SCHW 10-K & 10-Q changes, risk factors and insider trading

We face a variety of risks that may affect our operations, financial results, or stock price and many of those risks are driven by factors that we cannot control or predict. The following discussion addresses those risks that management believes are the most significant, although there may be other risks that could arise, or may prove to be more significant than expected, that may affect our operations or financial results. For a discussion of our risk management governance and processes, including operational risk, compliance risk, credit risk, market risk, and liquidity risk, see Risk Management and Capital Management in Part II – Item 7. For additional information regarding cybersecurity risk, see Item 1C. Cybersecurity.

The monetary policies of the Federal Reserve, which regulates the supply of money and credit in the United States, have a significant effect on our operating results. Actions taken by the Federal Reserve, including changes in its target funds rate and its own balance sheet management, are difficult to predict and can affect our financial results, including net interest revenue and bank deposit account fees, and the market value of our investment securities. These policies can have implications for clients’ allocation to cash as we experienced in recent years, and higher or lower client cash balances have an impact on our capital requirements, as well as liquidity implications if such changes in allocation are sudden. Investor sentiment and market and trading dynamics can affect client preferences and security selection, and can impact transactions and asset-based revenues. Market-driven changes, such as declines in equity markets, can also reduce client demand for margin lending, which is a significant source of net interest revenue.

We rely heavily on clientClient cash balances toare generatea significant funding source for the generation of the Company’s revenue. Cash awaiting investment may be used to extend margin loans to clients or be swept to our banking subsidiaries and those bank deposits are then used to extend loans to clients and purchase investment securities. We also sweep a portion of such cash to the TD Depository Institutions pursuant to the 2023 IDA agreement, through which we earn bank deposit account fees. A significant reduction in our clients’ allocation to cash, a change in the allocation of that cash, or a transfer of cash away from the Company, would likely reduce our income. AsFor example, as a result of the rapid increases in short-term interest rates in 2022 and 2023, the Company saw a significant decrease in clients’ asset allocation to sweep cash and greater client investment in higher-yielding alternatives at Schwab such as fixed income investments and proprietary purchased money market funds. To help facilitatesupport these changes in client cash allocations, the Company extensively utilized higher-cost supplemental funding sources, which negatively impacted the Company’s net income.

The direction and level of interest rates are important factors in our earnings. A decline in interest rates may have a negative impact on our net interest revenue and our bank deposit account fee revenue. The Company’s interest-earning assets include significant holdings of investment securities, which include fixed- and floating-rate debt securities, including substantial holdings of mortgage-backed securities, as well as mortgages.margin loans, mortgages, and PALs. The Company could be adversely affected by a decline in interest rates if the rates that the Company earns on interest-earning assets decline more than the rates that the Company pays on its funding sources, or if prepayment rates increase on the mortgages and mortgage-backed securities that the Company holds. A low interest rate environment may also have a negative impact on our asset management and administration fee revenues when we have to waive a portion of our management fees, as we experienced in 2020 and 2021, for certain Schwab-sponsored money market mutual funds in order to continue providing a positive return to clients. A decline in interest rates may also negatively impact our bank deposit account fee revenue, which is earned primarily pursuant to the 2023 IDA agreement.

Though the Company may benefit from a rising interest rate environment, a rise in interest rates may cause our funding costs to increaseincrease. if market conditions or theThe competitive environment inducesmay induce us to raise our interest rates to avoid losing deposits, or we may need to replace deposits with higher-cost funding sources as we experienced in recent years. In such situations, without offsetting increases in yields on interest-earning assets, which can reduce the benefit of higher market interest rates to our net interest revenue,revenue asmay webe experienced in recent years.reduced. The rapid increases in market interest rates experienced in 2022 and 2023 also contributed to increased unrealized losses on our investment securities portfolios. Increased unrealized losses on investment securities or other assets on our balance sheet can reduce market or client confidence in us, which could limit our ability to attract new client assets and accounts or result in the transfer of client assets and accounts from the Company.

A rise in interest rates may also reduce our bank deposit account fee revenue, as clients may reallocate assets out of bank deposit account balances and into higher-yielding investment alternatives, as we experienced in recent years. The 2023 IDA agreement involves certain commitments, including the maintenance of prescribed minimum and maximum insured deposit account balances (IDA balances), that limit our ability to respond to changes in interest rates and may impact our profitability and bank deposit account fee revenue. The bank deposit account fee revenue that we earn related to the 2023 IDA agreement may be less than the net interest revenue that we could have earned if the deposit balances were swept to our banking subsidiaries rather than the TD Depository Institutions. When we are permitted to reduce the IDA balances, we can only move the balances to our banking subsidiaries if we have sufficient capital.

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

Concerns regarding the soundness or creditworthiness of other financial institutions can cause substantial disruption within the financial markets and have negative impacts for us and our industry, including reductions in availability of liquidity, higher borrowing costs, and higher costs of capital. Such concerns regarding one or more financial institutions may also advance public concerns regarding Schwab or the financial services industry more broadly, which could harm our reputation and adversely affect our results of operations and financial condition, even if underlying matters impacting other financial institutions are of limited or no direct applicability to us. Financial institutions are interrelated through trading, clearing, custody, or other relationships, and, as a result, concerns about the financial condition of one or more institutions could lead to significant market-wide liquidity and credit problems, losses, or defaults by other institutions. This risk may adversely affect financial intermediaries, such as broker-dealers, banks, clearing houses, securities exchanges, market makers, and others, with which we interact on a daily basis, and therefore, could adversely affect us.

Events affecting the financial services industry may also result in potentially adverse changes to laws or regulations governing banks and savings and loan holding companies or result in the imposition of restrictions through supervisory or enforcement activities, including higher capital or liquidity requirements or increased FDIC premiums and special assessments, which could have a material impact on our business. Following the failure of several U.S. banks in 2023, the U.S. federal banking agencies proposed rules that would significantly impact our regulatory capital requirements, including requiring us to include AOCI in regulatory capital, as well as rules that would require minimum levels of eligible long-term debt at CSC and our banking subsidiaries. As a result of heightened regulatory focus on capital requirements, the Company took measures to increase its capital, including revising its long-term operating objective. In addition, the cost of resolving the 2023 bank failures resulted in increased FDIC costscosts, and potential future bank failures or other similar events may prompt the FDIC to further increase its premiums or to issue additional special assessments, which could have a material negative impact on our profitability and our business.

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

As a member firm of securities and derivatives clearing houses, we are required to deposit cash, stock and/or government securities for margin requirements and to clearing funds. The margin requirements may fluctuate significantly from time to time based upon the nature and size of clients’ trading activity and market volatility, and member firms like us have been required to deposit additional funds. Clearing houses could also require additional funds from member firms if a clearing member defaults on its obligations to the clearing house in an amount larger than its own margin and clearing fund deposits.

As a participant in the financial services industry, Schwab relies on access to external financing in the normal course of business. During periods of disruptions in the credit and capital markets, potential sources of external financing could be reduced, and borrowing costs could increase. AlthoughCSC, CSCCS&Co, and CS&Coour banking subsidiaries maintain multiple sources of external financing including repurchase agreements and securities lending, secured lines of credit and unsecured uncommitted bank credit lineslines, and CSC has a commercial paper issuance program, as well as a universal shelf registration statement filed with the SEC which can be used to sell securities,securities. financingFinancing may not be available on acceptable terms or at all due to market conditions or disruptions in the credit markets. In addition, a downgrade in the Company’s credit ratings could increase its borrowing costs and limit its access to the capital markets.

When short-term interest rates rapidly increase, as they did in 2022 and 2023, client movement of certain cash balances out of our sweep features and into higher-yielding alternatives generally increases. When these outflows outpace excess cash on hand and cash generated by maturities and paydowns on our investment and loan portfolios, as theywe haveexperienced in recent2022 years,and 2023, we may need to rely on supplementalincreased funding, such as advances under Federal Home Loan Bank (FHLB) secured credit facilities, borrowings under repurchase agreements with external financial institutions, issuanceslevels of brokered certificates of deposit (CDs), or other sources ofhigher-cost funding, which have higher costs and could be subject to limitations on availability.availability Inand addition,additional toregulatory access new FHLB advances or roll over existing advances, our banking subsidiaries must maintain positive tangible capital, as defined by the Federal Housing Finance Agency (FHFA). Larger unrealized losses on our available for sale (AFS) portfolio due to higher market interest rates negatively impact our capital position inclusive of AOCI, including our tangible capital.requirements.

Our business involves the secure processing, storage, and transmission of confidential information about our clients and us. Information security risks for financial institutions are increasing, in part because of the use of the internet and mobile and cloud technologies to conduct financial transactions, and the increased sophistication and activities, including the use of artificial intelligence technologies, of organized crime, activists, hackers and other external parties, including foreign state actors. Our systems and those of other financial institutions, as well as those of our third-party service providers, have been and will continue to be the frequent target of cyber attacks, malicious code, computer viruses, ransomware, and denial of service attacks that could result in unauthorized access, misuse, loss or destruction of data (including confidential client information), account takeovers, unavailability of service or other events. Despite our efforts to ensure the integrity of our systems, we may not be able to anticipate or to implement effective preventive measures against all security breaches of these types, especially because the techniques used change frequently or are not recognized until launched, and because security attacks can originate from a wide variety of sources. Data security breaches may also result from non-technical means, for example, employee misconduct. Data exposure may also result from a failure to adequately destroy data during system or asset decommissioning, which might result in client or Company information being made available to external parties in error.

Given the high volume of transactions that we process, the large number of clients, counterpartiescounterparties, and third-party service providers with which we do business, including cloud service providers, and the increasing sophistication of cyber attacks, a cyber attack could occur and persist for an extended period of time before being detected. The extent of a particular cyber attack and the steps we may need to take to investigate the attack may not be immediately clear, and it may take a significant amount of time before an investigation is completed and full and reliable information about the attack is known. During such time we would not necessarily know the extent of the harm or how best to remediate it, and certain errors or actions could be repeated or compounded before they are discovered and remediated, all or any of which would further increase the costs and consequences of a cyber attack.

Security breaches, including breaches of our security measures or those of our third-party service providers, could result in a violation of applicable privacy and other lawslaws, and could subject us to significant liability or loss that may not be covered by insurance, actions by our regulators, damage to our reputation, or a loss of confidence in our security measures which could harm our business. We may be required to expend significant additional resources to modify our protective measures or to investigate and remediate vulnerabilities or other exposures. We may also be required to pay ransom to threat actors to restore operations or prevent dissemination of sensitive data.

We must process, record and monitor a large number of transactions and our operations are highly dependent on the integrity of our technology systems and our ability to make timely enhancements and additions to our systems. System interruptions, errors or downtime can result from a variety of causes, including changes in client use patterns, technological failure, changes to our systems, linkages with third-party systems and power failures and can have a significant impact on our business and operations. Our systems are vulnerable to disruptions from human error, execution errors, errors in models such as those used for asset management, capital planning and management, risk management, stress testing and compliance, employee misconduct, unauthorized trading, external fraud, computer viruses, distributed denial of service attacks, cyber attacks, terrorist attacks, natural disaster, extreme weather, power outage, capacity constraints, software flaws, events impacting key business partners and vendors, and similar events. For example, we and other financial institutions have been the target of various denial of service attacks that have, in certain circumstances, made websites, mobile applications and email unavailable for periods of time. Cloud technologies are critical to the operation of our systems and platforms and our reliance on cloud technologies is growing. We have experienced, and could, in the future, experience cloud service disruptions that lead to delays in accessing data that is important to our businesses. Such disruptions, such as the broad-reaching cloud platform outages that impacted multiple industries in 2024,recent years, can and have hindered our clients’ access to our platforms. It could take an extended period of time to restore full functionality to our technology or other operating systems in the event of an unforeseen occurrence, which could affect our ability to process and settle client transactions. Despite our efforts to identify areas of risk, oversee operational areas involving risk, and implement policies and procedures designed to manage these risks, there can be no assurance that we will not suffer unexpected losses, reputational damage or regulatory action due to technology or other operational failures or errors, including those of our vendors or other third parties.

While we devote substantial attention and resources to the reliability, capacity and scalability of our systems, we occasionally experience extraordinary trading volumes, which have caused and could cause our computer systems to operate at unacceptably slow speeds or even fail, affecting our ability to process client transactions and potentially resulting in some clients’ orders being executed at prices they did not anticipate. Disruptions in service and slower system response times could result in substantial losses, decreased client satisfaction, reputational damage, and regulatory inquiries. We are also dependent on the integrity and performance of securities exchanges, clearing houses, market makers, dealers, custodians, and other intermediaries to which client orders are routed for execution and settlement. System failures and constraints and transaction errors at such intermediaries could result in delays and erroneous or unanticipated execution prices and cancelled orders, cause substantial losses for us and for our clients, and subject us to claims from our clients for damages, and cause reputational harm. We have experienced in 2024recent years technology outages of client websites, mobile applications, and certain corporate technology as a result of technological issues with third-party service providers that we use to support websites and mobile applications used by us and our clients. An internal issue or issues with vendor or industry systems and connectivity could materially impact our operations and ability to service clients, subject us to material losses, and cause reputational harm.

We rely on external service providers to perform certain key technology, cloud infrastructure, processing, servicing, support, and supportcustody functions. These service providers face technology, operating, business, and economic risks, and any significant failures by them, including the improper use or disclosure of our confidential client, employee, or company information, could cause us to incur losses and could harm our reputation. An interruption in or the cessation of service by any external service provider as a result of systems failures, capacity constraints, financial difficulties, natural disasters, extreme weather, power outage, public health crises, political developments, war, international disputes, or for any other reason, and our inability to make alternative arrangements in a timely manner could disrupt our operations, impact our ability to offer certain products and services, and result in financial losses to us. As a result of both broad-reaching and company-specific technology impacts from our third-party service providers, we have experienced in recent years outages of client websites, mobile applications, and certain corporate technology. During the COVID-19 pandemic, we temporarily lost the services from some of our outsourced service providers which contributed to increased client service response and processing times. Switching to an alternative service provider may require a transition period and result in less efficient operations.

We rely on market makers, dealers, securities exchanges, clearing houses, custodians, and other financial intermediaries to execute and settle our clients’ orders. In addition, payments received from market makers and exchanges in connection with the execution of client equity and options trades, and from dealers and other counterparties in connection with securities lending, account for significant revenue. The unwillingness or inability of any of these parties to perform their usual functions coupled with the unavailability of alternative arrangements could result in our clients’ orders not getting executed or settled. This may be due to market volatility, uneconomic trading conditions, capacity constraints, financial constraints, system failures, unanticipated trading halts invoked by securities exchanges, market closures, or other reasons. Our inability to get client orders executed or settled because of the unwillingness or inability of these or similar parties to perform their usual functions could result in client dissatisfaction and reputational harm and expose us to client claims for damages.

Our businesses are subject to the risk that a client, counterparty or issuer will fail to perform its contractual obligations, or that the value of collateral held to secure obligations will prove to be inadequate. While we have policies and procedures designed to manage this risk, the policies and procedures may not be fully effective. Our exposure mainly results from margin lending, clients’ options and futures trading, securities lending, mortgage lending, pledged asset lending, our role as a counterparty in financial contracts and investing activities, and indirectly from the investing activities of certain of the proprietary funds that the Company sponsors.

When clients purchase securities on margin, borrow on lines of credit collateralized by securities, or trade options or futures, we are subject to the risk that clients may default on their obligations when the value of the securities and cash in their accounts falls below the amount of clients’ indebtedness. Our margin, options and futures business has materially increased in recent years as a result of market-driven factors and overall growth of our Ameritradebusiness acquisition,including growth in our trader client base, and market liquidity represents an increased risk. Abrupt changes in securities valuations and the failure of clients to meet margin calls could result in substantial losses, especially if there is a lack of liquidity.

We have exposure to credit risk associated with our investments.investments, Those investmentswhich are subject to price fluctuations. Loss of value of securities can negatively affect earnings if management determines that such loss of value has resulted from a credit loss. The evaluation of whether a credit loss exists is a matter of judgment, which includes the assessment of multiple factors. If management determines that a security’s decline in fair value is the result of a credit loss, an allowance for credit losses on the security will be recorded and a corresponding loss will be recognized in current earnings. Even if a decline in fair value of a security is not determined to have resulted from a credit loss, if we were ever forced to sell the security sooner than intended prior to maturity due to liquidity needs, we would have to recognize any unrealized losses at that time.

Our bank loans primarily consist of First Mortgages, PALs, and HELOCs. Increases in delinquency and default rates, housing and stock price declines, increases in the unemployment rate, and other economic factors, can result in increases in allowances for credit losses and related credit loss expense, as well as write downswrite-downs on such loans.

The Company sponsors a number of proprietary money market mutual funds and other proprietary funds. Although the Company has no obligation to do so, the Company may decide for competitive or other reasons to provide credit, liquidity or other support to our funds in the event of significant declines in valuation of fund holdings or significant redemption activity that exceeds available liquidity. Such support could cause the Company to take significant charges, could reduce the Company’s liquidityliquidity, and, in certain situations, could, with respect to proprietary funds other than money market mutual funds, result in the Company having to consolidate one or more funds in its financial statements. If the Company were to choose not to provide credit, liquidity or other support in such a situation, the Company could suffer reputational damage and its business could be adversely affected.

As a participant in the securities, banking, and financial services industries, we are subject to extensive regulation under federal, state, and foreign laws by governmental agencies, supervisory authorities and SROs. The costs and uncertainty related to complying with such regulations continue to increase. These regulations affect our business operations and impose capital, client protection, and market conduct requirements on us as well as restrictions on the activities that we are allowed to conduct. We become subject to increasing regulatory scrutiny as we grow.grow and expand client offerings.

Regulators have broad discretion in connection with their supervisory and enforcement activities and examination policies, and could prevent us from pursuing our business strategy. Regulators could also limit our ability to grow, including adding assets, launching new products, making acquisitions, and undertaking strategic investments. Our banking regulators could require CSC and/or our banking subsidiaries to hold more capital, increase liquidity, or limit their ability to pay dividends or CSC’s ability to repurchase or redeem shares. Despite our efforts to comply with applicable legal requirements, there are a number of risks, particularly in areas where applicable laws or regulations may be unclear or where regulators could revise their previous guidance. Any enforcement actions or other proceedings brought by our regulators against us or our affiliates, officers or employees could result in fines, penalties, cease and desist orders, enforcement actions, suspension, disqualification or expulsion, or other disciplinary sanctions, including limitations on our business activities, any of which could harm our reputation and adversely affect our results of operations and financial condition.

New legislation, rules, regulations and guidance, or changes in the interpretation or enforcement of existing federal, state, foreign and SRO rules, regulations and guidance, including changes relating to mutual funds, money market funds, standards of conduct with clients, conflicts of interest, regulatory treatment of deposit accounts, CRA, changes in required minimum capital and capital structure, and changes in equity market structure, including rules relating to order routing and order-related revenues, and digital assets may directly affect our operations and profitability or our specific business lines. InThe recentCompany years,anticipates it will begin providing increased access for clients to trade in digital assets including select cryptocurrencies. While some legislative and regulatory details have emerged, laws and regulations related to transactions in these asset types are still pending further development, which could negatively impact our ability to launch these products or services or limit the SEC has proposed a numberprofitability of new rules, such as its equity market structure proposals, that would require sweeping changes in industry operations and practices, thereby increasing uncertainty for markets and investors. The U.S. federal banking agencies have recently proposed rules regarding regulatory capital and long-term debt, and compliancetransacting with these proposed rules may result in increased costs and reduce our net income. In addition, the FDIC recently proposed amending the brokered deposits framework setting forth its conditions for when broker-dealers, such as CS&Co, that place deposits with depository institutions through brokerage sweep arrangements qualify for the primary purpose exception from the definition of a deposit broker.assets. Our profitability could also be affected by rules and regulations that impact the business and financial communities generally, including changes to the laws governing taxation, electronic commerce, client privacy and security of client data. In addition, the rules and regulations could result in limitations on the lines of business we conduct, modifications to our business practices, more stringent capital and liquidity requirements, increased deposit insurance assessments or additional costs and could limit our ability to return capital to stockholders. These changes may also require us to invest significant management attention and resources to evaluate and make necessary changes to our compliance, risk management, treasury, and operations functions.

CSC, together with its banking, broker-dealer, and FCM/FDM subsidiaries, must meet certain capital and liquidity standards, subject to qualitative judgments by regulators about the adequacy of our capital and our internal assessment of our capital needs. The Uniform Net Capital Rule limits the ability of our broker-dealer subsidiary to transfer capital to CSC and other affiliates. New regulatory capital, liquidity, capital planning, and stress testing requirements may limit or otherwise restrict how we utilize our capital, including paying dividends, stock repurchases,repurchases and redemptions, and may require us to increase our capital and/or liquidity or to limit our growth. Failure by either CSC or its banking subsidiaries to meet minimum capital requirements could result in certain mandatory and additional discretionary actions by regulators that, if undertaken, could have a negative impact on us. In addition, failure by CSC or our banking subsidiaries to maintain a sufficient amount of capital to satisfy their stress capital buffer (CSC) or capital conservation buffer (banking subsidiaries) and countercyclical capital buffer requirements would result in restrictions on our ability to make capital distributions and discretionary cash bonus payments to executive officers. Any requirement that we increase our regulatory capital, replace certain capital instruments which presently qualify as Tier 1 Capital, or increase regulatory capital ratios or liquidity, could require us to liquidate assets, deleverage or otherwise change our business and/or investment plans, which may adversely affect our financial results. Issuing additional common stock would dilute the ownership of existing stockholders.

We evaluate potential strategic transactions, including business combinations, acquisitions, and dispositions. Any such transactiontransaction, including our acquisition of Forge, could have a material impact on our financial position, results of operations, or cash flows. The process of evaluating, negotiating, effecting, and integrating any such strategic transaction may divert management’s attention from other business concerns, and might cause the loss of key clients, employees, and business partners. Moreover, integrating businesses and systems may result in unforeseen expenditures as well as numerous risks and uncertainties, including the need to integrate operational, financial, and management information systems and management controls, integrate relationships with clients and business partners, and manage facilities and employees in different geographic areas. The integration process could result in the disruption of ongoing businesses or changes to inconsistent standards, controls, procedures and policies that could adversely affect our ability to maintain relationships with clients, employees, outsourced service providers and vendors. In addition, an acquisition may cause us to assume liabilities or become subject to litigation or regulatory proceedings or require the amortization of a large amount of acquired intangible assets. Further, we may not realize the anticipated benefits from an acquisition, including our acquisition of Forge, in a timely manner or at all, and any future acquisition could be dilutive to our current stockholders’ percentage ownership or to earnings per common share (EPS).

We operate in a highly competitive environment with a broad array of competitors from large integrated banks to venture-capital backedventure-capital-backed private companies. We continually monitor our pricing in relation to competitors and periodically adjust interest rates on deposits and loans, fees for advisory services, expense ratios on mutual funds and ETFs, trade commission rates, and other pricing and incentives to sustain our competitive position. Increased price competition from other financial services firms to attract clients, such as reduced commissions, higher deposit rates, reduced mutual fund or ETF expense ratios, or the increased use of incentives, could impact our results of operations and financial condition.

In addition to historical information, this Annual Report on Form 10-K 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,” “prioritize,” “will,” “may,” “estimate,” “appear,” “could,” “would,” “expand,” “aim,” “maintain,” “continue,” “seek,” and other similar expressions. In addition, any statements that refer to expectations, strategy, objectives, projections, or other characterizations of future events or circumstances are forward-looking statements.

These forward-looking statements, which reflect management’s beliefs, objectives,expectations and expectationsobjectives 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 Business Strategy and Competitive Environment, and Products and Services in Part I – Item 1);

•Net interest revenue, theclient cash allocation behavior, and adjustment of rates paid on client-related liabilities, and client cash realignment activityliabilities (see Results of Operations – Net Interest Revenue in Part II – Item 7);

•Utilization of bank supplementalWholesale funding and expectationsfunding for repayment of outstanding balancesstrategy (see Results of Operations in Part II – Item 7, and Liquidity Risk in Part II – Item 7);

•Management of interest rate risk; modeling and assumptions, the impact of changes in interest rates on net interest margin and revenue, bank deposit account fee revenue, economic value of equity,equity (EVE), and liability and asset duration (see Risk Management in Part II – Item 7);

•Capital management; potential migration of IDA balances to our balance sheet; capital accretion; expectations about capital requirements, including AOCI; long-term operating objective; and uses of capital and return of excess capital to stockholders, including dividends and repurchasesstockholders (see Capital Management – Regulatory Capital Requirements in Part II – Item 7; and Commitments and Contingencies in Part II – Item 8 – Note 15);

•The expected impact of proposed and final rules (see Current Regulatory and Other Developments in Part II – Item 7 and Regulation in Part I – Item 1);

•The likelihood of indemnification and guarantee payment obligations and clients failing to fulfill contractual obligations (see Commitments and Contingencies in Part II – Item 8 – Note 15, and Financial Instruments Subject to Off-Balance Sheet Credit Risk – Client Trade Settlement in Note 1817); and

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

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

•Our ability to access and use supplemental funding sources;

Accumulated Other Comprehensive Income (AOCI): A component of stockholders’ equity which primarily includes unrealized gains and losses on available for sale (AFS) securities and securities transferred from the AFS category to the held to maturity (HTM) category.

Bank deposit account balances (BDA balances): Clients’ uninvested cash balances held off-balance sheet in deposit accounts at unconsolidated third-party financial institutions, pursuant to the 2023 IDA agreement or agreements with other third-party financial institutions. Average BDA balances represent the daily average balance for the reporting period.

Core net new client assets: Net new client assets before significant one-time inflows or outflows, such as acquisitions/divestitures or extraordinary flows (generally greater than $25 billion ($10 billion ($25prior billion beginning into 2025)) relating to a specific client, and activity from off-platform brokered CDs issued by CSB. These flows may span multiple reporting periods.

Interest-bearing liabilities: Primarily includes bank deposits, payables to brokerage clients, payables to brokers, dealers, and clearing organizations, Federal Home Loan Bank (FHLB) borrowings, other short-term borrowings, and long-term debt on which Schwab pays interest.

Investment grade: Defined as a rating equivalent to a Moody’s Investors Service (Moody’s) rating of “Baa3” or higher, or a Standard & Poor’s Rating Group (Standard & Poor’s) or Fitch Ratings, LtdInc. (Fitch) rating of “BBB-” or higher.

(1) 2025 includes net outflows of $20.8 billion from off-platform brokered CDs issued by CSB. 2024 includes net outflows of $14.6 billion from off-platform brokered CDs issued by CSB andCSB, an inflow of $10.3 billion from a mutual fund clearing services clientclient, and an outflow of $1.0 billion from an international relationship. 2023 includes net inflows of $32.5 billion from off-platform brokered CDs issued by CSB and $12.0 billion from a mutual fund clearing services client and outflows of $13.0 billion from an international relationship. 2022 includes outflows of $20.8 billion from certain mutual fund clearing services clients.

(2) Beginning in 2023, 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.

Through an evolving macroeconomic landscape in 2024, Schwab continued its “Through Clients’ Eyes” strategy, striving to meet the needs of our diverse client base, while driving growth across multiple fronts and successfully completing the integration of Ameritrade.Ameritrade Holding LLC and its consolidated subsidiaries (collectively referred to as Ameritrade). Amid easing inflation, the Federal Reserve began in September to cut interest rates for the first time in over four years, reducing the federal funds overnight rate by a total of 100 basis points in the third and fourth quarters. Equity markets were positive for the year in 2024, with the S&P 500® and the NASDAQ Composite® finishing the year higher by 23% and 29%, respectively.

Total expenses excluding interest were $11.9 billion in 2024, down 4% from 2023. This decrease reflected lower restructuring costs, lower acquisition and integration-related costs, and lower regulatory fees and assessments due primarily to a $172 million FDIC special assessment recognized in the fourth quarter of 2023 (see Current Regulatory and Other Developments).2023. These lower expenses were partially offset by higher incentive compensation, higher depreciation and amortization due to continued investment to support growth of the business, and higher other expense. Other expense reflected higher industry fees resulting from the SEC’s May 2024 fee rate increase. Adjusted total expenses (1) were $11.3 billion in 2024, up 2% from 2023. Acquisition and integration-related costs, amortization of acquired intangible assets, and restructuring costs totaled $645 million in 2024, down 55% from 2023, as substantially all of the Company’s costs related to its restructuring were incurred in 2023, and spending for the Ameritrade integration decreased in 2024 as we completed the final integration activities.

Return on average common stockholders’ equity was 15% in 2024, down from 16% in 2023, and return on tangible common equityROTCE (1) (ROTCE) was 35% in 2024, down from 54% in 2023. These changes reflect the benefit of higher net income in 2024 offset by higher average common stockholders’ equity. Average common stockholders’ equity was higher year-over-year due to higher retained earnings as well as higher average AOCI. The increase in average AOCI was driven by lower unrealized losses on our AFS investment securities portfolio and securities transferred in 2022 from AFS to HTM (see Item 8 – Note 21).HTM.

Employing our diligent approach to managing the balance sheet, Schwab supported client-driven growth in margin and bank lending, while reducing our bank supplemental funding in 2024. Total balance sheet assets decreased 3% during the year, though margin lending grew to $83.8 billion at year-end 2024, up 34%, and bank loans increased to $45.2 billion, rising 12% during the year. Principal and interest from our AFS and HTM securities portfolios, along with deceleration of client cash realignment from sweep products to higher-yielding investment solutions, supported a reduction in bank supplemental funding, which includes brokered CDs, FHLB borrowings, and borrowings under repurchase agreements at our banks.funding. Total bank supplemental funding ended 2024 at $49.9 billion, down $29.7 billion, or 37%, from year-end 2023, and down 49% from peak levels in May 2023. Supported by strength of net income, our consolidated Tier 1 Leverage Ratio increased to 9.9% as of December 31, 2024, and our consolidated adjusted Tier 1 Leverage Ratio (1) rose to 6.8%, ending the year within our long-term operating objective of 6.75% - 7.00%.

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

Integration of Ameritrade and Other Restructuring

The Company’s integration of Ameritrade was completed as of December 31, 2024. Over the course of five client transition groups in 2023 and 2024, we converted approximately $1.9 trillion in client assets across more than 17 million client accounts, including 7,000 RIAs, from Ameritrade to Schwab. In May 2024, the Company completed the conversion of the final client transition group from Ameritrade to the Schwab platform. In connection with these transitions, we experienced some expected attrition of client assets from retail accounts and RIAs, though such attrition was below our initial estimates when we announced the acquisition. Throughout the integration, the Company incurred total acquisition and integration-related costs and capital expenditures of approximately $2.5 billion. Acquisition and integration-related costs, which are inclusive of related exit costs, totaled $117 million and $401 million in 2024 and 2023, respectively. Over the course of the integration, we realized annualized run-rate cost synergies of approximately $2.0 billion.

In addition to cost synergies directly related to the integration of Ameritrade, the Company began takingtook incremental actions in 2023 and 2024 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 incurred total exit and related costs, primarily related to employee compensation and benefits and facility exit costs, of approximately $500 million. ActionsSubstantially all of these costs were recognized in 2023 and actions under the plan have beenwere completed as of December 31, 2024. Refer to Results of Operations – Total Expenses Excluding Interest, Non-GAAP Financial Measures, and Item 8 – Note 16 for additional information.

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 advisorRIA channels, along with bank deposits) currently exceeds $85$90 trillion, which means the Company’s $11.77$13.08 trillion in client assets leaves substantial opportunity for growth. Our strategy is based on the principle that developing trusted relationships will translate into more assets from both new and existing clients, ultimately driving more revenue, and along with expense discipline and thoughtful capital management, will generate earnings growth and build long-term stockholder value.

•The Company’s rolloutspot ofcrypto trading in select cryptocurrenciesoffer (see Overview in Part I – Item 2);

•The integration of Forge Global Holdings, Inc. and its private market capabilities (see Overview in Part I – Item 2 and Business Acquisition in Part I – Item 1 – Financial Information – Notes to Condensed Consolidated Financial Statements (Item 1) – Note 3);

•Net interest revenue, client cash allocation behavior,allocation, and adjustment of rates paid on client-related liabilities (see Results of Operations in Part I – Item 2);

•Capital management; long-term operating objective; and uses of capital and return of excess capital to stockholders (see Capital Management in Part I – Item 2 and Commitments and Contingencies in Item 1 – Note 11);

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

•The outcome and impact of legal proceedings and regulatory matters (see Legal Proceedings in Part II – Item 1, and Commitments and Contingencies in Item 1 – Note 11, and Legal Proceedings in Part II – Item 111).

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

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

Management focuses on several client activity and financial metrics in evaluating Schwab’s financial position and operating performance. Results for the second quarter and first quartersix months of 2026 and 2025 are as follows:

(1) The second quarter and first quartersix months of 2026 and 2025 include net outflows of $0.1$1.1 billion and $5.3$1.2 billion, respectively, from off-platform brokered certificates of deposit (CDs) issued by CSB. The second quarter and first six months of 2025 include net outflows of $6.7 billion and $12.0 billion, respectively, from off-platform brokered CDs issued by CSB.

StrongSupported client asset gathering partially offsetby equity market declines,growth asand strong asset gathering, total client assets endedincreased theto first$13.08 quarter of the yeartrillion at $11.77June trillion,30, downup 1%10% from year-end 2025. CoreSchwab attracted core net new assets roseof 2%$119.8 year-over-yearbillion in the first quarter of 2026 to $140.0 billion, which included a $17.5 billion outflow from a planned mutual fund clearing client deconversion. Clients opened 1.3 million new brokerage accounts in the firstsecond quarter of 2026, up 10%49% from the prior-yearsame period in 2025, bringing the total for the first quarter,half of the year to $259.8 billion, up 19% from the first half of 2025. New brokerage accounts were 1.4 million and 2.7 million in the second quarter and first half of 2026, respectively, up 26% and 18% from the same prior-year periods, and active brokerage accounts werereached 39.139.8 million at MarchJune 31,30, 2026, up 6% year-over-year. Clients werecontinued to be highly engaged in the markets to begin the year, as clients’ daily average trades (DATs) rose significantly year-over-year to 9.9 million forthroughout the first quarterhalf of 2026.2026, with DATs reaching 11.9 million and 10.9 million in the second quarter and first six months of 2026, respectively, higher by 57% and 46% from the respective 2025 periods.

Total net revenues rosewere 16%$7.1 year-over-yearbillion toand $13.6 billion in the second quarter and first six months of 2026, respectively, growing 21% and 18% from the same periods in 2025. Net interest revenue was $3.4 billion and $6.5 billion in the firstsecond quarter and first six months of 2026. Net interest revenue totaled $3.1 billion in the firstyear, quarterrespectively, ofhigher 2026,by rising19% 16%and 18% from the prior-year’ssame firstperiods quarter,in which2025, reflectedreflecting growth in margin and bank lending assolutions well asand lower aggregateaverage wholesale borrowings, partially offset by lower yields on floating-rate assets.assets, lower available for sale (AFS) and held to maturity (HTM) securities, and lower segregated cash and investments. Asset management and administration fees weretotaled $1.8 billion and $3.6 billion in the second quarter and first quartersix months of 2026, anrespectively, increaseincreasing of16% 15%from year-over-year,both comparable periods in 2025, due primarily to higher average client assetassets balances,driven reflectingby asset gathering, year-over-year market appreciation, and growth in managed investing solutions, money market funds, and other proprietary fund products.solutions. Trading revenue grewwas 20%$1.2 year-over-yearbillion toand $1.1$2.3 billion in the second quarter and first quarterhalf of 2026, respectively, increasing 28% and 24% from the comparable periods in 2025, reflecting higher order flow revenue and commissions amiddue market volatility andto higher trading volume.volume and mix of trading activity. Bank deposit account fee revenue totaledwas $295$333 million and $628 million in the second quarter and first quartersix months of 2026, higherrespectively, byincreasing 20%35% and 28% from the prior-yearsame period,periods in 2025, due primarily to higher net yields, partially offset by lower average bank deposit account balances (BDA balances).

Total expenses excluding interest were $3.4 billion and $6.7 billion in the firstsecond quarter and first six months of 20262026, wererespectively, $3.3up billion,12% and 8% from the same prior-year periods. For the second quarter and first six months of 2026, adjusted total expenses (1) were $3.2 billion and $6.4 billion, bothrespectively, higherincreasing 11% and 8% from the comparable periods in 2025. These increases in expenses were driven by 5% year-over-year, reflecting strong client engagement and ongoingthe inclusion of Forge Global Holdings, Inc. (Forge) beginning in March 2026, as well as continued investments to support ourin key strategic initiatives including supporting organic growth, new products, and ongoing scale and efficiency efforts. TheThese increasesfactors were primarily attributablecontributed to higher compensation and benefits expenseexpenses, due to annual merit increases andreflecting growth in headcount, including financial consultants and wealth advisors to support our expanding client base,advisors, and higher incentive compensation, higher professional services expenseand resultingoccupancy fromand overallequipment growthexpenses, inand, for the business,quarter-to-date partiallyperiod, offset by lowerhigher industry fees within other expense.

Return on average common stockholders’ equity was 25% and 23% infor the second quarter and first quartersix months of 2026, respectively, up from 19% and 18% from the same periods in the2025. firstThese quarterincreases ofwere the prior year,due primarily as a result ofto growth in net income, which more than offset higher average common stockholders’ equity. Return on tangible common equity (1) was 40%44% inand 41% for the second quarter and first quarterhalf of 2026, increasingrespectively, rising from 35% inand 34% from the firstsame quarter2025 of 2025,periods, as growth in adjusted net income available to common stockholders (1) more than offset growth in average common stockholders’ equity. Average common stockholders’ equity increased as a result of growth in retained earnings and improved average accumulated other comprehensive income (AOCI), partially offset by higher treasury stock due to repurchases of common stock repurchases in 2025 and the first quarterhalf of 2026. The improvement in average AOCI resulted from lower unrealized losses on available for sale (AFS) investment securities, driven by lower market interest rates and lower investment holdings in 2026, and from amortization of losses on securities previously transferred from AFS to heldHTM toand maturitylower (HTM).unrealized losses on AFS securities.

Schwab continued to support our clients’ evolving needs through effective management of the balance sheet management,and financial resources, including supporting sustained demand for margin and bank lending.lending in the first half of 2026. Total balance sheet assets were $493.3$517.3 billion at theJune end of the first quarter of 2026,30, increasing slightly5% from year-end 2025. Client demand for margin loans continuedwas to be strong to start 2026,strong, with marginreceivables loansfrom endingbrokerage clients reaching $122.8 billion at June 30, rising 16% during the firstsecond quarter at $126.7 billion, up 13% from year-end 2025. This growth reflected ongoing demand for margin lending as a result of engagement in the markets and long/short17% strategies implemented by RIA clients, and was supported in part by wholesale funding.year-to-date. Bank loans totaled $60.9$67.0 billion at theJune end30, of2026, rising 16% year-to-date and 10% during the firstsecond quarter, rising 5% from year-end 2025 due toreflecting growth in pledged asset lines (PALs) and first lien residential real estate mortgage loans (First Mortgages.Mortgages).

During the second quarter and first quarter,six months of 2026, the Company repurchased $2.4common stock of $1.0 billion inand common$3.4 stock,billion, respectively, and also increased its common dividend by 19% to $.32 per share.share during the first quarter of the year. During the second quarter, the Company issued $1.5 billion of Series L preferred stock, and redeemed $2.1 billion of Series I preferred stock. Inclusive of both returns of capital and organic capital generation during the quarterfirst half of 2026 from earnings, the Company’s consolidated Tier 1 Leverage Ratio at MarchJune 31,30, 2026 was 8.9%,8.7%, down from 9.3% at year-end 2025. Our consolidated adjusted Tier 1 Leverage Ratio (1) was 6.8% at Marchthe 31,end of the second quarter, down from 7.1% at year-end 2025, and within our long-term operating objective of 6.75% to- 7.00%. In addition, subsequent to quarter-end, the Company issued $1.5 billion of Series L preferred stock on April 22, 2026.

Acquisition of Forge Global Holdings, Inc.

On March 2, 2026, Schwab completed its acquisition of Forge Global Holdings, Inc. (Forge),Forge, an operator of a leading private market platform and trading marketplace, for $636 million of cash and other consideration. Integration work is underway,progressing, and we anticipate that incorporating Forge’s private company investment capabilities will enhance our ability to meet the evolving needs of investors across our growing client base. Our condensed consolidated financial statements include the financial condition and results of operations for Forge beginning on March 2, 2026. See also Item 1 – Note 3.

In March 2026, the U.S. federal banking agencies issued a notice of proposed rulemaking regarding amendments to the regulatory capital rules. The March 2026 proposal would replace the banking agencies’ 2023 proposal, and, among other things would require us to include AOCI in regulatory capital under a revised standardized approach, subject to a five-year phase-in period. The comment period for the proposed rules endsended on June 18, 2026. The Company’s capital management for consolidated CSC and our banking subsidiaries incorporates measures that are inclusive of AOCI, and we do not anticipate that the proposed rules will have a material impact to the Company’s business, financial condition, or results of operations.

During the first quarterhalf of 2026, the Federal Reserve maintainedheld the upper bound of the target overnight rate unchanged at 3.75%. In 2025, the Federal Reserve maintained the upper bound of the target overnight rate at 4.50% before reducing the rate by 25 basis points in the third quarter and an additional 50 basis points across two cuts in the fourth quarter of 2025.

Schwab’s average interest-earning assets increased 2%5% and 4% in the firstsecond quarter and first six months of 20262026, respectively, from the same periodperiods in 2025, reflectingprimarily due to growth in margin lending, which was supported in part by higherwholesale payables to brokerage clients and payables to brokers, dealers, and clearing organizations,funding, as well as increases in bank lending and cash and investments segregated,lending, partially offset by lower balances of AFS and HTM securities.securities and cash and investments segregated. Client demand for margin and bank lending remainedcontinued strongto grow in the firstsecond quarter and first six months of 2026,2026. reflectingReceivables clientfrom engagementbrokerage andclients, growthwhich inare long/shortprimarily strategiescomprised implementedof bymargin RIA clients. Margin loan balancesloans, ended the firstsecond quarter at $126.7$122.8 billion, increasing 52%48% and 17% from MarchJune 30, 2025, and December 31, 2025, including $21.3 billion related to long/short strategies implemented by RIA clients.respectively. Total bank loans finished the firstsecond quarter of 2026 at $60.9$67.0 billion, higher by 29%33% and 16% from MarchJune 30, 2025 and December 31, 2025, respectively, due primarily to growth in PALs and First Mortgages.

Client cash activity during the second quarter and first quartersix months of 2026 reflected seasonality, organic growth from asset gathering, and client asset allocation decisions against a backdrop of increased market volatility.decisions. Bank sweep deposits and payables to brokerage clients increased by a total of $42.1$42.7 billion, or 14%, from MarchJune 31,30, 2025 to the end of the firstsecond quarter of 2026.2026 and $3.6 billion, or 1%, from December 31, 2025. Clients’ use of long/short strategies is presented on a net basis on the condensed consolidated balance sheet. While timing differences can arise between long and short positions, these strategies typically result in limited direct increases to assets and liabilities due to netting in the clients’ accounts.

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

(1) Beginning in the fourth quarter of 2025, average balances of client margin loans and short credits related to certain client long/short strategies from which the Company earns a fixed net yield are excluded from interest-earning assets and funding sources. PriorAlso periodbeginning amountsin the fourth quarter of 2025, related interest revenue and expense were moved from receivables from brokerage clients and payables to brokerage clients, respectively, to other interest revenue and other interest expense, respectively. Amounts and average yields have been reclassified and recalculated for 2025 periods to reflect thisthese change.changes. Average margin loans related to these client strategies totaled $14.1$33.1 billion and $235$23.7 billion for the three and six months ended June 30, 2026, respectively, compared to $884 million and $562 million for the threesame monthsperiods endedin March 31, 2026 and 2025, respectively.2025. Average short credits related to these client strategies totaled $14.4$34.3 billion and $237$24.5 billion for the three and six months ended June 30, 2026, respectively, compared to $898 billion and $569 million for the threesame months ended March 31, 2026 and 2025, respectively. Interest revenue and expense related to these client strategies are presentedperiods in other interest revenue and other interest expense, respectively.2025.

Net interest revenue increased $438$535 million, or 16%,19%, and $973 million, or 18%, in the second quarter and first quartersix months of 2026, respectively, compared to the same periodperiods in 2025. ThisThese increaseincreases waswere primarily due to growth in margin and bank lending, lower aggregate balances ofaverage wholesale funding,borrowings, and lower average rates paidyields on most funding sources, partially offset by lower yields on floating-rate assets due to lower market ratesrates, and alower decreasebalances inof AFS and HTM securities.securities and cash and investments segregated. Securities lending revenue increased in the second quarter and first six months of 2026, reflecting growth in fees received for securities borrowed transactions to facilitate certain client short sales related to long/short strategies, partially supported by growth in securities loaned.

Net interest margin increased to 2.88%3.00% and 2.94% in the firstsecond quarter and first six months of 20262026, respectively, compared to 2.53%2.66% and 2.59% during the same periodperiods in 2025, asprimarily due to the growth in margin and bank lending, along with the reduced aggregate use of wholesale funding and lower rates paid on most funding sourcessources, which more than offset lower yields on floating-rate assets due to lower market interest rates.

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

Asset management and administration fees increased by $229$255 million, or 15%,16%, and $484 million, or 16%, in the firstsecond quarter and first six months of 20262026, respectively, compared to the same periodperiods in 2025. ThisThese increaseincreases waswere primarily a result of continued growth in fee-based managed investing solutions and SchwabMutual moneyFund market funds,OneSource®, as well as growth in MutualSchwab Fundmoney OneSource®,market funds, and Schwab equity and bond funds, ETFs, and CTFs. This growth was driven primarily by higher client asset balances, reflecting year-over-year equity market appreciation, the Company’s asset gathering, and net flows into managed investing solutions, which more than offset equity market declines experienced in the first quarter of 2026.

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 49% and 50% of the asset management and administration fees earned in the second quarter and first six months of 2026, respectively, compared with 50% in both the firstsecond quarter and first six months of 2026 and 2025:

Trading revenue increased $181$263 million, or 20%,28%, and $444 million, or 24%, in the firstsecond quarter and first six months of 20262026, respectively, compared to the same periodperiods in 2025, driven by an increase in order flow revenue,revenue which resulted from market volatility andreflecting higher clientrates options tradingand volume, as well as changes in the mix of equityclient securitiestrading trading.activity. Commissions revenue increased primarilyduring duethe tosecond higherquarter client trading volume.and

Bank deposit account fees increased $86 million, or 35%, and $136 million, or 28%, in the second quarter and first six months of 2026, respectively, compared to the same periods in 2025, primarily due to an increase in average net yield and decreases in the amount paid to clients as a result of lower interest rates and in other applicable fees paid. This was partially offset by lower average BDA balances, which reduced the base on which bank deposit account fees are earned. The decrease in average BDA balances in the second quarter and first quartersix months of 2026 compared to the same periodperiods in 2025 was primarily due to the transfer of $1.1$3.0 billion of BDA balances to Schwab’s balance sheet during the first threesix months of 2026 and $6.7 billion of BDA balances transferred in the prior year after September 10, 2025, as well as client cash allocation decisions. Transfers of BDA balances to Schwab’s balance sheet result in lower balances upon which bank deposit account fee revenue is earned but provide a source of funding to invest in interest-earning assets or reduce reliance on borrowings to increase net interest revenue.

Average net yield increased in the second quarter and first quartersix months of 2026 compared to the same periodperiods in 2025 due to an increase in the average net yield on fixed-rate BDA balances, which was partially offset by decreases in the average amount of fixed-rate and floating-rate BDA balances and in the net yield on floating-rate BDA balances. The percentages of BDA balances designated as fixed-rate and floating-rate obligation amounts as of MarchJune 31,30, 2026 were 81%85% and 19%,15%, respectively.

AtOther revenue increased $82 million, or 32%, and $67 million, or 14%, in the endsecond quarter and first six months of February2026, respectively, compared to the same periods in 2025. The increase in the second quarter of 2026 compared to the same period in 2025 was largely driven by higher industry fees. Effective April 4, 2026, the SEC announced that effective April 4, 2026, it would increaseincreased the fee rate applicable to most securities transactions from zero, which hashad been in effect since May 14, 2025. This change will result in higher industry fees in other revenue and a corresponding increase in other expense after the effective date, resulting in no impact to net income. The timing of the increase in the fee rate resulted in only an incremental net increase in industry fees in the first six months of 2026 compared to the same period in 2025.

Expenses excluding interest increased $150$355 million, or 5%,12%, and $505 million, or 8%, in the second quarter and first quartersix months of 2026, respectively, compared to the same periodperiods in 2025. Adjusted total expenses, which excludes acquisition and integration-related costs and amortization of acquired intangible assets, increased $13711% million,and or 5%,8% in the firstsecond quarter and first six months of 20262026, respectively, compared to the same periodperiods in 2025. See Non-GAAP Financial Measures for further details and a reconciliation of such measures to GAAP reported results. The Company’s first quarter 2026 results include expenses related to Forge subsequent to our March 2, 2026 acquisition (see also Item 1 – Note 3). Acquisition and integration-related costs related to Forge in the first quarter of 2026 totaled $11 million; there were no acquisition and integration-related costs in the first quarter of 2025.

Total compensation and benefits expense increased in the second quarter and first quartersix months of 2026 compared to the same periodperiods in 2025, primarily due to annual merit increases and growth in headcount, including growth in financial consultants and wealth advisors and the acquisition of Forge, higher incentive compensation,compensation driven by the Company’s financial performance, and higher other employee-related costs. Compensation and benefits included acquisition and integration-related costs of $26 million in the second quarter and first six months of 2026.