What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-08-07 compared with 2026-05-08 · 423 added, 240 removed, 644 unchanged (51% of the section changed)

21 unchanged sentences

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 $85 trillion, which means the Company’s $11.77 trillion in client assets leaves substantial opportunity for growth.

Management estimates that investable wealth in the United States (U.S.) (consisting of assets in defined contribution, retail wealth management and brokerage, and RIA channels, along with bank deposits) currently exceeds $90 trillion, which means the Company’s $13.08 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.

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• 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 Company’s spot crypto trading offer (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;

and its private market capabilities (see Overview in Part I – Item 2);

• Estimates of market opportunity (see Introduction in Part I – Item 2);

• Growth of our client base and our business, strong client engagement, sustained demand for the Company’s offerings and solutions, and strategic initiatives (see Overview in Part I – Item 2);

• 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);

• Net interest revenue, client cash allocation, and adjustment of rates paid on client-related liabilities (see Results of Operations 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);

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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 Item 1 – Note 11);

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

• 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 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).

• The likelihood of indemnification and guarantee payment obligations and clients failing to fulfill contractual obligations (see Commitments and Contingencies in Part I – Item 1 – Financial Information – Notes to Condensed Consolidated Financial Statements (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 Legal Proceedings in Part II – Item 1, and Commitments and Contingencies in Item 1 – Note 11).

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

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• Client cash allocations and sensitivity to deposit rates;

• Competitive pressure on pricing, including deposit rates;

THE CHARLES SCHWAB CORPORATION

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

• 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;

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

• Regulatory guidance and adverse impacts from new or changed legislation, rulemaking or regulatory expectations;

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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;

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

• Our ability to support client activity levels;

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• Interest-earning asset mix and growth;

• Our ability to access funding sources;

• Our ability to access funding sources and the cost of funding;

• Prepayment levels for mortgage-backed securities;

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

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

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

Three Months Ended

March 31, Percent

June 30, Percent

Change Six Months Ended

June 30, Percent

2026 2025 2026 2025

Client Metrics

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Net income available to common stockholders $ 2,681 $ 1,977 36 % $ 5,078 $ 3,773 35 %

Earnings per common share — diluted $ 1.37 $ .99 38 %

Earnings per common share (EPS) — diluted $ 1.54 $ 1.08 43 % $ 2.91 $ 2.07 41 %

Net revenue change from prior year 21 % 25 % 18 % 21 %

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Adjusted total expenses $ 3,233 $ 2,920 $ 6,384 $ 5,934

Adjusted diluted earnings per common share $ 1.43 $ 1.04

Return on tangible common equity 40 % 35 %

Adjusted diluted EPS $ 1.62 $ 1.14 $ 3.05 $ 2.17

Return on tangible common equity (annualized) 44 % 35 % 41 % 34 %

Adjusted Tier 1 Leverage Ratio (consolidated) 6.8 % 7.2 %

(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.

(1) The second quarter and first six months of 2026 include net outflows of $1.1 billion and $1.2 billion, respectively, from off-platform brokered certificates of deposit (CDs) issued by CSB.

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 CDs issued by CSB.

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

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 second quarter and first six months of 2026 was a changing but generally positive macroeconomic environment for clients.

While equity markets declined amid elevated volatility in the first quarter of 2026, market returns rebounded strongly positive and volatility eased in the second quarter, as the Standard and Poor’s ® 500 Index and NASDAQ Composite ® rose 15% and 21%, respectively, in the second quarter, finishing the first half of the year up 10% and 13%, respectively.

The Federal Reserve kept the target federal funds overnight rate unchanged throughout the first six months of 2026, while the 10-year U.S.

Treasury yield rose 25 basis points to 4.44% at June 30.

Supported by equity market growth and strong asset gathering, total client assets increased to $13.08 trillion at June 30, up 10% from year-end 2025.

Schwab attracted core net new assets of $119.8 billion in the second quarter of 2026, up 49% from the same period in 2025, bringing the total for the first half of the year to $259.8 billion, up 19% from the first half of 2025.

New brokerage accounts were 1.4 million and 2.7 million in the second quarter and first half of 2026, respectively, up 26% and 18% from the same prior-year periods, and active brokerage accounts reached 39.8 million at June 30, 2026, up 6% year-over-year.

Clients continued to be highly engaged in the markets throughout the first half of 2026, with DATs reaching 11.9 million and 10.9 million in the second quarter and first six months of 2026, respectively, higher by 57% and 46% from the respective 2025 periods.

THE CHARLES SCHWAB CORPORATION

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

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.

Schwab’s financial results for the second quarter and first six months of 2026 reflected the growth of our client base, strong client engagement, and sustained demand for Schwab’s lending offerings and managed investing solutions.

Net income increased to $2.8 billion and $5.3 billion in the second quarter and first six months of 2026, respectively, higher by 32% and 31% from the same periods in 2025.

Diluted EPS was $1.54 and $2.91 in the second quarter and first six months of 2026, respectively, rising year-over-year 43% and 41%, respectively.

Adjusted diluted EPS (1) was $1.62 and $3.05 in the second quarter and first six months of 2026, respectively, up 42% and 41% from the same prior-year periods.

Total net revenues were $7.1 billion and $13.6 billion in the second quarter and first six months of 2026, respectively, growing 21% and 18% from the same periods in 2025.

Net interest revenue was $3.4 billion and $6.5 billion in the second quarter and first six months of the year, respectively, higher by 19% and 18% from the same periods in 2025, reflecting growth in margin and bank lending solutions and lower average wholesale borrowings, partially offset by lower yields on floating-rate assets, lower available for sale (AFS) and held to maturity (HTM) securities, and lower segregated cash and investments.

Asset management and administration fees totaled $1.8 billion and $3.6 billion in the second quarter and first six months of 2026, respectively, increasing 16% from both comparable periods in 2025, due primarily to higher average client assets driven by asset gathering, market appreciation, and growth in managed investing solutions.

Trading revenue was $1.2 billion and $2.3 billion in the second quarter and first half of 2026, respectively, increasing 28% and 24% from the comparable periods in 2025, reflecting higher order flow revenue and commissions due to higher trading volume and mix of trading activity.

Bank deposit account fee revenue was $333 million and $628 million in the second quarter and first six months of 2026, respectively, increasing 35% and 28% from the same periods in 2025, due primarily to higher net yields, partially offset by lower average bank deposit account balances (BDA balances).

Total expenses excluding interest were $3.4 billion and $6.7 billion in the second quarter and first six months of 2026, respectively, up 12% and 8% from the same prior-year periods.

For the second quarter and first six months of 2026, adjusted total expenses (1) were $3.2 billion and $6.4 billion, respectively, increasing 11% and 8% from the comparable periods in 2025.

These increases in expenses were driven by strong client engagement and the inclusion of Forge Global Holdings, Inc.

(Forge) beginning in March 2026, as well as continued investments in key strategic initiatives including supporting organic growth, new products, and ongoing scale and efficiency efforts.

These factors contributed to higher compensation and benefits expenses, reflecting growth in headcount, including financial consultants and wealth advisors, and higher incentive compensation, higher professional services and occupancy and equipment expenses, and, for the quarter-to-date period, higher industry fees within other expense.

Return on average common stockholders’ equity was 25% and 23% for the second quarter and first six months of 2026, respectively, up from 19% and 18% from the same periods in 2025.

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

Return on tangible common equity (1) was 44% and 41% for the second quarter and first half of 2026, respectively, rising from 35% and 34% from the same 2025 periods, 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 common stock repurchases in 2025 and the first half of 2026.

The improvement in average AOCI resulted from amortization of losses on securities previously transferred from AFS to HTM and lower unrealized losses on AFS securities.

Schwab continued to support our clients’ evolving needs through effective management of the balance sheet and financial resources, including sustained demand for margin and bank lending in the first half of 2026.

Total balance sheet assets were $517.3 billion at June 30, increasing 5% from year-end 2025.

Client demand for margin loans was strong, with receivables from brokerage clients reaching $122.8 billion at June 30, rising 16% during the second quarter and 17% year-to-date.

Bank loans totaled $67.0 billion at June 30, 2026, rising 16% year-to-date and 10% during the second quarter, reflecting growth in pledged asset lines (PALs) and first lien residential real estate mortgage loans (First Mortgages).

During the second quarter and first six months of 2026, the Company repurchased common stock of $1.0 billion and $3.4 billion, respectively, and also increased its common dividend by 19% to $.32 per share during the first quarter of the year.

During the second quarter, the Company issued $1.5 billion of Series L preferred stock, and redeemed $2.1 billion of Series I preferred stock.

Inclusive of both returns of capital and capital generation during the first half of 2026 from earnings, the Company’s consolidated Tier 1 Leverage Ratio at June 30, 2026 was 8.7%, down from 9.3% at year-end 2025.

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

(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.

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

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.

Acquisition of Forge

On March 2, 2026, Schwab completed its acquisition of Forge, an operator of a leading private market platform and trading marketplace, for $636 million of cash and other consideration.

Integration work is progressing, 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