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What changed in Charles Schwab Corporation's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Charles Schwab Corporation's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+585 added−526 removedSource: 10-K (2024-02-23) vs 10-K (2023-02-24)

Top changes in Charles Schwab Corporation's 2023 10-K

585 paragraphs added · 526 removed · 371 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

85 edited+23 added−22 removed77 unchanged
Biggest changeExamples of these offerings include the following: • Brokerage – an array of full-feature brokerage accounts with equity and fixed income trading, margin lending, options trading, futures and forex trading, and cash management capabilities including certificates of deposit; • Mutual funds – third-party mutual funds through the Mutual Fund Marketplace ® , including no-transaction-fee (NTF) mutual funds through the Mutual Fund OneSource ® service, which also includes proprietary mutual funds, plus mutual fund trading and clearing services to broker-dealers; • Exchange-traded funds (ETFs) – an extensive offering of ETFs, including both proprietary and third-party ETFs; • Advice solutions – managed portfolios of both proprietary and third-party mutual funds and ETFs, separately managed accounts, customized personal advice for tailored portfolios, specialized planning, and full-time portfolio management; • Banking – checking and savings accounts, first lien residential real estate mortgage loans (First Mortgages), home equity lines of credit (HELOCs), and pledged asset lines (PALs); and • Trust – trust custody services, personal trust reporting services, and administrative trustee services. - 3 - THE CHARLES SCHWAB CORPORATION These investing products and services are made available through two business segments – Investor Services and Advisor Services.
Biggest changeExamples of these offerings include the following: • Brokerage – an array of full-feature brokerage accounts with equity and fixed income trading, margin lending, options trading, futures and forex trading, and cash management capabilities including certificates of deposit; • Mutual funds – third-party mutual funds through the Mutual Fund Marketplace ® , including no-transaction-fee (NTF) mutual funds through the Mutual Fund OneSource ® service, which also includes proprietary mutual funds, plus mutual fund trading and clearing services to broker-dealers; • Exchange-traded funds (ETFs) – an extensive offering of ETFs, including both proprietary and third-party ETFs; • Advice solutions – managed portfolios of both proprietary and third-party mutual funds and ETFs, separately managed accounts, customized personal advice for tailored portfolios, specialized planning, and full-time portfolio management; • Alternative investments – access to a variety of third-party alternative investments such as private equity and real estate on Schwab’s alternative investment platforms – Schwab Alternative Investment OneSource ® and Schwab Alternative Investment Marketplace. • Banking – checking and savings accounts, first lien residential real estate mortgage loans (First Mortgages), home equity lines of credit (HELOCs), and pledged asset lines (PALs); and • Trust – trust custody services, personal trust reporting services, and administrative trustee services.
The Company and independent retirement plan providers work together to serve plan sponsors, combining the consulting and administrative expertise of the administrator with our investment, technology, trust, and custodial services. Retirement Business Services also offers the Schwab Personal Choice Retirement Account ® , a self-directed brokerage offering for retirement plans.
Retirement Business Services also offers the Schwab Personal Choice Retirement Account ® , a self-directed brokerage offering for retirement plans. The Company and independent retirement plan providers work together to serve plan sponsors, combining the consulting and administrative expertise of the administrator with our investment, technology, brokerage, trust, and custodial services.
Across both segments, our key competitive advantages are: • Scale and Size of the Business – As one of the largest investment services firms in the U.S., we are able to spread operating costs and amortize new investments over a large base of clients, and harness the resources to evolve capabilities to meet client needs. • Operating Efficiency – Coupled with scale, our operating efficiency and sharing of infrastructure across different businesses creates a cost advantage that enables us to competitively price products and services while profitably serving clients of various sizes across multiple channels. • Operating Structure – Providing bank and asset management services to broker-dealer clients helps serve a wider array of needs, thereby deepening relationships, enhancing the stability of client assets, and enabling diversified revenue streams. • Brand and Corporate Reputation – In an industry dependent on trust, Schwab’s reputation and brand across multiple constituents enable us to attract clients and employees while credibly introducing new products to the market. • Service Culture – Delivering a great client experience earns the trust and loyalty of clients and increases the likelihood that those clients will refer others. • Willingness to Disrupt – Management’s willingness to challenge the status quo, including our own business practices, to benefit clients fosters innovation and continuous improvement, which helps to attract more clients and assets.
Across both segments, our key competitive advantages are: • Scale and Size of the Business – As one of the largest investment services firms in the U.S., we are able to spread operating costs and amortize new investments over a large base of clients, and harness the resources to evolve capabilities to meet client needs. • Operating Efficiency – Coupled with scale, our operating efficiency and sharing of infrastructure across different businesses creates a cost advantage that enables us to competitively price products and services while profitably serving clients of various sizes across multiple channels. • Operating Structure – Providing bank, wealth, and asset management services to broker-dealer clients helps serve a wider array of needs, thereby deepening relationships, enhancing the stability of client assets, and enabling diversified revenue streams. • Brand and Corporate Reputation – In an industry dependent on trust, Schwab’s reputation and brand across multiple constituents enable us to attract clients and employees while credibly introducing new products to the market. • Service Culture – Delivering a great client experience earns the trust and loyalty of clients and increases the likelihood that those clients will refer others. • Willingness to Disrupt – Management’s willingness to challenge the status quo, including our own business practices, to benefit clients fosters innovation and continuous improvement, which helps to attract more clients and assets.
Under the Federal Reserve capital stress testing rules, savings and loan holding companies that are Category III banking organizations and state member banks with total consolidated assets over $250 billion are required to disclose the results of company-run stress tests in even-numbered years.
Capital Stress Testing Under the current Federal Reserve capital stress testing rules, savings and loan holding companies that are Category III banking organizations and state member banks with total consolidated assets over $250 billion are required to disclose the results of company-run stress tests in even-numbered years.
Schwab Intelligent Portfolios Premium ® , a hybrid advisory service, offers clients an advisory service which combines unlimited guidance provided by a C ERTIFIED F INANCIAL P LANNER ™ and our robo-advice technology to make financial and investment planning more accessible to investors.
Schwab Intelligent Portfolios Premium ® , a hybrid advisory service, offers clients an advisory service which combines our robo-advice technology with unlimited guidance provided by a C ERTIFIED F INANCIAL P LANNER ™ to make financial and investment planning more accessible to investors.
Regulatory Capital and Liquidity Framework Banking organizations are subject to the regulatory capital rules issued by the Federal Reserve and other U.S. banking regulators, including the Office of the Comptroller of the Currency (OCC) and the FDIC.
Regulatory Capital and Liquidity Framework Banking organizations are subject to the regulatory capital rules issued by the Federal Reserve and other U.S. banking regulators, including the Office of the Comptroller of the Currency and the FDIC.
Under the new framework, the FDIC established a new “25 percent” business relationship designated exception where a broker-dealer or other third-party may qualify for the primary purpose exception by filing a notice with the FDIC indicating that less than 25 percent of its customer assets under administration for a particular business line are placed at depository institutions.
Under this framework, the FDIC established a “25 percent” business relationship designated exception where a broker-dealer or other third-party may qualify for the primary purpose exception by filing a notice with the FDIC indicating that less than 25 percent of its customer assets under administration for a particular business line are placed at depository institutions.
CSC was required to comply with the new risk management and risk committee requirements, as well as the new liquidity risk-management, stress testing, and buffer requirements commencing on January 1, 2021. The single counterparty credit limits went into effect for CSC on January 1, 2022.
CSC was required to comply with these risk management and risk committee requirements, as well as the liquidity risk-management, stress testing, and buffer requirements commencing on January 1, 2021. The single counterparty credit limits went into effect for CSC on January 1, 2022.
Additional Enhanced Prudential Standards In addition to the revisions to the capital stress testing regime discussed above, the Federal Reserve’s enhanced prudential standards rules also extended the applicability of certain additional enhanced prudential standards to large savings and loan holding companies, with the specific requirements tailored based on the same four-category framework utilized in the interagency regulatory capital and liquidity rules.
Additional Enhanced Prudential Standards In addition to the capital stress testing regime discussed above, the Federal Reserve’s enhanced prudential standards rules also extend the applicability of certain additional enhanced prudential standards to large savings and loan holding companies, with the specific requirements tailored based on the same four-category framework utilized in the interagency regulatory capital and liquidity rules.
These additional enhanced prudential standards, which have been applicable to large U.S. bank holding companies under section 165 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), include: risk management and risk committee requirements; liquidity risk management, stress testing, and buffer requirements; and single counterparty credit limits.
These additional enhanced prudential standards, applicable to large U.S. bank holding companies under section 165 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), include: risk management and risk committee requirements; liquidity risk management, stress testing, and buffer requirements; and single counterparty credit limits.
The accounting policies of the reportable segments are the same as those described in Item 8 – Note 2. Investor Services Charles Schwab initially founded the Company nearly 50 years ago to provide individual investors with access to the financial markets at a highly competitive cost.
The accounting policies of the reportable segments are the same as those described in Part II – Item 8 – Note 2. Investor Services Charles Schwab initially founded the Company 50 years ago to provide individual investors with access to the financial markets at a highly competitive cost.
The Federal Reserve also made Category III savings and loan holding companies subject to an annual supervisory stress testing requirement in which the Federal Reserve conducts its own stress testing analysis to evaluate the ability of a holding company to absorb losses in specified economic and financial conditions over a nine-quarter planning horizon using such analytical techniques as the agency determines are appropriate.
Pursuant to the Federal Reserve’s requirements, Category III savings and loan holding companies are also subject to an annual supervisory stress testing requirement in which the Federal Reserve conducts its own stress testing analysis to evaluate the ability of a holding company to absorb losses in specified economic and financial conditions over a nine-quarter planning horizon using such analytical techniques as the agency determines are appropriate.
Another example of expanding access to investing includes Schwab Stock Slices™, a service which enables investors to purchase a single stock slice, or up to 30 different stock slices at once, from the S&P 500 ® , commission-free through our online channels.
Another example of expanding access to investing includes Schwab Stock Slices™, a service which enables investors to purchase a single stock slice, or up to 30 different stock slices at once, from the S&P 500 ® , - 4 - THE CHARLES SCHWAB CORPORATION commission-free through our online channels.
Our ERGs are made up of employees who share characteristics or life experiences and are committed to enhancing diversity and inclusion at Schwab. Additionally, our leaders are explicitly responsible for creating an environment where all people can do their best work, and for fostering the development of high-performance teams that recognize the value of diverse perspectives, skills, and backgrounds.
Our ERGs are centered around employees who share characteristics or life experiences and are committed to enhancing diversity and inclusion at Schwab. Additionally, our leaders are explicitly responsible for creating an environment where all people can do their best work, and for fostering the development of high-performance teams that recognize the value of diverse perspectives, skills, and backgrounds.
Management believes that we can maintain our market position primarily through the efforts of our sales, support, technology, and business consulting service teams, which are dedicated to helping RIAs grow, compete, and succeed in serving their clients.
Management believes that we can maintain our competitive position primarily through the efforts of our sales, support, technology, and business consulting teams, which are dedicated to helping RIAs grow, compete, and succeed in serving their clients.
Capital requirements for Category III banking organizations include the generally applicable risk-based capital and Tier 1 leverage ratio requirements (the “standardized approach” framework), the minimum 3.0% supplementary leverage ratio, the countercyclical capital buffer, which is currently 0%, and the stress capital buffer.
Capital requirements for Category III banking organizations include the generally applicable risk-based capital and Tier 1 leverage ratio requirements (the “standardized approach” framework), the minimum 3.0% supplementary leverage ratio, the stress capital buffer (CSC), the capital conservation buffer (banking subsidiaries), and the countercyclical capital buffer, which is currently 0%.
And we offer award-winning and 24/7 service to all our clients, regardless of asset levels, via a multi-channel service delivery model, which includes online, mobile, telephone, and branch support. We believe in the power of investing and the importance of planning in helping clients achieve their financial goals.
And we offer award-winning and 24/7 service to all our clients, regardless of asset levels, via a multi-channel service delivery model, which includes online, mobile, telephone, and branch support. - 3 - THE CHARLES SCHWAB CORPORATION We believe in the power of investing and the importance of planning in helping clients achieve their financial goals.
As discussed below, starting in 2022, CSC, as a large savings and loan holding company became subject to the stress capital buffer requirement, which applies to risk-based capital ratios (CET1, Tier 1 Capital, and Total Capital).
As discussed below, starting in 2022, CSC, as a large savings and loan holding company became subject to the stress capital buffer requirement, which applies to risk-based capital ratios (Common Equity Tier 1 Capital, Tier 1 Capital, and Total Capital).
In addition to the activities that a savings and loan holding company that has not elected to be treated as an FHC is permitted to conduct, the Company may now also engage in activities that are financial in nature or incidental to a financial activity (FHC Activities), including underwriting, dealing and making markets in securities, various insurance underwriting activities, and making merchant banking investments in non-financial companies.
In addition to the activities that a savings and loan holding - 6 - THE CHARLES SCHWAB CORPORATION company that has not elected to be treated as an FHC is permitted to conduct, an FHC may also engage in activities that are financial in nature or incidental to a financial activity (FHC Activities), including underwriting, dealing and making markets in securities, various insurance underwriting activities, and making merchant banking investments in non-financial companies.
We recruit from underrepresented communities through targeted campus recruiting, scholarship programs, and partnerships with professional organizations. For Schwab employees, we support a number of Employee Resource Groups (ERGs) which are employee-driven and provide support, leadership development opportunities, and connection to our diverse marketplace.
We recruit from underrepresented communities through targeted campus recruiting, scholarship programs, and partnerships with professional organizations. For Schwab employees, we support a number of Employee Resource Groups (ERGs) which are employee-driven and provide support, leadership development opportunities, and connection.
In October 2020, the Federal Reserve, OCC, and FDIC jointly adopted a final net stable funding ratio (NSFR) rule to strengthen the resilience of large bank and savings and loan holding companies by requiring them to maintain a minimum level of stable funding based on the liquidity characteristics of the holding company’s assets, commitments, and derivative exposures over a one-year time horizon.
The final Net Stable Funding Ratio (NSFR) rule was jointly adopted by the Federal Reserve, the Office of the Comptroller of the Currency, and FDIC in 2020 to strengthen the resilience of large bank and savings and loan holding companies by requiring them to maintain a minimum level of stable funding based on the liquidity characteristics of the holding company’s assets, commitments, and derivative exposures over a one-year time horizon.
To meet the specific needs of trading clients, Schwab offers integrated web-, mobile-, and software-based trading platforms, real-time market data, options trading, premium research, and multi-channel access, as well as sophisticated account and trade management features, risk management tools, and dedicated service support.
To meet the specific needs of trading clients, Schwab offers integrated web-, mobile-, and software-based trading platforms, real-time market data, options trading, premium research, and multi-channel access, as well as sophisticated account and trade management features, risk management tools, and dedicated service support – all at highly competitive pricing.
Management estimates that investable wealth in the United States (U.S.) (consisting of assets in defined contribution, retail wealth management and brokerage, and registered investment advisor channels, along with bank deposits) currently exceeds $60 trillion, which means the Company’s $7.05 trillion in client assets leaves substantial opportunity for growth.
Management estimates that investable wealth in the United States (U.S.) (consisting of assets in defined contribution, retail wealth management and brokerage, and registered investment advisor channels, along with bank deposits) currently exceeds $65 trillion, which means the Company’s $8.52 trillion in client assets leaves substantial opportunity for growth.
The regulations cover all aspects of the securities business, including, among other things, sales and trading practices, publication of research, margin lending, uses and safekeeping of clients’ funds and securities, capital adequacy, recordkeeping and reporting, fee arrangements, disclosure to clients, fiduciary duties, and the conduct of directors, officers, and employees.
The regulations cover all aspects of the securities business, including, among other things, sales and trading practices, publication of research, margin lending, uses and safekeeping of clients’ funds and securities, capital adequacy, recordkeeping and reporting, fee arrangements, order flow revenue from securities exchanges and market makers, disclosure to clients, fiduciary duties, and the conduct of directors, officers, and employees.
We conduct industry research on an ongoing basis, and hold a series of events and conferences every year to discuss topics of interest to RIAs, including business strategies and best practices.
We conduct industry research on an ongoing basis, and hold a series of events and conferences every year to discuss topics of interest to RIAs, including business - 5 - THE CHARLES SCHWAB CORPORATION strategies and best practices.
As of December 31, 2022, Schwab had full-time, part-time, and temporary employees, and persons employed on a contract basis, that represented the equivalent of approximately 35,300 full-time employees. Schwab offers a compensation package that rewards both employee and company performance.
As of December 31, 2023, Schwab had full-time, part-time, and temporary employees, and persons employed on a contract basis, that represented the equivalent of approximately 33,000 full-time employees. Schwab offers a compensation package that rewards both employee and company performance.
Our premier advisory solution, Schwab Wealth Advisory™ (formerly known as Schwab Private Client™), features a personal advice relationship with a dedicated Wealth Advisor, supported by a team of investment professionals who provide individualized service, a customized investment strategy developed in collaboration with the client, and ongoing guidance and execution.
Our premier advisory solution, Schwab Wealth Advisory™, features a personal advice relationship with a dedicated Wealth Advisor, supported by a team of wealth management professionals who provide individualized service, financial planning, a customized investment strategy developed in collaboration with the client, and ongoing guidance and execution.
As a result of our operations in countries outside the U.S., we are also subject to rules and regulations issued by certain foreign authorities, including the Financial Conduct Authority (FCA) in the United Kingdom, the Securities and Futures Commission (SFC) in Hong Kong, and the Monetary Authority of Singapore (MAS) in Singapore.
As a result of our operations in countries outside the U.S., we are also subject to rules and regulations issued by certain foreign authorities, including the Financial Conduct Authority in the United Kingdom, the Securities and Futures Commission in Hong Kong, the Monetary Authority of Singapore in Singapore, and the Ministry of Finance in the People’s Republic of China.
In accordance with the IDA agreement, which became effective October 6, 2020, cash held in eligible brokerage client accounts is swept off-balance sheet to deposit accounts at the TD Depository Institutions. Schwab provides recordkeeping and support services to the TD Depository Institutions with respect to the deposit accounts for which Schwab receives an aggregate monthly fee.
Consistent with the 2019 IDA agreement, in accordance with the 2023 IDA agreement, cash held in eligible brokerage client accounts is swept off-balance sheet to deposit accounts at the TD Depository Institutions. Schwab provides recordkeeping and support services to the TD Depository Institutions with respect to the deposit accounts for which Schwab receives an aggregate monthly fee.
The FDIC uses a risk-based deposit premium assessment system that, for large insured depository institutions with at least $10 billion in total consolidated assets, uses a scorecard method based on a number of factors, including the institution’s regulatory ratings, asset quality and brokered deposits. The deposit insurance assessment base is calculated as average consolidated total assets minus average tangible equity.
The FDIC uses a risk-based deposit premium assessment system that, for large insured depository institutions with at least $10 billion in total consolidated assets, uses a scorecard method based on a number of factors, including the institution’s regulatory ratings, asset quality and brokered deposits.
Retirement Business Services provides trust, custody, and retirement business services to independent retirement plan advisors and independent recordkeepers. Retirement plan assets are held at Charles Schwab Trust Bank (Trust Bank) or trusteed by a separate, independent trustee.
Retirement Business Services provides trust, custody, brokerage, and software services to independent retirement plan advisors and independent recordkeepers. Through Retirement Business Services, retirement plan assets are held at Charles Schwab Trust Bank (Trust Bank) or trusteed by a separate, independent trustee, or through brokerage accounts at CS&Co.
Charles Schwab Futures and Forex LLC (CSFF, formerly known as TD Ameritrade Futures & Forex, LLC) is registered as an FCM and FDM with the Commodity Futures Trading Commission (CFTC). Much of the regulation of broker-dealers has been delegated to SROs. Our principal broker-dealers are each members of the Financial Industry Regulatory Authority, Inc.
Charles Schwab Futures and Forex LLC (CSFF) is registered as an FCM and FDM with the Commodity Futures Trading Commission (CFTC). Much of the regulation of broker-dealers has been delegated to SROs. Our principal broker-dealers are each members of the Financial Industry Regulatory Authority, Inc. (FINRA) and the Municipal Securities Rulemaking Board (MSRB).
In January 2021, the Federal Reserve adopted a new rule making savings and loan holding companies with total consolidated assets of $100 billion or more, including CSC, subject to an annual Comprehensive Capital Analysis and Review (CCAR) process, which requires submission of an annual capital plan to the Federal Reserve.
Pursuant to the Federal Reserve’s 2021 rule, savings and loan holding companies with total consolidated assets of $100 billion or more, including CSC, are subject to an annual Comprehensive Capital Analysis and Review (CCAR) process, which requires submission of an annual capital plan to the Federal Reserve.
Under this agreement, uninvested cash within eligible brokerage client accounts is swept off-balance sheet to deposit accounts at the TD Depository Institutions. Schwab provides recordkeeping and support services to the TD Depository Institutions for bank deposit account fees.
Bank deposit account fees are primarily recognized pursuant to the Company’s IDA agreement with the TD Depository Institutions. Under the IDA agreement, uninvested cash within eligible brokerage client accounts is swept off-balance sheet to deposit accounts at the TD Depository Institutions. Schwab provides recordkeeping and support services to the TD Depository Institutions for bank deposit account fees.
Under the revised capital requirements, Category III organizations are not subject to the “advanced approaches” regulatory capital framework and are permitted to opt out of including accumulated other comprehensive income (AOCI) in their regulatory capital calculations. CSC made this opt out election, and commencing with the first quarter of 2020, excludes AOCI from its regulatory capital.
Under the currently applicable revised capital requirements, Category III organizations are not subject to the “advanced approaches” regulatory capital framework and are permitted to opt out of including accumulated other comprehensive income (AOCI) in their regulatory capital calculations. CSC made this opt out election and excludes AOCI from its regulatory - 7 - THE CHARLES SCHWAB CORPORATION capital.
In 2022, CSC and CSB - 8 - THE CHARLES SCHWAB CORPORATION conducted company-run stress tests, reported the results of their stress testing to the Federal Reserve, and published a summary of their stress test results.
In the most recent cycle in 2022, CSC and CSB conducted company-run stress tests, reported the results of their stress testing to the Federal Reserve, and published a summary of their stress test results.
Schwab’s major sources of revenues are generated by both of the reportable segments, based on their respective levels of client assets and activity. Revenue is attributable to a reportable segment based on which segment has the primary responsibility for serving the client.
These investing products and services are made available through two business segments – Investor Services and Advisor Services. Schwab’s major sources of revenues are generated by both of the reportable segments, based on their respective levels of client assets and activity. Revenue is attributable to a reportable segment based on which segment has the primary responsibility for serving the client.
Brokered Deposits In December 2020, the FDIC adopted amendments to its brokered deposits rule to establish a new framework for determining whether deposits made through arrangements between third parties and depository institutions constitute brokered deposits and more specifically to clarify the circumstances under which broker-dealers that place deposits with depository institutions through brokerage sweep arrangements such as CS&Co and TDAC qualify for the “primary purpose exception” from the definition of a deposit broker.
Brokered Deposits The FDIC’s amended brokered deposits rule became effective April 1, 2021, which established a new framework for determining whether deposits made through arrangements between third parties and depository institutions constitute brokered deposits and more specifically to clarify the circumstances under which broker-dealers that place deposits with depository institutions through brokerage sweep arrangements, such as CS&Co and TDAC, qualify for the “primary purpose exception” from the definition of a deposit broker.
The Company is generally adopting Schwab platforms and systems, though we’re leveraging certain material advantages in TD Ameritrade’s platforms, as exemplified by our retention of TD Ameritrade’s thinkorswim ® and thinkpipes ® trading platforms, education, and tools into our offerings for retail and RIA clients.
The Company has generally adopted Schwab platforms and systems, though we’ve leveraged certain material advantages in TD Ameritrade’s platforms, as exemplified by our comprehensive integration of TD Ameritrade’s thinkorswim ® and thinkpipes ® trading platforms, education, and tools into our offerings for retail and RIA clients.
CSC’s three depository institution subsidiaries are CSB, CSC’s principal depository institution subsidiary, Charles Schwab Premier Bank, SSB (CSPB), and Trust Bank. On March 20, 2020, CSB and CSPB converted from federal savings associations headquartered in Henderson, Nevada to Texas-chartered savings banks headquartered in Westlake, Texas. Trust Bank is a Nevada-chartered savings bank.
CSC’s three depository institution subsidiaries are CSB, CSC’s principal depository institution subsidiary, Charles Schwab Premier Bank, SSB (CSPB), and Trust Bank. CSB and CSPB are Texas-chartered savings banks headquartered in Westlake, Texas, and Trust Bank is a Nevada-chartered savings bank.
As of December 31, 2022, CSC had total consolidated assets of approximately $552 billion and cross-jurisdictional activity of approximately $29 billion.
As of December 31, 2023, CSC had total consolidated assets of approximately $493 billion and cross-jurisdictional activity of approximately $25 billion.
IDA Agreement Concurrently with the execution of the Agreement and Plan of Merger, dated as of November 24, 2019, as amended (the Merger Agreement), CSC entered into an amended and restated insured deposit account agreement with the TD Depository Institutions (the IDA agreement).
IDA Agreement Concurrently with the execution of the Agreement and Plan of Merger, dated as of November 24, 2019, as amended (the Merger Agreement), CSC entered into an amended and restated insured deposit account agreement with TD Bank USA, National Association and TD Bank, National Association (together, the TD Depository Institutions) (the 2019 IDA agreement), which became effective October 6, 2020.
At December 31, 2022, Schwab had $7.05 trillion in client assets, 33.8 million active brokerage accounts, 2.4 million corporate retirement plan participants, and 1.7 million banking accounts. Principal business subsidiaries of CSC include the following: • Charles Schwab & Co., Inc.
At December 31, 2023, Schwab had $8.52 trillion in client assets, 34.8 million active brokerage accounts, 5.2 million workplace plan participant accounts, and 1.8 million banking accounts. Principal business subsidiaries of CSC include the following: • Charles Schwab & Co., Inc.
In addition to minimum risk-based capital requirements, banking organizations must hold additional capital, referred to as buffers, to avoid being subject to limits on capital distributions and discretionary bonus payments to executive officers. - 7 - THE CHARLES SCHWAB CORPORATION The banking regulators have established four risk-based categories for determining the regulatory capital and liquidity requirements applicable to large U.S. banking organizations with $100 billion or more in total consolidated assets based on their total assets, cross-jurisdictional activity, weighted short-term wholesale funding, nonbank assets, and off-balance sheet exposure.
The banking regulators have established four risk-based categories for determining the regulatory capital and liquidity requirements applicable to large U.S. banking organizations with $100 billion or more in total consolidated assets based on their total assets, cross-jurisdictional activity, weighted short-term wholesale funding, nonbank assets, and off-balance sheet exposure.
The final NSFR rule became effective on July 1, 2021, and banking entities subject to the rule will be required to publicly disclose their quarterly NSFRs on a semi-annual basis beginning with the first and second quarters of 2023.
Beginning with the first and second quarters of 2023, banking organizations subject to the rule are required to publicly disclose their quarterly NSFRs on a semi-annual basis.
In January 2021, the FDIC announced that it would resume requiring resolution plan submissions for insured depository institutions with total consolidated assets of $100 billion or more and in June 2021, the FDIC announced a modified resolution plan approach for these insured depository institutions which extends the submission frequency to a three-year cycle, streamlines content requirements, and places enhanced emphasis on engagement with firms.
In June 2021, the FDIC announced a modified resolution plan approach for insured depository institutions with total consolidated assets of $100 billion or more which established a three-year cycle submission frequency, streamlined content requirements, and placed enhanced emphasis on engagement with firms. CSB most recently submitted a resolution plan pursuant to these requirements in November 2022.
The FDIC’s brokered deposit rule amendments became effective on April 1, 2021. Under the new framework, funds swept by our broker-dealer subsidiaries to CSB and Schwab’s other depository institution subsidiaries continue to qualify for the primary purpose exception.
Funds swept by our broker-dealer subsidiaries to CSB and Schwab’s other depository institution subsidiaries continue to qualify for the primary purpose exception under this framework.
The rule also imposes a stress capital buffer requirement, floored at 2.5 percent of risk-weighted assets, that replaced CSC’s 2.5 percent capital conservation buffer. The capital plan requirement became effective for CSC with the 2022 CCAR cycle, and CSC’s initial stress capital buffer requirement was based on its 2022 CCAR stress testing results as described below.
The rule also imposes a stress capital buffer requirement, floored at 2.5 percent of risk-weighted assets, that replaced CSC’s 2.5 percent capital conservation buffer. The capital plan requirement became effective for CSC with the 2022 CCAR cycle, and in June 2022, the Company received the results of the Federal - 8 - THE CHARLES SCHWAB CORPORATION Reserve’s 2022 CCAR.
Integration Overview The acquisition of TD Ameritrade supports the Company’s ongoing efforts to enhance the client experience, to provide deeper resources for individual investors and RIAs including more robust trading capabilities, and to continue to improve our operating efficiency. At the time the acquisition closed, TDA had approximately $1.6 trillion in client assets and approximately 14.5 million brokerage accounts.
The acquisition of TD Ameritrade supports the Company’s ongoing efforts to enhance the client experience, to provide deeper resources for individual investors and RIAs including more robust trading capabilities, and to continue to improve our operating efficiency.
The Company has made significant progress in its efforts to reduce overlapping or redundant roles across the two firms and has largely completed the rationalization of CS&Co and TD Ameritrade, - 2 - THE CHARLES SCHWAB CORPORATION Inc. branch locations.
The Company has made significant progress in its efforts to reduce overlapping or redundant roles across the two firms and has largely completed the rationalization of CS&Co and TD Ameritrade, Inc. branch locations. Integration activities for the final client transition event and selective role reductions are expected to be completed in 2024.
(FINRA) and the Municipal Securities Rulemaking Board (MSRB). In addition, CS&Co is a member of Nasdaq Stock Market, Cboe EDGX and MEMX, and TDAC is a member of NYSE Arca, Nasdaq Stock Market, Cboe EDGX and MEMX. In addition to the SEC, the primary regulators of our principal broker-dealers are FINRA and, for municipal securities, the MSRB.
In addition, CS&Co and TDAC are members of Nasdaq Stock Market, Cboe EDGX, and MEMX LLC. In addition to the SEC, the primary regulators of our principal broker-dealers are FINRA and, for municipal securities, the MSRB. The National Futures Association (NFA) is the primary regulator for CSFF’s futures, commodities, and forex trading activities.
Business and Asset Acquisitions Acquisition of TD Ameritrade Effective October 6, 2020, the Company completed its acquisition of TD Ameritrade Holding Corporation (TDA Holding) and its consolidated subsidiaries (collectively referred to as “TD Ameritrade” or “TDA”). TD Ameritrade provides securities brokerage services, including trade execution, clearing services, and margin lending; and futures and foreign exchange trade execution services.
Business Acquisition Acquisition of TD Ameritrade Effective October 6, 2020, the Company completed its acquisition of TD Ameritrade Holding Corporation, now TD Ameritrade Holding LLC (TDA Holding) and its consolidated subsidiaries (collectively referred to as “TD Ameritrade” or “TDA”).
While CSC is now required to make adjustments to its risk-weighted assets related to de minimis positions, those adjustments are not expected to significantly impact our risk-based capital ratios nor have a current impact on CSC’s activities.
CSC began incorporating market risk capital for the period ending December 31, 2022, and while CSC is required to make adjustments to its risk-weighted assets related to de minimis positions, those adjustments have not significantly impacted our risk-based capital ratios nor have they had a current impact on CSC’s activities. The U.S.
Trading revenue includes commissions earned for executing trades for clients in certain individual equities, options, futures, fixed income securities, and certain third-party mutual funds and ETFs; order flow revenue; and principal transaction revenue earned primarily from actions to support client trading in fixed income securities. - 6 - THE CHARLES SCHWAB CORPORATION Bank deposit account fees are primarily recognized pursuant to the Company’s IDA agreement with the TD Depository Institutions.
Trading revenue includes commissions earned for executing trades for clients in certain individual equities, options, futures, fixed income securities, and certain third-party mutual funds and ETFs; order flow revenue; and principal transactions revenue earned primarily from actions to support client trading in fixed income securities.
Virgin - 10 - THE CHARLES SCHWAB CORPORATION Islands, and the Commonwealth of Puerto Rico. CS&Co, CSIM, and certain of our other subsidiaries are registered as investment advisors with the SEC.
Securities and Exchange Commission (SEC or Commission), the fifty states, the District of Columbia, the U.S. Virgin Islands, and the Commonwealth of Puerto Rico. CS&Co, CSIM, and certain of our other subsidiaries are registered as investment advisors with the SEC.
Our advisory solutions span a broad range of discretionary and non-discretionary choices, with minimum investments starting as low as $5,000, making it accessible to a broad set of investors.
Clients enrolled in these offerings have access to a dedicated relationship and service team, specialists, expedited processing, pricing discounts and product access. Our advisory solutions span a broad range of discretionary and non-discretionary choices, with minimum investments starting as low as $5,000, making it accessible to a broad set of investors.
The Company is working to integrate thinkpipes into its ongoing offerings as well as TD Ameritrade Institutional’s customizable portfolio rebalancing solution, iRebal ® , as part of our offering for RIA clients. The Advisor Services segment also includes the Retirement Business Services business unit.
The Company recently launched the thinkpipes ® trading platform, which offers real-time charting and efficient trading and allocation, into its ongoing offerings, as well as our customizable portfolio rebalancing solution, iRebal ® , as part of our offering for RIA clients. The Advisor Services segment also includes the Retirement Business Services business unit.
Results of the Federal Reserve’s 2022 Comprehensive Capital Analysis and Review In June 2022, the Company received the results of the Federal Reserve’s 2022 Comprehensive Capital Analysis and Review. These results included the Federal Reserve’s estimate of CSC’s minimum capital ratios under the supervisory severely adverse scenario for the nine-quarter horizon beginning December 31, 2021 and ending March 31, 2024.
These results included the Federal Reserve’s estimate of CSC’s minimum capital ratios under the supervisory severely adverse scenario for the nine-quarter horizon beginning December 31, 2021 and ending March 31, 2024. Based on these results, CSC’s calculated stress capital buffer was below the 2.5% minimum, resulting in a stress capital buffer at the 2.5% floor.
The failure of an institution to receive at least a “satisfactory” rating could inhibit the institution or its holding company from undertaking certain activities, including acquisitions or opening branch offices. Consumer Financial Protection The CFPB has broad rulemaking, supervisory and enforcement authority for a wide range of federal consumer protection laws relating to financial products.
The failure of an institution to receive at least a “satisfactory” rating could inhibit the institution or its holding company from undertaking certain activities, including acquisitions or opening branch offices.
In addition, the website also includes the Dodd-Frank Act stress test results, our regulatory capital disclosures based on Basel III, and our quarterly average LCR. All such filings are available free of charge either on our website or by request via email ( investor.relations@schwab.com ), or mail (Charles Schwab Investor Relations at 211 Main Street, San Francisco, CA 94105).
All such filings are available free of charge either on our website or by request via email ( investor.relations@schwab.com ), or mail (Charles Schwab Investor Relations at 211 Main Street, San Francisco, CA 94105).
The Advisor Services website is the core platform for RIAs to conduct daily business activities online with Schwab, including viewing and managing client account information and accessing news and market - 5 - THE CHARLES SCHWAB CORPORATION information.
The Advisor Services website is the core platform for RIAs to conduct daily business activities online with Schwab, including viewing and managing client account information and accessing news and market information. The website provides account servicing capabilities for RIAs, including account opening, money movement, transfer of assets, trading, checking status, and communicating with our service team.
For example, clients that trade more actively can - 4 - THE CHARLES SCHWAB CORPORATION use these channels to access highly competitive pricing, expert tools, and extensive service capabilities – including experienced, knowledgeable teams of trading specialists, and integrated product offerings.
For example, clients that trade more actively can use these channels to access expert tools and extensive service capabilities – including experienced, knowledgeable teams of trading specialists, and integrated product offerings. In 2023, we introduced Schwab Trading Powered by Ameritrade™, which brings together the best of Schwab and Ameritrade’s trading platforms, comprehensive education and specialized service.
We also refer investors who want to utilize a specific third-party money manager to direct a portion of their investment assets to the Schwab Managed Account ™ program. Schwab Intelligent Portfolios ® , available since 2015, is for clients who are looking to have their assets professionally managed via a fully automated online investment advisory service.
We also refer investors who want to utilize a specific third-party money manager to direct a portion of their investment assets to the Schwab Managed Account ™ program.
We also offer benefits and resources designed to help our employees achieve their financial goals, including a 401(k) plan, an employee stock purchase plan, financial planning - 11 - THE CHARLES SCHWAB CORPORATION consultations, and disability and life insurance options.
We also offer benefits and resources designed to help our employees achieve their financial goals, including a 401(k) plan, an employee stock purchase plan, financial planning consultations, and disability and life insurance options. In addition, Schwab offers programs to help with employee career growth including mentorship, development, and leadership programs as well as reimbursement for qualified business-related education and training.
We also offer referrals to an independent RIA in the Schwab Advisor Network ® . These RIAs provide personalized portfolio management, financial planning, and wealth management solutions. For clients seeking a relationship in which investment decisions are fully delegated to a financial professional, Schwab offers several alternatives.
We offer referrals to independent RIAs in the Schwab Advisor Network ® for clients seeking personalized portfolio management, financial planning, and wealth management solutions.
With COVID-19 restrictions now eased, Schwab completed its return-to-office plan which entails various in-office and remote work options. The Company’s flexible work arrangements are designed to balance the importance our employees place on workplace flexibility with the benefits of in-person interactions to train and learn from one another, build human connections, and maintain Schwab’s culture as we serve our clients.
The Company offers a hybrid work and - 11 - THE CHARLES SCHWAB CORPORATION flexibility approach to work arrangements that is designed to balance the importance our employees place on workplace flexibility with the benefits of in-person interactions to train and learn from one another, build human connections, and maintain Schwab’s culture as we serve our clients.
The CFPB has examination and primary enforcement authority over depository institutions with $10 billion or more in consolidated total assets.
Consumer Financial Protection The CFPB has broad rulemaking, supervisory and enforcement authority for a wide range of federal consumer protection laws relating to financial products. The CFPB has examination and primary enforcement authority over depository institutions with $10 billion or more in consolidated total assets.
In addition, Schwab offers programs to help with employee career growth including mentorship, development, and leadership programs as well as reimbursement for qualified business-related education and training. We also encourage and empower employees to volunteer in the communities where we live and work, offering paid time off for every employee to volunteer in his or her community.
We also encourage and empower employees to volunteer in the communities where we live and work, offering paid time off for every employee to volunteer in his or her community.
FDIC Assessment Rate Increase In October 2022, the FDIC adopted a final rule to increase the initial base deposit insurance assessment rates by two basis points, beginning with the first quarterly assessment period of 2023.
The deposit insurance assessment base is calculated as average consolidated total assets minus average tangible equity. - 9 - THE CHARLES SCHWAB CORPORATION In October 2022, the FDIC adopted a final rule to increase the initial base deposit insurance assessment rates by two basis points, which became effective for the first quarterly assessment period of 2023.
Broker-Dealer, Futures Commission Merchant (FCM), Forex Dealer Member (FDM), and Investment Advisor Regulation Our principal broker-dealer subsidiaries, CS&Co, TD Ameritrade, Inc., and TDAC, are each registered as a broker-dealer with the U.S. Securities and Exchange Commission (SEC or Commission), the fifty states, the District of Columbia, the U.S.
In addition, CSC and various subsidiaries of the Company are subject to U.S. sanctions programs administered by the Office of Foreign Assets Control. - 10 - THE CHARLES SCHWAB CORPORATION Broker-Dealer, Futures Commission Merchant (FCM), Forex Dealer Member (FDM), and Investment Advisor Regulation Our principal broker-dealer subsidiaries, CS&Co, TD Ameritrade, Inc., and TDAC, are each registered as a broker-dealer with the U.S.
Also during 2020, the Company completed its acquisition of Wasmer, Schroeder & Company, LLC (Wasmer Schroeder), which added established strategies and new separately managed account offerings to our fixed income lineup. Products and Services Schwab offers a broad range of products and services through intuitive end-to-end solutions, including robust digital capabilities, to address our clients’ varying investment and financial needs.
Products and Services Schwab offers a broad range of products and services through intuitive end-to-end solutions, including robust digital capabilities, to address our clients’ varying investment and financial needs.
The National Futures Association (NFA) is the primary regulator for CSFF’s futures, commodities, and forex trading activities. The principal purpose of regulating these entities is the protection of clients and securities markets.
The principal purpose of regulating these entities is the protection of clients and securities markets.
TD Ameritrade serves individual retail investors and RIAs predominantly through the Internet, a national branch network, and relationships with RIAs.
TD Ameritrade provides securities brokerage services, including trade execution, clearing services, and margin lending; and futures and foreign exchange trade execution services. TD Ameritrade has served individual retail investors and RIAs predominantly through the Internet, a national branch network, and relationships with RIAs.
It delivers core capabilities and features through an intuitive modern experience, without the need to download and reconcile data. The Advisor Services website also provides interactive tools, educational content, and thought leadership for advisors turning independent.
The Advisor Services website also provides interactive tools, educational content, and thought leadership for advisors turning independent.
The requirement is expressed as a ratio of a banking entity’s available stable funding (ASF) to its required stable funding (RSF).
The requirement is expressed as a ratio of a banking organization’s available stable funding (ASF) to its required stable funding (RSF). Under the NSFR rule, Schwab is required to maintain ASF in an amount equal to 100% of its RSF on an ongoing, daily basis.
For U.S. clients wishing to invest in foreign equities, Schwab offers a suite of global investing capabilities, including online access to certain foreign equity markets with the ability to trade in their local currencies. In addition, Schwab serves both foreign investors and non-English-speaking U.S. clients who wish to trade or invest in U.S. dollar-based securities.
Schwab’s international business offers clients outside the U.S. the ability to invest in U.S. markets. For clients living inside the U.S., it offers multicurrency and foreign exchange trading. For all clients, it offers trading in foreign stocks. In addition, Schwab serves both foreign investors and non-English-speaking U.S. clients who wish to trade or invest in U.S. dollar-based securities.
Based on these results, CSC’s calculated stress capital buffer was below the 2.5% minimum, resulting in a stress capital buffer at the 2.5% floor. This 2.5% stress capital buffer became applicable on October 1, 2022. See Item 1 – Note 23 for additional information regarding our capital requirements.
This 2.5% stress capital buffer became applicable on October 1, 2022. Based on the results of the Federal Reserve’s 2023 CCAR, a 2.5% stress capital buffer continues to be applicable to Schwab for the four-quarter period that began October 1, 2023. See Part II – Item 8 – Note 23 for additional information regarding our capital requirements.
In 2022, we re-launched in-person events to engage with retail and institutional clients after maintaining virtual events during the unprecedented environment seen in 2020 and 2021. Additionally, we provide various online research and analysis tools that are designed to help clients achieve better investment outcomes.
Additionally, we provide various online research and analysis tools that are designed to help clients achieve better investment outcomes.
We also provide access to integrations with third-party platforms, which support a variety of advisor needs including client relationship management, portfolio management systems, trade order management, and financial planning. As an example, we offer Schwab Advisor Portfolio Connect ® , a simplified portfolio management solution that is available free of charge to advisors to manage Schwab accounts.
The site provides multi-year archiving of statements, trade confirms, and tax reports, along with document search capabilities. We also provide access to integrations with third-party platforms, which support a variety of advisor needs including client relationship management, portfolio management systems, trade order management, and financial planning.
CSC recently became subject to the rule and the related Market Risk Rule required disclosures . CSC began incorporating market risk capital for the period ending December 31, 2022.
CSC is subject to the rule and the related Market Risk Rule required disclosures .

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIn market downturns and periods of heightened volatility, the volume of legal claims and amount of damages sought in litigation and regulatory proceedings against financial services companies have historically increased. Operational Risk Security breaches of our systems, or those of our clients or third parties, may subject us to significant liability and damage our reputation.
Biggest changeA substantial judgment, settlement, fine, or penalty could be material to our operating results or cash flows for a particular future period, depending on our results for that period. In market downturns and periods of heightened volatility, the volume of legal claims and amount of damages sought in litigation and regulatory proceedings against financial services companies have historically increased.
Our bank loans primarily consist of First Mortgages, HELOCs, and PALs. Increases in delinquency and default rates, housing and stock price declines, increases in the unemployment rate, and other economic factors, can result in increases in allowances for credit losses and related credit loss expense, as well as write downs on such loans.
Our bank loans primarily consist of First Mortgages, PALs, and HELOCs. Increases in delinquency and default rates, housing and stock price declines, increases in the unemployment rate, and other economic factors, can result in increases in allowances for credit losses and related credit loss expense, as well as write downs on such loans.
Further, we may not realize the anticipated benefits from an acquisition in a timely manner or at all (including without limitation the recent acquisition of TD Ameritrade), and any future acquisition could be dilutive to our current stockholders’ percentage ownership or to earnings per common share (EPS).
Further, we may not realize the anticipated benefits from an acquisition (including without limitation the acquisition of TD Ameritrade) in a timely manner or at all, and any future acquisition could be dilutive to our current stockholders’ percentage ownership or to earnings per common share (EPS).
A reduction in our liquidity position could reduce client confidence in us, which could result in the transfer of client assets and accounts, or could cause us to fail to satisfy our liquidity requirements, including the LCR.
A reduction in our liquidity position could reduce client confidence in us, which could result in the transfer out of client assets and accounts, or could cause us to fail to satisfy our liquidity requirements, including the LCR.
Although our acquisition of TD Ameritrade was structured such that completion of the merger would not result in CSC either (i) being deemed to be “controlled” by TD Bank (as that term is interpreted by the Federal Reserve under the BHC Act or HOLA) or (ii) being deemed to be in “control” of any of TD Bank’s depository institutions, changes in circumstances could trigger presumptions of control under the Federal Reserve’s regulations.
Although our acquisition of TD Ameritrade was structured such that completion of the merger would not result in CSC either (i) being deemed to be “controlled” (as that term is interpreted by the Federal Reserve under the BHC Act or HOLA) by The Toronto-Dominion Bank (TD Bank) or (ii) being deemed to be in “control” of any of TD Bank’s depository institutions, changes in circumstances could trigger presumptions of control under the Federal Reserve’s regulations.
We temporarily lost the services from some of our outsourced service providers during the COVID-19 pandemic which contributed to increased client service response and processing times. Following Russia’s invasion of Ukraine, we had to replace certain vendor resources which added incremental complexity in our TD Ameritrade conversion work.
We temporarily lost the services from some of our outsourced service providers during the COVID-19 pandemic which contributed to increased client service response and processing times. Following Russia’s invasion of Ukraine, we had to replace certain vendor resources which added incremental complexity in earlier phases of our TD Ameritrade conversion work.
Information security risks for financial institutions are increasing, in part because of the use of the internet and mobile and cloud technologies to conduct financial transactions, and the increased sophistication and activities of organized crime, activists, hackers and other external parties, including foreign state actors.
Information security risks for financial institutions are increasing, in part because of the use of the internet and mobile and cloud technologies to conduct financial transactions, and the increased sophistication and activities, including the use of artificial intelligence technologies, of organized crime, activists, hackers and other external parties, including foreign state actors.
In 2022, CSC became subject to the CCAR process, which requires submission of an annual capital plan, and determination of CSC’s stress capital buffer. The plan must include a description of all planned capital actions, including dividends or stock repurchases, over a nine-quarter planning horizon beginning with the first quarter of the calendar year the capital plan is submitted.
CSC is subject to the CCAR process, which requires submission of an annual capital plan, and determination of CSC’s stress capital buffer. The plan must include a description of all planned capital actions, including dividends or stock repurchases, over a nine-quarter planning horizon beginning with the first quarter of the calendar year the capital plan is submitted.
Abrupt changes in securities valuations and the failure of clients to meet margin calls could result in substantial losses, especially if there is a lack of liquidity. As a result of our TD Ameritrade acquisition, our margin, options and futures business has materially increased and market liquidity may represent an increased risk.
Our margin, options and futures business has materially increased as a result of our TD Ameritrade acquisition, and market liquidity represents an increased risk. Abrupt changes in securities valuations and the failure of clients to meet margin calls could result in substantial losses, especially if there is a lack of liquidity.
Although CSC, CS&Co, and TDAC maintain uncommitted, unsecured bank credit lines and CSC has a commercial paper issuance program, as well as a universal shelf registration statement filed with the SEC which can be used to sell securities, - 17 - THE CHARLES SCHWAB CORPORATION financing may not be available on acceptable terms or at all due to market conditions or disruptions in the credit markets.
Although CSC, CS&Co, and TDAC maintain uncommitted, unsecured bank credit lines and CSC has a commercial paper issuance program, as well as a universal shelf registration statement filed with the SEC which can be used to sell securities, financing may not be available on acceptable terms or at all due to market conditions or disruptions in the credit markets.
The issuance of any additional equity or convertible securities could be substantially dilutive to holders of CSC’s common stock and may adversely affect the market price of CSC’s common stock. Our ongoing relationships with TD Bank and its affiliates could have a negative impact on us.
The issuance of any additional equity or convertible securities could be substantially dilutive to holders of CSC’s common stock and may adversely affect the market price of CSC’s common stock. Our ongoing relationships with The Toronto-Dominion Bank and its affiliates could have a negative impact on us.
Deterioration in the housing and credit markets, reduction in interest rates, and decreases in securities valuations negatively impact our results of operations and capital resources. The monetary policies of the Federal Reserve, which regulates the supply of money and credit in the United States, have a significant effect on our operating results.
Deterioration in the housing and credit markets and decreases in securities valuations negatively impact our results of operations and capital resources. The monetary policies of the Federal Reserve, which regulates the supply of money and credit in the United States, have a significant effect on our operating results.
Disruptions in service and slower system response times could result in substantial losses, decreased client satisfaction, reputational damage, and regulatory inquiries. We are also dependent on the integrity and performance of securities exchanges, clearing houses, market makers, dealers, and other intermediaries to which client orders are routed for execution and settlement.
Disruptions in service and slower system response times could result in substantial losses, decreased client satisfaction, reputational damage, and regulatory inquiries. We are also dependent on the integrity and performance of securities exchanges, clearing houses, market makers, dealers, and other intermediaries to which client orders are - 17 - THE CHARLES SCHWAB CORPORATION routed for execution and settlement.
Actions taken by the Federal Reserve, including changes in its target funds rate and balance sheet management, are difficu lt to predict and can affect our net interest revenue and bank deposit account fees.
Actions taken by the Federal Reserve, including changes in its target funds rate and its own balance sheet management, are difficu lt to predict and can affect our financial results, including net interest revenue and bank deposit account fees.
A low interest rate environment may also have a negative impact on our asset management and administration fee revenues when we have to waive a portion of our management fees for certain Schwab-sponsored money market mutual funds in order to continue providing a positive return to clients.
A low interest rate environment may also have a negative impact on our asset management and administration fee revenues when we have to waive a portion of our management fees, as we experienced in 2020 and 2021, for certain Schwab-sponsored money market mutual funds in order to continue providing a positive return to clients.
Our business can be adversely affected by the general environment – economic, corporate, securities market, regulatory, and geopolitical developments all play a role in client asset valuations, trading activity, interest rates, and overall investor engagement, and are outside of our control.
Economic and Market Risks Developments in the business, economic, and geopolitical environment could negatively impact our business. Our business can be adversely affected by the general environment – economic, corporate, securities market, regulatory, and geopolitical developments all play a role in client asset valuations, trading activity, interest rates, and overall investor engagement, and are outside of our control.
Any enforcement actions or other proceedings brought by our regulators against us or our affiliates, officers or employees could result in fines, penalties, cease and desist orders, enforcement actions, suspension, disqualification or expulsion, - 13 - THE CHARLES SCHWAB CORPORATION or other disciplinary sanctions, including limitations on our business activities, any of which could harm our reputation and adversely affect our results of operations and financial condition.
Any enforcement actions or other proceedings brought by our regulators against us or our affiliates, officers or employees could result in fines, penalties, cease and desist orders, enforcement actions, suspension, disqualification or expulsion, or other disciplinary sanctions, including limitations on our business activities, any of which could harm our reputation and adversely affect our results of operations and financial condition.
New legislation, rules, regulations and guidance, or changes in the interpretation or enforcement of existing federal, state, foreign and SRO rules, regulations and guidance, including changes relating to mutual funds, money market funds, standards of conduct with clients, conflicts of interest, regulatory treatment of deposit accounts, CRA, and market structure reform, including order routing practices and order-related revenues, may directly affect our operations and profitability or our specific business lines.
New legislation, rules, regulations and guidance, or changes in the interpretation or enforcement of existing federal, state, foreign and SRO rules, regulations and guidance, including changes relating to mutual funds, money market funds, standards of conduct with clients, conflicts of interest, regulatory treatment of deposit accounts, CRA, changes in required minimum capital and capital structure, and changes in equity market structure, including rules relating to order routing and order-related revenues, may directly affect our operations and profitability or our specific business lines.
Among the factors that may affect the volatility of our stock price are the following: • Speculation in the investment community or the press about, or actual changes in, our competitive position, organizational structure, executive team, operations, financial condition, financial reporting and results, expense discipline, strategic transactions, progress on achieving the expected benefits from our TD Ameritrade acquisition, or ratings from third parties; • The announcement of new products, services, acquisitions, or dispositions by us or our competitors; • Increases or decreases in revenue or earnings, changes in earnings estimates by the investment community, and variations between estimated financial results and actual financial results; and • Sales of a substantial number of shares of our common stock by large stockholders.
Among the factors that may affect the volatility of our stock price are the following: • Speculation in the investment community or the press about, or actual changes in, our competitive position, organizational structure, executive team, operations, financial condition, financial reporting and results, expense discipline, strategic transactions, the expected benefits from our TD Ameritrade acquisition, or ratings from third parties; • The announcement of new products, services, acquisitions, or dispositions by us or our competitors; • Increases or decreases in revenue or earnings, changes in earnings estimates by the investment community, and variations between estimated financial results and actual financial results; • Business metrics, such as client cash and net new client assets; and • Sales of a substantial number of shares of our common stock by large stockholders.
Failure by either CSC or its banking subsidiaries to meet minimum capital requirements could result in certain mandatory and additional discretionary actions by regulators that, if undertaken, could have a negative impact on us.
Failure by either CSC or its banking subsidiaries to meet minimum capital requirements could - 15 - THE CHARLES SCHWAB CORPORATION result in certain mandatory and additional discretionary actions by regulators that, if undertaken, could have a negative impact on us.
Our exposure mainly results from margin lending, clients’ options and futures trading, securities lending, mortgage lending, pledged asset lending, our role as a counterparty in financial contracts and investing activities, and indirectly from the investing activities of certain of the proprietary funds we sponsor.
Our exposure mainly results from margin lending, clients’ options and futures trading, securities lending, mortgage lending, pledged asset lending, our role as a counterparty in financial contracts and investing activities, and indirectly from the investing activities of certain of the proprietary funds that the Company sponsors.
This presumption of control could also be triggered if the revenue generated to either us or to any of the TD Bank depository institutions exceeds a certain percentage. The Stockholder Agreement contains provisions to address such situations.
This presumption of control could also be triggered if the revenue generated to either us or to any of the TD Bank depository institutions exceeds a certain percentage. The Stockholder Agreement contains provisions to address such situations. Item 1B. Unresolved Staff Comments None.
Such support could cause us to take significant charges, could reduce our liquidity and, in certain situations, could, with respect to proprietary funds other than money market mutual funds, result in us having to consolidate one or more funds in our financial statements.
Such support could cause the Company to take significant charges, could reduce the Company’s liquidity and, in certain situations, could, with respect to proprietary funds other than money market mutual funds, result in the Company having to consolidate one or more funds in its financial statements.
Switching to an alternative service provider may require a transition period and result in less efficient operations. We rely on financial intermediaries to execute and settle client orders. We rely on market makers, dealers, securities exchanges, clearing houses, and other financial intermediaries to execute and settle our clients’ orders.
Switching to an alternative service provider may require a transition period and result in less efficient operations. We rely on financial intermediaries to execute and settle client orders and transactions with financial intermediaries are a significant source of revenue. We rely on market makers, dealers, securities exchanges, clearing houses, and other financial intermediaries to execute and settle our clients’ orders.
Our systems and those of other financial institutions have been and will continue to be the target of cyber attacks, malicious code, computer viruses, ransomware, and denial of service attacks that could result in unauthorized access, misuse, loss or destruction of data (including confidential client information), account takeovers, unavailability of service or other events.
Our systems and those of other financial institutions, as well as those of our third-party service providers, have been and will continue to be the target of cyber attacks, malicious code, computer viruses, ransomware, and denial of service attacks that could - 16 - THE CHARLES SCHWAB CORPORATION result in unauthorized access, misuse, loss or destruction of data (including confidential client information), account takeovers, unavailability of service or other events.
In addition, a significant downgrade in the Company’s credit ratings could increase its borrowing costs and limit its access to the capital markets. When short-term interest rates rapidly increase, as they did in 2022, the pace at which clients move certain cash balances out of our sweep features and into higher yielding alternatives generally increases.
In addition, a downgrade in the Company’s credit ratings could increase its borrowing costs and limit its access to the capital markets. When short-term interest rates rapidly increase, as they did in 2022 and 2023, client movement of certain cash balances out of our sweep features and into higher-yielding alternatives generally increases.
Although we believe our net interest revenue will increase in a rising interest rate environment, a rise in interest rates may cause our funding costs to increase if market conditions or the competitive environment induces us to raise our interest rates to avoid losing deposits, or replace deposits with higher cost funding sources without offsetting increases in yields on interest-earning assets which can reduce the benefit to our net interest revenue.
A rise in interest rates may cause our funding costs to increase if market conditions or the competitive environment induces us to raise our interest rates to avoid losing deposits, or replace deposits with higher-cost funding sources without offsetting increases in yields on interest-earning assets, which can reduce the benefit of higher market interest rates to our net interest revenue, as we experienced in 2022 and 2023.
If we choose not to provide credit, liquidity or other support in such a situation, we could suffer reputational damage and its business could be adversely affected. - 18 - THE CHARLES SCHWAB CORPORATION Risks Related to Our TD Ameritrade Acquisition We are undertaking one of the largest brokerage account conversions and could experience unanticipated issues.
If the Company were to choose not to provide credit, liquidity or other support in such a situation, the Company could suffer reputational damage and its business could be adversely affected. Risks Related to Our TD Ameritrade Integration We are working to complete one of the largest brokerage account conversions and could experience unanticipated issues.
Errors in the design, function, or underlying assumptions used in these models and - 16 - THE CHARLES SCHWAB CORPORATION tools, particularly if we fail to detect the errors over an extended period, could subject us to claims of a breach of fiduciary duty and potentially large liabilities for make-whole payments, litigation, and/or regulatory fines.
Errors in the design, function, or underlying assumptions used in these models and tools, particularly if we fail to detect the errors over an extended period, could subject us to claims of a breach of fiduciary duty and potentially large liabilities for make-whole payments, litigation, and/or regulatory fines. We rely on outsourced service providers to perform key functions.
Factors which may adversely affect our liquidity position include CS&Co and TDAC having temporary liquidity demands due to timing differences between brokerage transaction settlements and the availability of segregated cash balances, fluctuations in cash held in banking or brokerage client accounts, a dramatic increase in our lending activities (including margin, mortgage-related, and personal lending), increased capital requirements, changes in regulatory guidance or interpretations, other regulatory changes, or a loss of market or client confidence in us resulting in unanticipated withdrawals of client funds.
Factors which may adversely affect our liquidity position include CS&Co and TDAC having temporary liquidity demands due to timing differences between brokerage transaction settlements and the availability of segregated cash balances, fluctuations in cash held in banking or brokerage client accounts, such as the significant client reallocation from sweep cash to higher-yielding investments that we experienced in 2022 and 2023 in response to rapid interest rate increases, a dramatic increase in our lending activities (including margin, mortgage-related, and personal lending), increased capital requirements, changes in regulatory guidance or interpretations, other regulatory changes, or a loss of market or client confidence in us resulting in unanticipated withdrawals of client funds.
These service providers face technology, operating, business, and economic risks, and any significant failures by them, including the improper use or disclosure of our confidential client, employee, or company information, could cause us to incur losses and could harm our reputation.
We rely on external service providers to perform certain key technology, cloud infrastructure, processing, servicing, and support functions. These service providers face technology, operating, business, and economic risks, and any significant failures by them, including the improper use or disclosure of our confidential client, employee, or company information, could cause us to incur losses and could harm our reputation.
We sponsor a number of proprietary money market mutual funds and other proprietary funds. Although we have no obligation to do so, we may decide for competitive or other reasons to provide credit, liquidity or other support to our funds in the event of significant declines in valuation of fund holdings or significant redemption activity that exceeds available liquidity.
Although the Company has no obligation to do so, the Company may decide for competitive or other reasons to provide credit, liquidity or other support to our funds in the event of significant declines in valuation of fund holdings or significant redemption activity that exceeds available liquidity.
When these outflows outpace excess cash on hand and cash generated by maturities and paydowns on our investment and loan portfolios, as they recently have, our banking subsidiaries may use temporary supplemental funding, such as advances under Federal Home Loan Bank (FHLB) secured credit facilities, borrowings under repurchase agreements with external financial institutions, and issuances of brokered certificates of deposit, which have higher costs.
When these outflows outpace excess cash on hand and cash generated by maturities and paydowns on our investment and loan portfolios, as they did in 2022 and 2023, we may need to rely on temporary supplemental funding, such as advances under Federal Home Loan Bank (FHLB) secured credit facilities, borrowings under repurchase agreements with external financial institutions, issuances of brokered certificates of deposit (CDs), or other sources of funding, which have higher costs and could be subject to limitations on availability.
Fluctuations in client cash or deposit balances, as well as market conditions or changes in regulatory treatment of client deposits, may affect our ability to meet our liquidity needs.
We meet our liquidity needs primarily from working capital and cash generated by client activity as well as external financing. Fluctuations in client cash or deposit balances, as well as market conditions or changes in regulatory treatment of client deposits, may affect our ability to meet our liquidity needs.
We may be required to expend significant additional resources to modify our protective measures or to investigate and remediate vulnerabilities or other exposures. We also face risk related to external fraud involving the misappropriation and use of clients’ user names, passwords or other personal information to gain access to our clients’ financial accounts.
We also face risk related to external fraud involving the misappropriation and use of clients’ user names, passwords or other personal information to gain access to our clients’ financial accounts.
Any such transaction could have a material impact on our financial position, results of operations, or cash flows. The process of evaluating, negotiating, effecting, and integrating any such strategic transaction may divert management’s attention from other business concerns, and might cause the loss of key clients, employees, and business partners.
The process of evaluating, negotiating, effecting, and integrating any such strategic transaction may divert management’s attention from other business concerns, and might cause the loss of key clients, employees, and business partners.
Technology and operational failures or errors and other operational risks could subject us to losses, litigation, regulatory actions, and reputational damage. We must process, record and monitor a large number of transactions and our operations are highly dependent on the integrity of our technology systems and our ability to make timely enhancements and additions to our systems.
We must process, record and monitor a large number of transactions and our operations are highly dependent on the integrity of our technology systems and our ability to make timely enhancements and additions to our systems.
Credit Risk We may suffer significant losses from our credit exposures. Our businesses are subject to the risk that a client, counterparty or issuer will fail to perform its contractual obligations, or that the value of collateral held to secure obligations will prove to be inadequate.
Our businesses are subject to the risk that a client, counterparty or issuer will fail to perform its contractual obligations, or that the value of collateral held to secure obligations will prove to be inadequate. While we have policies and procedures designed to manage this risk, the policies and procedures may not be fully effective.
In addition, to access new FHLB advances or roll over existing advances, our banking subsidiaries must maintain positive tangible capital, as defined by the Federal Housing Finance Agency. Larger unrealized losses on our available for sale (AFS) portfolio due to higher market interest rates could negatively impact our tangible capital.
In addition, to access new FHLB advances or roll over existing advances, our banking subsidiaries must maintain positive tangible capital, as defined by the Federal Housing Finance Agency.
Our inability to get client orders executed or settled because of the unwillingness or inability of these parties to perform their usual functions could result in client dissatisfaction and reputational harm and expose us to client claims for damages. Liquidity Risk A significant decrease in our liquidity could negatively affect our business as well as reduce client confidence in us.
Our inability to get client orders executed or settled because of the unwillingness or inability of these parties to perform their usual functions could result in client dissatisfaction and reputational harm and expose us to client claims for damages. - 18 - THE CHARLES SCHWAB CORPORATION Credit Risk We may suffer significant losses from our credit exposures.
Although we have undertaken extensive planning and testing, the account transitions are complicated and we could experience issues which cause a transition group to be delayed, or negatively impact the client experience. Such issues could impact client retention, integration-related costs, the timing for realizing synergies, our reputation, and compliance with regulatory requirements.
Although we have undertaken extensive planning and testing, the account transitions are complicated and we could experience issues which cause the final transition group or the remaining integration work to be delayed, or negatively impact the client experience.
For a discussion of our risk management governance and processes, including operational risk, compliance risk, credit risk, market risk, and liquidity risk, see Risk Management and Capital Management in Part II, Item 7. Economic and Market Risks Developments in the business, economic, and geopolitical environment could negatively impact our business.
For a discussion of our risk management governance and processes, including operational risk, compliance risk, credit risk, market risk, and liquidity risk, see Risk Management and Capital Management in Part II – Item 7. For additional information regarding cybersecurity risk, see Item 1C. Cybersecurity.
These - 12 - THE CHARLES SCHWAB CORPORATION policies could also have implications for clients’ allocation to cash; higher or lower client cash balances have an impact on our capital requirements as well as liquidity implications if such changes in allocation are sudden . A significant change in client cash allocations could negatively impact our income.
These policies can have implications for clients’ allocation to cash as we experienced in 2022 and 2023, and higher or lower client cash balances have an impact on our capital requirements, as well as liquidity implications if such changes in allocation are sudden.
At various times, different functions and roles are in especially high demand in the market, compelling us to pay more to attract talent. Our ability to continue to compete effectively will depend upon our ability to attract new employees and retain existing employees while managing compensation costs.
At various times, different functions and roles are in especially high demand in the market, compelling us to pay more to attract talent.
We rely heavily on client cash balances to generate revenue. Cash awaiting investment in a portion of our client brokerage accounts is swept to our banking subsidiaries and those bank deposits are then used to extend loans to clients and purchase investment securities.
Cash awaiting investment in a portion of our client brokerage accounts is swept to our banking subsidiaries and those bank deposits are then used to extend loans to clients and purchase investment securities. We also sweep a portion of such cash to the TD Depository Institutions pursuant to the 2023 IDA agreement, through which we earn bank deposit account fees.
At December 31, 2022, CSC had approximately $552 billion in total assets and cross-jurisdictional activity of approximately $29 billion. - 14 - THE CHARLES SCHWAB CORPORATION We are subject to litigation and regulatory investigations and proceedings and may not be successful in defending against claims or proceedings. The financial services industry faces significant litigation and regulatory risks.
We are subject to litigation and regulatory investigations and proceedings and may not be successful in defending against claims or proceedings. The financial services industry faces significant litigation and regulatory risks.
Maintaining adequate liquidity is crucial to our business operations, including transaction settlement, custody requirements, and lending commitments, among other liquidity needs. We meet our liquidity needs primarily from working capital and cash generated by client activity as well as external financing.
Liquidity Risk A significant decrease in our liquidity could negatively affect our business as well as reduce client confidence in us. Maintaining adequate liquidity is crucial to our business operations, including transaction settlement, custody requirements, and lending commitments, among other liquidity needs.
Our business involves the secure processing, storage, and transmission of confidential information about our clients and us.
Operational Risk Security breaches of our systems, or those of our clients or third parties, may subject us to significant liability and damage our reputation. Our business involves the secure processing, storage, and transmission of confidential information about our clients and us.
Any dilution of, reduction in, or delay of any accretion to, our earnings per share could cause the price of shares of our common stock to decline or grow at a reduced rate. Other Business Risks Potential strategic transactions could have a negative impact on our financial position. We evaluate potential strategic transactions, including business combinations, acquisitions, and dispositions.
Other Business Risks Potential strategic transactions could have a negative impact on our financial position. We evaluate potential strategic transactions, including business combinations, acquisitions, and dispositions. Any such transaction could have a material impact on our financial position, results of operations, or cash flows.
We also sweep a portion of such cash to unconsolidated third-party financial institutions, including pursuant to the IDA agreement, through which we earn bank deposit account fees. A significant reduction in our clients’ allocation to cash, a change in the allocation of that cash, or a transfer of cash away from the Company, could reduce our income.
A significant reduction in our clients’ allocation to cash, a change in the allocation of that cash, or a transfer of cash away from the Company, would likely reduce our income.
Significant interest rate changes could affect our profitability. The direction and level of interest rates are important factors in our earnings. A decline in interest rates may have a negative impact on our net interest revenue and our bank deposit account fee revenue.
A decline in interest rates may have a negative impact on our net interest revenue and our bank deposit account fee revenue. The Company’s interest-earning assets include significant holdings of investment securities, which include fixed- and floating-rate debt securities, including substantial holdings of mortgage-backed securities, as well as mortgages.
If we are not able to successfully combine the businesses of Schwab and TD Ameritrade within the anticipated time frame, or at all, the anticipated cost savings and other benefits of the merger may not be realized fully or may take longer to realize than expected, the combined business may not perform as expected and the value of our common stock may be adversely affected.
Additional unanticipated costs may be incurred in the integration process. If we are not able to successfully transition the remaining client accounts, and complete planned technology wind-down activities, within the anticipated time frames, the anticipated cost savings and other benefits of the merger may not be realized fully or may take longer to realize than expected.
Such risk has grown in recent years due to the increased sophistication and activities of organized crime and other external parties, including foreign state-sponsored parties. Losses reimbursed to clients under our - 15 - THE CHARLES SCHWAB CORPORATION guarantee against unauthorized account activity could have a negative impact on our business, financial condition and results of operations.
Losses reimbursed to clients under our guarantee against unauthorized account activity could have a negative impact on our business, financial condition and results of operations. Technology and operational failures or errors and other operational risks could subject us to losses, litigation, regulatory actions, and reputational damage.
Demand for skilled technology professionals is high and we may experience delays in hiring the appropriate skilled resources. - 20 - THE CHARLES SCHWAB CORPORATION Our stock price has fluctuated historically, and may continue to fluctuate. Our stock price can be volatile.
Our ability to continue to compete effectively will depend upon our ability to attract new employees and retain existing employees while managing compensation costs. - 20 - THE CHARLES SCHWAB CORPORATION Our stock price has fluctuated historically, and may continue to fluctuate. Our stock price can be volatile.
Even if we are successful in defending against these actions, the defense of such matters may result in us incurring significant expenses. A substantial judgment, settlement, fine, or penalty could be material to our operating results or cash flows for a particular future period, depending on our results for that period.
Even if we are successful in defending against these actions, the defense of such matters may result in us incurring significant expenses. We may also determine that it is in the Company’s best interests to settle a matter, such as to avoid protracted litigation, even though the Company may have strong defenses.
We will continue to incur significant integration costs in connection with the integration of TD Ameritrade. We will continue to incur significant non-recurring costs related to formulating and implementing integration plans with respect to combining the operations of Schwab and TD Ameritrade, including technology-related, workforce and facilities consolidation costs.
It is possible that the remaining integration process could result in the loss of clients, including to a greater degree than previously planned or experienced in relation to the 2023 client account conversions. We expect to continue to incur significant costs in 2024 to finish combining the operations of Schwab and TD Ameritrade, including workforce, technology-related, and facilities consolidation costs.
Removed
The announced phase-out of the London Interbank Offered Rate (LIBOR) could negatively impact our net interest revenue and will continue to require operational work.
Added
Investor sentiment and market and trading dynamics can affect client preferences and security selection, and can impact transactions and asset-based revenues. - 12 - THE CHARLES SCHWAB CORPORATION A significant change in client cash allocations could negatively impact our income. We rely heavily on client cash balances to generate revenue.
Removed
Certain securities in our investment portfolio, the floating rate loans we offered, and a series of our outstanding preferred stock reference LIBOR as the benchmark rate to determine the applicable interest rate, payment amount or floating dividend rates. While we have substantially transitioned our financial models and systems away from LIBOR, in limited circumstances we still use LIBOR.
Added
As a result of the rapid increases in short-term interest rates in 2022 and 2023, the Company saw a significant decrease in clients’ asset allocation to sweep cash and greater client investment in higher-yielding alternatives at Schwab such as fixed income investments and proprietary purchased money market funds.
Removed
The Federal Reserve adopted a final rule that provides default rules for certain contracts that use LIBOR, with replacement rates based on the Secured Overnight Financing Rate (SOFR).
Added
To help facilitate these changes in client cash allocations, the Company has utilized higher-cost supplemental funding sources, which has negatively impacted the Company’s net income. Significant interest rate changes could affect our profitability. The direction and level of interest rates are important factors in our earnings.
Removed
When LIBOR is discontinued as announced, there will be uncertainty or differences in the calculation of the applicable interest rate or payment amount depending on the terms of the governing instruments and the details of any fallback provisions. This could result in different financial performance for previously booked transactions.
Added
The Company could be adversely affected by a decline in interest rates if the rates that the Company earns on interest-earning assets decline more than the rates that the Company pays on its funding sources, or if prepayment rates increase on the mortgages and mortgage-backed securities that the Company holds.
Removed
The calculation of interest rates under the replacement benchmarks could also impact our net interest revenue. LIBOR may also perform differently during the phase-out period than in the past which could result in lower interest payments and a reduction in the value of certain securities in our investment portfolio.
Added
A decline in interest rates may also negatively impact our bank deposit account fee revenue, which is earned primarily pursuant to the 2023 IDA agreement.
Removed
In addition, further operational work will be required to transition our legacy loan portfolio to alternate reference rates. See also Part II – Item 7 – Risk Management for additional information regarding the Company’s consideration of the phase-out of LIBOR. Compliance Risks Extensive regulation of our businesses may subject us to significant penalties or limitations on business activities.
Added
The rapid increases in market interest rates recently experienced have also contributed to increased unrealized losses on our investment securities portfolios.
Removed
We rely on outsourced service providers to perform key functions. We rely on external service providers to perform certain key technology, cloud infrastructure, processing, servicing, and support functions.
Added
Increased unrealized losses on investment securities or other assets on our balance sheet can reduce market or client confidence in us, which could limit our ability to attract new client assets and accounts or result in the transfer of client assets and accounts from the Company.
Removed
While we have policies and procedures designed to manage this risk, the policies and procedures may not be fully effective.
Added
A rise in interest rates may also reduce our bank deposit account fee revenue, as clients may reallocate assets out of bank deposit account balances and into higher-yielding investment alternatives, as we experienced in 2022 and 2023.
Removed
As part of our TD Ameritrade integration, we plan to transition the TD Ameritrade brokerage accounts to Schwab in multiple transition groups, as well as several TD Ameritrade platforms, while at the same time adding scale. Doing the conversion in multiple transition groups adds complexity, including maintaining appropriate regulatory capital and liquidity.
Added
The 2023 IDA agreement involves certain commitments, including the maintenance of prescribed minimum and maximum IDA balances, that limit our ability to respond to changes in interest rates and may impact our profitability and bank deposit account fee revenue.
Removed
In order to support TD Ameritrade clients through the account transitions, some of which will take place over holiday weekends, we are increasing our client service staffing.
Added
Problems encountered by other financial institutions and responsive measures to manage such problems could adversely affect financial markets generally, could have an adverse effect on our financial position or results of operations, and have indirect adverse effects on us.
Removed
If we are not able to add and retain sufficient client service staff or retain other employees working on the account transitions, client service may be unacceptable, leading to higher than anticipated client attrition, or account transitions may not be successful.
Added
Concerns regarding the soundness or creditworthiness of other financial institutions can cause substantial disruption within the financial markets and have negative impacts for us and our industry, including reductions in availability of liquidity, higher borrowing costs, and higher costs of capital.
Removed
We may fail to realize the anticipated cost savings and other benefits of the TD Ameritrade acquisition, which could adversely affect the value of our stock.
Added
Such concerns regarding one or more financial institutions may also advance public concerns regarding Schwab or the financial services industry more broadly, which could harm our reputation and adversely affect our results of operations and financial condition, even if underlying matters impacting other financial institutions are of limited or no direct applicability to us.

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Item 2. Properties

Properties — owned and leased real estate

3 edited+3 added−1 removed1 unchanged
Biggest changeOur corporate headquarters, data centers, offices, and service centers support both of our segments. The Company’s acquisition of TD Ameritrade expanded the Company’s branch footprint. As of December 31, 2022, the Company had approximately 400 domestic branch offices in 48 states and the District of Columbia, as well as locations in Puerto Rico, the United Kingdom, Hong Kong, and Singapore.
Biggest changeAs of December 31, 2023, the Company had more than 380 domestic branch offices in 48 states and the District of Columbia, as well as locations in Puerto Rico, the United Kingdom, Hong Kong, and Singapore. Substantially all branch offices are located in leased premises. Item 3.
December 31, 2022 Square Footage (amounts in thousands) Leased Owned Location Corporate headquarters: Westlake, TX 22 795 Service and other office space: Phoenix, AZ 57 728 Denver, CO — 767 Omaha, NE — 578 Austin, TX — 561 San Francisco, CA 417 — Southlake, TX 13 375 St.
December 31, 2023 Square Footage (amounts in thousands) Leased Owned Location Corporate headquarters: Westlake, TX 22 795 Service and other office space: Phoenix, AZ 67 728 Denver, CO — 767 Omaha, NE — 578 Austin, TX — 561 San Francisco, CA 417 — Southlake, TX 13 375 St.
Louis, MO — 331 Chicago, IL 230 — Jersey City, NJ 208 — Indianapolis, IN — 161 Orlando, FL 159 — Richfield, OH — 117 San Diego, CA 111 — El Paso, TX — 105 The square footage amounts presented in the table above are net of space that has been subleased to third parties.
Louis, MO — 375 Chicago, IL 223 — Jersey City, NJ 208 — Indianapolis, IN — 161 Orlando, FL 159 — Richfield, OH — 117 El Paso, TX — 105 The square footage amounts presented in the table above are net of space that has been subleased to third parties.
Removed
Substantially all branch offices are located in leased premises. Item 3. Legal Proceedings For a discussion of legal proceedings, see Item 8 – Note 15. Item 4. Mine Safety Disclosures Not applicable. - 22 - THE CHARLES SCHWAB CORPORATION PART II
Added
Our corporate headquarters, data centers, offices, and service centers support both of our segments. - 22 - THE CHARLES SCHWAB CORPORATION During 2023, the Company continued its integration of TD Ameritrade and engaged in certain other cost reduction efforts, including to decrease its real estate footprint.
Added
As part of these actions, the Company’s use of certain of the above locations was decreased in 2023, including Jersey City, NJ and San Francisco, CA, and certain additional reductions in the Company’s real estate footprint are expected in 2024. See Part II – Item 8 – Notes 7, 13, and 15 for additional information.
Added
Legal Proceedings For a discussion of legal proceedings, see Part II – Item 8 – Note 14.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

3 edited+2 added−1 removed2 unchanged
Biggest changeInvestment Services Index $ 100 $ 88 $ 110 $ 130 $ 182 $ 163 Securities Authorized for Issuance Under Equity Compensation Plans For information relating to compensation plans under which our equity securities are authorized for issuance, see Item 8 – Note 21 and Part III – Item 12. - 23 - THE CHARLES SCHWAB CORPORATION Issuer Purchases of Equity Securities The following table summarizes purchases made by or on behalf of CSC of its common stock for each calendar month in the fourth quarter of 2022 (in millions, except number of shares, which are in thousands, and per share amounts): Month Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Program Approximate Dollar Value of Shares That May Yet Be Purchased Under the Publicly Announced Program October: Share repurchase program (1) 9,607 $ 73.44 9,607 $ 12,794 Employee transactions (2) 15 $ 70.79 N/A N/A November: Share repurchase program (1) 6,183 $ 78.27 6,183 $ 12,310 Employee transactions (2) 461 $ 79.98 N/A N/A December: Share repurchase program (1) 9,377 $ 79.39 9,377 $ 11,565 Employee transactions (2) 30 $ 79.67 N/A N/A Total: Share repurchase program (1) 25,167 $ 76.85 25,167 $ 11,565 Employee transactions (2) 506 $ 79.69 N/A N/A (1) All shares were repurchased under an authorization approved by CSC’s Board of Directors of up to $15.0 billion of common stock publicly announced by CSC on July 27, 2022.
Biggest changeSee also Item 8 – Note 19. - 24 - THE CHARLES SCHWAB CORPORATION The following table summarizes purchases made by or on behalf of CSC of its common stock for each calendar month in the fourth quarter of 2023 (in millions, except number of shares, which are in thousands, and per share amounts): Month Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Program Approximate Dollar Value of Shares That May Yet Be Purchased Under the Publicly Announced Program October: Share repurchase program — $ — — $ 8,723 Employee transactions (1) 94 $ 53.78 N/A N/A November: Share repurchase program — $ — — $ 8,723 Employee transactions (1) 318 $ 53.20 N/A N/A December: Share repurchase program — $ — — $ 8,723 Employee transactions (1) 2 $ 63.61 N/A N/A Total: Share repurchase program — $ — — $ 8,723 Employee transactions (1) 414 $ 53.37 N/A N/A (1) Includes restricted shares withheld (under the terms of grants under employee stock incentive plans) to offset tax withholding obligations that occur upon vesting and release of restricted shares.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities Market Information CSC’s common stock is listed on The New York Stock Exchange under the ticker symbol SCHW. The number of common stockholders of record as of January 31, 2023, was 5,255. The closing market price per share on that date was $77.42.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities Market Information CSC’s common stock is listed on The New York Stock Exchange under the ticker symbol SCHW. The number of common stockholders of record as of January 31, 2024, was 5,045. The closing market price per share on that date was $62.92.
December 31, 2017 2018 2019 2020 2021 2022 The Charles Schwab Corporation $ 100 $ 82 $ 95 $ 108 $ 173 $ 173 Standard & Poor’s 500 Index $ 100 $ 96 $ 126 $ 149 $ 192 $ 157 Dow Jones U.S.
December 31, 2018 2019 2020 2021 2022 2023 The Charles Schwab Corporation $ 100 $ 116 $ 132 $ 212 $ 212 $ 178 Standard & Poor’s 500 Index $ 100 $ 131 $ 156 $ 200 $ 164 $ 207 Dow Jones U.S.
Removed
The authorization does not have an expiration date. This authorization replaced the previous repurchase authorization publicly announced by CSC on January 30, 2019 of up to $4.0 billion of common stock. (2) Includes restricted shares withheld (under the terms of grants under employee stock incentive plans) to offset tax withholding obligations that occur upon vesting and release of restricted shares.
Added
Investment Services Index $ 100 $ 124 $ 147 $ 206 $ 185 $ 209 Securities Authorized for Issuance Under Equity Compensation Plans For information relating to compensation plans under which our equity securities are authorized for issuance, see Item 8 – Note 21 and Part III – Item 12.
Added
Issuer Purchases of Equity Securities On July 27, 2022, CSC publicly announced that its Board of Directors terminated its prior repurchase authorization and replaced it with a new authorization to repurchase up to $15.0 billion of common stock. The authorization does not have an expiration date.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

224 edited+157 added−103 removed107 unchanged
Biggest changeThese statements relate to, among other things: • Maximizing our market valuation and stockholder returns over time; 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; maintaining our market position; and the impact from adjustments related to the Market Risk Rule (see Business Strategy and Competitive Environment, Products and Services and Regulation in Part I, Item 1); • Expected benefits from the TD Ameritrade and other completed acquisitions; and expected timing for the TD Ameritrade client transitions (see Business and Asset Acquisitions in Part I, Item 1; Overview – Business and Asset Acquisitions in Part II, Item 7; Business Acquisitions in Part II, Item 8 – Note 3; and Exit and Other Related Liabilities in Part II, Item 8 – Note 16); • The impact of legal proceedings and regulatory matters (see Legal Proceedings in Part I, Item 3; and Commitments and Contingencies in Part II, Item 8 – Note 15); • Investments to support growth in our client base (see Overview in Part II, Item 7); • Cost estimates and timing related to the TD Ameritrade integration, including acquisition and integration-related costs and capital expenditures, cost synergies, and exit and other related costs (see Overview – Business and Asset Acquisitions in Part II, Item 7; Results of Operations – Total Expenses Excluding Interest; and Exit and Other Related Liabilities in Part II, Item 8 – Note 16); • The expected impact of proposed rules (see Current Regulatory Environment and other Developments); • Net interest revenue; and the adjustment of rates paid on client-related liabilities (see Results of Operations – Net Interest Revenue in Part II, Item 7); • Capital expenditures (see Results of Operations – Total Expenses Excluding Interest in Part II, Item 7); • The phase-out of the use of LIBOR (see Risk Management – Expected Phase-out of LIBOR in Part II, Item 7); • Sources and uses of liquidity, capital, and level of dividends; and Tier 1 Leverage Ratio operating objective (see Liquidity Risk, Capital Management, Regulatory Capital Requirements, and Dividends in Part II, Item 7); • Capital management; the return of capital to stockholders; and the migration of IDA balances to our balance sheet (see Capital Management – Regulatory Capital Requirements in Part II, Item 7; and Commitments and Contingencies in Part II, Item 8 – Note 15); • The expected impact of new accounting standards not yet adopted (see Summary of Significant Accounting Policies in Part II, Item 8 – Note 2); and • The likelihood of indemnification and guarantee payment obligations and clients failing to fulfill contractual obligations (see Commitments and Contingencies in Part II, Item 8 – Note 15 and Financial Instruments Subject to Off-Balance Sheet Credit Risk – Client Trade Settlement in Note 17).
Biggest changeThese statements relate to, among other things: • Maximizing our market valuation and stockholder returns over time; 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; and maintaining our competitive position (see Business Strategy and Competitive Environment, and Products and Services in Part I – Item 1); • The impact from adjustments related to the Market Risk Rule (see Regulation in Part I – Item 1); • Expected benefits from the TD Ameritrade acquisition; expected timing for the TD Ameritrade client transitions; deal-related asset attrition; and cost estimates and timing, including acquisition and integration-related costs, capital expenditures, cost synergies, and exit and other related costs (see Business Acquisition in Part I – Item 1; Overview –Integration of TD Ameritrade in Part II – Item 7; and Exit and Other Related Liabilities in Part II – Item 8 – Note 15); • Actions to streamline our operations and our expectation of incremental run-rate cost savings and the timing and amount of associated exit and related costs (see Overview – Other in Part II – Item 7; and Exit and Other Related Liabilities in Part II – Item 8 – Note 15); • The outcome and impact of legal proceedings and regulatory matters (see Legal Proceedings in Part I – Item 3; and Commitments and Contingencies in Part II – Item 8 – Note 14); • Anticipated expenses and investments to support business growth and growth in our client base (see Overview and Results of Operations – Total Expenses Excluding Interest in Part II – Item 7); • The expected impact of proposed and final rules (see Regulation in Part I – Item 1; and Current Regulatory and Other Developments in Part II – Item 7); • Net interest revenue; the adjustment of rates paid on client-related liabilities; and outstanding balances and the use of supplemental funding (see Results of Operations – Net Interest Revenue in Part II – Item 7); • Capital expenditures (see Results of Operations – Total Expenses Excluding Interest in Part II – Item 7); • Impact from the phase-out of LIBOR (see Risk Management – Phase-out of LIBOR in Part II – Item 7); • Management of interest rate risk; the impact of changes in interest rates on net interest margin and revenue, bank deposit account fee revenue, economic value of equity, and liability and asset duration (see Risk Management in Part II – Item 7); • Sources and uses of liquidity and capital; and Tier 1 Leverage Ratio operating objective (see Liquidity Risk, Capital Management, Regulatory Capital Requirements, and Dividends in Part II – Item 7); • Capital management; the return of capital to stockholders; the migration of IDA balances to our balance sheet; expectations about capital requirements, including AOCI, and meeting those requirements; and plans regarding capital and dividends (see Capital Management – Regulatory Capital Requirements in Part II – Item 7; and Commitments and Contingencies in Part II – Item 8 – Note 14); • The expected impact of new accounting standards not yet adopted (see Summary of Significant Accounting Policies in Part II – Item 8 – Note 2); and • 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 14 and Financial Instruments Subject to Off-Balance Sheet Credit Risk – Client Trade Settlement in Note 17).
Partially offsetting this growth, we experienced significant seasonal tax outflows in the second quarter, and, due to the rapid increases to the federal funds overnight rate, changes in client cash allocations increased in the second half of 2022 which resulted in a total decrease in bank deposits and payables to brokerage clients of 18% since year-end 2021.
Partially offsetting this growth, we experienced significant seasonal tax outflows in the second quarter of 2022, and, due to the rapid increases to the federal funds overnight rate, changes in client cash allocations increased in the second half of 2022 which resulted in a total decrease in bank deposits and payables to brokerage clients of 18% since year-end 2021.
Net interest revenue increased $2.7 billion or 33%, in 2022 from 2021 primarily due to higher average yields on interest-earning assets as a result of higher market interest rates. Net premium amortization of investment securities decreased to $1.4 billion from $2.3 billion in 2021.
Net interest revenue increased $2.7 billion, or 33%, in 2022 from 2021 primarily due to higher average yields on interest-earning assets as a result of higher market interest rates. Net premium amortization of investment securities decreased to $1.4 billion in 2022 from $2.3 billion in 2021.
We exclude acquisition and integration-related costs and amortization of acquired intangible assets 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.
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.
Non-GAAP Adjustment or Measure Definition Usefulness to Investors and Uses by Management Acquisition and integration-related costs and amortization of acquired intangible assets 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, and, where applicable, the income tax effect of these expenses.
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.
The unrealized loss at the time of transfer is amortized over the remaining life of the security, offsetting the amortization of the security’s premium or discount, and resulting in no impact to net income. IDA Agreement Certain brokerage client deposits are swept off-balance sheet to the TD Depository Institutions pursuant to the IDA agreement.
The unrealized loss at the time of transfer is amortized over the remaining life of the security, offsetting the amortization of the security’s premium or discount, and resulting in no impact to net income. IDA Agreement Certain brokerage client deposits are swept off-balance sheet to the TD Depository Institutions pursuant to the 2023 IDA agreement.
Depreciation and amortization expense increased in 2022 from 2021, primarily as a result of higher amortization of purchased and internally developed software and higher depreciation of hardware, driven by capital expenditures in 2021 and 2022 to support the TDA integration and enhance our technological infrastructure to support growth of the business.
Depreciation and amortization expense increased in 2023 from 2022, and in 2022 from 2021, primarily as a result of higher amortization of purchased and internally developed software and higher depreciation of hardware, driven by capital expenditures to support the TDA integration and enhance our technological infrastructure to support growth of the business.
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.
A decline in short-term interest rates could also 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.
Occupancy and equipment expense increased in 2022 from 2021, primarily due to an increase in software maintenance and other agreements as well as other technology equipment costs to support growth of the business and the integration of TD Ameritrade.
Occupancy and equipment expense increased in 2023 from 2022, and in 2022 from 2021, primarily due to an increase in software maintenance and other agreements as well as other technology equipment costs to support growth of the business and the integration of TD Ameritrade.
These regulations prohibit the broker-dealer subsidiaries 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, 2022, CS&Co, TDAC, and TD Ameritrade, Inc. were in compliance with their respective net capital requirements.
These regulations prohibit the broker-dealer subsidiaries 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, 2023, CS&Co, TDAC, and TD Ameritrade, Inc. were in compliance with their respective net capital requirements.
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.
For more information on credit quality indicators relating to Schwab’s bank loans, see Item 8 – Note 6. 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.
At December 31, 2022, 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.
At December 31, 2023, 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.
Due to its role as a source of financial strength, CSC’s liquidity needs are primarily driven by the liquidity and capital needs of: CS&Co, TD Ameritrade, Inc., and TDAC, our principal broker-dealer subsidiaries; the capital needs of the banking subsidiaries; principal and interest due on corporate debt; dividend payments on CSC’s preferred stock; and returns of capital to common stockholders.
Due to its role as a source of financial strength, CSC’s liquidity needs are primarily driven by the liquidity and capital needs of: CS&Co, TD Ameritrade, Inc., and TDAC, our principal broker-dealer subsidiaries; the capital needs of the banking subsidiaries; principal and interest due on corporate debt, and dividend payments on CSC’s preferred and common stock.
These benefits were partially offset by higher rates paid on funding sources, higher average short-term borrowings and long-term debt outstanding, and lower balances of margin loans and lower securities lending revenue due to decreased market demand. Average interest-earning assets for 2022 were higher by 8%, compared to 2021.
These benefits were partially offset by higher rates paid on funding sources, higher average FHLB borrowings and long-term debt outstanding, and lower balances of margin loans and lower securities lending revenue due to decreased market demand. Average interest-earning assets for 2022 were higher by 8%, compared to 2021.
Other revenue increased $33 million, or 4%, in 2022 compared to 2021 primarily due to higher exchange processing fees, partially offset by a higher provision for credit losses on bank loans, certain lower service fees due to lower trading volume, and net losses on sales of AFS securities in 2022.
Other revenue increased $33 million, or 4%, in 2022 compared to 2021 primarily due to these gains and higher exchange processing fees, partially offset by a higher provision for credit losses on bank loans, certain lower service fees due to lower trading volume, and net losses on sales of AFS securities in 2022.
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 floating-rate securities and loans, and changes in prepayment levels for mortgage-backed and other asset-backed securities and loans.
Revenue on interest-earning assets is affected by various factors, such as the composition of assets, prevailing interest rates and spreads at the time of origination or purchase, changes in interest rates on cash and cash equivalents, floating-rate securities and loans, and changes in prepayment levels for mortgage-backed and other asset-backed securities and loans.
(GAAP), Management’s Discussion and Analysis of Financial Condition and Results of Operations contains 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.
(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.
Segment Expenses Excluding Interest Investor Services and Advisor Services total expenses excluding interest increased by 3% and 14%, respectively, in 2022 compared to 2021.
Investor Services and Advisor Services total expenses excluding interest increased by 3% and 14%, respectively, in 2022 compared to 2021.
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 IDA agreement and agreements with other third-party financial institutions. Average BDA balances represent the daily average balance for 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 IDA agreement and agreements formerly in effect with other third-party financial institutions. Average BDA balances represent the daily average balance for the reporting period.
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 as appropriate. Primary 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.
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.
Acquisition and integration-related costs fluctuate based on the timing of acquisitions and integration 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.
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.
The liquidity needs of our broker-dealer subsidiaries are primarily driven by client activity including trading and margin lending activities and capital expenditures. The capital needs of the banking subsidiaries are primarily driven by client deposit levels.
The liquidity needs of our broker-dealer subsidiaries are primarily driven by client activity including trading and margin lending activities and capital expenditures. The capital needs of the banking subsidiaries are primarily driven by client deposit levels and other borrowings.
Professional services expense increased in 2022 from 2021, primarily due to increased utilization of technology-related and other professional services to support overall growth of the business and enhancement to technological infrastructure to support our expanding client base, as well as the integration of TD Ameritrade.
The increase in 2022 from 2021 was primarily due to increased utilization of technology-related and other professional services to support overall growth of the business and enhancement to technological infrastructure to support our expanding client base, as well as the integration of TD Ameritrade.
The Company’s ability to migrate these balances to its balance sheet is dependent upon multiple factors including having sufficient capital levels to sustain these incremental deposits. See Item 8 – Note 15 for further information on the IDA agreement.
The Company’s ability to migrate these balances to its balance sheet is dependent upon multiple factors including having sufficient capital levels to sustain these incremental deposits. See Item 8 – Note 14 for further information on the 2023 IDA agreement.
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 levels and sufficient capital above regulatory capital 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.
FOREIGN EXPOSURE At December 31, 2022, Schwab had exposure to non-sovereign financial and non-financial institutions in foreign countries, as well as agencies of foreign governments.
FOREIGN EXPOSURE At December 31, 2023, Schwab had exposure to non-sovereign financial and non-financial institutions in foreign countries, as well as agencies of foreign governments.
Contractual Obligations Schwab’s principal contractual obligations as of December 31, 2022 include credit-related financial instruments, representing our banking subsidiaries’ commitments to extend credit to banking clients, purchase mortgage loans, and fund CRA investments; payments on short-term borrowings and long-term debt; purchase obligations for services such as advertising and marketing, telecommunications, hardware- and software-related agreements, and professional services; and lease payments including legally-binding minimum lease payments for leases signed but not yet commenced.
Contractual Obligations Schwab’s principal contractual obligations as of December 31, 2023 include payments on brokered CDs; payments on FHLB borrowings, other short-term borrowings, and long-term debt; 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.
The Company expects to achieve the vast majority of the remaining estimated cost synergies by the end of 2024, with anticipated full year synergy realization beginning in 2025. Estimated timing and amounts of synergy realization are subject to change as we progress in the integration.
The Company expects to achieve the vast majority of the remaining estimated cost synergies by the end of 2024, with anticipated full year synergy realization beginning in 2025. The estimated timing and amounts of synergy realization remain subject to change as we progress through the remaining stages of the integration.
Schwab also seeks to return excess capital to stockholders. We may return excess capital through such activities as dividends, repurchases of common shares, preferred stock redemptions, and repurchases of our preferred stock represented by depositary shares. Schwab’s primary sources of capital are funds generated by the operations of subsidiaries and securities issuances by CSC in the capital markets.
We may return excess capital through such activities as dividends, repurchases of common shares, preferred stock redemptions, and repurchases of our preferred stock represented by depositary shares. Schwab’s primary sources of capital are funds generated by the operations of subsidiaries and securities issuances by CSC in the capital markets.
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.
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.
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.
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. Please see Part I – Item 1C.
Over the course of the integration, we continue to expect to realize annualized cost synergies of between $1.8 billion and $2.0 billion, and, through December 31, 2022, we have achieved over 65% of this amount on an annualized run-rate basis.
Over the course of the integration, we continue to expect to realize annualized cost synergies of between $1.8 billion and $2.0 billion, and, through December 31, 2023, we have achieved approximately 80% of this amount on an annualized run-rate basis.
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 – Note 23 for additional information on the components of stockholders’ equity and information on the capital requirements of significant subsidiaries.
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.
Capital forecasts are reviewed monthly at Asset-Liability Management and Pricing Committee and Financial Risk Oversight Committee meetings. A number of early warning indicators are monitored to help identify potential problems that could impact capital. In addition, we monitor the subsidiaries’ capital levels and requirements.
Capital forecasts are reviewed monthly at Asset-Liability Management and Pricing Committee and Financial Risk Oversight 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.
Swing pricing would require funds to adjust the fund’s current net asset value (NAV) per share by a “swing factor” if the fund has either (i) net redemptions (no threshold) or (ii) net purchases that exceed a specified threshold (2% of the fund’s net assets).
Swing pricing would require funds that are not exchange-traded funds or money market funds to adjust the fund’s current net asset value (NAV) per share by a “swing factor” if the fund has either (i) net redemptions (no threshold) or (ii) net purchases that exceed a specified threshold (2% of the fund’s net assets).
Equity Issuances and Redemptions CSC’s preferred stock issued and net proceeds for 2022, 2021, and 2020 are shown below: Date Issued and Sold Net Proceeds Series G April 30, 2020 $ 2,470 Series H December 11, 2020 $ 2,470 Series I March 18, 2021 $ 2,222 Series J March 30, 2021 $ 584 Series K March 4, 2022 $ 740 On June 1, 2021, the Company redeemed all of the outstanding shares of its 6.00% Non-Cumulative Perpetual Preferred Stock, Series C, and the corresponding depositary shares.
Equity Issuances and Redemptions CSC’s preferred stock issued and net proceeds for 2023, 2022, and 2021 are shown below: Date Issued and Sold Net Proceeds Series I March 18, 2021 $ 2,222 Series J March 30, 2021 $ 584 Series K March 4, 2022 $ 740 On June 1, 2021, the Company redeemed all of the outstanding shares of its 6.00% Non-Cumulative Perpetual Preferred Stock, Series C, and the corresponding depositary shares.
For Investor Services, these increases were partially offset by lower other expenses due to a charge of approximately $200 million in 2021 for a now-settled regulatory matter (see Item 8 – Note 15), partially offset by higher exchange fees and clearing charges, and lower advertising and market development expense due to reduced spending for marketing communications for TD Ameritrade.
For Investor Services, these increases were partially offset by lower other expenses due to a charge of approximately $200 million in 2021 for a regulatory matter settled in 2022, partially offset by higher exchange fees and clearing charges, and lower advertising and market development expense due to reduced spending for marketing communications for TD Ameritrade.
Dividends Since the initial dividend in 1989, and as of December 31, 2022, CSC has paid 135 consecutive quarterly dividends and has increased the quarterly dividend rate 27 times, resulting in a 20% compounded annual growth rate, excluding the special cash dividend of $1.00 per common share in 2007.
Dividends Since the initial dividend in 1989, and as of December 31, 2023, CSC has paid 139 consecutive quarterly dividends and has increased the quarterly dividend rate 28 times, resulting in a 20% compounded annual growth rate, excluding the special cash dividend of $1.00 per common share in 2007.
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, Schwab One ® balances, BDA balances, and certain cash equivalents divided by client assets.
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 Company’s estimates of the nature, amounts, and timing of recognition of acquisition and integration-related costs remain subject to change based on a number of factors, including the expected duration and complexity of the integration process and the continued uncertainty of the economic environment.
The Company’s estimates of the nature, amounts, and timing of recognition of acquisition and integration-related costs remain subject to change based on certain factors, including the duration and complexity of the remaining integration process and the continued uncertainty of the economic environment.
In 2023, we expect to be required to obtain approval from the Federal Reserve for our banking subsidiaries to declare and pay dividends in excess of the amount of recent net income and retained earnings.
In future periods, we may be required to obtain approval from the Federal Reserve for our banking subsidiaries to declare and pay dividends in excess of the amount of recent net income and retained earnings.
Important factors that may cause actual results to differ include, but are not limited to: • General market conditions, including equity valuations and the level of interest rates; • The level and mix of client trading activity; • 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; - 25 - 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; • Competitive pressure on pricing, including deposit rates; • Client sensitivity to rates; • Regulatory guidance and adverse impacts from new legislation or rulemaking; • Capital and liquidity needs and management; • Our ability to manage expenses; • Our ability to attract and retain talent; • Our ability to develop and launch new and enhanced products, services, and capabilities, as well as enhance our infrastructure, in a timely and successful manner; • Our ability to monetize client assets; • Our ability to support client activity levels; • The risk that expected cost synergies and other benefits from the TD Ameritrade acquisition may not be fully realized or may take longer to realize than expected and that integration-related expenses may be higher than expected; • Increased compensation and other costs due to inflationary pressures; • The ability to successfully implement integration strategies and plans relating to TD Ameritrade, including client account transitions; • The timing and scope of integration-related and other technology projects; • Real estate and workforce decisions; • Client cash allocations; • Migrations of bank deposit account balances (BDA balances); • Balance sheet positioning relative to changes in interest rates; • Interest earning asset mix and growth; • Prepayment levels for mortgage-backed securities; • LIBOR trends; • Adverse developments in litigation or regulatory matters and any related charges; • Potential breaches of contractual terms for which we have indemnification and guarantee obligations; and • Client activity, including daily average trades; margin balances; and balance sheet cash.
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. - 26 - 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) Important factors that may cause actual results to differ include, but are not limited to: • General market conditions, including the level of interest rates and equity market valuations; • Our ability to attract and retain clients, develop trusted relationships, and grow client assets; • Client use of our advisory and lending solutions and other products and services; • The level of client assets, including cash balances; • Client 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; • Our ability to monetize client assets; • Our ability to support client activity levels; • The risk that expected cost synergies and other benefits from the TD Ameritrade acquisition may not be fully realized or may take longer to realize than expected and that integration-related expenses may be higher than expected; • Increased compensation and other costs due to inflationary pressures; • The ability to successfully implement integration strategies and plans relating to TD Ameritrade, including client account transitions; • The timing and scope of integration-related and other technology projects; • Real estate and workforce decisions; • Client cash allocations; • Migrations of bank deposit account balances (BDA balances); • Balance sheet positioning relative to changes in interest rates; • Interest earning asset mix and growth; • Our ability to access and use supplemental funding sources; • Prepayment levels for mortgage-backed securities; • 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.
Other revenues increased for Investor Services in 2022 from 2021 due to higher exchange processing fees, partially offset by a higher provision for credit losses on bank loans, certain lower service fees, and lower net gains on sales of AFS securities. Investor Services and Advisor Services total net revenues increased by 68% and 32%, respectively, in 2021 compared to 2020.
Other revenues increased for Investor Services in 2022 from 2021 due to higher exchange processing fees, partially offset by a higher provision for credit losses on bank loans, certain lower service fees, and lower net gains on sales of AFS securities.
For further discussion of the exchange, see Item 8 – Note 13.
For further discussion of the exchange, see Item 8 – Note 12.
The decrease in the effective tax rate in 2022 from 2021 was primarily related to the reversal of tax reserves in 2022 due to the resolution of certain state tax matters and tax benefits recognized on the portion of the 2021 regulatory matter charge (see Item 8 – Note 15) that was determined upon final settlement to be deductible.
The decrease in the effective tax rate in 2022 from 2021 was primarily related to reversal of tax reserves in 2022 due to the resolution of certain state tax matters and tax benefits recognized on the portion of the 2021 charge for a regulatory matter settled in 2022 that was determined upon final settlement to be deductible.
Share Repurchases On July 27, 2022, CSC publicly announced that its Board of Directors terminated the existing share repurchase authorization of up to $4.0 billion of common stock and replaced it with a new authorization to repurchase up to $15.0 billion of common stock. The new share repurchase authorization does not have an expiration date.
Share Repurchases On July 27, 2022, CSC publicly announced that its Board of Directors approved a new share repurchase authorization to repurchase up to $15.0 billion of common stock, replacing the previous and now terminated share repurchase authorization of up to $4.0 billion of common stock. The new share repurchase authorization does not have an expiration date.
The model risk rating determines the scope of model governance activities. 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.
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.
During 2022 and 2021, Schwab moved net amounts of $13.7 billion and $10.1 billion, respectively, of IDA balances to its balance sheet. The Company’s overall capital management strategy includes supporting migration of IDA balances in future periods as available pursuant to the terms of the IDA agreement.
During 2023, Schwab did not move IDA balances to its balance sheet, and during 2022, Schwab moved net amounts of $13.7 billion of IDA balances to its balance sheet. The Company’s overall capital management strategy includes supporting migration of IDA balances in future periods as available pursuant to the terms of the 2023 IDA agreement.
The depositary shares were redeemed at a redemption price of $1,000 per depositary share for a total of $600 million. For further discussion, see Item 8 – Note 13 for the Company’s outstanding debt and borrowing facilities and Item 8 – Note 19 for equity outstanding balances, issuances, and redemptions.
The depositary shares were redeemed at a redemption price of $1,000 per depositary share for a total of $600 million. For further discussion, see Item 8 – Note 11 for the Company’s bank deposits, Item 8 – Note 12 for the Company’s outstanding debt and borrowing facilities, and Item 8 – Note 19 for equity outstanding balances and activity.
Early market closures are counted as half-days. U.S. federal banking agencies: Refers to the Federal Reserve, the OCC, the FDIC, and the CFPB.
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.
These increases reflected higher compensation and benefits expense and higher occupancy and equipment expense, as we continued to invest in our people and technology to support ongoing growth in our client base. These increases were partially offset by lower other expense, which included a charge of approximately $200 million in 2021 (see Item 8 – Note 15).
These increases reflected higher compensation and benefits expense and higher occupancy and equipment expense, as we continued to invest in our people and technology to support ongoing growth in our client base. These increases were partially offset by lower other expense, which included a charge of approximately $200 million in 2021 for a regulatory matter settled in 2022.
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.
While all personnel are 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.
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, Technology, Fraud, Third-Party Risk, Data, and Model Governance; • Compliance Risk Committee – provides oversight of compliance risk management programs (inclusive of Anti-Money Laundering/Sanctions, Conduct, Fiduciary, 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 corporate policy and procedures relating to, the risk governance of new products and services.
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.
Acquisition and integration-related costs, which are inclusive of related exit costs, totaled $392 million, $468 million, and $442 million in 2022, 2021, and 2020, respectively, and the Company expects to incur acquisition and integration-related costs of approximately $450-$550 million in 2023.
Acquisition and integration-related costs, which are inclusive of related exit costs, totaled $401 million, $392 million, and $468 million in 2023, 2022, and 2021, respectively, and the Company expects to incur acquisition and integration-related costs of approximately $200 million in 2024.
Prior to redemption, dividends were paid semi-annually until February 1, 2022 and quarterly thereafter. The final dividend was paid on November 1, 2022. (2) Series C was redeemed on June 1, 2021. Prior to redemption, dividends were paid quarterly and the final dividend was paid on June 1, 2021. (3) Dividends paid quarterly.
Prior to redemption, dividends were paid semi-annually until February 1, 2022 and quarterly thereafter. The final dividend was paid on November 1, 2022. (2) Dividends are paid quarterly. (3) Series E was redeemed on December 1, 2022. Prior to redemption, dividends were paid semi-annually until March 1, 2022 and quarterly thereafter. The final dividend was paid on December 1, 2022.
Other expense decreased in 2022 from 2021, primarily due to the recognition of a charge of approximately $200 million for a now-settled regulatory matter in 2021 (see Item 8 – Note 15), partially offset by higher exchange processing fees as a result of fee rate increases beginning in the second quarter of 2022 and also higher clearing charges.
The decrease in 2022 from 2021 was primarily due to the recognition of a charge of approximately $200 million in 2021 for a regulatory matter settled in 2022, partially offset by higher exchange processing fees as a result of fee rate increases beginning in the second quarter of 2022 and also higher clearing charges.
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.
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.
Total compensation and benefits increased in 2022 from 2021 due to growth in employee headcount to support our expanding client base, annual merit increases, as well as a 5% employee salary increase and other targeted compensation adjustments that went into effect in late 2021.
The 2022 increase was a result of growth in employee headcount to support our expanding client base, annual merit increases, as well as a 5% employee salary increase and other targeted compensation adjustments that went into effect in late 2021.
Year Ended December 31, 2022 2021 2020 Amount Diluted EPS Amount Diluted EPS Amount Diluted EPS Net income available to common stockholders (GAAP), Earnings per common share — diluted (GAAP) $ 6,635 $ 3.50 $ 5,360 $ 2.83 $ 3,043 $ 2.12 Acquisition and integration-related costs 392 .21 468 .25 442 .31 Amortization of acquired intangible assets 596 .31 615 .32 190 .13 Income tax effects (1) (237) (.12) (268) (.15) (154) (.11) Adjusted net income available to common stockholders (non-GAAP), Adjusted diluted EPS (non-GAAP) $ 7,386 $ 3.90 $ 6,175 $ 3.25 $ 3,521 $ 2.45 (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 and amortization of acquired intangible assets on an after-tax basis.
Year Ended December 31, 2023 2022 2021 Amount Diluted EPS Amount Diluted EPS Amount Diluted EPS Net income available to common stockholders (GAAP), Earnings per common share — diluted (GAAP) $ 4,649 $ 2.54 $ 6,635 $ 3.50 $ 5,360 $ 2.83 Acquisition and integration-related costs 401 .22 392 .21 468 .25 Amortization of acquired intangible assets 534 .29 596 .31 615 .32 Restructuring costs 495 .27 — — — — Income tax effects (1) (338) (.19) (237) (.12) (268) (.15) Adjusted net income available to common stockholders (non-GAAP), Adjusted diluted EPS (non-GAAP) $ 5,741 $ 3.13 $ 7,386 $ 3.90 $ 6,175 $ 3.25 (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.
As part of our ongoing integration of TD Ameritrade, the Company has aligned TD Ameritrade’s risk management practices with Schwab’s risk appetite. Our integration work included evaluating new or changed risks impacting the combined company, and taking action through various means.
As part of our integration of TD Ameritrade, the Company has aligned TD Ameritrade’s risk management practices with Schwab’s risk appetite. Our integration work included evaluating new or changed risks impacting the combined company and taking action through various means. Though integration work continues, the Company’s operations, inclusive of TD Ameritrade, remain consistent with our ERM Framework.
The Compensation Committee of CSC’s Board of Directors maintains discretion in evaluating performance against these criteria. - 61 - 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, 2022 2021 2020 Total expenses excluding interest (GAAP) $ 11,374 $ 10,807 $ 7,391 Acquisition and integration-related costs (1) (392) (468) (442) Amortization of acquired intangible assets (596) (615) (190) Adjusted total expenses (non-GAAP) $ 10,386 $ 9,724 $ 6,759 (1) Acquisition and integration-related costs for 2022 primarily consist of $220 million of compensation and benefits, $140 million of professional services, and $21 million of occupancy and equipment.
The Compensation Committee of CSC’s Board of Directors maintains discretion in evaluating performance against these criteria. - 62 - 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, 2023 2022 2021 Total expenses excluding interest (GAAP) $ 12,459 $ 11,374 $ 10,807 Acquisition and integration-related costs (1) (401) (392) (468) Amortization of acquired intangible assets (534) (596) (615) Restructuring costs (2) (495) — — Adjusted total expenses (non-GAAP) $ 11,029 $ 10,386 $ 9,724 (1) 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.
Total net revenues rose 12% year-over-year to $20.8 billion in 2022. Net interest revenue increased to $10.7 billion, rising 33% from 2021 as significantly higher market rates more than offset the impact of balance sheet contraction due to client cash allocation decisions.
Net interest revenue increased to $10.7 billion, rising 33% from 2021 as significantly higher market rates more than offset the impact of balance sheet contraction due to client cash allocation decisions.
Repurchases under this new authorization totaled 47 million shares for $3.4 billion in 2022. The Company issued $750 million in preferred stock in the first quarter of 2022, and redeemed a total of $1.0 billion of preferred stock during the second half of the year.
Repurchases under this new authorization totaled 47 million shares for $3.4 billion in 2022. The Company issued $750 million in preferred stock in the first quarter of 2022, and redeemed a total of $1.0 billion of preferred stock during the second half of the year. Inclusive of these actions, the Company’s Tier 1 Leverage Ratio finished the year at 7.2%.
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 subsidiaries send 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.
Trading Revenue Trading revenue includes commissions, order flow revenue, and principal transaction revenues. 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 subsidiaries send equity and option orders.
The Company was in compliance with the LCR rule at December 31, 2022, and the table below presents information about our average daily LCR: Average for the Three Months Ended December 31, 2022 Total eligible HQLA $ 93,986 Net cash outflows $ 76,754 LCR 123 % To support growth in margin loan balances at our broker-dealer subsidiaries while meeting our LCR requirements, the Company may issue commercial paper or draw on secured lines of credit, in addition to capital markets issuances.
The Company was in compliance with the LCR rule at December 31, 2023, and the table below presents information about our average daily LCR: Average for the Three Months Ended December 31, 2023 September 30, 2023 Total eligible HQLA $ 58,056 $ 60,781 Net cash outflows 44,793 51,351 LCR 130 % 119 % To support growth in margin loan balances at our broker-dealer subsidiaries while meeting our LCR requirements, the Company may issue commercial paper or draw on secured lines of credit, in addition to capital markets issuances.
At December 31, 2022, the fair value of these holdings totaled $16.4 billion, with the top three exposures being to issuers and counterparties domiciled in France at $5.1 billion, the United Kingdom at $4.8 billion, and Canada at $1.7 billion.
At December 31, 2022, the fair value of these holdings totaled $16.4 billion, with the top three exposures being to issuers and counterparties domiciled in France at $5.1 billion, the United Kingdom at $4.8 billion, and Canada at $1.7 billion. In addition, Schwab had outstanding margin loans to foreign residents of $2.5 billion at both December 31, 2023 and 2022.
Adjusted total expenses, which excludes acquisition and integration-related costs and amortization of acquired intangible assets, increased $662 million, or 7%, in 2022 from 2021 and $3.0 billion, or 44%, in 2021 from 2020. See Non-GAAP Financial Measures for further details and a reconciliation of such measures to GAAP reported results.
Adjusted total expenses, which excludes acquisition and integration-related costs, amortization of acquired intangible assets, and, beginning in the third quarter of 2023, restructuring costs, increased $643 million, or 6%, in 2023 from 2022 and $662 million, or 7%, in 2022 from 2021. See Non-GAAP Financial Measures for further details and a reconciliation of such measures to GAAP reported results.
Interest expense on long-term debt, short-term borrowings, and other funding sources is impacted by market interest rates at the time of borrowing and changes in interest rates on floating-rate liabilities. See also Risk Management – Interest Rate Risk Simulations. Interest rates increased significantly from year-end 2021 through year-end 2022.
Interest expense on long-term debt, FHLB borrowings, other short-term borrowings, and other funding sources is impacted by market interest rates at the time of borrowing and changes in interest rates on floating-rate liabilities. See also Risk Management – Market Risk. Interest rates increased significantly beginning late in the first quarter of 2022 through the third quarter of 2023.
The Board of Directors of the Company declared quarterly cash dividend increases per common share during 2022 as shown below: Date of Declaration Quarterly Cash Increase Per Common Share % Increase New Quarterly Dividend Per Common Share January 26, 2022 $ .02 11 % $ .20 July 27, 2022 .02 10 % .22 In addition, on January 26, 2023, the Board of Directors of the Company declared a three cent, or 14%, increase in the quarterly cash dividend to $.25 per common share. - 58 - 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, 2022 2021 Cash Paid Per Share Amount Cash Paid Per Share Amount Common and Nonvoting Common Stock $ 1,591 $ .84 $ 1,366 $ .72 Preferred Stock: Series A (1) 33 82.73 28 70.00 Series C (2) N/A N/A 18 30.00 Series D (3) 45 59.52 45 59.52 Series E (4) 37 6,161.42 28 4,625.00 Series F (5) 25 5,000.00 25 5,000.00 Series G (3) 134 5,375.00 134 5,375.00 Series H (6) 100 4,000.00 97 3,888.89 Series I (7) 90 4,000.00 63 2,811.11 Series J (8) 27 44.52 18 29.80 Series K (9) 28 3,708.33 N/A N/A (1) Series A was redeemed on November 1, 2022.
The Board of Directors of the Company declared a quarterly cash dividend increase per common share during 2023 as shown below: Date of Declaration Quarterly Cash Increase Per Common Share % Increase New Quarterly Dividend Per Common Share January 26, 2023 $ .03 14 % $ .25 - 59 - 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, 2023 2022 Cash Paid Per Share Amount Cash Paid Per Share Amount Common and Nonvoting Common Stock $ 1,838 $ 1.00 $ 1,591 $ .84 Preferred Stock: Series A (1) N/A N/A 33 82.73 Series D (2) 45 59.52 45 59.52 Series E (3) N/A N/A 37 6,161.42 Series F (4) 24 5,000.00 25 5,000.00 Series G (2) 132 5,375.00 134 5,375.00 Series H (2) 90 4,000.00 100 4,000.00 Series I (2) 83 4,000.00 90 4,000.00 Series J (2) 27 44.52 27 44.52 Series K (5) 37 5,000.00 28 3,708.33 (1) Series A was redeemed on November 1, 2022.
Year Ended December 31, 2022 2021 2020 Return on average common stockholders’ equity (GAAP) 18 % 11 % 9 % Average common stockholders’ equity $ 36,605 $ 47,318 $ 33,640 Less: Average goodwill (11,952) (11,952) (6,590) Less: Average acquired intangible assets — net (9,084) (9,685) (5,059) Plus: Average deferred tax liabilities related to goodwill and acquired intangible assets — net 1,870 1,919 1,005 Average tangible common equity $ 17,439 $ 27,600 $ 22,996 Adjusted net income available to common stockholders (1) $ 7,386 $ 6,175 $ 3,521 Return on tangible common equity (non-GAAP) 42 % 22 % 15 % (1) See table above for the reconciliation of net income available to common stockholders to adjusted net income available to common stockholders (non-GAAP).
Year Ended December 31, 2023 2022 2021 Return on average common stockholders’ equity (GAAP) 16 % 18 % 11 % Average common stockholders’ equity $ 29,334 $ 36,605 $ 47,318 Less: Average goodwill (11,951) (11,952) (11,952) Less: Average acquired intangible assets — net (8,524) (9,084) (9,685) Plus: Average deferred tax liabilities related to goodwill and acquired intangible assets — net 1,805 1,870 1,919 Average tangible common equity $ 10,664 $ 17,439 $ 27,600 Adjusted net income available to common stockholders (1) $ 5,741 $ 7,386 $ 6,175 Return on tangible common equity (non-GAAP) 54 % 42 % 22 % (1) See table above for the reconciliation of net income available to common stockholders to adjusted net income available to common stockholders (non-GAAP).
Accumulated Other Comprehensive Income (AOCI): A component of stockholders’ equity which primarily includes unrealized gains and losses on available for sale (AFS) securities. Asset-backed securities: Debt securities backed by financial assets such as loans or receivables.
Accumulated Other Comprehensive Income (AOCI): A component of stockholders’ equity which primarily includes unrealized gains and losses on 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.
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.
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.
These factors drove lower commissions and order flow revenue in 2022 relative to 2021. Partially offsetting these decreases, principal transactions revenue increased as a result of higher volume in clients’ fixed income trading and higher market interest rates.
These factors drove lower commissions and order flow revenue in 2022 relative to 2021. Partially offsetting these decreases, principal transactions revenue increased as a result of higher volume in clients’ fixed income trading and higher market interest rates. Bank Deposit Account Fees The Company earns bank deposit account fee revenue from the TD Depository Institutions.
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. - 27 - 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) 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.
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.
The insurance program is specifically designed to address our key operational risks and to maintain compliance with local laws and regulation. Schwab’s operations are highly dependent on the integrity and resilience of our critical business functions and technology systems.
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.
Please see Non-GAAP Financial Measures for further details and a reconciliation of such measures to GAAP reported results. - 32 - 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 continued its consistent approach to balance sheet management in 2021, supporting overall growth and liquidity.
See Non-GAAP Financial Measures for further details and a reconciliation of such measures to GAAP reported results. - 32 - 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 continued its diligent approach to balance sheet management in 2022, maintaining appropriate capital and liquidity to support client activity and returning excess capital to stockholders.
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. - 49 - 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) Other Counterparty Exposures Schwab performs clearing services for all securities transactions in its client accounts.
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.
Results for the years ended December 31, 2022, 2021, and 2020 are as follows: Growth Rate 1-Year 2021-2022 2022 2021 2020 Client Metrics Net new client assets (in billions) (1) (21)% $ 406.9 $ 516.2 $ 1,952.5 Core net new client assets (in billions) (23)% $ 427.7 $ 558.2 $ 281.9 Client assets (in billions, at year end) (13)% $ 7,049.8 $ 8,138.0 $ 6,691.7 Average client assets (in billions) (3)% $ 7,292.8 $ 7,493.8 $ 4,579.0 New brokerage accounts (in thousands) (2) (45)% 4,044 7,306 18,627 Active brokerage accounts (in thousands, at year end) 2% 33,758 33,165 29,629 Assets receiving ongoing advisory services (in billions, at year end) (10)% $ 3,673.2 $ 4,064.4 $ 3,300.1 Client cash as a percentage of client assets (at year end) 12.3 % 10.9 % 12.3 % Company Financial Information and Metrics Total net revenues 12% $ 20,762 $ 18,520 $ 11,691 Total expenses excluding interest 5% 11,374 10,807 7,391 Income before taxes on income 22% 9,388 7,713 4,300 Taxes on income 19% 2,205 1,858 1,001 Net income 23% $ 7,183 $ 5,855 $ 3,299 Preferred stock dividends and other 11% 548 495 256 Net income available to common stockholders 24% $ 6,635 $ 5,360 $ 3,043 Earnings per common share — diluted 24% $ 3.50 $ 2.83 $ 2.12 Net revenue growth from prior year 12 % 58 % 9 % Pre-tax profit margin 45.2 % 41.6 % 36.8 % Return on average common stockholders’ equity 18 % 11 % 9 % Expenses excluding interest as a percentage of average client assets 0.16 % 0.14 % 0.16 % Consolidated Tier 1 Leverage Ratio (at year end) 7.2 % 6.2 % 6.3 % Non-GAAP Financial Measures (3) Adjusted total expenses (4) $ 10,386 $ 9,724 $ 6,759 Adjusted diluted EPS $ 3.90 $ 3.25 $ 2.45 Return on tangible common equity 42 % 22 % 15 % (1) 2022 includes outflows of $20.8 billion from certain mutual fund clearing services clients. 2021 includes outflows of $42.0 billion from certain mutual fund clearing services clients. 2020 includes inflows of $1.6 trillion related to the acquisition of TD Ameritrade, $79.9 billion related to the acquisition of the assets of USAA-IMCO, $8.5 billion related to the acquisition of Wasmer Schroeder, and $10.9 billion from a mutual fund clearing services client.
Results for the years ended December 31, 2023, 2022, and 2021 are as follows: Percent Change 2022-2023 2023 2022 2021 Client Metrics Net new client assets (in billions) (1) (17)% $ 337.2 $ 406.9 $ 516.2 Core net new client assets (in billions) (29)% $ 305.7 $ 427.7 $ 558.2 Client assets (in billions, at year end) 21% $ 8,516.6 $ 7,049.8 $ 8,138.0 Average client assets (in billions) 7% $ 7,793.8 $ 7,292.8 $ 7,493.8 New brokerage accounts (in thousands) (6)% 3,806 4,044 7,306 Active brokerage accounts (in thousands, at year end) 3% 34,838 33,758 33,165 Assets receiving ongoing advisory services (in billions, at year end) 18% $ 4,338.8 $ 3,673.2 $ 4,064.4 Client cash as a percentage of client assets (at year end) (2) 10.5 % 12.2 % 10.9 % Company Financial Information and Metrics Total net revenues (9)% $ 18,837 $ 20,762 $ 18,520 Total expenses excluding interest 10% 12,459 11,374 10,807 Income before taxes on income (32)% 6,378 9,388 7,713 Taxes on income (41)% 1,311 2,205 1,858 Net income (29)% $ 5,067 $ 7,183 $ 5,855 Preferred stock dividends and other (24)% 418 548 495 Net income available to common stockholders (30)% $ 4,649 $ 6,635 $ 5,360 Earnings per common share — diluted (27)% $ 2.54 $ 3.50 $ 2.83 Net revenue growth from prior year (9) % 12 % 58 % Pre-tax profit margin 33.9 % 45.2 % 41.6 % Return on average common stockholders’ equity 16 % 18 % 11 % Expenses excluding interest as a percentage of average client assets 0.16 % 0.16 % 0.14 % Consolidated Tier 1 Leverage Ratio (at year end) 8.5 % 7.2 % 6.2 % Non-GAAP Financial Measures (3) Adjusted total expenses (4) $ 11,029 $ 10,386 $ 9,724 Adjusted diluted EPS $ 3.13 $ 3.90 $ 3.25 Return on tangible common equity 54 % 42 % 22 % (1) 2023 includes net inflows of $32.5 billion from off-platform brokered CDs issued by CSB and $12.0 billion from a mutual fund clearing services client and outflows of $13.0 billion from an international relationship. 2022 includes outflows of $20.8 billion from certain mutual fund clearing services clients. 2021 includes outflows of $42.0 billion from certain mutual fund clearing services clients.
Insured Deposit Account (IDA) Agreement: The IDA agreement with the TD Depository Institutions. Interest-bearing liabilities: Primarily includes bank deposits, payables to brokerage clients, 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.
Interest-bearing liabilities: Primarily includes bank deposits, payables to brokerage clients, Federal Home Loan Bank 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.
We have established a policy that aligns with regulatory guidance to describe the roles and responsibilities of all key stakeholders in model development, management, and use. All models are registered in a centralized database and classified into different risk ratings depending on their potential financial, reputational, or regulatory impact to the Company.
Schwab has established a policy that aligns with regulatory guidance to describe the roles and responsibilities of all key stakeholders in model development, management, and use. Schwab registers models in a centralized database, performs risk assessment of models based on their potential financial, reputational, or regulatory impact to the Company.

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