Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
FORWARD-LOOKING STATEMENTS
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 expectations and objectives as of the date hereof, are based on the best judgment of Schwab’s senior management. These statements relate to, among other things:
• 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);
• Industry and competitive trends including artificial intelligence, digital assets, private company securities and other alternative investments;
• The Company’s plan to provide increased access for clients to trade in digital assets including select cryptocurrencies (see Products and Services in Part I – Item 1);
• The acquisition and integration of Forge and its private markets capabilities (see Business Acquisition in Part I – Item 1; Overview in Part II – Item 7, and Results of Operations in Part II – Item 7);
• Capital expenditures and expense management (see Results of Operations in Overview and Results of Operations – Total Expenses Excluding Interest in Part II – Item 7);
• Net interest revenue, client cash allocation behavior, and adjustment of rates paid on client-related liabilities (see Results of Operations – Net Interest Revenue in Part II – Item 7);
• Wholesale funding and funding strategy (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 (EVE), and liability and asset duration (see Risk Management in Part II – Item 7);
• Sources and uses of liquidity (see Liquidity Risk in Part II – Item 7);
• Capital management; long-term operating objective; and uses of capital and return of excess capital to stockholders (see Capital Management 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 expected impact of new accounting standards not yet adopted (see Summary of Significant Accounting Policies in Part II – Item 8 – Note 2);
• 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 – Note 17); and
• The outcome and impact of legal proceedings and regulatory matters (see Commitments and Contingencies in Part II – Item 8 – Note 15, and Legal Proceedings in Part I – Item 3).
Achievement of these expectations and objectives is subject to certain risks and uncertainties that could cause actual results to differ materially. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Annual Report on Form 10-K 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 economic and market conditions, including the level of interest rates, equity market valuations and volatility;
• The impact of new and emerging technologies;
• Our ability to attract and retain clients, develop trusted relationships, and grow client assets;
• Client use of our advisory and lending solutions and other products and services;
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 of client assets, including cash balances;
• Client cash allocations and sensitivity to deposit rates;
• Competitive pressure on pricing, including deposit rates;
• The level and mix of client trading activity, including daily average trades, margin balances, and balance sheet cash;
• 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;
• Management’s ability to close the acquisition of Forge on the anticipated terms and timing;
• Our ability to monetize client assets;
• Our ability to support client activity levels;
• Increased compensation and other costs;
• Real estate and workforce decisions;
• The timing and scope of technology projects;
• Balance sheet positioning relative to changes in interest rates;
• Interest-earning asset mix and growth;
• Our ability to access funding sources;
• Prepayment levels for mortgage-backed securities;
• Balance sheet positioning relative to changes in interest rates;
• Regulatory and legislative developments;
• 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 Risk Factors in Part I – Item 1A.
GLOSSARY OF TERMS
Active brokerage accounts: Brokerage accounts with activity within the preceding 270 days.
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.
Asset-backed securities: Debt securities backed by financial assets such as loans or receivables.
Assets receiving ongoing advisory services: Market value of all client assets custodied at the Company under the guidance of an independent advisor or enrolled in one of Schwab’s managed investing solutions at the end of the reporting period.
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.
Basel III: Global regulatory standards on bank capital adequacy and liquidity issued by the Basel Committee on Banking Supervision.
Basis point: One basis point equals 1/100 th of 1%, or 0.01%.
Client assets: The market value, as of the end of the reporting period, of all client assets in our custody, BDA balances, and proprietary products, which includes both cash and securities. Average client assets are the daily average client asset balance for the reporting period.
Client cash as a percentage of client assets: Calculated as the value, at the end of the reporting period, of all money market fund balances, bank deposits excluding brokered CDs issued by CSB, Schwab One ® balances, BDA balances, and certain cash equivalents divided by client assets.
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)
Common Equity Tier 1 (CET1) Capital: The sum of common stock and related surplus net of treasury stock, retained earnings, AOCI, and qualifying minority interests, less applicable regulatory adjustments and deductions. As a Category III banking organization, CSC has elected to exclude most components of AOCI from CET1 Capital.
Common Equity Tier 1 Risk-Based Capital Ratio: The ratio of CET1 Capital to total risk-weighted assets as of the end of the 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 prior to 2025)) relating to a specific client, and activity from off-platform brokered CDs issued by CSB. These flows may span multiple reporting periods.
Customer Protection Rule: Refers to Rule 15c3-3 of the Securities Exchange Act of 1934.
Daily Average Trades (DATs): Includes daily average revenue trades by clients, trades by clients in asset-based pricing relationships, commission-free trades, and allocated trades by investment advisors.
Delinquency roll rates: The rates at which loans transition through delinquency stages, ultimately resulting in a loss. Schwab considers a loan to be delinquent if it is 30 days or more past due.
Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act): Regulatory reform legislation containing numerous provisions which expanded prudential regulation of large financial services companies.
Duration: Duration is typically used to measure the expected change in value of a financial instrument for a 1% change in interest rates, expressed in years.
First Mortgages: Refers to first lien residential real estate mortgage loans.
Full-time equivalent employees: Represents the total number of hours worked divided by a 40-hour work week for the following categories: full-time, part-time, and temporary employees and persons employed on a contract basis.
High Quality Liquid Assets (HQLA): HQLA is defined by the Federal Reserve, but includes assets that are actively traded and readily convertible to cash in times of stress.
Industry Fees: Includes fees collected from clients for certain securities transactions to offset, as applicable, charges assessed on the Company by SROs and foreign governments. Such charges include Section 31 fees, FINRA trading activity fees, options regulatory fees, proprietary index options fees, and foreign transaction tax on American Depositary Receipts.
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.
Interest-earning assets: Primarily includes cash and cash equivalents, cash and investments segregated, receivables from brokerage clients, investment securities, and bank loans on which Schwab earns 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, Inc. (Fitch) rating of “BBB-” or higher.
Liquidity Coverage Ratio (LCR): The ratio of HQLA to projected net cash outflows during a 30-day stress scenario.
Loan-To-Value (LTV) ratio: Calculated as the principal amount of a loan divided by the value of the collateral securing the loan.
Margin loans: Money borrowed against the value of certain stocks, bonds, and mutual funds in a client portfolio. The borrowed money can be used to purchase additional securities or to meet short-term financial needs.
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)
Master netting arrangement: An agreement between two counterparties that have multiple contracts with each other that provides for net settlement of all contracts through a single cash payment in the event of default or termination of any one contract.
Mortgage-backed securities: A type of asset-backed security that is secured by a mortgage or group of mortgages.
Net interest margin: Net interest revenue (annualized for interim periods) divided by average interest-earning assets.
Net new client assets: Total inflows of client cash and securities to Schwab less client outflows. Inflows include dividends and interest; outflows include commissions and fees. Capital gains distributions are excluded.
Net Stable Funding Ratio (NSFR): The ratio of the amount of available stable funding relative to the amount of required stable funding.
New brokerage accounts: All brokerage accounts opened during the period, as well as any accounts added via acquisition.
Nonperforming assets: The total of nonaccrual loans and other real estate owned.
Order flow revenue: Payments received from trade execution venues to which our broker-dealer subsidiary sends equity and option orders.
Pledged Asset Line ® (PAL): A non-purpose revolving line of credit from a banking subsidiary secured by eligible assets held in a separate pledged brokerage account maintained at CS&Co.
Return on average common stockholders’ equity: Calculated as net income available to common stockholders (annualized for interim periods) divided by average common stockholders’ equity.
Risk-weighted assets: Computed by assigning specific risk-weightings to assets and off-balance sheet instruments for capital adequacy calculations.
Tier 1 Capital: The sum of CET1 Capital and additional Tier 1 Capital instruments and related surplus, less applicable adjustments and deductions.
Tier 1 Leverage Ratio: End-of-period Tier 1 Capital divided by adjusted average total consolidated assets for the period.
Trading days: Days in which the markets/exchanges are open for the buying and selling of securities. Early market closures are counted as half-days.
U.S. federal banking agencies: Refers to the Federal Reserve, the Office of the Comptroller of the Currency, the FDIC, and the CFPB.
Uniform Net Capital Rule: Refers to Rule 15c3-1 under the Securities Exchange Act of 1934, which specifies minimum capital requirements that are intended to ensure the general financial soundness and liquidity of broker-dealers at all times.
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. We believe that metrics relating to net new and total client assets, as well as client cash levels and utilization of advisory services, offer perspective on our business momentum and client engagement. Data on new and total client brokerage accounts provides additional perspective on our ability to attract and retain new business. Total net revenue growth, pre-tax profit margin, EPS, return on average common stockholders’ equity, and the consolidated Tier 1 Leverage Ratio provide broad indicators of Schwab’s overall financial health, operating efficiency, and ability to generate acceptable returns. Total expenses excluding interest as a percentage of average client assets is a measure of operating efficiency.
Results for the years ended December 31, 2025, 2024, and 2023 are as follows:
Percent Change 2025-2024
Client Metrics
Net new client assets (in billions) (1)
Core net new client assets (in billions)
Client assets (in billions, at year end)
Average client assets (in billions)
New brokerage accounts (in thousands)
Active brokerage accounts (in thousands, at year end)
Assets receiving ongoing advisory services (in billions, at year end)
Client cash as a percentage of client assets (at year end)
Company Financial Information and Metrics
Total net revenues
Total expenses excluding interest
Income before taxes on income
Taxes on income
Net income
Preferred stock dividends and other
Net income available to common stockholders
Earnings per common share — diluted
Net revenue growth from prior year
Pre-tax profit margin
Return on average common stockholders’ equity
Expenses excluding interest as a percentage of average client assets
Consolidated Tier 1 Leverage Ratio (at year end)
Non-GAAP Financial Measures (2)
Adjusted total expenses
Adjusted diluted EPS
Return on tangible common equity
Adjusted tier 1 leverage ratio (consolidated)
(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, an inflow of $10.3 billion from a mutual fund clearing services client, 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.
(2) See Non-GAAP Financial Measures for further details and a reconciliation of such measures to GAAP reported results.
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)
2025 Compared to 2024
Guided by our “Through Clients’ Eyes” strategy, and with a generally supportive market and engaged clients, Schwab delivered growth in 2025 across multiple client metrics and in our financial results, and we continued to innovate to help our clients achieve their financial goals. Equity markets finished 2025 with significant full-year gains, as the S&P 500 ® rose 16% in 2025, and the NASDAQ Composite ® rose 20% during the year. The Federal Reserve reduced the target federal funds rate by a total of 75 basis points in the third and fourth quarters.
With equity market gains and strong client asset gathering, Schwab’s total client assets reached $11.90 trillion at December 31, 2025, up 18% on the year. Core net new assets for 2025 totaled $519.4 billion, increasing 42% from the prior year, and resulting in an annualized organic growth rate of 5.1%. In 2025, clients opened 4.7 million new brokerage accounts, an increase of 13% from the prior year, and active brokerage accounts totaled 38.5 million as of December 31, 2025, up 6% from year-end 2024. Our clients were highly engaged with the markets in 2025; clients’ DATs were 7.7 million for full-year 2025 and 8.3 million in the fourth quarter, increasing 31% over both the prior year-to-date and fourth-quarter periods.
Schwab’s financial performance in 2025 reflected strong asset gathering, sustained client engagement and equity market appreciation, continued demand for Schwab’s lending offerings and managed investing solutions, as well as reduction of higher-cost funding and balanced expense management. Net income reached $8.9 billion in 2025, rising 49% from 2024, and diluted EPS was $4.65, an increase of 56% over the prior year. Adjusted diluted EPS (1) rose to $4.87 in 2025, higher by 50% from 2024.
Total net revenues increased 22% year-over-year to $23.9 billion in 2025. Net interest revenue was $11.8 billion in 2025, up 28% from 2024, due primarily to lower interest expense from reductions in bank supplemental funding and lower rates on funding sources, as well as growth in margin and bank lending and higher segregated cash and investments, which more than offset lower yields on interest-earning assets due to lower market rates. Asset management and administration fees totaled $6.5 billion in 2025, increasing 14% from 2024, due primarily to higher client asset balances, reflecting market appreciation, asset gathering, and growth in managed investing solutions and money market funds. Trading revenue was $3.9 billion in 2025, rising 20% from 2024, due primarily to higher trading volume. Bank deposit account fee revenue increased to $977 million in 2025, up 34% from the prior year, due primarily to higher net yields, partially offset by lower BDA balances.
Total expenses excluding interest were $12.5 billion in 2025, higher by 5% from 2024, and adjusted total expenses (1) were $12.0 billion in 2025, increasing 6% from the prior year. These increases reflect ongoing investments to support growth of the business and enhance client-serving capabilities while driving incremental efficiencies across the Company. The year-over-year changes in expenses were primarily attributable to higher compensation and benefits and higher professional services expense, due largely to growth in the business and volume-related costs, including higher incentive compensation driven by the Company’s financial performance, partially offset by lower regulatory fees and assessments due to lower FDIC assessments.
Return on average common stockholders’ equity was 21% in 2025, rising from 15% in 2024 as a result of higher net income, which more than offset higher average common stockholders’ equity. Return on tangible common equity (1) (ROTCE) was 38% in 2025, up from 35% in 2024, as growth in adjusted net income available to common stockholders (1) more than offset growth in average common stockholders’ equity. Average common stockholders equity increased primarily as a result of growth in retained earnings and improved average AOCI, partially offset by higher treasury stock due to common stock repurchases in 2025. The improvement in average AOCI was due to lower unrealized losses on AFS investment securities and securities previously transferred from AFS to HTM, reflecting decreases in market interest rates and lower investment holdings in 2025.
Schwab supported strong client demand for margin and bank lending in 2025, while significantly reducing bank supplemental funding to within a range generally consistent with our diversified funding strategy. Balance sheet assets totaled $491.0 billion as of December 31, 2025, higher by 2% from year-end 2024. Principal and interest from our AFS and HTM securities portfolios along with normal client cash behavior supported reduction of bank supplemental funding, which has included brokered CDs, FHLB borrowings, and borrowings under repurchase agreements at our banks. The Company reduced bank supplemental funding in 2025 by $44.8 billion, or 90%, to $5.1 billion at year-end 2025. Client sweep cash trends improved in 2025, with bank sweep deposits and payables to brokerage clients increasing by a total of $36.6 billion, or 12%. Client demand for margin loans increased significantly in 2025, with margin loans ending the year at $112.3 billion, up 34% from year-end 2024 and up 16% during the fourth quarter alone, supported by growth in bank and broker-dealer sweep cash, as well as wholesale funding. The growth in margin lending in 2025 reflects strong client demand and engagement amid rising equity markets and long/short strategies implemented by RIA clients. Bank loans totaled $58.0 billion at year-end 2025, increasing 28% during the year due primarily to growth of PALs and First Mortgages, which ended the year at $26.6 billion and $30.5 billion, respectively.
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 Company returned meaningful excess capital in 2025. Total common stock repurchased during the year amounted to $7.3 billion. In addition, the Company increased its common dividend by 8% to $.27 per share in the first quarter of 2025, and redeemed its Series G preferred stock for $2.5 billion in the second quarter. Inclusive of these capital actions and organic capital generation from net income, the Company’s consolidated Tier 1 Leverage Ratio was 9.3% at year-end 2025, down from 9.9% at December 31, 2024. Our consolidated adjusted Tier 1 Leverage Ratio (1) increased to 7.1% at December 31, 2025 from 6.8% at the prior year-end, driven by net income and improvement in AOCI in 2025.
Planned Acquisition of Forge
On November 6, 2025, Schwab announced that it had entered into a definitive agreement to acquire Forge, operator of a leading private market platform and trading marketplace, in a transaction valued at approximately $660 million. The Company anticipates that incorporating Forge’s private company investment capabilities will enhance Schwab’s ability to meet the evolving needs of investors across our growing client base. The transaction was approved by Forge’s stockholders in January 2026, and is expected to close in March 2026, subject to customary closing conditions, including regulatory approvals.
2024 Compared to 2023
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 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.
Reflecting the strength of equity markets and organic asset gathering, total client assets rose to $10.10 trillion as of year-end 2024, up 19% from year-end 2023. Core net new assets totaled $366.9 billion in 2024, up 20% from 2023, and representing an annualized growth rate of 4.3%. Following the successful completion of our final Ameritrade client conversion in May, our organic growth trends strengthened, and core net new assets for the fourth quarter of 2024 were $114.8 billion, up 51% from the fourth quarter of 2023. We saw strong client engagement in the markets throughout 2024, with acceleration in the fourth quarter; clients’ DATs were 5.9 million in full-year 2024 and 6.3 million in the fourth quarter, increasing 9% and 22%, respectively, from the same periods in 2023. Clients opened 4.2 million new brokerage accounts in 2024, a year-over-year increase of 10%, and active brokerage accounts ended 2024 at 36.5 million, up 5% on the year.
The Company’s financial results in 2024 reflected the impact of positive equity markets, solid asset gathering, sustained client engagement, and improvement in client cash trends. Net income totaled $5.9 billion in 2024, up 17% year-over-year, and diluted EPS was $2.99, an increase of 18% over the prior year. Adjusted diluted EPS (1) was $3.25 in 2024, up 4% from $3.13 in 2023.
Total net revenues rose 4% year-over-year to $19.6 billion in 2024. Net interest revenue was $9.1 billion in 2024, down 3% from 2023, which reflected lower average interest-earning assets and higher rates on funding sources, partially offset by growth in margin and bank lending and lower bank supplemental funding. Client cash realignment activity continued to decelerate in 2024, and principal and interest payments on the AFS and HTM investment securities portfolios supported reductions in bank supplemental funding balances. Asset management and administration fees were $5.7 billion in 2024, increasing 20% from the prior year primarily as a result of growth in money market funds, equity market gains, and growth in managed investing solutions. Trading revenue was $3.3 billion in 2024, up 1% from the prior year, reflecting higher volume and changes in mix of client trading activity. Bank deposit account fee revenue totaled $729 million in 2024, up 3% year-over-year, due primarily to $97 million in breakage fees recognized in 2023, partially offset by lower average BDA balances. BDA balances totaled $87.6 billion at December 31, 2024, down 10% from year-end 2023 primarily resulting from lower client cash allocations.
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. 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.
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)
Return on average common stockholders’ equity was 15% in 2024, down from 16% in 2023, and ROTCE (1) 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.
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. 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 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 took 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. Substantially all of these costs were recognized in 2023 and actions under the plan were completed as of December 31, 2024.
CURRENT REGULATORY AND OTHER DEVELOPMENTS
On June 12, 2025, the SEC withdrew certain notices of proposed rulemaking issued between March 2022 and November 2023, which the Company had been evaluating. The withdrawn proposals included the December 2022 equity market structure rule proposals, “Order Competition Rule” and “Regulation Best Execution”.
On March 3, 2025, the FDIC also withdrew certain notices of proposed rulemaking issued in 2023 and 2024 that the Company had been evaluating, including the July 2024 proposal related to the brokered deposits framework.
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, in conjunction with associated prohibited transaction exemptions (PTEs), subjects broker-dealers who provide non-discretionary investment advice to retirement plans and accounts to a “best interest” standard. The rule was scheduled to take effect September 23, 2024, with a one-year transition period for certain PTE provisions. In July 2024, in two separate industry lawsuits seeking to vacate the rule, federal district court judges stayed effectiveness of the rule pending resolution of litigation. The stay was appealed by the Department of Labor in late 2024, and in November 2025 the Department of Labor formally withdrew its appeal and the stay remains in place.
In November 2023, the FDIC approved a special assessment to recover losses incurred by the DIF to protect uninsured depositors due to the March 2023 closures of two banks. The Company recognized a charge of $172 million in 2023 for its
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)
estimated portion of this special assessment. The FDIC has since provided updates to its estimated losses to recover. The Company has revised its estimates accordingly, resulting in an additional charge of $30 million recognized in 2024 and a subsequent reduction of $32 million recognized in 2025.
In August 2023, the U.S. federal banking agencies issued a proposed rulemaking on long-term debt requirements for certain large banking organizations. Among other things, the proposed rule would require CSC and our banking subsidiaries to maintain outstanding minimum levels of eligible long-term debt. The comment period for the proposed rule ended on January 16, 2024 and the rule proposal is subject to further modification. The proposed rule could have a significant impact on the amount of debt that CSC and our banking subsidiaries are required to maintain.
In July 2023, the U.S. federal banking agencies issued a notice of proposed rulemaking with amendments to the regulatory capital rules. Among other things, the proposed rules 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, phased in over a three-year transition period. The comment period for the proposed rules ended on January 16, 2024. The Company’s capital management for consolidated CSC and our banking subsidiaries now incorporates measures that are inclusive of AOCI. See Capital Management for additional information.
RESULTS OF OPERATIONS
Total Net Revenues
The following table presents a comparison of revenue by category:
Year Ended December 31,
Percent Change
Amount
Total Net
Revenues
Amount
Total Net
Revenues
Amount
Total Net
Revenues
Net interest revenue
Interest revenue
Interest expense
Net interest revenue
Asset management and administration fees
Mutual funds, ETFs, and CTFs
Managed investing solutions
Other
Asset management and administration fees
Trading revenue
Commissions
Order flow revenue
Principal transactions
Trading revenue
Bank deposit account fees
Other
Total net revenues
Net Interest Revenue
Schwab’s primary interest-earning assets include cash and cash equivalents; cash and investments segregated; margin loans; investment securities; and bank loans. Schwab’s interest-bearing liabilities are comprised of bank deposits and payables to brokerage clients, which together are the Company’s primary funding source; payables to brokers, dealers, and clearing organizations (e.g., securities lending, broker-dealer repurchase agreements); FHLB borrowings; other short-term borrowings (e.g., commercial paper, bank repurchase agreements, other secured borrowings); and long-term debt. Schwab deploys the funds from these sources into the aforementioned interest-earning assets.
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
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)
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. Schwab’s use and the financial impacts of the Company’s various funding sources are dependent on a number of market and client activity factors. Net interest revenue also reflects the impacts of derivatives used to manage interest rate risk. See also Risk Management – Market Risk and Item 8 – Note 16 for additional information.
The Federal Reserve maintained the upper bound of the target overnight rate at 4.50% for most of the first nine months of 2025 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 in 2025 were relatively consistent in aggregate with 2024, while the mix of interest-earning assets shifted year-over-year to reflect higher margin and bank lending, higher cash and investments segregated, and lower balances of AFS and HTM securities. Client demand for margin and bank lending was strong during 2025, reflecting positive equity market performance and client engagement, as margin loan balances rebounded following market volatility in late March and early April, increasing in the third quarter and through the end of 2025. Margin loan balances ended the year at $112.3 billion, increasing 34% from year-end 2024. Total bank loans rose to $58.0 billion at year-end 2025, higher by 28% from December 31, 2024, due primarily to growth in PALs and First Mortgages.
Cash activity during 2025 reflected normal client cash behavior, inclusive of organic growth, and engagement in equity markets. Bank sweep deposits and payables to brokerage clients increased by a total of $36.6 billion, or 12% during 2025. Principal and interest payments on AFS and HTM securities, as well as transfers of $6.7 billion of BDA balances to our balance sheet (see Results of Operations – Bank Deposit Account Fees and Item 8 – Note 15), supported paydowns in bank supplemental funding of $44.8 billion, or 90% during 2025.
The Federal Reserve maintained the upper bound of the target overnight rate at 5.50% through most of 2024 before reducing the rate by 50 basis points during the third quarter and another 50 basis points across two cuts during the fourth quarter of 2024.
Average interest-earning assets decreased $45.6 billion in 2024 from 2023; however, Schwab saw strong client demand for margin and bank lending, which grew by 34% and 12%, respectively. Even as higher interest rates continued for much of the year, the pace of clients’ reallocation of cash from sweep products to higher-yielding investment solutions further decelerated in 2024, particularly in the second half of the year. Bank sweep deposits and payables to brokerage clients increased by a total of $9.8 billion, or 4%, during the third quarter, and $30.1 billion, or 11%, in the fourth quarter of 2024, inclusive of typical seasonal cash inflows near year-end. Deceleration of client cash reallocation activity, along with principal and interest payments on the AFS and HTM securities portfolios, supported a reduction in bank supplemental funding of $14.9 billion, or 23%, during the fourth quarter and $29.7 billion, or 37%, for the full year ended December 31, 2024.
THE CHARLES SCHWAB CORPORATION
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Tabular Amounts in Millions, Except Ratios, or as Noted)
The following table presents net interest revenue information corresponding to interest-earning assets and funding sources on the consolidated balance sheets:
Year Ended December 31,
Average
Balance
Interest
Revenue/
Expense
Average
Yield/
Rate
Average
Balance
Interest Revenue/
Expense
Average
Yield/
Rate
Average
Balance
Interest Revenue/
Expense
Average
Yield/
Rate
Interest-earning assets
Cash and cash equivalents
Cash and investments segregated
Receivables from brokerage clients (1)
Available for sale securities (2)
Held to maturity securities (2)
Bank loans
Total interest-earning assets
Securities lending revenue
Other interest revenue (1)
Total interest-earning assets
Funding sources
Bank deposits (3)
Payables to brokers, dealers, and clearing
organizations
Payables to brokerage clients (1)
Other short-term borrowings
Federal Home Loan Bank borrowings
Long-term debt
Total interest-bearing liabilities
Non-interest-bearing funding sources
Other interest expense (1)
Total funding sources
Net interest revenue
(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. Average margin loans and average short credits related to these client strategies totaled $2.8 billion for the year ended December 31, 2025. Interest revenue and expense related to these client strategies are presented in other interest revenue and other interest expense, respectively. The amounts and average yields for 2025 have been reclassified and recalculated to reflect this change. Prior-year amounts were not impacted by this change.
(2) Amounts have been calculated based on amortized cost. Interest revenue on investment securities is presented net of related premium amortization.
(3) Average balance includes $15.0 billion, $37.4 billion, and $36.0 billion of brokered CDs in 2025, 2024 and 2023, respectively.
Net interest revenue increased $2.6 billion, or 28%, in 2025 from 2024 primarily due to lower balances of bank supplemental funding, lower average rates paid on funding sources, growth in margin and bank lending, and increases in securities lending revenue, partially offset by lower yields on floating-rate assets due to lower market rates. Average interest-earning assets for 2025 decreased slightly compared to 2024. This decrease was primarily due to lower average balances in AFS and HTM securities, as cash inflows from investment securities were used to pay down bank supplemental funding, largely offset by higher balances of cash and investments segregated, growth in margin lending which was supported by higher payables to brokerage clients and payables to brokers, dealers, and clearing organizations, and increased bank lending.
Net interest margin increased to 2.74% in 2025, from 2.12% in 2024, as reduced balances of bank supplemental funding and lower rates paid on funding sources more than offset lower yields on floating-rate assets due to lower market interest rates.
With the paydowns of bank supplemental funding during 2025, the outstanding balance of $5.1 billion as of December 31, 2025 is within a range generally consistent with our diversified funding strategy. See also Risk Management – Liquidity Risk and Item 8 – Notes 12, 13, and 17 for additional information on these and other funding sources.
Net interest revenue decreased $283 million, or 3%, in 2024 from 2023 primarily due to lower average interest-earning assets, higher average rates paid on most funding sources, and lower net interest revenue contributed from securities lending, partially offset by growth in margin and bank lending and lower bank supplemental funding. Average interest-earning assets for 2024 were lower by 10% compared to 2023. This decrease was primarily due to lower average bank sweep deposits, reflecting client cash reallocation and strong client engagement in the equity markets, as well as reduction in bank supplemental funding. The decreases in average interest-earning assets in 2024 were partially offset by growth in margin lending, which was supported by higher payables to brokerage clients and increased securities lending, and growth in bank loans. Net interest margin increased to
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)
2.12% in 2024, from 1.98% in 2023, as improved average yields on interest-earning assets offset higher rates paid across interest-bearing funding sources.
Asset Management and Administration Fees
Asset management and administration fees include mutual fund, ETF, and CTF service fees and fees for other asset-based financial services provided to individual and institutional clients. Schwab earns mutual fund, ETF, and CTF service fees for shareholder services, administration, and investment management provided to its proprietary funds, and recordkeeping and shareholder services provided to third-party funds. Asset management and administration fees are based upon the daily balances of client assets invested in these funds and do not include securities lending revenues earned by proprietary mutual funds, ETFs, and CTFs, as those amounts, net of program fees, are credited to the fund shareholders. Proprietary CTFs may, but generally do not, directly participate in securities lending. The fair values of client assets included in proprietary and third-party mutual funds, ETFs, and CTFs are based on quoted market prices and other observable market data.
We also earn asset management fees for managed investing solutions, which include managed portfolios, specialized strategies, and customized investment advice. Other asset management and administration fees include various asset-based fees, such as trust fees, 401(k) recordkeeping fees, mutual fund clearing fees, and non-balance based service and transaction fees.
Asset management and administration fees vary with changes in the balances of client assets due to market fluctuations and client activity.
The following table presents asset management and administration fees, average client assets, and average fee yields:
Year Ended December 31,
Average
Client
Assets
Revenue
Average
Fee
Average
Client
Assets
Revenue
Average
Fee
Average
Client
Assets
Revenue
Average
Fee
Schwab money market funds
Schwab equity and bond funds, ETFs, and CTFs
Mutual Fund OneSource ® and other NTF funds (1)
Other third-party mutual funds and ETFs (1)
Total mutual funds, ETFs, and CTFs (2)
Managed investing solutions (2) :
Fee-based
Non-fee-based
Total managed investing solutions
Other balance-based fees (3)
Other (4)
Total asset management and administration fees
(1) 2025 and 2023 include transfers from other third-party mutual funds and ETFs to Mutual Fund OneSource ® and other NTF funds.
(2) Average client assets for managed investing solutions may also include the asset balances contained in the mutual fund and/or ETF categories listed above.
(3) Includes various asset-related fees, such as trust fees, 401(k) recordkeeping fees, and mutual fund clearing fees and other service fees.
(4) Includes miscellaneous service and transaction fees relating to mutual funds and ETFs that are not balance-based.
Asset management and administration fees increased by $790 million, or 14%, in 2025 from 2024, due primarily to growth in Schwab money market funds and f ee-based managed investing solutions, as well as growth in Mutual Fund OneSource ® , 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 inflows into managed investing solutions.
Asset management and administration fees increased by $960 million, or 20%, in 2024 from 2023, primarily as a result of higher balances in Schwab money market funds as clients shifted their cash allocations to higher-yielding investment solutions. The increase in asset management and administration fees in 2024 was also due to growth in balances in fee-based managed investing solutions and Mutual Fund OneSource, as a result of strong equity markets and, for managed investing solutions, net inflows of client assets.
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 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. The following funds generated 50%, 49%, and 44% of the asset management and administration fees earned during 2025, 2024, and 2023, respectively:
Schwab Money
Schwab Equity and
Mutual Fund OneSource ®
Market Funds
Bond Funds, ETFs, and CTFs
and Other NTF Funds
Year Ended December 31,
Balance at beginning of period
Net inflows (outflows)
Net market gains (losses) and other (1)
Balance at end of period
(1) 2025 and 2023 include $63.3 billion and $39.8 billion, respectively, of transfers from other third-party mutual funds and ETFs to Mutual Fund OneSource ® and Other NTF Funds.
Trading Revenue
Trading revenue includes commissions, order flow revenue, and principal transactions revenue. Commission revenue is affected by volume and mix of trades executed. Order flow revenue is comprised of payments received from trade execution venues to which our broker-dealer subsidiary sends equity and option orders. Order flow revenue is affected by volume and mix of client trades, as well as pricing received from trade execution venues. Principal transactions revenue is recognized primarily as a result of accommodating clients’ fixed income trading activity, and includes adjustments to the fair value of securities positions held to facilitate such client trading activity. Principal transactions revenue also includes unrealized gains and losses on cash and investments segregated for regulatory purposes.
The following tables present trading revenue, client trading activity, and related information:
Year Ended December 31,
Percent Change
Commissions
Order flow revenue
Options
Equities
Total order flow revenue
Principal transactions
Total trading revenue
Year Ended December 31,
Percent Change
DATs (in thousands)
Product as a percentage of DATs
Equities
Derivatives
ETFs
Mutual funds
Fixed income
Number of trading days
Revenue per trade (1)
(1) Revenue per trade is calculated as trading revenue divided by the product of DATs multiplied by the number of trading days.
Trading revenue increased $657 million, or 20%, in 2025 compared to 2024, driven by an increase in order flow and commission revenue due primarily to higher client trading volume.
Trading revenue increased $34 million, or 1%, in 2024 compared to 2023, driven by an increase in order flow revenue reflecting higher volume and changes in the mix of client trading activity. This increase was offset by a decrease in principal transactions revenue due to lower volume in fixed income trading and lower market interest rates. Commission revenue was relatively flat due to higher volume offset by changes in the mix of client trading activity.
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)
Bank Deposit Account Fees
The Company earns bank deposit account fee revenue from the TD Depository Institutions, in accordance with the 2023 IDA agreement. Bank deposit account fee revenue is presented net of interest paid to clients, and other applicable fees, and is affected by changes in interest rates and the composition of balances designated as fixed- and floating-rate obligation amounts. See Item 8 – Note 15 for additional information.
The following table presents bank deposit account fee revenue and related information:
Year Ended December 31,
Percent Change
Bank deposit account fees
Average BDA balances
Average net yield
Percentage of average BDA balances designated as:
Fixed-rate balances
Floating-rate balances
Bank deposit account fees increased $248 million, or 34%, in 2025 compared to 2024, primarily due to a decrease in the amount paid to clients as a result of lower interest rates. 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 2025 compared to 2024 was primarily due to the transfer of $6.7 billion of BDA balances to Schwab’s balance sheet after September 10, 2025, as well as client cash allocation decisions in 2024 in response to elevated short-term market interest rates through most of 2024. Pursuant to the 2023 IDA agreement, after September 10, 2025, Schwab has broader discretion to withdraw balances, subject to certain constraints, as described in Item 8 – Note 15. 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 2025 compared to 2024 due to an increase in the average amount of floating-rate BDA balances, which earned higher net yields relative to fixed-rate balances. This was partially offset by a decrease in the average net yields earned on both fixed-rate and floating-rate BDA balances compared to 2024. The percentages of BDA balances designated as fixed-rate and floating-rate obligation amounts as of December 31, 2025 were 78% and 22%, respectively.
Bank deposit account fees increased $24 million, or 3%, in 2024 compared to 2023. This increase reflected the impact of breakage fees of $97 million incurred in 2023 as a result of ending other third-party bank arrangements and a decrease in the amount paid to clients due to interest rates declining in the third and fourth quarters of 2024, partially offset by lower average BDA balances. The decrease in average BDA balances in 2024 compared to 2023 was primarily due to client cash allocation decisions in response to higher short-term market interest rates. Average net yield increased in 2024 compared to 2023 due to the breakage fees incurred in 2023 and an increase in the average amount of and average net yield on floating-rate BDA balances, which was partially offset by a decrease in average net yield on fixed-rate BDA balances. The percentages of BDA balances designated as fixed-rate and floating-rate obligation amounts as of December 31, 2024 were 76% and 24%, respectively.
Other Revenue
Other revenue includes industry fees, certain service fees, other gains and losses from the sale of assets, and the provision for credit losses on bank loans.
Other revenue increased $14 million, or 2%, in 2025 compared to 2024, primarily due to higher other service fees and gains recognized on certain equity investments, partially offset by higher losses recognized on sales of AFS securities, higher provision for credit losses on bank loans, and lower industry fees. Effective May 14, 2025, the SEC decreased the fee rate applicable to most securities transactions to zero from the rate in effect since May 22, 2024. This change resulted in lower industry fees in 2025 compared to 2024.
Other revenue increased $34 million, or 5%, in 2024 compared to 2023 primarily due to higher industry fees and lower losses recognized on sales of AFS securities, partially offset by certain lower service and other fees and a smaller release from the provision for credit losses on bank loans. Industry fees increased in 2024 due to higher average SEC fee rates in effect during 2024 compared to 2023. Effective May 22, 2024, the SEC increased its fee rate applicable to most securities transactions from the rate in effect since late February 2023.
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 shows a comparison of total expenses excluding interest:
Percent Change 2025-2024
Compensation and benefits
Salaries and wages
Incentive compensation
Employee benefits and other
Total compensation and benefits
Professional services
Occupancy and equipment
Advertising and market development
Communications
Depreciation and amortization
Amortization of acquired intangible assets
Regulatory fees and assessments
Other
Total expenses excluding interest
Expenses as a percentage of total net revenues
Compensation and benefits
Advertising and market development
Full-time equivalent employees (in thousands)
At year end
Average
Total expenses excluding interest increased $548 million, or 5%, in 2025 from 2024, and decreased $545 million, or 4%, in 2024 from 2023. Adjusted total expenses, which excludes acquisition and integration-related costs, amortization of acquired intangible assets, and restructuring costs, increased $681 million, or 6%, in 2025 from 2024 and $240 million, or 2%, in 2024 from 2023. See Non-GAAP Financial Measures for further details and a reconciliation of such measures to GAAP reported results. We currently anticipate total expenses excluding interest in full-year 2026 will increase approximately 5.5% to 6.5% from 2025. We currently expect the Company’s acquisition of Forge to close in March 2026, and costs related to the operations and integration of Forge would be in addition to the 5.5% to 6.5% expected growth in expenses.
Total compensation and benefits expense increased in 2025 compared to 2024, primarily due to annual merit increases and growth in headcount, higher incentive compensation, and higher other employee-related costs. These increases reflect investments to support growth of the business and enhance client-serving capabilities, as well as higher incentive compensation driven by the Company’s financial performance. Total compensation and benefits decreased in 2024 from 2023 primarily due to restructuring costs recognized in 2023, as well as lower headcount as a result of position eliminations from the restructuring and Ameritrade integration. These decreases were partially offset by higher incentive compensation and annual merit increases. Compensation and benefits included acquisition and integration-related costs of $54 million and $187 million in 2024 and 2023, respectively. Compensation and benefits also included a $34 million benefit in 2024, due to a change in estimated restructuring costs, and included restructuring costs of $292 million in 2023.
Professional services expense increased in 2025 compared to 2024, reflecting overall growth of the business and increased utilization of technology and other professional services. Professional services expense remained consistent in 2024 compared to 2023. Professional services included acquisition and integration-related costs of $36 million and $135 million in 2024 and 2023, respectively.
Occupancy and equipment expense increased in 2025 compared to 2024, primarily driven by higher technology equipment and software costs, as well as building expenses, related to growth of the business, and a benefit related to property taxes reflected in 2024. Occupancy and equipment expense decreased in 2024 from 2023, due to lower technology equipment and software costs, lower property tax expense, and 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 $5 million and $17 million in 2024 and 2023, respectively, and acquisition and integration-related costs of $28 million in 2023.
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)
Advertising and market development expense increased in 2025 compared to 2024, primarily due to higher client promotional spending and digital advertising costs. Advertising and market development expense remained consistent in 2024 compared to 2023, as higher client promotional spending was offset by lower spending on digital advertising.
Communications expense increased in 2025 compared to 2024 primarily due to higher exchange quotation services and proxy-related expenses, reflecting growth in the business, partially offset by lower telecommunications expenses. Communications expense decreased in 2024 compared to 2023 due to lower exchange quotation services expenses.
Depreciation and amortization expense decreased in 2025 compared to 2024 primarily due to lower depreciation on equipment due to abandonment of certain data centers in 2024 related to the integration of Ameritrade, lower software amortization and lower finance lease amortization as a result of terminations in 2024. Depreciation and amortization expense increased in 2024 from 2023 primarily as a result of higher amortization of purchased and internally developed software and higher depreciation of hardware, driven by capital expenditures to support growth of the business.
Amortization of acquired intangible assets was largely consistent in 2025 compared to 2024. Amortization of acquired intangible assets decreased in 2024 from 2023, primarily as certain assets from the Ameritrade acquisition were fully amortized during 2023.
Regulatory fees and assessments decreased in 2025 compared to 2024 primarily due to $32 million of reductions in the FDIC special assessment in 2025 and $30 million of incremental FDIC special assessments in 2024, coupled with lower FDIC deposit insurance assessments primarily due to lower assessment rates driven by a decrease in brokered CDs. Regulatory fees and assessments decreased in 2024 from 2023, primarily due to a $172 million FDIC special assessment recorded during the fourth quarter of 2023, partially offset by $30 million of incremental FDIC special assessments in 2024. See Current Regulatory and Other Developments for discussion of the FDIC special assessments.
Other expense increased in 2025 compared to 2024, due to certain higher costs resulting from growth of the business and increased trading volume. The increase was partially offset by a charge recognized in the second quarter of 2024 for the SEC’s industry-wide review of off-channel communications, and lower industry fees in 2025 compared to 2024 due to lower average fee rates stemming from the SEC decreasing the fee rate applicable to most securities transactions to zero effective May 14, 2025. Other expense increased in 2024 from 2023, primarily due to higher industry fees, partially offset by impairment charges recorded in 2023 related to restructuring. Industry fees increased primarily due to higher average SEC fee rates in effect during 2024 compared to 2023. Effective May 22, 2024, the SEC increased its fee rate applicable to most securities transactions from the rate in effect since late February 2023. Other expense included restructuring costs of $37 million and $181 million in 2024 and 2023, respectively, and acquisition and integration-related costs of $27 million in 2023.
Capital expenditures primarily include capitalized software costs, information technology and telecommunications equipment, and buildings. Total capital expenditures were $602 million, $607 million, and $804 million in 2025, 2024, and 2023, respectively. Capital expenditures decreased 1% in 2025 compared to 2024, primarily due to t he completion of certain construction projects in 2024 resulting in a decrease of land and building-related capital expenditures, offset by higher investment in purchased and internally developed software and telecommunications and information technology equipment. Capital expenditures decreased 25% in 2024 compared to 2023, primarily due to lower purchased and internally developed software as we completed Ameritrade client account transitions in the second quarter of 2024 and completed the Ameritrade integration, partially offset by higher investment in buildings.
Capital expenditures were 2.5% of total net revenues in 2025, slightly lower than our previously disclosed expected range of approximately 3-5% of total net revenues. We anticipate capital expenditures for 2026 to be within our longer term expectation of 3-5% of total net revenues.
Taxes on Income
Taxes on income were $2.6 billion, $1.8 billion, and $1.3 billion for 2025, 2024, and 2023, respectively, resulting in effective tax rates of 22.8% in 2025 and 2024, and 20.6% in 2023. The effective tax rate in 2025 remained consistent with 2024 primarily due to a decrease in the state tax rate and in non-deductible FDIC deposit insurance assessments, offset by an increase in state tax reserves and a decrease in certain tax credits. The increase in the effective tax rate in 2024 from 2023 was primarily due to an increase in state tax expense and the recognition of certain tax credits during 2023, partially offset by additional tax credits recognized and the reversal of tax reserves due to the resolution of certain state tax matters during 2024.
THE CHARLES SCHWAB CORPORATION
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Tabular Amounts in Millions, Except Ratios, or as Noted)
Segment Information
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. Net revenues in both segments are generated from the underlying client assets and trading activity; differences in the composition of net revenues between the segments are based on the composition of client assets, client trading frequency, and pricing unique to each. While both segments leverage the scale and efficiency of our platforms, segment expenses reflect the dynamics of serving millions of clients in Investor Services versus the thousands of RIAs on the Advisor Services platform. See Item 8 – Note 24 for additional segment information.
Financial information for our segments is presented in the following table:
Investor Services
Advisor Services
Total
Percent Change
Percent Change
Percent Change
Year Ended December 31,
Net Revenues
Net interest revenue
Asset management and
administration fees
Trading revenue
Bank deposit account fees
Other
Total net revenues
Expenses Excluding Interest
Compensation and
benefits
Professional services
Occupancy and equipment
Advertising and market
development
Communications
Depreciation and
amortization
Amortization of acquired
intangible assets
Regulatory fees and
assessments
Other
Total expenses
excluding interest
Income before taxes
on income
Net new client assets
(in billions) (1)
(1) In 2025, Investor Services includes net outflows of $20.8 billion from off-platform brokered CDs issued by CSB. In 2024, Investor Services includes net outflows of $14.6 billion from off-platform brokered CDs issued by CSB, an inflow of $10.3 billion from a mutual fund clearing services client, and outflows of $0.7 billion from an international relationship. In 2023, Investor Services includes net inflows of $32.5 billion from off-platform brokered CDs issued by CSB, inflows of $12.0 billion from a mutual fund clearing services client, and outflows of $5.8 billion from an international relationship. In 2024 and 2023, Advisor Services includes outflows of $0.3 billion and $7.2 billion, respectively, from an international relationship.
Segment Net Revenues
Total net revenues increased by 22% for both Investor Services and Advisor Services in 2025 compared to 2024. Net interest revenue increased for both segments primarily due to reductions in bank supplemental funding, lower average rates paid on funding sources, and growth of margin and bank lending balances, partially offset by lower yields on interest-earning assets. Asset management and administration fees increased for both segments primarily due to higher balances in money market funds, Schwab equity and bond funds, ETFs, and CTFs, and Mutual Fund OneSource ® , and, additionally for Investor Services, managed investing solutions. Trading revenue increased for both segments primarily due to higher order flow revenue and commission revenue reflecting higher trading volume. Bank deposit account fees increased for both segments primarily due to improved net yields partially offset by lower average BDA balances. Other revenue was largely flat for Investor Services and increased for Advisor Services, due to higher other service fees and gains recognized on certain equity investments, partially
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)
offset by losses recognized on the sale of AFS securities, higher provision for credit losses on bank loans, and lower industry fees.
Investor Services total net revenues increased by 6% in 2024 compared to 2023. Net interest revenue increased for Investor Services primarily due to growth of margin lending and lower average balances of FHLB borrowings, partially offset by lower average interest-earning assets and higher average rates paid on most funding sources. Trading revenue increased for Investor Services due to higher order flow revenue as a result of increased trading volumes and changes in the mix of trading activity. Other revenue increased for Investor Services primarily due to higher industry fees and lower losses recognized on sales of AFS securities. Advisor Services total net revenues decreased by 3% in 2024 compared to 2023. Net interest revenue decreased for Advisor Services primarily as a result of lower average interest-earning assets and higher average rates paid on most funding sources, partially offset by lower average balances of FHLB borrowings, and trading revenue decreased for Advisor Services, primarily due to lower order flow revenue as a result of changes in the mix of client trading activity. Asset management and administration fees increased for both segments, primarily as a result of higher balances in money market funds and Mutual Fund OneSource ® , and, additionally for Investor Services, fee-based managed investing solutions. Additionally, bank deposit account fees increased for both segments, primarily due to breakage fees incurred that resulted in lower bank deposit account fee revenue in 2023, partially offset by lower BDA balances.
Segment Expenses Excluding Interest
Investor Services and Advisor Services total expenses excluding interest increased by 5% and 4%, respectively, in 2025 compared to 2024. Compensation and benefits expense increased in both segments primarily due to annual merit increases, higher incentive compensation, and higher employee-related costs. Professional services expense increased in both segments due to overall growth of the business and increased utilization of technology and other professional services. Occupancy and equipment expense increased in both segments primarily due to higher technology equipment and software costs related to growth of the business, as well as building expenses, and a property tax benefit reflected in 2024. Regulatory fees and assessments decreased in both segments, primarily due to a reduction in FDIC assessments in 2025 and lower FDIC special assessments from 2024 to 2025.
Investor Services and Advisor Services total expenses excluding interest decreased 2% and 11%, respectively, in 2024 compared to 2023. Compensation and benefits expense decreased in both segments, primarily due to restructuring costs recognized in 2023 and lower headcount as a result of position eliminations, 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, lower property tax expense, and facility closures in 2023 related to restructuring and the Ameritrade integration. For Investor Services, depreciation and amortization expense increased, primarily due to higher amortization of purchased and internally developed software, driven by capital expenditures in 2023 and 2024 to enhance our technological infrastructure to support growth of the business. Regulatory fees and assessments decreased in both segments in 2024, primarily due to an FDIC special assessment recorded during the fourth quarter of 2023, partially offset by additional FDIC special assessments in 2024, as described above. Other expense increased for Investor Services primarily due to higher industry fees, partially offset by impairment charges recorded in 2023 related to restructuring. Other expense decreased for Advisor Services primarily due to charges recorded in 2023 related to and lower clearing charges.
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. Our risk management process is comprised of risk identification and assessment, risk response, risk measurement and monitoring, and risk reporting and escalation. We use periodic risk and control self-assessments, control testing programs, and our internal audit department performs evaluations of our risk management processes and controls.
Culture
A fundamental commitment to strong and effective risk management is core to Schwab’s business strategy. Risk management is an integrated and foundational part of our culture and a duty of every employee. The Board of Directors has approved an Enterprise Risk Management (ERM) Framework that incorporates our purpose, vision, and values, which form the bedrock of our corporate culture and set the tone for the organization. We designed the ERM Framework to enable a comprehensive approach to managing risks encountered by Schwab in its business activities. The ERM Framework incorporates key concepts commensurate with the size, risk profile, complexity, and continuing growth of the Company. While all personnel are
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)
responsible for risk management, the Company’s risk appetite, which is defined as the amount of risk the Company is willing to accept in pursuit of its corporate strategy, is developed by executive management and approved by the Board of Directors.
The Company’s “Through Clients’ Eyes” strategy guides our actions and behaviors at Schwab, and informs our corporate culture, our risk appetite, and approach to risk management. Schwab is committed to the highest standards of ethical conduct and compliance with applicable laws, rules, and regulations, and our Code of Business Conduct and Ethics outlines the ethical conduct that we must demonstrate to deliver our strategy while retaining the trust of our stakeholders.
Risk Governance
Schwab maintains an integrated risk governance structure that directs Company-wide execution of the risk management process. The risk governance structure includes the Board of Directors, designated committees of the Board, and management risk committees.
CSC’s Board of Directors sets the tone and culture of effective risk management. The Board has a Risk Committee that assists the Board in setting the type and level of risks that the Company is willing to take and supports the independence and stature of independent risk management. The Board Risk Committee also assists the Board in overseeing and holding senior management accountable for implementing the Board’s approved risk appetite, maintaining the Company’s risk management and control processes, and managing the Company’s activities in a safe and sound manner, and in compliance with applicable laws and regulations. The Board Risk Committee also approves risk appetite statements and related key risk appetite metrics, key risk policies, and reviews information relating to risk issues from functional areas of corporate risk management, legal, and internal audit.
The Audit Committee of the Board of Directors assists the Board in fulfilling its oversight responsibilities by reviewing the integrity of the Company’s financial statements and financial reporting processes, the qualifications and independence of the independent auditors and performance of the Company’s internal audit function and independent auditors, compliance with legal and regulatory requirements, processes to assess and manage risk exposures, and other matters as directed by the Board. The Compensation Committee of the Board of Directors assists the Board in oversight of compensation of the Company’s directors, executive officers, and other senior officers. The Board Nominating and Corporate Governance Committee assists the Board in its oversight responsibilities regarding Board composition, performance, and developing corporate governance principles, policies, and procedures.
Senior management takes an active role in the risk management process and has developed policies and procedures under which specific business and control units are responsible for risk identification and assessment, risk response, risk measurement and monitoring, and risk reporting and escalation. The Global Risk Committee, which is comprised of senior executives from each client enterprise and support function, is responsible for the oversight of risk management. This includes identifying emerging risks, assessing risk management practices and the control environment, reinforcing business accountability for risk management, supervisory controls and regulatory compliance, supporting resource prioritization across the organization, and escalating significant issues to the Board of Directors. The Chief Risk Officer regularly reports activities of the Global Risk Committee to the Risk Committee of the Board of Directors.
We have established risk metrics and reporting that enable measurement of the impact of strategy execution against risk appetite. The risk metrics, with risk limits and tolerance levels, are established for key risk categories by the Global Risk Committee and its functional risk sub-committees. Functional risk sub-committees focusing on specific areas of risk report to the Global Risk Committee. These sub-committees include the:
• Operational Risk Oversight Committee – provides oversight of and approves operational risk management policies, risk tolerance levels, and operational risk governance processes, and includes sub-committees covering Information Security and Cybersecurity, Technology, Fraud, Third-Party Risk, Data Integrity, and Model Governance;
• Compliance Risk Committee – provides oversight of compliance risk management (inclusive of compliance programs for Schwab’s regulated entities, Anti-Money Laundering/Sanctions, Conduct, Fiduciary, Conflicts of Interest, and Privacy), policies, and risk tolerance levels providing an aggregate view of compliance risk exposure and employee conduct, including subcommittees covering Fiduciary and Conflicts of Interest Risk;
• Financial Risk Oversight Committee – provides oversight of and approves credit, market, liquidity, and capital risk policies, limits, and exposures and includes the Liquidity and Capital Subcommittee; and
• New Products and Services Risk Oversight Committee – provides oversight of and approves new products, including the policy, program, and process designed to oversee new products and services risks prior to and post launch.
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)
Senior management created the Incentive Compensation Risk Oversight Committee to provide oversight of incentive compensation risks and achieve sound incentive compensation risk management practices; it reports directly to the Compensation Committee of the Board of Directors.
The Company’s finance, internal audit, legal, and corporate risk management departments assist management and the various risk committees in evaluating, testing, and monitoring risk management.
In addition, the Disclosure Committee is responsible for monitoring and evaluating the effectiveness of our disclosure controls and procedures and internal control over financial reporting as of the end of each fiscal quarter. The Disclosure Committee reports on this evaluation to the Chief Executive Officer and Chief Financial Officer prior to their certification required by Sections 302 and 906 of the Sarbanes Oxley Act of 2002.
Operational Risk
Operational risk arises due to potential inadequacies or failures related to internal processes, people, and systems, or from external events or relationships impacting the Company and/or any of its key business partners and vendors. While operational risk is inherent in all business activities, the Company has established a system of internal controls and risk management practices designed to keep operational risk and operational losses within the Company’s risk appetite. We have specific policies and procedures to identify and manage operational risk and perform periodic testing to evaluate the effectiveness of relevant internal controls. Where appropriate, we manage the impact of operational loss and litigation expense through the purchase of insurance. The insurance program is specifically designed to address our key operational risks and to maintain compliance with local laws and regulations.
Schwab’s operations are highly dependent on the integrity and resilience of our critical business functions and technology systems. To the extent Schwab experiences business or system interruptions, errors or downtime (which could result from a variety of causes, including natural disasters, terrorist attacks, technological failure, cyber attacks, changes to systems, linkages with third-party systems, extreme weather, and power failures), our business and operations could be negatively impacted. To minimize business interruptions and ensure the capacity to continue operations during an incident regardless of duration, Schwab maintains a backup and recovery infrastructure which includes facilities for backup and communications, a geographically dispersed workforce, and routine testing of business continuity and disaster recovery plans and a well-established incident management program. See Part I – Item 1C. Cybersecurity for additional information regarding information security risk, including cybersecurity risk management.
Fraud risk arises from attempted or actual theft of financial assets or other property of any client or the Company. Fraud risk includes internal fraud, or the risk arising from personnel attempting or committing theft of financial assets or other property of any client or the Company. Schwab is committed to protecting the Company’s and its clients’ assets from fraud and complying with all applicable laws and regulations to prevent, detect, and report fraudulent activity. Schwab manages fraud risk through policies, procedures, and controls. We also take affirmative steps to prevent and detect fraud and report, to appropriate authorities, any known or suspected acts of fraud in accordance with existing laws and requirements.
Schwab also faces operational risk when we employ the services of various third parties, including domestic and international outsourcing of certain technology, processing, servicing, and support functions. We manage the exposure to third-party risk and promote a culture of resiliency through internal policies, procedures and controls, and contractual provisions, control standards, ongoing monitoring of third-party performance, and appropriate testing with third-party service providers.
Model risk is the potential for adverse consequences from decisions based on incorrect or misused model outputs and reports. Model uses at Schwab include, but are not limited to, calculating capital requirements for hypothetical stressful environments, estimating interest and credit risk for loans and other balance sheet assets, identifying and preventing fraud and other financial crimes, and providing guidance in the management of client portfolios. Schwab manages model risk, including use of artificial intelligence, through use of policies, standards, and controls which evaluate the conceptual and technical soundness of models used by the Company. Prior to the use of any artificial intelligence, we employ procedures which require cross-functional review from applicable oversight functions. We maintain a model inventory that includes a distinct record and risk rating for each model, and we conduct independent validations, annual reviews, and performance monitoring of the Company’s models.
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)
Compliance Risk
Schwab faces compliance risk which is the potential exposure to legal or regulatory sanctions, fines or penalties, financial loss, or damage to reputation resulting from the failure to comply with laws, regulations, rules, or other regulatory requirements. Among other things, compliance risks relate to the suitability of client investments, consumer protection, conflicts of interest, disclosure obligations and performance expectations for products and services, supervision of employees, the retention of required records, and the adequacy of our controls. The Company and its affiliates are subject to extensive regulation by federal, state, and foreign regulatory authorities, including SROs.
We manage compliance risk through policies, procedures, and controls reasonably designed to achieve and/or monitor compliance with applicable legal and regulatory requirements. These procedures address issues such as conduct and ethics, sales and trading practices, marketing and communications, extension of credit, client funds and securities, books and records, anti-money laundering, privacy, and employment policies.
Privacy risk is the risk of unauthorized collection, use, storage, or sharing of personal information, including data incidents and other mismanagement of personal information. We manage privacy risk through policies, procedures, and controls reasonably designed to achieve and/or monitor compliance with these laws and regulations.
Anti-money laundering/sanctions risk is the risk of legal or regulatory sanctions, fines or penalties, financial loss, or damage to reputation resulting from the failure to comply with the Bank Secrecy Act/Anti-Money Laundering (BSA/AML) and Office of Foreign Assets Control (OFAC)/global sanctions (collectively, “AML”) laws, regulations, rules, or other regulatory requirements. Schwab manages this risk through daily monitoring, a system of internal controls, education and training for appropriate personnel, and developing risk-based procedures for conducting ongoing customer due diligence and complying with beneficial ownership requirements for legal entity customers.
Conduct risk arises from inappropriate, unethical, or unlawful behavior of the Company, its employees or third parties acting on the Company’s behalf that may result in detriment to the Company’s clients, financial markets, the Company, and/or the Company’s employees. We manage this risk through policies, procedures, and a system of internal controls, including personnel monitoring and surveillance. Conduct-related matters are escalated through appropriate channels by the Company’s Corporate Responsibility Officer.
Fiduciary risk is the potential for financial or reputational loss through breach of fiduciary duties to a client. Fiduciary activities include, but are not limited to, individual and institutional trust, investment management, custody, and cash and securities processing. We manage this risk by establishing policy and procedures to ensure that obligations to clients are discharged faithfully and in compliance with applicable legal and regulatory requirements. Business units have the primary responsibility for adherence to the policy and procedures applicable to their business. Guidance and control are provided through the creation, approval, and ongoing review of applicable policies by business units and various risk committees.
Incentive Compensation risk is the potential for adverse consequences resulting from compensation plans that do not balance the execution of our strategy with risk and financial rewards, potentially encouraging imprudent risk-taking by employees. We have implemented risk management processes, including a policy, to identify, evaluate, assess, and manage risks associated with incentive compensation plans and the activities of certain employees, defined as Covered Employees, who have the authority to expose the Company to material amounts of risk.
Credit Risk
Credit risk is the potential for loss due to a borrower, counterparty, or issuer failing to perform its contractual obligations. Our exposure to credit risk mainly results from investing activities in our liquidity and investment portfolios, mortgage lending, margin lending and client option and futures activities, pledged asset lending, securities lending activities, and our role as a counterparty in other financial contracts. To manage the risks of such losses, we have established policies and procedures, which include setting and reviewing credit limits, monitoring credit limits and quality of counterparties, and adjusting margin, PAL, option, and futures requirements for certain securities and instruments.
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 and Investment Portfolios
Schwab has exposure to credit risk associated with its investment portfolios, which include U.S. agency and non-agency mortgage-backed securities, asset-backed securities, corporate debt securities, U.S. agency notes, U.S. Treasury securities, CDs, U.S. state and municipal securities, commercial paper, and foreign government agency securities.
At December 31, 2025, substantially all securities in the investment portfolios were rated 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.
Mortgage Lending Portfolio
The bank loan portfolio includes First Mortgages, HELOCs, PALs (discussed below), and other loans. The credit risk exposure related to loans is actively managed through individual loan and portfolio reviews. Management regularly reviews asset quality, including concentrations, delinquencies, nonaccrual loans, charge-offs, and recoveries. All are factors in the determination of an appropriate allowance for credit losses.
Our residential loan underwriting guidelines include maximum LTV ratios, cash out limits, and minimum Fair Isaac Corporation (FICO) credit scores. The specific guidelines are dependent on the individual characteristics of a loan (for example, whether the property is a primary or secondary residence, whether the loan is for investment property, whether the loan is for an initial purchase of a home or refinance of an existing home, and whether the loan size is conforming or jumbo).
Schwab does not originate or purchase residential loans that allow for negative amortization and does not originate or purchase subprime loans (generally defined as extensions of credit to borrowers with a FICO score of less than 620 at origination), unless the borrower has compensating credit factors. For more information on credit quality indicators relating to Schwab’s bank loans, see Item 8 – Note 7.
Securities and Instrument-Based Lending Portfolios
Collateral arrangements relating to margin loans, PALs, option and futures positions, securities lending agreements, and securities purchased under agreements to resell (resale agreements) include provisions that require additional collateral in the event of market fluctuations. Additionally, for margin loans, PALs, options and futures positions, and securities lending agreements, collateral arrangements require that the fair value of such collateral sufficiently exceeds the credit exposure in order to maintain a fully secured position.
Other Counterparty Exposures
Schwab performs clearing services for all securities transactions in its client accounts. Schwab has exposure to credit risk due to its obligation to settle transactions with clearing corporations, mutual funds, and other financial institutions even if Schwab’s clients or a counterparty fail to meet their obligations to the Company.
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 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. The Company utilizes 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 8 – Note 16.
Our measurement of interest rate risk involves assumptions that are inherently uncertain and, as a result, cannot precisely estimate the impact of changes in interest rates on net interest revenue, bank deposit account fees, or EVE. Actual results may
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)
differ from simulated results due to balance growth or decline and the timing, magnitude, and frequency of interest rate changes, as well as changes in market conditions and management strategies, including changes in asset and liability mix. Financial instruments are also subject to the risk that valuations will be negatively affected by changes in demand and the underlying market for a financial instrument.
We are indirectly exposed to option, futures, and equity market fluctuations in connection with client option and futures accounts, securities collateralizing margin loans to brokerage customers, and client securities used in securities lending and similar activities. Equity market valuations may also affect the level of brokerage client trading activity, margin borrowing, and overall client engagement with Schwab. Additionally, we earn mutual fund and ETF service fees and asset management fees based upon daily balances of certain client assets. Fluctuations in these client asset balances caused by changes in equity valuations directly impact the amount of fee revenue we earn. Our market risk related to financial instruments held for trading is not material.
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 both proprietary and independent third-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. The Company’s net interest revenue sensitivity analyses utilize 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, cash and investments segregated, 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 are able to take certain actions to manage our net interest spread, depending on competitive factors and market conditions. When liquidity needs exceed our primary sources of funding, the Company will 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 increased use of higher-cost funding sources, 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 analyses assume both statically and dynamically-sized balance sheet composition. Statically-sized balance sheet modeling 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 therefore also conduct dynamically-sized balance sheet compositions as a function of interest rates. Dynamic net interest revenue simulations assume runoff of bank deposit and payables to brokerage client balances is supplemented with wholesale borrowing when needed to fund assets through the simulation horizon. We also conduct similar 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 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 assumes a statically-sized balance sheet with simulated changes to net interest revenue over the next twelve months beginning December 31, 2025 and 2024 of a gradual increase or decrease in market interest rates relative to prevailing market rates at the end of each reporting period:
December 31,
Increase of 200 basis points
Increase of 100 basis points
Increase of 50 basis points
Decrease of 50 basis points
Decrease of 100 basis points
Decrease of 200 basis points
The Company’s simulated incremental increases and decreases in market interest rates had an overall smaller impact on net interest revenue as of December 31, 2025 compared to December 31, 2024. These changes were primarily due to the use of cash flow hedges related to PALs beginning in 2025 and additional hedging of Senior Notes, partially offset by higher concentrations of both margin loan and cash balances.
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 composition of funding sources and typically decreases in periods of rising market interest rates and increases in periods of declining market interest rates. The Company also utilizes derivative hedging instruments such as interest rate swaps in managing its asset and liability duration.
The following table presents the Company’s estimated effective durations, which reflect anticipated future payments, by category:
December 31, 2025
December 31, 2024
In years
Estimated effective duration, exclusive of derivatives:
Consolidated total assets
AFS investment securities portfolio
AFS and HTM investment securities portfolios
Pledged asset lines (1)
Long-term debt CSC Senior Notes
Estimated effective duration, inclusive of derivatives (2) :
Consolidated total assets
AFS investment securities portfolio
AFS and HTM investment securities portfolios
Pledged asset lines (1)
Long-term debt CSC Senior Notes
(1) The duration of PALs was less than 0.1 years at December 31, 2024.
(2) See Item 8 – Note 16 for additional discussion of the Company’s derivatives.
AFS and HTM securities comprised approximately 40% and 48% of the Company’s consolidated total assets as of December 31, 2025 and 2024, respectively. The estimated effective duration of the remaining balance sheet assets, excluding the effect of hedging, in aggregate was less than one year as of both December 31, 2025 and 2024.
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 sensitivity is calculated by subjecting the balance sheet to hypothetical instantaneous shifts in
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 of interest rates. This analysis is highly dependent upon asset and liability assumptions based on historical and certain expected 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 interest rate term structure modeling, prepayment speed modeling for mortgage-backed securities and mortgage loans, and cash flow projections based on interest income, and contractual maturities.
Schwab’s EVE profile is characterized by a more stable asset duration relative to liabilities in both higher and lower interest rate environments. Currently, the EVE exposure to rates increasing or decreasing in a similar magnitude shows that there is greater exposure to rates decreasing.
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 December 31, 2025 and 2024, 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 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, our principal broker-dealer subsidiary; 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 liquidity needs of our broker-dealer subsidiary 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 and the Fixed Income Clearing Corporation (FICC), 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 38.5 million active brokerage accounts. More than 80% of our bank deposits qualified for FDIC insurance as of December 31, 2025. Our clients’ allocation of cash held on our
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)
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.
As a participant in the financial services industry, Schwab relies on access to external financing in the normal course of business. Schwab’s use of external debt facilities may arise from timing differences between cash flow requirements, such as client cash outflows, cash flows from operations, payments on interest-earning assets, movements of cash to meet regulatory brokerage client cash segregation requirements, and general corporate purposes. Rollover risk is the risk that we will not be able to refinance or payoff borrowings as they mature. We maintain policies and procedures necessary to access funding and test borrowing procedures on a periodic basis. We manage rollover risk on borrowings, taking into account expected principal paydowns on our investment and loan portfolios along with expected deposit flows.
The following table describes certain external debt facilities available at December 31, 2025:
Description
Borrower
Outstanding
Available
Maturity of Amounts Outstanding
Weighted-Average Interest Rate on Amounts Outstanding
FHLB secured credit facilities
Banking subsidiaries
February 2026 - March 2026
Federal Reserve discount window
Banking subsidiaries
Repurchase agreements
Banking subsidiaries, CSC, CS&Co
February 2026 - April 2026 (3)
Unsecured uncommitted lines of credit with various external banks
CSC, CS&Co
Unsecured commercial paper
CSC
May 2026 - July 2026
Secured uncommitted lines of credit with
various external banks
February 2026 - May 2026
(1) Amounts shown as available from the FHLB and Federal Reserve facilities represent remaining capacity based on assets pledged as of December 31, 2025. Incremental borrowing capacity may be made available by pledging additional assets, subject to applicable facility terms. See below and Item 8 – Note 13 for additional information.
(2) Secured borrowing capacity is made available based on our borrower’s ability to provide collateral deemed acceptable by each respective counterparty. See below and Item 8 – Note 17 for additional information.
(3) Repurchase agreements outstanding as of December 31, 2025 at CS&Co maintain continuous contractual maturities of 35 days and are included in payables to brokers, dealers, and clearing organizations on the consolidated balance sheets.
(4) Outstanding balance of unsecured commercial paper as of December 31, 2025 represents the gross par value before discount of $32 million.
(5) Secured borrowing capacity is made available based on CS&Co’s ability to provide acceptable collateral to the lenders as determined by the credit agreements.
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 December 31, 2025, the Company had additional investment securities with a par value of approximately $103 billion, or a fair value of approximately $97 billion, available to be pledged to obtain additional capacity. Additional details regarding these facilities is described below.
Amounts available under secured credit facilities with the FHLB are dependent on the value of our First Mortgages, HELOCs, and the 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 and the Standing Repo Facility with the Federal Reserve Bank of New York. 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 and the FICC in repurchase agreements and resale agreements collateralized by investment securities as another source of short-term liquidity and to monetize certain balance sheet assets. CSC maintains standing bilateral repurchase agreements with external banks.
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)
CSC’s ratings for Commercial Paper Notes were P1 by Moody’s, A2 by Standard & Poor’s, and F1 by Fitch at December 31, 2025. CSC has a universal automatic shelf registration statement on file with the SEC, which enables it to issue debt, equity, and other securities.
CS&Co maintains unsecured uncommitted 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. CS&Co also engages with external financial institutions in repurchase agreements collateralized by client margin securities as a source of liquidity. Additionally, CS&Co is able to lend eligible securities held in client brokerage accounts in exchange for cash collateral as a source of short-term liquidity. As of December 31, 2025, liabilities for securities loaned totaled $25.1 billion and are included in payables to brokers, dealers, and clearing organizations on the consolidated balance sheets. At December 31, 2025, $15.0 billion of securities loaned had overnight and continuous remaining contractual maturities; $10.1 billion of securities loaned had contractual maturities of 35-95 days and had a weighted-average interest rate of 3.97%. See Item 8 – Note 17 for additional information on securities lending activities.
CSB issues brokered CDs as a source of funding. As of December 31, 2025, there were $2.0 billion brokered CDs issued by CSB outstanding with maturities ranging from January 2026 to March 2026 and a weighted-average interest of 4.03%.
Cash Flow Activity
The Company’s cash and cash equivalents increased $3.9 billion from year-end 2024 to $46.0 billion at December 31, 2025; cash and cash equivalents, including amounts restricted, increased $4.1 billion from year-end 2024 to $69.7 billion at December 31, 2025. These increases were due to net investing cash inflows of $24.5 billion, which were driven by net inflows of $37.6 billion from our AFS and HTM securities, partially offset by net outflows of $12.8 billion due to strong growth in bank loans. Net cash inflows from operations during 2025 were $9.3 billion. Increases in investing and operating cash flows were partially offset by net financing outflows of $29.7 billion, primarily due to paydowns of FHLB borrowings and other short-term borrowings by a net total of $14.0 billion, repurchases of common and nonvoting common stock for $7.3 billion, and the redemption of Series G preferred stock for $2.5 billion. Additionally, net financing outflows related to decreases in bank deposits during 2025 were $3.4 billion, primarily due to a decrease of $25.7 billion in brokered CDs, partially offset by a $21.8 billion increase in deposits swept from brokerage accounts.
The Company’s cash and cash equivalents decreased $1.3 billion from year-end 2023 to $42.1 billion at December 31, 2024; cash and cash equivalents, including amounts restricted, decreased $9.0 billion from year-end 2023 to $65.5 billion at December 31, 2024. These decreases reflected a net reduction of bank supplemental funding balances of $29.7 billion and maturities of long-term debt of $3.7 billion. Bank deposits decreased in 2024 by $30.8 billion, which reflected a net decrease in brokered CDs of $20.6 billion, as well as a $9.7 billion decrease in deposits swept from brokerage accounts due to client cash allocations and engagement with equity markets. The average pace of client cash allocations out of sweep products into higher-yielding investment solutions decreased in 2024. The Company reduced FHLB borrowings and other short-term borrowings by a net total of $10.3 billion. Partially offsetting the decrease in bank deposits and repayment of borrowings, net investing cash inflows from our AFS and HTM securities totaled $40.9 billion in 2024 and net cash inflows from operations totaled $2.7 billion.
Liquidity Coverage Ratio
Schwab is subject to the full LCR rule, which requires the Company to hold 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 – Regulation for additional information. The Company was in compliance with the LCR rule at December 31, 2025, and the table below presents information about our average daily LCR:
Average for the Three Months Ended
December 31, 2025
September 30, 2025
Total eligible HQLA
Net cash outflows
LCR
To support growth in margin loan balances at our broker-dealer subsidiary while meeting our LCR requirements, the Company may utilize wholesale funding sources, such as issuing commercial paper, drawing on secured lines of credit, borrowing under
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)
repurchase agreements, or engaging in securities lending, in addition to capital markets issuances. In managing compliance with our LCR requirements, the broker-dealer subsidiary may also retain client cash balances rather than sweeping such balances to our banking subsidiaries.
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 ASF must be at least 100% of the Company’s 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 December 31, 2025, and the table below presents information about our average NSFR:
Average for the Three Months Ended
December 31, 2025
September 30, 2025
ASF
RSF
NSFR
Long-Term Borrowings
The Company’s long-term debt is primarily comprised of Senior Notes and totaled $22.2 billion and $22.4 billion at December 31, 2025 and 2024, respectively.
The following table provides information about our Senior Notes outstanding at December 31, 2025:
December 31, 2025
Par Outstanding
Maturity
Weighted-Average
Interest Rate (1)
Moody’s
Standard
& Poor’s
Fitch
CSC Senior Notes
Ameritrade Holding LLC Senior Notes
(1) Weighted-average interest rates presented here exclude the impact of derivatives. See Item 1 – Note 16 for information on the Company’s hedging of Senior Notes.
New Debt Issuances
The long-term debt issuances below in 2025 and 2023 were senior unsecured obligations issued by CSC. During 2024, no new long-term debt was issued by the Company. Additional details are as follows:
Issuance Date
Issuance Amount
Maturity Date
Interest Rate
Interest Payable
November 14, 2025
Semi-annually
November 14, 2025
Semi-annually
November 17, 2023
Semi-annually
August 24, 2023
Semi-annually
August 24, 2023
Semi-annually
May 19, 2023
Semi-annually
May 19, 2023
Semi-annually
(1) Interest rates presented are those in effect at December 31, 2025. For additional information regarding future interest rates on fixed-to-floating rate Senior Notes, see Item 8 – Note 13.
Equity Issuances and Redemptions
During 2025, 2024, and 2023, CSC did not issue preferred stock.
On June 2, 2025, the Company redeemed all of the 24,580 outstanding shares of its fixed-rate reset non-cumulative perpetual preferred stock, Series G, and the corresponding 2,457,964 depositary shares. The depositary shares were redeemed at a redemption price of $1,000 per depositary share for a total of $2.5 billion.
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 also Item 8 – Consolidated Statements of Cash Flows, Item 8 – Note 12 for the Company’s bank deposits, Item 8 – Note 13 for the Company’s debt and borrowing facilities, Item 8 – Note 17 for the Company’s securities lending and collateralized financing activities, and Item 8 – Note 19 for the Company’s equity outstanding balances and activity.
Contractual Obligations
Schwab’s principal contractual obligations as of December 31, 2025 include payments on long-term debt; payments on securities lending and wholesale borrowings, including brokered CDs, FHLB borrowings, and other short-term borrowings; lease payments including legally-binding minimum lease payments for leases signed but not yet commenced; credit-related financial instruments, representing our banking subsidiaries’ commitments to extend credit to banking clients, purchase mortgage loans, and fund CRA investments; and purchase obligations for services such as advertising and marketing, telecommunications, hardware- and software-related agreements, and professional services. For information on our contractual obligations for brokered CDs, FHLB borrowings, other short-term borrowings, long-term debt, leases, and credit-related financial instruments, see Item 8 – Notes 12, 13, 14, 15, 16, and 17. As of December 31, 2025, the Company had total short-term purchase obligations of $687 million and total long-term purchase obligations of $613 million.
Schwab enters into guarantees and other similar arrangements in the ordinary course of business. For information on these arrangements, see Item 8 – Notes 6, 7, 11, 13, 15, and 17. Pursuant to the 2023 IDA agreement, certain brokerage client deposits are required to be swept off-balance sheet to the TD Depository Institutions. See Item 8 – Note 15 for additional information.
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, 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 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, balance sheet growth, or declines in asset values, we have adopted a policy to remain well capitalized even in stressed scenarios. Internal guidelines are set, for both CSC and its regulated subsidiaries, to ensure capital levels are in line with our strategy and regulatory requirements. Capital forecasts are reviewed monthly at Asset-Liability Management Committee meetings and regularly at meetings of the Board of Directors. A number of early warning indicators are monitored to help identify potential developments that could negatively impact capital. In addition, we monitor the subsidiaries’ capital levels and requirements. Subject to regulatory capital requirements and any required approvals, any excess capital held by subsidiaries is transferred to CSC in the form of dividends and returns of capital. At the banking subsidiaries, dividends and returns of capital are managed with consideration of minimum tangible common equity and regulatory capital requirements. When subsidiaries have need of additional capital, funds are provided by CSC as equity investments and also as subordinated loans. The details and method used for each cash infusion are based on an analysis of the particular entity’s needs and financing alternatives. The amounts and structure of infusions take into consideration maintenance of regulatory capital requirements, debt/equity ratios, and equity double leverage ratios.
Schwab conducts regular capital stress testing to assess the potential financial impacts of various adverse macroeconomic and company-specific events to which the Company could be subjected. The objective of the capital stress testing is (1) to explore various potential outcomes – including rare and extreme events and (2) to assess impacts of potential stressful outcomes on both capital and liquidity (see also Risk Management – Liquidity Risk for discussion of liquidity stress testing). Additionally, we have a comprehensive Capital Contingency Plan to provide action plans for certain low probability/high impact capital events that the Company might face. The Capital Contingency Plan is issued under the authority of the Financial Risk Oversight Committee and provides guidelines for sustained capital events. It does not specifically address every contingency, but is designed to provide a framework for responding to any capital stress. The results of the stress testing indicate there are two scenarios which could stress the Company’s capital: (1) inflows of balance sheet cash during a period of very low interest rates and (2) outflows of balance sheet cash when other sources of financing are not available and the Company is required to sell assets at a to fund the outflows. The Capital Contingency Plan is reviewed annually and updated as appropriate.
For additional information, see Business – Regulation in Part I – Item 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 Requirements
CSC is subject to capital requirements set by the Federal Reserve and is required to serve as a source of strength for our banking subsidiaries and to provide financial assistance if our banking subsidiaries experience financial distress. Schwab is required to maintain a Tier 1 Leverage Ratio for CSC of at least 4%. Due to the relatively low credit risk of our balance sheet assets and risk-based capital ratios at CSC and CSB that are in excess of regulatory requirements, the Tier 1 Leverage Ratio is the most restrictive capital constraint on CSC’s asset growth.
Our banking subsidiaries are subject to capital requirements set by their regulators that are substantially similar to those imposed on CSC by the Federal Reserve. Our banking subsidiaries’ failure to remain well capitalized could result in certain mandatory and possibly additional discretionary actions by the regulators that could have a direct material effect on the banks. Schwab’s principal banking subsidiary, CSB, is required to maintain a Tier 1 Leverage Ratio of at least 5% to be well capitalized, but seeks to maintain a ratio of at least 6.5%. Based on its regulatory capital ratios at December 31, 2025, CSB is considered well capitalized.
As a supplemental measure of capital, the Company utilizes 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. The Company maintains a long-term operating objective for its consolidated adjusted Tier 1 Leverage Ratio of 6.75% - 7.00% (see Non-GAAP Financial Measures for further details and a reconciliation to GAAP reported results).
The ability of our banking subsidiaries to distribute dividends to CSC is subject to regulatory oversight. Our banking subsidiaries are required to notify, and in certain cases obtain approval from, the Federal Reserve and applicable state banking regulators prior to declaring or paying dividends. For example, the Federal Reserve requires approval to declare or pay dividends that would be in excess of recent net income and retained earnings.
As a broker-dealer, CS&Co is subject to regulatory requirements of the Uniform Net Capital Rule, which are intended to ensure the general financial soundness and liquidity of broker-dealers. These regulations prohibit our broker-dealer subsidiary from paying cash dividends, making unsecured advances and loans to CSC and employees, and repaying subordinated borrowings from CSC, if such payment would result in a net capital amount below prescribed thresholds. At December 31, 2025, CS&Co was in compliance with its net capital requirements.
In addition to the capital requirements above, Schwab’s subsidiaries are subject to other regulatory requirements intended to ensure financial soundness and liquidity. See Item 8 – Notes 19 and 23 for additional information on the components of stockholders’ equity and information on the capital requirements of significant subsidiaries and CSC (consolidated).
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:
December 31,
CSC
CSB
CSC
CSB
Total stockholders’ equity
Less:
Preferred stock
Common Equity Tier 1 Capital before regulatory adjustments
Less:
Goodwill, net of associated deferred tax liabilities
Other intangible assets, net of associated deferred tax liabilities
Deferred tax assets, net of valuation allowances and deferred tax liabilities
AOCI adjustment (1)
Common Equity Tier 1 Capital
Tier 1 Capital
Total Capital
Risk-Weighted Assets
Average Assets with regulatory adjustments
Total Leverage Exposure
Common Equity Tier 1 Capital/Risk-Weighted Assets
Tier 1 Capital/Risk-Weighted Assets
Total Capital/Risk-Weighted Assets
Tier 1 Leverage Ratio
Supplementary Leverage Ratio
(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 most components of AOCI from regulatory capital.
The Company’s consolidated Tier 1 Leverage Ratio decreased to 9.3% at December 31, 2025 from 9.9% at year-end 2024. This decrease reflects returns of excess capital and higher total Company assets, partially offset by organic growth from net income earned during the year. During 2025, the Company repurchased $7.3 billion of total voting and nonvoting common stock, increased its common stock dividend by 8% to $.27 per share, and redeemed its Series G preferred stock for $2.5 billion. CSB’s Tier 1 Leverage Ratio decreased to 11.1% at December 31, 2025 from 11.6% at year-end 2024, primarily as a result of dividends to CSC, partially offset by 2025 net income.
As of December 31, 2025, our adjusted Tier 1 Leverage Ratio (see Non-GAAP Financial Measures for further details and a reconciliation of such measures to GAAP reported results) was 7.1% for CSC (consolidated) and 7.6% for CSB, increasing from 6.8% for CSC (consolidated) and 7.3% for CSB as of year-end 2024. These increases were driven primarily by 2025 net income and improvement in AOCI.
Dividends
Since the initial dividend in 1989, and as of December 31, 2025, CSC has paid 147 consecutive quarterly dividends and has increased the quarterly dividend rate 29 times, resulting in a 19% compounded annual growth rate, excluding the special cash dividend of $1.00 per common share in 2007. While the payment and amount of dividends are at the discretion of the Board of Directors, subject to certain regulatory and other restrictions, CSC currently targets its common stock cash dividend at approximately 20% to 30% of net income.
The Board of Directors of the Company declared a quarterly cash dividend increase per common share during 2025 as shown below:
Date of Declaration
Quarterly Cash Increase Per Common Share
% Increase
New Quarterly Dividend Per Common Share
January 29, 2025
In addition, on January 29, 2026, the Board of Directors of the Company declared a five cent, or 19%, increase in the quarterly cash dividend to $.32 per common share.
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 CSC’s cash dividends paid and per share amounts:
Year Ended December 31,
Cash Paid
Per Share
Amount
Cash Paid
Per Share
Amount
Common and Nonvoting Common Stock (1)
Preferred Stock:
Series D (2)
Series F (3)
Series G (4)
Series H (2)
Series I (2)
Series J (2)
Series K (2)
(1) The Company had no nonvoting common stock outstanding as of the record date for the Company’s 2025 dividends and accordingly, no dividends were paid on nonvoting common stock during the year ended December 31, 2025.
(2) Dividends are paid quarterly.
(3) Dividends are paid semi-annually until December 1, 2027 and quarterly thereafter.
(4) Series G was redeemed on June 2, 2025. Prior to redemption, dividends were paid quarterly. The final dividend was paid on June 2, 2025.
Share Repurchases
On February 12, 2025, TD Group US Holdings LLC, an affiliate of TD Bank, completed a secondary public offering of the Company’s common shares through which TD Group US Holdings LLC sold 133.8 million shares of the Company’s common stock and 31.7 million shares of the Company’s nonvoting common stock, which automatically converted into common stock, for an aggregate amount of $13.1 billion. The Company did not receive any of the proceeds from the sale of shares.
Concurrent with the completion of the secondary offering, and pursuant to a repurchase agreement dated February 9, 2025, the Company repurchased directly from TD Group US Holdings LLC its remaining 19.2 million shares of nonvoting common stock at a price of $77.982 per share for an aggregate repurchase amount of $1.5 billion, which settled on February 12, 2025. The shares of nonvoting common stock automatically converted into common stock upon repurchase and transferred to treasury stock, reducing the number of shares outstanding. These shares were purchased under CSC’s previous $15 billion share repurchase authorization.
Through the completion of the secondary offering and the Company’s repurchase of nonvoting common stock, TD Bank disposed of all of its common shares of CSC and the Company has no remaining nonvoting common stock outstanding.
CSC repurchased an additional 3.9 million shares of its common stock for $351 million under its previous $15 billion share repurchase authorization during the year ended December 31, 2025.
On July 24, 2025, CSC publicly announced that its Board of Directors approved a share repurchase authorization to repurchase up to $20 billion of common stock, replacing the previous and now terminated share repurchase authorization of up to $15 billion of common stock. The new share repurchase authorization does not have an expiration date. During the year ended December 31, 2025, CSC repurchased 58.2 million shares of its common stock under the new authorization for $5.5 billion. As of December 31, 2025, approximately $14.5 billion remained on the new authorization.
There were no repurchases of CSC’s common stock during the year ended December 31, 2024.
Common stock repurchases, net of issuances, are subject to a nondeductible 1% excise tax which is recognized as a direct and incremental cost associated with these transactions. The tax is recorded as part of the cost basis of the treasury stock repurchased, resulting in no impact to the consolidated statements of income.
See Risk Management – Liquidity Risk for discussion of the 2025 redemption of certain of the Company’s preferred stock. There were no repurchases or redemptions of CSC’s preferred stock during the year ended December 31, 2024.
THE CHARLES SCHWAB CORPORATION
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Tabular Amounts in Millions, Except Ratios, or as Noted)
FOREIGN EXPOSURE
At December 31, 2025, Schwab had exposure to non-sovereign financial and non-financial institutions in foreign countries. At December 31, 2025, the fair value of these holdings totaled $10.5 billion, with the top three exposures being to issuers and counterparties domiciled in France at $7.4 billion, the United Kingdom at $1.9 billion, and Japan at $600 million. At December 31, 2024, the fair value of these holdings totaled $10.6 billion, with the top three exposures being to issuers and counterparties domiciled in France at $5.1 billion, the United Kingdom at $2.1 billion, and Canada at $889 million. In addition, Schwab had outstanding margin loans to foreign residents of $4.8 billion and $3.5 billion at December 31, 2025 and 2024, respectively.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Schwab uses the market approach to determine the fair value of certain financial assets and liabilities recorded at fair value, and to determine fair value disclosures. See Item 8 – Notes 2 and 18 for more information on our assets and liabilities recorded at fair value.
CRITICAL ACCOUNTING ESTIMATES
The consolidated financial statements of Schwab have been prepared in accordance with GAAP. Item 8 – Note 2 contains more information on our significant accounting policies made in applying these accounting principles.
While the majority of the revenues, expenses, assets, and liabilities are not based on estimates, there are certain accounting principles that require management to make estimates regarding matters that are uncertain and susceptible to change where such change may result in a material adverse impact on Schwab’s financial position and financial results. These critical accounting estimates are described below. Management regularly reviews the estimates and assumptions used in the preparation of the financial statements for reasonableness and adequacy.
Management has discussed the development and selection of these critical accounting estimates with the Audit Committee of the Board of Directors. Additionally, management has reviewed with the Audit Committee the Company’s significant estimates discussed in this Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Income Taxes
Schwab estimates income tax expense based on amounts expected to be owed to the various tax jurisdictions in which we operate, including federal, state, and local domestic jurisdictions, and immaterial amounts owed to several foreign jurisdictions. The estimated income tax expense is reported in the consolidated statements of income in taxes on income. Accrued taxes are reported in other assets or accrued expenses and other liabilities on the consolidated balance sheets and represent the net estimated amount due to or to be received from taxing jurisdictions either currently or deferred to future periods. Deferred taxes arise from differences between assets and liabilities measured for financial reporting purposes versus income tax reporting purposes. Deferred tax assets are recognized if, in management’s judgment, their realizability is determined to be more likely than not. Uncertain tax positions that meet the more likely than not recognition threshold are measured to determine the amount of benefit to recognize. An uncertain tax position is measured at the largest amount of benefit management believes is more likely than not to be realized upon settlement. In estimating accrued taxes, we assess the relative merits and risks of the appropriate tax treatment considering statutory, judicial, and regulatory guidance in the context of the tax position. Because of the complexity of tax laws and regulations, interpretation can be difficult and subject to legal judgment given specific facts and circumstances.
Changes in the estimate of accrued taxes occur periodically due to changes in tax rates, interpretations of tax laws, the status of examinations being conducted by various taxing authorities, and newly enacted statutory, judicial, and regulatory guidance that impacts the relative merits and risks of tax positions. These changes, when they occur, affect accrued taxes and can be significant to the operating results of the Company. See Item 8 – Note 22 for more information on the Company’s income taxes.
Legal and Regulatory Reserves
Reserves for legal and regulatory claims and proceedings reflect an estimate of probable losses for each matter, after considering, among other factors, the progress of the case, prior experience and the experience of others in similar cases, available defenses, and the opinions and views of legal counsel. In many cases, including most class action lawsuits, it is not possible to determine
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)
whether a loss will be incurred, or to estimate the range of that loss, until the matter is close to resolution, in which case no accrual is made until that time. Reserves are adjusted as more information becomes available. Significant judgment is required in making these estimates, and the actual cost of resolving a matter may ultimately differ materially from the amount reserved. See Item 8 – Note 15 for more information on the Company’s contingencies related to legal and regulatory reserves.
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.
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. Additionally, the Company uses adjusted Tier 1 Leverage Ratio in managing capital, including its use of the measure as its long-term operating objective.
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:
Year Ended December 31,
Total expenses excluding interest (GAAP)
Amortization of acquired intangible assets
Acquisition and integration-related costs (1)
Restructuring costs (2)
Adjusted total expenses (non-GAAP)
(1) Acquisition and integration-related costs for 2024 primarily consist of $54 million of compensation and benefits, $36 million of professional services, and $19 million of depreciation and amortization. Acquisition and integration-related costs for 2023 primarily consist of $187 million of compensation and benefits, $135 million of professional services, $28 million of occupancy and equipment, and $27 million of other expense.
(2) Restructuring costs for 2024 reflect a benefit due to a change in estimate of $34 million in compensation and benefits, offset by $5 million of occupancy and equipment expense and $37 million of other expense. Restructuring costs for 2023 primarily consist of $292 million of compensation and benefits, $17 million of occupancy and equipment, and $181 million of other expense.
Year Ended December 31,
Amount
Diluted EPS
Amount
Diluted EPS
Amount
Diluted EPS
Net income available to common stockholders (GAAP),
Earnings per common share — diluted (GAAP)
Amortization of acquired intangible assets
Acquisition and integration-related costs
Restructuring costs
Income tax effects (1)
Adjusted net income available to common stockholders
(non-GAAP), Adjusted diluted EPS (non-GAAP)
(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.
Year Ended December 31,
Return on average common stockholders’ equity (GAAP)
Average common stockholders’ equity
Less: Average goodwill
Less: Average acquired intangible assets — net
Plus: Average deferred tax liabilities related to goodwill and acquired intangible
assets — net
Average tangible common equity
Adjusted net income available to common stockholders (1)
Return on tangible common equity (non-GAAP)
(1) See table above for the reconciliation of net income available to common stockholders to adjusted net income available to common stockholders (non-GAAP).
December 31, 2025
December 31, 2024
December 31, 2023
CSC
CSB
CSC
CSB
CSC
CSB
Tier 1 Leverage Ratio (GAAP)
Tier 1 Capital
Plus: AOCI adjustment
Adjusted Tier 1 Capital
Average assets with regulatory adjustments
Plus: AOCI adjustment
Adjusted average assets with regulatory adjustments
Adjusted Tier 1 Leverage Ratio (non-GAAP)
