues 6% 15,558 14,650 15,846 (3)% 4,048 4,187 4,916 4% 19,606 18,837 20,762

Expenses Excluding

Interest 8% 9,217 8,514 8,289 13% 3,242 2,860 2,518 10% 12,459 11,374 10,807

Expenses Excluding Interest

Compensation and

benefits (3)% 4,656 4,779 4,551 (10)% 1,387 1,536 1,385 (4)% 6,043 6,315 5,936

Professional services 1% 834 824 809 (6)% 219 234 223 — 1,053 1,058 1,032

Occupancy and equipment (13)% 823 951 889 (22)% 237 303 286 (15)% 1,060 1,254 1,175

Advertising and market

development (14)% 256 296 316 40% 141 101 103 — 397 397 419

Communications (6)% 415 441 411 (6)% 176 188 177 (6)% 591 629 588

Depreciation and

amortization 18% 716 609 483 3% 200 195 169 14% 916 804 652

Amortization of acquired

intangible assets (1)% 445 449 489 (13)% 74 85 107 (3)% 519 534 596

Regulatory fees and

assessments (20)% 311 387 197 (46)% 87 160 65 (27)% 398 547 262

Other 11% 782 703 568 (29)% 155 218 146 2% 937 921 714

Total expenses

excluding interest (2)% 9,238 9,439 8,713 (11)% 2,676 3,020 2,661 (4)% 11,914 12,459 11,374

Income before taxes

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(11)% $ 161.1 $ 181.3 $192.9 29% $ 200.5 $ 155.9 $ 214.0 7% $ 361.6 $ 337.2 $ 406.9

(1) In connection with certain changes in Schwab’s organizational management structure, in the fourth quarter of 2024, the Retirement Business Services business unit was transferred from the Advisor Services segment to the Investor Services segment.

Accordingly, amounts related to the Retirement Business Services business unit are included within Investor Services for full-year 2024, and prior-year amounts have been recast to reflect this new basis of segmentation.

(2) In 2024, Investor Services includes net outflows of $14.6 billion from off-platform brokered CDs issued by CSB, an inflow of $10.3 billion from a mutual fund clearing services client, and outflows of $0.7 billion from an international relationship.

In 2023, Investor Services includes net inflows of $32.5 billion from off-platform brokered CDs issued by CSB, inflows of $12.0 billion from a mutual fund clearing services client, and outflows of $5.8 billion from an international relationship.

In 2022 and 2021, Investor Services includes outflows of $20.8 billion and $42.0 billion, respectively, from mutual fund clearing services clients.

In 2023, Advisor Services includes outflows of $7.2 billion from an international relationship.

In 2022, Investor Services includes outflows of $20.8 billion from mutual fund clearing services clients.

In 2024 and 2023, Advisor Services includes outflows of $0.3 billion and $7.2 billion, respectively, from an international relationship.

Segment Net Revenues

Investor Services total net revenues increased by 6% in 2024 compared to 2023.

Net interest revenue increased for Investor Services primarily due to growth of margin lending and lower average balances of FHLB borrowings, partially offset by lower average interest-earning assets and higher average rates paid on most funding sources.

Trading revenue increased for Investor Services due to higher order flow revenue as a result of increased trading volumes and changes in the mix of trading activity.

Other revenue increased for Investor Services primarily due to higher industry fees and lower losses recognized on sales of AFS securities.

Advisor Services total net revenues decreased by 3% in 2024 compared to 2023.

Net interest revenue decreased for Advisor Services primarily as a result of lower average interest-earning assets and higher average rates paid on most funding sources, partially offset by lower average balances of FHLB borrowings, and trading revenue decreased for Advisor Services, primarily due to lower order flow revenue as a result of changes in the mix of client trading activity.

Asset management and administration fees increased for both segments, primarily as a result of higher balances in money market funds and Mutual Fund OneSource, and, additionally for Investor Services, fee-based managed investing solutions.

Additionally, bank deposit account fees increased for both segments, primarily due to breakage fees incurred that resulted in lower bank deposit account fee revenue in 2023, partially offset by lower BDA balances.

Investor Services and Advisor Services total net revenues decreased by 8% and 15%, respectively, in 2023 compared to 2022.

Net interest revenue decreased for both segments due to higher-cost funding sources and lower average interest-earning asset balances, as described above.

Both segments saw a decrease in bank deposit account fees due to lower average BDA balances and higher yields paid to clients, as well as breakage fees incurred as a result of ending certain third-party bank arrangements.

Both segments saw a decrease in bank deposit account fees due to lower average BDA balances

THE CHARLES SCHWAB CORPORATION

Management’s Discussion and Analysis of Financial Condition and Results of Operations

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

and higher yields paid to clients, as well as breakage fees incurred as a result of ending certain third-party bank arrangements.

Trading revenue decreased for both segments, primarily as a result of lower order flow revenue and commissions, due to lower client trading activity and pricing, partially offset by higher fixed income trading activity.

Other revenue decreased for both segments primarily due to lower exchange processing fees, net losses on sales of AFS securities, and gains on the sale of certain investments in 2022, partially offset by lower provision for credit losses on bank loans.

Other revenue decreased for both segments primarily due to lower industry fees, net losses on sales of AFS securities, and gains on the sale of certain investments in 2022, partially offset by lower provision for credit losses on bank loans.

These decreases were partially offset by higher asset management and administration fees in both segments, primarily as a result of higher money market fund balances and the elimination of money market fund fee waivers during 2022 and growth in Schwab proprietary fund products, partially offset by lower balances in certain third-party funds.

Investor Services and Advisor Services total net revenues increased by 8% and 28%, respectively, in 2022 compared to 2021.

Investor Services growth was primarily driven by increases in net interest revenue as described above, partially offset by decreases in trading revenue due to lower client trading activity and changes in the mix of trading activity, resulting in lower commissions and order flow revenue, and a decrease in bank deposit account fees.

Advisor Services growth was primarily driven by increases in net interest revenue as described above, as well as increases in trading revenue primarily due to higher trading volume amid market volatility and bank deposit account fees primarily due to a rising interest rate environment.

Asset management and administration fees were essentially flat for Advisor Services, while declining slightly for Investor Services as equity market weakness during 2022 weighed on client asset valuations, partially offset by the elimination of money market fund fee waivers.

Other revenues increased for Investor Services in 2022 from 2021 due to higher exchange processing fees, partially offset by a higher provision for credit losses on bank loans, certain lower service fees, and lower net gains on sales of AFS securities.

Segment Expenses Excluding Interest

Investor Services and Advisor Services total expenses excluding interest decreased 2% and 11%, respectively, in 2024 compared to 2023.

Compensation and benefits expense decreased in both segments, primarily due to restructuring costs recognized in 2023 and lower headcount as a result of position eliminations, partially offset by higher incentive compensation and annual merit increases.

Occupancy and equipment expense decreased in both segments, primarily due to lower technology equipment and software costs, lower property tax expense, and facility closures in 2023 related to restructuring and the Ameritrade integration.

For Investor Services, depreciation and amortization expense increased, primarily due to higher amortization of purchased and internally developed software, driven by capital expenditures in 2023 and 2024 to enhance our technological infrastructure to support growth of the business.

Regulatory fees and assessments decreased in both segments in 2024, primarily due to an FDIC special assessment recorded during the fourth quarter of 2023, partially offset by additional FDIC special assessments in 2024, as described above.

Other expense increased for Investor Services primarily due to higher industry fees, partially offset by impairment charges recorded in 2023 related to restructuring.

Other expense decreased for Advisor Services primarily due to impairment charges recorded in 2023 related to restructuring and lower clearing charges.

Investor Services and Advisor Services total expenses excluding interest increased by 8% and 13%, respectively, in 2023 compared to 2022.

Both segments saw higher compensation and benefits expenses due to restructuring costs recognized in the

THE CHARLES SCHWAB CORPORATION

Management’s Discussion and Analysis of Financial Condition and Results of Operations

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

second half of 2023, higher average headcount to support TDA client account transitions, and annual merit increases, partially offset by lower incentive compensation.

Both segments saw higher compensation and benefits expenses due to restructuring costs recognized in the second half of 2023, higher average headcount to support Ameritrade client account transitions, and annual merit increases, partially offset by lower incentive compensation.

Regulatory fees and assessments increased in both segments, primarily due to an FDIC special assessment recorded during the fourth quarter of 2023 and higher FDIC deposit insurance assessments as described above.

Other expenses were also higher for both segments, primarily driven by impairment of certain leased corporate offices related to restructuring and TDA integration.

Depreciation and amortization increased for both segments primarily due to higher amortization of purchased and internally developed software and higher depreciation of hardware, driven by capital expenditures in 2022 and 2023 to enhance our technological infrastructure to support the TDA integration and growth of the business.

Investor Services and Advisor Services total expenses excluding interest increased by 3% and 14%, respectively, in 2022 compared to 2021.

Both segments saw higher compensation and benefits expenses due to increases in headcount to support our expanding client base, annual merit increases, as well as a 5% employee salary increase and other targeted compensation adjustments that went into effect in late 2021.

Occupancy and equipment expenses increased in both segments, primarily due to an increase in software maintenance and other agreements as well as other technology equipment costs to support growth of the business and the integration of TD Ameritrade.

In addition, depreciation and amortization increased for both segments primarily due to higher amortization of purchased and internally developed software and higher depreciation of hardware, driven by capital expenditures in 2022 and 2021 to enhance our technological infrastructure to support growth of the business.

For Investor Services, these increases were partially offset by lower other expenses due to a charge of approximately $200 million in 2021 for a regulatory matter settled in 2022, partially offset by higher exchange fees and clearing charges, and lower advertising and market development expense due to reduced spending for marketing communications for TD Ameritrade.

Other expenses were also higher for both segments, primarily driven by impairment of certain leased corporate offices related to restructuring and Ameritrade integration.

RISK MANAGEMENT

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The Company’s “Through Clients’ Eyes” strategy guides our actions and behaviors at Schwab, and informs our corporate culture, our risk appetite, and approach to risk management.

Schwab is committed to the highest standards of ethical conduct and compliance with applicable laws, rules, and regulations, and our Code of Business Conduct and Ethics outlines the ethical conduct that we must demonstrate to deliver our strategy while retaining the trust of our stakeholders.

As part of our integration of TD Ameritrade, the Company has aligned TD Ameritrade’s risk management practices with Schwab’s risk appetite.

Our integration work included evaluating new or changed risks impacting the combined company and taking action through various means.

Though integration work continues, the Company’s operations, inclusive of TD Ameritrade, remain consistent with our ERM Framework.

Risk Governance

Schwab maintains an integrated risk governance structure that directs Company-wide execution of the risk management process.

The risk governance structure includes the Board of Directors, designated committees of the Board, and management risk committees.

Schwab is committed to the highest standards of ethical conduct and

THE CHARLES SCHWAB CORPORATION

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compliance with applicable laws, rules, and regulations, and our Code of Business Conduct and Ethics outlines the ethical conduct that we must demonstrate to deliver our strategy while retaining the trust of our stakeholders.

Risk Governance

Schwab maintains an integrated risk governance structure that directs Company-wide execution of the risk management process.

The risk governance structure includes the Board of Directors, designated committees of the Board, and management risk committees.

CSC’s Board of Directors sets the tone and culture of effective risk management.

The Board has a Risk Committee that assists the Board in setting the type and level of risks that the Company is willing to take and supports the independence and stature of independent risk management.

The Board Risk Committee also assists the Board in overseeing and holding senior management accountable for implementing the Board’s approved risk tolerance, maintaining the Company’s risk management and control program, and managing the Company’s activities in a safe and sound manner, and in compliance with applicable laws and regulations.

The Board Risk Committee also approves risk appetite statements and related key risk appetite metrics, key risk policies, and reviews reports relating to risk issues from functional areas of corporate risk management, legal, and internal audit.

The Board Risk Committee also assists the Board in overseeing and holding senior management accountable for implementing the Board’s approved risk appetite, maintaining the Company’s risk management and control processes, and managing the Company’s activities in a safe and sound manner, and in compliance with applicable laws and regulations.

The Board Risk Committee also approves risk appetite statements and related key risk appetite metrics, key risk policies, and reviews information relating to risk issues from functional areas of corporate risk management, legal, and internal audit.

The Audit Committee of the Board of Directors assists the Board in fulfilling its oversight responsibilities by reviewing the integrity of the Company’s financial statements and financial reporting processes, the qualifications and independence of the independent auditors and performance of the Company’s internal audit function and independent auditors, compliance with legal and regulatory requirements, processes to assess and manage risk exposures, and other matters as directed by the Board.

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Senior management takes an active role in the risk management process and has developed policies and procedures under which specific business and control units are responsible for risk identification and assessment, risk response, risk measurement and monitoring, and risk reporting and escalation.

The Global Risk Committee, which is comprised of senior executives from each major business and control function, is responsible for the oversight of risk management.

The Global Risk Committee, which is comprised of senior executives from each client enterprise and support function, is responsible for the oversight of risk management.

This includes identifying emerging risks, assessing risk management practices and the control environment, reinforcing business accountability for risk management, supervisory controls and regulatory compliance, supporting resource prioritization across the organization, and escalating significant issues to the Board of Directors.

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• New Products and Services Risk Oversight Committee – provides oversight of, and approves new products, including the policy, program, and process designed to oversee new products and services risks prior to and post launch.

Senior management has also created an Incentive Compensation Risk Oversight Committee to provide oversight of incentive compensation risks and achieve sound incentive compensation risk management practices;

Senior management created the Incentive Compensation Risk Oversight Committee to provide oversight of incentive compensation risks and achieve sound incentive compensation risk management practices;

it reports directly to the Compensation Committee of the Board of Directors.

The Company’s finance, internal audit, legal, and corporate risk management departments assist management and the various risk committees in evaluating, testing, and monitoring risk management.

In addition, the Disclosure Committee is responsible for monitoring and evaluating the effectiveness of our disclosure controls and procedures and internal control over financial reporting as of the end of each fiscal quarter.

The Disclosure Committee reports on this evaluation to the CEO and CFO prior to their certification required by Sections 302 and 906 of the Sarbanes Oxley Act of 2002.

THE CHARLES SCHWAB CORPORATION

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The Company’s finance, internal audit, legal, and corporate risk management departments assist management and the various risk committees in evaluating, testing, and monitoring risk management.

The Disclosure Committee reports on this evaluation to the CEO and CFO prior to their certification required by Sections 302 and 906 of the Sarbanes Oxley Act of 2002.

Operational Risk

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Fraud risk arises from attempted or actual theft of financial assets or other property of any client or the Company.

Fraud risk includes internal fraud, or the risk arising from personnel attempting or committing theft of financial assets or other property of any client or the Company.

Schwab is committed to protecting the Company’s and its clients’ assets from fraud and complying with all applicable laws and regulations to prevent, detect, and report fraudulent activity.

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Model uses at Schwab include, but are not limited to, calculating capital requirements for hypothetical stressful environments, estimating interest and credit risk for loans and other balance sheet assets, identifying and preventing fraud and other financial crimes, and providing guidance in the management of client portfolios.

Schwab has established a policy that aligns with regulatory guidance to describe the roles and responsibilities of all key stakeholders in model development, management, and use.

Schwab registers models in a centralized database, performs risk assessment of models based on their potential financial, reputational, or regulatory impact to the Company.

The model risk rating determines the scope of model governance activities such as independent model validations, model annual reviews, and model performance monitoring.

Schwab manages model risk, including use of artificial intelligence, through use of policies, standards, and controls which evaluate the conceptual and technical soundness of models used by the Company.

We maintain a model inventory that includes a distinct record and risk rating for each model, and we conduct independent validations, annual reviews, and performance monitoring of the Company’s models.

Compliance Risk

Schwab faces compliance risk which is the potential exposure to legal or regulatory sanctions, fines or penalties, financial loss, or damage to reputation resulting from the failure to comply with laws, regulations, rules, or other regulatory requirements.

Among other things, compliance risks relate to the suitability of client investments, conflicts of interest, disclosure obligations and performance expectations for products and services, supervision of employees, and the adequacy of our controls.

The Company and its affiliates are subject to extensive regulation by federal, state and foreign regulatory authorities, including SROs.

We manage compliance risk through policies, procedures, and controls reasonably designed to achieve and/or monitor compliance with applicable legal and regulatory requirements.

These procedures address issues such as conduct and ethics, sales and trading practices, marketing and communications, extension of credit, client funds and securities, books and records, anti-money laundering, privacy, and employment policies.

Among other things, compliance risks relate to the suitability of client investments, consumer protection, conflicts of interest, disclosure obligations and performance expectations for products and services, supervision of employees, the retention of

THE CHARLES SCHWAB CORPORATION

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required records, and the adequacy of our controls.

The Company and its affiliates are subject to extensive regulation by federal, state, and foreign regulatory authorities, including SROs.

We manage compliance risk through policies, procedures, and controls reasonably designed to achieve and/or monitor compliance with applicable legal and regulatory requirements.

Privacy risk is the risk of unauthorized collection, use, storage, or sharing of personal information, including data incidents and other mismanagement of personal information.

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Our exposure to credit risk mainly results from investing activities in our liquidity and investment portfolios, mortgage lending, margin lending and client option and futures activities, pledged asset lending, securities lending activities, and our role as a counterparty in other financial contracts.

To manage the risks of such losses, we have established policies and procedures, which include setting and reviewing credit limits, monitoring of credit limits and quality of counterparties, and adjusting margin, PAL, option, and futures requirements for certain securities and instruments.

To manage the risks of such losses, we have established policies and procedures, which include setting and reviewing credit limits, monitoring credit limits and quality of counterparties, and adjusting margin, PAL, option, and futures requirements for certain securities and instruments.

Liquidity and Investment Portfolios

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government-sponsored enterprises.

THE CHARLES SCHWAB CORPORATION

Management’s Discussion and Analysis of Financial Condition and Results of Operations

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

Mortgage Lending Portfolio

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All are factors in the determination of an appropriate allowance for credit losses.

THE CHARLES SCHWAB CORPORATION

Management’s Discussion and Analysis of Financial Condition and Results of Operations

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

Our residential loan underwriting guidelines include maximum LTV ratios, cash out limits, and minimum Fair Isaac Corporation (FICO) credit scores.

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Management monitors established guidelines to stay within the Company’s risk appetite.

In 2023, the Company began to utilize interest rate swap derivative instruments to assist with managing interest rate risk, the effects of which are incorporated into the Company’s net interest revenue and EVE analyses.

The Company utilizes interest rate swap derivative instruments to assist with managing interest rate risk, the effects of which are incorporated into the Company’s net interest revenue and EVE analyses.

For further information on our interest rate risk management strategies utilizing interest rate swaps, see Item 8 – Note 17.

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Fluctuations in these client asset balances caused by changes in equity valuations directly impact the amount of fee revenue we earn.

Our market risk related to financial instruments held for trading is not material.

Net Interest Revenue Simulation

For our net interest revenue sensitivity analysis, we use net interest revenue simulation modeling techniques to evaluate and manage the effect of changing interest rates.

The simulations include all balance sheet interest rate-sensitive assets and

THE CHARLES SCHWAB CORPORATION

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liabilities, and include derivative instruments.

Our market risk related to financial instruments held for trading is not material.

Net Interest Revenue Simulation

For our net interest revenue sensitivity analysis, we use net interest revenue simulation modeling techniques to evaluate and manage the effect of changing interest rates.

The simulations include all balance sheet interest rate-sensitive assets and liabilities, and include derivative instruments.

Key assumptions include the projection of interest rate scenarios with rate floors, rates and balances of non-maturity client cash held on the balance sheet, prepayment speeds of mortgage-related investments, repricing of financial instruments, and reinvestment of matured or paid-down securities and loans.

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Fixed income analytical vendors provide term structure models, prepayment speed models for mortgage-backed securities and mortgage loans, and cash flow projections based on interest income, contractual maturities, and prepayments.

Consistent with our policies related to the management of interest rate risk, the Company’s net interest revenue sensitivity analysis primarily involves gradual parallel increases/decreases in interest rates over a twelve-month period, though we also regularly simulate the effects of non-parallel shifts and instantaneous shifts of interest rates on net interest revenue.

The Company’s net interest revenue sensitivity analyses utilize gradual parallel increases/decreases in interest rates over a twelve-month period, though we also regularly simulate the effects of non-parallel shifts and instantaneous shifts of interest rates on net interest revenue.

Net interest revenue is affected by various factors, such as the distribution and composition of interest-earning assets and interest-bearing liabilities, the spread between yields earned on interest-earning assets and rates paid on interest-bearing liabilities, which may reprice at different times or by different amounts, and the spread between short- and long-term interest rates.

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Higher prevailing short-term interest rates generally improve yields on shorter duration interest-earning assets.

During periods of rapidly rising interest rates, clients tend to reallocate cash out of sweep products into higher-yielding, off-balance sheet, fixed income securities and money market funds within Schwab’s product offerings.

This can result in lower interest-earning assets and/or may require replacement funding with higher funding costs, which therefore tend to constrain net interest revenue when interest rates are moving rapidly higher.

A decline in short-term interest rates could also negatively impact the yield on the Company’s investment and loan portfolios to a greater degree than any offsetting reduction in interest expense from funding sources, compressing net interest margin.

Net interest revenue sensitivity analysis assumes the asset and liability structure of the consolidated balance sheet would not be changed as a result of the simulated changes in interest rates.

During periods of rapidly rising interest rates, clients tend to reallocate cash out of sweep products into higher-yielding, off-balance sheet, fixed income investments and money market funds within Schwab’s product offerings.

This can result in lower interest-earning assets and/or may require supplemental funding with higher funding costs, which therefore tend to constrain net interest revenue when interest rates are moving rapidly higher.

A decline in short-term interest rates could negatively impact the yield on the Company’s investment and loan portfolios to a greater degree than any offsetting reduction in interest expense from funding sources, compressing net interest margin.

Net interest revenue sensitivity analyses assume both static and dynamically-sized balance sheet composition.

Statically-sized balance sheet modeling assumes the asset and liability structure of the consolidated balance sheet would not be changed as a result of the simulated changes in interest rates.

While this approach is useful to isolate the impact of changes in interest rates on a statically-sized asset and liability structure, it does not capture changes to client cash allocations.

We conduct simulations on EVE to capture the impact of client cash allocation changes on our balance sheet.

We therefore also conduct dynamically-sized balance sheet compositions as a function of interest rates.

Dynamic net interest revenue simulations assume deposit and client credit balance runoff is supplemented with wholesale borrowing when needed to fund assets through the simulation horizon.

We also conduct similar simulations on EVE to capture the impact of client cash allocation changes on our balance sheet.

As we actively manage the consolidated balance sheet and interest rate exposure, we have taken and would typically seek to take steps to manage additional interest rate exposure that could result from changes in the interest rate environment.

As part of the Company’s ongoing evaluation of its modeling, in the fourth quarter of 2023, the Company updated deposit beta assumptions in a declining market interest rate environment for its net interest revenue simulation model.

The following table shows simulated changes to net interest revenue over the next 12 months beginning December 31, 2023 and 2022 of a gradual increase or decrease in market interest rates relative to prevailing market rates at the end of each reporting period:

The following table assumes a statically-sized balance sheet with simulated changes to net interest revenue over the next 12 months beginning December 31, 2024 and 2023 of a gradual increase or decrease in market interest rates relative to prevailing market rates at the end of each reporting period:

December 31, 2024 2023

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(9.3)% (4.2)%

(1) Reflects the impact of the assumption updates implemented in the fourth quarter of 2023.

The prior period has not been recast.

The Company’s simulated incremental increases in market interest rates had a larger impact on net interest revenue as of December 31, 2023 compared to December 31, 2022 primarily due to higher margin loan and cash balances, which was partially offset by an increased allocation to FHLB borrowings and other short-term borrowings across the Company’s banking subsidiaries.

In the absence of the assumption updates, simulated decreases of 50, 100, and 200 basis points as of December 31, 2023 would have reduced net interest revenue by 1.7%, 3.8%, and 8.3%, respectively.

Simulated incremental decreases in market interest rates had a lesser impact on net interest revenue as of December 31, 2023 compared to December 31, 2022 due primarily to the change in assumptions for deposit betas, which, along with a lower rate environment, drove greater expense

THE CHARLES SCHWAB CORPORATION

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savings across non-maturity deposits and an increased allocation to shorter-term liabilities, partially offset by higher concentrations of margin loan and cash balances.

The Company’s simulated incremental increases in market interest rates had a smaller impact on net interest revenue as of December 31, 2024 compared to December 31, 2023, reflecting the impacts of hedging fixed-to-floating rate Senior Notes with receive-fixed-pay-floating interest rate swaps, resulting in higher interest expense in a higher rate environment, and lower cash balances held, partially offset by the benefit of a decreased allocation to shorter-term liabilities, which reduces interest expense in a higher rate environment.

The Company’s simulated incremental decreases in market interest rates had a larger impact on net interest revenue as of December 31, 2024 compared to December 31, 2023, primarily due to lower non-maturity deposit rates and a decreased allocation to shorter-term liabilities, both of which reduce interest expense savings in a lower rate environment, partially offset by interest expense savings from hedging fixed-to-floating rate Senior Notes.

Effective Duration

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The Company’s liability duration is impacted by the composition of funding sources, and typically decreases in periods of rising market interest rates and increases in periods of declining market interest rates.

The Company’s estimated effective duration of consolidated total assets was approximately 2.4 years at December 31, 2023 (inclusive of the impact of derivative instruments) and 2.6 years at December 31, 2022.

The estimated effective duration of our AFS investment securities portfolio was approximately 2.5 years (2.2 years inclusive of the impact of derivative instruments) as of December 31, 2023 and 2.4 years as of December 31, 2022.

The estimated effective duration for the Company’s total AFS and HTM investment securities portfolio was approximately 4.0 years as of both December 31, 2023 and 2022 (3.9 years inclusive of the impact of derivative instruments on AFS securities as of December 31, 2023).

The Company also utilizes derivative hedging instruments such as interest rate swaps in managing its asset and liability duration.

The following table presents the Company’s estimated effective durations, which reflects anticipated future payments, by category:

December 31, 2024 December 31, 2023

Estimated effective duration, exclusive of derivatives:

Consolidated total assets 2.1 2.5

AFS investment securities portfolio 2.3 2.5

AFS and HTM investment securities portfolio 3.9 4.0

Long-term debt CSC Senior Notes (2)

Estimated effective duration, inclusive of derivatives (1) :

Consolidated total assets 2.0 2.4

AFS investment securities portfolio 1.8 2.2

AFS and HTM investment securities portfolio 3.7 3.9

Long-term debt CSC Senior Notes (2)

(1) See Item 8 – Note 17 for additional discussion on the Company’s derivatives.

(2) In the fourth quarter of 2024, Schwab executed $15.0 billion of receive-fixed swaps on CSC’s Senior Notes to reduce interest expense exposure in a lower interest rate environment.

AFS and HTM securities comprised approximately 48% and 54% of the Company’s consolidated total assets as of December 31, 2024 and 2023, respectively.

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We develop and maintain client credits and deposits run-off models internally based on historical experience and prevailing client cash realignment behaviors.

We rely on third-party models for term structure modeling, prepayment speed modeling for mortgage-backed securities and mortgage loans, and cash flow projections based on interest income, contractual maturities, and prepayments.

As interest rates rose throughout 2023, EVE sensitivity generally trended higher due to a shortening of liability duration.

While the Company’s asset duration remained largely stable during the period of rising interest rates, liability duration shortened significantly and is now shorter than asset duration.

We rely on third-party models for interest rate term structure modeling, prepayment speed modeling for mortgage-backed securities and mortgage loans, and cash flow projections based on interest income, and contractual maturities.

THE CHARLES SCHWAB CORPORATION

Management’s Discussion and Analysis of Financial Condition and Results of Operations

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

Schwab’s EVE profile is characterized by a more stable asset duration relative to liabilities in both higher and lower interest rate environments.

Currently, the EVE exposure to rates increasing or decreasing in a similar magnitude shows that there is greater exposure to rates decreasing.

Bank Deposit Account Fees Simulation

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Our net interest revenue, EVE, and bank deposit account fee revenue simulations reflect the assumption of non-negative investment yields.

Phase-out of LIBOR

Effective June 30, 2023, publication of the London Interbank Offered Rate (LIBOR) ceased.

Schwab completed all LIBOR transition work that could be done prior to June 30, 2023, though we have continued to monitor and manage the LIBOR substitution for the portfolio of legacy loans that we have for which scheduled interest rate resets or related interest rate transitions will occur in future periods.

Certain of the Company’s technology systems and financial models have historically utilized LIBOR.

We’ve transitioned our financial models and systems to alternative reference rates, and we continue to monitor

THE CHARLES SCHWAB CORPORATION

Management’s Discussion and Analysis of Financial Condition and Results of Operations

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

our financial models and systems that previously referenced LIBOR.

In addition, we have transitioned the Company’s IDA agreement and certain intercompany lending agreements that previously were tied to LIBOR to other appropriate reference rates.

The Company’s investment securities that previously referenced LIBOR have transitioned to applicable alternative benchmark indices.

The Company’s work to transition from LIBOR is now substantially complete, and we do not expect the phase-out of LIBOR will have a material impact to the Company going forward.

Liquidity Risk

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Due to its role as a source of financial strength, CSC’s liquidity needs are primarily driven by the liquidity and capital needs of:

CS&Co, TD Ameritrade, Inc., and TDAC, our principal broker-dealer subsidiaries;

CS&Co, our principal broker-dealer subsidiary;

the capital needs of the banking subsidiaries;

principal and interest due on corporate debt, and dividend payments on CSC’s preferred and common stock.

The liquidity needs of our broker-dealer subsidiaries are primarily driven by client activity including trading and margin lending activities and capital expenditures.

principal and interest due on corporate debt;

and dividend payments on CSC’s preferred and common stock.

The liquidity needs of our broker-dealer subsidiary are primarily driven by client activity, including trading and margin lending activities, and capital expenditures.

The capital needs of the banking subsidiaries are primarily driven by client deposit levels and other borrowings.

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These funds are used to purchase investment securities and extend loans to clients.

Other sources of funds may include cash flows from operations, maturities and sales of investment securities, repayments on loans, securities lending of assets held in client brokerage accounts, FHLB borrowings, issuance of CDs, cash provided by securities issuances by CSC in the capital markets, and other facilities described below.

Other sources of funds may include cash flows from operations, maturities and sales of investment securities, repayments on loans, securities lending of assets held in client brokerage accounts, FHLB borrowings, borrowings under repurchase agreements with external financial institutions, issuance of CDs, cash provided by securities issuances by CSC in the capital markets, and other facilities described below.

To meet daily funding needs, we maintain liquidity in the form of overnight cash deposits and short-term investments.

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Our clients’ allocation of cash held on our balance sheet as bank deposits or payables to brokerage clients is sensitive to interest rate levels, with clients typically increasing their utilization of investment cash solutions, such as purchased money market funds and certain fixed income products when those yields are higher than those of cash sweep features.

Schwab’s need for borrowings from external debt facilities arises primarily from timing differences between cash flow requirements, including in the event the outflow of client cash from the balance sheet is greater than cash flows from operations and investment securities and bank loans;

payments on interest-earning investments;

movements of cash to meet regulatory brokerage client cash segregation requirements;

and general corporate purposes.

We maintain policies and procedures necessary to access funding, and test borrowing procedures on a periodic basis.

As a participant in the financial services industry, Schwab relies on access to external financing in the normal course of business.

Schwab’s use of external debt facilities may arise from timing differences between cash flow requirements, such as client cash outflows, cash flows from operations, payments on interest-earning assets, movements of cash to meet regulatory brokerage client cash segregation requirements, and general corporate purposes.

Rollover risk is the risk that we will not be able to refinance or payoff borrowings as they mature.

We manage rollover risk on borrowings, taking into account expected principal paydowns on our investment and loan portfolios along with expected deposit flows.

We maintain policies and procedures necessary to access funding, and test

THE CHARLES SCHWAB CORPORATION

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The following table describes external debt facilities available at December 31, 2023:

borrowing procedures on a periodic basis.

We manage rollover risk on borrowings, taking into account expected principal paydowns on our investment and loan portfolios along with expected deposit flows.

The following table describes certain external debt facilities available at December 31, 2024:

Description Borrower Outstanding Available Maturity of Amounts Outstanding Weighted-Average Interest Rate on Amounts Outstanding

FHLB secured credit facilities

Banking subsidiaries $ 26,400 $ 63,102 (1)

January 2024 - November 2024 5.34%

FHLB secured credit facilities Banking subsidiaries $ 16,700 $ 59,810 (1)

January 2025 - July 2025 5.11%

Federal Reserve discount window Banking subsidiaries — 30,512 (1)

Federal Reserve Bank Term Funding Program Banking subsidiaries — 39,170 (1)

Repurchase agreements Banking subsidiaries, CSC 5,499 — (2)

January 2024 -

July 2024 5.53%

Uncommitted, unsecured lines of credit with various external banks CSC, CS&Co — 1,767 N/A —

January 2025 - May 2025 5.26%

Unsecured uncommitted lines of credit with various external banks

CSC, CS&Co — 1,692 N/A —

Unsecured commercial paper CSC — 5,000 N/A —

Secured uncommitted lines of credit with various external banks CS&Co 500 — (3)

January 2024 - February 2024 5.70%

Secured uncommitted lines of credit with various external banks TDAC 700 — (3)

January 2024 - February 2024 5.72%

April 2025 5.13%

Unsecured committed revolving line of credit with various external banks CSC — 2,100 (4)

(1) Amounts shown as available from the FHLB and Federal Reserve facilities represent remaining capacity based on assets pledged as of December 31, 2024.

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(2) Secured borrowing capacity is made available based on the banking subsidiaries’ or CSC’s ability to provide collateral deemed acceptable by each respective counterparty.

See Item 8 – Note 17 for additional information.

(3) Secured borrowing capacity is made available based on CS&Co’s or TDAC’s ability to provide acceptable collateral to the lenders as determined by the credit agreements.

See below and Item 8 – Note 18 for additional information.

(3) Secured borrowing capacity is made available based on CS&Co’s ability to provide acceptable collateral to the lenders as determined by the credit agreements.

(4) During the first quarter of 2024, CSC entered into an unsecured committed revolving line of credit with various external banks.

N/A Not applicable.

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As of December 31, 2024, the Company had additional investment securities with a par value of approximately $124 billion, or a fair value of approximately $113 billion, available to be pledged to obtain additional capacity.

These securities could be used to provide additional borrowing capacity of up to $142 billion as of December 31, 2023, dependent on the facility utilized.

Additional details regarding availability and use of these facilities is described below.

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These credit facilities are also available as backup financing in the event the outflow of client cash from the banking subsidiaries’ respective balance sheets is greater than maturities and paydowns on investment securities and bank loans.

CSC’s banking subsidiaries must each maintain positive tangible capital, as defined by the Federal Housing Finance Agency, in order to place new draws upon these credit facilities, and the Company manages capital with consideration of minimum tangible capital ratios at our banking subsidiaries.

CSC’s banking subsidiaries must each maintain positive tangible capital, as defined by the FHFA, in order to place new draws upon these credit facilities, and the Company manages capital with consideration of minimum tangible capital ratios at our banking subsidiaries.

Tangible capital pursuant to the requirements of the FHLB borrowing facilities for our banking subsidiaries is common equity less goodwill and intangible assets.

Our banking subsidiaries also have access to short-term secured funding through the Federal Reserve discount window.

Amounts available under the Federal Reserve discount window are dependent on the fair value of certain investment securities that are pledged as collateral.

Amounts available under the Federal Reserve discount window are dependent on the value of certain investment securities that are pledged as collateral.

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

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other than de minimis tests performed to satisfy the Federal Reserve Bank of New York’s testing requirements, this facility was not used during 2024 and there were no amounts outstanding at December 31, 2024.

Beginning in 2023, CSC maintains a standing bilateral repurchase agreement with an external bank.

Other than de minimis tests, this facility was not used during 2023 and there were no amounts outstanding under this facility at December 31, 2023.

On March 12, 2023, the Federal Reserve Board announced the creation of a new Bank Term Funding Program, offering loans through March 11, 2024 of up to one year in length to eligible financial institutions with U.S.

Treasury securities, agency debt, mortgage-backed securities, and other qualifying assets pledged as collateral.

Borrowing capacity available under this program is dependent upon the par value of the investment securities that are pledged as collateral.

The Company is eligible to obtain advances under this program.

This facility was not used during 2023.

CSC maintains standing bilateral repurchase agreements with external banks.

Other than de minimis tests, these facilities were not used during 2024 and there were no amounts outstanding under these facilities at December 31, 2024.

CSC’s ratings for Commercial Paper Notes were P1 by Moody’s Investor Service (Moody’s), A2 by Standard & Poor’s Rating Group (Standard & Poor’s), and F1 by Fitch Ratings, Ltd (Fitch) at December 31, 2024.

During the second quarter of 2023,

CSC also has a universal automatic shelf registration statement on file with the SEC, which enables it to issue debt, equity, and other securities.

THE CHARLES SCHWAB CORPORATION

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Standard & Poor’s downgraded its rating of CSC’s Commercial Paper Notes from A1 to A2, and Moody’s changed its outlook from positive to stable.

CSC also has a universal automatic shelf registration statement on file with the SEC, which enables it to issue debt, equity, and other securities.

CS&Co maintains uncommitted, unsecured bank credit lines with a group of banks as a source of short-term liquidity, which can also be accessed by CSC.

Beginning in 2024, CSC had access to an unsecured committed revolving line of credit with various external banks.

This line expired in January 2025 and was not renewed.

Other than an overnight borrowing to test the availability, the facility was not used during 2024.

CS&Co maintains unsecured uncommitted bank credit lines with a group of banks as a source of short-term liquidity, which can also be accessed by CSC.

CS&Co also maintains secured uncommitted lines of credit, under which CS&Co may borrow on a short-term basis and pledge either client margin securities or firm securities as collateral, based on the terms of the agreements.

TDAC maintains secured uncommitted lines of credit, under which TDAC borrows on either a demand or short-term basis and pledges client margin securities as collateral.

In the fourth quarter of 2022 and in 2023, CSB issued brokered CDs as a supplemental funding source.

CS&Co is also able to lend eligible securities held in client brokerage accounts in exchange for cash collateral as a source of short-term liquidity.

As of December 31, 2024, liabilities for securities loaned totaled $13.1 billion and are included in payables to brokers, dealers, and clearing organizations on the consolidated balance sheet.

At December 31, 2024, $8.8 billion of securities loaned had overnight and continuous remaining contractual maturities;

$4.3 billion of securities loaned had contractual maturities of 35-95 days and had a weighted-average interest rate of 4.62%.

See Item 8 – Note 18 for additional information on securities lending activities.

CSB issues brokered CDs as a supplemental funding source.

The following table provides information about brokered CDs issued by CSB and outstanding as of December 31, 2024:

Amount Outstanding Maturity Weighted-Average Interest Rate

Brokered CDs $ 48,297 January 2024 - April 2025 5.15%

Brokered CDs $ 27,701 January 2025 - November 2025 4.90%

Cash Flow Activity

As a result of rapidly increasing short-term interest rates beginning in 2022, the Company saw an increase in the pace at which clients moved certain cash balances out of our sweep features and into higher-yielding alternatives at Schwab.

As a result of these outflows, our banking subsidiaries have supplemented excess cash on hand and cash generated by maturities and paydowns on our investment securities portfolios with fixed- and floating-rate FHLB advances, repurchase agreements, and issuances of brokered CDs.

The average pace of client cash allocations out of sweep products into higher-yielding investment solutions decreased significantly beginning in the second quarter of 2023, and, apart from an increase in August following the Federal Reserve’s July rate increase, continued to decline during the second half of 2023.

See also Results of Operations – Net Interest Revenue.

In the fourth quarter of 2023, the Company’s FHLB borrowings and total other short-term borrowings decreased by $6.4 billion as a result of repayments during the period.

Bank deposits increased during the fourth quarter of 2023 by $5.5 billion, resulting from an increase of $2.8 billion in deposits swept from brokerage accounts due to the slowed pace of client cash realignment decisions and seasonal cash inflows near year-end, as well as an increase of $2.9 billion in brokered CDs.

The average pace of client cash allocations out of sweep products into higher-yielding investment solutions decreased significantly beginning in the second half of 2023, and continued to decrease through 2024.

In the fourth quarter of 2024, the Company saw an increase in client sweep cash, which, along with principal and interest on the AFS and HTM investment securities portfolio, supported the Company’s net reduction of $14.9 billion of aggregate bank supplemental funding.

Bank deposits increased $12.7 billion during the fourth quarter of 2024, which reflected a $17.7 billion increase in deposits swept from brokerage accounts, partially offset by a net decrease of $6.4 billion in brokered CDs.

The Company’s cash and cash equivalents decreased $1.3 billion from year-end 2023 to $42.1 billion at December 31, 2024;

cash and cash equivalents, including amounts restricted, decreased $9.0 billion from year-end 2023 to $65.5 billion at December 31, 2024.

These decreases reflected a net reduction of bank supplemental funding balances of $29.7 billion and maturities of long-term debt of $3.7 billion.

Bank deposits decreased in 2024 by $30.8 billion, which reflected a net decrease in brokered CDs of $20.6 billion, as well as a $9.7 billion decrease in deposits swept from brokerage accounts due to client cash allocations and engagement with equity markets.

The Company reduced FHLB borrowings and other short-term borrowings by a net total of $10.3 billion.

Partially offsetting the decrease in bank deposits and repayment of borrowings, net investing cash inflows from our AFS and HTM securities totaled $40.9 billion in 2024 and net cash inflows from operations totaled $2.7 billion.

Cash and cash equivalents increased $3.1 billion from year-end 2022 to $43.3 billion at December 31, 2023;

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Offsetting the decrease in bank deposits, investing cash flows from our AFS and HTM securities totaled $58.9 billion in 2023, cash flows from operating activities totaled $19.6 billion, and the Company increased FHLB borrowings and other short-term borrowings by a total of $15.9 billion in 2023.

In 2022, cash and cash equivalents decreased $22.8 billion to end the year at $40.2 billion.

Cash and cash equivalents, including amounts restricted, decreased $34.6 billion during 2022 to $58.7 billion at December 31, 2022.

This decrease was driven primarily by net cash used for financing activities, partially offset by net cash provided by investing activities.

Bank deposits decreased $77.1 billion in 2022, primarily due to a decrease of $78.5 billion in deposits swept from brokerage accounts due to client cash allocation decisions, partially offset by the issuance of $6.0 billion of brokered CDs.

In 2022, FHLB borrowings and other short-term borrowings increased $12.2 billion, and investing cash flows from AFS and HTM securities were $39.4 billion.

THE CHARLES SCHWAB CORPORATION

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LCR 140 % 130 %

To support growth in margin loan balances at our broker-dealer subsidiaries while meeting our LCR requirements, the Company may issue commercial paper or draw on secured lines of credit, in addition to capital markets issuances.

To support growth in margin loan balances at our broker-dealer subsidiary while meeting our LCR requirements, the Company may issue commercial paper, draw on secured lines of credit, or engage in securities lending, in addition to capital markets issuances.

In managing compliance with our LCR requirements, the broker-dealer subsidiary may also retain client cash balances rather than sweeping such balances to our banking subsidiaries.

Net Stable Funding Ratio

Schwab is subject to disclosure requirements under the NSFR rule, which requires the semi-annual public disclosure of its NSFR levels beginning in the second quarter of 2023.

The NSFR rule stipulates that the Company’s available stable funding (ASF) must be at least 100% of the Company’s required stable funding (RSF).

Schwab is subject to disclosure requirements under the NSFR rule, which requires the semi-annual public disclosure of its NSFR levels.

The NSFR rule stipulates that the Company’s ASF must be at least 100% of the Company’s RSF.

ASF is calculated by assessing the stability of the Company’s funding sources and RSF is calculated by evaluating the characteristics of the Company’s assets, derivatives, and off-balance-sheet exposures.

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CSC Senior Notes $ 22,262 2025 - 2034 3.69% A2 A- A

TDA Holding Senior Notes $ 213 2024 - 2029 3.47% A2 A- —

During the second quarter of 2023, Standard and Poor’s downgraded CSC’s and TDA Holding’s long-term issuer credit and senior unsecured debt ratings from A to A- and affirmed its outlook remained stable.

Moody’s also affirmed its rating of A2 for CSC and TDA Holding and changed its outlook from positive to stable.

Ameritrade Holding Senior Notes 163 2025 - 2029 3.38% A2 A- —

THE CHARLES SCHWAB CORPORATION

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New Debt Issuances

During 2024, CSC did not issue new long-term debt.

The below debt issuances in 2023 and 2022 were senior unsecured obligations.

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March 3, 2022 $ 1,000 3/3/2032 2.900% Semi-annually

May 13, 2021 $ 500 5/13/2026 SOFR + 0.520% Quarterly

May 19, 2023 $ 1,200 5/19/2029 5.643% Semi-annually (1)

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August 24, 2023 $ 1,350 8/24/2034 6.136% Semi-annually (1)

March 3, 2022 $ 500 3/3/2027 SOFR + 1.050% Quarterly

March 3, 2022 $ 1,500 3/3/2027 2.450% Semi-annually

March 3, 2022 $ 1,000 3/3/2032 2.900% Semi-annually

May 19, 2023 $ 1,200 5/19/2029 5.643% Semi-annually (2)

May 19, 2023 $ 1,300 5/19/2034 5.853% Semi-annually (2)

August 24, 2023 $ 1,000 8/24/2026 5.875% Semi-annually

November 17, 2023 $ 1,300 11/17/2029 6.196% Semi-annually (1)

(1) On February 18, 2024, the Company redeemed all of these outstanding floating-rate Senior Notes.

(1) Interest rates presented are those in effect at December 31, 2024.

For additional information regarding future interest rates on fixed-to-floating rate Senior Notes, see Item 8 – Note 13.

During 2021, we completed a debt exchange offer related to certain senior notes issued by TDA Holding for an equivalent amount of senior notes issued by CSC.

For further discussion of the exchange, see Item 8 – Note 12.

Equity Issuances and Redemptions

CSC’s preferred stock issued and net proceeds for 2023, 2022, and 2021 are shown below:

During 2024 and 2023, CSC did not issue preferred stock.

CSC’s preferred stock issued and net proceeds for 2022 are shown below:

Date Issued and Sold Net Proceeds

Series I March 18, 2021 $ 2,222

Series J March 30, 2021 $ 584

Series K March 4, 2022 $ 740

On June 1, 2021, the Company redeemed all of the outstanding shares of its 6.00% Non-Cumulative Perpetual Preferred Stock, Series C, and the corresponding depositary shares.

The depositary shares were redeemed at a redemption price of $25 per depositary share for a total of $600 million.

The redemption was funded with the net proceeds from the Series J preferred stock offering.

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

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

For further discussion, see Item 8 – Note 11 for the Company’s bank deposits, Item 8 – Note 12 for the Company’s outstanding debt and borrowing facilities, and Item 8 – Note 19 for equity outstanding balances and activity.

See also Item 8 – Consolidated Statements of Cash Flows, Item 8 – Note 12 for the Company’s bank deposits, Item 8 – Note 13 for the Company’s outstanding debt and borrowing facilities, Item 8 – Note 18 for the Company’s securities lending activities, and Item 8 – Note 20 for equity outstanding balances and activity.

Contractual Obligations

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For information on our contractual obligations for brokered CDs, FHLB borrowings, other short-term borrowings, long-term debt, leases, and credit-related financial instruments, see Item 8 – Notes 12, 13, 14, and 15.

THE CHARLES SCHWAB CORPORATION

Management’s Discussion and Analysis of Financial Condition and Results of Operations

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

December 31, 2023, the Company had total short-term purchase obligations of $537 million and total long-term purchase obligations of $439 million.

As of December 31, 2024, the Company had total short-term purchase obligations of $726 million and total long-term purchase obligations of $499 million.

Schwab also enters into guarantees and other similar arrangements in the ordinary course of business.

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See Item 8 – Note 15 for additional information on the 2023 IDA agreement.

THE CHARLES SCHWAB CORPORATION

Management’s Discussion and Analysis of Financial Condition and Results of Operations

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

CAPITAL MANAGEMENT

Schwab seeks to manage capital to a level and composition sufficient to support execution of our business strategy, inclusive of balance sheet growth over time, management of the 2023 IDA agreement, financial support to our subsidiaries, sustained access to the capital markets, and regulatory capital requirements.

Schwab seeks to manage capital to a level and composition sufficient to support execution of our business strategy, inclusive of balance sheet growth over time, financial support to our subsidiaries, sustained access to the capital markets, and regulatory capital requirements.

Schwab also seeks to return excess capital to stockholders.

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Internal guidelines are set, for both CSC and its regulated subsidiaries, to ensure capital levels are in line with our strategy and regulatory requirements.

Capital forecasts are reviewed monthly at Asset-Liability Management and Pricing Committee and Financial Risk Oversight Committee meetings and regularly at meetings of the Board of Directors.

Capital forecasts are reviewed monthly at Asset-Liability Management Committee meetings and regularly at meetings of the Board of Directors.

A number of early warning indicators are monitored to help identify potential developments that could negatively impact capital.

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The results of the stress testing indicate there are two scenarios which could stress the Company’s capital:

(1) inflows of balance sheet cash during a period of very low interest rates and (2) outflows of balance sheet cash when other sources of financing are not available and the Company is required to sell assets to fund the flows at a loss.

The Capital Contingency Plan is reviewed annually and updated as appropriate.

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CSC is subject to capital requirements set by the Federal Reserve and is required to serve as a source of strength for our banking subsidiaries and to provide financial assistance if our banking subsidiaries experience financial distress.

Schwab is required to maintain a Tier 1 Leverage Ratio for CSC of at least 4%, and has maintained a long-term operating objective for the consolidated Tier 1 Leverage Ratio of 6.50%-6.75%.

Schwab is required to maintain a Tier 1 Leverage Ratio for CSC of at least 4%.

Due to the relatively low credit risk of our balance sheet assets and risk-based capital ratios at CSC and CSB that are in excess of regulatory requirements, the Tier 1 Leverage Ratio is the most restrictive capital constraint on CSC’s asset growth.

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Our banking subsidiaries’ failure to remain well capitalized could result in certain mandatory and possibly additional discretionary actions by the regulators that could have a direct material effect on the banks.

Schwab’s principal banking subsidiary, CSB, is required to maintain a Tier 1 Leverage Ratio of at least 5% to be well

THE CHARLES SCHWAB CORPORATION

Management’s Discussion and Analysis of Financial Condition and Results of Operations

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

capitalized, but has sought to maintain a ratio of at least 6.25%.

Schwab’s principal banking subsidiary, CSB, is required to maintain a Tier 1 Leverage Ratio of at least 5% to be well capitalized, but seeks to maintain a ratio of at least 6.5%.

Based on its regulatory capital ratios at December 31, 2024, CSB is considered well capitalized.

In July 2023, the Federal Reserve issued a notice of proposed changes to the regulatory capital rules that would require us to include AOCI in regulatory capital, phased in over a three-year transition period, beginning July 1, 2025 (see Current Regulatory and Other Developments).

In anticipation of the rules being adopted, the Company’s capital management for consolidated CSC, CSB, and our other banking subsidiaries now incorporates measures that are inclusive of AOCI.

In anticipation of the rules being adopted, the Company’s capital management for CSC (consolidated), CSB, and our other banking subsidiaries now incorporates measures that are inclusive of AOCI.

During the second quarter of 2024, Schwab updated its long-term operating objective to be its consolidated adjusted Tier 1 Leverage Ratio of 6.75% - 7.00%.

See below and Non-GAAP Financial Measures for additional information.

THE CHARLES SCHWAB CORPORATION

Management’s Discussion and Analysis of Financial Condition and Results of Operations

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

Our banking subsidiaries are required to provide notice to, and may be required to obtain approval from, the Federal Reserve and the banking subsidiaries’ state regulators in order to declare and pay dividends to CSC.

In future periods, we may be required to obtain approval from the Federal Reserve for our banking subsidiaries to declare and pay dividends in excess of the amount of recent net income and retained earnings.

As broker-dealers, CS&Co, TDAC, and TD Ameritrade, Inc., are subject to regulatory requirements of the Uniform Net Capital Rule, which is intended to ensure the general financial soundness and liquidity of broker-dealers.

These regulations prohibit the broker-dealer subsidiaries from paying cash dividends, making unsecured advances and loans to CSC and employees, and repaying subordinated borrowings from CSC if such payment would result in a net capital amount below prescribed thresholds.

At December 31, 2023, CS&Co, TDAC, and TD Ameritrade, Inc.

were in compliance with their respective net capital requirements.

As a broker-dealer, CS&Co is subject to regulatory requirements of the Uniform Net Capital Rule, which are intended to ensure the general financial soundness and liquidity of broker-dealers.

These regulations prohibit our broker-dealer subsidiary from paying cash dividends, making unsecured advances and loans to CSC and employees, and repaying subordinated borrowings from CSC, if such payment would result in a net capital amount below prescribed thresholds.

At December 31, 2024, CS&Co was in compliance with its net capital requirements.

In addition to the capital requirements above, Schwab’s subsidiaries are subject to other regulatory requirements intended to ensure financial soundness and liquidity.

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(1) Changes in market interest rates can result in unrealized gains or losses on AFS securities, which are included in AOCI.

As a Category III banking organization, CSC has elected to exclude AOCI from regulatory capital.

As a Category III banking organization, CSC has elected to exclude most components of AOCI from regulatory capital.

The Company’s consolidated Tier 1 Leverage Ratio increased to 9.9% at December 31, 2024 from 8.5% at year-end 2023.

This increase was due primarily to a decrease in the Company’s total assets and 2023 net income.

Total balance sheet assets decreased $58.6 billion, or 11%, during 2023 primarily driven by a decrease of $89.4 billion, or 19%, in total bank deposits and payables to brokerage clients due to client cash allocation decisions resulting from the rising interest rate environment.

This increase was due primarily to a decrease in the Company’s total assets and the benefit of net income earned during the year.

Total balance sheet assets decreased $13.3 billion, or 3%, during 2024, primarily driven by decreases of $30.8 billion in total bank deposits and $9.7 billion in FHLB borrowings due to repayments, offset by an increase in payables to brokerage clients and payables to brokers, dealers, and clearing organizations totaling $23.5 billion.

CSB’s Tier 1 Leverage Ratio also increased from year-end 2023, ending 2024 at 11.6%, primarily as a result of lower total assets and 2024 net income.

In light of the Federal Reserve’s 2023 regulatory capital rule proposal, which, among other things, would require the Company to include AOCI in regulatory capital, the Company has developed an adjusted Tier 1 Leverage Ratio, which is a non-GAAP and non-regulatory capital financial measure that includes AOCI in the ratio.

The primary component of AOCI for Schwab is unrealized gains and losses on our AFS investment securities portfolio and on securities transferred from AFS to the HTM category.

During the second quarter of 2024, Schwab updated its long-term operating objective to be its consolidated adjusted Tier 1 Leverage Ratio of 6.75% - 7.00%.

As of December 31, 2024, our adjusted Tier 1 Leverage Ratio, which includes AOCI in the

THE CHARLES SCHWAB CORPORATION

1 unchanged sentence

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

Tier 1 Leverage Ratio also increased from year-end 2022, ending 2023 at 10.1% primarily as a result of lower total assets and capital contributions from CSC as well as 2023 net income.

In light of the Federal Reserve’s 2023 regulatory capital rule proposal, which among other things, would require the Company to include AOCI in regulatory capital, the Company has developed an adjusted Tier 1 Leverage Ratio, which is a non-GAAP financial measure that includes AOCI in the ratio.

The primary component of AOCI for Schwab is unrealized gains and losses on our AFS investment securities portfolio and on securities transferred from AFS to the HTM category.

As of December 31, 2023, our adjusted Tier 1 Leverage Ratio, which includes AOCI in the ratio, was 4.9% for CSC consolidated and 5.4% for CSB (see Non-GAAP Financial Measures for further details and a reconciliation of such measures to GAAP reported results).

The Company is continuing to retain and accrete capital organically well ahead of the Federal Reserve’s proposed regulatory capital rules’ transition period.

During 2022, the Company transferred investment securities from the AFS category to the HTM category, with aggregate fair values of $188.6 billion and net unrealized losses at the time of transfer of $18.2 billion.

The transfer of these securities to the HTM category reduces the Company’s exposure to fluctuations in AOCI that can result from unrealized gains and 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.

ratio, was 6.8% for CSC (consolidated) and 7.3% for CSB (see Non-GAAP Financial Measures for further details and a reconciliation of such measures to GAAP reported results).

The Company is continuing to accrete capital organically, and will continue to manage its capital as described above.

In evaluating returns of excess capital to stockholders, we will consider the amount of bank supplemental funding outstanding, and may choose to utilize the liquidity we would otherwise use for capital returns to repay outstanding bank supplemental funding balances.

See also below and Item 8 – Note 28 for additional information regarding share repurchase activity subsequent to December 31, 2024.

IDA Agreement

Certain brokerage client deposits are swept off-balance sheet to the TD Depository Institutions pursuant to the 2023 IDA agreement.

During 2023, Schwab did not move IDA balances to its balance sheet, and during 2022, Schwab moved net amounts of $13.7 billion of IDA balances to its balance sheet.

During 2024 and 2023, Schwab did not move IDA balances to its balance sheet.

The Company’s overall capital management strategy includes supporting migration of IDA balances in future periods as available pursuant to the terms of the 2023 IDA agreement.

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January 26, 2023 $ .03 14 % $ .25

THE CHARLES SCHWAB CORPORATION

Management’s Discussion and Analysis of Financial Condition and Results of Operations

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

In addition, on January 29, 2025, the Board of Directors of the Company declared a two cent, or 8%, increase in the quarterly cash dividend to $.27 per common share.

The following table details CSC’s cash dividends paid and per share amounts:

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Preferred Stock:

N/A N/A 33 82.73

45 59.52 45 59.52

N/A N/A 37 6,161.42

24 5,000.00 24 5,000.00

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37 5,000.00 37 5,000.00

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

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

The final dividend was paid on November 1, 2022.

(1) Dividends are paid quarterly.

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

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

The final dividend was paid on December 1, 2022.

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

(5) Series K was issued on March 4, 2022.

Dividends are paid quarterly, and the first dividend was paid on June 1, 2022.

N/A Not applicable.

In addition, on January 24, 2024, the Board of Directors of the Company declared a dividend of $.25 per common share.

Share Repurchases

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

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

On August 1, 2022, CSC purchased, directly from an affiliate of TD Bank, 15 million shares of nonvoting common stock for a total of $1.0 billion, or approximately $66.53 per share.

The shares of nonvoting common stock automatically converted into common stock and were purchased under CSC’s new share repurchase authorization.

The purchase price paid by CSC was equal to the lowest price per share that the affiliate of TD Bank received in a contemporaneous share sale facilitated by a third-party market maker, which resulted in a purchase price lower than the closing price on August 1, 2022.

CSC repurchased an additional 32 million shares of its common stock under the new authorization for $2.4 billion during the year ended December 31, 2022.

CSC repurchased 37 million shares of its common stock under the new authorization for $2.8 billion during 2023;

we did not initiate repurchases after the first quarter of 2023.

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

There were no repurchases of CSC’s common stock under the terminated authorization during 2022.

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

we did not initiate repurchases after the first quarter of 2023 .

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

The share repurchase authorization does not have an expiration date.

There were no repurchases of CSC’s common stock during the year ended December 31, 2024.

CSC repurchased 37 million shares of its common stock for

THE CHARLES SCHWAB CORPORATION

Management’s Discussion and Analysis of Financial Condition and Results of Operations

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

$2.8 billion during the year ended December 31, 2023.

As of December 31, 2024, approximately $8.7 billion remained on the authorization.

Subsequent to December 31, 2024, pursuant to a repurchase agreement dated February 9, 2025, on February 12, 2025, the Company repurchased directly from TD Group US Holdings LLC 19.2 million shares of nonvoting common stock at a price of $77.982 per share for an aggregate repurchase amount of $1.5 billion.

The Company completed this repurchase under its share repurchase authorization, and following the repurchase, approximately $7.2 billion remains on the authorization.

See Item 8 – Note 28 for additional information.

There were no repurchases of CSC’s preferred stock during the year ended December 31, 2024.

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

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

Beginning in 2023, share repurchases, net of issuances, are subject to a nondeductible 1% excise tax which was recognized as a direct and incremental cost associated with these transactions.

Share repurchases, net of issuances, are subject to a nondeductible 1% excise tax which was recognized as a direct and incremental cost associated with these transactions.

For repurchases of common stock, the tax is recorded as part of the cost basis of the treasury stock repurchased, resulting in no impact to the consolidated statement of income.

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At December 31, 2024, Schwab had exposure to non-sovereign financial and non-financial institutions in foreign countries, as well as agencies of foreign governments.

At December 31, 2023, the fair value of these holdings totaled $12.8 billion, with the top three exposures being to issuers and counterparties domiciled in the United Kingdom at $5.0 billion, France at $3.2 billion,

THE CHARLES SCHWAB CORPORATION

Management’s Discussion and Analysis of Financial Condition and Results of Operations

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

and Canada at $1.5 billion.

At December 31, 2022, the fair value of these holdings totaled $16.4 billion, with the top three exposures being to issuers and counterparties domiciled in France at $5.1 billion, the United Kingdom at $4.8 billion, and Canada at $1.7 billion.

In addition, Schwab had outstanding margin loans to foreign residents of $2.5 billion at both December 31, 2023 and 2022.

At December 31, 2024, the fair value of these holdings totaled $10.6 billion, with the top three exposures being to issuers and counterparties domiciled in France at $5.1 billion, the United Kingdom at $2.1 billion, and Canada at $889 million.

In addition, Schwab had outstanding margin loans to foreign residents of $3.5 billion and $2.5 billion at December 31, 2024 and 2023, respectively.

FAIR VALUE OF FINANCIAL INSTRUMENTS

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Additionally, management has reviewed with the Audit Committee the Company’s significant estimates discussed in this Management’s Discussion and Analysis of Financial Condition and Results of Operations.

THE CHARLES SCHWAB CORPORATION

Management’s Discussion and Analysis of Financial Condition and Results of Operations

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

Schwab estimates income tax expense based on amounts expected to be owed to the various tax jurisdictions in which we operate, including federal, state, and local domestic jurisdictions, and immaterial amounts owed to several foreign jurisdictions.

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Schwab’s use of non-GAAP measures is reflective of certain adjustments made to GAAP financial measures as described below.

Beginning in the third quarter of 2023, these adjustments also include restructuring costs, which the Company began incurring in connection with its previously announced plans to streamline its operations to prepare for post-integration of TD Ameritrade.

See Item 8 – Note 16 for additional information.

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The Compensation Committee of CSC’s Board of Directors maintains discretion in evaluating performance against these criteria.

Additionally, the Company uses adjusted Tier 1 Leverage Ratio in managing capital, including its use of the measure as its long-term operating objective.

THE CHARLES SCHWAB CORPORATION

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Adjusted total expenses (non-GAAP) $ 11,269 $ 11,029 $ 10,386

(1) Acquisition and integration-related costs for 2023 primarily consist of $187 million of compensation and benefits, $135 million of professional services,

$28 million of occupancy and equipment, and $27 million of other.

Acquisition and integration-related costs for 2022 primarily consist of $220 million of compensation and benefits, $140 million of professional services, and $21 million of occupancy and equipment.

(1) Acquisition and integration-related costs for 2024 primarily consist of $54 million of compensation and benefits, $36 million of professional services, and $19 million of depreciation and amortization.

Acquisition and integration-related costs for 2023 primarily consist of $187 million of compensation and benefits, $135 million of professional services, $28 million of occupancy and equipment, and $27 million of other expense.

Acquisition and integration-related costs for 2022 primarily consist of $220 million of compensation and benefits, $140 million of professional services, and $21 million of occupancy and equipment.

(2) Restructuring costs for 2023 primarily consist of $292 million of compensation and benefits, $17 million of occupancy and equipment, and $181 million of other.

There were no restructuring costs for 2022 and 2021.

(2) Restructuring costs for 2024 reflect a change in estimate of $34 million in compensation and benefits, offset by $5 million of occupancy and equipment and $37 million of other expense.

Restructuring costs for 2023 primarily consist of $292 million of compensation and benefits, $17 million of occupancy and equipment, and $181 million of other expense.

There were no restructuring costs for 2022.

With the Ameritrade integration and restructuring programs complete as of December 31, 2024, non-GAAP adjustments to total expenses excluding interest in 2025 are anticipated to be solely comprised of amortization of acquired intangible assets, which is estimated to be $512 million for 2025.

Year Ended December 31,

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Restructuring costs 9 — 495 .27 — —

495 .27 — — — —

Income tax effects (1)

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(1) See table above for the reconciliation of net income available to common stockholders to adjusted net income available to common stockholders (non-GAAP).

December 31, 2023

THE CHARLES SCHWAB CORPORATION

Management’s Discussion and Analysis of Financial Condition and Results of Operations

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

December 31, 2024 December 31, 2023

CSC CSB CSC CSB

Tier 1 Leverage Ratio (GAAP)

9.9 % 11.6 % 8.5 % 10.1 %

Tier 1 Capital

$ 45,186 $ 32,584 $ 40,602 $ 31,777

AOCI adjustment (14,839) (12,938) (18,131) (15,746)

1 unchanged sentence

Average assets with regulatory adjustments

458,119 280,701 476,069 315,851

AOCI adjustment (14,831) (13,037) (19,514) (17,194)

1 unchanged sentence

Adjusted Tier 1 Leverage Ratio (non-GAAP)

THE CHARLES SCHWAB CORPORATION

6.8 % 7.3 % 4.9 % 5.4 %

Quantitative and Qualitative Disclosures About Market Risk

2 unchanged sentences

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

What changed 10-K

Item 7. Management’s Discussion and Analysis