SCHWAB CHARLES CORP 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations INTRODUCTION The Charles Schwab Corporation (CSC) is a savings and loan holding company. CSC engages, through its subsidiaries (collectively referred to as Schwab or the Company), in wealth management, securities brokerage, banking, asset management, custody, and financial advisory services. Principal business subsidiaries of CSC include the following: • Charles Schwab & Co., Inc. (CS&Co), incorporated in 1971, a securities broker-dealer; • Charles Schwab Bank, SSB (CSB), our principal banking entity; and • Charles Schwab Investment Management, Inc. (CSIM), the investment advisor for Schwab’s proprietary mutual funds (Schwab Funds ® ) and for Schwab’s exchange-traded funds (Schwab ETFs). Unless otherwise indicated, the terms “Schwab,” “the Company,” “we,” “us,” or “our” mean CSC together with its consolidated subsidiaries. Schwab provides financial services to individuals and institutional clients through two segments – Investor Services and Advisor Services. The Investor Services segment provides retail brokerage, investment advisory, and banking and trust services to individual investors, and retirement plan and business services, as well as other corporate brokerage services, to businesses and their employees. The Advisor Services segment provides custodial, trading, banking and trust, and support services to independent registered investment advisors (RIAs), independent retirement advisors, and recordkeepers. Schwab was founded on the belief that all Americans deserve access to a better investing experience. Although much has changed in the intervening years, our purpose remains clear – to champion every client’s goals with passion and integrity. Guided by this purpose and our vision of creating the most trusted leader in investment services, management has adopted a strategy described as “Through Clients’ Eyes.” This strategy emphasizes placing clients’ perspectives, needs, and desires at the forefront. Because investing plays a fundamental role in building financial security, we strive to deliver a better investing experience for our clients – individual investors and the people and institutions who serve them – by disrupting longstanding industry practices on their behalf and providing superior service. We also aim to offer a broad range of products and solutions to meet client needs with a focus on transparency, value, and trust. In addition, management works to couple Schwab’s scale and resources with ongoing expense discipline to keep costs low and ensure that products and solutions are affordable as well as responsive to client needs. In combination, these are the key elements of our “no trade-offs” approach to serving investors. We believe that following this strategy is the best way to maximize our market valuation and stockholder returns over time. Management estimates that investable wealth in the United States (U.S.) (consisting of assets in defined contribution, retail wealth management and brokerage, and registered investment advisor channels, along with bank deposits) currently exceeds $70 trillion, which means the Company’s $10.76 trillion in client assets leaves substantial opportunity for growth. Our strategy is based on the principle that developing trusted relationships will translate into more assets from both new and existing clients, ultimately driving more revenue, and along with expense discipline and thoughtful capital management, will generate earnings growth and build long-term stockholder value. This Management’s Discussion and Analysis should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 (2024 Form 10-K). On our website, https://www.aboutschwab.com , we post the following filings after they are electronically filed with or furnished to the Securities and Exchange Commission (SEC or Commission): annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934. In addition, we post to the website the Dodd-Frank stress test results, our regulatory capital disclosures based on Basel III, our average liquidity coverage ratio (LCR), and our average net stable funding ratio (NSFR). The SEC maintains a website at https://www.sec.gov that contains reports, proxy statements, and other information that we file electronically with the Commission. - 1 - 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) FORWARD-LOOKING STATEMENTS 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,” “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. These forward-looking statements, which reflect management’s beliefs, objectives, and expectations as of the date hereof, are estimates based on the best judgment of Schwab’s senior management. These statements relate to, among other things: • Maximizing our market valuation and stockholder returns over time; and our belief that developing trusted relationships will translate into more client assets which drives revenue, and along with expense discipline and thoughtful capital management, generates earnings growth and builds stockholder value (see Introduction in Part I – Item 2); • Capital expenditures and expense management (see Results of Operations in Part I – Item 2); • Net interest revenue, client cash allocation behavior, and adjustment of rates paid on client-related liabilities (see Results of Operations in Part I – Item 2); • Funding sources and uses of liquidity (see 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; modeling and assumptions, the impact of changes in interest rates on net interest margin and revenue, bank deposit account fee revenue, economic value of equity (EVE), and liability and asset duration (see Risk Management in Part I – Item 2); • Capital management; long-term operating objective; and uses of capital and return of excess capital to stockholders (see Capital Management in Part I – Item 2 and Commitments and Contingencies in Part I – Item 1 – Financial Information – Notes to Condensed Consolidated Financial Statements (Item 1) – Note 10); • The expected impact of proposed and final rules (see Current Regulatory and Other Developments in Part I – Item 2); • The expected impact of new accounting standards not yet adopted (see New Accounting Standards in Item 1 – Note 2); • The likelihood of indemnification and guarantee payment obligations and clients failing to fulfill contractual obligations (see Commitments and Contingencies in Item 1 – Note 10); and • The outcome and impact of legal proceedings and regulatory matters (see Commitments and Contingencies in Item 1 – Note 10, and Legal Proceedings in Part II – Item 1). Achievement of the expressed beliefs, objectives, and expectations described in these statements is subject to certain risks and uncertainties that could cause actual results to differ materially from the expressed beliefs, objectives, and expectations. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q or, in the case of documents incorporated by reference, as of the date of those documents. Important factors that may cause actual results to differ include, but are not limited to: • General economic and market conditions, including the level of interest rates, equity market valuations and volatility; • Our ability to attract and retain clients, develop trusted relationships, and grow client assets; • Client use of our advisory and lending solutions and other products and services; • The level of client assets, including cash balances; • Client cash allocations and sensitivity to deposit rates; • Competitive pressure on pricing, including deposit rates; • The level and mix of client trading activity, including daily average trades, margin balances, and balance sheet cash; • Regulatory guidance and adverse impacts from new or changed legislation, rulemaking or regulatory expectations; • Capital and liquidity needs and management; • Our ability to manage expenses; • Our ability to attract and retain talent; • Our ability to develop and launch new and enhanced products, services, and capabilities, as well as enhance our infrastructure, in a timely and successful manner; • Our ability to monetize client assets; • Our ability to support client activity levels; • Increased compensation and other costs; - 2 - 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) • Re al estate and workforce decisions; • The timing and scope of technology projects; • Balance sheet positioning relative to changes in interest rates; • Interest-earning asset mix and growth; • Our ability to access funding sources; • Prepayment levels for mortgage-backed securities; • Regulatory and legislative developments; • Adverse developments in litigation or regulatory matters and any related charges; and • Potential breaches of contractual terms for which we have indemnification and guarantee obligations. Certain of these factors, as well as general risk factors affecting the Company, are discussed in greater detail in Part I – Item 1A – Risk Factors in the 2024 Form 10-K. - 3 - 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) OVERVIEW Management focuses on several client activity and financial metrics in evaluating Schwab’s financial position and operating performance. Results for the second quarter and first six months of 2025 and 2024 are as follows: Three Months Ended June 30, Percent Change Six Months Ended June 30, Percent Change 2025 2024 2025 2024 Client Metrics Net new client assets (in billions) (1) $ 73.6 $ 74.2 (1) % $ 206.0 $ 162.4 27 % Core net new client assets (in billions) $ 80.3 $ 61.2 31 % $ 218.0 $ 156.8 39 % Client assets (in billions, at quarter end) $ 10,757.3 $ 9,407.5 14 % Average client assets (in billions) $ 10,108.5 $ 9,134.1 11 % $ 10,160.3 $ 8,946.1 14 % New brokerage accounts (in thousands) 1,098 985 11 % 2,281 2,079 10 % Active brokerage accounts (in thousands, at quarter end) 37,476 35,612 5 % 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 % Company Financial Information and Metrics Total net revenues $ 5,851 $ 4,690 25 % $ 11,450 $ 9,430 21 % Total expenses excluding interest 3,048 2,943 4 % 6,192 5,885 5 % Income before taxes on income 2,803 1,747 60 % 5,258 3,545 48 % Taxes on income 677 415 63 % 1,223 851 44 % Net income 2,126 1,332 60 % 4,035 2,694 50 % Preferred stock dividends and other 149 121 23 % 262 232 13 % Net income available to common stockholders $ 1,977 $ 1,211 63 % $ 3,773 $ 2,462 53 % Earnings per common share — diluted $ 1.08 $ .66 64 % $ 2.07 $ 1.34 54 % Net revenue change from prior year 25 % 1 % 21 % (3) % Pre-tax profit margin 47.9 % 37.2 % 45.9 % 37.6 % Return on average common stockholders’ equity (annualized) 19 % 14 % 18 % 15 % Expenses excluding interest as a percentage of average client assets (annualized) 0.12 % 0.13 % 0.12 % 0.13 % Consolidated Tier 1 Leverage Ratio (at quarter end) 9.8 % 9.4 % Non-GAAP Financial Measures (2) Adjusted total expenses $ 2,920 $ 2,768 $ 5,934 $ 5,570 Adjusted diluted earnings per common share $ 1.14 $ .73 $ 2.17 $ 1.47 Return on tangible common equity 35 % 34 % 34 % 36 % (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 - 4 - 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) 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 - 5 - 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) six months of 2025, reflecting growth in pledged asset lines (PALs) and First Mortgages, ending the second quarter at $50.4 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). 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 U.S. 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 to protect uninsured depositors due to the March 2023 closures of two banks; • The U.S. federal banking agencies’ August 2023 proposed rulemaking on long-term debt requirements for certain large banking organizations; and • The U.S. 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. - 6 - 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 Total Net Revenues The following tables present a comparison of revenue by category: 2025 2024 Three Months Ended June 30, Percent Change Amount % of Total Net Revenues Amount % of Total Net Revenues Net interest revenue Interest revenue (1) % $ 3,787 65 % $ 3,817 81 % Interest expense (42) % (965) (17) % (1,659) (35) % Net interest revenue 31 % 2,822 48 % 2,158 46 % Asset management and administration fees Mutual funds, exchange-traded funds (ETFs), and collective trust funds (CTFs) 13 % 884 15 % 785 17 % Managed investing solutions 15 % 589 10 % 510 11 % Other 10 % 97 2 % 88 2 % Asset management and administration fees 14 % 1,570 27 % 1,383 30 % Trading revenue Commissions 13 % 431 7 % 383 8 % Order flow revenue 31 % 466 8 % 357 8 % Principal transactions 49 % 55 1 % 37 1 % Trading revenue 23 % 952 16 % 777 17 % Bank deposit account fees 61 % 247 4 % 153 3 % Other 19 % 260 5 % 219 4 % Total net revenues 25 % $ 5,851 100 % $ 4,690 100 % 2025 2024 Six Months Ended June 30, Percent Change Amount % of Total Net Revenues Amount % of Total Net Revenues 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 % - 7 - 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 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%. - 8 - 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 net interest revenue information corresponding to interest-earning assets and funding sources on the condensed consolidated balance sheets: 2025 2024 Three 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 $ 28,000 $ 305 4.30 % $ 28,839 $ 382 5.24 % Cash and investments segregated 47,574 506 4.20 % 21,493 281 5.17 % Receivables from brokerage clients 79,616 1,332 6.62 % 68,715 1,351 7.78 % Available for sale securities (1) 77,750 405 2.08 % 104,045 555 2.13 % Held to maturity securities (1) 141,098 602 1.70 % 154,314 658 1.70 % Bank loans 48,691 518 4.27 % 41,562 460 4.44 % Total interest-earning assets 422,729 3,668 3.45 % 418,968 3,687 3.50 % Securities lending revenue 96 95 Other interest revenue 23 35 Total interest-earning assets $ 422,729 $ 3,787 3.56 % $ 418,968 $ 3,817 3.62 % Funding sources Bank deposits $ 237,645 $ 326 0.55 % $ 258,119 $ 840 1.31 % Payables to brokers, dealers, and clearing organizations (2) 16,657 167 3.97 % 5,642 57 3.98 % Payables to brokerage clients 92,425 69 0.30 % 67,680 77 0.45 % Other short-term borrowings 7,644 87 4.55 % 9,268 129 5.59 % 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 % 2025 2024 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 % Total interest-bearing liabilities (2) 387,245 2,016 1.04 % 397,108 3,365 1.70 % Non-interest-bearing funding sources (2) 37,740 30,912 Other interest expense — 2 Total funding sources $ 424,985 $ 2,016 0.95 % $ 428,020 $ 3,367 1.57 % Net interest revenue $ 5,528 2.59 % $ 4,391 2.03 % (1) Amounts have been calculated based on amortized cost. Interest revenue on investment securities is presented net of related premium amortization. (2) Beginning in the fourth quarter of 2024, payables to brokers, dealers, and clearing organizations is presented separately from non-interest-bearing funding sources and included in total interest-bearing liabilities. This line item includes securities loaned and related interest expense. Prior period amounts have been reclassified to reflect this change. - 9 - 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 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. - 10 - 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 June 30, 2025 2024 Average Client Assets Revenue Average Fee Average Client Assets Revenue Average Fee Schwab money market funds $ 644,811 $ 442 0.27 % $ 523,665 $ 357 0.27 % Schwab equity and bond funds, ETFs, and CTFs 661,793 122 0.07 % 565,848 112 0.08 % Mutual Fund OneSource ® and other no-transaction-fee (NTF) funds (1) 350,487 218 0.25 % 338,198 214 0.25 % Other third-party mutual funds and ETFs (1) 603,509 102 0.07 % 600,902 102 0.07 % Total mutual funds, ETFs, and CTFs (2) $ 2,260,600 $ 884 0.16 % $ 2,028,613 $ 785 0.16 % Managed investing solutions (2) Fee-based $ 595,203 $ 589 0.40 % $ 525,689 $ 510 0.39 % Non-fee-based 120,726 — — 110,234 — — Total managed investing solutions $ 715,929 $ 589 0.33 % $ 635,923 $ 510 0.32 % Other balance-based fees (3) 846,552 75 0.04 % 763,750 69 0.04 % Other (4) 22 19 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 % Other (4) 41 37 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. (3) Includes various asset-related fees, such as trust fees, 401(k) recordkeeping fees, and mutual fund clearing fees and other service fees. (4) Includes miscellaneous service and transaction fees relating to mutual funds and ETFs that are not balance-based. 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. - 11 - 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 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: Schwab Money Market Funds Schwab Equity and Bond Funds, ETFs, and CTFs Mutual Fund OneSource ® and Other NTF funds 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 Net inflows (outflows) 5,433 11,295 16,115 8,794 (7,804) (6,863) Net market gains (losses) and other (1) 6,508 6,613 48,016 6,318 121,443 22,500 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 The following tables present trading revenue, client trading activity, and related information: Three Months Ended June 30, Percent Change Six Months Ended June 30, Percent Change 2025 2024 2025 2024 Commissions $ 431 $ 383 13 % $ 862 $ 796 8 % Order flow revenue Options 268 248 8 % 538 490 10 % Equities 198 109 82 % 371 219 69 % Total order flow revenue 466 357 31 % 909 709 28 % Principal transactions 55 37 49 % 89 89 — Total trading revenue $ 952 $ 777 23 % $ 1,860 $ 1,594 17 % Three Months Ended June 30, Percent Change Six Months Ended June 30, Percent Change 2025 2024 2025 2024 DATs (in thousands) 7,571 5,486 38 % 7,482 5,718 31 % Product as a percentage of DATs Equities 54 % 52 % 55 % 52 % Derivatives 20 % 22 % 20 % 22 % ETFs 20 % 18 % 19 % 18 % Mutual funds 5 % 6 % 5 % 6 % Fixed income 1 % 2 % 1 % 2 % Number of trading days 62.0 63.0 (2) % 122.0 124.0 (2) % Revenue per trade (1) $ 2.03 $ 2.25 (10) % $ 2.04 $ 2.25 (9) % (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 $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 - 12 - 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 The Company earns bank deposit account fee revenue from TD Bank USA, National Association and TD Bank, National Association (together, the TD Depository Institutions), in accordance with the Second Amended and Restated Insured Deposit Account Agreement (2023 IDA agreement). These fees are affected by changes in interest rates and the composition of balances designated as fixed- and floating-rate obligation amounts. See Item 1 – Note 10 for additional information. The following table presents bank deposit account fee revenue and related information: 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 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 % Percentage of average BDA balances designated as: Fixed-rate balances 78 % 88 % 78 % 88 % Floating-rate balances 22 % 12 % 22 % 12 % 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 $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. - 13 - THE CHARLES SCHWAB CORPORATION Management’s Discussion and Analysis of Financial Condition and Results of Operations (Tabular Amounts in Millions, Except Ratios, or as Noted) Total Expenses Excluding Interest The following table presents a comparison of expenses excluding interest: Three Months Ended June 30, Percent Change Six Months Ended June 30, Percent Change 2025 2024 2025 2024 Compensation and benefits Salaries and wages $ 927 $ 886 5 % $ 1,850 $ 1,740 6 % Incentive compensation 351 329 7 % 763 716 7 % Employee benefits and other 258 235 10 % 595 532 12 % Total compensation and benefits $ 1,536 $ 1,450 6 % $ 3,208 $ 2,988 7 % Professional services 291 259 12 % 560 500 12 % Occupancy and equipment 270 248 9 % 544 513 6 % Advertising and market development 108 107 1 % 204 195 5 % Communications 176 172 2 % 329 313 5 % Depreciation and amortization 215 233 (8) % 432 461 (6) % Amortization of acquired intangible assets 128 129 (1) % 258 259 — Regulatory fees and assessments 77 96 (20) % 166 221 (25) % Other 247 249 (1) % 491 435 13 % Total expenses excluding interest $ 3,048 $ 2,943 4 % $ 6,192 $ 5,885 5 % Expenses as a percentage of total net revenues Compensation and benefits 26 % 31 % 28 % 32 % Advertising and market development 2 % 2 % 2 % 2 % Full-time equivalent employees (in thousands) At quarter end 32.6 32.3 1 % Average 32.3 32.3 — 32.2 32.5 (1) % 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 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. - 14 - 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) 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 $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. - 15 - THE CHARLES SCHWAB CORPORATION Management’s Discussion and Analysis of Financial Condition and Results of Operations (Tabular Amounts in Millions, Except Ratios, or as Noted) Segment Information Financial information for our segments is presented in the following table (1) : Investor Services Advisor Services Total Three Months Ended June 30, Percent Change 2025 2024 Percent Change 2025 2024 Percent Change 2025 2024 Net Revenues Net interest revenue 29 % $ 2,244 $ 1,736 37 % $ 578 $ 422 31 % $ 2,822 $ 2,158 Asset management and administration fees 14 % 1,144 1,001 12 % 426 382 14 % 1,570 1,383 Trading revenue 24 % 852 688 12 % 100 89 23 % 952 777 Bank deposit account fees 63 % 194 119 56 % 53 34 61 % 247 153 Other 17 % 201 172 26 % 59 47 19 % 260 219 Total net revenues 25 % 4,635 3,716 25 % 1,216 974 25 % 5,851 4,690 Expenses Excluding Interest Compensation and benefits 6 % $ 1,191 $ 1,122 5 % $ 345 $ 328 6 % $ 1,536 $ 1,450 Professional services 12 % 231 206 13 % 60 53 12 % 291 259 Occupancy and equipment 10 % 212 193 5 % 58 55 9 % 270 248 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 Revenues 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 (10) % 210 234 92 % 48 25 — 258 259 Regulatory fees and assessments (22) % 132 170 (33) % 34 51 (25) % 166 221 Other 14 % 411 362 10 % 80 73 13 % 491 435 Total expenses excluding interest 4 % 4,795 $ 4,597 8 % 1,397 $ 1,288 5 % 6,192 5,885 Income before taxes on income 50 % $ 4,285 $ 2,856 41 % $ 973 $ 689 48 % $ 5,258 $ 3,545 Net New Client Assets (in billions) (2) 30 % $ 100.7 $ 77.7 24 % $ 105.3 $ 84.7 27 % $ 206.0 $ 162.4 (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 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. - 16 - 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) 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 Schwab’s business activities expose it to a variety of risks, including operational, compliance, credit, market, and liquidity risks. The Company has a comprehensive risk management program to identify and manage these risks and their associated potential for financial and reputational impact. For a discussion of our risk management programs, see Part II – Item 7 – Risk Management in the 2024 Form 10-K. Market Risk Market risk is the potential for changes in earnings or the value of financial instruments held by Schwab as a result of fluctuations in interest rates, equity prices, or market conditions. Schwab is exposed to market risk primarily from changes in interest rates within our interest-earning assets relative to changes in the costs of funding sources that finance these assets. To manage interest rate risk, we have established policies and procedures, which include setting limits on net interest revenue risk and EVE risk. To remain within these limits, we manage the maturity, repricing, and cash flow characteristics of the investment portfolios. Management monitors established guidelines to stay within the Company’s risk appetite. The Company utilizes interest rate swap derivative instruments to assist with managing interest rate risk, the effects of which are incorporated into the Company’s net interest revenue and EVE analyses. For further information on our interest rate risk management strategies utilizing interest rate swaps, see Item 1 – Note 11. Our measurement of interest rate risk involves assumptions that are inherently uncertain and, as a result, cannot precisely estimate the impact of changes in interest rates on net interest revenue, bank deposit account fees, or EVE. Actual results may differ from simulated results due to balance growth or decline and the timing, magnitude, and frequency of interest rate changes, as well as changes in market conditions and management strategies, including changes in asset and liability mix. 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. - 17 - 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. Equity market valuations may also affect the level of brokerage client trading activity, margin borrowing, and overall client engagement with Schwab. Additionally, we earn mutual fund and ETF service fees and asset management fees based upon daily balances of certain client assets. Fluctuations in these client asset balances caused by changes in equity valuations directly impact the amount of fee revenue we earn. Our market risk related to financial instruments held for trading is not material. Net Interest Revenue Simulation For our net interest revenue sensitivity analysis, we use net interest revenue simulation modeling techniques to evaluate and manage the effect of changing interest rates. The simulations include all balance sheet interest rate-sensitive assets and liabilities, and include derivative instruments. Key assumptions include the projection of interest rate scenarios with rate floors, rates and balances of non-maturity client cash held on the balance sheet, prepayment speeds of mortgage-related investments, repricing of financial instruments, and reinvestment of matured or paid-down securities and loans. 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. The Company’s net interest revenue sensitivity analyses utilize gradual parallel increases/decreases in interest rates over a twelve-month period, though we also regularly simulate the effects of non-parallel shifts and instantaneous shifts of interest rates on net interest revenue. Net interest revenue is affected by various factors, such as the distribution and composition of interest-earning assets and interest-bearing liabilities, the spread between yields earned on interest-earning assets and rates paid on interest-bearing liabilities, which may reprice at different times or by different amounts, and the spread between short- and long-term interest rates. Interest-earning assets include investment securities, margin loans, bank loans, and cash and cash equivalents. 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 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. Higher prevailing short-term interest rates generally improve yields on shorter duration interest-earning assets. During periods of rapidly rising interest rates, clients tend to reallocate cash out of sweep products into higher-yielding, off-balance sheet, fixed income investments and money market funds within Schwab’s product offerings. This can result in lower interest-earning assets and/or may require supplemental funding with higher funding costs, which therefore tend to constrain net interest revenue when interest rates are moving rapidly higher. A decline in short-term interest rates could negatively impact the yield on the Company’s investment and loan portfolios to a greater degree than any offsetting reduction in interest expense from funding sources, compressing net interest margin. Net interest revenue sensitivity analyses assume both statically and dynamically-sized balance sheet composition. Statically-sized balance sheet modeling assumes the asset and liability structure of the consolidated balance sheet would not be changed as a result of the simulated changes in interest rates. While this approach is useful to isolate the impact of changes in interest rates on a statically-sized asset and liability structure, it does not capture changes to client cash allocations. We therefore also conduct dynamically-sized balance sheet compositions as a function of interest rates. Dynamic net interest revenue simulations assume runoff of bank deposit and payables to brokerage client balances is supplemented with wholesale borrowing when needed to fund assets through the simulation horizon. We also conduct similar simulations on EVE to capture the impact of client cash allocation changes on our balance sheet. As we actively manage the consolidated balance sheet and interest rate exposure, we have taken and would typically seek to take steps to manage additional interest rate exposure that could result from changes in the interest rate environment. - 18 - 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% Increase of 100 basis points 4.1% 4.6% Increase of 50 basis points 2.2% 2.5% Decrease of 50 basis points (2.0)% (2.3)% Decrease of 100 basis points (4.0)% (4.6)% Decrease of 200 basis points (7.9)% (9.3)% 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 Effective duration measures price sensitivity relative to a change in prevailing interest rates, taking account of amortizing cash flows and prepayment optionality for mortgage-related securities and loans. Duration is measured in years and commonly interpreted as the average timing of principal and interest cash flows. We seek to manage the Company’s asset duration in relation to management’s estimate of the Company’s liability duration. The Company’s liability duration is impacted by the composition of funding sources, and typically decreases in periods of rising market interest rates and increases in periods of declining market interest rates. The Company also utilizes derivative hedging instruments such as interest rate swaps in managing its asset and liability duration. The following table presents the Company’s estimated effective durations, which reflect anticipated future payments, by category: June 30, 2025 June 30, 2024 In years Estimated effective duration, exclusive of derivatives: Consolidated total assets 2.1 2.4 AFS investment securities portfolio 2.5 2.3 AFS and HTM investment securities portfolio 4.0 3.9 Pledged asset lines (1) 0.1 — Long-term debt CSC Senior Notes 3.1 3.6 Estimated effective duration, inclusive of derivatives (2) : Consolidated total assets 2.1 2.4 AFS investment securities portfolio 2.0 2.1 AFS and HTM investment securities portfolio 3.8 3.8 Pledged asset lines (1) 0.8 — Long-term debt CSC Senior Notes 2.4 3.6 (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 Management also uses EVE simulations to measure interest rate risk. EVE sensitivity measures the long-term impact of interest rate changes on the net present value of assets and liabilities, and includes the impact of derivative instruments. While EVE does not have a direct accounting relationship, the measure aims to capture a theoretical value of assets and liabilities under a variety of interest rate environments. 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 and certain - 19 - 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. We use both proprietary and independent third-party models to simulate EVE sensitivity and related analyses. We develop and maintain client credits and deposits run-off models internally based on historical experience and prevailing client cash realignment behaviors. We rely on third-party models for interest rate term structure modeling, prepayment speed modeling for mortgage-backed securities and mortgage loans, and cash flow projections based on interest income, and contractual maturities. Schwab’s EVE profile is characterized by a more stable asset duration relative to liabilities in both higher and lower interest rate environments. Currently, the EVE exposure to rates increasing or decreasing in a similar magnitude shows that there is greater exposure to rates decreasing. Bank Deposit Account Fees Simulation 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 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. Liquidity Risk Liquidity risk is the potential that Schwab will be unable to sell assets or meet cash flow obligations when they come due without incurring unacceptable losses. Due to its role as a source of financial strength, CSC’s liquidity needs are primarily driven by the liquidity and capital needs of: CS&Co, our principal broker-dealer subsidiary; the capital needs of the banking subsidiaries; principal and interest due on corporate debt; and dividend payments on CSC’s preferred and common stock. The liquidity needs of our broker-dealer 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. We have established liquidity policies to support the successful execution of business strategies, while ensuring ongoing and sufficient liquidity to meet operational needs and satisfy applicable regulatory requirements under both normal and stressed conditions. We seek to maintain client confidence in the balance sheet and the safety of client assets by maintaining liquidity and diversity of funding sources to allow the Company to meet its obligations. To this end, we have established limits and contingency funding plans to support liquidity levels during both business as usual and stressed conditions. We employ a variety of metrics to monitor and manage liquidity. We conduct regular liquidity stress testing to develop a view of liquidity risk exposures and to ensure our ability to maintain sufficient liquidity during market-related or company-specific liquidity stress events. Liquidity sources are also tested periodically and results are reported to the Financial Risk Oversight Committee. A number of early warning indicators are monitored to help identify emerging liquidity stresses in the market or within the organization and are reviewed with management periodically. Funding Sources Schwab’s primary source of funds is cash generated by client activity which includes bank deposits and cash balances in client brokerage accounts. 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 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. For unanticipated liquidity needs, we also maintain a buffer of highly liquid investments, including U.S. Treasury securities. 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 June 30, 2025. Our clients’ allocation of cash held on - 20 - 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. Schwab’s use of external debt facilities may arise from timing differences between cash flow requirements, such as client cash outflows, cash flows from operations, payments on interest-earning assets, movements of cash to meet regulatory brokerage client cash segregation requirements, and general corporate purposes. Rollover risk is the risk that we will not be able to refinance or payoff borrowings as they mature. We maintain policies and procedures necessary to access funding, and test borrowing procedures on a periodic basis. We manage rollover risk on borrowings, taking into account expected principal paydowns on our investment and loan portfolios along with expected deposit flows. The following table describes certain external debt facilities available at 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) July 2025 - October 2025 4.40% Federal Reserve discount window Banking subsidiaries — 29,863 (1) N/A — Repurchase agreements Banking subsidiaries, CSC 5,991 — (2) July 2025 - October 2025 4.45% Unsecured uncommitted lines of credit with various external banks CSC, CS&Co — 1,692 N/A — Unsecured commercial paper CSC 2,000 3,000 (3) July 2025 - November 2025 4.52% Secured uncommitted lines of credit with various external banks CS&Co 500 — (4) 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 June 30, 2025. Incremental borrowing capacity may be made available by pledging additional assets, subject to applicable facility terms. See below and Item 1 – Note 9 for additional information. (2) Secured borrowing capacity is made available based on the banking subsidiaries’ or CSC’s ability to provide collateral deemed acceptable by each respective counterparty. See below and Item 1 – Note 12 for additional information. (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. N/A Not applicable. 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 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. Amounts available under secured credit facilities with the FHLB are dependent on the value of our First Mortgages, home equity lines of credit (HELOCs), and the value of certain of our investment securities that are pledged as collateral. These credit facilities are also available as backup financing in the event the outflow of client cash from the banking subsidiaries’ respective balance sheets is greater than maturities and paydowns on investment securities and bank loans. CSC’s banking subsidiaries must each maintain positive tangible capital, as defined by the Federal Housing Finance Agency (FHFA), in order to place new draws upon these credit facilities, and the Company manages capital with consideration of minimum tangible capital ratios at our banking subsidiaries. Tangible capital pursuant to the requirements of the FHLB borrowing facilities for our banking subsidiaries is common equity less goodwill and intangible assets. Our banking subsidiaries also have access to short-term secured funding through the Federal Reserve discount window. Amounts available under the Federal Reserve discount window are dependent on the value of certain investment securities that are pledged as collateral. 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 - 21 - 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) 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’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 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. CS&Co also maintains secured uncommitted lines of credit, under which CS&Co may borrow on a short-term basis and pledge either client margin securities or firm securities as collateral, based on the terms of the agreements. 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 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%. See Item 1 – Note 12 for additional information on securities lending activities. CSB issues brokered CDs as a supplemental funding source. The following table provides information about brokered CDs issued by CSB and outstanding as of June 30, 2025: Amount Outstanding Maturity Weighted-Average Interest Rate Brokered CDs $ 12,720 July 2025 - December 2025 4.32% Cash Flow Activity 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 $24.8 billion in the first six months of 2025, and net cash inflows from operations totaled $9.5 billion. Liquidity Coverage Ratio Schwab is subject to the full LCR rule, which requires the Company to hold high quality liquid assets (HQLA) in an amount equal to at least 100% of the Company’s projected net cash outflows over a prospective 30-calendar-day period of acute liquidity stress, calculated on each business day. 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 June 30, 2025, and the table below presents information about our average daily LCR: Average for the Three Months Ended June 30, 2025 March 31, 2025 Total eligible HQLA $ 54,707 $ 55,383 Net cash outflows 38,361 40,213 LCR 143 % 138 % To support growth in margin loan balances at our broker-dealer subsidiary while meeting our LCR requirements, the Company may issue commercial paper, draw on secured lines of credit, or engage in securities lending, in addition to capital markets issuances. In managing compliance with our LCR requirements, the broker-dealer subsidiary may also retain client cash balances rather than sweeping such balances to our banking subsidiaries. - 22 - 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 Schwab is subject to disclosure requirements under the NSFR rule, which requires the semi-annual public disclosure of its NSFR levels. The NSFR rule stipulates that the Company’s available stable funding (ASF) must be at least 100% of the Company’s required stable funding (RSF). ASF is calculated by assessing the stability of the Company’s funding sources and RSF is calculated by evaluating the characteristics of the Company’s assets, derivatives, and off-balance-sheet exposures. 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 $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 Interest Rate (1) Moody’s Standard & Poor’s Fitch CSC Senior Notes $ 20,119 2026 - 2034 3.66% A2 A- A Ameritrade Holding Senior Notes 81 2027 - 2029 3.13% A2 A- — (1) Weighted average interest rates presented here exclude the impact of derivatives. See Note 11 for information on the Company’s hedging of Senior Notes. New Debt Issuances 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. For information on these arrangements, see Item 1 – Notes 6, 7, 9, 10, and 12. Pursuant to the 2023 IDA agreement, certain brokerage accounts are required to be swept off-balance sheet to the TD Depository Institutions. See Item 1 – Note 10 for additional information. Additional information regarding our sources and uses of liquidity and management of liquidity risk is included in Part II – Item 7 – Risk Management – Liquidity Risk in our 2024 Form 10-K. 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. - 23 - THE CHARLES SCHWAB CORPORATION Management’s Discussion and Analysis of Financial Condition and Results of Operations (Tabular Amounts in Millions, Except Ratios, or as Noted) CAPITAL MANAGEMENT Schwab seeks to manage capital to a level and composition sufficient to support execution of our business strategy, inclusive of balance sheet growth over time, financial support to our subsidiaries, sustained access to the capital markets, and regulatory capital requirements. Schwab also seeks to return excess capital to stockholders. We may return excess capital through dividends, repurchases of common shares, preferred stock redemptions, and repurchases of our preferred stock represented by depositary shares. Schwab’s primary sources of capital are funds generated by the operations of subsidiaries and securities issuances by CSC in the capital markets. To ensure that Schwab has sufficient capital to absorb unanticipated losses or declines in asset values, we have adopted a policy to remain well capitalized even in stressed scenarios. Regulatory Capital Requirements 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 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: June 30, 2025 December 31, 2024 CSC CSB CSC CSB Total stockholders’ equity $ 49,451 $ 21,237 $ 48,375 $ 19,700 Less: Preferred stock 6,763 — 9,191 — Common Equity Tier 1 Capital before regulatory adjustments $ 42,688 $ 21,237 $ 39,184 $ 19,700 Less: Goodwill, net of associated deferred tax liabilities $ 11,725 $ 13 $ 11,746 $ 13 Other intangible assets, net of associated deferred tax liabilities 5,997 — 6,232 — Deferred tax assets, net of valuation allowances and deferred tax liabilities 50 41 50 41 AOCI adjustment (1) (12,588) (10,931) (14,839) (12,938) Common Equity Tier 1 Capital $ 37,504 $ 32,114 $ 35,995 $ 32,584 Tier 1 Capital $ 44,267 $ 32,114 $ 45,186 $ 32,584 Total Capital 44,297 32,137 45,218 32,606 Risk-Weighted Assets 113,697 76,495 113,648 78,134 Average Assets with regulatory adjustments 451,314 264,107 458,119 280,701 Total Leverage Exposure 454,452 266,352 461,200 282,629 Common Equity Tier 1 Capital/Risk-Weighted Assets 33.0 % 42.0 % 31.7 % 41.7 % Tier 1 Capital/Risk-Weighted Assets 38.9 % 42.0 % 39.8 % 41.7 % Total Capital/Risk-Weighted Assets 39.0 % 42.0 % 39.8 % 41.7 % Tier 1 Leverage Ratio 9.8 % 12.2 % 9.9 % 11.6 % Supplementary Leverage Ratio 9.7 % 12.1 % 9.8 % 11.5 % (1) Changes in market interest rates can result in unrealized gains or losses on AFS securities, which are included in AOCI. As a Category III banking organization, CSC has elected to exclude most components of AOCI from regulatory capital. 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. - 24 - 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 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. 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. Dividends 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 six months of 2025 and 2024 are as follows: 2025 2024 Six Months Ended June 30, Cash Paid Per Share Amount Cash Paid Per Share Amount Common and Nonvoting Common Stock (1) $ 985 $ .54 $ 919 $ .50 Preferred Stock: Series D (2) 22 29.76 22 29.76 Series F (3) 12 2,500.00 12 2,500.00 Series G (4) 66 2,687.50 66 2,687.50 Series H (2) 45 2,000.00 45 2,000.00 Series I (2) 41 2,000.00 41 2,000.00 Series J (2) 13 22.26 13 22.26 Series K (2) 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. - 25 - THE CHARLES SCHWAB CORPORATION Management’s Discussion and Analysis of Financial Condition and Results of Operations (Tabular Amounts in Millions, Except Ratios, or as Noted) Share Repurchases On February 12, 2025, TD Group US Holdings LLC, an affiliate of TD Bank, completed a secondary public offering of the Company’s common shares through which TD Group US Holdings LLC sold 133.8 million shares of the Company’s common stock and 31.7 million shares of the Company’s nonvoting common stock, which automatically converted into common stock, for an aggregate amount of $13.1 billion. The Company did not receive any of the proceeds from the sale of shares. Concurrent with the completion of the secondary offering, and pursuant to a repurchase agreement dated February 9, 2025, the Company repurchased directly from TD Group US Holdings LLC its remaining 19.2 million shares of nonvoting common stock at a price of $77.982 per share for an aggregate repurchase amount of $1.5 billion, which settled on February 12, 2025. 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 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. OTHER Foreign Exposure 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 $3.6 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 six months of 2025. NON-GAAP FINANCIAL MEASURES In addition to disclosing financial results in accordance with generally accepted accounting principles in the U.S. (GAAP), Management’s Discussion and Analysis of Financial Condition and Results of Operations contain references to the non-GAAP financial measures described below. We believe these non-GAAP financial measures provide useful supplemental information about the financial performance of the Company, and facilitate meaningful comparison of Schwab’s results in the current period to both historic and future results. 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. - 26 - 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. Non-GAAP Adjustment or Measure Definition Usefulness to Investors and Uses by Management Acquisition and integration-related costs, amortization of acquired intangible assets, and restructuring costs Schwab adjusts certain GAAP financial measures to exclude the impact of acquisition and integration-related costs incurred as a result of the Company’s acquisitions, amortization of acquired intangible assets, restructuring costs, and, where applicable, the income tax effect of these expenses. Adjustments made to exclude amortization of acquired intangible assets are reflective of all acquired intangible assets, which were recorded as part of purchase accounting. These acquired intangible assets contribute to the Company’s revenue generation. Amortization of acquired intangible assets will continue in future periods over their remaining useful lives. We exclude acquisition and integration-related costs, amortization of acquired intangible assets, and restructuring costs for the purpose of calculating certain non-GAAP measures because we believe doing so provides additional transparency of Schwab’s ongoing operations, and is useful in both evaluating the operating performance of the business and facilitating comparison of results with prior and future periods. Costs related to acquisition and integration or restructuring fluctuate based on the timing of acquisitions, integration and restructuring activities, thereby limiting comparability of results among periods, and are not representative of the costs of running the Company’s ongoing business. Amortization of acquired intangible assets is excluded because management does not believe it is indicative of the Company’s underlying operating performance. Return on tangible common equity Return on tangible common equity represents annualized adjusted net income available to common stockholders as a percentage of average tangible common equity. Tangible common equity represents common equity less goodwill, acquired intangible assets – net, and related deferred tax liabilities. Acquisitions typically result in the recognition of significant amounts of goodwill and acquired intangible assets. We believe return on tangible common equity may be useful to investors as a supplemental measure to facilitate assessing capital efficiency and returns relative to the composition of Schwab’s balance sheet. Adjusted Tier 1 Leverage Ratio Adjusted Tier 1 Leverage Ratio represents the Tier 1 Leverage Ratio as prescribed by bank regulatory guidance for the consolidated company and for CSB, adjusted to reflect the inclusion of AOCI in the ratio. Inclusion of the impacts of AOCI in the Company’s Tier 1 Leverage Ratio provides additional information regarding the Company’s current capital position. We believe Adjusted Tier 1 Leverage Ratio may be useful to investors as a supplemental measure of the Company’s capital levels. The Company also uses adjusted diluted EPS and return on tangible common equity as components of performance criteria for employee bonus and certain executive management incentive compensation arrangements. The Compensation Committee of CSC’s Board of Directors maintains discretion in evaluating performance against these criteria. Additionally, the Company uses adjusted Tier 1 Leverage Ratio in managing capital, including its use of the measure as its long-term operating objective. The following tables present reconciliations of GAAP measures to non-GAAP measures: 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 Amortization of acquired intangible assets (128) (129) (258) (259) Acquisition and integration-related costs (1) — (36) — (74) Restructuring costs (2) — (10) — 18 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 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. - 27 - 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 EPS Net income available to common stockholders (GAAP), Earnings per common share — diluted (GAAP) $ 1,977 $ 1.08 $ 1,211 $ .66 $ 3,773 $ 2.07 $ 2,462 $ 1.34 Amortization of acquired intangible assets 128 .07 129 .07 258 .14 259 .14 Acquisition and integration-related costs — — 36 .02 — — 74 .04 Restructuring costs — — 10 .01 — — (18) (.01) Income tax effects (1) (32) (.01) (42) (.03) (63) (.04) (75) (.04) Adjusted net income available to common stockholders (non-GAAP), Adjusted diluted EPS (non-GAAP) $ 2,073 $ 1.14 $ 1,344 $ .73 $ 3,968 $ 2.17 $ 2,702 $ 1.47 (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 June 30, Six Months Ended June 30, 2025 2024 2025 2024 Return on average common stockholders’ equity (GAAP) 19 % 14 % 18 % 15 % Average common stockholders’ equity $ 41,504 $ 33,991 $ 40,936 $ 33,264 Less: Average goodwill (11,951) (11,951) (11,951) (11,951) Less: Average acquired intangible assets — net (7,551) (8,067) (7,615) (8,132) Plus: Average deferred tax liabilities related to goodwill and acquired intangible assets — net 1,710 1,747 1,716 1,753 Average tangible common equity $ 23,712 $ 15,720 $ 23,086 $ 14,934 Adjusted net income available to common stockholders (1) $ 2,073 $ 1,344 $ 3,968 $ 2,702 Return on tangible common equity (non-GAAP) 35 % 34 % 34 % 36 % (1) See table above for the reconciliation of net income available to common stockholders to adjusted net income available to common stockholders (non-GAAP). June 30, 2025 December 31, 2024 CSC CSB CSC CSB Tier 1 Leverage Ratio (GAAP) 9.8 % 12.2 % 9.9 % 11.6 % Tier 1 Capital $ 44,267 $ 32,114 $ 45,186 $ 32,584 Plus: AOCI adjustment (12,589) (10,932) (14,839) (12,938) Adjusted Tier 1 Capital 31,678 21,182 30,347 19,646 Average assets with regulatory adjustments 451,314 264,107 458,119 280,701 Plus: AOCI adjustment (13,231) (11,623) (14,831) (13,037) Adjusted average assets with regulatory adjustments $ 438,083 $ 252,484 $ 443,288 $ 267,664 Adjusted Tier 1 Leverage Ratio (non-GAAP) 7.2 % 8.4 % 6.8 % 7.3 %