schw-20240331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to ________

Commission File Number: 1-9700

THE CHARLES SCHWAB CORPORATION

(Exact name of registrant as specified in its charter)


Delaware									94-3025021
(State or other jurisdiction of incorporation or organization)									(I.R.S. Employer Identification No.)

3000 Schwab Way, Westlake, TX 76262

(Address of principal executive offices and zip code)

Registrant’s telephone number, including area code: (817) 859-5000

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock – $.01 par value per share	SCHW	New York Stock Exchange
Depositary Shares, each representing a 1/40th ownership interest in a share of 5.95% Non-Cumulative Preferred Stock, Series D	SCHW PrD	New York Stock Exchange
Depositary Shares, each representing a 1/40th ownership interest in a share of 4.450% Non-Cumulative Preferred Stock, Series J	SCHW PrJ	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ☒ Accelerated filer ☐

Non-accelerated filer ☐ Smaller reporting company ☐

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

1,777,281,304 shares of $.01 par value Common Stock and 50,893,695 shares of $.01 par value Nonvoting Common Stock outstanding on April 30, 2024

THE CHARLES SCHWAB CORPORATION

Quarterly Report on Form 10-Q

For the Quarter Ended March 31, 2024

Index

Part I - Financial Information

Item 1.

Condensed Consolidated Financial Statements (Unaudited):

Statements of Income

Statements of Comprehensive Income

Balance Sheets

Statements of Stockholders’ Equity

Statements of Cash Flows

30-31

Notes

32-62

Item 2.

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

1-25

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Item 4.

Controls and Procedures

Part II - Other Information

Item 1.

Legal Proceedings

Item 1A.

Risk Factors

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

Item 3.

Defaults Upon Senior Securities

Item 4.

Mine Safety Disclosures

Item 5.

Other Information

Item 6.

Exhibits

Signature

Part I – FINANCIAL INFORMATION

THE CHARLES SCHWAB CORPORATION

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

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

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

INTRODUCTION

The Charles Schwab Corporation (CSC) is a savings and loan holding company. CSC engages, through its subsidiaries (collectively referred to as Schwab or the Company), in wealth management, securities brokerage, banking, asset management, custody, and financial advisory services.

Principal business subsidiaries of CSC include the following:

•Charles Schwab & Co., Inc. (CS&Co), incorporated in 1971, a securities broker-dealer;

•TD Ameritrade, Inc., an introducing securities broker-dealer;

•TD Ameritrade Clearing, Inc. (TDAC), a securities broker-dealer that provides trade execution and clearing services to TD Ameritrade, Inc.;

•Charles Schwab Bank, SSB (CSB), our principal banking entity; and

•Charles Schwab Investment Management, Inc. (CSIM), the investment advisor for Schwab’s proprietary mutual funds (Schwab Funds®) and for Schwab’s exchange-traded funds (Schwab ETFs™).

Unless otherwise indicated, the terms “Schwab,” “the Company,” “we,” “us,” or “our” mean CSC together with its consolidated subsidiaries.

Schwab provides financial services to individuals and institutional clients through two segments – Investor Services and Advisor Services. The Investor Services segment provides retail brokerage, investment advisory, and banking and trust services to individual investors, and retirement plan services, as well as other corporate brokerage services, to businesses and their employees. The Advisor Services segment provides custodial, trading, banking and trust, and support services, as well as retirement business services, to independent registered investment advisors (RIAs), independent retirement advisors, and recordkeepers.

Schwab was founded on the belief that all Americans deserve access to a better investing experience. Although much has changed in the intervening years, our purpose remains clear – to champion every client’s goals with passion and integrity. Guided by this purpose and our vision of creating the most trusted leader in investment services, management has adopted a strategy described as “Through Clients’ Eyes.”

This strategy emphasizes placing clients’ perspectives, needs, and desires at the forefront. Because investing plays a fundamental role in building financial security, we strive to deliver a better investing experience for our clients – individual investors and the people and institutions who serve them – by disrupting longstanding industry practices on their behalf and providing superior service. We also aim to offer a broad range of products and solutions to meet client needs with a focus on transparency, value, and trust. In addition, management works to couple Schwab’s scale and resources with ongoing expense discipline to keep costs low and ensure that products and solutions are affordable as well as responsive to client needs. In combination, these are the key elements of our “no trade-offs” approach to serving investors. We believe that following this strategy is the best way to maximize our market valuation and stockholder returns over time.

Management estimates that investable wealth in the United States (U.S.) (consisting of assets in defined contribution, retail wealth management and brokerage, and registered investment advisor channels, along with bank deposits) currently exceeds $65 trillion, which means the Company’s $9.12 trillion in client assets leaves substantial opportunity for growth. Our strategy is based on the principle that developing trusted relationships will translate into more assets from both new and existing clients, ultimately driving more revenue, and along with expense discipline and thoughtful capital management, will generate earnings growth and build long-term stockholder value.

This Management’s Discussion and Analysis should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 (2023 Form 10-K).

On our website, https://www.aboutschwab.com, we post the following filings after they are electronically filed with or furnished to the Securities and Exchange Commission (SEC or Commission): annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934. In addition, we post to the website the Dodd-Frank stress test results, our

- 1 -

THE CHARLES SCHWAB CORPORATION

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

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

regulatory capital disclosures based on Basel III, our average liquidity coverage ratio (LCR), and our average net stable funding ratio (NSFR). The SEC maintains a website at https://www.sec.gov that contains reports, proxy statements, and other information that we file electronically with the Commission.

FORWARD-LOOKING STATEMENTS

In addition to historical information, this Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act, and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are identified by words such as “believe,” “anticipate,” “expect,” “intend,” “plan,” “will,” “may,” “estimate,” “appear,” “could,” “would,” “expand,” “aim,” “maintain,” “continue,” “seek,” and other similar expressions. In addition, any statements that refer to expectations, projections, or other characterizations of future events or circumstances are forward-looking statements.

These forward-looking statements, which reflect management’s beliefs, objectives, and expectations as of the date hereof, are estimates based on the best judgment of Schwab’s senior management. These statements relate to, among other things:

•Maximizing our market valuation and stockholder returns over time; and our belief that developing trusted relationships will translate into more client assets which drives revenue and, along with expense discipline and thoughtful capital management, generates earnings growth and builds stockholder value (see Introduction in Part I – Item 2);

•Integration of Ameritrade, including the timing of client transitions, transition-related attrition, the amount and timing of expense and revenue synergies, and the benefits of the combined platform (see Overview in Part I – Item 2, and Exit and Other Related Liabilities in Part I – Item 1 – Financial Information – Notes to Condensed Consolidated Financial Statements (Item 1) – Note 10);

•Investments to support growth in our client base (see Overview in Part I – Item 2);

•Our actions to streamline our operations and amount of associated exit and related costs that we will incur (see Overview and Results of Operations in Part I – Item 2, and Exit and Other Related Liabilities in Item 1 – Note 10);

•The expected impact of proposed and final rules (see Current Regulatory and Other Developments in Part I – Item 2);

•Net interest revenue; the adjustment of rates paid on client-related liabilities; and outstanding balances and the use of supplemental funding (see Results of Operations in Part I – Item 2);

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

•Management of interest rate risk; the impact of changes in interest rates on net interest margin and revenue, bank deposit account fee revenue, economic value of equity, and liability and asset duration (see Risk Management in Part I – Item 2);

•Sources and uses of liquidity and capital (see Liquidity Risk and Capital Management in Part I – Item 2);

•Capital management; the return of capital to stockholders; potential migration of insured deposit account balances (IDA balances) to our balance sheet; expectations about capital requirements, including accumulated other comprehensive income (AOCI), and meeting those requirements; plans regarding capital and dividends (see Capital Management in Part I – Item 2 and Commitments and Contingencies in Item 1 – Note 9);

•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 9); and

•The outcome and impact of legal proceedings and regulatory matters (see Commitments and Contingencies in Item 1 – Note 9 and Legal Proceedings in Part II – Item 1).

Achievement of the expressed beliefs, objectives, and expectations described in these statements is subject to certain risks and uncertainties that could cause actual results to differ materially from the expressed beliefs, objectives, and expectations. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q or, in the case of documents incorporated by reference, as of the date of those documents.

Important factors that may cause actual results to differ include, but are not limited to:

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

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

•Client use of our advisory and lending solutions and other products and services;

•The level of client assets, including cash balances;

•Client cash allocations and sensitivity to deposit rates;

•Competitive pressure on pricing, including deposit rates;

- 2 -

THE CHARLES SCHWAB CORPORATION

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

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

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

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

•Capital and liquidity needs and management;

•Our ability to manage expenses;

•Our ability to attract and retain talent;

•Our ability to develop and launch new and enhanced products, services, and capabilities, as well as enhance our infrastructure, in a timely and successful manner;

•Our ability to monetize client assets;

•Our ability to support client activity levels;

•Our ability to successfully implement integration plans relating to Ameritrade, including client account transitions;

•The risk that client transitions may not be completed when expected or may result in a negative client experience; expected expense and revenue synergies and other benefits from the Ameritrade acquisition may not be fully realized or may take longer to realize, and integration expense may be higher than expected;

•Increased compensation and other costs due to inflationary pressures;

•Real estate and workforce decisions;

•The timing and scope of technology projects;

•Capital and liquidity needs and management;

•Balance sheet positioning relative to changes in interest rates;

•Interest earning asset mix and growth;

•Our ability to access and use supplemental funding sources;

•Prepayment levels for mortgage-backed securities;

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

•Adverse developments in litigation or regulatory matters and any related charges; and

•Potential breaches of contractual terms for which we have indemnification and guarantee obligations.

Certain of these factors, as well as general risk factors affecting the Company, are discussed in greater detail in Part I – Item 1A – Risk Factors in the 2023 Form 10-K.

- 3 -

THE CHARLES SCHWAB CORPORATION

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

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

OVERVIEW

Management focuses on several client activity and financial metrics in evaluating Schwab’s financial position and operating performance. Results for the first quarter of 2024 and 2023 are as follows:


	Three Months Ended March 31,						Percent Change
	2024			2023
Client Metrics
Net new client assets (in billions) (1)	$	88.2		$	150.7		(41)	%
Core net new client assets (in billions)	$	95.6		$	131.7		(27)	%
Client assets (in billions, at quarter end)	$	9,118.4		$	7,580.0		20	%
Average client assets (in billions)	$	8,761.1		$	7,385.4		19	%
New brokerage accounts (in thousands)	1,094			1,042			5	%
Active brokerage accounts (in thousands, at quarter end)	35,301			34,120			3	%
Assets receiving ongoing advisory services (in billions, at quarter end)	$	4,628.0		$	3,895.5		19	%
Client cash as a percentage of client assets (at quarter end) (2)	10.0		%	11.2		%
Company Financial Information and Metrics
Total net revenues	$	4,740		$	5,116		(7)	%
Total expenses excluding interest	2,942			3,006			(2)	%
Income before taxes on income	1,798			2,110			(15)	%
Taxes on income	436			507			(14)	%
Net income	1,362			1,603			(15)	%
Preferred stock dividends and other	111			70			59	%
Net income available to common stockholders	$	1,251		$	1,533		(18)	%
Earnings per common share — diluted	$	.68		$	.83		(18)	%
Net revenue change from prior year	(7)		%	10		%
Pre-tax profit margin	37.9		%	41.2		%
Return on average common stockholders’ equity (annualized)	15		%	23		%
Expenses excluding interest as a percentage of average client assets (annualized)	0.14		%	0.17		%
Consolidated Tier 1 Leverage Ratio (at quarter end)	8.8		%	7.1		%
Non-GAAP Financial Measures (3)
Adjusted total expenses (4)	$	2,802		$	2,773
Adjusted diluted EPS	$	.74		$	.93
Return on tangible common equity	39		%	83		%

(1) The first quarter of 2024 and 2023 include net outflows of $7.4 billion and inflows of $19.0 billion, respectively, from off-platform certificates of deposit (CDs) issued by CSB.

(2) Beginning in the third quarter of 2023, client cash as a percentage of client assets excludes brokered CDs issued by CSB. The prior period has been recast to reflect this change.

(3) In the first quarter of 2024, adjustments made to GAAP financial measures also include restructuring costs. See Non-GAAP Financial Measures for further details and a reconciliation of such measures to GAAP reported results.

(4) Adjusted total expenses is a non-GAAP financial measure adjusting total expenses excluding interest. See Non-GAAP Financial Measures.

Further improvements in the macroeconomic environment helped bolster investor sentiment and engagement in the first quarter of 2024. Inflation remained at moderate though persistent levels during the quarter, leading to shifting market expectations around the pace and extent of potential Federal Reserve interest rate reductions. Equity markets had a strong start to the year, with the S&P 500® rising 10% in the first quarter of 2024.

Schwab’s organic asset gathering and equity market gains helped total client assets reach $9.12 trillion as of quarter-end, up 20% from March 31, 2023, as clients entrusted us with core net new assets of $95.6 billion in the first quarter of 2024. As we have experienced over the course of the Ameritrade client account conversions, net new assets in the first quarter of 2024 reflected expected asset attrition from the Ameritrade integration, though the amount of attrition continued to be below amounts anticipated when we announced the acquisition in late 2019. Clients’ daily average trades (DATs) were 6.0 million in the first quarter of 2024, up slightly from the first quarter of the prior year. Clients opened 1.1 million new brokerage accounts in the first quarter of 2024, helping active brokerage accounts rise 3% year-over-year to reach 35.3 million at quarter-end.

- 4 -

THE CHARLES SCHWAB CORPORATION

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

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

Schwab’s financial performance in the first quarter of 2024 reflected the benefits of a supportive macroeconomic backdrop, increased client engagement, and solid organic growth. The Company’s financial results were down relative to the first quarter of 2023, though overall performance improved sequentially from the fourth quarter of 2023 driven by lower interest expense due to reduced supplemental funding, rising equity markets and client engagement, and our late-2023 cost reduction efforts. Net income totaled $1.4 billion in the first quarter of 2024, down 15% from the first quarter of 2023 and up 30% from the fourth quarter of 2023. Diluted earnings per share (EPS) was $.68 in the first quarter of 2024, down 18% from the prior-year first quarter and up 33% from the fourth quarter of 2023. Adjusted diluted EPS (1) was $.74 in the first quarter of 2024, down 20% from the first quarter of 2023 and up 9% from the fourth quarter of 2023.

Total net revenues decreased 7% year-over-year to $4.7 billion during the first quarter of 2024. Net interest revenue was $2.2 billion in the first quarter of 2024, down 19% from the prior year’s first quarter due primarily to greater use of supplemental funding and lower average interest-earning assets, partially offset by higher rates on interest-earning assets. Asset management and administration fees totaled $1.3 billion in the first quarter of 2024, rising 21% from the first quarter of 2023 primarily as a result of growth in money market funds, equity market gains, and growth in advice solutions. Trading revenue declined 8% year-over-year to $817 million in the first quarter of 2024, primarily due to a decrease in order flow revenue, reflecting narrower spreads on options and lower equity volume. Bank deposit account fee revenue was $183 million in the first quarter of 2024, up 21% year-over-year due primarily to $97 million of one-time breakage fees incurred when we ended our arrangements with certain third-party banks in the first quarter of 2023. BDA balances totaled $90.3 billion at March 31, 2024, down 7% from year-end 2023, reflecting client cash allocation decisions.

Total expenses excluding interest were $2.9 billion in the first quarter of 2024, down 2% from the first quarter of 2023, reflecting the benefits of our cost reduction restructuring efforts undertaken in late 2023, which drove year-over-year decreases in compensation and benefits and occupancy and equipment. Partially offsetting these reductions were growth in depreciation and amortization driven by capital expenditures to support the Ameritrade integration and growth of the business, and higher regulatory fees and assessments, which included an incremental Federal Deposit Insurance Corporation (FDIC) special assessment of $25 million (see Current Regulatory and Other Developments). Adjusted total expenses (1) were $2.8 billion, up 1% from the first quarter of 2023 reflecting the above items and lower acquisition and integration-related costs in the first quarter of 2024. Acquisition and integration-related costs, amortization of acquired intangible assets, and restructuring costs totaled $140 million in the first quarter of 2024, down 40% from the first quarter of 2023.

Return on average common stockholders’ equity was 15% in the first quarter of 2024, down from 23% in the first quarter of 2023. Return on tangible common equity (1) (ROTCE) was 39% in the first quarter of 2024, down from 83% in the first quarter of 2023. These decreases were due primarily to higher average stockholders’ equity and lower year-over-year net income. Average stockholders’ equity was higher in the first quarter of 2024 due to higher average retained earnings due to full-year 2023 and first-quarter 2024 net income, as well as higher average AOCI. The increase in average AOCI was driven by lower unrealized losses on our available for sale (AFS) investment securities portfolio and securities transferred in 2022 from AFS to held to maturity (HTM) (see Item 1 – Note 15).

The Company continued its diligent approach to balance sheet management, seeking to prioritize flexibility. During the first quarter of 2024, total balance sheet assets decreased 5% from year-end 2023 to $468.8 billion. This decrease was driven primarily by lower cash balances. As the pace and amount of client cash realignment continued to decrease, the Company reduced the total outstanding balance of supplemental funding, which includes brokered CDs, Federal Home Loan Bank (FHLB) borrowings, and borrowings under repurchase agreements, by $8.8 billion, or 11%, during the first quarter of 2024. In addition, the Company repaid $3.3 billion in maturing long-term debt during the first quarter of 2024. Supported by net income and a smaller balance sheet, our consolidated Tier 1 Leverage Ratio increased to 8.8% as of March 31, 2024.

(1) Adjusted diluted EPS, adjusted total expenses, and return on tangible common equity are non-GAAP financial measures. See Non-GAAP Financial Measures for further details and a reconciliation of such measures to GAAP reported results.

Integration of Ameritrade

Effective October 6, 2020, the Company completed its acquisition of TD Ameritrade Holding Corporation, now Ameritrade Holding LLC (Ameritrade Holding), and its consolidated subsidiaries (collectively referred to as “Ameritrade”). The Company has made significant progress in its integration of Ameritrade. We’ve transitioned approximately $1.6 trillion in client assets across more than 15 million client accounts, including 7,000 RIAs, from Ameritrade to the Schwab platform across four transition groups. In connection with these transitions, we have experienced some related attrition of client assets from retail

- 5 -

THE CHARLES SCHWAB CORPORATION

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

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

accounts and RIAs, which have been below our initial estimates when we announced the acquisition. The Company expects to complete the remaining client transitions from Ameritrade to Schwab in a final transition group in May 2024.

We continue to expect total acquisition and integration-related costs and capital expenditures will be between $2.4 billion and $2.5 billion. The Company’s estimates of the nature, amounts, and timing of recognition of acquisition and integration-related costs remain subject to change based on certain factors, including the duration and complexity of the remaining integration process and the continued uncertainty of the economic environment. More specifically, factors that could cause variability in our expected acquisition and integration-related costs as we prepare for the last transition group and remaining integration work include the level of employee attrition, the complexity to wind-down the operations of the Ameritrade broker-dealers and related technology, and real estate-related exit cost variability.

Acquisition and integration-related costs, which are inclusive of related exit costs, totaled $38 million and $98 million for the first quarters of 2024 and 2023, respectively. Over the course of the integration, we expect to realize annualized cost synergies of between $1.8 billion and $2.0 billion, and, through March 31, 2024, we have achieved over 80% of this amount on an annualized run-rate basis. The Company expects to realize the remaining estimated cost synergies by the end of 2024, with anticipated full year synergy realization beginning in 2025. Estimated timing and amounts of synergy realization are subject to change as we progress in the integration. Refer to Part II – Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations (Item 7) – Overview in our 2023 Form 10-K, Results of Operations – Total Expenses Excluding Interest, Non-GAAP Financial Measures, and Item 1 – Note 10 for additional information regarding our integration of Ameritrade.

Other

In addition to cost synergies directly related to the integration of Ameritrade, the Company took incremental actions in 2023 to streamline its operations to prepare for post-integration, including through position eliminations and decreasing its real estate footprint. Through these actions, the Company has realized approximately $500 million of incremental run-rate cost savings in addition to integration synergies. In order to achieve these cost savings, the Company expects to incur total exit and related costs, primarily related to employee compensation and benefits and facility exit costs, of approximately $500 million, substantially all of which have been recognized as of March 31, 2024. The Company anticipates the remaining costs, primarily related to real estate, will be incurred during 2024. Refer to Results of Operations – Total Expenses Excluding Interest and Item 1 – Note 10 for additional information.

Current Regulatory and Other Developments

In April 2024, the U.S. Department of Labor adopted a final rule to significantly broaden the definition of “fiduciary” under the Employee Retirement Income Security Act of 1974. Among other requirements, the rule subjects broker-dealers who provide non-discretionary investment advice to retirement plans and accounts to a “best interest” standard. The rule generally takes effect on September 23, 2024 with a one-year transition period after the effective date for certain provisions. The Company is currently evaluating the impacts and the related implementation and operational issues of the final rule.

In March 2024, the SEC adopted amendments to Rule 605 of Regulation National Market System (NMS) requiring enhanced disclosures of order execution quality for large broker-dealers that handle retail orders. We do not expect the new rule to have a material impact on the Company’s business, financial condition, or results of operations. Three related equity market structure rule proposals released in December 2022 by the SEC remain pending.

In November 2023, the FDIC approved a final special assessment to recover losses incurred by the Deposit Insurance Fund (DIF) to protect uninsured depositors due to the March 2023 closures of two banks, that was subject to potential extension and a potential one-time final special assessment for any shortfall in the DIF. The pre-tax impact of the final rule’s initial assessment to the Company was $172 million, which is tax deductible and was recognized in earnings in the fourth quarter of 2023. The special assessment will be paid over eight quarters which began in the first quarter of 2024. In late February 2024, the FDIC notified banks, including the Company’s banking subsidiaries, that the estimated assessed losses to the DIF increased. Accordingly, during the first quarter of 2024, Schwab recognized a pre-tax charge of $25 million for its estimate of this incremental special assessment, which is tax deductible. This amount remains subject to further adjustment; the FDIC has indicated it will provide any updates to the estimated special assessment applicable to each bank as part of the FDIC’s June 2024 invoices.

- 6 -

THE CHARLES SCHWAB CORPORATION

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

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

See Part II – Item 7 – Current Regulatory and Other Developments in our 2023 Form 10-K for additional information regarding these and other pending regulatory matters including:

•The U.S. federal banking agencies’ August 2023 proposed rulemaking on long-term debt requirements for certain large banking organizations;

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

•The SEC’s November 2022 proposed rule that would require substantial changes to the liquidity risk management programs for open-end mutual funds other than money market funds and require them to implement “swing pricing” and impose a “hard close” on the acceptance of purchase and redemption orders.

RESULTS OF OPERATIONS

Total Net Revenues

The following tables present a comparison of revenue by category:


			2024				2023
Three Months Ended March 31,	Percent Change		Amount		% of Total Net Revenues		Amount		% of Total Net Revenues
Net interest revenue
Interest revenue	(2)	%	$	3,941	83	%	$	4,016	78	%
Interest expense	37	%	(1,708)		(36)	%	(1,246)		(24)	%
Net interest revenue	(19)	%	2,233		47	%	2,770		54	%
Asset management and administration fees
Mutual funds, exchange-traded funds (ETFs), and collective trust funds (CTFs)	30	%	758		16	%	585		11	%
Advice solutions	11	%	503		11	%	453		9	%
Other	9	%	87		2	%	80		2	%
Asset management and administration fees	21	%	1,348		29	%	1,118		22	%
Trading revenue
Commissions	(2)	%	413		9	%	422		8	%
Order flow revenue	(15)	%	352		7	%	414		8	%
Principal transactions	(7)	%	52		1	%	56		1	%
Trading revenue	(8)	%	817		17	%	892		17	%
Bank deposit account fees	21	%	183		4	%	151		3	%
Other	(14)	%	159		3	%	185		4	%

Total net revenues	(7)	%	$	4,740	100	%	$	5,116	100	%

Net Interest Revenue

Revenue on interest-earning assets is affected by various factors, such as the composition of assets, prevailing interest rates and spreads at the time of origination or purchase, changes in interest rates on cash and cash equivalents, floating-rate securities and loans, and changes in prepayment levels for mortgage-backed and other asset-backed securities and loans. Schwab establishes the rates paid on client-related liabilities, and management expects that it will generally adjust the rates paid on these liabilities at some fraction of any movement in short-term rates. Interest expense on long-term debt, FHLB borrowings, other short-term borrowings, and other funding sources is impacted by market interest rates at the time of borrowing and changes in interest rates on floating-rate liabilities. See also Risk Management – Interest Rate Risk Simulations.

In response to continued elevated inflation, the Federal Reserve raised the federal funds target overnight rate four times in the first three quarters of 2023 for a total of 100 basis points before holding rates unchanged since July 2023. Short-term rates

- 7 -

THE CHARLES SCHWAB CORPORATION

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

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

remained consistent through the first quarter of 2024, as the Federal Reserve maintained the upper bound of the target overnight rate at 5.50%.

Schwab’s average interest-earning assets in the first quarter of 2024 were lower compared with the first quarter of 2023, primarily due to clients’ reallocation of cash from sweep products to higher-yielding investment solutions throughout 2023 and the first quarter of 2024, which resulted primarily from increases to the federal funds overnight rate. These changes in client cash allocations reduced average balances of bank deposits and payables to brokerage clients. To support this client cash allocation activity, the Company has been utilizing supplemental funding, including drawing upon FHLB secured lending facilities, engaging with external financial institutions in repurchase agreements, and issuing brokered CDs. The average pace of client cash allocation out of sweep products into higher-yielding investment solutions decreased significantly beginning in the second half of 2023, and continued to decrease in the first quarter of 2024.

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


	2024						2023
Three Months Ended March 31,	Average Balance		Interest Revenue/ Expense		Average Yield/Rate		Average Balance		Interest Revenue/ Expense		Average Yield/Rate
Interest-earning assets
Cash and cash equivalents	$	33,791	$	454	5.31	%	$	37,056	$	413	4.46	%
Cash and investments segregated	29,297		388		5.24	%	40,068		432		4.31	%

Receivables from brokerage clients	63,804		1,260		7.81	%	60,543		1,084		7.16	%
Available for sale securities (1)	111,867		594		2.12	%	155,791		825		2.12	%
Held to maturity securities (1)	157,410		690		1.75	%	170,889		746		1.75	%
Bank loans	40,529		440		4.36	%	40,248		391		3.92	%
Total interest-earning assets	436,698		3,826		3.48	%	504,595		3,891		3.09	%
Securities lending revenue			76						112
Other interest revenue			39						13
Total interest-earning assets	$	436,698	$	3,941	3.59	%	$	504,595	$	4,016	3.19	%
Funding sources
Bank deposits	$	274,368	$	921	1.35	%	$	343,105	$	618	0.73	%
Payables to brokerage clients	68,343		73		0.43	%	77,169		75		0.39	%
Other short-term borrowings	7,385		103		5.61	%	6,917		86		5.05	%
Federal Home Loan Bank borrowings	24,857		330		5.27	%	24,458		304		5.05	%
Long-term debt	25,000		224		3.59	%	20,290		139		2.74	%
Total interest-bearing liabilities	399,953		1,651		1.65	%	471,939		1,222		1.05	%
Non-interest-bearing funding sources	36,745						32,656
Securities lending expense			55						22
Other interest expense			2						2
Total funding sources	$	436,698	$	1,708	1.57	%	$	504,595	$	1,246	1.00	%
Net interest revenue			$	2,233	2.02	%			$	2,770	2.19	%

(1) Amounts have been calculated based on amortized cost. Interest revenue on investment securities is presented net of related premium amortization.

Net interest revenue decreased $537 million, or 19%, in the first quarter of 2024 compared to the same period in 2023. This decrease was primarily due to utilization of higher cost supplemental funding sources to support client cash allocations in the rising rate environment, and lower average interest-earning assets, which more than offset the benefits of higher average yields on interest-earning assets. Average interest-earning assets for the first quarter of 2024 were lower by 13% compared to the same period in 2023. This decrease was primarily due to lower bank deposits as a result of changes in client cash allocations due to higher market interest rates and a smaller investment securities portfolio, partially offset by greater margin loan balances.

Net interest margin decreased to 2.02% in the first quarter of 2024 from 2.19% in the same period in 2023, as the higher rates paid across interest-bearing funding sources more than offset the improved yields on interest-earning assets.

The Company’s higher average balances in the first quarter of 2024 relative to the same period in 2023 of FHLB borrowings, repurchase agreements, and brokered CDs resulted in higher funding costs. The Company prioritizes repayment of the outstanding balances of its supplemental funding sources, and during the first quarter of 2024, the total outstanding balance

- 8 -

THE CHARLES SCHWAB CORPORATION

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

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

decreased by $8.8 billion, which helped support a 13-basis-point improvement in net interest margin for the first quarter of 2024 compared with the fourth quarter of 2023. Our use and the financial impacts of such supplemental funding is dependent on several factors, including the volume and pace of clients’ cash allocation activity, which is driven primarily by changes in market interest rates, as well as asset gathering. While client cash realignment activity has continued to decline from peak levels, uncertainty remains, including in regard to the path of market interest rates and client behavior, which will significantly impact our utilization of supplemental funding sources. The impacts to net interest revenue of using supplemental funding sources also depend on the type of funding source used and levels of interest rates. The Company currently expects its outstanding balances of supplemental funding sources to decrease over time. Certain amounts outstanding at March 31, 2024 will require rollover into new borrowings, the amount and costs of which will depend on the above noted factors. See also Risk Management – Liquidity Risk, Item 1 – Note 7 Bank Deposits, and Item 1 – Note 8 Borrowings for additional information on these and other funding sources.

Asset Management and Administration Fees

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


Three Months Ended March 31,	2024						2023
	Average Client Assets		Revenue		Average Fee		Average Client Assets		Revenue		Average Fee


Schwab money market funds	$	499,887	$	336	0.27	%	$	316,391	$	213	0.27	%
Schwab equity and bond funds, ETFs, and CTFs	539,661		107		0.08	%	450,581		91		0.08	%
Mutual Fund OneSource® and other no-transaction-fee (NTF) funds	314,576		209		0.27	%	222,437		148		0.27	%
Other third-party mutual funds and ETFs	605,625		106		0.07	%	676,344		133		0.08	%
Total mutual funds, ETFs, and CTFs (1)	$	1,959,749	758		0.16	%	$	1,665,753	585		0.14	%
Advice solutions (1)
Fee-based	$	506,133	503		0.40	%	$	443,027	453		0.41	%
Non-fee-based	106,032		—		—		94,469		—		—


Total advice solutions	$	612,165	503		0.33	%	$	537,496	453		0.34	%
Other balance-based fees (2)	719,447		69		0.04	%	561,788		62		0.04	%
Other (3)			18						18
Total asset management and administration fees			$	1,348					$	1,118

(1) Average client assets for advice solutions may also include the asset balances contained in the mutual fund and/or ETF categories listed above.

(2) Includes various asset-related fees, such as trust fees, 401(k) recordkeeping fees, and mutual fund clearing fees and other service fees.

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

Asset management and administration fees increased by $230 million, or 21%, in the first quarter of 2024 compared to the same period in 2023. This increase was primarily a result of higher balances in Schwab money market funds as clients shifted their cash allocations to higher-yielding investment solutions. The increase was also due to growth in balances in Mutual Fund OneSource® and fee-based advice solutions, as a result of strong equity markets and, for advice solutions, net inflows of client assets.

The following table presents a roll forward of client assets for the Schwab money market funds, Schwab equity and bond funds, ETFs, and CTFs, and Mutual Fund OneSource® and other NTF funds. These funds generated 48% and 40% of the asset management and administration fees earned in the first quarter of 2024 and 2023, respectively:


	Schwab Money Market Funds				Schwab Equity and Bond Funds, ETFs, and CTFs				Mutual Fund OneSource® and Other NTF funds
Three Months Ended March 31,	2024		2023		2024		2023		2024		2023
Balance at beginning of period	$	476,409	$	278,926	$	506,149	$	412,942	$	306,222	$	235,738
Net inflows (outflows)	30,940		75,036		7,719		10,344		(4,161)		(4,629)
Net market gains (losses) and other	8,329		3,860		35,022		20,433		27,115		13,153
Balance at end of period	$	515,678	$	357,822	$	548,890	$	443,719	$	329,176	$	244,262

- 9 -

THE CHARLES SCHWAB CORPORATION

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

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

Trading Revenue

The following tables present trading revenue, client trading activity, and related information:


	Three Months Ended March 31,				Percent Change
	2024		2023
Commissions	$	413	$	422	(2)	%
Order flow revenue
Options	242		281		(14)	%
Equities	110		133		(17)	%
Total order flow revenue	352		414		(15)	%
Principal transactions	52		56		(7)	%
Total trading revenue	$	817	$	892	(8)	%


	Three Months Ended March 31,						Percent Change
	2024			2023
DATs (in thousands)	5,958			5,895			1	%
Product as a percentage of DATs
Equities	51		%	49		%
Derivatives	22		%	23		%
ETFs	19		%	21		%
Mutual funds	6		%	5		%
Fixed income	2		%	2		%

Number of trading days	61.0			62.0			(2)	%
Revenue per trade (1)	$	2.25		$	2.44		(8)	%

(1) Revenue per trade is calculated as trading revenue divided by DATs multiplied by the number of trading days.

Trading revenue decreased $75 million, or 8%, in the first quarter of 2024 compared to the same period in 2023. This change is primarily due to lower options order flow revenue reflecting narrower quoted spreads in the options market, and lower equities order flow revenue reflecting lower equity trading volume overall. Additionally, commissions decreased as a result of changes in the mix of client trading activity and fewer trading days.

Bank Deposit Account Fees

The Company earns bank deposit account fee revenue from TD Bank USA, National Association and TD Bank, National Association (together, the TD Depository Institutions). These fees are affected by changes in interest rates and the composition of balances designated as fixed- and floating-rate obligation amounts.

In accordance with the Second Amended and Restated Insured Deposit Account Agreement (2023 IDA agreement) executed on May 4, 2023, cash held in eligible brokerage client accounts is swept off-balance sheet to deposit accounts at the TD Depository Institutions. Schwab provides recordkeeping and support services to the TD Depository Institutions with respect to the deposit accounts for which Schwab receives an aggregate monthly fee. Under the 2023 IDA agreement, the service fee on client cash deposits held at the TD Depository Institutions is 15 basis points. See Item 1 – Note 9 for additional discussion of the 2023 IDA agreement.

- 10 -

THE CHARLES SCHWAB CORPORATION

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

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

The following table presents bank deposit account fee revenue, average BDA balances, average net yield, and average balances earning fixed- and floating-rate yields:


	Three Months Ended March 31,						Percent Change
	2024			2023
Bank deposit account fees	$	183		$	151		21	%
Average BDA balances	$	92,859		$	115,877		(20)	%
Average net yield	0.78		%	0.52		%
Percentage of average BDA balances designated as:
Fixed-rate balances	88		%	92		%
Floating-rate balances	12		%	8		%

Bank deposit account fees increased $32 million, or 21%, in the first quarter of 2024, compared to the same period in 2023. The increase was primarily due to $97 million of breakage fees incurred that resulted in lower bank deposit account fee revenue in the first quarter of 2023. In addition, the average amount of floating-rate BDA balances increased in the first quarter of 2024 compared to the first quarter of 2023, which contributed to an increase in average net yield. These factors were partially offset by a decrease in average BDA balances in the first quarter of 2024 compared to the same period in 2023, primarily due to client cash allocation decisions in response to higher short-term market interest rates. The percentages of BDA balances designated as fixed-rate and floating-rate obligation amounts as of March 31, 2024 were 88% and 12%, respectively.

Other Revenue

Other revenue includes exchange processing fees, certain service fees, other gains and losses from the sale of assets, and the provision for credit losses on bank loans.

Other revenue decreased $26 million, or 14%, in the first quarter of 2024 compared to the same period in 2023, primarily due to lower exchange processing fees and certain lower service fees, partially offset by lower provision for credit losses on bank loans. Exchange processing fees decreased primarily due to a decrease in the SEC fee rate which became effective in the first quarter of 2023. The provision for credit losses on bank loans was lower in the first quarter of 2024 compared to the same period in 2023, as during the first quarter of 2024, loan loss factors decreased while the total balance of first lien residential real estate mortgage loans (First Mortgages) remained consistent with year-end 2023.

Subsequent to March 31, 2024, the SEC announced that effective May 22, 2024, it would increase its fee rates applicable to most securities transactions from the rate in effect since late February 2023. This change will result in higher exchange processing fees per security transaction in other revenue and a corresponding increase in other expense, resulting in no impact to net income.

- 11 -

THE CHARLES SCHWAB CORPORATION

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

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

Total Expenses Excluding Interest

The following table presents a comparison of expenses excluding interest:


	Three Months Ended March 31,						Percent Change
	2024			2023
Compensation and benefits
Salaries and wages	$	854		$	972		(12)	%
Incentive compensation	387			364			6	%
Employee benefits and other	297			302			(2)	%
Total compensation and benefits	$	1,538		$	1,638		(6)	%
Professional services	241			258			(7)	%
Occupancy and equipment	265			299			(11)	%
Advertising and market development	88			88			—
Communications	141			146			(3)	%
Depreciation and amortization	228			177			29	%
Amortization of acquired intangible assets	130			135			(4)	%
Regulatory fees and assessments	125			83			51	%
Other	186			182			2	%
Total expenses excluding interest	$	2,942		$	3,006		(2)	%
Expenses as a percentage of total net revenues
Compensation and benefits	32		%	32		%
Advertising and market development	2		%	2		%
Full-time equivalent employees (in thousands)
At quarter end	32.6			36.0			(9)	%
Average	32.7			35.6			(8)	%

Expenses excluding interest decreased by $64 million, or 2%, in the first quarter of 2024, compared to the same period in 2023. Adjusted total expenses, which excludes acquisition and integration-related costs, amortization of acquired intangible assets, and, beginning in the third quarter of 2023, restructuring costs, increased 1% in the first quarter of 2024, compared to the same period in 2023. See Non-GAAP Financial Measures for further details and a reconciliation of such measures to GAAP reported results. The Company began incurring restructuring costs in the third quarter of 2023 in connection with actions to streamline its operations to prepare for post-integration of Ameritrade (see below and Overview – Other for additional information).

Total compensation and benefits expense decreased in the first quarter of 2024 compared to the same period in 2023, primarily due to lower headcount as a result of position eliminations completed in the second half of 2023 as part of restructuring, partially offset by higher incentive compensation and annual merit increases. Compensation and benefits included acquisition and integration-related costs of $17 million and $58 million in the first quarter of 2024 and 2023, respectively. Compensation and benefits also included a $31 million benefit in the first quarter of 2024 primarily due to a change in estimate in restructuring costs.

Professional services expense decreased in the first quarter of 2024 compared to the same period in 2023, primarily due to lower utilization of professional services as we approach the completion of the Ameritrade integration and client account transitions. Professional services included acquisition and integration-related costs of $17 million and $33 million in the first quarter of 2024 and 2023, respectively.

Occupancy and equipment expense decreased in the first quarter of 2024 compared to the same period in 2023, primarily due to lower technology equipment and software costs, as well as lower occupancy costs as a result of facility closures in 2023 related to restructuring and the Ameritrade integration. Occupancy and equipment included restructuring costs of $2 million in the first quarter of 2024 and acquisition and integration-related costs of $4 million in the first quarter of 2023.

Advertising and market development expense in the first quarter of 2024 remained consistent with the same period in 2023.

Communications expense decreased slightly in the first quarter of 2024, compared to the same period in 2023, primarily as a result of certain lower exchange quotation services expenses.

- 12 -

THE CHARLES SCHWAB CORPORATION

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

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

Depreciation and amortization expense increased in the first quarter of 2024 compared to the same period in 2023, primarily as a result of higher amortization of purchased and internally developed software, driven by capital expenditures in 2023 and the first three months of 2024 to support the Ameritrade integration and enhance our technological infrastructure to support growth of the business.

Amortization of acquired intangible assets decreased slightly in the first quarter of 2024 compared to the same period in 2023, as certain assets from the Ameritrade acquisition were fully amortized during 2023.

Regulatory fees and assessments increased in the first quarter of 2024 compared to the same period in 2023, primarily as a result of a $25 million incremental FDIC special assessment and higher FDIC deposit insurance assessments, reflecting greater use of brokered CDs, partially offset by a lower assessment base. See Current Regulatory and Other Developments for discussion of the FDIC special assessment.

Other expense increased slightly in the first quarter of 2024 compared to the same period in 2023, primarily due to higher exchange processing fees, partially offset by lower other clearing costs. Exchange processing fees increased in the first quarter of 2024 compared to the first quarter of 2023 as a result of higher trading volumes. Other expense included restructuring costs of $1 million in the first quarter of 2024. Subsequent to March 31, 2024, the SEC announced that effective May 22, 2024, it would increase its fee rates applicable to most securities transactions from the rate in effect since late February 2023. This change will result in higher exchange processing fees per security transaction in other expense and a corresponding increase in other revenue, resulting in no impact to net income.

Capital expenditures were $122 million and $187 million in the first quarter of 2024 and 2023, respectively. Capital expenditures decreased for the first quarter of 2024 compared to the same period in 2023, primarily due to lower purchased and internally developed software as we approach the completion of the Ameritrade integration and client account transitions. We continue to anticipate capital expenditures for full-year 2024 will be approximately 3-5% of total net revenues.

Taxes on Income

Taxes on income were $436 million and $507 million for the first quarter of 2024 and 2023, respectively, resulting in effective tax rates of 24.2% and 24.0%, respectively. The increase in the effective tax rate in the first quarter of 2024 compared to the same period in 2023 was primarily related to the release of tax reserves in the first quarter of 2023 due to the resolution of certain state tax matters and a decrease in equity compensation benefit in the first quarter of 2024. These increases were partially offset by a decrease in state tax expense and the recognition of certain tax credits.

Segment Information

Financial information for our segments is presented in the following tables:


	Investor Services						Advisor Services						Total
Three Months Ended March 31,	Percent Change		2024		2023		Percent Change		2024		2023		Percent Change		2024		2023
Net Revenues
Net interest revenue	(14)	%	$	1,742	$	2,033	(33)	%	$	491	$	737	(19)	%	$	2,233	$	2,770
Asset management and administration fees	18	%	947		805		28	%	401		313		21	%	1,348		1,118
Trading revenue	(8)	%	713		775		(11)	%	104		117		(8)	%	817		892
Bank deposit account fees	36	%	135		99		(8)	%	48		52		21	%	183		151
Other	(11)	%	135		151		(29)	%	24		34		(14)	%	159		185
Total net revenues	(5)	%	3,672		3,863		(15)	%	1,068		1,253		(7)	%	4,740		5,116
Expenses Excluding Interest	1	%	2,265		2,233		(12)	%	677		773		(2)	%	2,942		3,006
Income before taxes on income	(14)	%	$	1,407	$	1,630	(19)	%	$	391	$	480	(15)	%	$	1,798	$	2,110

Net New Client Assets (in billions) (1)	(56)	%	$	34.9	$	79.4	(25)	%	$	53.3	$	71.3	(41)	%	$	88.2	$	150.7

(1) In the first quarter of 2024 and 2023, Investor Services includes net outflows of $7.4 billion and inflows of $19.0 billion, respectively, from off-platform brokered CDs issued by CSB.

- 13 -

THE CHARLES SCHWAB CORPORATION

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

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

Segment Net Revenues

Investor Services total net revenues decreased by 5% in the first quarter of 2024, compared to the same period in 2023, and Advisor Services total net revenues decreased by 15% in the first quarter of 2024, compared to the same period in 2023. Net interest revenue decreased for both segments due to higher cost funding sources and lower average interest-earning asset balances, as described above. Trading revenue decreased for both segments, primarily due to lower payment for order flow and, for Investor Services, lower commissions, as described above. Other revenue decreased for both segments, primarily due to lower exchange processing fees and certain lower service fees, partially offset by lower provision for credit losses on bank loans. These decreases were partially offset by higher asset management and administration fees in both segments, primarily as a result of higher balances in money market funds, and Mutual Fund OneSource® and, additionally for Investor Services, fee-based advice solutions. Bank deposit account fees increased for Investor Services and decreased for Advisor Services. Both segments were impacted by breakage fees incurred in the first quarter of 2023, partially offset by lower average BDA balances in the first quarter of 2024.

Segment Expenses Excluding Interest

Investor Services total expenses excluding interest increased by 1% in the first quarter of 2024, compared to the same period in 2023, while Advisor Services total expenses excluding interest decreased by 12% in the first quarter of 2024, compared to the same period in 2023. Both segments had decreases in compensation and benefits expense primarily due to lower headcount as a result of position eliminations in 2023, partially offset by higher incentive compensation and annual merit increases. Occupancy and equipment expense decreased in both segments, primarily due to lower technology equipment and software costs and lower occupancy costs due to facility closures in 2023 related to restructuring and the Ameritrade integration. Other expense decreased for Advisor Services and increased for Investor Services, primarily due to decreases in exchange processing fees and other clearing costs for Advisor Services and increases in similar fees and costs for Investor Services. Additionally, regulatory fees and assessments increased in both segments, primarily due to higher FDIC assessments, as described above. For Investor Services, depreciation and amortization expense also increased, primarily due to higher amortization of purchased and internally developed software, driven by capital expenditures in 2023 and the first three months of 2024 to enhance our technological infrastructure to support growth of the business.

RISK MANAGEMENT

Schwab’s business activities expose it to a variety of risks, including operational, compliance, credit, market, and liquidity risks. The Company has a comprehensive risk management program to identify and manage these risks and their associated potential for financial and reputational impact.

For a discussion of our risk management programs, see Part II – Item 7 – Risk Management in the 2023 Form 10-K.

Market Risk

Market risk is the potential for changes in earnings or the value of financial instruments held by Schwab as a result of fluctuations in interest rates, equity prices, or market conditions. Schwab is exposed to market risk primarily from changes in interest rates within our interest-earning assets relative to changes in the costs of funding sources that finance these assets.

To manage interest rate risk, we have established policies and procedures, which include setting limits on net interest revenue risk and economic value of equity (EVE) risk. To remain within these limits, we manage the maturity, repricing, and cash flow characteristics of the investment portfolios. Management monitors established guidelines to stay within the Company’s risk appetite. In 2023, the Company began to utilize interest rate swap derivative instruments to assist with managing interest rate risk, the effects of which are incorporated into the Company’s net interest revenue and EVE analyses. For further information on our interest rate risk management strategies utilizing interest rate swaps, see Item 1 – Note 11.

Net Interest Revenue Simulation

For our net interest revenue sensitivity analysis, we use net interest revenue simulation modeling techniques to evaluate and manage the effect of changing interest rates. The simulations include all balance sheet interest rate-sensitive assets and liabilities, and include derivative instruments. Key assumptions include the projection of interest rate scenarios with rate floors, rates and balances of non-maturity client cash held on the balance sheet, prepayment speeds of mortgage-related investments, repricing of financial instruments, and reinvestment of matured or paid-down securities and loans. We use independent third-

- 14 -

THE CHARLES SCHWAB CORPORATION

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

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

party models to simulate net interest revenue sensitivity and related analyses. Fixed income analytical vendors provide term structure models, prepayment speed models for mortgage-backed securities and mortgage loans, and cash flow projections based on interest income, contractual maturities, and prepayments. Consistent with our policies related to the management of interest rate risk, the Company’s net interest revenue sensitivity analysis primarily involves gradual parallel increases/decreases in interest rates over a twelve-month period, though we also regularly simulate the effects of non-parallel shifts and instantaneous shifts of interest rates on net interest revenue.

Net interest revenue is affected by various factors, such as the distribution and composition of interest-earning assets and interest-bearing liabilities, the spread between yields earned on interest-earning assets and rates paid on interest-bearing liabilities, which may reprice at different times or by different amounts, and the spread between short- and long-term interest rates. Interest-earning assets include investment securities, margin loans, bank loans, and cash and cash equivalents. These assets are sensitive to changes in interest rates and changes in prepayment levels that tend to increase in a declining rate environment and decrease in a rising rate environment. Because we establish the rates paid on certain brokerage client cash balances and bank deposits and the rates charged on certain margin and bank loans, and control the composition of our investment securities, we have some ability to manage our net interest spread, depending on competitive factors and market conditions. When we have liquidity needs that exceed our primary sources of funding, the Company has needed to utilize higher-cost funding sources, which can reduce net interest margin and net interest revenue.

Higher prevailing short-term interest rates generally improve yields on shorter duration interest-earning assets. During periods of rapidly rising interest rates, clients tend to reallocate cash out of sweep products into higher-yielding, off-balance sheet, fixed income investments and money market funds within Schwab’s product offerings. This can result in lower interest-earning assets and/or may require supplemental funding with higher funding costs, which therefore tend to constrain net interest revenue when interest rates are moving rapidly higher. A decline in short-term interest rates could negatively impact the yield on the Company’s investment and loan portfolios to a greater degree than any offsetting reduction in interest expense from funding sources, compressing net interest margin.

Net interest revenue sensitivity analysis assumes the asset and liability structure of the consolidated balance sheet would not be changed as a result of the simulated changes in interest rates. While this approach is useful to isolate the impact of changes in interest rates on a statically-sized asset and liability structure, it does not capture changes to client cash allocations. We conduct simulations on EVE to capture the impact of client cash allocation changes on our balance sheet. As we actively manage the consolidated balance sheet and interest rate exposure, we have taken and would typically seek to take steps to manage additional interest rate exposure that could result from changes in the interest rate environment.

The following table presents simulated changes to net interest revenue over the next 12 months beginning March 31, 2024 and December 31, 2023 of a gradual increase or decrease in market interest rates relative to prevailing market rates at the end of each reporting period:


	March 31, 2024		December 31, 2023
Increase of 200 basis points	10.0	%	10.8	%
Increase of 100 basis points	5.3	%	5.8	%
Increase of 50 basis points	2.9	%	3.1	%
Decrease of 50 basis points	0.5	%	0.4	%
Decrease of 100 basis points	0.0	%	(0.2)	%
Decrease of 200 basis points	(3.5)	%	(4.2)	%

The Company’s simulated incremental increases and decreases in market interest rates had a smaller impact on net interest revenue as of March 31, 2024 compared to December 31, 2023. This is primarily due to lower cash balances held at March 31, 2024, partially offset by lower interest-bearing deposits, which reduces interest expense in a higher rate environment and reduces interest expense savings in a lower rate environment.

Effective Duration

Effective duration measures price sensitivity relative to a change in prevailing interest rates, taking account of amortizing cash flows and prepayment optionality for mortgage-related securities and loans. Duration is measured in years and commonly interpreted as the average timing of principal and interest cash flows. We seek to manage the Company’s asset duration in relation to management’s estimate of the Company’s liability duration. The Company’s liability duration is impacted by the

- 15 -

THE CHARLES SCHWAB CORPORATION

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

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

composition of funding sources, and typically decreases in periods of rising market interest rates and increases in periods of declining market interest rates.

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


	March 31, 2024	March 31, 2023
	In years
Estimated effective duration, exclusive of derivatives:
Consolidated total assets	2.5	2.6
AFS investment securities portfolio	2.4	2.4
AFS and HTM investment securities portfolio	3.9	4.0
Estimated effective duration, inclusive of derivatives (1):
Consolidated total assets	2.4	2.6
AFS investment securities portfolio	2.1	2.3
AFS and HTM investment securities portfolio	3.8	3.9

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

AFS and HTM securities comprised approximately 55% and 58% of the Company’s consolidated total assets as of March 31, 2024 and 2023, respectively. The estimated effective duration of the remaining balance sheet assets in aggregate was less than one year as of both March 31, 2024 and 2023.

Economic Value of Equity Simulation

Management also uses EVE simulations to measure interest rate risk. EVE sensitivity measures the long-term impact of interest rate changes on the net present value of assets and liabilities, and includes the impact of derivative instruments. While EVE does not have a direct accounting relationship, the measure aims to capture a theoretical value of assets and liabilities under a variety of interest rate environments. EVE is calculated by subjecting the balance sheet to hypothetical instantaneous shifts in the level of interest rates. This analysis is highly dependent upon asset and liability assumptions based on historical behaviors. Key assumptions in our EVE calculation include projection of interest rate scenarios with rate floors, prepayment speeds of mortgage-related investments, term structure models of interest rates, behavior of non-maturity client cash held on the balance sheet, and pricing assumptions. We use both proprietary and independent third-party models to simulate EVE sensitivity and related analyses. We develop and maintain client credits and deposits run-off models internally based on historical experience and prevailing client cash realignment behaviors. We rely on third-party models for term structure modeling and prepayment speed modeling for mortgage-backed securities and mortgage loans.

As interest rates have risen in the Federal Reserve’s tightening cycle, EVE sensitivity has generally trended higher due to a shortening of liability duration. While the Company’s asset duration remained largely stable during the period of rising interest rates, liability duration shortened significantly and is now shorter than asset duration.

Bank Deposit Account Fees Simulation

Consistent with the presentation on the consolidated statement of income, the sensitivity of bank deposit account fee revenue to interest rate changes is assessed separately from the net interest revenue simulation described above. As of March 31, 2024 and December 31, 2023, simulated changes in bank deposit account fee revenue from gradual changes in market interest rates relative to prevailing market rates, under the interest rate scenarios described above for net interest revenue, did not have a significant impact on the Company’s total net revenues. Our net interest revenue, EVE, and bank deposit account fee revenue simulations reflect the assumption of non-negative investment yields.

Liquidity Risk

Liquidity risk is the potential that Schwab will be unable to sell assets or meet cash flow obligations when they come due without incurring unacceptable losses.

Due to its role as a source of financial strength, CSC’s liquidity needs are primarily driven by the liquidity and capital needs of: CS&Co, TD Ameritrade, Inc., and TDAC, our principal broker-dealer subsidiaries; the capital needs of the banking subsidiaries; principal and interest due on corporate debt, and dividend payments on CSC’s preferred and common stock. The

- 16 -

THE CHARLES SCHWAB CORPORATION

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

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

liquidity needs of our broker-dealer subsidiaries are primarily driven by client activity including trading and margin lending activities and capital expenditures. The capital needs of the banking subsidiaries are primarily driven by client deposit levels and other borrowings. We have established liquidity policies to support the successful execution of business strategies, while ensuring ongoing and sufficient liquidity to meet operational needs and satisfy applicable regulatory requirements under both normal and stressed conditions. We seek to maintain client confidence in the balance sheet and the safety of client assets by maintaining liquidity and diversity of funding sources to allow the Company to meet its obligations. To this end, we have established limits and contingency funding plans to support liquidity levels during both business as usual and stressed conditions.

We employ a variety of metrics to monitor and manage liquidity. We conduct regular liquidity stress testing to develop a view of liquidity risk exposures and to ensure our ability to maintain sufficient liquidity during market-related or company-specific liquidity stress events. Liquidity sources are also tested periodically and results are reported to the Financial Risk Oversight Committee. A number of early warning indicators are monitored to help identify emerging liquidity stresses in the market or within the organization and are reviewed with management periodically.

Funding Sources

Schwab’s primary source of funds is cash generated by client activity which includes bank deposits and cash balances in client brokerage accounts. These funds are used to purchase investment securities and extend loans to clients. Other sources of funds may include cash flows from operations, maturities and sales of investment securities, repayments on loans, securities lending of assets held in client brokerage accounts, FHLB borrowings, borrowings under repurchase agreements with external financial institutions, issuance of CDs, cash provided by securities issuances by CSC in the capital markets, and other facilities described below.

To meet daily funding needs, we maintain liquidity in the form of overnight cash deposits and short-term investments. For unanticipated liquidity needs, we also maintain a buffer of highly liquid investments, including U.S. Treasury securities.

Our clients’ bank deposits and brokerage cash balances primarily originate from our 35.3 million active brokerage accounts. More than 80% of our bank deposits qualified for FDIC insurance as of March 31, 2024. Our clients’ allocation of cash held on our balance sheet as bank deposits or payables to brokerage clients is sensitive to interest rate levels, with clients typically increasing their utilization of investment cash solutions such as purchased money market funds and certain fixed income products when those yields are higher than those of cash sweep features.

Schwab’s need for borrowings from external debt facilities arises primarily from timing differences between cash flow requirements, including in the event the outflow of client cash from the balance sheet is greater than cash flows from operations and investment securities and bank loans; payments on interest-earning investments; movements of cash to meet regulatory brokerage client cash segregation requirements; and general corporate purposes. We maintain policies and procedures necessary to access funding, and test borrowing procedures on a periodic basis. Rollover risk is the risk that we will not be able to refinance or payoff borrowings as they mature. We manage rollover risk on borrowings, taking into account expected principal paydowns on our investment and loan portfolios along with expected deposit flows.

- 17 -

THE CHARLES SCHWAB CORPORATION

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

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

The following table describes external debt facilities available at March 31, 2024:


Description	Borrower	Outstanding		Available			Maturity of Amounts Outstanding	Weighted-Average Interest Rate on Amounts Outstanding
FHLB secured credit facilities	Banking subsidiaries	$	24,000	$	63,439	(1)	May 2024 - January 2025	5.33%
Federal Reserve discount window	Banking subsidiaries	—		32,935		(1,2)	N/A	—

Repurchase agreements	Banking subsidiaries, CSC	7,705		—		(3)	April 2024 - December 2024	5.46%
Unsecured, uncommitted lines of credit with various external banks	CSC, CS&Co	—		1,617			N/A	—
Unsecured commercial paper	CSC	—		5,000			N/A	—


Secured uncommitted lines of credit with various external banks	CS&Co	—		—		(4)	N/A	—
Secured uncommitted lines of credit with various external banks	TDAC	700		—		(4)	April 2024	5.69%
Unsecured, committed revolving line of credit with various external banks	CSC	—		2,100		(5)	N/A	—

(1) Amounts shown as available from the FHLB and Federal Reserve facilities represent remaining capacity based on assets pledged as of March 31, 2024. Incremental borrowing capacity may be made available by pledging additional assets, subject to applicable facility terms. See below and Note 8 for additional information.

(2) On March 11, 2024, the Federal Reserve Bank Term Funding Program (BTFP) ceased to make new loans available. As such, during the first quarter of 2024, the Company reallocated certain amounts of collateral previously pledged under the BTFP to the Federal Reserve discount window. The BTFP was not used by the Company during the first quarter of 2024.

(3) Secured borrowing capacity is made available based on the banking subsidiaries’ or CSC’s ability to provide collateral deemed acceptable by each respective counterparty. See Note 12 for additional information.

(4) Secured borrowing capacity is made available based on CS&Co’s or TDAC’s ability to provide acceptable collateral to the lenders as determined by the credit agreements.

(5) During the first quarter of 2024, CSC entered into an unsecured committed revolving line of credit with various external banks.

N/A Not applicable.

Available borrowing capacity from the FHLB and Federal Reserve facilities maintained by our banking subsidiaries is dependent on the value of assets pledged and the terms of the borrowing arrangements. As of March 31, 2024, the Company had additional investment securities with a par value of approximately $135 billion or a fair value of approximately $124 billion available to be pledged to obtain additional capacity. Additional details regarding availability and use of these facilities is described below.

Amounts available under secured credit facilities with the FHLB are dependent on the value of our First Mortgages, home equity lines of credit (HELOCs), and the fair value of certain of our investment securities that are pledged as collateral. These credit facilities are also available as backup financing in the event the outflow of client cash from the banking subsidiaries’ respective balance sheets is greater than maturities and paydowns on investment securities and bank loans. CSC’s banking subsidiaries must each maintain positive tangible capital, as defined by the Federal Housing Finance Agency, in order to place new draws upon these credit facilities, and the Company manages capital with consideration of minimum tangible capital ratios at our banking subsidiaries. Tangible capital pursuant to the requirements of the FHLB borrowing facilities for our banking subsidiaries is common equity less goodwill and intangible assets.

Our banking subsidiaries also have access to short-term secured funding through the Federal Reserve discount window. Amounts available under the Federal Reserve discount window are dependent on the value of certain investment securities that are pledged as collateral. Our banking subsidiaries may also engage with external financial institutions in repurchase agreements collateralized by investment securities as another source of short-term liquidity. In addition, our banking subsidiaries are counterparties to the standing repo facility with the Federal Reserve Bank of New York; other than de minimis tests performed to satisfy the Federal Reserve Bank of New York’s testing requirements, this facility was not used during the first three months of 2024 and there were no amounts outstanding at March 31, 2024. CSC maintains a standing bilateral repurchase agreement with an external bank. This facility was not used during the first quarter of 2024 and there were no amounts outstanding under this facility at March 31, 2024.

CSC’s ratings for Commercial Paper Notes were P1 by Moody’s Investor Service (Moody’s), A2 by Standard & Poor’s Rating Group (Standard & Poor’s), and F1 by Fitch Ratings, Ltd (Fitch) at March 31, 2024.

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

- 18 -

THE CHARLES SCHWAB CORPORATION

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

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

Beginning in the first quarter of 2024, CSC has access to an unsecured, committed revolving line of credit with various external banks. This line will expire in January 2025. Other than an overnight borrowing to test the availability, the facility was not used during the first quarter of 2024.

CS&Co maintains uncommitted, unsecured bank credit lines with a group of banks as a source of short-term liquidity, which can also be accessed by CSC. CS&Co also maintains secured, uncommitted lines of credit, under which CS&Co may borrow on a short-term basis and pledge either client margin securities or firm securities as collateral, based on the terms of the agreements. TDAC maintains secured uncommitted lines of credit, under which TDAC borrows on either a demand or short-term basis and pledges client margin securities as collateral.

During 2023 and the first three months of 2024, CSB issued brokered CDs as a supplemental funding source. The following table provides information about brokered CDs issued by CSB and outstanding as of March 31, 2024:


	Amount Outstanding		Maturity	Weighted-Average Interest Rate
Brokered CDs	$	39,128	April 2024 - April 2025	5.22%

Cash Flow Activity

As a result of rapidly increasing short-term interest rates beginning in 2022, the Company saw an increase in the pace at which clients moved certain cash balances out of our sweep features and into higher-yielding alternatives at Schwab. As a result of these outflows, our banking subsidiaries have supplemented excess cash on hand and cash generated by maturities and paydowns on our investment securities portfolios with fixed- and floating-rate FHLB advances, repurchase agreements, and issuances of brokered CDs. The average pace of client cash allocations out of sweep products into higher-yielding investment solutions decreased significantly beginning in the second half of 2023, and continued to decrease in the first quarter of 2024.

Cash and cash equivalents decreased $11.6 billion from year-end 2023 to $31.8 billion at March 31, 2024; cash and cash equivalents, including amounts restricted, decreased $16.8 billion to $57.7 billion at March 31, 2024. This decrease reflected repayments of supplemental funding balances of $8.8 billion and maturities of long-term debt of $3.3 billion. Bank deposits decreased during the first quarter of 2024 by $20.5 billion, resulting from a decrease of $11.4 billion in deposits swept from brokerage accounts due to client cash allocations and a decrease in brokered CDs of $9.2 billion. Partially offsetting the decrease in bank deposits and repayment of borrowings, net investing cash flows from our AFS and HTM securities totaled $10.0 billion in the first three months of 2024.

Liquidity Coverage Ratio

Schwab is subject to the full LCR rule, which requires the Company to hold high quality liquid assets (HQLA) in an amount equal to at least 100% of the Company’s projected net cash outflows over a prospective 30-calendar-day period of acute liquidity stress, calculated on each business day. See Part I – Item 1 – Business – Regulation in the 2023 Form 10-K for additional information. The Company was in compliance with the LCR rule at March 31, 2024, and the table below presents information about our average daily LCR:


	Average for the Three Months Ended
	March 31, 2024			December 31, 2023
Total eligible HQLA	$	58,841		$	58,056
Net cash outflows	45,195			44,793
LCR	130		%	130		%

To support growth in margin loan balances at our broker-dealer subsidiaries while meeting our LCR requirements, the Company may issue commercial paper or draw on secured lines of credit, in addition to capital markets issuances. In managing compliance with our LCR requirements, the broker-dealer subsidiaries may also retain client cash balances rather than sweeping such balances to our banking subsidiaries.

- 19 -

THE CHARLES SCHWAB CORPORATION

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

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

Net Stable Funding Ratio

Schwab is subject to disclosure requirements under the NSFR rule, which requires the semi-annual public disclosure of its NSFR levels. The NSFR rule stipulates that the Company’s available stable funding (ASF) must be at least 100% of the Company’s required stable funding (RSF). ASF is calculated by assessing the stability of the Company’s funding sources and RSF is calculated by evaluating the characteristics of the Company’s assets, derivatives, and off-balance-sheet exposures. The Company was in compliance with the NSFR rule at March 31, 2024.

Long-Term Borrowings

The Company’s long-term debt is primarily comprised of Senior Notes and totaled $22.9 billion and $26.1 billion at March 31, 2024 and December 31, 2023, respectively.

The following table provides information about our Senior Notes outstanding at March 31, 2024:

March 31, 2024

Par
Outstanding

Maturity

Weighted Average
Interest Rate

Moody’s

Standard
& Poor’s

Fitch

CSC Senior Notes

22,612

2024 - 2034

3.72%

A-

Ameritrade Holding Senior Notes

213

2024 - 2029

3.47%

A-

—

New Debt Issuances

There were no new debt issuances of senior unsecured obligations in the first three months of 2024.

Schwab additionally enters into guarantees and other similar arrangements in the ordinary course of business. For information on these arrangements, see Item 1 – Notes 5, 6, 8, 9, and 12.

Additional information regarding our sources and uses of liquidity and management of liquidity risk is included in Part II – Item 7 – Risk Management – Liquidity Risk in our 2023 Form 10-K. See also Item 1 – Condensed Consolidated Statements of Cash Flows, Item 1 – Note 7 for the Company’s bank deposits, Item 1 – Note 8 for the Company’s debt and borrowing facilities, and Item 1 – Note 14 for equity outstanding balances and activity.

CAPITAL MANAGEMENT

Schwab seeks to manage capital to a level and composition sufficient to support execution of our business strategy, inclusive of balance sheet growth over time, management of the 2023 IDA agreement, financial support to our subsidiaries, sustained access to the capital markets, and regulatory capital requirements. Schwab also seeks to return excess capital to stockholders. We may return excess capital through such activities as dividends, repurchases of common shares, preferred stock redemptions, and repurchases of our preferred stock represented by depositary shares. Schwab’s primary sources of capital are funds generated by the operations of subsidiaries and securities issuances by CSC in the capital markets. To ensure that Schwab has sufficient capital to absorb unanticipated losses or declines in asset values, we have adopted a policy to remain well capitalized even in stressed scenarios.

Regulatory Capital Requirements

CSC and certain subsidiaries including our banking and broker-dealer subsidiaries are subject to various capital requirements set by regulatory agencies as discussed in further detail in Part II – Item 7 – Capital Management of the 2023 Form 10-K and in Item 1 – Note 17. As of March 31, 2024, CSC and our banking subsidiaries are considered well capitalized, and CS&Co, TDAC, and TD Ameritrade, Inc. are in compliance with their respective net capital requirements.

- 20 -

THE CHARLES SCHWAB CORPORATION

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

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

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


	March 31, 2024						December 31, 2023
	CSC			CSB				CSC			CSB
Total stockholders’ equity	$	42,412		$	16,695			$	40,958		$	16,079
Less:
Preferred stock	9,191			—				9,191			—
Common Equity Tier 1 Capital before regulatory adjustments	$	33,221		$	16,695			$	31,767		$	16,079
Less:
Goodwill, net of associated deferred tax liabilities	$	11,764		$	13			$	11,782		$	13
Other intangible assets, net of associated deferred tax liabilities	6,577			—				6,664			—
Deferred tax assets, net of valuation allowances and deferred tax liabilities	41			35				41			35
AOCI adjustment (1)	(17,568)			(15,297)				(18,131)			(15,746)
Common Equity Tier 1 Capital	$	32,407		$	31,944			$	31,411		$	31,777
Tier 1 Capital	$	41,598		$	31,944			$	40,602		$	31,777
Total Capital	41,635			31,977				40,645			31,816
Risk-Weighted Assets	121,328			81,261				128,230			83,809
Average Assets with regulatory adjustments	471,116			306,869				476,069			315,851
Total Leverage Exposure	474,371			309,011				479,302			318,007
Common Equity Tier 1 Capital/Risk-Weighted Assets	26.7		%	39.3		%		24.5		%	37.9		%
Tier 1 Capital/Risk-Weighted Assets	34.3		%	39.3		%		31.7		%	37.9		%
Total Capital/Risk-Weighted Assets	34.3		%	39.4		%		31.7		%	38.0		%
Tier 1 Leverage Ratio	8.8		%	10.4		%		8.5		%	10.1		%
Supplementary Leverage Ratio	8.8		%	10.3		%		8.5		%	10.0		%

(1) Changes in market interest rates can result in unrealized gains or losses on AFS securities, which are included in AOCI. As a Category III banking organization, CSC has elected to exclude AOCI from regulatory capital.

The Company’s consolidated Tier 1 Leverage Ratio increased to 8.8% at March 31, 2024 from 8.5% at year-end 2023. This increase during the first quarter was primarily due to lower total Company assets and also the benefit of net income earned during the quarter. Total balance sheet assets decreased $24.4 billion, or 5%, during the first quarter of 2024 due primarily to a decrease of $11.4 billion in bank sweep deposits, a decrease of $9.2 billion in brokered CDs, and repayment of $3.3 billion in long-term debt. CSB’s Tier 1 Leverage Ratio also increased from year-end 2023, ending the first quarter of 2024 at 10.4% primarily as a result of lower total assets as well as net income during the quarter.

In light of the Federal Reserve’s 2023 regulatory capital rule proposal, which among other things, would require the Company to include AOCI in regulatory capital (See Part II – Item 7 – Current Regulatory and Other Developments in the 2023 Form 10-K), the Company has developed an adjusted Tier 1 Leverage Ratio, which is a non-GAAP financial measure that includes AOCI in the ratio. The primary component of AOCI for Schwab is unrealized gains and losses on our AFS investment securities portfolio and on securities transferred from AFS to the HTM category. As of March 31, 2024, our adjusted Tier 1 Leverage Ratio, which includes AOCI in the ratio, was 5.3% for CSC consolidated and 5.7% for CSB (see Non-GAAP Financial Measures for further details and a reconciliation of such measures to GAAP reported results). The Company is continuing to retain and accrete capital organically well ahead of the Federal Reserve’s proposed regulatory capital rules’ transition period.

IDA Agreement

Certain brokerage client deposits are swept off-balance sheet to the TD Depository Institutions pursuant to the 2023 IDA agreement. During the first three months of 2024, Schwab did not move IDA balances to its balance sheet. The Company’s overall capital management strategy includes supporting migration of IDA balances in future periods as available pursuant to the terms of the 2023 IDA agreement. The Company’s ability to migrate these balances to its balance sheet is dependent upon multiple factors including having sufficient capital levels to sustain these incremental deposits. See Item 1 – Note 9 for further information on the 2023 IDA agreement.

- 21 -

THE CHARLES SCHWAB CORPORATION

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

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

Dividends

Cash dividends paid and per share amounts, exclusive of amounts related to preferred stock repurchases, for the first three months of 2024 and 2023 are as follows:


	2024				2023
Three Months Ended March 31,	Cash Paid		Per Share Amount		Cash Paid		Per Share Amount
Common and Nonvoting Common Stock	$	459	$	.25	$	463	$	.25
Preferred Stock:

Series D (1)	11		14.88		11		14.88

Series F (2)	—		—		—		—
Series G (1)	33		1,343.75		33		1,343.75
Series H (1)	22		1,000.00		24		1,000.00
Series I (1)	21		1,000.00		21		1,000.00
Series J (1)	7		11.13		7		11.13
Series K (1)	9		1,250.00		9		1,250.00

(1) Dividends paid quarterly.

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

Share Repurchases

On July 27, 2022, CSC publicly announced that its Board of Directors approved a share repurchase authorization to repurchase up to $15.0 billion of common stock, replacing the previous and now terminated share repurchase authorization of up to $4.0 billion of common stock. The share repurchase authorization does not have an expiration date. There were no repurchases of CSC’s common stock during the three months ended March 31, 2024. CSC repurchased 37 million shares of its common stock for $2.8 billion during the three months ended March 31, 2023. As of March 31, 2024, approximately $8.7 billion remained on the authorization.

There were no repurchases of CSC’s preferred stock during the three months ended March 31, 2024. During the three months ended March 31, 2023, the Company repurchased on the open market 11,620 depositary shares representing interests in Series F preferred stock for $11 million, 42,036 depositary shares representing interests in Series G preferred stock for $42 million, 273,251 depositary shares representing interests in Series H preferred stock for $235 million, and 194,567 depositary shares representing interests in Series I preferred stock for $179 million. The repurchase prices are inclusive of $3 million of dividends accrued by the stockholders as of the repurchase date.

Share repurchases, net of issuances, are subject to a nondeductible 1% excise tax which was recognized as a direct and incremental cost associated with these transactions. For repurchases of common stock, the tax is recorded as part of the cost basis of the treasury stock repurchased, resulting in no impact to the condensed consolidated statement of income. For repurchases of preferred stock, the tax impact is included within preferred stock dividends and other on the condensed consolidated statement of income.

OTHER

Foreign Exposure

At March 31, 2024, Schwab had exposure to non-sovereign financial and non-financial institutions in foreign countries, as well as agencies of foreign governments. At March 31, 2024, the fair value of these holdings totaled $13.0 billion, with the top three exposures being to issuers and counterparties domiciled in France at $5.9 billion, the United Kingdom at $2.7 billion, and Canada at $887 million. At December 31, 2023, the fair value of these holdings totaled $12.8 billion, with the top three exposures being to issuers and counterparties domiciled in the United Kingdom at $5.0 billion, France at $3.2 billion, and Canada at $1.5 billion. In addition, Schwab had outstanding margin loans to foreign residents of $2.7 billion and $2.5 billion at March 31, 2024 and December 31, 2023, respectively.

- 22 -

THE CHARLES SCHWAB CORPORATION

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

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

CRITICAL ACCOUNTING ESTIMATES

Certain of our accounting policies that involve a higher degree of judgment and complexity are discussed in Part II – Item 7 – Critical Accounting Estimates in the 2023 Form 10-K. There have been no changes to critical accounting estimates during the first three months of 2024.

NON-GAAP FINANCIAL MEASURES

In addition to disclosing financial results in accordance with generally accepted accounting principles in the U.S. (GAAP), Management’s Discussion and Analysis of Financial Condition and Results of Operations contain references to the non-GAAP financial measures described below. We believe these non-GAAP financial measures provide useful supplemental information about the financial performance of the Company, and facilitate meaningful comparison of Schwab’s results in the current period to both historic and future results. These non-GAAP measures should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and may not be comparable to non-GAAP financial measures presented by other companies.

Schwab’s use of non-GAAP measures is reflective of certain adjustments made to GAAP financial measures as described below. Beginning in the third quarter of 2023, these adjustments also include restructuring costs, which the Company began incurring in connection with its previously announced plans to streamline its operations to prepare for post-integration of Ameritrade. See Part I – Item 1 – Note 10 for additional information.


Non-GAAP Adjustment or Measure	Definition	Usefulness to Investors and Uses by Management
Acquisition and integration-related costs, amortization of acquired intangible assets and restructuring costs	Schwab adjusts certain GAAP financial measures to exclude the impact of acquisition and integration-related costs incurred as a result of the Company’s acquisitions, amortization of acquired intangible assets, restructuring costs and, where applicable, the income tax effect of these expenses. Adjustments made to exclude amortization of acquired intangible assets are reflective of all acquired intangible assets, which were recorded as part of purchase accounting. These acquired intangible assets contribute to the Company’s revenue generation. Amortization of acquired intangible assets will continue in future periods over their remaining useful lives.	We exclude acquisition and integration-related costs, amortization of acquired intangible assets and restructuring costs for the purpose of calculating certain non-GAAP measures because we believe doing so provides additional transparency of Schwab’s ongoing operations, and is useful in both evaluating the operating performance of the business and facilitating comparison of results with prior and future periods. Costs related to acquisition and integration or restructuring fluctuate based on the timing of acquisitions, integration and restructuring activities, thereby limiting comparability of results among periods, and are not representative of the costs of running the Company’s ongoing business. Amortization of acquired intangible assets is excluded because management does not believe it is indicative of the Company’s underlying operating performance.
Return on tangible common equity	Return on tangible common equity represents annualized adjusted net income available to common stockholders as a percentage of average tangible common equity. Tangible common equity represents common equity less goodwill, acquired intangible assets – net, and related deferred tax liabilities.	Acquisitions typically result in the recognition of significant amounts of goodwill and acquired intangible assets. We believe return on tangible common equity may be useful to investors as a supplemental measure to facilitate assessing capital efficiency and returns relative to the composition of Schwab’s balance sheet.
Adjusted Tier 1 Leverage Ratio	Adjusted Tier 1 Leverage Ratio represents the Tier 1 Leverage Ratio as prescribed by bank regulatory guidance for the consolidated company and for CSB, adjusted to reflect the inclusion of AOCI in the ratio.	Inclusion of the impacts of AOCI in the Company’s Tier 1 Leverage Ratio provides additional information regarding the Company’s current capital position. We believe Adjusted Tier 1 Leverage Ratio may be useful to investors as a supplemental measure of the Company’s capital levels.

The Company also uses adjusted diluted EPS and return on tangible common equity as components of performance criteria for employee bonus and certain executive management incentive compensation arrangements. The Compensation Committee of CSC’s Board of Directors maintains discretion in evaluating performance against these criteria.

- 23 -

THE CHARLES SCHWAB CORPORATION

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

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

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


	Three Months Ended March 31,
	2024		2023
Total expenses excluding interest (GAAP)	$	2,942	$	3,006
Acquisition and integration-related costs (1)	(38)		(98)
Amortization of acquired intangible assets	(130)		(135)
Restructuring costs (2)	28		—
Adjusted total expenses (non-GAAP)	$	2,802	$	2,773

(1) Acquisition and integration-related costs for the three months ended March 31, 2024 primarily consist of $17 million of compensation and benefits, and $17 million of professional services. Acquisition and integration-related costs for the three months ended March 31, 2023 primarily consist of $58 million of compensation and benefits, $33 million of professional services, and $4 million of occupancy and equipment.

(2) Restructuring costs for the three months ended March 31, 2024 reflect a change in estimate of $31 million in compensation and benefits, partially offset by $2 million of occupancy and equipment expense and $1 million of other expense for the period. There were no restructuring costs for the three months ended March 31, 2023.


	Three Months Ended March 31,
	2024				2023
	Amount		Diluted EPS		Amount		Diluted EPS
Net income available to common stockholders (GAAP), Earnings per common share — diluted (GAAP)	$	1,251	$	.68	$	1,533	$	.83
Acquisition and integration-related costs	38		.02		98		.05
Amortization of acquired intangible assets	130		.07		135		.07
Restructuring costs	(28)		(.01)		—		—
Income tax effects (1)	(33)		(.02)		(56)		(.02)
Adjusted net income available to common stockholders (non-GAAP), Adjusted diluted EPS (non-GAAP)	$	1,358	$	.74	$	1,710	$	.93

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


	Three Months Ended March 31,
	2024			2023
Return on average common stockholders’ equity (GAAP)	15		%	23		%
Average common stockholders’ equity	$	32,493		$	27,028
Less: Average goodwill	(11,951)			(11,951)
Less: Average acquired intangible assets — net	(8,196)			(8,724)
Plus: Average deferred tax liabilities related to goodwill and acquired intangible assets — net	1,759			1,842
Average tangible common equity	$	14,105		$	8,195
Adjusted net income available to common stockholders (1)	$	1,358		$	1,710
Return on tangible common equity (non-GAAP)	39		%	83		%

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

- 24 -

THE CHARLES SCHWAB CORPORATION

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

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


	March 31, 2024
	CSC			CSB
Tier 1 Leverage Ratio (GAAP)	8.8		%	10.4		%
Tier 1 Capital	$	41,598		$	31,944
Plus: AOCI adjustment	(17,568)			(15,297)
Adjusted Tier 1 Capital	24,030			16,647
Average assets with regulatory adjustments	471,116			306,869
Plus: AOCI adjustment	(17,817)			(15,664)
Adjusted average assets with regulatory adjustments	$	453,299		$	291,205
Adjusted Tier 1 Leverage Ratio (non-GAAP)	5.3		%	5.7		%

Item 3. Quantitative and Qualitative Disclosures About Market Risk

For discussion of the quantitative and qualitative disclosures about market risk, see Risk Management in Item 2.

- 25 -

Part I - FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

THE CHARLES SCHWAB CORPORATION

Condensed Consolidated Statements of Income

(In Millions, Except Per Share Amounts)

(Unaudited)


	Three Months Ended March 31,
	2024		2023
Net Revenues
Interest revenue	$	3,941	$	4,016
Interest expense	(1,708)		(1,246)
Net interest revenue	2,233		2,770
Asset management and administration fees	1,348		1,118
Trading revenue	817		892
Bank deposit account fees	183		151
Other	159		185

Total net revenues	4,740		5,116
Expenses Excluding Interest
Compensation and benefits	1,538		1,638
Professional services	241		258
Occupancy and equipment	265		299
Advertising and market development	88		88
Communications	141		146
Depreciation and amortization	228		177
Amortization of acquired intangible assets	130		135
Regulatory fees and assessments	125		83
Other	186		182
Total expenses excluding interest	2,942		3,006
Income before taxes on income	1,798		2,110
Taxes on income	436		507
Net Income	1,362		1,603
Preferred stock dividends and other	111		70
Net Income Available to Common Stockholders	$	1,251	$	1,533
Weighted-Average Common Shares Outstanding:
Basic	1,825		1,834
Diluted	1,831		1,842
Earnings Per Common Shares Outstanding (1):
Basic	$	.69	$	.84
Diluted	$	.68	$	.83

(1) The Company has voting and nonvoting common stock outstanding. As the participation rights, including dividend and liquidation rights, are identical between the voting and nonvoting stock classes, basic and diluted earnings per share are the same for each class. See Note 16 for additional information.

See Notes to Condensed Consolidated Financial Statements.

- 26 -

THE CHARLES SCHWAB CORPORATION

Condensed Consolidated Statements of Comprehensive Income

(In Millions)

(Unaudited)


	Three Months Ended March 31,
	2024		2023
Net income	$	1,362	$	1,603
Other comprehensive income (loss), before tax:
Change in net unrealized gain (loss) on available for sale securities:
Net unrealized gain (loss)	139		1,849

Other reclassifications included in other revenue	10		9
Change in net unrealized gain (loss) on held to maturity securities:

Amortization of amounts previously recorded upon transfer to held to maturity from available for sale	564		609
Other	(8)		(8)
Other comprehensive income (loss), before tax	705		2,459
Income tax effect	(150)		(528)
Other comprehensive income (loss), net of tax	555		1,931
Comprehensive Income (Loss)	$	1,917	$	3,534

See Notes to Condensed Consolidated Financial Statements.

- 27 -

THE CHARLES SCHWAB CORPORATION

Condensed Consolidated Balance Sheets

(In Millions, Except Per Share and Share Amounts)

(Unaudited)


	March 31, 2024		December 31, 2023
Assets
Cash and cash equivalents	$	31,752	$	43,337
Cash and investments segregated and on deposit for regulatory purposes (including resale agreements of $9,384 and $8,844 at March 31, 2024 and December 31, 2023, respectively)	25,905		31,836
Receivables from brokerage clients — net	71,169		68,667
Available for sale securities (amortized cost of $109,627 at March 31, 2024 and $116,336 at December 31, 2023; including assets pledged of $1,688 and $1,733, respectively)	101,086		107,646
Held to maturity securities (including assets pledged of $6,745 at March 31, 2024 and $3,703 at December 31, 2023)	156,371		159,452
Bank loans — net	40,783		40,439
Equipment, office facilities, and property — net	3,584		3,690
Goodwill	11,951		11,951
Acquired intangible assets — net	8,131		8,260
Other assets	18,052		17,900
Total assets	$	468,784	$	493,178
Liabilities and Stockholders’ Equity
Bank deposits	$	269,460	$	289,953
Payables to brokerage clients	84,005		84,786
Accrued expenses and other liabilities	17,637		18,400
Other short-term borrowings	8,405		6,553
Federal Home Loan Bank borrowings	24,000		26,400
Long-term debt	22,865		26,128
Total liabilities	426,372		452,220
Stockholders’ equity:
Preferred stock — $.01 par value per share; aggregate liquidation preference of $9,329 at March 31, 2024 and December 31, 2023	9,191		9,191
Common stock — 3 billion shares authorized; $.01 par value per share; 2,023,295,180 shares issued at March 31, 2024 and December 31, 2023	20		20
Nonvoting common stock — 300 million shares authorized; $.01 par value per share; 50,893,695 shares issued at March 31, 2024 and December 31, 2023	1		1
Additional paid-in capital	27,358		27,330
Retained earnings	34,701		33,901
Treasury stock, at cost — 247,203,220 and 250,678,452 shares at March 31, 2024 and December 31, 2023, respectively	(11,283)		(11,354)
Accumulated other comprehensive income (loss)	(17,576)		(18,131)
Total stockholders’ equity	42,412		40,958
Total liabilities and stockholders’ equity	$	468,784	$	493,178

See Notes to Condensed Consolidated Financial Statements.

- 28 -

THE CHARLES SCHWAB CORPORATION

Condensed Consolidated Statements of Stockholders’ Equity

(In Millions)

(Unaudited)


															Accumulated Other Comprehensive Income (Loss)
	Preferred Stock		Common Stock			Nonvoting Common Stock			Additional Paid-in Capital		Retained Earnings		Treasury Stock, at cost				Total
			Shares	Amount		Shares	Amount
Balance at December 31, 2022	$	9,706	2,023	$	20	51	$	1	$	27,075	$	31,066	$	(8,639)	$	(22,621)	$	36,608
Net income	—		—	—		—	—		—		1,603		—		—		1,603
Other comprehensive income (loss), net of tax	—		—	—		—	—		—		—		—		1,931		1,931

Redemption and repurchase of preferred stock, inclusive of tax	(515)		—	—		—	—		—		44		—		—		(471)


Dividends declared on preferred stock	—		—	—		—	—		—		(105)		—		—		(105)
Dividends declared on common stock — $.25 per share	—		—	—		—	—		—		(464)		—		—		(464)
Repurchase of common stock, inclusive of tax	—		—	—		—	—		—		—		(2,869)		—		(2,869)


Stock option exercises and other	—		—	—		—	—		(92)		—		111		—		19
Share-based compensation	—		—	—		—	—		129		—		—		—		129
Other	—		—	—		—	—		24		—		(58)		—		(34)
Balance at March 31, 2023	$	9,191	2,023	$	20	51	$	1	$	27,136	$	32,144	$	(11,455)	$	(20,690)	$	36,347

Balance at December 31, 2023	$	9,191	2,023	$	20	51	$	1	$	27,330	$	33,901	$	(11,354)	$	(18,131)	$	40,958
Net income	—		—	—		—	—		—		1,362		—		—		1,362
Other comprehensive income (loss), net of tax	—		—	—		—	—		—		—		—		555		555



Dividends declared on preferred stock	—		—	—		—	—		—		(103)		—		—		(103)
Dividends declared on common stock — $.25 per share	—		—	—		—	—		—		(459)		—		—		(459)



Stock option exercises and other	—		—	—		—	—		(120)		—		142		—		22
Share-based compensation	—		—	—		—	—		125		—		—		—		125
Other	—		—	—		—	—		23		—		(71)		—		(48)
Balance at March 31, 2024	$	9,191	2,023	$	20	51	$	1	$	27,358	$	34,701	$	(11,283)	$	(17,576)	$	42,412

See Notes to Condensed Consolidated Financial Statements.

- 29 -

THE CHARLES SCHWAB CORPORATION

Condensed Consolidated Statements of Cash Flows

(in Millions)

(Unaudited)


	Three Months Ended March 31,
	2024		2023
Cash Flows from Operating Activities
Net income	$	1,362	$	1,603
Adjustments to reconcile net income to net cash provided by (used for) operating activities:
Share-based compensation	131		134
Depreciation and amortization	228		177
Amortization of acquired intangible assets	130		135
Provision (benefit) for deferred income taxes	(49)		3
Premium amortization, net, on available for sale and held to maturity securities	205		185
Other	116		132
Net change in:
Investments segregated and on deposit for regulatory purposes	716		13,690
Receivables from brokerage clients	(2,515)		3,395
Other assets	(95)		212
Payables to brokerage clients	(782)		(9,885)
Accrued expenses and other liabilities	(796)		(4)
Net cash provided by (used for) operating activities	(1,349)		9,777
Cash Flows from Investing Activities
Purchases of available for sale securities	(523)		—
Proceeds from sales of available for sale securities	1,189		1,051
Principal payments on available for sale securities	5,809		7,312

Principal payments on held to maturity securities	3,509		3,613
Net change in bank loans	(349)		521

Purchases of equipment, office facilities, and property	(149)		(159)
Purchases of FHLB stock	(180)		(1,439)
Proceeds from sales of FHLB stock	324		82
Purchases of Federal Reserve stock	(82)		—
Proceeds from sales of Federal Reserve stock	—		98
Other investing activities	(73)		(50)
Net cash provided by (used for) investing activities	9,475		11,029
Cash Flows from Financing Activities
Net change in bank deposits	(20,493)		(40,979)



Proceeds from FHLB borrowings	5,000		36,200
Repayments of FHLB borrowings	(7,400)		(3,000)
Proceeds from other short-term borrowings	4,050		3,657
Repayments of other short-term borrowings	(2,198)		(1,241)

Repayments of long-term debt	(3,260)		(808)

Redemption and repurchase of preferred stock	—		(467)
Dividends paid	(562)		(568)
Proceeds from stock options exercised	22		19
Repurchases of common stock and nonvoting common stock	—		(2,842)
Other financing activities	(85)		(67)
Net cash provided by (used for) financing activities	(24,926)		(10,096)
Increase (Decrease) in Cash and Cash Equivalents, including Amounts Restricted	(16,800)		10,710
Cash and Cash Equivalents, including Amounts Restricted at Beginning of Year	74,473		58,720
Cash and Cash Equivalents, including Amounts Restricted at End of Period	$	57,673	$	69,430

Continued on following page.

- 30 -

THE CHARLES SCHWAB CORPORATION

Condensed Consolidated Statements of Cash Flows

(in Millions)

(Unaudited)

Continued from previous page.


	Three Months Ended March 31,
	2024		2023
Supplemental Cash Flow Information
Non-cash investing activity:




Changes in accrued equipment, office facilities, and property purchases	$	(27)	$	28




Other Supplemental Cash Flow Information:
Cash paid during the period for:
Interest	$	1,957	$	923
Income taxes	$	41	$	40
Amounts included in the measurement of lease liabilities	$	61	$	63
Leased assets obtained in exchange for new operating lease liabilities	$	20	$	12


	March 31, 2024		March 31, 2023
Reconciliation of cash, cash equivalents and amounts reported within the balance sheet (1)
Cash and cash equivalents	$	31,752	$	49,162
Restricted cash and cash equivalents amounts included in cash and investments segregated and on deposit for regulatory purposes	25,921		20,268
Total cash and cash equivalents, including amounts restricted shown in the statement of cash flows	$	57,673	$	69,430

(1) For more information on the nature of restrictions on restricted cash and cash equivalents, see Note 17.

See Notes to Condensed Consolidated Financial Statements.

- 31 -

THE CHARLES SCHWAB CORPORATION

Notes to Condensed Consolidated Financial Statements

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

(Unaudited)

1. Introduction and Basis of Presentation

Principal business subsidiaries of CSC include the following:

•Charles Schwab & Co., Inc. (CS&Co), incorporated in 1971, a securities broker-dealer;

•TD Ameritrade, Inc., an introducing securities broker-dealer;

•TD Ameritrade Clearing, Inc. (TDAC), a securities broker-dealer that provides trade execution and clearing services to TD Ameritrade, Inc.;

•Charles Schwab Bank, SSB (CSB), our principal banking entity; and

•Charles Schwab Investment Management, Inc. (CSIM), the investment advisor for Schwab’s proprietary mutual funds (Schwab Funds®) and for Schwab’s exchange-traded funds (Schwab ETFs™).

Unless otherwise indicated, the terms “Schwab,” “the Company,” “we,” “us,” or “our” mean CSC together with its consolidated subsidiaries.

These unaudited condensed consolidated financial statements have been prepared in conformity with GAAP, which require management to make certain estimates and assumptions that affect the reported amounts in the accompanying financial statements and in the related disclosures. These estimates are based on information available as of the date of the condensed consolidated financial statements. While management makes its best judgment, actual amounts or results could differ from these estimates. In the opinion of management, all normal, recurring adjustments have been included for a fair statement of this interim financial information.

These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto, included in Schwab’s 2023 Form 10-K.

The significant accounting policies are included in Item 8 – Note 2 in the 2023 Form 10-K. There have been no significant changes to these accounting policies during the first three months of 2024.

2. New Accounting Standards

Adoption of New Accounting Standards


Standard	Description	Date of Adoption	Effects on the Financial Statements or Other Significant Matters
Accounting Standards Update (ASU) 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures”	Requires annual and interim disclosure of significant segment expenses that are provided to the chief operating decision maker (CODM) and included in segment profit or loss. Also requires disclosure of the CODM’s title and position and how the CODM uses reported segment profit or loss information in assessing segment performance and allocating resources. All required segment disclosures will be presented both on an interim and annual basis. Adoption requires retrospective application as of the earliest comparative period presented in the financial statements.	January 1, 2024 (applies to the annual financial statements for 2024 and interim periods thereafter)	The Company does not expect this guidance will have a material impact on its financial statements or disclosures.

- 32 -

THE CHARLES SCHWAB CORPORATION

Notes to Condensed Consolidated Financial Statements

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

(Unaudited)

New Accounting Standards Not Yet Adopted


Standard	Description	Required Date of Adoption	Effects on the Financial Statements or Other Significant Matters
ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures”	Expands income tax disclosures, primarily by enhancing the rate reconciliation table and requiring additional disaggregated information about income taxes paid. Adoption allows retrospective or prospective application, with early adoption permitted.	January 1, 2025	The Company does not expect this guidance will have a material impact on its financial statements or disclosures.

3. Revenue Recognition

Disaggregation of Schwab’s revenue by major source is as follows:


	Three Months Ended March 31,
	2024		2023
Net interest revenue
Cash and cash equivalents	$	454	$	413
Cash and investments segregated	388		432
Receivables from brokerage clients	1,260		1,084
Available for sale securities	594		825
Held to maturity securities	690		746
Bank loans	440		391
Securities lending revenue	76		112
Other interest revenue	39		13
Interest revenue	3,941		4,016
Bank deposits	(921)		(618)
Payables to brokerage clients	(73)		(75)
Other short-term borrowings	(103)		(86)
Federal Home Loan Bank borrowings	(330)		(304)
Long-term debt	(224)		(139)
Securities lending expense	(55)		(22)
Other interest expense	(2)		(2)
Interest expense	(1,708)		(1,246)
Net interest revenue	2,233		2,770
Asset management and administration fees
Mutual funds, ETFs, and CTFs	758		585
Advice solutions	503		453
Other	87		80
Asset management and administration fees	1,348		1,118
Trading revenue
Commissions	413		422
Order flow revenue	352		414
Principal transactions	52		56
Trading revenue	817		892
Bank deposit account fees	183		151
Other	159		185

Total net revenues	$	4,740	$	5,116

Note: For a summary of revenue provided by our reportable segments, see Note 18. The recognition of revenue is not impacted by the operating segment in which revenue is generated.

- 33 -

THE CHARLES SCHWAB CORPORATION

Notes to Condensed Consolidated Financial Statements

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

(Unaudited)

Contract balances: Receivables from contracts with customers within the scope of Accounting Standards Codification (ASC) 606 Revenue From Contracts With Customers (ASC 606), are included in other assets on the condensed consolidated balance sheets, and totaled $640 million and $599 million at March 31, 2024 and December 31, 2023, respectively.

The Company had net contract assets of $233 million and $239 million at March 31, 2024 and December 31, 2023, respectively, related to the buy down of fixed-rate obligation amounts pursuant to the 2023 IDA agreement. These amounts are included in other assets on the condensed consolidated balance sheets and are amortized on a straight-line basis over the remaining contractual term as a reduction to bank deposit account fee revenue. For additional discussion of the 2023 IDA agreement, see Note 9.

Unsatisfied performance obligations: We do not have any unsatisfied performance obligations other than those that are subject to an elective practical expedient under ASC 606. The practical expedient applies to and is elected for contracts where we recognize revenue at the amount to which we have the right to invoice for services performed.

- 34 -

THE CHARLES SCHWAB CORPORATION

Notes to Condensed Consolidated Financial Statements

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

(Unaudited)

4. Investment Securities

The amortized cost, gross unrealized gains and losses, and fair value of the Company’s AFS and HTM investment securities are as follows:


March 31, 2024	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Available for sale securities
U.S. agency mortgage-backed securities	$	66,573	$	—	$	6,402	$	60,171
U.S. Treasury securities	21,095		—		902		20,193
Corporate debt securities (1)	12,232		—		864		11,368
Asset-backed securities (2)	8,166		—		319		7,847
Foreign government agency securities	831		—		28		803
U.S. state and municipal securities	632		—		57		575
Non-agency commercial mortgage-backed securities	123		—		13		110


Other	22		—		3		19
Unallocated portfolio layer method fair value basis adjustments (3)	(47)		—		(47)		—
Total available for sale securities	$	109,627	$	—	$	8,541	$	101,086
Held to maturity securities
U.S. agency mortgage-backed securities	$	156,371	$	402	$	14,433	$	142,340









Total held to maturity securities	$	156,371	$	402	$	14,433	$	142,340

December 31, 2023
Available for sale securities
U.S. agency mortgage-backed securities	$	69,173	$	—	$	6,378	$	62,795
U.S. Treasury securities	22,459		1		989		21,471
Corporate debt securities (1)	13,344		—		860		12,484
Asset-backed securities (2)	9,465		—		378		9,087
Foreign government agency securities	1,035		—		33		1,002
U.S. state and municipal securities	634		—		55		579

Non-agency commercial mortgage-backed securities	123		—		14		109

Certificates of deposit	100		—		—		100
Other	22		—		3		19
Unallocated portfolio layer method fair value basis adjustments (3)	(19)		—		(19)		—
Total available for sale securities	$	116,336	$	1	$	8,691	$	107,646
Held to maturity securities
U.S. agency mortgage-backed securities	$	159,452	$	1,435	$	13,796	$	147,091
Total held to maturity securities	$	159,452	$	1,435	$	13,796	$	147,091

(1) As of March 31, 2024 and December 31, 2023, approximately 34% and 36%, respectively, of the total AFS in corporate debt securities were issued by institutions in the financial services industry.

(2) Approximately 57% and 61% of asset-backed securities held as of March 31, 2024 and December 31, 2023, respectively, were Federal Family Education Loan Program Asset-Backed Securities. Asset-backed securities collateralized by credit card receivables represented approximately 27% and 24% of the asset-backed securities held as of March 31, 2024 and December 31, 2023, respectively.

(3) This represents the amount of PLM basis adjustments related to AFS securities hedged in a closed portfolio. See Note 11 for more information on PLM hedge accounting.

At March 31, 2024, our banking subsidiaries had pledged investment securities with a value of $68.2 billion as collateral to secure borrowing capacity on secured credit facilities with the FHLB (see Note 8). Our banking subsidiaries also pledge investment securities as collateral to secure borrowing capacity at the Federal Reserve discount window, and had pledged securities with a value of $32.9 billion as collateral for this facility at March 31, 2024. The Company also pledges investment securities issued by federal agencies to secure certain trust deposits. The value of these pledged securities was $1.6 billion at March 31, 2024.

At March 31, 2024, our banking subsidiaries had pledged HTM and AFS securities as collateral under repurchase agreements with external financial institutions. HTM securities pledged were U.S. agency mortgage-backed securities with an aggregate amortized cost of $6.7 billion, and AFS securities pledged were U.S. agency mortgage-backed securities with an aggregate fair

- 35 -

THE CHARLES SCHWAB CORPORATION

Notes to Condensed Consolidated Financial Statements

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

(Unaudited)

value of $1.5 billion. Securities pledged as collateral under these repurchase agreements may be sold, repledged, or otherwise used by the counterparties. See Notes 8 and 12 for additional information on these repurchase agreements.

At March 31, 2024, our banking subsidiaries had pledged AFS securities consisting of U.S. Treasury securities with an aggregate fair value of $191 million as initial margin on interest rate swaps (see Notes 11 and 12). All of Schwab’s interest rate swaps are cleared through central counterparty (CCP) clearing houses which require the Company to post initial margin as collateral against potential losses. Initial margin is posted through futures commission merchants (FCM) which serve as the intermediary between the CCPs and Schwab. The FCM agreements governing our swaps allow for securities pledged as initial margin to be sold, repledged, or otherwise used by the FCM.

Securities with unrealized losses, aggregated by category and period of continuous unrealized loss, of AFS investment securities are as follows:


	Less than 12 months				12 months or longer				Total
March 31, 2024	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Available for sale securities
U.S. agency mortgage-backed securities (1)	$	1	$	—	$	60,171	$	6,402	$	60,172	$	6,402
U.S. Treasury securities	754		1		18,447		901		19,201		902
Corporate debt securities	—		—		11,193		864		11,193		864
Asset-backed securities (1)	22		—		7,676		319		7,698		319
Foreign government agency securities	—		—		803		28		803		28
U.S. state and municipal securities	—		—		575		57		575		57
Non-agency commercial mortgage-backed securities	—		—		110		13		110		13


Other	—		—		19		3		19		3
Total (2)	$	777	$	1	$	98,994	$	8,587	$	99,771	$	8,588


December 31, 2023
Available for sale securities
U.S. agency mortgage-backed securities (1)	$	1	$	—	$	62,794	$	6,378	$	62,795	$	6,378
U.S. Treasury securities	—		—		19,450		989		19,450		989
Corporate debt securities	—		—		12,484		860		12,484		860
Asset-backed securities (1)	29		—		9,058		378		9,087		378
Foreign government agency securities	—		—		1,002		33		1,002		33

U.S. state and municipal securities	—		—		579		55		579		55
Non-agency commercial mortgage-backed securities	—		—		109		14		109		14
Other	—		—		19		3		19		3
Total (2)	$	30	$	—	$	105,495	$	8,710	$	105,525	$	8,710

(1) Unrealized losses less than 12 months amounts were less than $500 thousand.

(2) For purposes of this table, unrealized losses on AFS securities excludes the unallocated PLM fair value hedge basis adjustments of $47 million and
$19 million at March 31, 2024, and December 31, 2023, respectively.

At March 31, 2024, substantially all rated securities in the investment portfolios were investment grade. U.S. agency mortgage-backed securities do not have explicit credit ratings; however, management considers these to be of the highest credit quality and rating given the guarantee of principal and interest by the U.S. government or U.S. government-sponsored enterprises.

For a description of management’s quarterly evaluation of AFS securities in unrealized loss positions, see Item 8 – Note 2 in the 2023 Form 10-K. No amounts were recognized as credit loss expense and no securities were written down to fair value through earnings for the three months ended March 31, 2024 and the year ended December 31, 2023. None of the Company’s AFS securities held as of March 31, 2024 and December 31, 2023 had an allowance for credit losses. All HTM securities as of March 31, 2024 and December 31, 2023 were U.S. agency mortgage-backed securities and therefore had no allowance for credit losses because expected nonpayment of the amortized cost basis is zero.

The Company had $531 million and $565 million of accrued interest for AFS and HTM securities as of March 31, 2024 and December 31, 2023, respectively. These amounts are excluded from the amortized cost basis and fair market value of AFS and HTM securities and included in other assets on the condensed consolidated balance sheets. There were no writeoffs of accrued interest receivable on AFS and HTM securities during the three months ended March 31, 2024, or for the year ended December 31, 2023.

- 36 -

THE CHARLES SCHWAB CORPORATION

Notes to Condensed Consolidated Financial Statements

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

(Unaudited)

The following table presents the Company’s estimated effective duration, which reflects anticipated future payments, by category at March 31, 2024:


			In years
Estimated effective duration, exclusive of derivatives:
AFS investment securities portfolio			2.4
AFS and HTM investment securities portfolio			3.9
Estimated effective duration, inclusive of derivatives (1):
AFS investment securities portfolio			2.1
AFS and HTM investment securities portfolio			3.8

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

In the table below, mortgage-backed securities and other asset-backed securities have been allocated to maturity groupings based on final contractual maturities. As borrowers may have the right to call or prepay certain obligations underlying our investment securities, actual maturities may differ from the scheduled contractual maturities presented below.

The maturities of AFS and HTM investment securities are as follows:


March 31, 2024	Within 1 year		After 1 year through 5 years		After 5 years through 10 years		After 10 years		Total
Available for sale securities
U.S. agency mortgage-backed securities	$	1,263	$	10,067	$	10,252	$	38,589	$	60,171
U.S. Treasury securities	9,982		10,211		—		—		20,193
Corporate debt securities	4,406		5,514		1,448		—		11,368
Asset-backed securities	10		2,444		1,229		4,164		7,847
Foreign government agency securities	492		311		—		—		803
U.S. state and municipal securities	—		97		386		92		575
Non-agency commercial mortgage-backed securities	—		—		—		110		110


Other	—		—		—		19		19
Total fair value	$	16,153	$	28,644	$	13,315	$	42,974	$	101,086
Total amortized cost (1)	$	16,423	$	30,576	$	14,883	$	47,792	$	109,674

Held to maturity securities
U.S. agency mortgage-backed securities	$	1,076	$	8,012	$	36,508	$	96,744	$	142,340









Total fair value	$	1,076	$	8,012	$	36,508	$	96,744	$	142,340
Total amortized cost	$	1,099	$	8,522	$	39,472	$	107,278	$	156,371

(1) For purposes of this table, the amortized cost of AFS securities excludes the unallocated PLM fair value hedge basis adjustments of $47 million at March 31, 2024.

Proceeds and gross realized gains and losses from sales of AFS investment securities are as follows:


	Three Months Ended March 31,

	2024		2023
Proceeds	$	1,189	$	1,051
Gross realized gains	—		—
Gross realized losses	10		9

- 37 -

THE CHARLES SCHWAB CORPORATION

Notes to Condensed Consolidated Financial Statements

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

(Unaudited)

5. Bank Loans and Related Allowance for Credit Losses

The composition of bank loans and delinquency analysis by portfolio segment and class of financing receivable is as follows:


March 31, 2024	Current		30-59 days past due		60-89 days past due		>90 days past due and other nonaccrual loans (3)		Total past due and other nonaccrual loans		Total loans		Allowance for credit losses		Total bank loans – net
Residential real estate:
First Mortgages (1,2)	$	26,157	$	29	$	4	$	11	$	44	$	26,201	$	27	$	26,174
HELOCs (1,2)	450		1		—		4		5		455		1		454
Total residential real estate	26,607		30		4		15		49		26,656		28		26,628
Pledged asset lines	13,833		4		4		—		8		13,841		—		13,841
Other	318		—		—		—		—		318		4		314
Total bank loans	$	40,758	$	34	$	8	$	15	$	57	$	40,815	$	32	$	40,783

December 31, 2023
Residential real estate:
First Mortgages (1,2)	$	26,111	$	33	$	2	$	7	$	42	$	26,153	$	32	$	26,121
HELOCs (1,2)	473		1		1		4		6		479		2		477
Total residential real estate	26,584		34		3		11		48		26,632		34		26,598
Pledged asset lines	13,533		11		—		4		15		13,548		—		13,548
Other	297		—		—		—		—		297		4		293
Total bank loans	$	40,414	$	45	$	3	$	15	$	63	$	40,477	$	38	$	40,439

(1) First Mortgages and HELOCs include unamortized premiums and discounts and direct origination costs of $101 million and $100 million at March 31, 2024 and December 31, 2023, respectively.

(2) At March 31, 2024 and December 31, 2023, 42% and 43%, respectively, of the First Mortgage and HELOC portfolios were concentrated in California. These loans have performed in a manner consistent with the portfolio as a whole.

(3) There were no loans accruing interest that were contractually 90 days or more past due at March 31, 2024 or December 31, 2023.

At March 31, 2024, CSB had pledged the full balance of First Mortgages and HELOCs pursuant to a blanket lien status collateral arrangement to secure borrowing capacity on a secured credit facility with the FHLB (see Note 8).

Changes in the allowance for credit losses on bank loans were as follows:


Three Months Ended
March 31, 2024	First Mortgages		HELOCs		Total residential real estate		Pledged asset lines		Other		Total
Balance at beginning of period	$	32	$	2	$	34	$	—	$	4	$	38
Charge-offs	—		—		—		—		—		—
Recoveries	—		—		—		—		—		—
Provision for credit losses	(5)		(1)		(6)		—		—		(6)
Balance at end of period	$	27	$	1	$	28	$	—	$	4	$	32

March 31, 2023
Balance at beginning of period	$	66	$	4	$	70	$	—	$	3	$	73
Charge-offs	—		—		—		—		—		—
Recoveries	—		—		—		—		—		—
Provision for credit losses	1		—		1		—		—		1
Balance at end of period	$	67	$	4	$	71	$	—	$	3	$	74

Consistent with Schwab’s loan charge-off policy for pledged asset lines (PALs) as disclosed in Item 8 – Note 2 of the 2023 Form 10-K, the Company charges off any unsecured balances no later than 90-days past due. As of March 31, 2024, substantially all PALs are also subject to the collateral maintenance practical expedient under ASC 326 Financial Instruments — Credit Losses. All PALs were fully collateralized by securities with fair values in excess of borrowings as of March 31, 2024 and December 31, 2023 and no allowance for credit losses for PALs as of those dates was required.

- 38 -

THE CHARLES SCHWAB CORPORATION

Notes to Condensed Consolidated Financial Statements

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

(Unaudited)

The U.S. economy continued to be challenged by elevated inflation, tight monetary policy, and geopolitical unrest. However, amid sustained economic growth, supply and demand moved to a more balanced state. While the Federal Reserve held the policy rate steady during the first quarter of the year, management’s macroeconomic outlook reflects a near term continuation of elevated interest rates, with only a slight increase in unemployment and modest home price appreciation. Though higher mortgage rates are softening demand and reducing borrower affordability, we expect constrained housing supply will keep home prices relatively stable. Furthermore, credit quality metrics in the Company’s bank loans portfolio remain very strong and have improved in recent quarters. As a result of these factors, we decreased projected loss rates at March 31, 2024, as compared to December 31, 2023.

Bank loan-related nonperforming assets consisted of nonaccrual loans of $15 million at both March 31, 2024 and
December 31, 2023. Nonaccrual loans include nonaccrual troubled debt restructurings recorded prior to the adoption of ASU 2022-02, “Financial Instruments — Credit Losses: Troubled Debt Restructurings and Vintage Disclosures” on January 1, 2023.

Credit Quality

In addition to monitoring delinquency, Schwab monitors the credit quality of First Mortgages and HELOCs by stratifying the portfolios by the following:

•Year of origination;

•Borrower FICO scores at origination (Origination FICO);

•Updated borrower FICO scores (Updated FICO);

•Loan-to-value (LTV) ratios at origination (Origination LTV); and

•Estimated Current LTV ratios (Estimated Current LTV).

Borrowers’ FICO scores are provided by an independent third-party credit reporting service and generally updated quarterly. The Origination LTV and Estimated Current LTV for a HELOC include any first lien mortgage outstanding on the same property at the time of the HELOC’s origination. The Estimated Current LTV for each loan is updated on a monthly basis by reference to a home price appreciation index.

- 39 -

THE CHARLES SCHWAB CORPORATION

Notes to Condensed Consolidated Financial Statements

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

(Unaudited)

The credit quality indicators of the Company’s First Mortgages and HELOCs are detailed below:


	First Mortgages Amortized Cost Basis by Origination Year
March 31, 2024	2024			2023			2022			2021			2020			pre-2020			Total First Mortgages			Revolving HELOCs amortized cost basis			HELOCs converted to term loans			Total HELOCs
Origination FICO
<620	$	—		$	—		$	3		$	—		$	1		$	1		$	5		$	—		$	—		$	—
620 – 679	5			5			26			30			19			15			100			—			2			2
680 – 739	67			280			773			1,147			390			278			2,935			49			35			84
≥740	559			2,205			5,185			10,304			3,505			1,403			23,161			250			119			369
Total	$	631		$	2,490		$	5,987		$	11,481		$	3,915		$	1,697		$	26,201		$	299		$	156		$	455
Origination LTV
≤70%	$	453		$	1,673		$	4,434		$	9,954		$	3,257		$	1,314		$	21,085		$	271		$	109		$	380
>70% – ≤90%	178			817			1,553			1,527			658			381			5,114			28			46			74
>90% – ≤100%	—			—			—			—			—			2			2			—			1			1
Total	$	631		$	2,490		$	5,987		$	11,481		$	3,915		$	1,697		$	26,201		$	299		$	156		$	455
Updated FICO
<620	$	—		$	10		$	15		$	15		$	16		$	17		$	73		$	2		$	6		$	8
620 – 679	8			37			83			106			34			47			315			7			9			16
680 – 739	61			227			533			922			299			160			2,202			45			24			69
≥740	562			2,216			5,356			10,438			3,566			1,473			23,611			245			117			362
Total	$	631		$	2,490		$	5,987		$	11,481		$	3,915		$	1,697		$	26,201		$	299		$	156		$	455
Estimated Current LTV (1)
≤70%	$	457		$	1,732		$	4,838		$	11,239		$	3,894		$	1,691		$	23,851		$	296		$	155		$	451
>70% – ≤90%	174			758			1,124			240			20			6			2,322			3			1			4
>90% – ≤100%	—			—			20			2			1			—			23			—			—			—
>100%	—			—			5			—			—			—			5			—			—			—
Total	$	631		$	2,490		$	5,987		$	11,481		$	3,915		$	1,697		$	26,201		$	299		$	156		$	455
Gross charge-offs	$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—
Percent of Loans on Nonaccrual Status	0.01		%	0.01		%	0.02		%	0.01		%	0.01		%	0.39		%	0.04		%	0.13		%	2.36		%	0.88		%

(1) Represents the LTV for the full line of credit (drawn and undrawn) for revolving HELOCs.

- 40 -

THE CHARLES SCHWAB CORPORATION

Notes to Condensed Consolidated Financial Statements

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

(Unaudited)


	First Mortgages Amortized Cost Basis by Origination Year
December 31, 2023	2023			2022			2021			2020			pre-2020			Total First Mortgages			Revolving HELOCs amortized cost basis			HELOCs converted to term loans			Total HELOCs
Origination FICO
<620	$	—		$	2		$	1		$	1		$	1		$	5		$	—		$	—		$	—
620 – 679	4			27			30			20			15			96			—			1			1
680 – 739	299			782			1,160			395			294			2,930			50			38			88
≥740	2,391			5,258			10,439			3,558			1,476			23,122			261			129			390
Total	$	2,694		$	6,069		$	11,630		$	3,974		$	1,786		$	26,153		$	311		$	168		$	479
Origination LTV
≤70%	$	1,818		$	4,492		$	10,078		$	3,306		$	1,382		$	21,076		$	279		$	117		$	396
>70% – ≤90%	876			1,577			1,552			668			402			5,075			32			50			82
>90% – ≤100%	—			—			—			—			2			2			—			1			1
Total	$	2,694		$	6,069		$	11,630		$	3,974		$	1,786		$	26,153		$	311		$	168		$	479
Updated FICO
<620	$	4		$	15		$	19		$	8		$	17		$	63		$	2		$	5		$	7
620 – 679	46			77			87			38			50			298			6			10			16
680 – 739	265			575			984			316			169			2,309			48			26			74
≥740	2,379			5,402			10,540			3,612			1,550			23,483			255			127			382
Total	$	2,694		$	6,069		$	11,630		$	3,974		$	1,786		$	26,153		$	311		$	168		$	479
Estimated Current LTV (1)
≤70%	$	1,853		$	4,855		$	11,341		$	3,960		$	1,781		$	23,790		$	308		$	167		$	475
>70% – ≤90%	841			1,185			289			14			5			2,334			3			1			4
>90% – ≤100%	—			28			—			—			—			28			—			—			—
>100%	—			1			—			—			—			1			—			—			—
Total	$	2,694		$	6,069		$	11,630		$	3,974		$	1,786		$	26,153		$	311		$	168		$	479
Gross charge-offs	$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—
Percent of Loans on Nonaccrual Status	0.01		%	0.02		%	0.01		%	0.01		%	0.19		%	0.03		%	0.07		%	2.40		%	0.84		%

(1) Represents the LTV for the full line of credit (drawn and undrawn) for revolving HELOCs.

At March 31, 2024, First Mortgage loans of $21.6 billion had adjustable interest rates. Substantially all of these mortgages have initial fixed interest rates for three to ten years and interest rates that adjust annually thereafter. Approximately 27% of the balance of these mortgages consisted of loans with interest-only payment terms. The interest rates on approximately 84% of the balance of these interest-only loans are not scheduled to reset for three or more years. Schwab’s mortgage loans do not include interest terms described as temporary introductory rates below current market rates.

At March 31, 2024 and December 31, 2023, Schwab had $161 million and $157 million, respectively, of accrued interest on bank loans, which is excluded from the amortized cost basis of bank loans and included in other assets on the condensed consolidated balance sheets.

The HELOC product has a 30-year loan term with an initial draw period of ten years from the date of origination. After the initial draw period, the balance outstanding at such time is converted to a 20-year amortizing loan. The interest rate during the initial draw period and the 20-year amortizing period is a floating rate based on the prime rate plus a margin.

- 41 -

THE CHARLES SCHWAB CORPORATION

Notes to Condensed Consolidated Financial Statements

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

(Unaudited)

The following table presents when current outstanding HELOCs will convert to amortizing loans:


March 31, 2024	Balance
Converted to an amortizing loan by period end (1)	$	156
Within 1 year	17
> 1 year – 3 years	38
> 3 years – 5 years	44
> 5 years	200
Total	$	455

(1) Includes $3 million of HELOCs converted to amortizing loans during the three months ended March 31, 2024.

At March 31, 2024, $360 million of the HELOC portfolio was secured by second liens on the associated properties. Second lien mortgage loans typically possess a higher degree of credit risk given the subordination to the first lien holder in the event of default. In addition to the credit monitoring activities described previously, Schwab also monitors credit risk by reviewing the delinquency status of the first lien loan on the associated property. At March 31, 2024, the borrowers on approximately 59% of HELOC loan balances outstanding only paid the minimum amount due.

6. Variable Interest Entities

As of March 31, 2024 and December 31, 2023, substantially all of Schwab’s involvement with variable interest entities (VIEs) was through CSB’s CRA-related investments and most of these are related to Low-Income Housing Tax Credit (LIHTC) investments. As part of CSB’s community reinvestment initiatives, CSB invests in funds that make equity investments in multifamily affordable housing properties and receives tax credits and other tax benefits for these investments. During the first quarters of 2024 and 2023, CSB recorded amortization of $42 million and $41 million, respectively, and recognized tax credits and other tax benefits of $53 million and $54 million, respectively, associated with these investments. The amortization, as well as the tax credits and other tax benefits, are included in taxes on income on the condensed consolidated statements of income. Tax credits and other tax benefits are reflected as cash flows from operating activities on the condensed consolidated statements of cash flows.

Aggregate assets, liabilities, and maximum exposure to loss

The aggregate assets, liabilities, and maximum exposure to loss from those VIEs in which Schwab holds a variable interest, but is not the primary beneficiary, are summarized in the table below:


	March 31, 2024						December 31, 2023
	Aggregate assets		Aggregate liabilities		Maximum exposure to loss		Aggregate assets		Aggregate liabilities		Maximum exposure to loss
LIHTC investments (1)	$	1,467	$	791	$	1,467	$	1,407	$	759	$	1,407
Other investments (2)	183		—		230		179		—		231
Total	$	1,650	$	791	$	1,697	$	1,586	$	759	$	1,638

(1) Aggregate assets and aggregate liabilities are included in other assets and accrued expenses and other liabilities, respectively, on the condensed consolidated balance sheets.

(2) Other investments include non-LIHTC CRA investments that are accounted for as loans at amortized cost, equity method investments, AFS securities, or using the adjusted cost method. Aggregate assets are included in AFS securities, bank loans – net, or other assets on the condensed consolidated balance sheets.

Schwab’s maximum exposure to loss would result from the loss of the investments, including any committed amounts. Schwab’s funding of these remaining commitments is dependent upon the occurrence of certain conditions, and Schwab expects to pay substantially all of these commitments between 2024 and 2027. During the three months ended March 31, 2024 and year ended December 31, 2023, Schwab did not provide or intend to provide financial or other support to the VIEs that it was not contractually required to provide.

- 42 -

THE CHARLES SCHWAB CORPORATION

Notes to Condensed Consolidated Financial Statements

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

(Unaudited)

7. Bank Deposits

Bank deposits consist of interest-bearing and non-interest-bearing deposits as follows:


	March 31, 2024		December 31, 2023
Interest-bearing deposits:
Deposits swept from brokerage accounts	$	208,903	$	220,274
Time certificates of deposit (1)	39,128		48,297
Checking	15,642		15,691
Savings and other	4,268		4,461
Total interest-bearing deposits	267,941		288,723
Non-interest-bearing deposits	1,519		1,230
Total bank deposits	$	269,460	$	289,953

(1) Time certificates of deposit consist of brokered CDs. The weighted-average interest rates on outstanding time certificates of deposit at March 31, 2024 and December 31, 2023 were 5.22% and 5.15%, respectively. As of March 31, 2024 and December 31, 2023, there were no time deposits that were in excess of FDIC insurance limits or otherwise uninsured.

Annual maturities on time certificates of deposit outstanding at March 31, 2024 are as follows:


	Balance
2024	$	32,584
2025	6,544

Total	$	39,128

8. Borrowings

CSC Senior Notes

CSC’s Senior Notes are unsecured obligations. CSC may redeem some or all of the Senior Notes of each series prior to their maturity, subject to certain restrictions, and the payment of an applicable make-whole premium in certain instances. Interest is payable semi-annually for the fixed-rate Senior Notes and quarterly for the floating-rate Senior Notes. Interest for the fixed-to-floating rate Senior Notes is payable semi-annually during the fixed rate period of the notes and quarterly during the floating rate period of the notes.

Ameritrade Holding Senior Notes

Ameritrade Holding’s Senior Notes are unsecured obligations. Ameritrade Holding may redeem some or all of the Senior Notes of each series prior to their maturity, subject to certain restrictions, and the payment of an applicable make-whole premium in certain instances. Interest is payable semi-annually for the fixed-rate Senior Notes.

- 43 -

THE CHARLES SCHWAB CORPORATION

Notes to Condensed Consolidated Financial Statements

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

(Unaudited)

The following table lists long-term debt by instrument outstanding as of March 31, 2024 and December 31, 2023:


	Date of Issuance	Principal Amount Outstanding
		March 31, 2024		December 31, 2023
CSC Fixed-rate Senior Notes:



3.550% due February 1, 2024	10/31/18	$	—	$	500
0.750% due March 18, 2024	03/18/21	—		1,500
3.750% due April 1, 2024	09/24/21	350		350
3.000% due March 10, 2025	03/10/15	375		375
4.200% due March 24, 2025	03/24/20	600		600
3.625% due April 1, 2025	09/24/21	418		418
3.850% due May 21, 2025	05/22/18	750		750
3.450% due February 13, 2026	11/13/15	350		350
0.900% due March 11, 2026	12/11/20	1,250		1,250
1.150% due May 13, 2026	05/13/21	1,000		1,000
5.875% due August 24, 2026	08/24/23	1,000		1,000
3.200% due March 2, 2027	03/02/17	650		650
2.450% due March 3, 2027	03/03/22	1,500		1,500
3.300% due April 1, 2027	09/24/21	744		744
3.200% due January 25, 2028	12/07/17	700		700
2.000% due March 20, 2028	03/18/21	1,250		1,250
4.000% due February 1, 2029	10/31/18	600		600
3.250% due May 22, 2029	05/22/19	600		600
2.750% due October 1, 2029	09/24/21	475		475
4.625% due March 22, 2030	03/24/20	500		500
1.650% due March 11, 2031	12/11/20	750		750
2.300% due May 13, 2031	05/13/21	750		750
1.950% due December 1, 2031	08/26/21	850		850
2.900% due March 3, 2032	03/03/22	1,000		1,000
CSC Floating-rate Senior Notes:

SOFR + 0.500% due March 18, 2024	03/18/21	—		1,250
SOFR + 0.520% due May 13, 2026	05/13/21	500		500
SOFR + 1.050% due March 3, 2027	03/03/22	500		500
CSC Fixed-to-Floating rate Senior Notes:
5.643% due May 19, 2029 (1)	05/19/23	1,200		1,200
6.196% due November 17, 2029 (2)	11/17/23	1,300		1,300
5.853% due May 19, 2034 (3)	05/19/23	1,300		1,300
6.136% due August 24, 2034 (4)	08/24/23	1,350		1,350
Total CSC Senior Notes		22,612		25,862
Ameritrade Holding Fixed-rate Senior Notes:

3.750% due April 1, 2024	11/01/18	50		50
3.625% due April 1, 2025	10/22/14	82		82
3.300% due April 1, 2027	04/27/17	56		56
2.750% due October 1, 2029	08/16/19	25		25


Total Ameritrade Holding Senior Notes		213		213
Finance lease liabilities		75		85
Unamortized premium — net		77		87
Debt issuance costs		(112)		(119)
Total long-term debt		$	22,865	$	26,128

(1) The May 2029 fixed-to-floating rate Senior Notes bear interest at a fixed rate of 5.643%, payable semi-annually, until the interest reset date on May 19, 2028. On and after this date, these notes will bear interest at an annual floating rate of SOFR plus 2.210%, payable quarterly.

(2) The November 2029 fixed-to-floating rate Senior Notes bear interest at a fixed rate of 6.196%, payable semi-annually, until the interest reset date on November 17, 2028. On and after this date, these notes will bear interest at an annual floating rate of SOFR plus 1.878%, payable quarterly.

(3) The May 2034 fixed-to-floating rate Senior Notes bear interest at a fixed rate of 5.853%, payable semi-annually, until the interest reset date on May 19, 2033. On and after this date, these notes will bear interest at an annual floating rate of SOFR plus 2.500%, payable quarterly.

(4) The August 2034 fixed-to-floating rate Senior Notes bear interest at a fixed rate of 6.136%, payable semi-annually, until the interest reset date on August 24, 2033. On and after this date, these notes will bear interest at an annual floating rate of SOFR plus 2.010%, payable quarterly.

- 44 -

THE CHARLES SCHWAB CORPORATION

Notes to Condensed Consolidated Financial Statements

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

(Unaudited)

Annual maturities on all long-term debt outstanding at March 31, 2024 are as follows:


	Maturities
2024	$	426
2025	2,249
2026	4,112
2027	3,463
2028	1,950
Thereafter	10,700
Total maturities	22,900
Unamortized premium — net	77
Debt issuance costs	(112)
Total long-term debt	$	22,865

FHLB borrowings: Our banking subsidiaries maintain secured credit facilities with the FHLB. Amounts available under these facilities are dependent on the amount of bank loans and the value of certain investment securities that are pledged as collateral. There was $24.0 billion and $26.4 billion outstanding under these facilities as of March 31, 2024 and December 31, 2023, respectively, and these borrowings had a weighted-average interest rate of 5.33% and 5.34%, respectively. As of March 31, 2024 and December 31, 2023, the collateral pledged provided additional borrowing capacity of $63.4 billion and $63.1 billion, respectively.

Other short-term borrowings: Total other short-term borrowings outstanding at March 31, 2024 and December 31, 2023 were $8.4 billion and $6.6 billion, respectively, and had a weighted-average interest rate of 5.48% and 5.57%, respectively. Additional information regarding our other short-term borrowings facilities is described below.

The Company may engage with external financial institutions in repurchase agreements collateralized by investment securities as another source of short-term liquidity. The Company had $7.7 billion and $4.9 billion outstanding pursuant to such repurchase agreements at March 31, 2024 and December 31, 2023, respectively. Repurchase agreements outstanding at March 31, 2024 mature between April 2024 and December 2024.

Our banking subsidiaries have access to funding through the Federal Reserve discount window. Amounts available are dependent upon the value of certain investment securities that are pledged as collateral. As of March 31, 2024 and December 31, 2023, our collateral pledged provided total borrowing capacity of $32.9 billion and $6.2 billion, respectively, of which no amounts were outstanding at the end of either period. During the first quarter of 2024 and the year ended December 31, 2023, our banking subsidiaries had access to funding through the Federal Reserve Bank Term Funding Program. This program offered loans through March 11, 2024 of up to one year in length, and amounts available were dependent upon the par value of certain investment securities pledged as collateral. This facility was not used during the first quarter of 2024. As of December 31, 2023, our collateral pledged provided total borrowing capacity of $39.2 billion. There were no borrowings outstanding at December 31, 2023.

CSC has the ability to issue up to $5.0 billion of commercial paper notes with maturities of up to 270 days. There were no amounts outstanding at March 31, 2024 or December 31, 2023. Beginning in the first quarter of 2024, CSC has access to an unsecured, committed revolving line of credit with various external banks with a total borrowing capacity of $2.1 billion. There were no amounts outstanding as of March 31, 2024. CSC and CS&Co also have access to uncommitted lines of credit with external banks with total borrowing capacity of $1.6 billion; no amounts were outstanding as of March 31, 2024 or December 31, 2023.

CS&Co maintains secured, uncommitted lines of credit, under which CS&Co may borrow on a short-term basis and pledge either client margin securities or firm securities as collateral, based on the terms of the agreements, under which there were no borrowings at March 31, 2024 and $950 million outstanding as of December 31, 2023. TDAC also maintains secured uncommitted lines of credit, under which TDAC borrows on either a demand or short-term basis and pledges client margin securities as collateral. There was $700 million outstanding at March 31, 2024 and December 31, 2023.

- 45 -

THE CHARLES SCHWAB CORPORATION

Notes to Condensed Consolidated Financial Statements

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

(Unaudited)

Annual maturities on FHLB borrowings and other short-term borrowings outstanding at March 31, 2024 are as follows:


	2024		2025		Total
FHLB borrowings	$	22,000	$	2,000	$	24,000
Other short-term borrowings	8,405		—		8,405
Total	$	30,405	$	2,000	$	32,405

9. Commitments and Contingencies

Loan Portfolio: CSB provides a co-branded loan origination program for CSB clients (the Program) with Rocket Mortgage, LLC (Rocket Mortgage®). Pursuant to the Program, Rocket Mortgage originates and services First Mortgages and HELOCs for CSB clients. Under the Program, CSB purchases certain First Mortgages and HELOCs that are originated by Rocket Mortgage. CSB purchased First Mortgages of $680 million and $723 million during the first quarters of 2024 and 2023, respectively. CSB purchased HELOCs with commitments of $36 million and $43 million during the first quarters of 2024 and 2023, respectively.

The Company’s commitments to extend credit on lines of credit and to purchase First Mortgages are as follows:


	March 31, 2024		December 31, 2023
Commitments to extend credit related to unused HELOCs, PALs, and other lines of credit	$	2,567	$	2,996
Commitments to purchase First Mortgage loans	443		351
Total	$	3,010	$	3,347

Guarantees and indemnifications: Schwab has clients that sell (i.e., write) listed option contracts that are cleared by the Options Clearing Corporation – a clearing house that establishes margin requirements on these transactions. We satisfy the margin requirements of these transactions through pledging certain client securities. For additional information on these pledged securities, refer to Note 12. In connection with its securities lending activities, Schwab is required to provide collateral to certain brokerage clients. The Company satisfies the collateral requirements by providing cash as collateral.

The Company also provides guarantees to securities clearing houses and exchanges under standard membership agreements, which require members to guarantee the performance of other members. Under the agreements, if another member becomes unable to satisfy its obligations to the clearing houses and exchanges, other members would be required to meet shortfalls. The Company’s liability under these arrangements is not quantifiable and may exceed the amounts it has posted as collateral. The Company also engages third-party firms to clear clients’ futures and options on futures transactions and to facilitate clients’ foreign exchange trading, and has agreed to indemnify these firms for any losses that they may incur from the client transactions introduced to them by the Company. The potential requirement for the Company to make payments under these arrangements is remote. Accordingly, no liability has been recognized for these guarantees.

IDA agreement: On May 4, 2023, the Company executed the 2023 IDA agreement with the TD Depository Institutions that replaced and superseded the previous agreement dated November 24, 2019, as amended. The 2023 IDA agreement specifies responsibilities, including certain contingent obligations, of the Company going forward. Pursuant to the 2023 IDA agreement, uninvested cash within eligible brokerage client accounts is swept off-balance sheet to deposit accounts at the TD Depository Institutions. Schwab provides recordkeeping and support services to the TD Depository Institutions with respect to the deposit accounts for which Schwab receives an aggregate monthly fee. The Company’s ability to migrate these balances to its balance sheet is dependent on multiple factors including having sufficient capital levels to sustain these incremental deposits and certain binding limitations specified in the 2023 IDA agreement. During the first three months of 2024, Schwab did not move IDA balances to its balance sheet.

The 2023 IDA agreement extends the agreement term to sweep balances to the TD Depository Institutions through July 1, 2034, and requires that Schwab maintain minimum and maximum IDA balances as follows:

•Through September 10, 2025, Schwab must maintain minimum balances above the total of then-outstanding unmatured fixed-rate obligation amounts, with a maximum of $30 billion above this total amount. During this period, withdrawals of IDA balances by Schwab are generally permitted only to the extent of withdrawals initiated by Schwab customers, with limited exceptions, except to the extent necessary for Schwab to maintain balances below the applicable maximum.

•After September 10, 2025, withdrawals of IDA balances are permitted at Schwab’s discretion, subject to an obligation to maintain IDA balances above a minimum of $60 billion, with a maximum of $90 billion.

- 46 -

THE CHARLES SCHWAB CORPORATION

Notes to Condensed Consolidated Financial Statements

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

(Unaudited)

Designation of deposit balances for investment in fixed- or floating-rate instruments under the 2023 IDA agreement is at Schwab’s sole discretion with certain limitations on the amount of fixed-rate obligation amounts. If IDA balances decline below the required IDA balance minimum as described above, Schwab would be required to make a nonperformance payment to the TD Depository Institutions pursuant to the terms of the 2023 IDA agreement.

Pursuant to the 2023 IDA agreement, in 2023, Schwab opted to buy down $5.0 billion of fixed-rate obligation amounts, incurring market-based fees of $249 million, which were capitalized as contract assets and included in other assets on the condensed consolidated balance sheet. For additional information on these contract assets, see Note 3.

As of March 31, 2024, the total ending IDA balance was $90.3 billion, of which $79.2 billion was fixed-rate obligation amounts and $11.1 billion was floating-rate obligation amounts. As of December 31, 2023, the total ending IDA balance was $97.5 billion, of which $83.7 billion was fixed-rate obligation amounts and $13.8 billion was floating-rate obligation amounts.

Legal contingencies: Schwab is subject to claims and lawsuits in the ordinary course of business, including arbitrations, class actions and other litigation, some of which include claims for substantial or unspecified damages. The Company is also the subject of inquiries, investigations, and proceedings by regulatory and other governmental agencies.

Predicting the outcome of a litigation or regulatory matter is inherently difficult, requiring significant judgment and evaluation of various factors, including the procedural status of the matter and any recent developments; prior experience and the experience of others in similar cases; available defenses, including potential opportunities to dispose of a case on the merits or procedural grounds before trial (e.g., motions to dismiss or for summary judgment); the progress of fact discovery; the opinions of counsel and experts regarding potential damages; and potential opportunities for settlement and the status of any settlement discussions. It may not be reasonably possible to estimate a range of potential liability until the matter is closer to resolution – pending, for example, further proceedings, the outcome of key motions or appeals, or discussions among the parties. Numerous issues may have to be developed, such as discovery of important factual matters and determination of threshold legal issues, which may include novel or unsettled questions of law. Reserves are established or adjusted or further disclosure and estimates of potential loss are provided as the matter progresses and more information becomes available.

Schwab believes it has strong defenses in all significant matters currently pending and is contesting liability and any damages claimed. Nevertheless, some of these matters may result in adverse judgments or awards, including penalties, injunctions or other relief, and the Company may also determine to settle a matter because of the uncertainty and risks of litigation. Described below are matters in which there is a reasonable possibility that a material loss could be incurred or where the matter may otherwise be of significant interest to stockholders. Unless otherwise noted, the Company is unable to provide a reasonable estimate of any potential liability given the stage of proceedings in the matter. With respect to all other pending matters, based on current information and consultation with counsel, it does not appear reasonably possible that the outcome of any such matter would be material to the financial condition, operating results, or cash flows of the Company.

Corrente Antitrust Litigation: On June 6, 2022, CSC was sued in the U.S. District Court for the Eastern District of Texas on behalf of a putative class of customers who purchased or sold securities through CS&Co or TD Ameritrade, Inc. from October 26, 2020 to the present. The lawsuit alleges that CSC’s acquisition of Ameritrade violated Section 7 of the Clayton Act because it has resulted in an anticompetitive market for the execution of retail customer orders. Plaintiffs seek unspecified damages, as well as injunctive and other relief. A motion by the Company to dismiss the lawsuit was denied by the court on February 24, 2023, and discovery is proceeding.

Ford Order Routing Litigation: On September 15, 2014, Ameritrade Holding, TD Ameritrade, Inc. and its former CEO, Frederick J. Tomczyk, were sued in the U.S. District Court for the District of Nebraska on behalf of a putative class of TD Ameritrade, Inc. clients alleging that defendants failed to seek best execution and made misrepresentations and omissions regarding its order routing practices. Plaintiff seeks unspecified damages and injunctive and other relief. On September 14, 2018, the District Court granted plaintiff’s motion for class certification, and defendants petitioned for an immediate appeal of the District Court’s class certification decision. On April 23, 2021, the U.S. Court of Appeals, 8th Circuit, issued a decision reversing the District Court’s certification of a class and remanding the case back to the District Court for further proceedings. Plaintiff renewed his motion for class certification, which the District Court granted on September 20, 2022. Defendants are appealing the District Court’s ruling before the U.S. Court of Appeals, 8th Circuit.

- 47 -

THE CHARLES SCHWAB CORPORATION

Notes to Condensed Consolidated Financial Statements

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

(Unaudited)

10. Exit and Other Related Liabilities

Integration of Ameritrade

The Company completed its acquisition of Ameritrade effective October 6, 2020 and integration work continued during the first three months of 2024. The Company expects to complete the remaining client transitions from Ameritrade to Schwab in a final transition group in May of 2024.

The Company expects to continue to incur significant acquisition and integration-related costs and integration-related capital expenditures throughout the remaining integration process. Such costs have included, and are expected to continue to include, professional fees, such as legal, advisory, and accounting fees, compensation and benefits expenses for employees and contractors involved in the integration work, and costs for technology enhancements. The Company has also incurred exit and other related costs to attain anticipated synergies, which are primarily comprised of employee compensation and benefits such as severance pay, other termination benefits, and retention costs, as well as costs related to facility closures, such as accelerated amortization and depreciation or impairments of assets in those locations. Exit and other related costs are a component of the Company’s overall acquisition and integration-related spending, and support the Company’s ability to achieve integration objectives including expected synergies.

Our estimates of the nature, amounts, and timing of recognition of acquisition and integration-related costs remain subject to change based on certain factors, including the duration and complexity of the remaining integration process and the continued uncertainty of the economic environment. More specifically, factors that could cause variability in our expected acquisition and integration-related costs as we prepare for the last transition group and remaining integration work include the level of employee attrition, the complexity to wind-down the operations of the Ameritrade broker-dealers and related technology, and real estate-related exit cost variability.

Inclusive of costs recognized through March 31, 2024, Schwab currently expects to incur total exit and other related costs for the integration of Ameritrade ranging from $500 million to $600 million, consisting of employee compensation and benefits, facility exit costs, and certain other costs. During the three months ended March 31, 2024 and 2023, the Company recognized $3 million and $10 million of acquisition-related exit costs, respectively. The Company expects that remaining exit and other related costs will be incurred and charged to expense over the next 9 months, with some costs expected to be incurred after client transition to decommission duplicative platforms and complete integration work. In addition to ASC 420 Exit or Disposal Cost Obligations (ASC 420), certain of the costs associated with these activities are accounted for in accordance with ASC 360 Property, Plant and Equipment (ASC 360), ASC 712 Compensation — Nonretirement Post Employment Benefits (ASC 712), ASC 718 Compensation — Stock Compensation (ASC 718), and ASC 842 Leases (ASC 842).

The following is a summary of the Ameritrade integration activity in the Company’s exit and other related liabilities as of March 31, 2024 and activity for the three months ended March 31, 2024:



	Investor Services Employee Compensation and Benefits		Advisor Services Employee Compensation and Benefits		Total












Balance at December 31, 2023 (1)	$	42	$	12	$	54


Costs paid or otherwise settled	(9)		(2)		(11)
Balance at March 31, 2024 (1)	$	33	$	10	$	43

(1) Included in accrued expenses and other liabilities on the condensed consolidated balance sheets.

The following table summarizes the Ameritrade integration exit and other related costs recognized in expense for the three months ended March 31, 2024:


	Investor Services						Advisor Services
Three Months Ended March 31,	Employee Compensation and Benefits		Facility Exit Costs (1)		Investor Services Total		Employee Compensation and Benefits		Facility Exit Costs (1)		Advisor Services Total		Total



Occupancy and equipment	$	—	$	1	$	1	$	—	$	—	$	—	$	1


Other	—		2		2		—		—		—		2
Total	$	—	$	3	$	3	$	—	$	—	$	—	$	3

(1) Costs related to facility closures. These costs, which are primarily comprised of impairment and accelerated amortization of ROU assets, relate to the impact of abandoning leased properties. Impairment charges are included in other expense, while accelerated amortization of ROU assets are included in occupancy and equipment on the condensed consolidated statements of income.

- 48 -

THE CHARLES SCHWAB CORPORATION

Notes to Condensed Consolidated Financial Statements

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

(Unaudited)

The following table summarizes the Ameritrade integration exit and other related costs recognized in expense for the three months ended March 31, 2023:


	Investor Services						Advisor Services
Three Months Ended March 31,	Employee Compensation and Benefits		Facility Exit Costs		Investor Services Total		Employee Compensation and Benefits		Facility Exit Costs		Advisor Services Total		Total

Compensation and benefits	$	8	$	—	$	8	$	2	$	—	$	2	$	10

Total	$	8	$	—	$	8	$	2	$	—	$	2	$	10

The following table summarizes the Ameritrade integration exit and other related costs incurred from October 6, 2020 through March 31, 2024:


	Investor Services						Advisor Services
	Employee Compensation and Benefits		Facility Exit Costs (1)		Investor Services Total		Employee Compensation and Benefits		Facility Exit Costs (1)		Advisor Services Total		Total
Compensation and benefits	$	243	$	—	$	243	$	65	$	—	$	65	$	308

Occupancy and equipment	—		41		41		—		9		9		50
Depreciation and amortization	—		2		2		—		1		1		3
Professional services	—		1		1		—		—		—		1
Other	—		22		22		—		7		7		29
Total	$	243	$	66	$	309	$	65	$	17	$	82	$	391

(1) Costs related to facility closures. These costs, which are primarily comprised of impairment and accelerated amortization of ROU assets and accelerated depreciation of fixed assets, relate to the impact of abandoning leased and other properties. Impairment charges are included in other expense, while accelerated amortization of ROU assets are included in occupancy and equipment on the condensed consolidated statements of income.

Other

With significant progress made in the integration of Ameritrade, the Company took incremental actions in 2023 to streamline its operations to prepare for post-integration, including through position eliminations and decreasing its real estate footprint. In order to achieve anticipated cost savings through these actions, the Company expects to incur exit and related costs, primarily related to employee compensation and benefits and facility exit costs, of approximately $500 million inclusive of costs recognized through March 31, 2024 as described below. The Company anticipates the remaining costs, primarily related to real estate, will be incurred during 2024. In addition to ASC 420, certain of the costs associated with these activities are accounted for in accordance with ASC 360, ASC 712, ASC 718, and ASC 842.

The following is a summary of the restructuring activity in the Company’s exit and other related liabilities as of March 31, 2024 and activity for the three months ended March 31, 2024:



	Investor Services Employee Compensation and Benefits		Advisor Services Employee Compensation and Benefits		Total












Balance at December 31, 2023 (1)	$	171	$	63	$	234

Amounts recognized in expense (2)	(23)		(8)		(31)
Costs paid or otherwise settled	(146)		(54)		(200)
Balance at March 31, 2024 (1)	$	2	$	1	$	3

(1) Included in accrued expenses and other liabilities on the condensed consolidated balance sheets.

(2) Amounts recognized in expense for severance pay and other termination benefits are included in compensation and benefits on the condensed consolidated statements of income. The three months ended March 31, 2024 includes a reduction of the liability resulting from changes in estimates of $25 million and $8 million in Investor Services and Advisor Services, respectively.

- 49 -

THE CHARLES SCHWAB CORPORATION

Notes to Condensed Consolidated Financial Statements

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

(Unaudited)

The following table summarizes the restructuring exit and other related costs (benefits) recognized in expense for the three months ended March 31, 2024:


	Investor Services						Advisor Services
	Employee Compensation and Benefits		Facility Exit Costs (1)		Investor Services Total		Employee Compensation and Benefits		Facility Exit Costs (1)		Advisor Services Total		Total
Compensation and benefits	$	(23)	$	—	$	(23)	$	(8)	$	—	$	(8)	$	(31)

Occupancy and equipment	—		1		1		—		1		1		2


Other	—		1		1		—		—		—		1
Total	$	(23)	$	2	$	(21)	$	(8)	$	1	$	(7)	$	(28)

(1) Costs related to facility closures. These costs, which are primarily comprised of accelerated amortization of ROU assets, relate to the impact of abandoning leased properties.

The following table summarizes the restructuring exit and other related costs incurred from July 1, 2023 through March 31, 2024:


	Investor Services						Advisor Services
	Employee Compensation and Benefits		Facility Exit Costs (1)		Investor Services Total		Employee Compensation and Benefits		Facility Exit Costs (1)		Advisor Services Total		Total
Compensation and benefits	$	191	$	—	$	191	$	70	$	—	$	70	$	261

Occupancy and equipment	—		14		14		—		5		5		19

Professional services	—		4		4		—		1		1		5
Other	—		135		135		—		47		47		182
Total	$	191	$	153	$	344	$	70	$	53	$	123	$	467

(1) Costs related to facility closures. These costs, which are primarily comprised of impairment and accelerated amortization of ROU assets and impairment of fixed assets, relate to the impact of abandoning leased and other properties. Impairment charges are included in other expense, while accelerated amortization of ROU assets are included in occupancy and equipment on the condensed consolidated statements of income.

11. Derivative Instruments and Hedging Activities

Risk Management Objective of Using Derivatives

The Company utilizes derivative instruments to manage interest rate risk exposures that arise from business activities related to changes in fair values or the receipt of future known and uncertain cash amounts due to changes in interest rates. The Company uses derivative instruments to manage changes in the fair values of, as well as changes in the amounts and/or timing of known or expected cash receipts related to, our AFS investment portfolio.

For a description of how the Company accounts for derivative instruments, see Item 8 – Note 2 in the 2023 Form 10-K. For additional information on the basis of presentation for derivative instruments on the Company’s condensed consolidated balance sheets and related offsetting considerations, see Note 12. Cash flows associated with derivative instruments are reflected as cash flows from operating activities in the condensed consolidated statements of cash flows consistent with the treatment and nature of the items being hedged.

Fair Value Hedges of Interest Rate Risk

The Company is exposed to changes in the fair value of its fixed-rate AFS securities due to changes in benchmark interest rates. The Company uses cleared interest rate swaps to manage its exposure to changes in fair value on these instruments attributable to changes in the designated benchmark interest rate. Cleared interest rate swaps designated as fair value hedges involve the payment of fixed-rate amounts to a CCP in exchange for the Company receiving floating-rate payments over the life of the agreements without the exchange of the underlying notional amount.

The Company had outstanding interest rate swaps with aggregate notional amounts of $8.9 billion at March 31, 2024 and December 31, 2023 that were designated as fair value hedges of interest rate risk.

- 50 -

THE CHARLES SCHWAB CORPORATION

Notes to Condensed Consolidated Financial Statements

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

(Unaudited)

Fair Values of Derivative Instruments

The table below presents the gross fair values of the Company’s interest rate swaps designated as hedging instruments on the condensed consolidated balance sheets:


	March 31, 2024				December 31, 2023
	Assets		Liabilities		Assets		Liabilities
Interest rate swaps (1,2)	$	1	$	—	$	—	$	—

(1) Derivative assets are included in other assets and derivative liabilities are included in accrued expenses and other liabilities on the condensed consolidated balance sheets. Derivative assets and liabilities as of December 31, 2023 were less than $500 thousand.

(2) Includes reductions related to variation margin settlements. Settlements on derivative positions cleared through CCPs are reflected as reductions to the associated derivative asset and liability balances. As of March 31, 2024, there was a $241 million reduction of derivative assets related to variation margin settlements. As of December 31, 2023, there was an $87 million reduction of derivative assets and a $2 million reduction of derivative liabilities related to variation margin settlements.

Effects of Fair Value Hedge Accounting

The following amounts were recorded in AFS securities on the condensed consolidated balance sheets related to fair value hedges:


	March 31, 2024		December 31, 2023
Amortized cost of hedged AFS securities (1,2)	$	8,747	$	8,765
Cumulative fair value hedging adjustment included in the amortized cost of hedged AFS securities (1,2)	(242)		(85)

(1) Includes the amortized cost basis of closed portfolios of AFS securities used to designate hedging relationships in which the hedged item is the stated amount of assets in the closed portfolios anticipated to be outstanding for the designated hedge period. At March 31, 2024 and December 31, 2023, the amortized cost basis of the closed portfolios used in these hedging relationships was $2.1 billion, of which $1.6 billion was designated in a portfolio layer hedging relationship. The cumulative basis adjustments associated with these hedging relationships were a reduction of the amortized cost basis of the closed portfolios of $47 million and $19 million, respectively, at March 31, 2024 and December 31, 2023.

(2) Excludes the amortized cost and fair value hedging adjustment of AFS securities for which hedge accounting has been discontinued. The cumulative amount of fair value hedging adjustments remaining for these securities was a reduction of the amortized cost basis of less than $500 thousand, which is recorded in AFS securities on the condensed consolidated balance sheets and amortized to interest revenue as a yield adjustment over the lives of the securities.

The table below presents the effect of the Company’s interest rate swaps designated as fair value hedges on the condensed consolidated statements of income:


	Three Months Ended March 31,
	2024		2023
Gain (loss) on fair value hedging relationships recognized in interest revenue:
Hedged items	$	(157)	$	4
Derivatives designated as hedging instruments (1)	157		(4)

(1) Excludes net income from periodic interest accruals and receipts of $3 million for the three months ended March 31, 2024.

12. Financial Instruments Subject to Off-Balance Sheet Credit Risk

Interest rate swaps: Schwab uses interest rate swaps to manage certain interest rate risk exposures. Schwab’s interest rate swaps are cleared through CCPs which require the Company to post initial margin as collateral against potential losses. Schwab pledges investment securities as collateral in order to meet the CCP’s initial margin requirements. Initial margin is posted through FCMs which serve as the intermediary between CCPs and Schwab. Our interest rate swaps are subject to enforceable master netting arrangements allowing a right of setoff within each FCM-CCP relationship; however, we do not net these positions. Therefore, interest rate swaps are presented gross in the condensed consolidated balance sheets. See Note 11 for additional information on the Company’s interest rate swaps.

Resale agreements: Schwab enters into collateralized resale agreements principally with other broker-dealers, which could result in losses in the event the counterparty fails to purchase the securities held as collateral for the cash advanced and the fair value of the securities declines. To mitigate this risk, Schwab requires that the counterparty deliver securities to a custodian, to be held as collateral, with a fair value at or in excess of the resale price. Schwab also sets standards for the credit quality of the counterparty, monitors the fair value of the underlying securities as compared to the related receivable, including accrued interest, and requires additional collateral where deemed appropriate. The collateral provided under these resale agreements is utilized to meet obligations under broker-dealer client protection rules, which place limitations on our ability to access such

- 51 -

THE CHARLES SCHWAB CORPORATION

Notes to Condensed Consolidated Financial Statements

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

(Unaudited)

segregated securities. For Schwab to repledge or sell this collateral, we would be required to deposit cash and/or securities of an equal amount into our segregated reserve bank accounts in order to meet our segregated cash and investments requirement. Schwab’s resale agreements as of March 31, 2024 and December 31, 2023 were not subject to master netting arrangements.

Securities lending: Schwab loans brokerage client securities temporarily to other broker-dealers and clearing houses in connection with its securities lending activities and receives cash as collateral for the securities loaned. Increases in security prices may cause the fair value of the securities loaned to exceed the amount of cash received as collateral. In the event a counterparty to these transactions does not return the loaned securities or provide additional cash collateral, we may be exposed to the risk of acquiring the securities at prevailing market prices in order to satisfy our client obligations. Schwab mitigates this risk by requiring credit approvals for counterparties, monitoring the fair value of securities loaned, and requiring additional cash as collateral when necessary. In addition, most of our securities lending transactions are through a program with a clearing organization, which guarantees the return of cash to us. We also borrow securities from other broker-dealers to fulfill short sales by brokerage clients and deliver cash to the lender in exchange for the securities. The fair value of these borrowed securities was $1.8 billion and $1.5 billion at March 31, 2024 and December 31, 2023, respectively. Our securities lending transactions are subject to enforceable master netting arrangements with other broker-dealers; however, we do not net securities lending transactions. Therefore, the securities loaned and securities borrowed are presented gross in the condensed consolidated balance sheets.

Repurchase agreements: Schwab enters into collateralized repurchase agreements with external financial institutions in which the Company sells securities and agrees to repurchase these securities on a specified future date at a stated repurchase price. These repurchase agreements are collateralized by investment securities with a fair value equal to or in excess of the secured borrowing liability. Decreases in security prices posted as collateral for repurchase agreements may require Schwab to transfer cash or additional securities deemed acceptable by the counterparty. To mitigate this risk, Schwab monitors the fair value of underlying securities pledged as collateral compared to the related liability. Our collateralized repurchase agreements with each external financial institution are considered to be enforceable master netting arrangements. However, we do not net these arrangements. As such, the secured short-term borrowings associated with these collateralized repurchase agreements are presented gross in the condensed consolidated balance sheets.

- 52 -

THE CHARLES SCHWAB CORPORATION

Notes to Condensed Consolidated Financial Statements

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

(Unaudited)

The following table presents information about our interest rate swaps, resale agreements, securities lending, repurchase agreements, and other activity depicting the potential effect of rights of setoff between these recognized assets and liabilities.


	Gross Assets/ Liabilities		Gross Amounts Offset in the Condensed Consolidated Balance Sheets		Net Amounts Presented in the Condensed Consolidated Balance Sheets		Gross Amounts Not Offset in the Condensed Consolidated Balance Sheets					Net Amount
							Counterparty Offsetting		Collateral
March 31, 2024
Assets
Resale agreements (1)	$	9,384	$	—	$	9,384	$	—	$	(9,384)	(2)	$	—
Securities borrowed (3)	1,870		—		1,870		(1,704)		(164)			2
Interest rate swaps (4)	1		—		1		—		—		(5)	1
Total	$	11,255	$	—	$	11,255	$	(1,704)	$	(9,548)		$	3
Liabilities

Repurchase agreements (6)	$	7,705	$	—	$	7,705	$	—	$	(7,705)		$	—
Securities loaned (7)	5,776		—		5,776		(1,704)		(3,613)			459
Secured short-term borrowings (8)	700		—		700		—		(700)			—
Interest rate swaps (4)	—		—		—		—		—		(5)	—
Total	$	14,181	$	—	$	14,181	$	(1,704)	$	(12,018)		$	459

December 31, 2023
Assets
Resale agreements (1)	$	8,844	$	—	$	8,844	$	—	$	(8,844)	(2)	$	—
Securities borrowed (3)	1,563		—		1,563		(1,307)		(253)			3
Interest rate swaps (4)	—		—		—		—		—		(5)	—
Total	$	10,407	$	—	$	10,407	$	(1,307)	$	(9,097)		$	3
Liabilities
Repurchase agreements (6)	$	4,903	$	—	$	4,903	$	—	$	(4,903)		$	—
Securities loaned (7)	5,397		—		5,397		(1,307)		(3,619)			471
Secured short-term borrowings (8)	1,650		—		1,650		—		(1,650)			—
Interest rate swaps (4)	—		—		—		—		—		(5)	—
Total	$	11,950	$	—	$	11,950	$	(1,307)	$	(10,172)		$	471

(1) Included in cash and investments segregated and on deposit for regulatory purposes in the condensed consolidated balance sheets.

(2) Actual collateral was greater than or equal to the value of the related assets. At March 31, 2024 and December 31, 2023, the fair value of collateral received in connection with resale agreements that are available to be repledged or sold was $9.6 billion and $9.0 billion, respectively.

(3) Included in other assets in the condensed consolidated balance sheets.

(4) Derivative assets are included in other assets and derivative liabilities are included in accrued expenses and other liabilities on the condensed consolidated balance sheets. Derivative assets and liabilities as of December 31, 2023 were less than $500 thousand.

(5) At March 31, 2024 and December 31, 2023, the fair value of initial margin pledged as collateral related to interest rate swaps was $191 million and $195 million, respectively. See Notes 4 and 11 for additional information.

(6) Included in other short-term borrowings in the condensed consolidated balance sheets. Actual collateral value was greater than or equal to the value of the related liabilities. At March 31, 2024 and December 31, 2023, the fair value of collateral pledged in connection with repurchase agreements was $8.3 billion and $5.3 billion, respectively. See Note 8 for additional information.

(7) Included in accrued expenses and other liabilities in the condensed consolidated balance sheets. Securities loaned are predominantly comprised of equity securities held in client brokerage accounts with overnight and continuous remaining contractual maturities. The cash collateral received from counterparties under securities lending transactions was equal to or greater than the market value of the securities loaned at March 31, 2024 and December 31, 2023.

(8) Included in other short-term borrowings in the condensed consolidated balance sheets. See below for collateral pledged and Note 8 for additional information.

- 53 -

THE CHARLES SCHWAB CORPORATION

Notes to Condensed Consolidated Financial Statements

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

(Unaudited)

Margin lending: Clients with margin loans have agreed to allow Schwab to pledge collateralized securities in their brokerage accounts in accordance with federal regulations. The following table summarizes the fair value of client securities that were available, under such regulations, that could have been used as collateral, as well as the fair value of securities that we had pledged to third parties under such regulations and from securities borrowed transactions:


	March 31, 2024		December 31, 2023
Fair value of client securities available to be pledged	$	94,483	$	86,911
Fair value of securities pledged for:
Fulfillment of requirements with the Options Clearing Corporation (1)	$	16,803	$	13,355
Fulfillment of client short sales	5,987		7,009
Securities lending to other broker-dealers	5,029		4,688
Collateral for secured short-term borrowings	934		1,991
Total collateral pledged to third parties	$	28,753	$	27,043

Note: Excludes amounts available and pledged for securities lending from fully-paid client securities. The fair value of fully-paid client securities available and pledged was $229 million and $179 million at March 31, 2024 and December 31, 2023, respectively.

(1) Securities pledged to fulfill client margin requirements for open option contracts established with the Options Clearing Corporation.

13. Fair Values of Assets and Liabilities

Assets and liabilities measured at fair value on a recurring basis

Schwab’s assets and liabilities measured at fair value on a recurring basis include: certain cash equivalents, certain investments segregated and on deposit for regulatory purposes, AFS securities, certain other assets, interest rate swaps and certain accrued expenses and other liabilities. The Company uses the market approach to determine the fair value of assets and liabilities. When available, the Company uses quoted prices in active markets to measure the fair value of assets and liabilities. Quoted prices for investments in exchange-traded securities represent end-of-day close prices published by exchanges. Quoted prices for money market funds and other mutual funds represent reported net asset values. When utilizing market data and bid-ask spread, the Company uses the price within the bid-ask spread that best represents fair value. When quoted prices in active markets do not exist, the Company uses prices obtained from independent third-party pricing services to measure the fair value of investment assets, and we generally obtain prices from three independent third-party pricing sources for such assets recorded at fair value.

Our primary independent pricing service provides prices for our fixed income investments such as commercial paper; certificates of deposits; U.S. government and agency securities; state and municipal securities; corporate debt securities; asset-backed securities; foreign government agency securities; and non-agency commercial mortgage-backed securities. Such prices are based on observable trades, broker/dealer quotes, and discounted cash flows that incorporate observable information such as yields for similar types of securities (a benchmark interest rate plus observable spreads) and weighted-average maturity for the same or similar “to-be-issued” securities. We compare the prices obtained from the primary independent pricing service to the prices obtained from the additional independent pricing services to determine if the price obtained from the primary independent pricing service is reasonable. Schwab does not adjust the prices received from independent third-party pricing services unless such prices are inconsistent with the definition of fair value and result in material differences in the amounts recorded.

Liabilities measured at fair value on a recurring basis include interest rate swaps, securities sold but not yet purchased, and repurchase liabilities related to client-held fractional shares of equities, ETFs, and other securities, which are included in other assets on the condensed consolidated balance sheets. The fair values of securities sold but not yet purchased are based on quoted market prices or other observable market data. The Company has elected the fair value option pursuant to ASC 825 Financial Instruments for the repurchase liabilities to match the measurement and accounting of the related client-held fractional shares. The fair values of the repurchase liabilities are based on quoted market prices or other observable market data consistent with the related client-held fractional shares. Unrealized gains and losses on client-held fractional shares offset the unrealized gains and losses on the corresponding repurchase liabilities, resulting in no impact to the condensed consolidated statements of income. The Company’s liabilities to repurchase client-held fractional shares do not have credit risk, and, as a result, the Company has not recognized any gains or losses in the condensed consolidated statements of income or comprehensive income attributable to instrument-specific credit risk for these repurchase liabilities. The repurchase liabilities are included in accrued expenses and other liabilities on the condensed consolidated balance sheets.

- 54 -

THE CHARLES SCHWAB CORPORATION

Notes to Condensed Consolidated Financial Statements

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

(Unaudited)

The fair values of interest rate swaps are based on market observable interest rate yield curves. Fair value measurements are priced considering the coupon rate of the fixed leg of the contract and the variable coupon rate on the floating leg of the contract. Valuation is based on both spot and forward rates on the swap yield curve. The Company validates its valuations with counterparty quotations from CCPs. See Note 11 for additional information on the Company’s interest rate swaps.

For a description of the fair value hierarchy and Schwab’s fair value methodologies, see Item 8 – Note 2 in the 2023 Form 10-K. The Company did not adjust prices received from the primary independent third-party pricing service at March 31, 2024 or December 31, 2023.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following tables present the fair value hierarchy for assets and liabilities measured at fair value on a recurring basis:


March 31, 2024	Level 1		Level 2		Level 3		Balance at Fair Value
Cash equivalents:
Money market funds	$	12,807	$	—	$	—	$	12,807


Total cash equivalents	12,807		—		—		12,807
Investments segregated and on deposit for regulatory purposes:
U.S. Government securities	—		13,780		—		13,780

Total investments segregated and on deposit for regulatory purposes	—		13,780		—		13,780
Available for sale securities:
U.S. agency mortgage-backed securities	—		60,171		—		60,171
U.S. Treasury securities	—		20,193		—		20,193
Corporate debt securities	—		11,368		—		11,368
Asset-backed securities	—		7,847		—		7,847
Foreign government agency securities	—		803		—		803
U.S. state and municipal securities	—		575		—		575
Non-agency commercial mortgage-backed securities	—		110		—		110



Other	—		19		—		19
Total available for sale securities	—		101,086		—		101,086
Other assets:
Other securities owned:
Equity, corporate debt, and other securities	1,165		63		—		1,228
Mutual funds and ETFs	865		—		—		865
State and municipal debt obligations	—		31		—		31
U.S. Government securities	—		2		—		2
Total other securities owned	2,030		96		—		2,126
Interest rate swaps	—		1		—		1
Total other assets	2,030		97		—		2,127
Total assets	$	14,837	$	114,963	$	—	$	129,800
Accrued expenses and other liabilities:

Other	$	1,860	$	34	$	—	$	1,894
Total accrued expenses and other liabilities	1,860		34		—		1,894
Total liabilities	$	1,860	$	34	$	—	$	1,894

- 55 -

THE CHARLES SCHWAB CORPORATION

Notes to Condensed Consolidated Financial Statements

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

(Unaudited)


December 31, 2023	Level 1		Level 2		Level 3		Balance at Fair Value
Cash equivalents:
Money market funds	$	14,573	$	—	$	—	$	14,573

Total cash equivalents	14,573		—		—		14,573
Investments segregated and on deposit for regulatory purposes:
U.S. Government securities	—		20,358		—		20,358

Total investments segregated and on deposit for regulatory purposes	—		20,358		—		20,358
Available for sale securities:
U.S. agency mortgage-backed securities	—		62,795		—		62,795
U.S. Treasury securities	—		21,471		—		21,471
Corporate debt securities	—		12,484		—		12,484
Asset-backed securities	—		9,087		—		9,087
Foreign government agency securities	—		1,002		—		1,002
U.S. state and municipal securities	—		579		—		579
Non-agency commercial mortgage-backed securities	—		109		—		109
Certificates of deposit	—		100		—		100

Other	—		19		—		19
Total available for sale securities	—		107,646		—		107,646
Other assets:
Other securities owned:
Equity, corporate debt, and other securities	992		73		—		1,065
Mutual funds and ETFs	795		—		—		795
State and municipal debt obligations	—		27		—		27
U.S. Government securities	—		26		—		26
Total other securities owned	1,787		126		—		1,913
Total other assets	1,787		126		—		1,913
Total assets	$	16,360	$	128,130	$	—	$	144,490
Accrued expenses and other liabilities:
Other	$	1,644	$	89	$	—	$	1,733
Total accrued expenses and other liabilities	1,644		89		—		1,733
Total liabilities	$	1,644	$	89	$	—	$	1,733

- 56 -

THE CHARLES SCHWAB CORPORATION

Notes to Condensed Consolidated Financial Statements

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

(Unaudited)

Fair Value of Other Financial Instruments

The following tables present the fair value hierarchy for other financial instruments:


March 31, 2024	Carrying Amount		Level 1		Level 2		Level 3		Balance at Fair Value
Assets
Cash and cash equivalents	$	18,945	$	18,945	$	—	$	—	$	18,945
Cash and investments segregated and on deposit for regulatory purposes	12,080		2,735		9,345		—		12,080

Receivables from brokerage clients — net	71,118		—		71,118		—		71,118
Held to maturity securities:
U.S. agency mortgage-backed securities	156,371		—		142,340		—		142,340









Total held to maturity securities	156,371		—		142,340		—		142,340
Bank loans — net:
First Mortgages	26,174		—		23,198		—		23,198
HELOCs	454		—		484		—		484
Pledged asset lines	13,841		—		13,841		—		13,841
Other	314		—		314		—		314
Total bank loans — net	40,783		—		37,837		—		37,837
Other assets	5,706		—		5,706		—		5,706

Liabilities
Bank deposits	$	269,460	$	—	$	269,460	$	—	$	269,460

Payables to brokerage clients	84,005		—		84,005		—		84,005
Accrued expenses and other liabilities	7,750		—		7,750		—		7,750
Other short-term borrowings	8,405		—		8,405		—		8,405
Federal Home Loan Bank borrowings	24,000		—		24,000		—		24,000
Long-term debt	22,790		—		21,727		—		21,727


December 31, 2023	Carrying Amount		Level 1		Level 2		Level 3		Balance at Fair Value
Assets
Cash and cash equivalents	$	28,764	$	28,764	$	—	$	—	$	28,764
Cash and investments segregated and on deposit for regulatory purposes	11,438		2,628		8,810		—		11,438

Receivables from brokerage clients — net	68,629		—		68,629		—		68,629
Held to maturity securities:
U.S. agency mortgage-backed securities	159,452		—		147,091		—		147,091








Total held to maturity securities	159,452		—		147,091		—		147,091
Bank loans — net:
First Mortgages	26,121		—		23,226		—		23,226
HELOCs	477		—		508		—		508
Pledged asset lines	13,548		—		13,548		—		13,548
Other	293		—		293		—		293
Total bank loans — net	40,439		—		37,575		—		37,575
Other assets	4,960		—		4,960		—		4,960

Liabilities
Bank deposits	$	289,953	$	—	$	289,953	$	—	$	289,953

Payables to brokerage clients	84,786		—		84,786		—		84,786
Accrued expenses and other liabilities	7,609		—		7,609		—		7,609
Other short-term borrowings	6,553		—		6,553		—		6,553
Federal Home Loan Bank borrowings	26,400		—		26,400		—		26,400
Long-term debt	26,043		—		25,000		—		25,000

- 57 -

THE CHARLES SCHWAB CORPORATION

Notes to Condensed Consolidated Financial Statements

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

(Unaudited)

14. Stockholders’ Equity

There were no repurchases of CSC’s preferred stock during the three months ended March 31, 2024. The Company repurchased 11,620 depositary shares representing interests in Series F preferred stock for $11 million, 42,036 depositary shares representing interests in Series G preferred stock for $42 million, 273,251 depositary shares representing interests in Series H preferred stock for $235 million, and 194,567 depositary shares representing interests in Series I preferred stock for $179 million on the open market during the three months ended March 31, 2023. The repurchase prices are inclusive of $3 million of dividends accrued by the stockholders as of the repurchase date.

Share repurchases, net of issuances, are subject to a nondeductible excise tax which was recognized as a direct and incremental cost associated with these transactions.

The Company’s preferred stock issued and outstanding is as follows:


			Liquidation Preference Per Share							Dividend Rate in Effect at March 31, 2024		Earliest Redemption Date	Date at Which Dividend Rate Resets or Becomes Floating	Reset / Floating Rate	Margin Over Reset / Floating Rate
	Shares Issued and Outstanding (in ones) at				Carrying Value at
	March 31, 2024 (1)	December 31, 2023 (1)			March 31, 2024		December 31, 2023		Issue Date
Fixed-rate:
Series D	750,000	750,000	$	1,000	$	728	$	728	03/07/16	5.950	%	06/01/21	N/A	N/A	N/A
Series J	600,000	600,000	1,000		584		584		03/30/21	4.450	%	06/01/26	N/A	N/A	N/A
Fixed-to-floating rate/Fixed-rate reset:
Series F	4,884	4,884	100,000		481		481		10/31/17	5.000	%	12/01/27	12/01/27	3M LIBOR(4)	2.575	%
Series G (2)	24,580	24,580	100,000		2,428		2,428		04/30/20	5.375	%	06/01/25	06/01/25	5-Year Treasury	4.971	%
Series H (3)	22,267	22,267	100,000		2,200		2,200		12/11/20	4.000	%	12/01/30	12/01/30	10-Year Treasury	3.079	%
Series I (2)	20,554	20,554	100,000		2,030		2,030		03/18/21	4.000	%	06/01/26	06/01/26	5-Year Treasury	3.168	%
Series K (2)	7,500	7,500	100,000		740		740		03/04/22	5.000	%	06/01/27	06/01/27	5-Year Treasury	3.256	%
Total preferred stock	1,429,785	1,429,785			$	9,191	$	9,191

(1) Represented by depositary shares.

(2) The dividend rate for Series G, Series I, and Series K resets on each five-year anniversary from the first reset date.

(3) The dividend rate for Series H resets on each ten-year anniversary from the first reset date.

(4) The reset/floating rate for Series F will be determined by the calculation agent prior to the commencement of the floating rate period using what the calculation agent determines to be the industry-accepted substitute or successor base rate to LIBOR.

N/A Not applicable.

- 58 -

THE CHARLES SCHWAB CORPORATION

Notes to Condensed Consolidated Financial Statements

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

(Unaudited)

Dividends declared on the Company’s preferred stock are as follows:


	Three Months Ended March 31,
	2024				2023
	Total Declared		Per Share Amount		Total Declared (1)		Per Share Amount

Series D (2)	$	11.2	$	14.88	$	11.2	$	14.88

Series F (3)	—		—		—		—
Series G (2)	33.0		1,343.75		33.2		1,343.75
Series H (2)	22.3		1,000.00		23.7		1,000.00
Series I (2)	20.6		1,000.00		21.3		1,000.00
Series J (2)	6.7		11.13		6.7		11.13
Series K (2)	9.3		1,250.00		9.3		1,250.00
Total	$	103.1			$	105.4

(1) Excludes $3 million of dividends declared on Series G, H and I, and accrued by stockholders as of the repurchase date. Such dividends were part of the consideration paid upon repurchase of the depositary shares during the three months ended March 31, 2023.

(2) Dividends paid quarterly.

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

15. Accumulated Other Comprehensive Income

AOCI represents cumulative gains and losses that are not reflected in earnings. AOCI balances and the components of other comprehensive income (loss) are as follows:


	Total AOCI
Balance at December 31, 2022	$	(22,621)

Available for sale securities:
Net unrealized gain (loss), net of tax expense (benefit) of $421	1,428

Other reclassifications included in other revenue, net of tax expense (benefit) of $2	7
Held to maturity securities:

Amortization of amounts previously recorded upon transfer from available for sale, net of tax expense (benefit) of $107	502
Other, net of tax expense (benefit) of $(2)	(6)

Balance at March 31, 2023	$	(20,690)

Balance at December 31, 2023	$	(18,131)

Available for sale securities:
Net unrealized gain (loss), net of tax expense (benefit) of $26	113

Other reclassifications included in other revenue, net of tax expense (benefit) of $2	8
Held to maturity securities:

Amortization of amounts previously recorded upon transfer from available for sale, net of tax expense (benefit) of $122	442
Other (1)	(8)
Balance at March 31, 2024	$	(17,576)

(1) Tax expense (benefit) was less than $500 thousand.

In 2022, the Company transferred a portion of its AFS securities to the HTM category. The transfer of these securities to the HTM category reduces the Company’s exposure to fluctuations in AOCI that can result from unrealized losses on AFS securities due to changes in market interest rates. The unrealized loss at the time of transfer is amortized over the remaining life of the security, offsetting the amortization of the security’s premium or discount, and resulting in no impact to net income. As of March 31, 2024, the total remaining unamortized loss on these securities transferred to HTM included in AOCI was $11.0 billion net of tax effect ($14.5 billion pre-tax).

- 59 -

THE CHARLES SCHWAB CORPORATION

Notes to Condensed Consolidated Financial Statements

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

(Unaudited)

16. Earnings Per Common Share

The Company has voting and nonvoting common stock outstanding. As the rights of the voting and nonvoting common stock are identical, except with respect to voting, the net income of the Company has been allocated on a proportionate basis to the two classes. Diluted earnings per share is calculated using the treasury stock method for outstanding stock options and non-vested restricted stock units and the if-converted method for nonvoting common stock. The if-converted method assumes conversion of all nonvoting common stock to common stock. For further details surrounding the EPS computation, see Item 8 – Note 25 in the 2023 Form 10-K.

EPS under the basic and diluted computations for both common stock and nonvoting common stock are as follows:


	Three Months Ended March 31,
	2024				2023
	Common Stock		Nonvoting Common Stock		Common Stock		Nonvoting Common Stock
Basic earnings per share:
Numerator
Net income	$	1,324	$	38	$	1,559	$	44
Preferred stock dividends and other (1)	(108)		(3)		(68)		(2)
Net income available to common stockholders	$	1,216	$	35	$	1,491	$	42
Denominator
Weighted-average common shares outstanding — basic	1,774		51		1,783		51
Basic earnings per share	$	.69	$	.69	$	.84	$	.84
Diluted earnings per share:
Numerator
Net income available to common stockholders	$	1,216	$	35	$	1,491	$	42
Reallocation of net income available to common stockholders as a result of conversion of nonvoting to voting shares	35		—		42		—
Allocation of net income available to common stockholders:	$	1,251	$	35	$	1,533	$	42
Denominator
Weighted-average common shares outstanding — basic	1,774		51		1,783		51
Conversion of nonvoting shares to voting shares	51		—		51		—
Common stock equivalent shares related to stock incentive plans	6		—		8		—
Weighted-average common shares outstanding — diluted (2)	1,831		51		1,842		51
Diluted earnings per share	$	.68	$	.68	$	.83	$	.83

(1) Includes preferred stock dividends and undistributed earnings and dividends allocated to non-vested restricted stock units.

(2) Antidilutive stock options and restricted stock units excluded from the calculation of diluted EPS totaled 18 million and 16 million for the three months ended March 31, 2024 and 2023, respectively.

- 60 -

THE CHARLES SCHWAB CORPORATION

Notes to Condensed Consolidated Financial Statements

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

(Unaudited)

17. Regulatory Requirements

At March 31, 2024, CSC and its banking subsidiaries met all of their respective capital requirements. Regulatory capital and ratios for CSC (consolidated) and CSB are as follows:


	Actual				Minimum to be Well Capitalized				Minimum Capital Requirement
March 31, 2024	Amount		Ratio		Amount		Ratio		Amount		Ratio (1)
CSC
Common Equity Tier 1 Risk-Based Capital	$	32,407	26.7	%	N/A				$	5,460	4.5	%
Tier 1 Risk-Based Capital	41,598		34.3	%	N/A				7,280		6.0	%
Total Risk-Based Capital	41,635		34.3	%	N/A				9,706		8.0	%
Tier 1 Leverage	41,598		8.8	%	N/A				18,845		4.0	%
Supplementary Leverage Ratio	41,598		8.8	%	N/A				14,231		3.0	%
CSB
Common Equity Tier 1 Risk-Based Capital	$	31,944	39.3	%	$	5,282	6.5	%	$	3,657	4.5	%
Tier 1 Risk-Based Capital	31,944		39.3	%	6,501		8.0	%	4,876		6.0	%
Total Risk-Based Capital	31,977		39.4	%	8,126		10.0	%	6,501		8.0	%
Tier 1 Leverage	31,944		10.4	%	15,343		5.0	%	12,275		4.0	%





Supplementary Leverage Ratio	31,944		10.3	%	N/A				9,270		3.0	%

December 31, 2023
CSC
Common Equity Tier 1 Risk-Based Capital	$	31,411	24.5	%	N/A				$	5,770	4.5	%
Tier 1 Risk-Based Capital	40,602		31.7	%	N/A				7,694		6.0	%
Total Risk-Based Capital	40,645		31.7	%	N/A				10,258		8.0	%
Tier 1 Leverage	40,602		8.5	%	N/A				19,043		4.0	%
Supplementary Leverage Ratio	40,602		8.5	%	N/A				14,379		3.0	%
CSB
Common Equity Tier 1 Risk-Based Capital	$	31,777	37.9	%	$	5,448	6.5	%	$	3,771	4.5	%
Tier 1 Risk-Based Capital	31,777		37.9	%	6,705		8.0	%	5,029		6.0	%
Total Risk-Based Capital	31,816		38.0	%	8,381		10.0	%	6,705		8.0	%
Tier 1 Leverage	31,777		10.1	%	15,793		5.0	%	12,634		4.0	%
Supplementary Leverage Ratio	31,777		10.0	%	N/A				9,540		3.0	%

(1) Under risk-based capital rules, CSC and CSB are also required to maintain additional capital buffers above the regulatory minimum risk-based capital ratios. As of March 31, 2024, CSC was subject to a stress capital buffer of 2.5%. In addition, CSB is required to maintain a capital conservation buffer of 2.5%. CSC and CSB are also required to maintain a countercyclical capital buffer above the regulatory minimum risk-based capital ratios, which was zero for both periods presented. If a buffer falls below the minimum requirement, CSC and CSB would be subject to increasingly strict limits on capital distributions and discretionary bonus payments to executive officers. At March 31, 2024, the minimum capital ratio requirements for both CSC and CSB, inclusive of their respective buffers, were 7.0%, 8.5%, and 10.5% for Common Equity Tier 1 Risk-Based Capital, Tier 1 Risk-Based Capital, and Total Risk-Based Capital, respectively.

N/A Not applicable.

Based on its regulatory capital ratios at March 31, 2024, CSB is considered well capitalized (the highest category) under its respective regulatory capital rules. There are no conditions or events since March 31, 2024 that management believes have changed CSB’s capital category.

At March 31, 2024, the balance sheets of Charles Schwab Premier Bank, SSB (CSPB) and Charles Schwab Trust Bank (Trust Bank) consisted primarily of investment securities, and the entities held total assets of $26.0 billion and $10.2 billion, respectively. Based on their regulatory capital ratios, at March 31, 2024, CSPB and Trust Bank are considered well capitalized under their respective regulatory capital rules.

- 61 -

THE CHARLES SCHWAB CORPORATION

Notes to Condensed Consolidated Financial Statements

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

(Unaudited)

Net capital and net capital requirements for CS&Co, TDAC, and TD Ameritrade, Inc., are as follows:


	March 31, 2024		December 31, 2023
CS&Co
Net capital	$	6,227	$	5,629
Minimum dollar requirement	0.250		0.250
2% of aggregate debit balances	1,146		1,069
Net capital in excess of required net capital	$	5,081	$	4,560
TDAC
Net capital	$	3,144	$	3,634
Minimum dollar requirement	1.500		1.500
2% of aggregate debit balances	506		440
Net capital in excess of required net capital	$	2,638	$	3,194
TD Ameritrade, Inc.
Net capital	$	566	$	444
Minimum dollar requirement	0.250		0.250
2% of aggregate debit balances	—		—
Net capital in excess of required net capital	$	566	$	444

Pursuant to the SEC’s Customer Protection Rule and other applicable regulations, Schwab had cash and investments segregated for the exclusive benefit of clients at March 31, 2024. The SEC’s Customer Protection Rule requires broker-dealers to segregate client fully-paid securities and cash balances not collateralizing margin positions and not swept to money market funds or bank deposit accounts. Amounts included in cash and investments segregated and on deposit for regulatory purposes represent actual balances on deposit. Cash and cash equivalents included in cash and investments segregated and on deposit for regulatory purposes are presented as part of Schwab’s cash balances in the condensed consolidated statements of cash flows.

18. Segment Information

Schwab’s two reportable segments are Investor Services and Advisor Services. Schwab structures the operating segments according to its clients and the services provided to those clients. The Investor Services segment provides retail brokerage, investment advisory, and banking and trust services to individual investors, and retirement plan services, as well as other corporate brokerage services, to businesses and their employees. The Advisor Services segment provides custodial, trading, banking and trust, and support services, as well as retirement business services, to independent RIAs, independent retirement advisors, and recordkeepers. Revenues and expenses are attributed to the two segments based on which segment services the client.

Management evaluates the performance of the segments on a pre-tax basis. Segment assets and liabilities are not used for evaluating segment performance or in deciding how to allocate resources to segments. There are no revenues from transactions between the segments.

Financial information for the segments is presented in the following table:


	Investor Services				Advisor Services				Total
Three Months Ended March 31,	2024		2023		2024		2023		2024		2023
Net Revenues
Net interest revenue	$	1,742	$	2,033	$	491	$	737	$	2,233	$	2,770
Asset management and administration fees	947		805		401		313		1,348		1,118
Trading revenue	713		775		104		117		817		892
Bank deposit account fees	135		99		48		52		183		151
Other	135		151		24		34		159		185
Total net revenues	3,672		3,863		1,068		1,253		4,740		5,116
Expenses Excluding Interest	2,265		2,233		677		773		2,942		3,006
Income before taxes on income	$	1,407	$	1,630	$	391	$	480	$	1,798	$	2,110

- 62 -

THE CHARLES SCHWAB CORPORATION

Item 4. Controls and Procedures

Evaluation of disclosure controls and procedures: The management of the Company, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) as of March 31, 2024. Based on this evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures were effective as of March 31, 2024.

Changes in internal control over financial reporting: No change in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) was identified during the quarter ended March 31, 2024, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

For a discussion of legal proceedings, see Part I – Item 1 – Note 9.

Item 1A. Risk Factors

During the first three months of 2024, there have been no material changes to the risk factors in Part I – Item 1A – Risk Factors in the 2023 Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

On July 27, 2022, CSC publicly announced that its Board of Directors terminated its prior repurchase authorization and replaced it with an authorization to repurchase up to $15.0 billion of common stock. The authorization does not have an expiration date. See also Part I – Item 1 – Note 14.

The following table summarizes purchases made by or on behalf of CSC of its common stock for each calendar month in the first quarter of 2024 (in millions, except number of shares, which are in thousands, and per share amounts):


Month	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Program	Approximate Dollar Value of Shares That May Yet Be Purchased Under the Publicly Announced Program
January:
Share repurchase program	—	$	—	—	$	8,723
Employee transactions (1)	75	$	67.06	N/A	N/A
February:
Share repurchase program	—	$	—	—	$	8,723
Employee transactions (1)	6	$	62.70	N/A	N/A
March:
Share repurchase program	—	$	—	—	$	8,723
Employee transactions (1)	1,164	$	66.36	N/A	N/A
Total:
Share repurchase program	—	$	—	—	$	8,723
Employee transactions (1)	1,245	$	66.38	N/A	N/A

(1) Includes restricted shares withheld (under the terms of grants under employee stock incentive plans) to offset tax withholding obligations that occur upon vesting and release of restricted shares. CSC may receive shares delivered or attested to pay the exercise price and/or to satisfy tax withholding obligations by employees who exercise stock options granted under employee stock incentive plans, which are commonly referred to as stock swap exercises.

N/A Not applicable.

- 63 -

THE CHARLES SCHWAB CORPORATION

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

During the three months ended March 31, 2024, certain of our directors and officers adopted or terminated trading arrangements for the sale of shares of our common stock as follows:

Plans

Action

Date

Rule 10b5-1 (1)

Non-Rule 10b5-1 (2)

Number of Securities to

be Sold (3)

Latest

Expiration (4)

Bernard J. Clark, Managing Director and Head
of Advisor Services

Adoption

2/27/2024

—

3/17/2025

(1) Intended to satisfy the affirmative defense conditions of Rule 10b5-1(c).

(2) Not intended to satisfy the affirmative defense conditions of Rule 10b5-1(c).

(3) Securities to be sold under the plan represent the aggregate of (i) up to 81,085 shares of our common stock to be acquired upon the exercise of stock options; (ii) up to 48,761 shares of our common stock issued upon the settlement of performance-based restricted stock units (PBRSUs) that vested on March 1, 2024; and (iii) the net after-tax number of shares of our common stock to be issued upon settlement of PBRSUs vesting on March 1, 2025, which is based on the achievement of pre-established performance goals and is not yet determinable. The actual number of shares that will be issued to the officer in connection with the unvested PBRSUs and sold under the trading arrangement will be net of the number of shares withheld to satisfy tax withholding obligations arising from the vesting of such PBRSUs.

(4) The plan expires at the close of trading on the date presented or at such earlier date upon the completion of all trades under the plan (or the expiration of the orders relating to such trades without execution).

- 64 -

THE CHARLES SCHWAB CORPORATION

Item 6. Exhibits

The following exhibits are filed as part of this Quarterly Report on Form 10-Q:


Exhibit Number	Exhibit
31.1	Certification Pursuant to Rule 13a-14(a)/15d-14(a), As Adopted Pursuant to Section 302 of The Sarbanes-Oxley Act of 2002.

31.2	Certification Pursuant to Rule 13a-14(a)/15d-14(a), As Adopted Pursuant to Section 302 of The Sarbanes-Oxley Act of 2002.

32.1	Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of The Sarbanes-Oxley Act of 2002.	(1)

32.2	Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of The Sarbanes-Oxley Act of 2002.	(1)

101.INS	Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.	(2)

101.SCH	Inline XBRL Taxonomy Extension Schema	(2)

101.CAL	Inline XBRL Taxonomy Extension Calculation	(2)

101.DEF	Inline XBRL Extension Definition	(2)

101.LAB	Inline XBRL Taxonomy Extension Label	(2)

101.PRE	Inline XBRL Taxonomy Extension Presentation	(2)

104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

(1)	Furnished as an exhibit to this Quarterly Report on Form 10-Q.



(2)	Attached as Exhibit 101 to this Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2024 are the following materials formatted in Inline XBRL (Extensible Business Reporting Language) (i) the Condensed Consolidated Statements of Income, (ii) the Condensed Consolidated Statements of Comprehensive Income, (iii) the Condensed Consolidated Balance Sheets, (iv) the Condensed Consolidated Statements of Stockholders’ Equity, (v) the Condensed Consolidated Statements of Cash Flows, and (vi) Notes to Condensed Consolidated Financial Statements.

- 65 -

THE CHARLES SCHWAB CORPORATION

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.