# The Charles Schwab Corporation (NYSE: SCHW) — Narrative Review, FY26Q2

Source filings: Annual Report on Form 10-K for the fiscal year ended December 31, 2025 (accession 0000316709-26-000009, filed February 25, 2026); Quarterly Report on Form 10-Q for the quarter ended June 30, 2026 (accession 0000316709-26-000031, filed August 7, 2026); and Current Reports on Form 8-K as cited below.

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## Business

*From the FY2025 Form 10-K (accession 0000316709-26-000009).*

**What the company is.** The Charles Schwab Corporation (CSC) is a **savings and loan holding company** — not a pure broker. Through its subsidiaries it conducts wealth management, securities brokerage, banking, asset management, custody, and financial advisory services. The principal operating subsidiaries are Charles Schwab & Co., Inc. (CS&Co, incorporated 1971, the broker-dealer), Charles Schwab Bank, SSB (CSB, the principal banking entity), and Charles Schwab Investment Management, Inc. (CSIM, advisor to the Schwab Funds and Schwab ETFs). CSC has three depository institution subsidiaries: CSB and Charles Schwab Premier Bank, SSB (CSPB), both Texas-chartered state savings banks headquartered in Westlake, Texas, and Charles Schwab Trust Bank, a Nevada state-chartered savings bank.

At December 31, 2025 Schwab held **$11.90 trillion in client assets**, 38.5 million active brokerage accounts, 5.7 million workplace plan participant accounts, and 2.2 million banking accounts. Headcount was approximately **33,000 full-time equivalent employees**.

**Two reportable segments**, split by which segment services the client:

- **Investor Services** — retail brokerage, investment advisory, and banking and trust services to individual investors, plus retirement plan and business services to employers. Business units: Retail Investor; Workplace Services (Retirement Plan Services, Retirement Business Services, Stock Plan Services, Designated Brokerage Services); Mutual Fund Clearing Services; and Off-Platform Sales. Relationship tiers run from the Schwab Starter Kit and Stock Slices for new investors up to Schwab Private Client Services ($1–10 million in qualifying assets) and Schwab Private Wealth Services (above $10 million). Advisory minimums start at $5,000; the flagship discretionary program is Schwab Wealth Advisory. Self-directed traders use Schwab Trading Powered by Ameritrade and the thinkorswim suite. FY2025 net revenues: $18,999 million.
- **Advisor Services** — custodial, trading, banking and trust, and support services to independent registered investment advisors (RIAs), independent retirement advisors, and recordkeepers. Schwab is one of the largest RIA custodians in the U.S. Notably, **Schwab charges the RIA and end client no custody fee**; it earns instead on the underlying client assets, predominantly through net interest revenue and asset management and administration fees. Tools include Schwab Advisor Portfolio Connect (free portfolio management), thinkpipes, and iRebal; the segment sponsors the annual IMPACT conference and, from 2025, the membership program Schwab Advisor ProDirect. FY2025 net revenues: $4,922 million.

**How it makes money.** Four principal revenue streams, and the mix matters because it is unusually rate-sensitive for a "brokerage":

| FY2025 revenue line | Amount | % of net revenues |
|---|---|---|
| Net interest revenue | $11,750m | 49% |
| Asset management and administration fees | $6,506m | 27% |
| Trading revenue | $3,921m | 17% |
| Bank deposit account fees | $977m | 4% |
| Other | $767m | 3% |
| **Total net revenues** | **$23,921m** | **100%** |

- *Net interest revenue* is the spread between interest-earning assets (high-quality fixed income securities, margin loans, bank loans) and funding sources. The primary funding source is **uninvested client cash held on balance sheet** as part of the overall client relationship — a structurally cheap deposit base, but one whose size is a client allocation decision, not a management decision.
- *Asset management and administration fees* come from proprietary money market funds, proprietary and third-party mutual funds and ETFs, and fee-based managed investing solutions. Within FY2025: mutual funds/ETFs/CTFs $3,665m, managed investing solutions $2,440m, other $401m.
- *Trading revenue* is commissions ($1,797m), order flow revenue ($1,930m), and principal transactions ($194m). Order flow revenue — payments from execution venues — grew 31% in 2025 and is now the largest component.
- *Bank deposit account fees* arise under the **Second Amended and Restated Insured Deposit Account Agreement (2023 IDA agreement)** with TD Bank USA, N.A. and TD Bank, N.A. Uninvested cash in eligible brokerage accounts is swept **off balance sheet** to the TD Depository Institutions; Schwab provides recordkeeping and support and earns a fee (15 basis points on client cash deposits held there). The agreement runs through July 1, 2034 and requires Schwab to keep insured deposit account balances within a band — after September 10, 2025 withdrawals are at Schwab's discretion subject to a **$60 billion minimum and $90 billion maximum**. Falling below the minimum triggers a nonperformance payment to the TD Depository Institutions.

**Product breadth.** Brokerage (equities, fixed income, margin, options, futures, forex, cash management, money funds, CDs); third-party mutual funds through the Mutual Fund Marketplace including no-transaction-fee funds via Mutual Fund OneSource; proprietary and third-party ETFs; managed portfolios, SMAs and customized advice; third-party alternative investments via Schwab Alternative Investment OneSource and Alternative Investment Select; digital assets (crypto ETPs, options on select crypto ETPs, crypto futures, with expanded direct access from 2026); banking (checking and savings, first lien residential mortgages, HELOCs, and pledged asset lines); and trust services. Schwab Private Issuer Equity Services, introduced in late 2025, serves late-stage private companies ahead of an IPO.

**Strategy and stated advantages.** Management frames the strategy as "Through Clients' Eyes" / "no trade-offs": scale that spreads operating cost over a large client base; operating efficiency and shared infrastructure across brokerage, bank and asset management; an operating structure that combines bank, wealth and asset management with the broker-dealer to deepen relationships and diversify revenue; brand and reputation; service culture; and a stated willingness to disrupt its own practices. Management sizes U.S. investable wealth at **over $80 trillion** (as of the 10-K; the Q2 2026 report raised this estimate to over $90 trillion), against Schwab's own $11.90 trillion — the headroom argument for continued organic growth.

**Business acquisition — Forge.** On November 6, 2025 Schwab announced a definitive agreement to acquire **Forge Global Holdings, Inc.**, operator of a private-market platform and trading marketplace, in a transaction valued at approximately **$660 million**. Forge stockholders approved in January 2026 and closing was expected in March 2026 (see Current quarter, below, for the completed terms).

**Regulation — the defining constraint.** CSC is regulated, supervised and examined by the Federal Reserve and has elected Financial Holding Company treatment. It is a **Category III** banking organization (total consolidated assets between $250 billion and $700 billion, cross-jurisdictional activity under $75 billion); at December 31, 2025 total consolidated assets were approximately $491 billion and cross-jurisdictional activity approximately $31 billion. Category III status carries the standardized-approach risk-based capital rules, a 3.0% minimum supplementary leverage ratio, a stress capital buffer, and — critically — **the option to exclude most components of accumulated other comprehensive income (AOCI) from regulatory capital, which CSC has elected**. Crossing into Category II (a four-quarter average of $700 billion in assets, or $75 billion of cross-jurisdictional activity) would remove that opt-out and add the advanced-approaches framework and annual stress testing.

CSC is subject to the full Liquidity Coverage Ratio and Net Stable Funding Ratio rules, annual CCAR capital-plan submission, company-run and supervisory stress testing, enhanced prudential standards (risk committee, liquidity buffers, single counterparty credit limits), the source-of-strength doctrine, the Volcker Rule, CRA, and the FDIC's brokered-deposit framework — under which cash swept by CS&Co to Schwab's own banks and third-party banks qualifies for the primary purpose exception. In June 2025 CSC received 2025 CCAR results; its calculated stress capital buffer remained below the minimum, leaving it at the **2.5% floor**, effective October 1, 2025. CSB filed an IDI resolution plan with the FDIC by July 1, 2025; the next is due in 2028. CS&Co is registered with the SEC and all fifty states, is a FINRA and MSRB member, and is subject to the Uniform Net Capital Rule. Charles Schwab Futures and Forex LLC is a CFTC-registered FCM/FDM. Foreign operations bring the UK FCA, Hong Kong SFC, Monetary Authority of Singapore, and the PRC Ministry of Finance into scope.

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## Risk factors

*From the FY2025 Form 10-K (accession 0000316709-26-000009), condensed; supplemented by the new cryptocurrency risk disclosure in the Q2 2026 Form 10-Q (accession 0000316709-26-000031).*

### Economic and market

- **Macro, market and geopolitical conditions.** Client asset valuations, trading activity, interest rates and investor engagement are outside management's control. Housing and credit market deterioration and falling securities valuations hit results and capital directly. Equity declines also reduce margin lending demand, a significant source of net interest revenue.
- **Federal Reserve policy.** Target-rate moves and the Fed's own balance sheet management drive net interest revenue, bank deposit account fees, and the market value of the investment portfolio. Rate moves also change client cash allocation, which in turn changes capital requirements and can create liquidity pressure if the shift is sudden.
- **Client cash allocation — the central economic risk.** Client cash funds margin lending, bank deposits, and the securities portfolio. A meaningful reduction in the allocation to cash, a change in its composition, or a transfer away from Schwab reduces income. The company points to its own recent history: the rapid 2022–2023 rate increases produced a sharp decline in sweep cash and a shift into higher-yielding alternatives, forcing extensive use of higher-cost funding and depressing net income.
- **Interest rate direction, both ways.** *Falling* rates compress asset yields faster than funding costs, accelerate mortgage and MBS prepayments, can force money-fund fee waivers (as in 2020–2021), and reduce bank deposit account fee revenue. *Rising* rates raise funding costs, may force deposit repricing or replacement with wholesale funding, and enlarge unrealized losses on the securities portfolio — which the filing notes can itself reduce market or client confidence and prompt asset transfers out. The 2023 IDA agreement's minimum/maximum balance commitments limit Schwab's ability to respond to rate changes. Schwab quantifies this exposure quarterly and hedges it with interest rate swaps; the current magnitudes are in Interest rate sensitivity and hedging, below.
- **Contagion from other financial institutions.** Concerns about peers can restrict liquidity, raise borrowing and capital costs, and — even where the underlying issue does not apply to Schwab — damage its reputation. Sector stress also drives adverse rulemaking: after the 2023 bank failures the agencies proposed rules that would require AOCI inclusion in regulatory capital and minimum eligible long-term debt at CSC and its banks, and the FDIC levied a special assessment. Schwab responded to that regulatory focus by raising capital and revising its long-term operating objective.

### Liquidity

- A significant decrease in liquidity would impair settlement, custody and lending commitments and could itself reduce client confidence, creating a reflexive loop of asset outflows. Specific aggravators named: timing mismatches between brokerage settlement and availability of segregated cash; reallocation from sweep cash to higher-yielding investments; a rapid increase in margin, mortgage or personal lending; higher capital requirements; regulatory reinterpretation; and loss of confidence prompting unanticipated withdrawals. The growth in margin lending discussed under Credit below compounds each of these, and clearing-house margin requirements can swing sharply with volatility.
- If broker-dealer or bank subsidiaries fail capital guidelines, or a bank cannot obtain approval to dividend, regulators can block upstreaming to CSC — impairing CSC's ability to service debt, pay preferred and common dividends, repurchase shares, or redeem preferred.
- Schwab depends on external financing; credit market disruption or a **ratings downgrade** would raise borrowing costs and restrict market access.

### Operational

- **Security breaches.** Systems of Schwab, its clients and its third-party providers have been and will continue to be frequent targets of cyber attacks, malicious code, ransomware and denial-of-service. The filing flags attacker use of artificial intelligence, foreign state actors, the possibility that an attack persists undetected for an extended period, employee misconduct, inadequate data destruction at decommissioning, and the prospect of paying ransom.
- **Technology and operational failure.** Heavy dependence on system integrity and on **cloud technologies**, whose use is growing; Schwab has experienced cloud service disruptions and, in recent years, outages of client websites, mobile applications and corporate technology traceable to third-party providers. Extraordinary trading volumes have caused degraded performance, with the risk of orders executing at unanticipated prices.
- **Fiduciary and model risk in investment management.** Fund and trust administration involves pricing, corporate actions, NAV computation and distributions; errors in quantitative models used for risk assessment, portfolio management, trading, hedging and valuation — particularly if undetected over time — could produce breach-of-fiduciary-duty claims, make-whole payments and regulatory fines.
- **Third-party dependence.** Key technology, cloud infrastructure, processing, servicing, custody, order execution and securities lending functions are outsourced or intermediated. Payments from market makers and exchanges for equity and options order flow, and from securities-lending counterparties, "account for significant revenue"; their unwillingness or inability to perform, without alternatives, would leave client orders unexecuted or unsettled.
- **Fraud and financial crime.** Rising external fraud aided by AI-enabled impersonation and social engineering; client-initiated fraudulent conduct; and insider misconduct. Losses reimbursed under Schwab's guarantee against unauthorized account activity flow straight to results.

### Credit

- Exposure arises from margin lending, client options and futures, securities lending, mortgage and pledged-asset lending, counterparty roles, and indirectly from sponsored funds' investing activity. **The margin, options and futures business has materially increased**, and market liquidity is called out as an increased risk: abrupt valuation changes plus failure to meet margin calls could produce substantial losses, especially in illiquid conditions.
- Investment securities carry credit-loss risk; and even absent a credit loss, a forced sale for liquidity would crystallize unrealized losses.
- Bank loans are First Mortgages, PALs and HELOCs — sensitive to delinquency, house and stock price declines, and unemployment. Concentration risks named: instruments collateralized by economically similar assets or single issuers/industries; mortgages and HELOCs concentrated geographically; and client margin, options, futures, pledged-asset and securities-lending positions linked to a single issuer, index or industry.
- Schwab has **no obligation** to support its sponsored money market and other proprietary funds, but may choose to for competitive reasons — which could mean significant charges, reduced liquidity, or consolidation of a fund; declining to support could mean reputational damage.

### Compliance and regulatory

- Extensive supervision by federal, state and foreign authorities and SROs, with rising cost and uncertainty and increasing scrutiny as the company grows. Regulators can block strategy, limit asset growth, new products, acquisitions and strategic investments, require more capital or liquidity, and restrict dividends and buybacks. Penalties can attach even to inadvertent non-compliance.
- New or reinterpreted rules — covering mutual funds, money market funds, standards of conduct, conflicts, deposit account treatment, CRA, minimum capital and capital structure, equity market structure **including order routing and order-related revenues**, and digital assets — may directly affect operations and profitability.
- **Capital adequacy.** The Uniform Net Capital Rule limits transfers from CS&Co to CSC. Failure to satisfy the stress capital buffer or capital conservation buffer restricts distributions and executive bonuses. Any requirement to raise regulatory capital could force asset liquidation, deleveraging, or dilutive equity issuance. Category II status, discussed under Regulation above, would end the AOCI opt-out.
- **Litigation and investigations.** Ordinary-course arbitrations, class actions and regulatory proceedings, including claims by clients of third-party advisors who custody at Schwab, and intellectual property claims. Volumes and damages sought historically rise in downturns.

### Other business risks

- **Strategic transactions**, expressly including the Forge acquisition, may divert management, cause loss of key clients, employees and partners, create unforeseen integration costs, bring assumed liabilities or litigation, require large intangible amortization, and may not deliver anticipated benefits. Deals are subject to closing conditions including regulatory approvals; failure to close a material transaction could hit the stock price.
- **Digital assets.** Schwab expects to begin offering expanded access including spot trading in select cryptocurrencies. Risks named: custody, trading, settlement and liquidity; heightened fraud and illicit-activity exposure; uncertain and volatile client demand; an evolving regulatory landscape that could prohibit or restrict the offering; the irreversibility of transactions and permanent loss on compromise of private keys; unproven blockchain vulnerability; and reliance on third-party service providers, many of them early-stage companies with limited history, for whose control or compliance failures Schwab may be held responsible.
- **Price competition.** Competitors range from large integrated banks to venture-backed private firms. Reduced commissions, higher deposit rates, lower fund expense ratios and increased incentives all pressure results.
- **Stock price volatility** driven by results, client cash and net new asset metrics, projections and misses, analyst estimates, product/M&A announcements, dividends and buybacks, large-holder selling, and general market activity. Return of capital depends on capital position and legal restrictions, and the full repurchase authorization may not be completed; further common or preferred issuance could be substantially dilutive.

### New in the current quarter — cryptocurrency

The Q2 2026 Form 10-Q states there were no material changes to the 10-K risk factors **except** a new set of cryptocurrency risks tied to the Schwab Crypto launch:

- Crypto markets have no party able to prevent or reverse fraudulent transactions, restore lost or stolen assets, or halt operations during disruption. Custodians and service providers have been targets of sophisticated attacks including tampering with transaction software, theft or substitution of hardware security modules, impersonation of authorized signers, and manipulation of internal address books.
- **Client cryptocurrency held through Schwab Crypto is not a deposit or a security and is not protected by the FDIC or SIPC.**
- The offer relies on a **sub-custodian** to safeguard client crypto. The sub-custodian is contractually liable for loss but **may not have sufficient financial resources** to satisfy its obligations in a significant loss — and CSPB, as custodian, could be liable for losses greater than amounts recoverable from the sub-custodian.
- Legal treatment of crypto custody arrangements has not been broadly tested in U.S. courts. In a receivership, conservatorship or bankruptcy involving the sub-custodian, CSPB, or another intermediary, a court could treat client crypto as property of the insolvency estate or impose distribution restrictions; even a favorable outcome could mean delays, in-kind return constraints, and distributions at a different form or value.
- Accounting and disclosure practice for entities enabling customers to buy, sell or hold crypto is still developing and is not uniform; changes in views by the SEC staff, the FASB or Schwab's auditors could affect recognition and measurement, increase reported volatility, and affect key metrics and regulatory capital calculations.

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## Management's discussion — fiscal 2025

*From the FY2025 Form 10-K (accession 0000316709-26-000009).*

### The year in one paragraph

Equity markets finished 2025 with the S&P 500 up 16% and the NASDAQ Composite up 20%; the Federal Reserve cut the target rate by a total of 75 basis points across the third and fourth quarters. Against that backdrop Schwab delivered its strongest year on essentially every metric it tracks.

| Metric | 2025 | 2024 | 2023 |
|---|---|---|---|
| Client assets (year end, $bn) | 11,903.0 | 10,101.3 | 8,516.6 |
| Core net new client assets ($bn) | 519.4 | 366.9 | 305.7 |
| New brokerage accounts (000s) | 4,692 | 4,170 | 3,806 |
| Active brokerage accounts (year end, 000s) | 38,506 | 36,456 | 34,838 |
| Assets receiving ongoing advisory services ($bn) | 6,020.3 | 5,061.7 | 4,338.8 |
| Client cash as % of client assets (year end) | 9.7% | 10.1% | 10.5% |
| Total net revenues ($m) | 23,921 | 19,606 | 18,837 |
| Total expenses excluding interest ($m) | 12,462 | 11,914 | 12,459 |
| Income before taxes ($m) | 11,459 | 7,692 | 6,378 |
| Net income ($m) | 8,852 | 5,942 | 5,067 |

Core net new assets rose 42% to $519.4 billion, a 5.1% annualized organic growth rate. Daily average trades were 7.7 million for the year and 8.3 million in Q4, both up 31%. Net income rose 49% to $8.9 billion; diluted EPS rose 56% to $4.65 and adjusted diluted EPS 50% to $4.87. Return on average common stockholders' equity was 21% (2024: 15%) and return on tangible common equity 38% (2024: 35%).

### Revenue drivers

- **Net interest revenue $11.8 billion, +28%.** Driven by lower interest expense from **reductions in bank supplemental funding** and lower rates on funding sources, plus growth in margin and bank lending and higher segregated cash, more than offsetting lower asset yields. **Net interest margin rose to 2.74% from 2.12%.** Average interest-earning assets were roughly flat; the mix shifted from AFS/HTM securities toward margin and bank loans.
- **Asset management and administration fees $6.5 billion, +14%**, on higher client asset balances, market appreciation, asset gathering, and net inflows into managed investing solutions and money market funds. Proprietary and OneSource funds generated 50% of these fees in 2025 (2024: 49%).
- **Trading revenue $3.9 billion, +20%**, on higher volume — order flow revenue +31% and commissions +13%.
- **Bank deposit account fees $977 million, +34%**, principally because lower rates cut the amount paid to clients. Partly offset by lower average IDA balances, reflecting the **transfer of $6.7 billion of IDA balances onto Schwab's own balance sheet after September 10, 2025** (permitted once the 2023 IDA agreement's broader withdrawal discretion took effect) and prior-year client reallocation. At year end 78% of IDA balances were designated fixed-rate and 22% floating.
- **Other revenue $767 million, +2%.** Higher service fees and equity investment gains, offset by higher losses on AFS sales, higher bank loan credit provision, and lower industry fees after the SEC cut its transaction fee rate to **zero effective May 14, 2025**.

### Expenses

Total expenses excluding interest were $12.5 billion, up 5%; adjusted total expenses $12.0 billion, up 6%. The increase was driven by compensation and benefits (merit increases, headcount growth, higher incentive compensation on the year's financial performance) and professional services, partly offset by lower regulatory fees and assessments — the FDIC special assessment estimate was **reduced by $32 million in 2025**, after a $30 million increase in 2024 and the original $172 million charge in Q4 2023. Capital expenditures were $602 million, 2.5% of net revenues, below the stated 3–5% range. Effective tax rate 22.8%, unchanged from 2024.

Management's guidance in the 10-K: total expenses excluding interest to grow **approximately 5.5% to 6.5%** in full-year 2026, with Forge operating and integration costs on top of that; capital expenditures within the 3–5% of net revenues range. (Both were revised in the Q2 2026 report — see below.)

### Balance sheet and funding

Balance sheet assets ended 2025 at $491.0 billion, +2%. The dominant story is the **retirement of bank supplemental funding**: brokered CDs, FHLB borrowings and bank repurchase agreements were reduced by **$44.8 billion, or 90%, to $5.1 billion**, funded by principal and interest from the AFS and HTM portfolios plus improving client cash trends. Bank sweep deposits and payables to brokerage clients rose $36.6 billion, or 12%. Margin loans ended the year at **$112.3 billion, +34%** (+16% in Q4 alone), reflecting client engagement in rising markets and long/short strategies run by RIA clients. Bank loans reached $58.0 billion, +28%, with PALs at $26.6 billion and First Mortgages at $30.5 billion. AFS and HTM securities were approximately 40% of consolidated assets, down from 48%.

More than 80% of bank deposits qualified for FDIC insurance at year end. Securities loaned totalled $25.1 billion. Long-term debt was $22.2 billion. CSC's commercial paper ratings were P1/A2/F1.

### Capital return

Schwab repurchased **$7.3 billion** of common and nonvoting common stock in 2025, raised the quarterly dividend 8% to $.27 per share in Q1, and redeemed the Series G preferred for $2.5 billion in Q2. On February 12, 2025 TD Group US Holdings LLC completed a secondary offering of 133.8 million common and 31.7 million nonvoting common shares at $79.25, aggregating $13.1 billion (no proceeds to Schwab); concurrently Schwab repurchased TD's remaining 19.2 million nonvoting shares at $77.982 for $1.5 billion. **TD thereby disposed of all its CSC common shares**, and no nonvoting common stock remains outstanding. On July 24, 2025 the Board approved a new **$20 billion** repurchase authorization replacing the prior $15 billion program; $5.5 billion was used in 2025, leaving approximately $14.5 billion.

Consolidated Tier 1 Leverage Ratio fell to 9.3% from 9.9%; the adjusted (AOCI-inclusive) ratio rose to 7.1% from 6.8%, against a long-term operating objective of **6.75%–7.00%**. CSB's Tier 1 Leverage Ratio was 11.1%. CSC targets a common dividend of roughly 20–30% of net income and has paid 147 consecutive quarterly dividends since 1989, with 29 increases and a 19% compound annual growth rate.

### Regulatory developments noted for 2025

The SEC withdrew, on June 12, 2025, several proposed rules Schwab had been evaluating, including the December 2022 Order Competition Rule and Regulation Best Execution. The FDIC on March 3, 2025 withdrew certain 2023–2024 proposals including the July 2024 brokered-deposit proposal. The Department of Labor formally withdrew its appeal of the stay on the April 2024 "fiduciary" rule in November 2025. Still pending as of the 10-K: the August 2023 long-term debt proposal and the July 2023 capital rules proposal (AOCI inclusion and revised risk-weighted assets).

### Prior-year context

2024 (net income $5.9 billion, +17%; net revenues $19.6 billion, +4%) was the year the **Ameritrade integration completed** — approximately $1.9 trillion of client assets across more than 17 million accounts including 7,000 RIAs converted over five transition groups in 2023–2024, at a total cost of roughly $2.5 billion and yielding approximately **$2.0 billion of annualized run-rate cost synergies**, plus a further ~$500 million of run-rate savings from separate restructuring (position eliminations and real estate reduction) that cost about $500 million to achieve.

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## Current quarter — Q2 2026 (three and six months ended June 30, 2026)

*From the Form 10-Q for the quarter ended June 30, 2026 (accession 0000316709-26-000031).*

### Environment

Equity markets fell amid elevated volatility in Q1 2026, then rebounded strongly in Q2: the S&P 500 rose 15% and the NASDAQ Composite 21% in the quarter, leaving the first half up 10% and 13% respectively. The **Federal Reserve held the upper bound of the target overnight rate unchanged at 3.75% through the first six months of 2026**, while the 10-year Treasury yield rose 25 basis points to 4.44% at June 30.

### Results

| | Q2 2026 | Q2 2025 | Chg | 1H 2026 | 1H 2025 | Chg |
|---|---|---|---|---|---|---|
| Net new client assets ($bn) | 118.7 | 73.6 | +61% | 258.6 | 206.0 | +26% |
| Core net new client assets ($bn) | 119.8 | 80.3 | +49% | 259.8 | 218.0 | +19% |
| Client assets, quarter end ($bn) | 13,084.9 | 10,757.3 | +22% | | | |
| New brokerage accounts (000s) | 1,388 | 1,098 | +26% | 2,687 | 2,281 | +18% |
| Active brokerage accounts, quarter end (000s) | 39,802 | 37,476 | +6% | | | |
| Assets receiving ongoing advisory services ($bn) | 6,671.7 | 5,425.0 | +23% | | | |
| Client cash as % of client assets | 9.0% | 9.9% | | | | |
| Total net revenues ($m) | 7,072 | 5,851 | +21% | 13,554 | 11,450 | +18% |
| Total expenses excluding interest ($m) | 3,403 | 3,048 | +12% | 6,697 | 6,192 | +8% |
| Net income ($m) | 2,800 | 2,126 | +32% | 5,279 | 4,035 | +31% |
| Diluted EPS | $1.54 | $1.08 | +43% | $2.91 | $2.07 | +41% |
| Adjusted diluted EPS | $1.62 | $1.14 | | $3.05 | $2.17 | |
| Pre-tax profit margin | 51.9% | 47.9% | | 50.6% | 45.9% | |
| Return on average common equity (ann.) | 25% | 19% | | 23% | 18% | |
| Return on tangible common equity (ann.) | 44% | 35% | | 41% | 34% | |

Total client assets reached **$13.08 trillion**, up 10% from year-end 2025 and 22% year over year. Daily average trades reached **11.9 million in Q2 and 10.9 million for the half, up 57% and 46%** — a striking step-change in client engagement.

### Revenue lines

- **Net interest revenue $3,357m (+$535m, +19%)** in Q2 and $6,501m (+18%) for the half, on growth in margin and bank lending, lower average wholesale borrowings, and lower yields paid on most funding sources; partly offset by lower yields on floating-rate assets, and lower AFS/HTM and segregated balances. **Net interest margin rose to 3.00% in Q2 and 2.94% for the half**, from 2.66% and 2.59%. A basis point of caution on the denominator: from the fourth quarter of 2025 the margin loans and short credits tied to client long/short strategies — on which Schwab earns a fixed net yield — are **excluded from interest-earning assets and funding sources**, with the related revenue and expense moved into other interest revenue and expense. Schwab reclassified and recalculated the 2025 periods on that same basis, so the 3.00%-versus-2.66% comparison is like for like: the $33.1 billion average long/short book described below sits outside the margin denominator in *both* years, and none of the 34 basis point improvement comes from carving it out this year. (A further refinement in Q2 2026 moved the net fixed yield on those strategies into other interest revenue without recasting prior periods, the company stating the effect was immaterial.)
- **Asset management and administration fees $1,825m (+16%)** in Q2, $3,584m (+16%) for the half, on managed investing solutions, Mutual Fund OneSource, money market funds, and Schwab equity/bond funds, ETFs and CTFs.
- **Trading revenue $1,215m (+28%)** in Q2, $2,304m (+24%) for the half, on higher order flow revenue reflecting **higher rates and volume**, plus higher commissions.
- **Bank deposit account fees $333m (+35%)** in Q2, $628m (+28%) for the half, on higher net yields, partly offset by lower average IDA balances — Schwab moved a further **$3.0 billion of IDA balances onto its balance sheet in the first half of 2026** (total IDA balance $70.7 billion at June 30, versus $76.3 billion at year end 2025), against the $60 billion contractual floor. At June 30 the fixed/floating designation was **85%/15%**, up from 78%/22% at year end 2025.
- **Other revenue $342m (+32%)** in Q2, on higher industry fees — the SEC **raised its transaction fee rate from zero effective April 4, 2026**, which increases both other revenue and other expense with no net income impact — plus equity investment gains, higher service fees, and lower losses on AFS sales.

### Segments

| ($m) | Investor Services Q2'26 | Q2'25 | Advisor Services Q2'26 | Q2'25 |
|---|---|---|---|---|
| Total net revenues | 5,528 | 4,635 | 1,544 | 1,216 |
| Total expenses excl. interest | 2,663 | 2,361 | 740 | 687 |
| Income before taxes | 2,865 | 2,274 | 804 | 529 |

Advisor Services grew faster in the quarter (revenues +27% versus +19%, pre-tax income +52% versus +26%), helped by outsized net interest revenue growth (+35%) as RIA-driven margin and long/short activity expanded. For the half, Investor Services revenues were $10,605m and Advisor Services $2,949m.

### Expenses and revised guidance

Total expenses excluding interest rose 12% in the quarter, adjusted expenses 11%, on headcount growth (including financial consultants and wealth advisors), the inclusion of Forge from March 2026, higher incentive compensation, professional services, occupancy and equipment (software subscriptions, buildings, property tax), and higher industry fees. Forge acquisition and integration costs were **$28 million in Q2 and $39 million in the half**.

**Guidance was raised.** Management now expects total expenses excluding interest for full-year 2026 to increase **approximately 10% to 11%**, inclusive of volume-related expenses supporting strong trading activity and of Forge operations and integration — versus the 5.5%–6.5% (ex-Forge) originally communicated. Management states underlying expense growth remains in line with expectations. Capital expenditures were **$792 million in Q2 and $965 million in the half** (versus $136 million and $292 million a year earlier), largely because of a **$633 million multi-year software license** recognized as an asset with a corresponding long-term debt liability, plus telecommunications equipment, leasehold improvements and office expansions. Full-year 2026 capital expenditures are now expected to be **slightly higher than the 3–5% of net revenues range**.

Effective tax rates were 23.7% in Q2 (24.2% a year earlier) and 23.0% for the half.

### Forge acquisition — completed

On **March 2, 2026** Schwab completed the acquisition of **Forge Global Holdings, Inc.** for **$636 million of cash and other consideration** (the announced value had been approximately $660 million). Provisional purchase accounting: assets acquired $405 million (including $320 million of acquired intangibles and $39 million of cash), liabilities assumed $92 million, net identifiable assets $313 million, plus $16 million of noncontrolling interest fair value, producing **$339 million of goodwill** — assigned to Investor Services and not deductible for tax. Intangibles: client relationships $215 million (9-year life), existing technology $82 million (3 years), data and trade names $23 million (6 years). Subsequent to the acquisition date Schwab purchased the noncontrolling party's equity interest, making the subsidiary **100%-owned as of March 31, 2026**. Measurement-period adjustments in Q2 added $10 million to intangibles, $4 million to other assets and $6 million to accrued liabilities, and reduced goodwill by $8 million. Forge contributed net revenues of **$40 million and a net loss of $33 million** in Q2, and $54 million of revenue and a $39 million net loss for March 2 through June 30. Assumed Forge equity awards: $13 million of fair value treated as consideration, $37 million attributable to future service, $14 million unrecognized at June 30.

### Schwab Crypto launched

In **May 2026** Schwab began a phased retail rollout of **Schwab Crypto**, its spot crypto trading offer, providing direct access to **bitcoin and ether** with educational content and professional support. **Charles Schwab Premier Bank, SSB (CSPB) is the custodian** of client digital assets; CSPB has engaged **Paxos Trust Company, NA** as sub-custodian for sub-custody and trade execution, and may add others. CSPB plans to add further cryptocurrencies over time, plus in-kind transfer capability for deposits and withdrawals.

**No scale is disclosed.** Neither the 10-Q nor the second quarter earnings release gives any revenue, client balance, account count or assets-under-custody figure for Schwab Crypto — the offer is described, and its risks are set out at length in the risk factors, but there is nothing in the filings from which to size it.

### Leadership reorganization announced in the period

On **January 29, 2026** the Board appointed **Dennis Howard**, previously Managing Director, Chief Information Officer, as **Managing Director, Chief Technology, Operations and Data Officer, effective immediately**, to lead a newly formed Technology, Operations and Data organization that adds operations to his existing technology and data responsibilities. Howard joined Schwab in 2014 and was previously Chief Information Officer of Visa Inc.; he reports to President and CEO Rick Wurster. The same announcement set out the bank, internal audit and wealth advisory transitions that took effect after quarter end (Form 8-K, accession 0001193125-26-029376).

### Balance sheet, funding and capital at June 30, 2026

Total assets **$517.3 billion**, +5% from year end 2025. Receivables from brokerage clients (primarily margin) **$122.8 billion**, +16% in the quarter, +17% year to date, +48% year over year. Bank loans **$67.0 billion**, +10% in the quarter, +16% year to date, +33% year over year, on PALs and First Mortgages — CSB purchased $2.6 billion of First Mortgages in the quarter and $4.6 billion in the half through the Rocket Mortgage, LLC co-branded program. AFS securities amortized cost $66.3 billion; HTM securities $130.6 billion. Bank deposits $249.7 billion; payables to brokerage clients $124.0 billion. Bank sweep deposits plus payables to brokerage clients were up $42.7 billion (14%) year over year and $3.6 billion (1%) from year end.

Funding shifted materially toward wholesale and securities lending to support margin growth: payables to brokers, dealers and clearing organizations rose to $43.8 billion from $25.7 billion; other short-term borrowings to $13.9 billion from $6.9 billion; FHLB borrowings fell to $0.5 billion from $1.85 billion. **Securities loaned reached $38.7 billion** (year end 2025: $25.1 billion). Notably, **CS&Co's Board authorized up to $10.0 billion of unsecured commercial paper at the end of Q1 2026; issuance began in Q2 and $4.9 billion was outstanding at June 30** (rated P1/A1). Brokered CDs at CSB were down to $283 million. Long-term debt $22.7 billion. Unpledged investment securities of approximately $148 billion par / $135 billion fair value remained available as additional collateral. The company was in compliance with the LCR and NSFR at June 30.

Average margin loans tied to client long/short strategies were **$33.1 billion in Q2 2026 versus $884 million a year earlier** ($23.7 billion versus $562 million for the half), with matching short credits of $34.3 billion — an order-of-magnitude expansion in a business line that is netted out of interest-earning assets but drives securities-lending and securities-borrowing revenue, and which management cites as the reason securities lending revenue rose. Neither the 10-Q nor the earnings release explains what drove a book from under $1 billion to $33 billion in four quarters; no client, strategy or counterparty concentration is disclosed.

**Capital actions in the half:** $3.4 billion of common stock repurchased (35.5 million shares; $1.0 billion / 11.2 million shares in Q2), leaving approximately **$11.1 billion** on the $20 billion authorization; the quarterly common dividend raised **19% to $.32 per share** effective Q1 2026; **$1.5 billion of 6.100% Series L preferred issued April 22, 2026**; and **$2.1 billion of Series I preferred redeemed June 1, 2026** (producing a $25 million deemed dividend). New senior notes issued in Q2: $1.0 billion 4.744% fixed-to-floating due 2030 and $1.25 billion 5.493% fixed-to-floating due 2037, both dated May 21, 2026, and $1.0 billion 4.603% fixed-to-floating due July 27, 2029 issued June 25, 2026.

Consolidated Tier 1 Leverage Ratio **8.7%** (9.8% a year earlier; 9.3% at year end 2025); adjusted Tier 1 Leverage Ratio **6.8%** (7.2% and 7.1%), still inside the 6.75%–7.00% objective. CSB Tier 1 Leverage 10.7%; CSB adjusted 7.4%. Accumulated other comprehensive loss narrowed to $10.6 billion from $11.0 billion. Total stockholders' equity $50.1 billion.

Cash and cash equivalents including restricted amounts fell $459 million to $69.2 billion: operating inflows $11.6 billion, investing outflows $6.4 billion (bank loan growth $9.1 billion, offset by $3.9 billion from AFS/HTM), financing outflows $5.7 billion (deposits down $6.1 billion, $4.7 billion for buybacks and dividends, $1.4 billion FHLB paydowns, offset by $6.9 billion of other short-term borrowings).

### Interest rate sensitivity and hedging

Because roughly half of revenue is the spread between what Schwab earns on client assets and what it pays for client cash, the durability of the 3.00% margin is a question about rates. The 10-Q answers it directly, and the answer changed this quarter.

**The simulation.** Schwab models the effect of an instantaneous parallel shift in market rates on net interest revenue over the following twelve months. **Beginning with the second quarter of 2026 the published results reflect a dynamically-sized balance sheet** — one that assumes runoff of bank deposits and payables to brokerage clients is replaced with wholesale borrowing as needed — rather than the statically-sized structure previously shown. Both columns below are on the new basis:

| Instantaneous parallel shift | Change in net interest revenue over next 12 months, from June 30, 2026 | From December 31, 2025 |
|---|---|---|
| +200 basis points | +3.8% | +5.4% |
| +100 basis points | +3.6% | +2.0% |
| +50 basis points | +1.7% | +1.0% |
| −50 basis points | (0.7)% | (2.2)% |
| −100 basis points | (1.6)% | (5.3)% |
| −200 basis points | **(5.3)%** | **(15.0)%** |

The exposure narrowed in both directions, and sharply on the downside: a 200 basis point cut is now modelled at a 5.3% hit to net interest revenue, against 15.0% six months earlier. Schwab attributes the change to **2026 hedging activity and to changes in balance sheet composition**, the December position having reflected seasonal cash inflows near year end. One caution on reading across: the December 31, 2025 column above is not what the FY2025 10-K published for that date. That table assumed a statically-sized balance sheet and *gradual* rather than instantaneous shifts, and showed +8.6% for a 200 basis point rise and (8.8)% for a 200 basis point fall. The two columns above are the internally consistent comparison; the 10-K figures come from a different model and should not be spliced onto them.

**The hedging that did it.** Schwab manages the exposure with cleared interest rate swaps, and the designated notional more than doubled in six months, from $60.9 billion to $138.7 billion. Notional designated as **fair value hedges rose to $61.6 billion at June 30, 2026 from $42.2 billion** at year end; notional designated as **cash flow hedges rose to $77.1 billion from $18.7 billion** — more than a fourfold increase, and the substance of the "2026 hedging activity." The cash flow hedges convert floating client-lending receipts to fixed: at June 30 they covered interest receipts on **$20.0 billion of margin loans** (notional $43.6 billion) and **$24.8 billion of pledged asset lines** (notional $33.5 billion), the two fastest-growing floating-rate asset books on the balance sheet. The fair value hedges run the other way, swapping fixed to floating on **$21.8 billion of CSC Senior Notes** (notional $50.3 billion) and $11.3 billion of AFS securities.

**It is not free.** Receive-fixed hedges struck into a market that has since moved against them show a loss: accumulated other comprehensive income on cash flow hedges swung to a **$451 million pre-tax loss at June 30, 2026 from a $49 million gain at the start of the year** — a swing that sits *inside* the $10.6 billion accumulated other comprehensive loss reported above, not alongside it, and was more than offset there by the continuing amortization of losses on securities previously transferred from available for sale to held to maturity. Schwab expects to reclassify approximately **$197 million of pre-tax losses out of AOCI into interest revenue over the twelve months following June 30, 2026**. That is a known, quantified drag on the margin over the next year — the premium paid for the smaller downside above. Initial margin pledged as collateral on the swaps also rose to **$760 million from $281 million**.

**Duration.** Effective duration of consolidated total assets was **1.6 years excluding derivatives and 1.8 years including them** at June 30, 2026 (year end 2025: 1.8 and 1.9) — a short book by bank standards, which is what makes falling rates the greater risk. The AFS portfolio runs 2.3 years, cut to 1.9 by swaps; AFS and HTM together 3.6 years, 3.5 hedged. The clearest illustration of hedge intent is the liability side: **the duration of CSC Senior Notes is 3.3 years before derivatives and 0.8 years after** (3.0 and 1.9 at year end), the fair value hedges having converted most of the term debt to floating just as the asset side was being fixed.

**Economic value of equity.** Schwab describes its EVE profile as having a more stable asset duration relative to liabilities in both higher and lower rate environments, with **greater exposure to rates decreasing** than to an equivalent increase — the same asymmetry the revenue simulation shows, now on the long-horizon present-value measure rather than the next twelve months. Simulated changes in bank deposit account fee revenue under the same scenarios were not significant to total net revenues.

### Regulatory and legal developments in the period

- **March 2026:** federal district courts formally **vacated** the Department of Labor's April 2024 "fiduciary" rule; the rule was removed from the Code of Federal Regulations.
- **March 2026:** the U.S. federal banking agencies issued a new proposed rulemaking on regulatory capital that would **replace the 2023 proposal** and would require AOCI inclusion in regulatory capital under a revised standardized approach, subject to a **five-year phase-in**. The comment period closed June 18, 2026. Schwab states its capital management already incorporates AOCI-inclusive measures and that it **does not anticipate a material impact**.
- **Corrente antitrust litigation:** the putative class action alleging Schwab's Ameritrade acquisition violated Section 7 of the Clayton Act was settled on non-monetary undertakings plus immaterial attorneys' fees; the court granted final approval on **November 24, 2025**, and certain objectors have appealed to the Fifth Circuit.
- **May 21, 2026 annual meeting:** all director nominees were elected and Deloitte & Touche LLP was ratified as auditors; the say-on-pay advisory vote passed. The proposal to amend the certificate of incorporation and bylaws to **declassify the Board was not approved** — but not because stockholders opposed it. It drew 1,322,891,548 shares in favour against 114,865,672 opposed, about 92% of the votes cast; the charter requires the affirmative vote of 80% of *all outstanding* common shares, a threshold against which abstentions and unvoted shares tell as effective "no" votes, and the proposal fell short of it (accession 0001193125-26-237020). Stockholders had approved a non-binding proposal seeking the same change at the 2025 annual meeting, which is why the Board put the binding charter amendment on this year's ballot (accession 0001193125-25-125853).
- Foreign non-sovereign exposure fell to $8.5 billion at June 30 from $10.5 billion at year end (France $5.2 billion, UK $1.6 billion, Japan $0.6 billion); margin loans to foreign residents rose to $6.6 billion from $4.8 billion.

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## Subsequent events

The Q2 2026 Form 10-Q contains no separate subsequent-events note. The material developments after the June 30, 2026 quarter end are:

- **August 12, 2026 — senior notes issuance of $2.6 billion.** CSC issued **$1,250,000,000 aggregate principal of 5.108% Fixed-to-Floating Rate Senior Notes due 2032** and **$1,350,000,000 aggregate principal of 5.655% Fixed-to-Floating Rate Senior Notes due 2037**. Net proceeds were approximately **$2,582 million** after underwriting discounts, commissions and estimated offering expenses. The notes were issued under the Senior Indenture dated November 14, 2025 with The Bank of New York Mellon Trust Company, N.A. as trustee, as supplemented by the Fourth Supplemental Indenture dated August 12, 2026, off CSC's Form S-3 shelf (File No. 333-275858) and the prospectus supplement dated August 10, 2026. CSC entered the related underwriting agreement on August 10, 2026 with BofA Securities, Inc., Citigroup Global Markets Inc., Morgan Stanley & Co. LLC, TD Securities (USA) LLC and Wells Fargo Securities, LLC as representatives of the underwriters. (Form 8-K, accession 0001193125-26-347083.) This issuance is not reflected in the June 30, 2026 balance sheet and takes pro forma long-term debt above $25 billion.
- **July 21, 2026 — second quarter 2026 results announced** by press release (Form 8-K, accession 0000316709-26-000027).
- **July 1, 2026 — previously announced leadership transitions took effect.** Announced January 29, 2026 (Form 8-K, accession 0001193125-26-029376): Paul Woolway retired as CEO of Charles Schwab Bank after more than 16 years and was succeeded as President and CEO by **Tyler Woulfe**, who reports to Neesha Hathi; General Auditor Mitch Mantua retired after a decade of service and was succeeded by **Jessica Bramhall**, who reports functionally to the Audit Committee and administratively to President and CEO Rick Wurster; and **Neesha Hathi's** remit expanded to include Charles Schwab Bank within the newly created Wealth Advisory and Banking Services organization, continuing to report to Wurster.
- No acquisitions, divestitures, or litigation resolutions were disclosed for the post-quarter period beyond those above.

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## What a value investor should take away

Schwab in mid-2026 is earning a 44% return on tangible common equity at a 52% pre-tax margin, with client assets compounding at 22% year over year and organic growth reaccelerating. The engine behind the earnings inflection is not fee growth — it is the **normalization of the balance sheet**: bank supplemental funding was cut 90% in 2025, net interest margin has climbed from 2.12% (2024) to 3.00% (Q2 2026), and the drag from the 2022–2023 cash-sorting episode has largely reversed.

The margin looks more defensible than it did six months ago, and that is the single most useful forward-looking disclosure in the quarter. On Schwab's own modelling, an instantaneous 200 basis point rate cut would now cost 5.3% of net interest revenue over the following year, against 15.0% on the same basis at December 31, 2025 — bought with a cash flow hedge book that more than quadrupled in six months, fixing the yield on the fastest-growing floating-rate lending books while the term debt went the other way, to floating. The insurance has a price: $197 million of pre-tax hedging losses are already scheduled to move out of AOCI and into interest revenue over the next twelve months, and an asset book this short still loses more from a cut than it gains from an equivalent rise. But the tail has been cut, deliberately and expensively, before the Fed moved.

The offsetting observations are equally concrete. Client cash is down to 9.0% of client assets from 9.9% a year ago. Growth is now being funded increasingly with **wholesale money** — securities lending at $38.7 billion, other short-term borrowings at $13.9 billion, a brand-new $10 billion CS&Co commercial paper program already $4.9 billion drawn, and $3.25 billion of new senior notes across Q2 plus another $2.6 billion in August — to support a margin book that has grown 48% year over year, much of it in client long/short strategies that barely existed twelve months ago and that the filings nowhere explain. Both Tier 1 leverage ratios have declined. Expense guidance has nearly doubled, to 10–11% growth. AOCI remains a $10.6 billion unrealized loss that the pending March 2026 capital proposal would phase into regulatory capital over five years, and the company is roughly $180 billion of asset growth away from Category II thresholds that would remove its AOCI opt-out entirely. Two genuinely new businesses — private-market trading via Forge (loss-making so far, $33 million in Q2) and spot crypto held through a sub-custodian that Schwab acknowledges may lack the resources to make good on a large loss, leaving its own bank subsidiary on the hook, and for which no revenue or client balances have been disclosed at all — add optionality and a new class of operational and legal risk.