What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-08-08 compared with 2025-05-09 · 420 added, 261 removed, 612 unchanged (53% of the section changed)

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In addition to historical information, this Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934.

Forward-looking statements are identified by words such as “believe,” “anticipate,” “expect,” “intend,” “prioritize,” “will,” “may,” “estimate,” “appear,” “could,” “would,” “maintain,” “continue,” “seek,” and other similar expressions.

Forward-looking statements are identified by words such as “believe,” “anticipate,” “expect,” “prioritize,” “will,” “may,” “estimate,” “appear,” “could,” “would,” “maintain,” “continue,” “seek,” and other similar expressions.

In addition, any statements that refer to expectations, strategy, objectives, projections, or other characterizations of future events or circumstances are forward-looking statements.

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• Funding sources and uses of liquidity (see Liquidity Risk in Part I – Item 2);

• Utilization of bank supplemental funding and expectations for repayment of outstanding balances (see Results of Operations in Part I – Item 2, and Liquidity Risk in Part I – Item 2);

• Wholesale funding, targeted funding profile and expectations for paydown of bank supplemental funding (see Results of Operations in Part I – Item 2, and Liquidity Risk in Part I – Item 2);

• Management of interest rate risk;

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• Capital management;

potential migration of insured deposit account balances (IDA balances) to our balance sheet;

capital accretion;

expectations about capital requirements, including accumulated other comprehensive income (AOCI);

long-term operating objective;

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• Our ability to support client activity levels;

• Increased compensation and other costs;

THE CHARLES SCHWAB CORPORATION

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

• Increased compensation and other costs;

• Re al estate and workforce decisions;

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• Interest-earning asset mix and growth;

• Our ability to access and use supplemental funding sources;

• Our ability to access funding sources;

• Prepayment levels for mortgage-backed securities;

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

• Regulatory and legislative developments;

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Management focuses on several client activity and financial metrics in evaluating Schwab’s financial position and operating performance.

Results for the first quarter of 2025 and 2024 are as follows:

Results for the second quarter and first six months of 2025 and 2024 are as follows:

Three Months Ended

March 31, Percent

June 30, Percent

Change Six Months Ended

June 30, Percent

2025 2024 2025 2024

Client Metrics

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Active brokerage accounts (in thousands, at quarter end) 37,476 35,612 5 %

Assets receiving ongoing advisory services (in billions, at quarter end) $ 5,061.1 $ 4,628.0 9 %

Assets receiving ongoing advisory services (in billions,

at quarter end) $ 5,425.0 $ 4,722.9 15 %

Client cash as a percentage of client assets (at quarter end) 9.9 % 9.7 %

10.6 % 10.0 %

Company Financial Information and Metrics

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Return on average common stockholders’ equity (annualized) 19 % 14 % 18 % 15 %

Expenses excluding interest as a percentage of average client assets (annualized) 0.12 % 0.14 %

Expenses excluding interest as a percentage of average client

assets (annualized) 0.12 % 0.13 % 0.12 % 0.13 %

Consolidated Tier 1 Leverage Ratio (at quarter end) 9.8 % 9.4 %

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Adjusted total expenses $ 2,920 $ 2,768 $ 5,934 $ 5,570

$ 3,014 $ 2,802

Adjusted diluted earnings per common share $ 1.14 $ .73 $ 2.17 $ 1.47

Return on tangible common equity 35 % 34 % 34 % 36 %

(1) The first quarter of 2025 and 2024 include net outflows of $5.3 billion and $7.4 billion, respectively, from off-platform brokered certificates of deposit (CDs) issued by CSB.

(2) Adjusted total expenses is a non-GAAP financial measure adjusting total expenses excluding interest.

See Non-GAAP Financial Measures.

The first quarter of 2025 presented investors with an increasingly uncertain macroeconomic environment.

While equity markets rose early in the first quarter of 2025, uncertainty around the economic impacts of trade policy and increased volatility dampened equity markets and investor sentiment.

The Standard & Poor’s ® 500 Index (S&P 500 ® ) was down 5% during the first three months of 2025, and the NASDAQ Composite ® declined 10%.

The 10-year U.S.

Treasury yield fell by 35 basis points to 4.23%, and the Federal Reserve left the federal funds overnight rate unchanged in the first quarter.

Against this backdrop, clients continued to turn to Schwab, as the Company saw strength in asset gathering, new accounts, and client engagement in the first quarter of the year.

Core net new assets totaled $137.7 billion in the first quarter of 2025, up 44% from the same period in 2024, representing an annualized growth rate of 5.5%.

Active brokerage accounts rose 5% year-over-year to 37.0 million at March 31, 2025, including 1.2 million new brokerage accounts in the first quarter of 2025, up 8% from the first quarter of 2024.

Clients were highly engaged in the markets, especially amid market volatility late in the first quarter.

Clients’ daily average trades (DATs) were up significantly year-over-year to 7.4 million in the first three months of 2025, an increase of 24% from the first quarter of 2024.

Schwab’s financial performance in the first quarter of 2025 reflected strength in asset gathering, increased client engagement, reduced reliance on higher-cost bank supplemental funding, and continued demand for margin and bank lending.

Net income totaled $1.9 billion in the first quarter of 2025, rising 40% from the first quarter of 2024.

Diluted earnings per common share

(1) The second quarter and first six months of 2025 include net outflows of $6.7 billion and $12.0 billion, respectively, from off-platform brokered certificates of deposit (CDs) issued by CSB.

The second quarter and first six months of 2024 include net inflows of $2.7 billion and net outflows of $4.7 billion, respectively, from off-platform brokered CDs issued by CSB.

The second quarter and first six months of 2024 also include an inflow of $10.3 billion from a mutual fund clearing services client.

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

The first six months of 2025 presented an evolving macroeconomic landscape for investors.

With uncertainty around the economic impacts of trade policy, equity markets gave up some early 2025 gains late in the first quarter.

Though volatility continued into April, equity markets and investor sentiment rebounded during the second quarter.

The Standard and Poor’s ® 500 Index rose 11% and 5% during the second quarter and first six months of 2025, respectively, while the NASDAQ Composite ® gained 18% and 5% during the second quarter and year-to-date periods.

The Federal Reserve kept the federal funds overnight rate unchanged through the first six months of 2025.

Following some volatility during the second quarter, the 10-year U.S.

Treasury yield was 4.24% at June 30, 2025, largely consistent with March 31 and down 34 basis points year-to-date.

Amid the varying market conditions seen in the first six months of 2025, clients continued to turn to Schwab, resulting in strong asset gathering, year-over-year growth in new client accounts, and sustained client engagement.

Core net new assets, inclusive of seasonal tax payments, were $80.3 billion in the second quarter of 2025, up 31% year-over-year.

Year-to-date core net new assets totaled $218.0 billion, up 39% from the first half of 2024.

Clients opened 1.1 million and 2.3 million new brokerage accounts in the second quarter and first six months of the year, respectively, up 11% and 10% from the respective prior-year amounts, and active brokerage accounts rose 5% year-over-year to reach 37.5 million at June 30, 2025.

Client trading volume remained robust through the first six months of the year.

Reflecting the impact of increased market volatility late in the first

THE CHARLES SCHWAB CORPORATION

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

(EPS) was $.99 in the first quarter of 2025, higher by 46% from the prior-year first quarter.

Adjusted diluted EPS (1) was $1.04 in the first quarter of 2025, up 41% from the same period in 2024.

Total net revenues increased 18% year-over-year to $5.6 billion in the first quarter of 2025.

Net interest revenue was $2.7 billion in the first quarter of 2025, increasing 21% from the first quarter of 2024, primarily due to lower interest expense and growth in margin and bank lending, which more than offset lower yields on interest-earning assets due to lower market rates.

Asset management and administration fees were $1.5 billion in the first quarter of 2025, higher by 14% year-over-year due to continued growth in money market funds and managed investing solutions, and higher overall client asset balances due to strength of asset gathering and year-over-year equity market appreciation.

Trading revenue was $908 million in the first quarter of 2025, an increase of 11% from the first quarter of the prior year, which was due primarily to higher trading volume.

Bank deposit account fee revenue totaled $245 million in the first quarter of the year, rising 34% from the first quarter of 2024 due to improved net yield as a growing percentage of the balances have converted to floating rates.

BDA balances decreased 4% from year-end 2024, ending the first quarter at $83.7 billion.

Total expenses excluding interest were $3.1 billion in the first quarter of 2025, higher by 7% from the first quarter of 2024.

This increase was due primarily to higher compensation and benefits expense, inclusive of annual merit increases and a reduction in the prior year for a change in estimated restructuring costs, and higher other expense which was due to higher industry fees resulting from the SEC’s May 2024 fee rate increase and higher client trading volume.

For the first quarter of 2025, adjusted total expenses (1) totaled $3.0 billion, up 8% from the same period in 2024 due to higher compensation and benefits and other expense.

Return on average common stockholders’ equity was 18% in the first quarter of 2025, up from 15% in the first quarter of 2024, due to growth in net income, which more than offset higher average common stockholders’ equity.

Return on tangible common equity (1) was 35% in the first quarter of 2025, down from 39% in the first quarter of 2024, as higher average tangible common equity more than offset growth in net income.

Average common stockholders’ equity increased primarily as a result of year-over-year growth in retained earnings and higher average AOCI.

The increase in average AOCI was due to lower unrealized losses on available for sale (AFS) investment securities and securities previously transferred from AFS to held to maturity (HTM).

Schwab supported continued client-driven demand for margin and bank lending, while reducing bank supplemental funding and returning capital to stockholders.

Total balance sheet assets decreased 4% from year-end 2024 to end the first quarter of 2025 at $462.9 billion.

Principal and interest from our AFS and HTM securities portfolios supported further reduction in bank supplemental funding, which includes brokered CDs, Federal Home Loan Bank (FHLB) borrowings, and borrowings under repurchase agreements at our banks.

The Company reduced total bank supplemental funding by $11.8 billion, or 24%, during the first three months of 2025, with $38.1 billion outstanding at March 31.

Though investors reduced their leverage later in the first quarter following an increase in market volatility, the Company continued to see strong demand for margin lending, with margin loans ending the first quarter at $83.6 billion, largely flat with year-end 2024.

Bank loans grew 4% during the first three months of 2025, ending the first quarter at $47.1 billion.

Concurrent with the completion of The Toronto-Dominion Bank’s (TD Bank) February 2025 secondary public offering of CSC common shares, the Company repurchased all remaining outstanding shares of nonvoting common stock directly from TD Group US Holdings, LLC, an affiliate of TD Bank, for a total repurchase of $1.5 billion (see Capital Management – Share Repurchases and Item 1 – Note 14).

In addition, the Company increased its common dividend during the first quarter by 8% to $.27 per share.

Inclusive of these capital actions, the Company’s consolidated Tier 1 Leverage Ratio was 9.9% for the first quarter of 2025, remaining consistent with year-end 2024 due to strong first-quarter net income.

Our consolidated adjusted Tier 1 Leverage Ratio (1) rose to 7.1% due to the first quarter’s net income and higher AOCI.

(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.

quarter and early in the second quarter, clients’ daily average trades (DATs) rose significantly year-over-year, reaching 7.6 million and 7.5 million in the second quarter and first six months of 2025, respectively, which represented increases of 38% and 31% from the same periods in the prior year.

Schwab’s financial performance in the second quarter and first six months of 2025 reflected strong asset gathering, sustained client engagement and equity market appreciation, continued demand for margin and bank lending and Schwab’s managed investing solutions, and reduction of higher-cost bank supplemental funding as well as balanced expense management.

Net income grew to $2.1 billion and $4.0 billion in the second quarter and first six months of 2025, respectively, higher by 60% and 50% from the respective prior-year periods.

Diluted earnings per common share (EPS) was $1.08 and $2.07 in the second quarter and first six months of the year, respectively, up 64% and 54% from the same periods in 2024.

Adjusted diluted EPS (1) was $1.14 and $2.17 in the second quarter and first six months of 2025, respectively, rising 56% and 48% from the same periods in 2024.

Total net revenues increased 25% year-over-year in the second quarter of 2025 to $5.9 billion, bringing the year-to-date total to $11.5 billion, up 21% from the same period in 2024.

Net interest revenue was $2.8 billion and $5.5 billion in the second quarter and first six months of 2025, respectively, rising 31% and 26% from the comparable periods in 2024, primarily due to lower interest expense from reductions in bank supplemental funding and lower market rates, as well as growth in bank lending and higher cash and investments segregated, which more than offset lower yields on interest-earning assets due to lower market rates.

Asset management and administration fees were $1.6 billion and $3.1 billion in the second quarter and first six months of 2025, respectively, increasing 14% from both comparable prior-year periods due to continued growth in money market funds and also higher client asset balances reflecting asset gathering, equity market appreciation, and growth in managed investing solutions.

Trading revenue was $952 million and $1.9 billion in the second quarter and first six months of 2025, respectively, rising 23% and 17% from the comparable prior-year periods, due primarily to higher trading volume.

Bank deposit account fee revenue was $247 million and $492 million in the second quarter and first six months of 2025, respectively, up 61% and 46% from the same periods in 2024 due primarily to higher net yields.

Total expenses excluding interest were $3.0 billion and $6.2 billion in the second quarter and first six months of 2025, respectively, increasing 4% and 5% from the same periods in the prior year.

For the second quarter and first six months of 2025, adjusted total expenses (1) were $2.9 billion and $5.9 billion, respectively, up 5% and 7% from the comparable prior-year periods.

The increases in total expenses excluding interest and adjusted total expenses (1) reflect ongoing strategic investments to support growth of the business and enhance client-serving capabilities while driving incremental efficiencies.

The increases were primarily due to higher compensation and benefits expense, inclusive of annual merit increases, higher incentive compensation, and employee-related costs, higher professional services expense due to overall growth in the business, and higher industry fees within other expense due to increased client trading volume and the SEC’s May 2024 Section 31 fee rate increase, partially offset by lower regulatory fees and assessments.

Return on average common stockholders’ equity was 19% and 18% for the second quarter and first six months of 2025, respectively, up from 14% and 15% in the same prior-year periods, due to growth in net income, which more than offset higher average common stockholders’ equity.

Return on tangible common equity (1) (ROTCE) was 35% in the second quarter of 2025, up from 34% in the same period in 2024 due to higher adjusted net income available to common stockholders (1) .

ROTCE (1) was 34% for the six months ended June 30, 2025, down from 36% in the same period in 2024, as growth in average common stockholders’ equity for the year-to-date period more than offset growth in adjusted net income available to common stockholders (1) .

Average common stockholders’ equity increased in the second quarter and first six months of 2025 primarily as a result of year-over-year growth in retained earnings and improved average accumulated other comprehensive income (AOCI).

The improvement in average AOCI was due to lower unrealized losses on available for sale (AFS) investment securities and securities previously transferred from AFS to held to maturity (HTM).

Throughout the first six months of 2025, Schwab supported increased client activity in margin and bank lending, while further reducing bank supplemental funding and returning excess capital to stockholders.

Total balance sheet assets decreased 1% during the second quarter and 4% from year-end 2024 to $458.9 billion as of June 30, 2025.

Principal and interest from our AFS and HTM securities portfolios and excess cash on hand supported further reduction in bank supplemental funding, which includes brokered CDs, Federal Home Loan Bank (FHLB) borrowings, and borrowings under repurchase agreements at our banks.

Schwab reduced total bank supplemental funding by $22.2 billion, or 44%, in the first six months of 2025, including a reduction of $10.4 billion, or 27%, during the second quarter, with $27.7 billion remaining outstanding at June 30.

While investors reduced margin leverage in late March and April following market volatility, client margin loan balances rebounded later in the second quarter to $83.4 billion at June 30, 2025, down slightly from year-end 2024.

Bank loans rose 11% in the first

THE CHARLES SCHWAB CORPORATION

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

six months of 2025, reflecting growth in pledged asset lines (PALs) and First Mortgages, ending the second quarter at $50.4 billion.

Also during the first quarter of 2025, the Company increased its common dividend by 8% to $.27 per share.

During the second quarter of 2025, the Company redeemed its Series G preferred stock for $2.5 billion, and repurchased an additional $351 million in common stock.

Inclusive of these capital actions, the Company’s consolidated Tier 1 Leverage Ratio ended the second quarter at 9.8%, largely flat with year-end 2024 as a result of organic capital generation from net income in the first half of the year.

Our consolidated adjusted Tier 1 Leverage Ratio (1) rose to 7.2% as a result of net income in the first six months of 2025 and improvement in AOCI.

(1) Adjusted diluted EPS, adjusted total expenses, return on tangible common equity, adjusted net income available to common stockholders, 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.

Current Regulatory and Other Developments

On June 12, 2025, the SEC withdrew certain notices of proposed rulemaking issued by the SEC between March 2022 and November 2023, stating that the Commission does not intend to issue final rules with respect to these proposals.

Among the notices of proposed rulemaking withdrawn were the SEC’s December 2022 equity market structure rule proposals, “Order Competition Rule” and “Regulation Best Execution”, previously referenced in Part II – Item 7 – Current Regulatory and Other Developments in our 2024 Form 10-K.

On March 3, 2025, the Federal Deposit Insurance Corporation (FDIC) withdrew certain notices of proposed rulemaking issued by the FDIC in 2023 and 2024, stating that the FDIC no longer intends to issue final rules with respect to these proposals.

Among the proposed rulemaking withdrawn was the July 2024 proposal related to the brokered deposits framework, which proposed conditions for which broker-dealers such as CS&Co qualify for the primary purpose exception from the definition of a deposit broker and from attendant restrictions for brokered deposits, previously referenced in Part II – Item 7 – Current Regulatory and Other Developments in our 2024 Form 10-K.

Refer to Part II – Item 7 – Current Regulatory and Other Developments in our 2024 Form 10-K for information regarding pending regulatory matters including:

• The Federal Deposit Insurance Corporation’s (FDIC) July 2024 proposed rulemaking to amend the brokered deposits framework setting forth its conditions for when broker-dealers such as CS&Co qualify for the primary purpose exception (PPE) from the definition of a deposit broker and from attendant restrictions for brokered deposits;

Department of Labor’s April 2024 final rule significantly broadening the definition of “fiduciary” under the Employee Retirement Income Security Act of 1974 and related litigation;

• The FDIC’s November 2023 and February 2024 special assessments on banks, including the Company’s banking subsidiaries, to recover losses incurred by the Deposit Insurance Fund (DIF) to protect uninsured depositors due to the March 2023 closures of two banks;

• The FDIC’s November 2023 and February 2024 special assessments on banks, including the Company’s banking subsidiaries, to recover losses incurred by the Deposit Insurance Fund to protect uninsured depositors due to the March 2023 closures of two banks;

federal banking agencies’ August 2023 proposed rulemaking on long-term debt requirements for certain large banking organizations;

federal banking agencies’ July 2023 notice of proposed rulemaking with amendments to the regulatory capital rules, which, among other things, would require us to include AOCI in regulatory capital and to calculate our risk-weighted assets using a revised risk-based approach, a component of which is based on operational risk.

• The SEC’s December 2022 equity market structure rule proposals, “Order Competition Rule” and “Regulation Best Execution”.

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)

RESULTS OF OPERATIONS

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The following tables present a comparison of revenue by category:

Three Months Ended March 31, Percent

Three Months Ended June 30, Percent

Change Amount % of

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Total net revenues 25 % $ 5,851 100 % $ 4,690 100 %

Six Months Ended June 30, Percent

Change Amount % of

Revenues Amount % of

Net interest revenue

Interest revenue (3) % $ 7,544 66 % $ 7,758 82 %

Interest expense (40) % (2,016) (18) % (3,367) (36) %

Net interest revenue 26 % 5,528 48 % 4,391 46 %

Asset management and administration fees

Mutual funds, ETFs, and CTFs 13 % 1,749 15 % 1,543 16 %

Managed investing solutions 14 % 1,158 10 % 1,013 11 %

Other 10 % 193 2 % 175 2 %

Asset management and administration fees 14 % 3,100 27 % 2,731 29 %

Trading revenue

Commissions 8 % 862 7 % 796 8 %

Order flow revenue 28 % 909 8 % 709 8 %

Principal transactions — 89 1 % 89 1 %

Trading revenue 17 % 1,860 16 % 1,594 17 %

Bank deposit account fees 46 % 492 5 % 336 4 %

Other 24 % 470 4 % 378 4 %

Total net revenues 21 % $ 11,450 100 % $ 9,430 100 %

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

Revenue on interest-earning assets is affected by various factors, such as the composition of assets, prevailing interest rates and spreads at the time of origination or purchase, changes in interest rates on cash and cash equivalents, floating-rate securities and loans, and changes in prepayment levels for mortgage-backed and other asset-backed securities and loans.

Schwab establishes the rates paid on client-related liabilities, and management expects that it will generally adjust the rates paid on these liabilities at some fraction of any movement in short-term rates.

Interest expense on long-term debt, FHLB borrowings, other short-term

Interest expense on long-term debt, FHLB borrowings, other short-term borrowings, and other funding sources is impacted by market interest rates at the time of borrowing and changes in interest rates on floating-rate liabilities.

Net interest revenue reflects the impacts of derivatives used to manage interest rate risk.

See also Risk Management – Market Risk and Item 1 – Note 11 for additional information.

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 of 2024 and another 50 basis points across two cuts during the fourth quarter of 2024.

Throughout the first six months of 2025, the Federal Reserve maintained the upper bound of the target overnight rate at 4.50%.

Schwab’s average interest-earning assets in the second quarter of 2025 increased slightly compared to the same period in 2024, while average interest-earning assets in the first six months of 2025 decreased slightly compared with the same period in 2024.

Client demand for margin and bank lending continued to be strong in the first six months of 2025.

Though clients reduced leverage in late March and April following volatility, margin balances rebounded later in the second quarter as equity markets improved, and margin loan balances ended the second quarter at $83.4 billion, down slightly from year-end 2024, and up 16% from June 30, 2024.

Bank loan balances increased 11% in the first six months of 2025, finishing the second quarter at $50.4 billion, higher by 19% from June 30, 2024, due primarily to growth in PALs and First Mortgages.

Client cash activity during the first six months of 2025 reflected normal cash behavior, inclusive of seasonal tax payments in the second quarter, organic growth, and engagement in equity markets.

Bank sweep deposits and payables to brokerage clients increased by a total of $5.2 billion, or 2%, during the second quarter of 2025, and $37.5 billion, or 14%, from June 30, 2024 to June 30, 2025.

Principal and interest payments on AFS and HTM securities supported a further reduction in bank supplemental funding of $10.4 billion, or 27%, during the second quarter of 2025, and $22.2 billion, or 44%, during the first six months of 2025.

Since June 30, 2024, the Company has reduced bank supplemental funding by $46.0 billion, or 62%.

THE CHARLES SCHWAB CORPORATION

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borrowings, and other funding sources is impacted by market interest rates at the time of borrowing and changes in interest rates on floating-rate liabilities.

See also Risk Management – Market Risk.

During the first quarter of 2025, the Federal Reserve maintained the upper bound of the target overnight rate at 4.50%.

Schwab’s average interest-earning assets in the first quarter of 2025 were lower compared with the same period in 2024;

however, client demand for margin and bank lending continued to be strong during the first quarter of 2025, even as clients reduced leverage amid market volatility late in the first quarter.

Margin and bank loan balances increased by 23% and 16%, respectively, from March 31, 2024 to the end of the first quarter of 2025.

Following further deceleration in the pace of clients’ reallocation of cash from sweep products to higher-yielding investment solutions in 2024, client activity in the first quarter of 2025 reflected normalized cash behavior, inclusive of organic growth, seasonality, and investor sentiment against a backdrop of increased market volatility.

Bank sweep deposits and payables to brokerage clients increased by a total of $11.5 billion, or 4%, from March 31, 2024 to the end of the first quarter of 2025.

Principal and interest payments on AFS and HTM securities supported a further reduction in bank supplemental funding of $11.8 billion, or 24%, during the first quarter of 2025.

Since March 31, 2024, the Company has reduced bank supplemental funding by $32.7 billion, or 46%.

The following table presents net interest revenue information corresponding to interest-earning assets and funding sources on the condensed consolidated balance sheets:

Three Months Ended March 31, Average Balance Interest Revenue/ Expense Average Yield/Rate Average Balance Interest Revenue/ Expense Average Yield/Rate

Three Months Ended June 30, Average Balance Interest Revenue/ Expense Average Yield/Rate Average Balance Interest Revenue/ Expense Average Yield/Rate

Interest-earning assets

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Other short-term borrowings 7,644 87 4.55 % 9,268 129 5.59 %

6,695 82 4.96 % 7,385 103 5.61 %

Federal Home Loan Bank borrowings 9,753 110 4.48 % 25,582 348 5.42 %

Long-term debt 20,624 206 3.94 % 22,460 208 3.70 %

Total interest-bearing liabilities (2)

384,748 965 1.00 % 388,751 1,659 1.71 %

Non-interest-bearing funding sources (2)

37,981 30,217

Other interest expense — —

Total funding sources $ 422,729 $ 965 0.91 % $ 418,968 $ 1,659 1.59 %

Net interest revenue $ 2,822 2.65 % $ 2,158 2.03 %

Six Months Ended June 30, Average Balance Interest Revenue/ Expense Average Yield/Rate Average Balance Interest Revenue/ Expense Average Yield/Rate

Interest-earning assets

Cash and cash equivalents $ 29,236 $ 633 4.30 % $ 31,394 $ 836 5.26 %

Cash and investments segregated 43,117 918 4.23 % 25,503 669 5.19 %

Receivables from brokerage clients 81,367 2,714 6.63 % 66,259 2,611 7.80 %

Available for sale securities (1)

81,151 838 2.06 % 107,956 1,149 2.12 %

Held to maturity securities (1)

142,740 1,224 1.71 % 155,862 1,348 1.73 %

Bank loans 47,374 1,011 4.29 % 41,046 900 4.40 %

Total interest-earning assets 424,985 7,338 3.44 % 428,020 7,513 3.49 %

Securities lending revenue 156 171

Other interest revenue 50 74

Total interest-earning assets $ 424,985 $ 7,544 3.54 % $ 428,020 $ 7,758 3.60 %

Funding sources

Bank deposits $ 241,660 $ 762 0.64 % $ 266,243 $ 1,761 1.33 %

Payables to brokers, dealers, and clearing organizations (2)

15,424 304 3.93 % 5,577 112 3.97 %

Payables to brokerage clients 91,305 120 0.27 % 68,011 150 0.44 %

Other short-term borrowings 7,172 169 4.74 % 8,327 232 5.60 %

Federal home loan bank borrowings 10,236 243 4.72 % 25,220 678 5.35 %

Long-term debt 21,448 418 3.87 % 23,730 432 3.64 %

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

Net interest revenue increased $473 million, or 21%, in the first quarter of 2025, compared to the same period in 2024.

This increase was primarily due to lower balances of bank supplemental funding, lower average rates paid on funding sources, and growth in margin and bank lending, partially offset by lower yields on floating-rate assets due to lower market rates.

Average interest-earning assets declined by 2% in the first quarter of 2025 from the first quarter of 2024, as cash inflows from AFS and HTM securities were used to pay down bank supplemental funding amid improvement in client cash trends.

The decrease was partially offset by growth in margin lending, which was supported by higher payables to brokerage clients and increased securities lending, and growth in bank loans.

Net interest margin increased to 2.53% in the first quarter of 2025, compared to 2.02% during the same period in 2024, as lower rates paid on funding sources and reduced balances of bank supplemental funding more than offset lower yields on floating-rate assets due to lower market interest rates.

The Company continues to prioritize repayment of bank supplemental funding balances and expects the total outstanding balance to continue to decrease over time to a level consistent with our diversified long-term funding profile.

Our use and the financial impacts of such bank supplemental funding are dependent on several factors, including the volume and pace of clients’ cash allocation activity, which are driven primarily by changes in market interest rates, client engagement with equity markets, as well as asset gathering and the level of maturities and paydowns on our investment securities portfolios.

The Company may rollover certain balances outstanding at March 31, 2025 into new borrowings, the amount and costs of which will depend on the above noted factors.

See also Risk Management – Liquidity Risk, Capital Management, Item 1 – Notes 8, 9, and 12 for additional information on these and other funding sources.

Net interest revenue increased $664 million, or 31%, and $1.1 billion, or 26%, in the second quarter and first six months of 2025, respectively, compared to the same periods in 2024.

These increases were primarily due to lower balances of bank supplemental funding, lower average rates paid on funding sources, and growth in bank lending, partially offset by lower yields on floating-rate assets due to lower market rates.

Average interest-earning assets remained relatively flat, increasing slightly in the second quarter of 2025, and decreasing slightly in the first six months of 2025, compared to the same periods in 2024.

Both the second quarter and first six months of 2025 had higher balances of cash and investments segregated, growth in margin lending supported by higher payables to brokerage clients, and an increase in bank loans compared to the same periods in 2024.

The decrease in average interest-earning assets during the first six months of 2025 was due primarily to lower average balances in AFS and HTM securities, as cash inflows from investment securities were used to pay down bank supplemental funding.

Net interest margin increased to 2.65% and 2.59% in the second quarter and first six months of 2025, respectively, compared to 2.03% during both the second quarter and first six months of 2024, as reduced balances of bank supplemental funding and lower rates paid on funding sources more than offset lower yields on floating-rate assets due to lower market interest rates.

The Company continues to prioritize repayment of bank supplemental funding balances.

Schwab expects the total outstanding balance of bank supplemental funding to continue to decrease and is nearing a level consistent with our diversified long-term funding profile that includes the strategic use of wholesale funding.

Our use and the financial impacts of such bank supplemental funding are dependent on a number of market and client activity factors.

See also Risk Management – Liquidity Risk, Capital Management, Item 1 – Notes 8, 9, and 12, and Part II – Item 7 – Results of Operations – Net Interest Revenue in the 2024 Form 10-K for additional information on these and other funding sources.

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

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

Three Months Ended March 31, 2025 2024

Three Months Ended June 30, 2025 2024

Assets Revenue Average

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Total asset management and administration fees $ 1,570 $ 1,383

Six Months Ended June 30,

Schwab money market funds $ 633,143 $ 860 0.27 % $ 511,776 $ 693 0.27 %

Schwab equity and bond funds, ETFs, and CTFs 660,191 244 0.07 % 552,755 219 0.08 %

Mutual Fund OneSource and other NTF funds (1)

355,092 440 0.25 % 326,387 423 0.26 %

Other third-party mutual funds and ETFs (1)

613,576 205 0.07 % 603,263 208 0.07 %

Total mutual funds, ETFs, and CTFs (2)

$ 2,262,002 $ 1,749 0.16 % $ 1,994,181 $ 1,543 0.16 %

Managed investing solutions (2)

Fee-based $ 592,843 $ 1,158 0.39 % $ 515,911 $ 1,013 0.39 %

Non-fee-based 120,584 — — 108,133 — —

Total managed investing solutions $ 713,427 $ 1,158 0.33 % $ 624,044 $ 1,013 0.33 %

Other balance-based fees (3)

844,053 152 0.04 % 741,599 138 0.04 %

Total asset management and administration fees $ 3,100 $ 2,731

(1) The second quarter and first six months of 2025 include transfers from other third-party mutual funds and ETFs to Mutual Fund OneSource ® and other NTF funds.

(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.

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

Asset management and administration fees increased by $182 million, or 14%, in the first quarter of 2025 compared to the same period in 2024.

This increase was primarily a result of continued growth in Schwab money market funds amid the ongoing elevated interest rate environment.

The increase in asset management and administration fees in the first quarter of 2025 was also due to growth in fee-based managed investing solutions and Mutual Fund OneSource ® .

These increases reflected the Company’s asset gathering and net inflows into managed investing solutions, as well as year-over-year equity market appreciation, which more than offset equity market declines experienced in the first quarter of 2025.

Asset management and administration fees increased by $187 million, or 14%, and $369 million, or 14%, in the second quarter and first six months of 2025, respectively, compared to the same periods in 2024.

These increases were primarily a result of continued growth in Schwab money market funds amid the ongoing elevated interest rate environment.

These increases were also due to growth in fee-based managed investing solutions, Schwab equity and bond funds, ETFs, and CTFs, and Mutual Fund OneSource ® , reflecting the Company’s asset gathering and net inflows into managed investing solutions, as well as year-over-year equity market appreciation.

THE CHARLES SCHWAB CORPORATION

1 unchanged sentence

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

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.

These funds generated 50% and 48% of the asset management and administration fees earned in the first quarter of 2025 and 2024, respectively:

The following tables present 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.

These funds generated 50% of the asset management and administration fees earned in both the second quarter and first six months of 2025, compared with 49% in both the second quarter and first six months of 2024:

Market Funds Schwab Equity and

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and Other NTF funds

Three Months Ended March 31, 2025 2024 2025 2024 2025 2024

Three Months Ended June 30, 2025 2024 2025 2024 2025 2024

Balance at beginning of period $ 641,532 $ 515,678 $ 625,224 $ 548,890 $ 340,280 $ 329,176

3 unchanged sentences

Balance at end of period $ 653,473 $ 533,586 $ 689,355 $ 564,002 $ 453,919 $ 344,813

Six Months Ended June 30,

Balance at beginning of period $ 596,531 $ 476,409 $ 627,166 $ 506,149 $ 347,798 $ 306,222

Net inflows (outflows) 43,910 42,235 25,203 16,513 (14,850) (11,024)

Net market gains (losses) and other (1)

13,032 14,942 36,986 41,340 120,971 49,615

Balance at end of period $ 653,473 $ 533,586 $ 689,355 $ 564,002 $ 453,919 $ 344,813

(1) Includes $63.3 billion of transfers from other third-party mutual funds and ETFs to Mutual Fund OneSource ® and other NTF Funds for the three and six months ended June 30, 2025.

Trading Revenue

1 unchanged sentence

Three Months Ended

March 31, Percent

June 30, Percent

Change Six Months Ended

June 30, Percent

2025 2024 2025 2024

Commissions $ 431 $ 383 13 % $ 862 $ 796 8 %

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Three Months Ended

March 31, Percent

June 30, Percent

Change Six Months Ended

June 30, Percent

2025 2024 2025 2024

DATs (in thousands) 7,571 5,486 38 % 7,482 5,718 31 %

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(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 $91 million, or 11%, in the first quarter of 2025 compared to the same period in 2024, primarily driven by an increase in order flow revenue reflecting higher volume.

Commission revenue increased due to higher volume, partially offset by changes in the mix of client trading activity.

Offsetting the increase in commission revenue, principal transactions revenue decreased reflecting changes to the fair value of securities positions held to facilitate client activity and cash and investments segregated for regulatory purposes.

Trading revenue increased $175 million, or 23%, and $266 million, or 17%, in the second quarter and first six months of 2025, respectively, compared to the same periods in 2024, primarily driven by an increase in order flow revenue reflecting higher volume.

Commission revenue increased during the second quarter and first six months of 2025 compared to the same periods of 2024 due to higher volume, partially offset by changes in the mix of client trading activity.

Principal transactions revenue increased

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)

during the second quarter of 2025 compared to the same period in 2024, reflecting changes to the fair value of securities positions held to facilitate client activity and cash and investments segregated for regulatory purposes, and remained consistent during the first six months of 2025 compared to the same period in 2024.

Bank Deposit Account Fees

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See Item 1 – Note 10 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)

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

Three Months Ended March 31, Percent

Three Months Ended June 30, Percent

Change Six Months Ended

June 30, Percent Change

2025 2024 2025 2024

Bank deposit account fees $ 247 $ 153 61 % $ 492 $ 336 46 %

Average BDA balances $ 84,186 $ 92,859 (9) %

Average bank deposit account balances (BDA balances) $ 82,265 $ 87,016 (5) % $ 83,220 $ 89,938 (7) %

Average net yield 1.19 % 0.70 % 1.18 % 0.74 %

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Floating-rate balances 22 % 12 % 22 % 12 %

Bank deposit account fees increased $62 million, or 34%, in the first quarter of 2025, compared to the same period in 2024, primarily due to a decrease in the amount paid to clients as a result of lower interest rates in the first quarter of 2025 compared to the same period in 2024, partially offset by lower average BDA balances.

The decrease in average BDA balances in the first quarter of 2025 compared to the same period in 2024 was primarily due to client cash allocation decisions in 2024 in response to elevated short-term market interest rates through most of 2024.

Average net yield increased in the first quarter of 2025 compared to the same period in 2024 due to an increase in the average amount of floating-rate BDA balances, which was partially offset by a decrease in the average net yields on fixed-rate and floating-rate BDA balances.

The percentages of BDA balances designated as fixed-rate and floating-rate obligation amounts as of March 31, 2025 were 77% and 23%, respectively.

Bank deposit account fees increased $94 million, or 61%, and $156 million, or 46%, in the second quarter and first six months of 2025, respectively, compared to the same periods in 2024, primarily due to a decrease in the amount paid to clients as a result of lower interest rates, partially offset by lower average BDA balances.

The decrease in average BDA balances in the second quarter and first six months of 2025 compared to the same periods in 2024 was primarily due to client cash allocation decisions in 2024 in response to elevated short-term market interest rates through most of 2024.

Average net yield increased in the second quarter and first six months of 2025 compared to the same periods in 2024 due to an increase in the average amount of floating-rate BDA balances, which was partially offset by a decrease in the average net yields on fixed-rate and floating-rate BDA balances.

The percentages of BDA balances designated as fixed-rate and floating-rate obligation amounts as of June 30, 2025 were 78% and 22%, respectively.

Other Revenue

Other revenue includes industry 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 $51 million, or 32%, in the first quarter of 2025 compared to the same period in 2024, primarily due to higher industry fees.

Industry fees increased primarily due to higher SEC fee rates in effect during the first quarter of 2025 compared to the same period in 2024 and an increase in trading volumes.

Subsequent to March 31, 2025, the SEC announced that effective May 14, 2025, it would decrease the fee rate applicable to most securities transactions to zero from the rate in effect since May 22, 2024.

This change will result in lower industry fees in other revenue and a corresponding decrease in other expense after the effective date, resulting in no impact to net income.

Other revenue increased $41 million, or 19%, and $92 million, or 24%, in the second quarter and first six months of 2025, respectively, compared to the same periods in 2024.

These increases were primarily due to higher industry fees and a gain from the sale of an equity investment.

Industry fees increased in the second quarter of 2025 primarily due to higher DATs, partially offset by lower average SEC fee rates in effect compared to the same period in 2024.

Industry fees increased in the first six months of 2025 primarily due to higher average SEC fee rates in effect compared to the same period in 2024.

Effective May 14, 2025, the SEC decreased the fee rate applicable to most securities transactions to zero from the rate in effect since May 22, 2024.

This change will result in lower industry fees in other revenue and a corresponding decrease in other expense, resulting in no impact to net income.

THE CHARLES SCHWAB CORPORATION

4 unchanged sentences

Three Months Ended

March 31, Percent

June 30, Percent

Change Six Months Ended

June 30, Percent

2025 2024 2025 2024

Compensation and benefits

18 unchanged sentences

Average 32.3 32.3 — 32.2 32.5 (1) %

Expenses excluding interest increased by $202 million, or 7%, in the first quarter of 2025 compared to the same period in 2024.

Adjusted total expenses, which excludes acquisition and integration-related costs, amortization of acquired intangible assets, and restructuring costs, increased 8% in the first quarter of 2025 compared to the same period in 2024.

Expenses excluding interest increased $105 million, or 4%, and $307 million, or 5%, in the second quarter and first six months of 2025, respectively, compared to the same periods in 2024.

Adjusted total expenses, which excludes acquisition and integration-related costs, amortization of acquired intangible assets, and restructuring costs, increased 5% and 7% in the second quarter and first six months of 2025, respectively, compared to the same periods in 2024.

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

There were no acquisition and integration-related costs or restructuring costs in the first quarter of 2025.

Total compensation and benefits expense increased in the first quarter of 2025 compared to the same period in 2024, primarily due to annual merit increases and higher incentive compensation.

In the first quarter of 2024, compensation and benefits included a $31 million benefit due to a change in estimated restructuring costs, and also acquisition and integration-related costs of $17 million.

Professional services expense increased in the first quarter of 2025 compared to the same period in 2024, reflecting increased utilization of technology and other professional services to support overall growth of the business.

Professional services included acquisition and integration-related costs of $17 million in the first quarter of 2024.

Occupancy and equipment expense increased in the first quarter of 2025 compared to the same period in 2024, reflecting higher building expenses and technology equipment and software costs related to growth of the business.

Occupancy and equipment included restructuring costs of $2 million in the first quarter of 2024.

Advertising and market development expense increased in the first quarter of 2025 compared to the same period in 2024, primarily due to higher client promotional spending.

Communications expense increased in the first quarter of 2025 compared to the same period in 2024, primarily as a result of higher exchange quotation services expenses.

Depreciation and amortization expense decreased in the first quarter of 2025 compared to the same period in 2024, primarily due to finance lease terminations in 2024 and lower depreciation on equipment due to abandonment of certain data centers in 2024 related to the integration of Ameritrade Holding LLC (Ameritrade Holding) and its consolidated subsidiaries (collectively, Ameritrade).

There were no acquisition and integration-related costs or restructuring costs in the second quarter and first six months of 2025.

Total compensation and benefits expense increased in the second quarter and first six months of 2025 compared to the same periods in 2024, primarily due to annual merit increases, higher incentive compensation, and higher other employee-related costs.

Compensation and benefits included a $3 million and $34 million benefit in the second quarter and first six months of 2024, respectively, due to a change in estimated restructuring costs.

Compensation and benefits also included acquisition and integration-related costs of $18 million and $35 million in the second quarter and first six months of 2024, respectively.

Professional services expense increased in the second quarter and first six months of 2025 compared to the same periods in 2024, reflecting overall growth of business and increased utilization of technology and other professional services.

Professional services included acquisition and integration-related costs of $12 million and $29 million in the second quarter and first six months of 2024, respectively.

Occupancy and equipment expense increased in the second quarter and first six months of 2025 compared to the same periods in 2024, primarily driven by higher technology equipment and software costs related to growth of the business and a benefit related to property taxes reflected in the second quarter of 2024.

Occupancy and equipment included restructuring costs of $1 million and $3 million in the second quarter and first six months of 2024, respectively.

Advertising and market development expense increased slightly in the second quarter and first six months of 2025 compared to the same period in 2024, primarily due to higher client promotional spending.

THE CHARLES SCHWAB CORPORATION

1 unchanged sentence

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

Amortization of acquired intangible assets remained consistent in the first quarter of 2025 with the same period in 2024.

Regulatory fees and assessments decreased in the first quarter of 2025 compared to the same period in 2024.

The decrease in the first quarter of 2025 was primarily due to a $25 million incremental FDIC special assessment in the first quarter of 2024 and lower FDIC deposit insurance assessments, reflecting a decrease in brokered CDs and a lower assessment base, compared to the first quarter of 2024.

Other expense increased in the first quarter of 2025 compared to the same period in 2024, primarily due to higher industry fees.

Industry fees increased primarily due to higher SEC fee rates in effect during the first quarter of 2025 compared to the first quarter of 2024 and an increase in trading volumes.

This change will result in lower industry fees in other expense and a corresponding decrease in other revenue after the effective date, resulting in no impact to net income.

Capital expenditures were $156 million and $122 million in the first quarter of 2025 and 2024, respectively.

Capital expenditures increased in the first quarter of 2025 compared to the same period in 2024, primarily due to higher investment in purchased software and buildings, partially offset by lower internally developed software.

Communications expense increased in the second quarter and first six months of 2025 compared to the same periods in 2024.

The increase in the second quarter was primarily due to higher proxy-related expenses reflecting growth in the business, partially offset by lower telecommunications expenses.

The increase in the year-to-date period reflected higher exchange quotation services and proxy-related expenses, partially offset by lower telecommunications expenses.

Depreciation and amortization expense decreased in the second quarter and first six months of 2025 compared to the same periods in 2024, primarily due to finance lease terminations in 2024 and lower depreciation on equipment due to abandonment of certain data centers in 2024 related to the integration of Ameritrade Holding LLC (Ameritrade Holding) and its consolidated subsidiaries (collectively, Ameritrade).

Depreciation and amortization expense included acquisition and integration-related costs of $5 million in the second quarter and first six months of 2024 .

Amortization of acquired intangible assets remained consistent in the second quarter and first six months of 2025 compared to the same periods in 2024.

Regulatory fees and assessments decreased in the second quarter and first six months of 2025 compared to the same periods in 2024.

The decrease in the second quarter of 2025 was primarily due to lower FDIC deposit insurance assessments.

The decrease in the first six months of 2025 was primarily due to a $25 million incremental FDIC special assessment in the first quarter of 2024 and lower FDIC deposit insurance assessments, reflecting a decrease in brokered CDs and a lower assessment base.

Other expense was largely consistent in the second quarter and increased in the first six months of 2025 compared to the same periods in 2024.

The year-over-year change in the second quarter of 2025 was due to several offsetting items, including a charge recognized in the second quarter of 2024 for the SEC’s industry-wide review of off-channel communications, and certain higher costs in 2025 related to growth of the business and increased client trading volume, including higher industry fees.

The increase in the first six months of 2025 from the same period in 2024 reflected higher industry fees due to increased trading volume and higher average SEC fee rates.

Effective May 14, 2025, the SEC decreased the fee rate applicable to most securities transactions to zero from the rate in effect since May 22, 2024.

This change will result in lower industry fees in other expense and a corresponding decrease in other revenue, resulting in no impact to net income.

Other expense included restructuring costs of $12 million and $13 million in the second quarter and first six months of 2024, respectively.

Capital expenditures were $136 million and $92 million in the second quarter of 2025 and 2024, respectively, and $292 million and $214 million in the first six months of 2025 and 2024, respectively.

Capital expenditures increased in the second quarter and first six months of 2025 compared to the same periods in 2024, primarily due to higher investment in purchased software, information technology and telecommunications equipment, and buildings, partially offset by lower internally developed software.

We continue to anticipate capital expenditures for full-year 2025 will be approximately 3-5% of total net revenues.

Taxes on Income

Taxes on income were $546 million and $436 million for the first quarter of 2025 and 2024, respectively, resulting in effective tax rates of 22.2% and 24.2%, respectively.

The decrease in the effective tax rate in the first quarter of 2025 compared to the same period in 2024 was primarily due to the reversal of tax reserves due to the resolution of certain state tax matters during the first quarter of 2025, an increase in equity compensation tax deduction benefits, and a decrease in non-deductible FDIC deposit insurance assessments.

Taxes on income were $677 million and $415 million for the second quarter of 2025 and 2024, respectively, resulting in effective tax rates of 24.2% and 23.8%, respectively.

Taxes on income were $1.2 billion and $851 million for the first six months of 2025 and 2024 , respectively, resulting in tax rates of 23.3% and 24.0%, respectively.

The increase in the effective tax rate in the second quarter of 2025 compared to the same period in 2024 was primarily due to an increase in the state tax rate, partially offset by the recognition of certain tax credits, a decrease in non-deductible FDIC deposit insurance assessments, and the reversal of tax reserves due to the resolution of certain state tax matters during the second quarter of 2025.

The decrease in the effective tax rate in the first six months of 2025 compared to the same period in 2024 was primarily due to the reversal of tax reserves due to the resolution of certain state tax matters during 2025, a decrease in non-deductible FDIC deposit insurance assessments, an increase in equity compensation tax deduction benefits, and the recognition of certain tax credits, partially offset by an increase in the state tax rate.

THE CHARLES SCHWAB CORPORATION

4 unchanged sentences

Investor Services Advisor Services Total

Three Months Ended March 31, Percent Change 2025 2024 Percent Change 2025 2024 Percent Change 2025 2024

Three Months Ended June 30, Percent Change 2025 2024 Percent Change 2025 2024 Percent Change 2025 2024

Net interest revenue 29 % $ 2,244 $ 1,736 37 % $ 578 $ 422 31 % $ 2,822 $ 2,158

9 unchanged sentences

Advertising and market development — 70 70 3 % 38 37 1 % 108 107

Communications 1 % 120 119 6 % 56 53 2 % 176 172

Depreciation and amortization (12) % 162 185 10 % 53 48 (8) % 215 233

Amortization of acquired intangible assets (1) % 104 105 — 24 24 (1) % 128 129

Regulatory fees and assessments (18) % 62 76 (25) % 15 20 (20) % 77 96

Other 1 % 209 206 (12) % 38 43 (1) % 247 249

Total expenses excluding interest 3 % 2,361 2,282 4 % 687 661 4 % 3,048 2,943

Income before taxes on income 59 % $ 2,274 $ 1,434 69 % $ 529 $ 313 60 % $ 2,803 $ 1,747

Net New Client Assets (in billions) (2)

(22) % $ 31.2 $ 40.1 24 % $ 42.4 $ 34.1 (1) % $ 73.6 $ 74.2

Six Months Ended June 30,

Net interest revenue 26 % $ 4,402 $ 3,502 27 % $ 1,126 $ 889 26 % $ 5,528 $ 4,391

Asset management and administration fees 14 % 2,258 1,976 12 % 842 755 14 % 3,100 2,731

Trading revenue 18 % 1,657 1,405 7 % 203 189 17 % 1,860 1,594

Bank deposit account fees 48 % 385 260 41 % 107 76 46 % 492 336

Other 22 % 378 310 35 % 92 68 24 % 470 378

Total net revenues 22 % 9,080 7,453 20 % 2,370 1,977 21 % 11,450 9,430

Expenses Excluding Interest

Compensation and benefits 7 % $ 2,476 $ 2,311 8 % $ 732 $ 677 7 % $ 3,208 $ 2,988

Professional services 11 % 445 400 15 % 115 100 12 % 560 500

Occupancy and equipment 7 % 427 399 3 % 117 114 6 % 544 513

Advertising and market development 2 % 134 132 11 % 70 63 5 % 204 195

Communications 7 % 233 218 1 % 96 95 5 % 329 313

Depreciation and amortization (12) % 327 371 17 % 105 90 (6) % 432 461

Amortization of acquired intangible assets (18) % 106 129 N/M 24 1 — 130 130

Amortization of acquired intangible assets (10) % 210 234 92 % 48 25 — 258 259

Regulatory fees and assessments (22) % 132 170 (33) % 34 51 (25) % 166 221

5 unchanged sentences

(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 the first quarter of 2025, and prior-year amounts have been recast to reflect this new basis of segmentation.

(2) In the first quarter of 2025 and 2024, Investor Services includes net outflows of $5.3 billion and $7.4 billion, respectively, from off-platform brokered CDs issued by CSB.

N/M Not meaningful.

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

Segment Net Revenues

Investor Services and Advisor Services total net revenues increased by 19% and 15%, respectively, in the first quarter of 2025 compared to the same period in 2024.

Net interest revenue increased for both segments, primarily as a result of lower balances of bank supplemental funding, lower average rates paid on funding sources, and growth in margin and bank lending, partially offset by lower average interest-earnings assets.

Asset management and administration fees increased for both segments, primarily as a result of higher balances in money market funds, equity and bond funds, ETFs, CTFs, and Mutual Fund OneSource ® , and, additionally for Investor Services, managed investing solutions.

Trading revenue increased for both segments, primarily due to higher order flow revenue as a result of higher trading volume and increased commission revenue, partially offset by changes in the mix of client trading activity and lower principal transactions revenue.

Bank deposit account fees increased for both segments, primarily due to an increase in average net yield partially offset by lower average BDA balances.

Other revenue increased for both segments, primarily due to higher industry fees.

Segment Expenses Excluding Interest

Investor Services and Advisor Services total expenses excluding interest increased by 5% and 13%, respectively, in the first quarter of 2025, compared to the same period in 2024.

Compensation and benefits expense increased in both segments, primarily due to annual merit increases, higher incentive compensation, and employee benefits and taxes.

Professional services expense increased in both segments, due to increased utilization of technology and other professional services to support overall growth of the business.

Regulatory fees and assessments decreased for both segments primarily due to a $25 million incremental FDIC special assessment in the first quarter of 2024 and lower FDIC assessments.

Other expenses increased for both segments primarily due to higher industry fees driven by higher SEC fee rates coupled with higher trading volumes.

Accordingly, amounts related to the Retirement Business Services business unit are included within Investor Services for the second quarter and six months ended June 30, 2025, and prior-year amounts have been recast to reflect this new basis of segmentation.

(2) In the second quarter and first six months of 2025, Investor Services includes net outflows of $6.7 billion and $12.0 billion, respectively, from off-platform brokered CDs issued by CSB.

In the second quarter and first six months of 2024, Investor Services includes net inflows of $2.7 billion and net outflows of $4.7 billion, respectively, from off-platform brokered CDs issued by CSB.

Also in the second quarter and first six months of 2024, Investor Services includes an inflow of $10.3 billion from a mutual fund clearing services client.

THE CHARLES SCHWAB CORPORATION

1 unchanged sentence

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

Segment Net Revenues

Investor Services and Advisor Services total net revenues increased by 25% for both segments, in the second quarter of 2025, and increased by 22% and 20%, respectively, in the first six months of 2025, compared to the same periods in 2024.

Schwab’s net revenues increased similarly for both segments in the second quarter and first six months of 2025 compared to the same periods in 2024.

Net interest revenue increased primarily due to continued paydowns of bank supplemental funding, lower average rates paid on funding sources, and growth of bank lending, partially offset by lower yields on interest-earning assets.

Asset management and administration fees increased primarily as a result of higher balances in money market funds, Schwab equity and bond funds, ETFs, and CTFs, and Mutual Fund OneSource ® , and, additionally for Investor Services, managed investing solutions.

Trading revenue increased primarily due to higher order flow revenue and commission revenue due primarily to higher volume, and, in the second quarter, higher principal transactions revenue.

Bank deposit account fees increased primarily due to improved net yields partially offset by lower average BDA balances.

Other revenue increased primarily due to higher industry fees and a recognized gain on an equity investment in the second quarter of 2025.

Segment Expenses Excluding Interest

Investor Services and Advisor Services total expenses excluding interest increased by 3% and 4%, respectively, in the second quarter of 2025, and increased by 4% and 8%, respectively, in the first six months of 2025 compared to the same periods in 2024.

Most expenses changed similarly in the two segments in the second quarter and first six months of 2025 compared to the same periods in 2024.

Compensation and benefits expense increased primarily due to annual merit increases, higher incentive compensation, and higher employee-related costs.

Professional services expense increased due to overall growth of business and increased utilization of technology and other professional services .

Occupancy and equipment expense increased primarily due to higher technology equipment and software costs related to growth of the business and a property tax benefit reflected in the second quarter of 2024.

Regulatory fees and assessments decreased for both segments during the second quarter and first six months of 2025 compared to the same periods in 2024, primarily due to lower FDIC fees.

Additionally, during the first six months of 2025, regulatory fees and assessments decreased due to a $25 million incremental FDIC special assessment in the first quarter of 2024.

RISK MANAGEMENT

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Financial instruments are also subject to the risk that valuations will be negatively affected by changes in demand and the underlying market for a financial instrument.

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 are indirectly exposed to option, futures, and equity market fluctuations in connection with client option and futures accounts, securities collateralizing margin loans to brokerage customers, and client securities loaned out as part of the brokerage securities lending activities.

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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.

We use independent third-party models to simulate net interest revenue sensitivity and related analyses.

We use both proprietary and independent third-party models to simulate net interest revenue sensitivity and related analyses.

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.

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These assets are sensitive to changes in interest rates and changes in prepayment levels that tend to increase in a declining rate environment and decrease in a rising rate environment.

Because we establish the rates paid on certain brokerage client cash balances and bank deposits and the rates charged on certain margin and bank loans, and control the composition of our

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)

investment securities, we have some ability to manage our net interest spread, depending on competitive factors and market conditions.

Because we establish the rates paid on certain brokerage client cash balances and bank deposits and the rates charged on certain margin and bank loans, and control the composition of our investment securities, we have some ability to manage our net interest spread, depending on competitive factors and market conditions.

When we have liquidity needs that exceed our primary sources of funding, the Company has needed to utilize higher-cost funding sources, which can reduce net interest margin and net interest revenue.

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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.

The following table assumes a statically-sized balance sheet with simulated changes to net interest revenue over the next 12 months beginning March 31, 2025 and December 31, 2024 of a gradual increase or decrease in market interest rates relative to prevailing market rates at the end of each reporting period:

March 31, 2025 December 31, 2024

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 assumes a statically-sized balance sheet with simulated changes to net interest revenue over the next 12 months beginning June 30, 2025 and December 31, 2024 of a gradual increase or decrease in market interest rates relative to prevailing market rates at the end of each reporting period:

June 30, 2025 December 31, 2024

Increase of 200 basis points 7.8% 8.6%

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Decrease of 200 basis points (7.9)% (9.3)%

The Company’s simulated incremental increases in market interest rates had a largely consistent impact on net interest revenue as of March 31, 2025 compared to December 31, 2024.

The Company’s simulated incremental decreases in market interest rates had a smaller impact on net interest revenue as of March 31, 2025 compared to December 31, 2024, primarily due to lower balances of floating-rate interest-earning assets.

The Company’s simulated incremental increases and decreases in market interest rates had a smaller impact on net interest revenue as of June 30, 2025 compared to December 31, 2024, primarily due to the use of cash flow hedges related to Schwab’s PALs beginning in the second quarter of 2025, and lower cash balances.

Effective Duration

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

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

March 31, 2025 March 31, 2024

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

June 30, 2025 June 30, 2024

Estimated effective duration, exclusive of derivatives:

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AFS and HTM investment securities portfolio 4.0 3.9

Pledged asset lines (1)

Long-term debt CSC Senior Notes 3.1 3.6

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AFS and HTM investment securities portfolio 3.8 3.8

Pledged asset lines (1)

Long-term debt CSC Senior Notes 2.4 3.6

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

AFS and HTM securities comprised approximately 47% and 55% of the Company’s consolidated total assets as of March 31, 2025 and 2024, respectively.

The estimated effective duration of the remaining balance sheet assets in aggregate was less than one year as of both March 31, 2025 and 2024.

(1) The duration of PALs was less than 0.1 years at June 30, 2024.

(2) See Item 1 – Note 11 for additional discussion of the Company’s derivatives.

AFS and HTM securities comprised approximately 45% and 55% of the Company’s consolidated total assets as of June 30, 2025 and 2024, respectively.

The estimated effective duration of the remaining balance sheet assets in aggregate was less than one year as of both June 30, 2025 and 2024.

Economic Value of Equity Simulation

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EVE is calculated by subjecting the balance sheet to hypothetical instantaneous shifts in the level of interest rates.

This analysis is highly dependent upon asset and liability assumptions based on historical behaviors.

This analysis is highly dependent upon asset and liability assumptions based on historical and certain

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)

expected behaviors.

Key assumptions in our EVE calculation include projection of interest rate scenarios with rate floors, prepayment speeds of mortgage-related investments, term structure models of interest rates, behavior of non-maturity client cash held on the balance sheet, and pricing assumptions.

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Consistent with the presentation on the consolidated statement of income, the sensitivity of bank deposit account fee revenue to interest rate changes is assessed separately from the net interest revenue simulation described above.

As of March 31, 2025 and December 31, 2024, simulated changes in bank deposit account fee revenue from gradual changes in market interest rates relative to prevailing market rates, under the interest rate scenarios described above for net interest revenue, did not have a significant impact on the Company’s total net revenues.

As of June 30, 2025 and December 31, 2024, simulated changes in bank deposit account fee revenue from gradual changes in market interest rates relative to prevailing market rates, under the interest rate scenarios described above for net interest revenue, did not have a significant impact on the Company’s total net revenues.

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

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

The liquidity needs of our broker-dealer

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)

subsidiary are primarily driven by client activity, including trading and margin lending activities, and capital expenditures.

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, 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.

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 and the Fixed Income Clearing Corporation (FICC), 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’ bank deposits and brokerage cash balances primarily originate from our 37.5 million active brokerage accounts.

More than 80% of our bank deposits qualified for FDIC insurance as of March 31, 2025.

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.

More than 80% of our bank deposits qualified for FDIC insurance as of June 30, 2025.

Our clients’ allocation of cash held on

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 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.

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

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

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 describes certain external debt facilities available at March 31, 2025:

The following table describes certain external debt facilities available at June 30, 2025:

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

FHLB secured credit facilities Banking subsidiaries $ 9,000 $ 67,255 (1)

April 2025 - September 2025 4.60%

July 2025 - October 2025 4.40%

Federal Reserve discount window Banking subsidiaries — 29,863 (1)

Repurchase agreements Banking subsidiaries, CSC 5,991 — (2)

April 2025 - August 2025 4.65%

July 2025 - October 2025 4.45%

Unsecured uncommitted lines of credit with

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Unsecured commercial paper CSC 2,000 3,000 (3)

June 2025 - August 2025 4.53%

July 2025 - November 2025 4.52%

Secured uncommitted lines of credit with

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July 2025 4.84%

(1) Amounts shown as available from the FHLB and Federal Reserve facilities represent remaining capacity based on assets pledged as of March 31, 2025.

(1) Amounts shown as available from the FHLB and Federal Reserve facilities represent remaining capacity based on assets pledged as of June 30, 2025.

Incremental borrowing capacity may be made available by pledging additional assets, subject to applicable facility terms.

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See below and Item 1 – Note 12 for additional information.

(3) Outstanding balance of unsecured commercial paper as of March 31, 2025 represents the gross par value before discount of $15 million.

(3) Outstanding balance of unsecured commercial paper as of June 30, 2025 represents the gross par value before discount of $19 million.

(4) 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.

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Available borrowing capacity from the FHLB and Federal Reserve facilities maintained by our banking subsidiaries is dependent on the value of assets pledged and the terms of the borrowing arrangements.

As of March 31, 2025, the Company had additional investment securities with a par value of approximately $112 billion, or a fair value of approximately $104 billion, available to be pledged to obtain additional capacity.

As of June 30, 2025, the Company had additional investment securities with a par value of approximately $104 billion, or a fair value of approximately $97 billion, available to be pledged to obtain additional capacity.

Additional details regarding availability and use of these facilities is described below.

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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 and the Fixed Income Clearing Corporation (FICC) in repurchase agreements collateralized by investment securities as another source of short-term liquidity.

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

In addition, our banking subsidiaries are counterparties to the Standing Repo Facility with the Federal Reserve Bank of New York;

other than de minimis tests performed to satisfy the Federal Reserve Bank of New York’s testing requirements, this facility was not used during the first three months of 2025 and there were no amounts outstanding at March 31, 2025.

CSC maintains standing bilateral repurchase agreements with external banks.

Other than de minimis tests, these facilities were not used during the first three months of 2025 and there were no amounts outstanding under these facilities at March 31, 2025.

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 March 31, 2025.

CSC also has a universal automatic shelf registration statement on file with the SEC, which enables it to issue debt, equity, and other securities.

other than de minimis tests performed to satisfy the Federal Reserve Bank of New York’s testing requirements, this

THE CHARLES SCHWAB CORPORATION

1 unchanged sentence

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

facility was not used during the first six months of 2025 and there were no amounts outstanding at June 30, 2025.

CSC maintains standing bilateral repurchase agreements with external banks.

Other than de minimis tests, these facilities were not used during the first six months of 2025 and there were no amounts outstanding under these facilities at June 30, 2025.

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 unsecured uncommitted bank credit lines with a group of banks as a source of short-term liquidity, which can also be accessed by CSC.

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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 March 31, 2025, liabilities for securities loaned totaled $14.7 billion and are included in payables to brokers, dealers, and clearing organizations on the condensed consolidated balance sheet.

As of March 31, 2025, $9.4 billion of securities loaned had overnight and continuous remaining contractual maturities;

As of June 30, 2025, liabilities for securities loaned totaled $17.6 billion and are included in payables to brokers, dealers, and clearing organizations on the condensed consolidated balance sheet.

As of June 30, 2025, $13.4 billion of securities loaned had overnight and continuous remaining contractual maturities;

$4.2 billion of securities loaned had contractual maturities of 18-95 days and had a weighted-average interest rate of 4.69%.

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CSB issues brokered CDs as a supplemental funding source.

The following table provides information about brokered CDs issued by CSB and outstanding as of March 31, 2025:

The following table provides information about brokered CDs issued by CSB and outstanding as of June 30, 2025:

Amount Outstanding Maturity Weighted-Average Interest Rate

Brokered CDs $ 21,104 April 2025 - November 2025 4.82%

Brokered CDs $ 12,720 July 2025 - December 2025 4.32%

Cash Flow Activity

The Company’s cash and cash equivalents decreased $7.1 billion from year-end 2024 to $35.0 billion at March 31, 2025;

cash and cash equivalents, including amounts restricted, decreased $3.5 billion from year-end 2024 to $62.0 billion at March 31, 2025.

These decreases reflected a reduction of bank supplemental funding balances of $11.8 billion and maturities of long-term debt of $975 million.

Bank deposits decreased during the first three months of 2025 by $13.0 billion, which reflected a $6.7 billion decrease in deposits swept from brokerage accounts due to typical first quarter seasonality and a decrease of $6.6 billion in brokered CDs, partially offset by client net equity selling towards the end of the quarter.

The Company’s cash and cash equivalents decreased $9.9 billion from year-end 2024 to $32.2 billion at June 30, 2025;

cash and cash equivalents, including amounts restricted, decreased $9.9 billion from year-end 2024 to $55.6 billion at June 30, 2025.

These decreases reflected a reduction of bank supplemental funding balances of $22.2 billion, maturities of long-term debt of $2.2 billion, the redemption of Series G preferred stock for $2.5 billion, and repurchases of common and nonvoting common stock for $1.8 billion.

Bank deposits decreased during the first six months of 2025 by $26.1 billion, which reflected a decrease of $15.0 billion in brokered CDs and a $10.3 billion decrease in deposits swept from brokerage accounts due to typical seasonality, partially offset by client net equity selling during the second quarter.

The Company reduced FHLB borrowings and other short-term borrowings by a net total of $5.2 billion.

Partially offsetting the decrease in bank deposits and repayment of borrowings, net investing cash inflows from our AFS and HTM securities totaled $12.4 billion in the first three months of 2025, and net cash inflows from operations totaled $6.4 billion.

Partially offsetting the decrease in bank deposits and repayment of borrowings, net investing cash inflows from our AFS and HTM securities totaled $24.8 billion in the first six months of 2025, and net cash inflows from operations totaled $9.5 billion.

Liquidity Coverage Ratio

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See Part I – Item 1 – Business – Regulation in the 2024 Form 10-K for additional information.

The Company was in compliance with the LCR rule at March 31, 2025, and the table below presents information about our average daily LCR:

The Company was in compliance with the LCR rule at June 30, 2025, and the table below presents information about our average daily LCR:

Average for the Three Months Ended

March 31, 2025 December 31, 2024

June 30, 2025 March 31, 2025

Total eligible HQLA $ 54,707 $ 55,383

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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.

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 Stable Funding Ratio

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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.

The Company was in compliance with the NSFR rule at March 31, 2025.

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 was in compliance with the NSFR rule at June 30, 2025, and the table below presents information about our average NSFR:

Average for the Three Months Ended

June 30, 2025 March 31, 2025

ASF $ 198,858 $ 200,301

RSF 150,945 153,808

NSFR 132 % 130 %

Long-Term Borrowings

The Company’s long-term debt is primarily comprised of Senior Notes and totaled $21.5 billion and $22.4 billion at March 31, 2025 and December 31, 2024, respectively.

The following table provides information about our Senior Notes outstanding at March 31, 2025:

March 31, 2025 Par

The Company’s long-term debt is primarily comprised of Senior Notes and totaled $20.2 billion and $22.4 billion at June 30, 2025 and December 31, 2024, respectively.

The following table provides information about our Senior Notes outstanding at June 30, 2025:

June 30, 2025 Par

Outstanding Maturity Weighted Average

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New Debt Issuances

There were no new debt issuances of senior unsecured obligations in the first three months of 2025.

There were no new debt issuances of senior unsecured obligations in the first six months of 2025.

Equity Issuances and Redemptions

There were no new issuances of preferred stock in the first six months of 2025.

On June 2, 2025, the Company redeemed all of the 24,580 outstanding shares of its fixed-rate reset non-cumulative perpetual preferred stock, Series G, and the corresponding 2,457,964 depositary shares.

The depositary shares were redeemed at a redemption price of $1,000 per depositary share for a total of $2.5 billion.

Schwab enters into guarantees and other similar arrangements in the ordinary course of business.

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See also Item 1 – Condensed Consolidated Statements of Cash Flows, Item 1 – Note 8 for the Company’s bank deposits, Item 1 – Note 9 for the Company’s debt and borrowing facilities, Item 1 – Note 12 for the Company’s securities lending activities, and Item 1 – Note 14 for the Company’s equity outstanding balances and 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)

CAPITAL MANAGEMENT

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CSC and certain subsidiaries, including our banking and broker-dealer subsidiaries, are subject to various capital requirements set by regulatory agencies as discussed in further detail in Part II – Item 7 – Capital Management of the 2024 Form 10-K and in Item 1 – Note 17.

As of March 31, 2025, CSC and our banking subsidiaries are considered well capitalized, and CS&Co is in compliance with its net capital requirements.

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)

As of June 30, 2025, CSC and our banking subsidiaries are considered well capitalized, and CS&Co is in compliance with its net capital requirements.

The following table details the capital ratios for CSC (consolidated) and CSB:

March 31, 2025 December 31, 2024

June 30, 2025 December 31, 2024

CSC CSB CSC CSB

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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 at March 31, 2025 remained consistent with year-end 2024, ending the first quarter of 2025 at 9.9%.

CSB’s Tier 1 Leverage Ratio increased from 11.6% at year-end 2024, ending the first quarter of 2025 at 12.1% primarily as a result of lower total assets as well as net income during the quarter.

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 (see Part II – Item 7 – Current Regulatory and Other Developments in the 2024 Form 10-K), the Company has developed an adjusted Tier 1 Leverage Ratio, which is a non-GAAP financial measure that includes AOCI in the ratio.

The Company’s consolidated Tier 1 Leverage Ratio decreased to 9.8% at June 30, 2025 from 9.9% at both March 31, 2025 and year-end 2024.

This decrease during the second quarter of 2025 was primarily due to the redemption of Series G preferred stock for $2.5 billion, partially offset by lower total Company assets and also the benefit of net income earned in the second quarter and first six months of 2025.

Total balance sheet assets decreased $4.0 billion, or 1%, during the second quarter of 2025.

CSB’s Tier 1 Leverage Ratio increased from 12.1% at March 31, 2025 and 11.6% at year-end 2024, ending the second quarter of 2025 at 12.2%, primarily as a result of lower total assets as well as net income during the second quarter and first six months of 2025.

As a supplemental measure of capital, the Company utilizes 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.

The Company maintains a long-term operating objective for its consolidated adjusted Tier 1 Leverage Ratio of 6.75% - 7.00%.

As of March 31, 2025, our adjusted Tier 1 Leverage Ratio, which includes AOCI in the ratio, was 7.1% for CSC (consolidated) and 8.2% 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 and in Part II – Item 7 – Capital Management of the 2024 Form 10-K.

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.

IDA Agreement

Certain brokerage client deposits are swept off-balance sheet to the TD Depository Institutions pursuant to the 2023 IDA agreement.

During the first three months of 2025, 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.

The Company’s ability to migrate these balances to its balance sheet is dependent upon multiple factors including having sufficient capital levels to sustain these incremental deposits.

See Item 1 – Note 10 for further information on the 2023 IDA agreement.

THE CHARLES SCHWAB CORPORATION

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

The Company maintains a long-term operating objective for its consolidated adjusted Tier 1 Leverage Ratio of 6.75% - 7.00%.

As of June 30, 2025, our adjusted Tier 1 Leverage Ratio was 7.2% for CSC (consolidated) and 8.4% for CSB (see Non-GAAP Financial Measures for further details and a reconciliation of such measures to GAAP reported results).

The Company continues to manage its capital as described above and in Part II – Item 7 – Capital Management of the 2024 Form 10-K.

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.

Cash dividends paid and per share amounts for the first three months of 2025 and 2024 are as follows:

Three Months Ended March 31, Cash Paid Per Share

Cash dividends paid and per share amounts for the first six months of 2025 and 2024 are as follows:

Six Months Ended June 30, Cash Paid Per Share

Amount Cash Paid Per Share

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13 22.26 13 22.26

(1) The Company had no nonvoting common stock outstanding as of the record date for the Company’s first quarter 2025 dividend and accordingly, no dividends were paid on nonvoting common stock during the three months ended March 31, 2025.

19 2,500.00 19 2,500.00

(1) The Company had no nonvoting common stock outstanding as of the record date for the Company’s 2025 dividends and accordingly, no dividends were paid on nonvoting common stock during the six months ended June 30, 2025.

(2) Dividends paid quarterly.

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

(4) Series G was redeemed on June 2, 2025.

Prior to redemption, dividends were paid quarterly.

The final dividend was paid on June 2, 2025.

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)

Share Repurchases

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The shares of nonvoting common stock automatically converted into common stock upon repurchase and are now held in treasury stock, reducing the number of shares outstanding.

These shares were purchased under CSC’s $15.0 billion share repurchase authorization.

The share repurchase authorization does not have an expiration date and as of March 31, 2025, approximately $7.2 billion remained on the authorization.

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

These shares were purchased 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 and the Company has no remaining nonvoting common stock outstanding.

CSC repurchased an additional 3.9 million shares of its common stock for $351 million during the three months ended June 30, 2025.

These shares were purchased under CSC’s $15.0 billion share repurchase authorization and as of June 30, 2025, approximately $6.9 billion remained on the authorization.

On July 24, 2025, CSC publicly announced that its Board of Directors terminated the existing share repurchase authorization and replaced it with a new authorization to repurchase up to $20.0 billion of common stock.

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

There were no repurchases of CSC’s common stock during the three and six months ended June 30, 2024.

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 condensed consolidated statements of income.

See Item 1 – Note 14 for additional information.

Foreign Exposure

At March 31, 2025, Schwab had exposure to non-sovereign financial and non-financial institutions in foreign countries, as well as agencies of foreign governments.

At March 31, 2025, the fair value of these holdings totaled $15.2 billion, with the top three exposures being to issuers and counterparties domiciled in France at $8.7 billion, the United Kingdom at $3.8 billion, and Norway at $750 million.

At June 30, 2025, Schwab had exposure to non-sovereign financial and non-financial institutions in foreign countries, as well as agencies of foreign governments.

At June 30, 2025, the fair value of these holdings totaled $17.7 billion, with the top three exposures being to issuers and counterparties domiciled in France at $9.5 billion, the United Kingdom at $5.9 billion, and Japan at $600 million.

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 at both March 31, 2025 and December 31, 2024.

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, Schwab had outstanding margin loans to foreign residents of $3.6 billion and $3.5 billion at June 30, 2025 and December 31, 2024, respectively.

CRITICAL ACCOUNTING ESTIMATES

Certain of our accounting policies that involve a higher degree of judgment and complexity are discussed in Part II – Item 7 – Critical Accounting Estimates in the 2024 Form 10-K.

There have been no changes to critical accounting estimates during the first three months of 2025.

There have been no changes to critical accounting estimates during the first six months of 2025.

NON-GAAP FINANCIAL MEASURES

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These non-GAAP measures should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and may not be comparable to non-GAAP financial measures presented by other companies.

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 use of non-GAAP measures is reflective of certain adjustments made to GAAP financial measures as described below.

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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

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

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

The following tables present reconciliations of GAAP measures to non-GAAP measures:

Three Months Ended March 31,

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

2025 2024 2025 2024

Total expenses excluding interest (GAAP) $ 3,048 $ 2,943 $ 6,192 $ 5,885

1 unchanged sentence

Acquisition and integration-related costs (1)

— (36) — (74)

Restructuring costs (2)

Adjusted total expenses (non-GAAP) $ 2,920 $ 2,768 $ 5,934 $ 5,570

(1) There were no acquisition and integration-related costs for the three months ended March 31, 2025.

Acquisition and integration-related costs for the three months ended March 31, 2024 primarily consist of $17 million of compensation and benefits and $17 million of professional services.

(2) There were no restructuring costs for the three months ended March 31, 2025.

Restructuring costs for the three months ended March 31, 2024 reflect a benefit due to a change in estimate of $31 million in compensation and benefits, partially offset by $2 million of occupancy and equipment expense and $1 million of other expense.

Three Months Ended March 31,

Amount Diluted EPS Amount Diluted EPS

(1) There were no acquisition and integration-related costs for the three and six months ended June 30, 2025.

Acquisition and integration-related costs for the three and six months ended June 30, 2024 primarily consist of $18 million and $35 million of compensation and benefits, $12 million and $29 million of professional services, and $5 million of depreciation and amortization.

(2) There were no restructuring costs for the three and six months ended June 30, 2025.

Restructuring costs for the three and six months ended June 30, 2024 reflect a benefit due to a change in estimate of $3 million and $34 million in compensation and benefits, offset by $1 million and $3 million of occupancy and equipment expense and $12 million and $13 million of other expense.

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)

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

2025 2024 2025 2024

Amount Diluted EPS Amount Diluted EPS Amount Diluted

EPS Amount Diluted

Net income available to common stockholders (GAAP),

8 unchanged sentences

(1) The income tax effects of the non-GAAP adjustments are determined using an effective tax rate reflecting the exclusion of non-deductible acquisition costs and are used to present the acquisition and integration-related costs, amortization of acquired intangible assets, and restructuring costs on an after-tax basis.

Three Months Ended March 31,

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

2025 2024 2025 2024

Return on average common stockholders’ equity (GAAP) 19 % 14 % 18 % 15 %

4 unchanged sentences

acquired intangible assets — net

1,710 1,747 1,716 1,753

Average tangible common equity $ 23,712 $ 15,720 $ 23,086 $ 14,934

3 unchanged sentences

(1) See table above for the reconciliation of net income available to common stockholders to adjusted net income available to common stockholders (non-GAAP).

March 31, 2025 December 31, 2024

June 30, 2025 December 31, 2024

CSC CSB CSC CSB

11 unchanged sentences

7.2 % 8.4 % 6.8 % 7.3 %

THE CHARLES SCHWAB CORPORATION

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis