What changed in this filing

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Item 1A. Risk Factors

2026-02-25 compared with 2025-02-26 · 94 added, 67 removed, 174 unchanged (48% of the section changed)

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Cybersecurity.

THE CHARLES SCHWAB CORPORATION

Economic and Market Risks

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Investor sentiment and market and trading dynamics can affect client preferences and security selection, and can impact transactions and asset-based revenues.

Market-driven changes, such as declines in equity markets, can also reduce client demand for margin lending, which is a significant source of net interest revenue.

A significant change in client cash allocations could negatively impact our income.

We rely heavily on client cash balances to generate revenue.

Client cash balances are a significant funding source for the generation of the Company’s revenue.

Cash awaiting investment may be used to extend margin loans to clients or be swept to our banking subsidiaries and those bank deposits are then used to extend loans to clients and purchase investment securities.

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A significant reduction in our clients’ allocation to cash, a change in the allocation of that cash, or a transfer of cash away from the Company, would likely reduce our income.

As a result of the rapid increases in short-term interest rates in 2022 and 2023, the Company saw a significant decrease in clients’ asset allocation to sweep cash and greater client investment in higher-yielding alternatives at Schwab such as fixed income investments and proprietary purchased money market funds.

To help facilitate these changes in client cash allocations, the Company utilized higher-cost supplemental funding sources, which negatively impacted the Company’s net income.

For example, as a result of rapid increases in short-term interest rates in 2022 and 2023, the Company saw a significant decrease in clients’ asset allocation to sweep cash and greater client investment in higher-yielding alternatives at Schwab such as fixed income investments and proprietary purchased money market funds.

To help support these changes in client cash allocations, the Company extensively utilized higher-cost funding sources, which negatively impacted the Company’s net income.

Significant interest rate changes could affect our profitability.

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A decline in interest rates may have a negative impact on our net interest revenue and our bank deposit account fee revenue.

The Company’s interest-earning assets include significant holdings of investment securities, which include fixed- and floating-rate debt securities, including substantial holdings of mortgage-backed securities, as well as mortgages.

The Company could be adversely affected by a decline in interest rates if the rates that the Company earns on interest-earning assets decline more than the rates that the Company pays on its funding sources, or if prepayment rates increase on the mortgages and mortgage-backed securities that the Company holds.

A low interest rate environment may also have a negative impact on our asset management and administration fee revenues when we have to waive a portion of our management fees, as we experienced in 2020 and 2021, for certain Schwab-sponsored money market mutual funds in order to continue providing a positive return to clients.

A decline in interest rates may also negatively impact our bank deposit account fee revenue, which is earned primarily pursuant to the 2023 IDA agreement.

Though the Company may benefit from a rising interest rate environment, a rise in interest rates may cause our funding costs to increase if market conditions or the competitive environment induces us to raise our interest rates to avoid losing deposits, or replace deposits with higher-cost funding sources without offsetting increases in yields on interest-earning assets, which can reduce the benefit of higher market interest rates to our net interest revenue, as we experienced in recent years.

The rapid increases in market interest rates experienced in 2022 and 2023 also contributed to increased unrealized losses on our investment

THE CHARLES SCHWAB CORPORATION

securities portfolios.

A decline in interest rates may also negatively impact our bank deposit account fee revenue, pursuant to the 2023 IDA agreement.

Though the Company may benefit from a rising interest rate environment, a rise in interest rates may cause our funding costs to increase.

The competitive environment may induce us to raise our interest rates to avoid losing deposits, or we may need to replace deposits with higher-cost funding sources as we experienced in recent years.

In such situations, without offsetting increases in yields on interest-earning assets, the benefit of higher market interest rates to our net interest revenue may be reduced.

The rapid increases in market interest rates experienced in 2022 and 2023 also contributed to increased unrealized losses on our investment securities portfolios.

Increased unrealized losses on investment securities or other assets on our balance sheet can reduce market or client confidence in us, which could limit our ability to attract new client assets and accounts or result in the transfer of client assets and accounts from the Company.

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The 2023 IDA agreement involves certain commitments, including the maintenance of prescribed minimum and maximum insured deposit account balances (IDA balances), that limit our ability to respond to changes in interest rates and may impact our profitability and bank deposit account fee revenue.

The bank deposit account fee revenue that we earn related to the IDA agreement may be less than the net interest revenue that we could have earned if the deposit balances were swept to our banking subsidiaries rather than the TD Depository Institutions.

When we are permitted to reduce the IDA balances, we can only move the balances to our banking subsidiaries if we have sufficient capital.

Problems encountered by other financial institutions and responsive measures to manage such problems could adversely affect financial markets generally, could have an adverse effect on our financial position or results of operations, and have indirect adverse effects on us.

The bank deposit account fee revenue that we earn related to the 2023 IDA agreement may be less

THE CHARLES SCHWAB CORPORATION

than the net interest revenue that we could have earned if the deposit balances were used to extend margin loans or swept to our banking subsidiaries rather than the TD Depository Institutions.

Problems encountered by other financial institutions and responsive measures to manage such problems could have direct adverse effects on financial markets generally and our financial position or results of operations, as well as indirect adverse effects on us.

Concerns regarding the soundness or creditworthiness of other financial institutions can cause substantial disruption within the financial markets and have negative impacts for us and our industry, including reductions in availability of liquidity, higher borrowing costs, and higher costs of capital.

Such concerns regarding one or more financial institutions may also advance public concerns regarding Schwab or the financial services industry more broadly, which could harm our reputation and adversely affect our results of operations and financial condition, even if underlying matters impacting other financial institutions are of limited or no direct applicability to us.

Financial institutions are interrelated through trading, clearing, or other relationships, and, as a result, concerns about the financial condition of one or more institutions could lead to significant market-wide liquidity and credit problems, losses, or defaults by other institutions.

Financial institutions are interrelated through trading, clearing, custody, or other relationships, and, as a result, concerns about the financial condition of one or more institutions could lead to significant market-wide liquidity and credit problems, losses, or defaults by other institutions.

This risk may adversely affect financial intermediaries, such as broker-dealers, banks, clearing houses, securities exchanges, market makers, and others, with which we interact on a daily basis, and therefore, could adversely affect us.

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As a result of heightened regulatory focus on capital requirements, the Company took measures to increase its capital, including revising its long-term operating objective.

In addition, the cost of resolving the 2023 bank failures resulted in increased FDIC costs and may prompt the FDIC to further increase its premiums or to issue additional special assessments, which could have a material negative impact on our profitability and our business.

In addition, the cost of resolving the 2023 bank failures resulted in increased FDIC costs, and potential future bank failures or other similar events may prompt the FDIC to further increase its premiums or to issue additional special assessments, which could have a material negative impact on our profitability and our business.

Liquidity Risk

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In addition, CSC may need to provide additional funding to such subsidiaries.

THE CHARLES SCHWAB CORPORATION

activities (including margin, mortgage-related, and personal lending), increased capital requirements, changes in regulatory guidance or interpretations, other regulatory changes, or a loss of market or client confidence in us resulting in unanticipated withdrawals of client funds.

The Company’s margin lending activity has significantly increased in recent years, reflecting growth from our acquisition of Ameritrade and market-driven factors.

Factors which may adversely affect our liquidity position include CS&Co having temporary liquidity demands due to timing differences between brokerage transaction settlements and the availability of segregated cash balances, fluctuations in cash held in banking or brokerage client accounts, such as significant client reallocation from sweep cash to higher-yielding investments as we experienced in recent years in response to rapid interest rate increases, a dramatic increase in our lending activities (including margin, mortgage-related, and personal lending), increased capital requirements, changes in regulatory guidance or interpretations, other regulatory changes, or a loss of market or client confidence in us resulting in unanticipated withdrawals of client funds.

The Company’s margin lending activity has significantly increased in recent years due to market-driven factors and overall growth of our business.

As a member firm of securities and derivatives clearing houses, we are required to deposit cash, stock and/or government securities for margin requirements and to clearing funds.

The margin requirements may fluctuate significantly from time to time based upon the nature and size of clients’ trading activity and market volatility, and member firms like us have been required to deposit additional funds.

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deposit additional funds.

Clearing houses could also require additional funds from member firms if a clearing member defaults on its obligations to the clearing house in an amount larger than its own margin and clearing fund deposits.

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During periods of disruptions in the credit and capital markets, potential sources of external financing could be reduced, and borrowing costs could increase.

Although CSC and CS&Co maintain multiple sources of external financing including unsecured uncommitted bank credit lines and CSC has a commercial paper issuance program, as well as a universal shelf registration statement filed with the SEC which can be used to sell securities, financing may not be available on acceptable terms or at all due to market conditions or disruptions in the credit markets.

CSC, CS&Co, and our banking subsidiaries maintain multiple sources of external financing including repurchase agreements and securities lending, secured lines of credit and unsecured uncommitted bank credit lines, and CSC has a commercial paper issuance program, as well as a universal shelf registration statement filed with the SEC which can be used to sell securities.

Financing may not be available on acceptable terms or at all due to market conditions or disruptions in the credit markets.

In addition, a downgrade in the Company’s credit ratings could increase its borrowing costs and limit its access to the capital markets.

When short-term interest rates rapidly increase, as they did in 2022 and 2023, client movement of certain cash balances out of our sweep features and into higher-yielding alternatives generally increases.

When these outflows outpace excess cash on hand and cash generated by maturities and paydowns on our investment and loan portfolios, as they have in recent years, we may need to rely on supplemental funding, such as advances under Federal Home Loan Bank (FHLB) secured credit facilities, borrowings under repurchase agreements with external financial institutions, issuances of brokered certificates of deposit (CDs), or other sources of funding, which have higher costs and could be subject to limitations on availability.

In addition, to access new FHLB advances or roll over existing advances, our banking subsidiaries must maintain positive tangible capital, as defined by the Federal Housing Finance Agency (FHFA).

Larger unrealized losses on our available for sale (AFS) portfolio due to higher market interest rates negatively impact our capital position inclusive of AOCI, including our tangible capital.

When short-term interest rates rapidly increase, client movement of certain cash balances out of our sweep features and into higher-yielding alternatives generally increases.

When these outflows outpace excess cash on hand and cash generated by maturities and paydowns on our investment and loan portfolios, as we experienced in 2022 and 2023, we may need to rely on increased levels of higher-cost funding, which could be subject to limitations on availability and additional regulatory requirements.

Operational Risk

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Our systems and those of other financial institutions, as well as those of our third-party service providers, have been and will continue to be the frequent target of cyber attacks, malicious code, computer viruses, ransomware, and denial of service attacks that could result in unauthorized access, misuse, loss or destruction of data (including confidential client information), account takeovers, unavailability of service or other events.

Despite our efforts to ensure the integrity of our systems, we may not be able to anticipate or to implement effective preventive measures against all security breaches of these types, especially because the techniques used change frequently or are not recognized until launched, and because security attacks can originate from a wide variety of sources.

Data security breaches may also result from non-technical means, for example, employee misconduct.

Despite our efforts to ensure the integrity of our systems, we may not be able to anticipate or implement effective preventive measures against all security breaches of these types, especially because the techniques used change frequently or are not recognized until launched, and because security attacks can originate from a wide variety of sources.

Data security breaches may also result from employee misconduct.

Data exposure may also result from a failure to adequately destroy data during system or asset decommissioning, which might result in client or Company information being made available to external parties in error.

Given the high volume of transactions that we process, the large number of clients, counterparties, and third-party service providers with which we do business, including cloud service providers, and the increasing sophistication of cyber attacks, a cyber attack could occur and persist for an extended period of time before being detected.

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Security breaches, including breaches of our security measures or those of our third-party service providers, could result in a violation of applicable privacy and other laws, and could subject us to significant liability or loss that may not be covered by insurance, actions by our regulators, damage to our reputation, or a loss of confidence in our security measures which could harm our business.

We may be required to expend significant additional resources to modify our protective measures or to

THE CHARLES SCHWAB CORPORATION

investigate and remediate vulnerabilities or other exposures.

We may also be required to pay ransom to threat actors to restore or prevent dissemination of data.

We also face risk related to external fraud involving the misappropriation and use of clients’ user names, passwords or other personal information to gain access to our clients’ financial accounts.

This could occur from the compromise of clients’ personal electronic devices or as a result of a data security breach at an unrelated company where clients’ personal information is taken and then made available to fraudsters.

Additionally, data exposure can result from a failure to adequately destroy data during system or asset decommissioning, which might result in client or Company information being made available to external parties in error.

Such risks have grown in recent years due to the increased sophistication and activities of organized crime and other external parties, including foreign state-sponsored parties.

Losses reimbursed to clients under our guarantee against unauthorized account activity could have a negative impact on our business, financial condition, and results of operations.

We may be required to expend significant additional resources to modify our protective measures or to investigate and remediate vulnerabilities or other exposures.

We may also be required to pay ransom to threat actors to restore operations or prevent dissemination of sensitive data.

Technology and operational failures or errors and other operational risks could subject us to losses, litigation, regulatory actions, and reputational damage.

We must process, record and monitor a large number of transactions and our operations are highly dependent on the integrity of our technology systems and our ability to make timely enhancements and additions to our systems.

System interruptions, errors or downtime can result from a variety of causes, including changes in client use patterns, technological failure, changes to our systems, linkages with third-party systems and power failures and can have a significant impact on our business and operations.

System interruptions, errors or downtime can result from a variety of causes, including changes in client use patterns, technological failure, changes to our

THE CHARLES SCHWAB CORPORATION

systems, linkages with third-party systems and power failures and can have a significant impact on our business and operations.

Our systems are vulnerable to disruptions from human error, execution errors, errors in models such as those used for asset management, capital planning and management, risk management, stress testing and compliance, employee misconduct, unauthorized trading, external fraud, computer viruses, distributed denial of service attacks, cyber attacks, terrorist attacks, natural disaster, extreme weather, power outage, capacity constraints, software flaws, events impacting key business partners and vendors, and similar events.

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We have experienced, and could, in the future, experience cloud service disruptions that lead to delays in accessing data that is important to our businesses.

Such disruptions, such as the broad-reaching cloud platform outages that impacted multiple industries in 2024, can and have hindered our clients’ access to our platforms.

Such disruptions, such as the broad-reaching cloud platform outages that impacted multiple industries in recent years, can and have hindered our clients’ access to our platforms.

It could take an extended period of time to restore full functionality to our technology or other operating systems in the event of an unforeseen occurrence, which could affect our ability to process and settle client transactions.

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Disruptions in service and slower system response times could result in substantial losses, decreased client satisfaction, reputational damage, and regulatory inquiries.

We are also dependent on the integrity and performance of securities exchanges, clearing houses, market makers, dealers, and other intermediaries to which client orders are routed for execution and settlement.

We are also dependent on the integrity and performance of securities exchanges, clearing houses, market makers, dealers, custodians, and other intermediaries to which client orders are routed for execution and settlement.

System failures and constraints and transaction errors at such intermediaries could result in delays and erroneous or unanticipated execution prices and cancelled orders, cause substantial losses for us and for our clients, and subject us to claims from our clients for damages, and cause reputational harm.

We experienced in 2024 technology outages of client websites, mobile applications, and certain corporate technology as a result of technological issues with third-party service providers that we use to support websites and mobile applications used by us and our clients.

We have experienced in recent years technology outages of client websites, mobile applications, and certain corporate technology as a result of technological issues with third-party service providers that we use to support websites and mobile applications used by us and our clients.

An internal issue or issues with vendor or industry systems and connectivity could materially impact our operations and ability to service clients, subject us to material losses, and cause reputational harm.

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We consider service quality to be an important part of the client experience and our failure to meet client expectations could result in decreased client satisfaction.

We take steps to prevent and detect fraud but the ways that fraudulent activity is attempted is continuously evolving.

Although we monitor for new types of fraud, there may be a delay in recognizing the fraud is happening.

Besides potential losses, shutting down fraudulent activity often requires a balance with client experience.

Instances of fraud might negatively impact our reputation and client confidence in the Company, in addition to any direct losses that might result from such instances.

THE CHARLES SCHWAB CORPORATION

Our investment management operations may subject us to fiduciary or other legal liability for client losses.

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Errors in the design, function, or underlying assumptions used in these models and tools, particularly if we fail to detect the errors over an extended period, could subject us to claims of a breach of fiduciary duty and potentially large liabilities for make-whole payments, litigation, and/or regulatory fines.

We rely on outsourced service providers to perform key functions.

We rely on external service providers to perform certain key technology, cloud infrastructure, processing, servicing, and support functions.

We rely on outsourced service providers and financial intermediaries to perform key functions, and failure of these entities to perform as expected could result in financial or reputational harm to us or financial harm to our clients.

We rely on external service providers to perform certain key technology, cloud infrastructure, processing, servicing, support, and custody functions.

These service providers face technology, operating, business, and economic risks, and any significant failures by them, including the improper use or disclosure of our confidential client, employee, or company information, could cause us to incur losses and could harm our reputation.

An interruption in or the cessation of service by any external service provider as a result of systems failures, capacity constraints, financial difficulties, natural disasters, extreme weather, power outage, public health crises, political developments, war, international disputes, or for any other reason, and our inability to make alternative arrangements in a timely manner could disrupt our operations, impact our ability to offer certain products and services, and result in financial losses to us.

THE CHARLES SCHWAB CORPORATION

health crises, political developments, war, international disputes, or for any other reason, and our inability to make alternative arrangements in a timely manner could disrupt our operations, impact our ability to offer certain products and services, and result in financial losses to us.

As a result of both broad-reaching and company-specific technology impacts from our third-party service providers, we have experienced in recent years outages of client websites, mobile applications, and certain corporate technology.

During the COVID-19 pandemic, we temporarily lost the services from some of our outsourced service providers which contributed to increased client service response and processing times.

Switching to an alternative service provider may require a transition period and result in less efficient operations.

We rely on financial intermediaries to execute and settle client orders and transactions with financial intermediaries are a significant source of revenue.

We rely on market makers, dealers, securities exchanges, clearing houses, and other financial intermediaries to execute and settle our clients’ orders.

Switching to an alternative service provider may require a transition period and result in increased costs and less efficient operations.

In addition, if custodians holding Schwab’s or our clients’ collateral were to fail to return such collateral when required due to insolvency, operational deficiencies, legal proceedings, or other events, we could incur financial loss.

We rely on market makers, dealers, securities exchanges, clearing houses, custodians, and other financial intermediaries to execute and settle our clients’ orders.

In addition, payments received from market makers and exchanges in connection with the execution of client equity and options trades, and from dealers and other counterparties in connection with securities lending, account for significant revenue.

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This may be due to market volatility, uneconomic trading conditions, capacity constraints, financial constraints, system failures, unanticipated trading halts invoked by securities exchanges, market closures, or other reasons.

Our inability to get client orders executed or settled because of the unwillingness or inability of these parties to perform their usual functions could result in client dissatisfaction and reputational harm and expose us to client claims for damages.

Our inability to get client orders executed or settled because of the unwillingness or inability of these or similar parties to perform their usual functions could result in client dissatisfaction and reputational harm and expose us to client claims for damages.

We may suffer financial loss from fraud and financial crime.

The risk of fraud for financial institutions has significantly increased in recent years, in part because of the proliferation of new technologies and the increased sophistication and activities of organized crime and hackers, and other parties.

Any of these parties may attempt to fraudulently induce employees, clients, vendors, or other third parties to disclose sensitive information that could lead to the misappropriation and use of clients’ user names, passwords or other personal information to gain access to our clients’ financial accounts.

Through our clients’ accounts, fraudsters may seek to engage in unauthorized securities transactions or money movement involving, for example, wire transfers, automated clearinghouse (ACH) transactions, debit cards, and checks, as well as fraudulent or unauthorized new account openings.

Such fraud may occur from the compromise of clients’ personal electronic devices, social engineering, phishing scams, or as a result of a data security breach at an unrelated company where clients’ personal information is taken and then made available to fraudsters.

Any of these strategies can compromise credentials or be used to facilitate fraud.

Increasing sophistication in artificial intelligence and broad public availability of such technologies, including to organizations and individuals seeking to commit fraud, has resulted in increased risk of external fraud by enhanced or novel techniques, including those involving impersonation to gain access to client accounts or convince clients to initiate fraudulent transactions.

We also face risks arising from clients who intentionally engage in fraudulent or deceptive conduct.

In some instances, clients may knowingly authorize or initiate transactions under false pretenses, misuse payment channels, submit fraudulent checks or ACH items, or provide misleading information to facilitate fraudulent transfers or trading activity.

Schwab also faces risk of fraud by employees who misuse authorized access to critical information or systems.

Such insider misconduct may involve misappropriation of Company or client assets, misuse or theft of Company or client information, insider trading, operational sabotage, circumvention of internal controls, or other actions that could harm the Company or our clients.

We continue to take steps to implement new controls, strengthen capabilities in how we authenticate our clients, and enhance monitoring protocols to help prevent and detect fraud and ultimately protect our clients, but the ways that fraudulent activity is attempted are continuously evolving.

Although we monitor for new types of fraud, there may be a delay in recognizing such activity.

Losses reimbursed to clients under our guarantee against unauthorized account activity could have a negative impact on our business, financial condition, and results of operations.

Instances of fraud might negatively impact our reputation and client confidence in the Company, in addition to any direct losses that might result from such instances.

We may suffer significant losses from our credit exposures.

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While we have policies and procedures designed to manage this risk, the policies and procedures may not be fully effective.

Our exposure mainly results from margin lending, clients’ options and futures trading, securities lending, mortgage lending, pledged asset lending, our role as a counterparty in financial contracts and investing activities, and indirectly from the investing activities of certain of the proprietary funds that the Company sponsors.

Our exposure mainly results from margin lending, clients’ options and futures trading, securities lending, mortgage lending, pledged asset lending, our role as a counterparty in

THE CHARLES SCHWAB CORPORATION

financial contracts and investing activities, and indirectly from the investing activities of certain of the proprietary funds that the Company sponsors.

When clients purchase securities on margin, borrow on lines of credit collateralized by securities, or trade options or futures, we are subject to the risk that clients may default on their obligations when the value of the securities and cash in their accounts falls below the amount of clients’ indebtedness.

Our margin, options and futures business has materially increased in recent years as a result of our Ameritrade acquisition, and market liquidity represents an increased risk.

Our margin, options and futures business has materially increased in recent years as a result of market-driven factors and overall growth of our business including growth in our trader client base, and market liquidity represents an increased risk.

Abrupt changes in securities valuations and the failure of clients to meet margin calls could result in substantial losses, especially if there is a lack of liquidity.

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We have exposure to credit risk associated with our investments.

Those investments are subject to price fluctuations.

We have exposure to credit risk associated with our investments, which are subject to price fluctuations.

Loss of value of securities can negatively affect earnings if management determines that such loss of value has resulted from a credit loss.

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These regulations affect our business operations and impose capital, client prote ction, and market conduct requirements on us as well as restrictions on the activities that we are allowed to conduct.

We become subject to increasing regulatory scrutiny as we grow.

We become subject to increasing regulatory scrutiny as we grow and expand client offerings.

Regulators have broad discretion in connection with their supervisory and enforcement activities and examination policies, and could prevent us from pursuing our business strategy.

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Despite our efforts to comply with applicable legal requirements, there are a number of risks, particularly in areas where applicable laws or regulations may be unclear or where regulators could revise their previous guidance.

Any enforcement actions or other proceedings brought by our regulators against us or our affiliates, officers or employees could result in fines, penalties, cease and desist orders, enforcement actions, suspension, disqualification or expulsion, or other disciplinary sanctions, including limitations on our business activities, any of which could harm our reputation and adversely affect our results of operations and financial condition.

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or other disciplinary sanctions, including limitations on our business activities, any of which could harm our reputation and adversely affect our results of operations and financial condition.

While we maintain systems and procedures designed to ensure that we comply with applicable laws and regulations, violations could occur.

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Such a finding may also damage our reputation and our relationships with our regulators and could restrict the ability of institutional investment managers to invest in our securities.

THE CHARLES SCHWAB CORPORATION

Legislation or changes in rules and regulations could negatively affect our business and financial results.

New legislation, rules, regulations and guidance, or changes in the interpretation or enforcement of existing federal, state, foreign and SRO rules, regulations and guidance, including changes relating to mutual funds, money market funds, standards of conduct with clients, conflicts of interest, regulatory treatment of deposit accounts, CRA, changes in required minimum capital and capital structure, and changes in equity market structure, including rules relating to order routing and order-related revenues, may directly affect our operations and profitability or our specific business lines.

In recent years, the SEC has proposed a number of new rules, such as its equity market structure proposals, that would require sweeping changes in industry operations and practices, thereby increasing uncertainty for markets and investors.

federal banking agencies have recently proposed rules regarding regulatory capital and long-term debt, and compliance with these proposed rules may result in increased costs and reduce our net income.

In addition, the FDIC recently proposed amending the brokered deposits framework setting forth its conditions for when broker-dealers, such as CS&Co, that place deposits with depository institutions through brokerage sweep arrangements qualify for the primary purpose exception from the definition of a deposit broker.

New legislation, rules, regulations and guidance, or changes in the interpretation or enforcement of existing federal, state, foreign and SRO rules, regulations and guidance, including changes relating to mutual funds, money market funds, standards of conduct with clients, conflicts of interest, regulatory treatment of deposit accounts, CRA, changes in required minimum capital and capital structure, changes in equity market structure, including rules relating to order routing and order-related revenues, and digital assets may directly affect our operations and profitability or our specific business lines.

The Company anticipates it will begin providing increased access for clients to trade in digital assets including select cryptocurrencies.

While some legislative and regulatory details have emerged, laws and regulations related to transactions in these asset types are still pending further development, which could negatively impact our ability to launch these products or services or limit the profitability of transacting with these assets.

Our profitability could also be affected by rules and regulations that impact the business and financial communities generally, including changes to the laws governing taxation, electronic commerce, client privacy and security of client data.

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See also Part II – Item 7 – Current Regulatory and Other Developments for discussion of regulatory proposals that could, among other things, require the Company to include AOCI in its regulatory capital calculations.

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We are subject to litigation and regulatory investigations and proceedings and may not be successful in defending against claims or proceedings.

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We are also the subject of inquiries, investigations, and proceedings by regulatory and other governmental agencies.

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Litigation and arbitration claims include those brought by our clients and the clients of third-party advisors whose assets are custodied with us.

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We evaluate potential strategic transactions, including business combinations, acquisitions, and dispositions.

Any such transaction could have a material impact on our financial position, results of operations, or cash flows.

Any such transaction, including our acquisition of Forge, could have a material impact on our financial position, results of operations, or cash flows.

The process of evaluating, negotiating, effecting, and integrating any such strategic transaction may divert management’s attention from other business concerns, and might cause the loss of key clients, employees, and business partners.

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In addition, an acquisition may cause us to assume liabilities or become subject to litigation or regulatory proceedings or require the amortization of a large amount of acquired intangible assets.

Further, we may not realize the anticipated benefits from an acquisition in a timely manner or at all, and any future acquisition could be dilutive to our current stockholders’ percentage ownership or to earnings per common share (EPS).

Further, we may not realize the anticipated benefits from an acquisition, including our acquisition of Forge, in a timely manner or at all, and any future acquisition could be dilutive to our current stockholders’ percentage ownership or to earnings per common share (EPS).

Our acquisitions and dispositions are typically subject to closing conditions, including regulatory approvals and the absence of material adverse changes in the business, operations or financial condition of the entity or part of an entity being acquired or sold.

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If a material transaction does not close, our stock price could decline.

We intend to offer clients direct access to select digital assets, which exposes us to new and uncertain financial, operational, legal, and regulatory risks that could adversely affect our business and financial results.

In 2026, the Company anticipates it will begin offering expanded client access to trading in digital assets including spot trading in select cryptocurrencies.

Expansion of digital asset client offerings presents significant new risks to the Company, including risks related to digital asset custody, trading, settlement, and liquidity, and increased risk related to fraud and other illicit activity.

Client demand for digital assets is uncertain and may fluctuate significantly due to market volatility, regulatory developments, or changes in investor sentiment.

The regulatory landscape for cryptocurrencies is evolving and uncertain, and changes in laws, regulations, or regulatory interpretations could prohibit or limit our ability to offer these products, increase compliance costs, or expose us to increased regulatory scrutiny.

Digital assets function as bearer instruments controlled with private keys, and transactions in digital assets are generally irreversible.

Due to the unique nature of digital assets, the loss, theft, compromise, or destruction of private keys could result in

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the permanent loss of digital assets with no practical means of recovery.

Because blockchain technology is relatively new, it is difficult to predict how it might be vulnerable to cybersecurity and fraud risks that could affect our business.

We expect to engage with third-party service providers to facilitate certain activities related to digital assets.

These relationships present additional risks, including operational, reputational, and compliance risks that could adversely affect our business.

Internal and third-party systems needed to effect client activity in digital assets are vulnerable to operational failures, cyberattacks, and fraud, and we may be held responsible for deficiencies in the controls or regulatory compliance of third-party service providers, even where we do not have direct oversight of their operations.

Failure or breach of our or third-party service providers’ systems, cybersecurity controls, or operational processes could result in loss of client digital assets, which may not be recoverable in full or at all.

Many crypto industry participants are relatively early-stage companies with limited history.

There is no guarantee they will perform as reliably or efficiently as anticipated.

Regulatory change could also affect the ability of third-party service providers to continue to operate or provide services for Schwab clients.

Such events could result in material financial losses, legal or regulatory claims, and reputational harm, even if we are not at fault.

Our industry is highly competitive and characterized by aggressive price competition.

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• Sales of a substantial number of shares by large stockholders;

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• General stock market activity and industry developments;

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

What changed 10-K

Item 1A. Risk Factors