What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-05-08 compared with 2025-11-07 · 309 added, 467 removed, 575 unchanged (57% of the section changed)

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

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

Forward-looking statements are identified by words such as “believe,” “anticipate,” “expect,” “intend,” “plan,” “will,” “may,” “estimate,” “appear,” “could,” “would,” “aim,” “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 forward-looking statements, which reflect management’s expectations and objectives as of the date hereof, are based on the best judgment of Schwab’s senior management.

These statements relate to, among other things:

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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);

• Industry and competitive trends including artificial intelligence, digital assets, private company securities and other alternative investments;

• The Company’s rollout of trading in select cryptocurrencies (see Overview in Part I – Item 2);

• The integration of Forge Global Holdings, Inc.

and its private market capabilities (see Overview in Part I – Item 2 and Business Acquisition in Part I – Item 1 – Financial Information – Notes to Condensed Consolidated Financial Statements (Item 1) – Note 3);

• The Company’s development and deployment of artificial intelligence capabilities;

• Opportunities for deepening and monetizing client relationships;

• Capital expenditures and expense management (see Results of Operations in Part I – Item 2);

• SEC transaction fee increases (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, funding strategy, 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);

• Wholesale funding and funding strategy (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);

• Sources and uses of liquidity (see Liquidity Risk 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 acquisition of Forge Global Holdings, Inc.

(Forge) and our expectation that incorporating Forge’s private markets capabilities will enhance Schwab’s ability to meet the evolving needs of investors across our growing client base (see Subsequent Events in Overview and Item 1 – Note 19);

and uses of capital and return of excess capital to stockholders (see Capital Management in Part I – Item 2 and Commitments and Contingencies in Item 1 – Note 11);

• 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);

• The likelihood of indemnification and guarantee payment obligations and clients failing to fulfill contractual obligations (see Commitments and Contingencies in Item 1 – Note 11, and Financial Instruments Subject to Off-Balance Sheet Credit Risk in Item 1 – Note 13);

• The outcome and impact of legal proceedings and regulatory matters (see Commitments and Contingencies in Item 1 – Note 11, 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.

Achievement of these expectations and objectives is subject to certain risks and uncertainties that could cause actual results to differ materially.

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.

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

• The impact of new and emerging technologies;

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

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• Client cash allocations and sensitivity to deposit rates;

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)

• Competitive pressure on pricing, including deposit rates;

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• 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;

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)

• Management’s ability to close the acquisition of Forge on the anticipated terms and timing;

required regulatory approvals and approval by Forge’s stockholders;

disruptions to Forge’s business as a result of the announcement and pendency of the acquisition;

and the ability and timeframe to integrate the business and realize the anticipated benefits;

• Our ability to monetize client assets;

• Our ability to monetize client assets through value-added products and services;

• Our ability to support client activity levels;

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

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

Results for the first quarter of 2026 and 2025 are as follows:

Three Months Ended

September 30, Percent

Change Nine Months Ended

September 30, Percent

2025 2024 2025 2024

March 31, Percent

Client Metrics

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Return on tangible common equity 40 % 35 %

(1) The third quarter and first nine months of 2025 include net outflows of $3.1 billion and $15.1 billion, respectively, from off-platform brokered certificates of deposit (CDs) issued by CSB.

The third quarter and first nine months of 2024 include net outflows of $4.4 billion and $9.1 billion, respectively, from off-platform brokered CDs issued by CSB and an outflow of $0.1 billion from an international relationship.

The first nine months of 2024 also includes an inflow of $10.3 billion from a mutual fund clearing services client.

Adjusted tier 1 leverage ratio (consolidated) 6.8 % 7.1 %

(1) The first quarter of 2026 and 2025 include net outflows of $0.1 billion and $5.3 billion, respectively, from off-platform brokered certificates of deposit (CDs) issued by CSB.

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

The first nine months of 2025 continued to present a changing landscape for investors.

Though macroeconomic uncertainty continued, during the third quarter of 2025, investor sentiment further improved and equity markets reached record levels.

The Standard and Poor’s ® 500 Index rose 8% and 14% during the third quarter and first nine months of 2025, respectively, and the NASDAQ Composite ® increased 11% and 17% during the third quarter and year-to-date periods.

The Federal Reserve reduced the target federal funds overnight rate 25 basis points in September, representing the first such rate cut since December 2024.

Schwab saw strong client asset gathering, growth in new client accounts, and sustained client engagement continue through the first nine months of 2025.

Core net new assets totaled $137.5 billion and $355.5 billion in the third quarter and first nine months of the year, respectively, increasing 44% and 41% from the comparative prior-year periods.

Clients opened 1.1 million and 3.4 million new brokerage accounts in the third quarter and first nine months of the year, respectively, up 18% and 12% from the respective periods in 2024, and active brokerage accounts reached 38.0 million at the end of the third quarter of 2025, up 6% year-over-year.

Though clients’ daily average trades (DATs) in third quarter of 2025 declined slightly from the second quarter, client engagement with the markets remained strong.

DATs were 7.4 million and 7.5 million for the third quarter and first nine months of 2025, respectively, up 30% and 31% from the same periods in 2024.

THE CHARLES SCHWAB CORPORATION

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

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

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

Net income was $2.4 billion and $6.4 billion in the third quarter and first nine months of 2025, respectively, growing 67% and 56% from the same prior-year periods.

Diluted earnings per common share (EPS) was $1.26 and $3.33 for the third quarter and first nine months of 2025, respectively, rising 77% and 62% from the same periods in 2024.

Adjusted diluted EPS (1) was $1.31 and $3.49 for the third quarter and first nine months of 2025, respectively, increasing 70% and 55% from the same periods in 2024.

Total net revenues grew 27% year-over-year in the third quarter of 2025 to reach $6.1 billion, resulting in a year-to-date total of $17.6 billion, an increase of 23% from the same period in 2024.

Net interest revenue was $3.1 billion and $8.6 billion in the third quarter and first nine months of 2025, respectively, up 37% and 30% from the same periods in 2024, primarily due to lower interest expense from reductions in bank supplemental funding and lower rates on funding sources, as well as growth in bank and margin 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 $1.7 billion and $4.8 billion in the third quarter and first nine months of 2025, respectively, increasing 13% from both prior-year periods, due primarily 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 $995 million and $2.9 billion in the third quarter and first nine months of 2025, respectively, higher by 25% and 19% from comparable prior-year periods, due primarily to higher trading volume.

Bank deposit account fee revenue rose to $247 million and $739 million in the third quarter and first nine months of the year, respectively, up 63% and 51% from the same periods in 2024 due primarily to higher net yields, partially offset by lower bank deposit account balances (BDA balances).

Total expenses excluding interest were $3.1 billion and $9.3 billion in the third quarter and first nine months of 2025, respectively, increasing 4% and 5% from the same periods in 2024.

For the third quarter and first nine months of 2025, adjusted total expenses (1) were $3.0 billion and $8.9 billion, respectively, up 5% and 6% from the comparable prior-year periods.

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

The increases were primarily attributable to higher compensation and benefits expense and higher professional services expense, partially offset by lower regulatory fees and assessments, and for the quarter-to-date period, lower industry fees within other expense.

Return on average common stockholders’ equity was 21% and 20% for the third quarter and first nine months of 2025, respectively, up from 14% in both comparable prior-year periods.

These increases were due to higher net income, which more than offset higher average common stockholders’ equity.

Return on tangible common equity (1) (ROTCE) was 38% and 37% for the third quarter and first nine months of 2025, respectively, up from 31% and 33% for the same periods in the prior year, as growth in adjusted net income available to common stockholders (1) more than offset growth in average common stockholders’ equity.

Average common stockholders’ equity increased primarily as a result of growth in retained earnings and improved average accumulated other comprehensive income (AOCI), partially offset by higher treasury stock due to common stock repurchases in 2025.

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).

In the first nine months of 2025, Schwab supported strong client demand in margin and bank lending, while significantly reducing bank supplemental funding.

Balance sheet assets totaled $465.3 billion as of September 30, 2025, up 1% during the third quarter and down 3% from year-end 2024.

Principal and interest from our AFS and HTM securities portfolio along with normal client cash activity allowed for further reduction in bank supplemental funding, which includes brokered CDs, Federal Home Loan Bank (FHLB) borrowings, and borrowings under repurchase agreements at our banks.

In September, we transferred $3.0 billion of BDA balances to our balance sheet (see Item 1 – Note 10) to accelerate the paydown of bank supplemental borrowings.

In the first nine months of 2025, Schwab reduced the outstanding balance of total bank supplemental funding by $35.1 billion, or 70%, including a reduction of $12.9 billion during the third quarter.

As of September 30, 2025, remaining balances totaled $14.8 billion, which is within a range generally consistent with our diversified funding strategy.

Client margin loans increased during the third quarter to $97.2 billion at September 30, up 16% from year-end 2024, reflecting strong client demand amid rising equity markets and improved investor sentiment.

Bank loans totaled $53.6 billion as of the end of the third quarter, increasing 18% in the first nine months of 2025 due to growth of pledged asset lines (PALs) and First Mortgages.

The Company also returned meaningful excess capital in the first nine months of 2025.

During the third quarter, the Company repurchased $2.7 billion in common stock, bringing total year-to-date common stock repurchases to $4.6 billion.

In addition, the Company increased its common dividend by 8% to $.27 per share in the first quarter of the year, and redeemed its Series G preferred stock for $2.5 billion in the second quarter.

Inclusive of these capital actions and organic capital generation from net

In the first quarter of 2026, Schwab supported our clients through market volatility and heightened uncertainty.

Equity markets retreated in March, giving up early-quarter gains, as the Standard and Poor’s ® 500 Index and NASDAQ Composite ® finished the first quarter of 2026 down 5% and 7%, respectively.

Amid inflationary pressures and geopolitical uncertainty, the Federal Reserve kept the target federal funds overnight rate unchanged in the first quarter.

Strong client asset gathering partially offset equity market declines, as total client assets ended the first quarter of the year at $11.77 trillion, down 1% from year-end 2025.

Core net new assets rose 2% year-over-year in the first quarter of 2026 to $140.0 billion, which included a $17.5 billion outflow from a planned mutual fund clearing client deconversion.

Clients opened 1.3 million new brokerage accounts in the first quarter of 2026, up 10% from the prior-year first quarter, and active brokerage accounts were 39.1 million at March 31, 2026, up 6% year-over-year.

Clients were highly engaged in the markets to begin the year, as clients’ daily average trades (DATs) rose significantly year-over-year to 9.9 million for the first quarter of 2026.

Schwab delivered strong financial performance in the first quarter of 2026, reflecting strong asset gathering and client engagement, sustained client demand for Schwab’s lending offerings and managed investing solutions, and lower wholesale bank borrowings.

Net income was $2.5 billion in the first quarter of 2026, increasing 30% year-over-year.

Diluted earnings per

THE CHARLES SCHWAB CORPORATION

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

income in the first nine months of the year, the Company’s consolidated Tier 1 Leverage Ratio was 9.7% at September 30, 2025, down slightly from year-end 2024.

Our consolidated adjusted Tier 1 Leverage Ratio (1) increased to 7.3%, driven by net income in the first nine months of the 2025 and improvement in AOCI.

common share (EPS) and adjusted diluted EPS (1) for the first quarter of 2026 totaled $1.37 and $1.43, respectively, both rising 38% from the first quarter of the prior year.

Total net revenues rose 16% year-over-year to $6.5 billion in the first quarter of 2026.

Net interest revenue totaled $3.1 billion in the first quarter of 2026, rising 16% from the prior-year’s first quarter, which reflected growth in margin and bank lending as well as lower aggregate wholesale borrowings, partially offset by lower yields on floating-rate assets.

Asset management and administration fees were $1.8 billion in the first quarter of 2026, an increase of 15% year-over-year, due primarily to higher average client asset balances, reflecting asset gathering, year-over-year market appreciation, and growth in managed investing solutions, money market funds, and other proprietary fund products.

Trading revenue grew 20% year-over-year to $1.1 billion in the first quarter of 2026, reflecting higher order flow revenue and commissions amid market volatility and higher trading volume.

Bank deposit account fee revenue totaled $295 million in the first quarter of 2026, higher by 20% from the prior-year period, due primarily to higher net yields, partially offset by lower average bank deposit account balances (BDA balances).

Total expenses excluding interest in the first quarter of 2026 were $3.3 billion, and adjusted total expenses (1) were $3.2 billion, both higher by 5% year-over-year, reflecting strong client engagement and ongoing investments to support our key strategic initiatives including organic growth, new products, and ongoing scale and efficiency efforts.

The increases were primarily attributable to higher compensation and benefits expense due to annual merit increases and growth in headcount, including financial consultants and wealth advisors to support our expanding client base, and higher professional services expense resulting from overall growth in the business, partially offset by lower industry fees within other expense.

Return on average common stockholders’ equity was 23% in the first quarter of 2026, up from 18% in the first quarter of the prior year, primarily as a result of growth in net income, which more than offset higher average common stockholders’ equity.

Return on tangible common equity (1) was 40% in the first quarter of 2026, increasing from 35% in the first quarter of 2025, as growth in adjusted net income available to common stockholders (1) more than offset growth in average common stockholders’ equity.

Average common stockholders’ equity increased as a result of growth in retained earnings and improved average accumulated other comprehensive income (AOCI), partially offset by higher treasury stock due to repurchases of common stock in 2025 and the first quarter of 2026.

The improvement in average AOCI resulted from lower unrealized losses on available for sale (AFS) investment securities, driven by lower market interest rates and lower investment holdings in 2026, and from amortization of losses on securities previously transferred from AFS to held to maturity (HTM).

Schwab continued to support our clients’ evolving needs through effective balance sheet management, including supporting sustained demand for margin and bank lending.

Total balance sheet assets were $493.3 billion at the end of the first quarter of 2026, increasing slightly from year-end 2025.

Client demand for margin loans continued to be strong to start 2026, with margin loans ending the first quarter at $126.7 billion, up 13% from year-end 2025.

This growth reflected ongoing demand for margin lending as a result of engagement in the markets and long/short strategies implemented by RIA clients, and was supported in part by wholesale funding.

Bank loans totaled $60.9 billion at the end of the first quarter, rising 5% from year-end 2025 due to growth in pledged asset lines (PALs) and First Mortgages.

During the first quarter, the Company repurchased $2.4 billion in common stock, and also increased its common dividend by 19% to $.32 per share.

Inclusive of both returns of capital and organic capital generation during the quarter from earnings, the Company’s consolidated Tier 1 Leverage Ratio at March 31, 2026 was 8.9%, down from 9.3% at year-end 2025.

Our consolidated adjusted Tier 1 Leverage Ratio (1) was 6.8% at March 31, down from 7.1% at year-end 2025, and within our long-term operating objective of 6.75% to 7.00%.

In addition, subsequent to quarter-end, the Company issued $1.5 billion of Series L preferred stock on April 22, 2026.

In April 2026, Schwab announced a spot crypto trading offer that will be offered to retail clients through a phased rollout.

The Company plans to provide clients direct access to bitcoin and ethereum trading, combined with educational content and professional support with investment experience.

Schwab’s subsidiary, Charles Schwab Premier Bank, SSB (CSPB), will serve as the custodian of clients’ digital assets, responsible for safekeeping and record-keeping.

CSPB has engaged Paxos Trust Company, NA, a regulated blockchain infrastructure provider, to deliver sub-custody and trade execution services.

Over time, CSPB plans to add additional cryptocurrencies to the platform, as well as transfer capabilities for in-kind deposits and withdrawals, allowing clients with existing digital asset investments to bring them to the Schwab platform alongside their other investments.

See Part I – Item 1A – Risk Factors in the 2025 10-K for additional information.

(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.

Subsequent Events

On November 6, 2025, Schwab announced that it has entered into a definitive agreement to acquire Forge Global Holdings, Inc.

(Forge), operator of a leading private market platform and trading marketplace, in a transaction valued at approximately $660 million.

The Company anticipates that incorporating Forge’s private markets capabilities will enhance Schwab’s ability to meet the evolving needs of investors across our growing client base.

The transaction is expected to close in the first half of 2026, subject to customary closing conditions, including approval by Forge’s stockholders and regulatory approvals.

Current Regulatory and Other Developments

On June 12, 2025, the SEC withdrew certain notices of proposed rulemaking issued between March 2022 and November 2023, including 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 in 2023 and 2024, including the July 2024 proposal related to the brokered deposits framework, 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:

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;

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

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

THE CHARLES SCHWAB CORPORATION

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Acquisition of Forge Global Holdings, Inc.

On March 2, 2026, Schwab completed its acquisition of Forge Global Holdings, Inc.

(Forge), an operator of a leading private market platform and trading marketplace, for $636 million of cash and other consideration.

Integration work is underway, and we anticipate that incorporating Forge’s private company investment capabilities will enhance our ability to meet the evolving needs of investors across our growing client base.

Our condensed consolidated financial statements include the financial condition and results of operations for Forge beginning on March 2, 2026.

What changed 10-Q

Item 2. Management’s Discussion and Analysis