Schwab Reports Second Quarter Results

The Charles Schwab Corporation announced today that its net income for the second quarter of 2023 was $1.3 billion compared with $1.8 billion for the second quarter of 2022. Net income for the six months ended June 30, 2023 was $2.9 billion, compared with $3.2 billion for the year-earlier period.

	Three Months Ended June 30,						%		Six Months Ended June 30,						%
Financial Highlights ⁽¹⁾	2023			2022			Change		2023			2022			Change

Net revenues (in millions)	$	4,656		$	5,093		(9	)%	$	9,772		$	9,765		—
Net income (in millions)
GAAP	$	1,294		$	1,793		(28	)%	$	2,897		$	3,195		(9	)%
Adjusted ⁽¹⁾	$	1,494		$	1,981		(25	)%	$	3,274		$	3,572		(8	)%
Diluted earnings per common share
GAAP	$	.64		$	.87		(26	)%	$	1.48		$	1.54		(4	)%
Adjusted ⁽¹⁾	$	.75		$	.97		(23	)%	$	1.68		$	1.74		(3	)%
Pre-tax profit margin
GAAP		36.3	%		44.6	%				38.9	%		42.1	%
Adjusted ⁽¹⁾		42.0	%		49.5	%				44.0	%		47.2	%
Return on average common stockholders’ equity (annualized)		17	%		19	%				20	%		15	%
Return on tangible common equity (annualized) ⁽¹⁾		62	%		45	%				71	%		32	%

Note: All per-share results are rounded to the nearest cent, based on weighted-average diluted common shares outstanding.
⁽¹⁾		Further details on non-GAAP financial measures and a reconciliation of such measures to GAAP reported results are included on pages 10-11 of this release.

Co-Chairman and CEO Walt Bettinger noted, “Schwab’s modern approach to wealth management continues to resonate with investors, helping to sustain our strong client momentum. During the second quarter, we gathered $52 billion in core net new assets – bringing year-to-date asset gathering to over $180 billion and keeping us squarely within our long-term organic growth range of 5% – 7%. While we observed signs of typical tax seasonality, as well as softer investor sentiment at the beginning of the quarter, we still attracted nearly 1 million new brokerage accounts and finished the period serving $8.02 trillion in total client assets across 34 million accounts.”

“Against an improving, yet still somewhat unsettled backdrop, clients increased their utilization of help and advice at Schwab during the quarter, reflecting investors’ continued trust in us to support them on their journey towards a better financial future,” continued Mr. Bettinger. “Year-to-date net flows into our retail Managed Investing solutions were up 35%, and when including relationships with Registered Investment Advisors (RIAs), approximately half of the firm’s client assets are now receiving some form of ongoing advisory service. More importantly, even with the still shifting environment, satisfaction within these areas remains strong as Client Promoter Scores for both Schwab Wealth Advisory™ and our RIAs have been near recent highs.”

Mr. Bettinger added, “Further advancing our three strategic initiatives of scale and efficiency, win-win monetization, and segmentation helps reinforce our advantages within the marketplace. In late May, we completed the conversion of over 5 million Ameritrade accounts to the combined platform. Successfully transitioning what is believed to be the largest number of client accounts in the history of the industry over a single weekend is a testament to the team’s diligent preparation and the tireless work of our dedicated employees. With approximately 30% of client accounts converted thus far, we are on-track to move nearly all of the remaining Ameritrade clients over before year-end – with the final transition group scheduled for the first half of 2024. During the quarter, we also took steps to supplement our asset management and personalized investing products by announcing a new proprietary high-yield bond exchange-traded fund and rolling-out enhancements to Schwab Personalized Indexing™ (SPI). The new features included a digital onboarding experience, expanded customization capabilities, and dynamic reporting tools for RIAs utilizing SPI. Most recently, we announced the launch of branded and differentiated experiences for our High Net Worth and Ultra-High Net Worth clients. While the go-forward service model is built upon the foundation of our firm-wide ‘no trade-offs’ approach, it includes many new benefits aimed at meeting the specific needs of these investors – including an integrated experience that offers specialized support and dedicated relationships across wealth management and banking.”

Mr. Bettinger finished, “Schwab continues to operate from a position of strength, as our ‘Through Clients’ Eyes’ strategy and distinct competitive advantages enable us to meet the ever-evolving needs of individual investors and the advisors who serve them. In addition, our consistency of mission and long-term management orientation allows us to stay focused on pursuing the tremendous growth opportunities still in front of us.”

CFO Peter Crawford stated, “While navigating significant near-term headwinds, we generated second quarter revenues of $4.7 billion, down 9% on a year-over-year basis. This top-line result was driven primarily by a temporary increase in the utilization of supplemental funding to facilitate client cash allocation decisions during the current rising rate cycle. Net interest revenue declined 10% from the prior year to $2.3 billion as the incorporation of higher cost liabilities brought our net interest margin down by 32 basis points sequentially to 1.87%. While anticipated client cash realignment, along with net equity buying during June, pushed cash levels lower, we observed a continued and substantial deceleration in the daily pace of cash outflows versus prior months. The continuation of this trend through the end of the quarter further strengthens our conviction that this realignment activity will inflect before the end of 2023, unlocking growth in client cash held on the balance sheet.”

“Managing expenses in a manner that allows us to balance appropriate investment to support long-term growth while generating near-term returns has been a core tenet of Schwab’s business model since its inception over 50 years ago,” Mr. Crawford added. “GAAP expenses for the quarter grew 5% year-over-year to $3.0 billion – including $130 million in acquisition and integration-related costs and $134 million in amortization of acquired intangibles. Exclusive of these items, adjusted total expenses ⁽¹⁾ equaled $2.7 billion, also up 5% versus the prior year. Our commitment to expense discipline yielded a pre-tax margin of 36.3%, or 42.0% adjusted ⁽¹⁾, as we continued to produce profitability levels beyond those observed at nearly all publicly-traded wealth management firms.”

Mr. Crawford concluded, “Effective balance sheet management remains central to our strategy as we seek to optimize capital and liquidity levels to sustain ongoing business momentum. In May, we issued $2.5 billion in long-term debt which provided incremental liquidity to support growth and helped us further bolster our capital ratios at the banks. Concurrently, driven by a combination of healthy profitability and a smaller balance sheet, our consolidated Tier 1 Leverage Ratio moved higher to 7.5%. While recent results have been negatively influenced by a number of temporary factors, we remain extremely well-positioned heading into the years to come. As we look forward, our confidence in the future is based on the resiliency of Schwab’s core earnings power as demonstrated by our diversified model’s ability to deliver long-term value to all of our stakeholders – clients, employees, and owners – over the past five decades.”

⁽¹⁾		Further details on non-GAAP financial measures and a reconciliation of such measures to GAAP reported results are included on pages 10-11 of this release.

Commentary from the CFO

Periodically, our Chief Financial Officer provides insight and commentary regarding Schwab’s financial picture at: https://www.aboutschwab.com/cfo-commentary. The most recent commentary, which provides perspective on the recent client cash realignment trends and second quarter revenue expectations, was posted on June 14, 2023.

Summer Business Update

The company will host its Summer Business Update for institutional investors this morning from 7:30 a.m. – 8:30 a.m. CT, 8:30 a.m. – 9:30 a.m. ET. Registration for this Update webcast is accessible at https://www.aboutschwab.com/schwabevents.

Forward-Looking Statements

This press release contains forward-looking statements relating to the company’s momentum; client asset growth; strategy and approach; competitive advantages; Ameritrade client transition; positioning; opportunities; success with clients; client cash realignment activity and trends; growth of client cash on the balance sheet; expense discipline; balancing investment to support long-term growth with generating near-term returns; profitability; balance sheet management; capital and liquidity; earnings power; and stakeholder value. These forward-looking statements reflect management’s expectations as of the date hereof. Achievement of these expectations and objectives is subject to risks and uncertainties that could cause actual results to differ materially from the expressed expectations.

Important factors that may cause such differences include, but are not limited to, the company’s ability to attract and retain clients and independent investment advisors and grow those relationships and client assets; develop and launch new and enhanced products, services, and capabilities, as well as enhance its infrastructure and capacity, in a timely and successful manner; hire and retain talent; support client activity levels; successfully implement integration strategies and plans; monetize client assets; and manage expenses. Other important factors include client use of the company’s advisory solutions and other products and services; general market conditions, including the level of interest rates and equity valuations; client cash allocation decisions; client sensitivity to rates; level of client assets, including cash balances; competitive pressures on pricing; the level and mix of client trading activity; market volatility; securities lending; margin loan balances; capital and liquidity needs and management; balance sheet positioning relative to changes in interest rates; interest earning asset mix and growth; new or changed legislation, regulation or regulatory expectations; and other factors set forth in the company’s most recent reports on Form 10-K and Form 10-Q.

About Charles Schwab

The Charles Schwab Corporation (NYSE: SCHW) is a leading provider of financial services, with 34.4 million active brokerage accounts, 2.4 million corporate retirement plan participants, 1.8 million banking accounts, and $8.02 trillion in client assets. Through its operating subsidiaries, the company provides a full range of wealth management, securities brokerage, banking, asset management, custody, and financial advisory services to individual investors and independent investment advisors. Its broker-dealer subsidiaries, Charles Schwab & Co., Inc., TD Ameritrade, Inc., and TD Ameritrade Clearing, Inc., (members SIPC, https://www.sipc.org), and their affiliates offer a complete range of investment services and products including an extensive selection of mutual funds; financial planning and investment advice; retirement plan and equity compensation plan services; referrals to independent, fee-based investment advisors; and custodial, operational and trading support for independent, fee-based investment advisors through Schwab Advisor Services. Its primary banking subsidiary, Charles Schwab Bank, SSB (member FDIC and an Equal Housing Lender), provides banking and lending services and products. More information is available at https://www.aboutschwab.com. TD Ameritrade, Inc. and TD Ameritrade Clearing, Inc. are separate but affiliated companies and subsidiaries of TD Ameritrade Holding Corporation. TD Ameritrade Holding Corporation is a wholly owned subsidiary of The Charles Schwab Corporation. TD Ameritrade is a trademark jointly owned by TD Ameritrade IP Company, Inc. and The Toronto-Dominion Bank.


THE CHARLES SCHWAB CORPORATION
Consolidated Statements of Income
(In millions, except per share amounts)
(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
Net Revenues
Interest revenue	$	4,104		$	2,710		$	8,120		$	5,029
Interest expense		(1,814	)		(166	)		(3,060	)		(302	)
Net interest revenue		2,290			2,544			5,060			4,727
Asset management and administration fees ⁽¹⁾		1,173			1,052			2,291			2,120
Trading revenue		803			885			1,695			1,848
Bank deposit account fees		175			352			326			646
Other		215			260			400			424
Total net revenues		4,656			5,093			9,772			9,765
Expenses Excluding Interest
Compensation and benefits		1,498			1,426			3,136			2,972
Professional services		272			258			530			502
Occupancy and equipment		319			294			618			563
Advertising and market development		103			105			191			207
Communications		188			169			334			313
Depreciation and amortization		191			159			368			309
Amortization of acquired intangible assets		134			154			269			308
Regulatory fees and assessments		80			67			163			135
Other		180			187			362			343
Total expenses excluding interest		2,965			2,819			5,971			5,652
Income before taxes on income		1,691			2,274			3,801			4,113
Taxes on income		397			481			904			918
Net Income		1,294			1,793			2,897			3,195
Preferred stock dividends and other		121			141			191			265
Net Income Available to Common Stockholders	$	1,173		$	1,652		$	2,706		$	2,930
Weighted-Average Common Shares Outstanding:
Basic		1,820			1,896			1,827			1,895
Diluted		1,825			1,904			1,834			1,905
Earnings Per Common Shares Outstanding ⁽²⁾:
Basic	$	.64		$	.87		$	1.48		$	1.55
Diluted	$	.64		$	.87		$	1.48		$	1.54

⁽¹⁾		No fee waivers were recognized for the three and six months ended June 30, 2023. Includes fee waivers of $3 million and $57 million for the three and six months ended June 30, 2022, respectively.
⁽²⁾		The Company has voting and nonvoting common stock outstanding. As the participation rights, including dividend and liquidation rights, are identical between the voting and nonvoting stock classes, basic and diluted earnings per share are the same for each class.

THE CHARLES SCHWAB CORPORATION
Financial and Operating Highlights
(Unaudited)

	Q2-23 % change				2023						2022
	vs.		vs.		Second			First			Fourth			Third			Second
(In millions, except per share amounts and as noted)	Q2-22		Q1-23		Quarter			Quarter			Quarter			Quarter			Quarter
Net Revenues
Net interest revenue	(10	)%	(17	)%	$	2,290		$	2,770		$	3,029		$	2,926		$	2,544
Asset management and administration fees	12	%	5	%		1,173			1,118			1,049			1,047			1,052
Trading revenue	(9	)%	(10	)%		803			892			895			930			885
Bank deposit account fees	(50	)%	16	%		175			151			350			413			352
Other	(17	)%	16	%		215			185			174			184			260
Total net revenues	(9	)%	(9	)%		4,656			5,116			5,497			5,500			5,093
Expenses Excluding Interest
Compensation and benefits	5	%	(9	)%		1,498			1,638			1,488			1,476			1,426
Professional services	5	%	5	%		272			258			266			264			258
Occupancy and equipment	9	%	7	%		319			299			320			292			294
Advertising and market development	(2	)%	17	%		103			88			123			89			105
Communications	11	%	29	%		188			146			144			131			169
Depreciation and amortization	20	%	8	%		191			177			176			167			159
Amortization of acquired intangible assets	(13	)%	(1	)%		134			135			136			152			154
Regulatory fees and assessments	19	%	(4	)%		80			83			62			65			67
Other	(4	)%	(1	)%		180			182			184			187			187
Total expenses excluding interest	5	%	(1	)%		2,965			3,006			2,899			2,823			2,819
Income before taxes on income	(26	)%	(20	)%		1,691			2,110			2,598			2,677			2,274
Taxes on income	(17	)%	(22	)%		397			507			630			657			481
Net Income	(28	)%	(19	)%		1,294			1,603			1,968			2,020			1,793
Preferred stock dividends and other	(14	)%	73	%		121			70			147			136			141
Net Income Available to Common Stockholders	(29	)%	(23	)%	$	1,173		$	1,533		$	1,821		$	1,884		$	1,652
Earnings per common share ⁽¹⁾:
Basic	(26	)%	(24	)%	$	.64		$	.84		$	.98		$	1.00		$	.87
Diluted	(26	)%	(23	)%	$	.64		$	.83		$	.97		$	.99		$	.87
Dividends declared per common share	25	%	—		$	.25		$	.25		$	.22		$	.22		$	.20
Weighted-average common shares outstanding:
Basic	(4	)%	(1	)%		1,820			1,834			1,864			1,887			1,896
Diluted	(4	)%	(1	)%		1,825			1,842			1,873			1,895			1,904
Performance Measures
Pre-tax profit margin						36.3	%		41.2	%		47.3	%		48.7	%		44.6	%
Return on average common stockholders’ equity (annualized) ⁽²⁾						17	%		23	%		27	%		25	%		19	%
Financial Condition (at quarter end, in billions)
Cash and cash equivalents	(26	)%	(3	)%	$	47.7		$	49.2		$	40.2		$	46.5		$	64.6
Cash and investments segregated	(53	)%	(19	)%		25.1			31.0			43.0			44.1			53.5
Receivables from brokerage clients — net	(14	)%	3	%		65.2			63.2			66.6			73.9			76.1
Available for sale securities	(53	)%	(11	)%		125.8			141.3			147.9			236.5			265.3
Held to maturity securities	66	%	(2	)%		166.3			169.9			173.1			96.3			100.1
Bank loans — net	1	%	—			40.1			40.0			40.5			40.4			39.6
Total assets	(20	)%	(4	)%		511.5			535.6			551.8			577.6			637.6
Bank deposits	(31	)%	(7	)%		304.4			325.7			366.7			395.7			442.0
Payables to brokerage clients	(26	)%	(3	)%		84.8			87.6			97.4			110.0			114.9
Other short-term borrowings ⁽³⁾	N/M		10	%		7.8			7.1			4.7			0.5			1.4
Federal Home Loan Bank borrowings ⁽³⁾	N/M		(10	)%		41.0			45.6			12.4			—			—
Long-term debt	7	%	13	%		22.5			20.0			20.8			20.8			21.1
Stockholders’ equity	(17	)%	2	%		37.1			36.3			36.6			37.0			44.5
Other
Full-time equivalent employees (at quarter end, in thousands)	4	%	2	%		36.6			36.0			35.3			35.2			35.2
Capital expenditures — purchases of equipment, office facilities, and property, net (in millions)	(50	)%	(10	)%	$	168		$	187		$	211		$	193		$	339
Expenses excluding interest as a percentage of average client assets (annualized)						0.15	%		0.17	%		0.16	%		0.16	%		0.16	%
Clients’ Daily Average Trades (DATs) (in thousands)	(15	)%	(11	)%		5,272			5,895			5,389			5,523			6,227
Number of Trading Days	—		—			62.0			62.0			62.5			64.0			62.0
Revenue Per Trade ⁽⁴⁾	7	%	1	%	$	2.46		$	2.44		$	2.66		$	2.63		$	2.29

⁽¹⁾		The Company has voting and nonvoting common stock outstanding. As the participation rights, including dividend and liquidation rights, are identical between the voting and nonvoting stock classes, basic and diluted earnings per share are the same for each class.
⁽²⁾		Return on average common stockholders’ equity is calculated using net income available to common stockholders divided by average common stockholders’ equity.
⁽³⁾		Beginning in the first quarter of 2023, Federal Home Loan Bank borrowings are presented separately from other short-term borrowings. Prior period amounts have been reclassified to reflect this change.
⁽⁴⁾		Revenue per trade is calculated as trading revenue divided by DATs multiplied by the number of trading days.
N/M Not meaningful. Percentage changes greater than 200% are presented as not meaningful.

THE CHARLES SCHWAB CORPORATION
Net Interest Revenue Information
(In millions, except ratios or as noted)
(Unaudited)

	Three Months Ended June 30,														Six Months Ended June 30,
	2023							2022							2023						2022
	Average Balance		Interest Revenue/ Expense			Average Yield/ Rate		Average Balance		Interest Revenue/ Expense			Average Yield/ Rate		Average Balance		Interest Revenue/ Expense		Average Yield/ Rate		Average Balance		Interest Revenue/ Expense			Average Yield/ Rate
Interest-earning assets
Cash and cash equivalents	$	44,683	$	547		4.84	%	$	65,414	$	133		0.81	%	$	40,891	$	960	4.67	%	$	68,920	$	167		0.48	%
Cash and investments segregated		27,399		324		4.68	%		51,232		79		0.61	%		33,699		756	4.46	%		51,570		94		0.36	%
Receivables from brokerage clients		60,709		1,167		7.60	%		79,061		706		3.53	%		60,626		2,251	7.39	%		81,618		1,332		3.24	%
Available for sale securities ^(1,2)		145,032		791		2.18	%		287,313		1,088		1.51	%		150,382		1,616	2.15	%		285,927		2,035		1.42	%
Held to maturity securities		167,499		720		1.72	%		101,752		339		1.33	%		169,184		1,466	1.73	%		102,580		717		1.40	%
Bank loans		40,124		410		4.09	%		38,831		230		2.38	%		40,185		801	4.00	%		37,351		417		2.24	%
Total interest-earning assets		485,446		3,959		3.24	%		623,603		2,575		1.64	%		494,967		7,850	3.16	%		627,966		4,762		1.51	%
Securities lending revenue				124							130							236						259
Other interest revenue				21							5							34						8
Total interest-earning assets	$	485,446	$	4,104		3.36	%	$	623,603	$	2,710		1.73	%	$	494,967	$	8,120	3.27	%	$	627,966	$	5,029		1.60	%
Funding sources
Bank deposits	$	312,543	$	863		1.11	%	$	449,936	$	28		0.03	%	$	327,739	$	1,481	0.91	%	$	451,306	$	44		0.02	%
Payables to brokerage clients		64,892		64		0.40	%		101,784		4		0.02	%		70,997		139	0.40	%		103,846		6		0.01	%
Other short-term borrowings ⁽³⁾		7,622		97		5.08	%		2,587		4		0.69	%		7,272		183	5.06	%		3,646		8		0.46	%
Federal Home Loan Bank borrowings ^(3,4)		46,813		606		5.13	%		—		—		—			35,697		910	5.07	%		—		—		—
Long-term debt		21,237		157		2.95	%		21,119		124		2.34	%		20,766		296	2.85	%		20,495		232		2.26	%
Total interest-bearing liabilities		453,107		1,787		1.57	%		575,426		160		0.11	%		462,471		3,009	1.31	%		579,293		290		0.10	%
Non-interest-bearing funding sources		32,339							48,177							32,496						48,673
Securities lending expense				28							8							50						15
Other interest expense				(1	)						(2	)						1						(3	)
Total funding sources	$	485,446	$	1,814		1.49	%	$	623,603	$	166		0.11	%	$	494,967	$	3,060	1.24	%	$	627,966	$	302		0.10	%
Net interest revenue			$	2,290		1.87	%			$	2,544		1.62	%			$	5,060	2.03	%			$	4,727		1.50	%

⁽¹⁾		Amounts have been calculated based on amortized cost.
⁽²⁾		Beginning in the first quarter of 2023, amounts include the impact of derivative financial instruments and the related hedge accounting on our available for sale securities.
⁽³⁾		Beginning in the first quarter of 2023, Federal Home Loan Bank borrowings are presented separately from other short-term borrowings. Prior period amounts have been reclassified to reflect this change.
⁽⁴⁾		Average balance and interest expense was less than $500 thousand in the prior period.

THE CHARLES SCHWAB CORPORATION
Asset Management and Administration Fees Information
(In millions, except ratios or as noted)
(Unaudited)

	Three Months Ended June 30,													Six Months Ended June 30,
	2023						2022							2023						2022
	Average Client Assets		Revenue		Average Fee		Average Client Assets		Revenue			Average Fee		Average Client Assets		Revenue		Average Fee		Average Client Assets		Revenue			Average Fee
Schwab money market funds before fee waivers	$	375,898	$	252	0.27	%	$	146,009	$	106		0.29	%	$	346,145	$	465	0.27	%	$	145,371	$	208		0.29	%
Fee waivers				—						(3	)						—						(57	)
Schwab money market funds		375,898		252	0.27	%		146,009		103		0.28	%		346,145		465	0.27	%		145,371		151		0.21	%
Schwab equity and bond funds, exchange-traded funds (ETFs), and collective trust funds (CTFs)		465,079		94	0.08	%		431,747		92		0.09	%		457,830		185	0.08	%		444,036		189		0.09	%
Mutual Fund OneSource^® and other no-transaction-fee funds		229,207		151	0.26	%		192,435		149		0.31	%		225,822		299	0.27	%		202,538		314		0.31	%
Other third-party mutual funds and ETFs		681,486		133	0.08	%		795,727		171		0.09	%		678,915		266	0.08	%		833,969		350		0.08	%
Total mutual funds, ETFs, and CTFs⁽¹⁾	$	1,751,670		630	0.14	%	$	1,565,918		515		0.13	%	$	1,708,712		1,215	0.14	%	$	1,625,914		1,004		0.12	%
Advice solutions ⁽¹⁾
Fee-based	$	455,859		464	0.41	%	$	440,336		461		0.42	%	$	449,443		917	0.41	%	$	454,830		957		0.42	%
Non-fee-based		95,427		—	—			86,684		—		—			94,948		—	—			88,509		—		—
Total advice solutions	$	551,286		464	0.34	%	$	527,020		461		0.35	%	$	544,391		917	0.34	%	$	543,339		957		0.36	%
Other balance-based fees ⁽²⁾		594,528		63	0.04	%		566,712		61		0.04	%		578,158		125	0.04	%		591,695		128		0.04	%
Other ⁽³⁾				16						15							34						31
Total asset management and administration fees			$	1,173					$	1,052						$	2,291					$	2,120

⁽¹⁾		Advice solutions include managed portfolios, specialized strategies, and customized investment advice such as Schwab Wealth Advisory™, Schwab Managed Portfolios™, Managed Account Select^®, Schwab Advisor Network^®, Windhaven Strategies^®, ThomasPartners^® Strategies, Schwab Index Advantage^® advised retirement plan balances, Schwab Intelligent Portfolios^®, Institutional Intelligent Portfolios^®, Schwab Intelligent Portfolios Premium^®, TD Ameritrade AdvisorDirect^®, Essential Portfolios, Selective Portfolios, and Personalized Portfolios; as well as legacy non-fee advice solutions including Schwab Advisor Source and certain retirement plan balances. Average client assets for advice solutions may also include the asset balances contained in the mutual fund and/or ETF categories listed above. For the total end of period view, please see the Monthly Activity Report.
⁽²⁾		Includes various asset-related fees, such as trust fees, 401(k) recordkeeping fees, and mutual fund clearing fees and other service fees.
⁽³⁾		Includes miscellaneous service and transaction fees relating to mutual funds and ETFs that are not balance-based.

THE CHARLES SCHWAB CORPORATION
Growth in Client Assets and Accounts
(Unaudited)

	Q2-23 % Change				2023						2022
	vs.		vs.		Second			First			Fourth			Third			Second
(In billions, at quarter end, except as noted)	Q2-22		Q1-23		Quarter			Quarter			Quarter			Quarter			Quarter
Assets in client accounts
Schwab One^®, certain cash equivalents and bank deposits	(30	)%	(6	)%	$	384.4		$	408.5		$	459.4		$	501.4		$	552.5
Bank deposit account balances	(34	)%	(4	)%		102.7			106.5			126.6			139.6			155.6
Proprietary mutual funds (Schwab Funds^® and Laudus Funds^®) and CTFs
Money market funds ⁽¹⁾	147	%	10	%		392.9			357.8			278.9			211.1			159.2
Equity and bond funds and CTFs ⁽²⁾	15	%	6	%		172.6			163.1			153.6			141.5			149.5
Total proprietary mutual funds and CTFs	83	%	9	%		565.5			520.9			432.5			352.6			308.7
Mutual Fund Marketplace^{® (3)}
Mutual Fund OneSource^® and other no-transaction-fee funds	30	%	4	%		254.6			244.3			235.7			181.5			196.6
Mutual fund clearing services	20	%	9	%		220.7			201.7			191.1			175.3			184.4
Other third-party mutual funds ⁽⁴⁾	(3	)%	2	%		1,150.8			1,123.6			1,077.1			1,105.7			1,189.4
Total Mutual Fund Marketplace	4	%	4	%		1,626.1			1,569.6			1,503.9			1,462.5			1,570.4
Total mutual fund assets	17	%	5	%		2,191.6			2,090.5			1,936.4			1,815.1			1,879.1
Exchange-traded funds
Proprietary ETFs ⁽²⁾	23	%	4	%		293.2			280.6			259.3			232.2			237.7
Other third-party ETFs	22	%	6	%		1,381.4			1,297.5			1,208.4			1,094.6			1,129.0
Total ETF assets	23	%	6	%		1,674.6			1,578.1			1,467.7			1,326.8			1,366.7
Equity and other securities	18	%	8	%		3,002.7			2,772.2			2,529.4			2,451.3			2,548.5
Fixed income securities	79	%	6	%		722.6			684.7			593.4			481.5			403.5
Margin loans outstanding	(14	)%	4	%		(62.8	)		(60.5	)		(63.1	)		(71.5	)		(73.4	)
Total client assets	17	%	6	%	$	8,015.8		$	7,580.0		$	7,049.8		$	6,644.2		$	6,832.5
Client assets by business
Investor Services	19	%	7	%	$	4,267.9		$	4,001.9		$	3,682.1		$	3,508.1		$	3,598.7
Advisor Services	16	%	5	%		3,747.9			3,578.1			3,367.7			3,136.1			3,233.8
Total client assets	17	%	6	%	$	8,015.8		$	7,580.0		$	7,049.8		$	6,644.2		$	6,832.5
Net growth in assets in client accounts (for the quarter ended)
Net new assets by business
Investor Services ⁽⁵⁾	N/M		(55	)%	$	36.0		$	79.4		$	64.3		$	55.1		$	8.8
Advisor Services	4	%	(50	)%		36.0			71.3			64.1			59.5			34.6
Total net new assets	66	%	(52	)%	$	72.0		$	150.7		$	128.4		$	114.6		$	43.4
Net market gains (losses)						363.8			379.5			277.2			(302.9	)		(1,073.0	)
Net growth (decline)					$	435.8		$	530.2		$	405.6		$	(188.3	)	$	(1,029.6	)
New brokerage accounts (in thousands, for the quarter ended)	(5	)%	(8	)%		960			1,042			931			897			1,014
Client accounts (in thousands)
Active brokerage accounts ⁽⁶⁾	1	%	1	%		34,382			34,120			33,758			33,875			33,896
Banking accounts	7	%	2	%		1,781			1,746			1,716			1,696			1,669
Corporate retirement plan participants	7	%	3	%		2,443			2,379			2,351			2,305			2,275

⁽¹⁾		Total client assets in purchased money market funds are located at: https://www.aboutschwab.com/investor-relations.
⁽²⁾		Includes balances held on and off the Schwab platform. As of June 30, 2023, off-platform equity and bond funds, CTFs, and ETFs were $26.7 billion, $4.2 billion, and $112.5 billion, respectively.
⁽³⁾		Excludes all proprietary mutual funds and ETFs.
⁽⁴⁾		As of June 30, 2023, third-party money funds were $2.7 billion.
⁽⁵⁾		Second quarter of 2023 includes an inflow of $12.0 billion from a mutual fund clearing services client and inflows of $7.8 billion from off-platform Schwab Bank Retail Certificates of Deposit (CDs). First quarter of 2023 includes inflows of $19.0 billion from off-platform Schwab Bank Retail CDs. Second quarter of 2022 includes an outflow of $20.8 billion from a mutual fund clearing services client.
⁽⁶⁾		Fourth quarter of 2022 includes the Company-initiated closure of approximately 350 thousand low-balance accounts. Third quarter of 2022 includes the Company-initiated closure of approximately 152 thousand low-balance accounts.
N/M Not meaningful. Percentage changes greater than 200% are presented as not meaningful.

The Charles Schwab Corporation Monthly Activity Report For June 2023

	2022														2023												Change
	Jun		Jul		Aug		Sep		Oct		Nov		Dec		Jan		Feb		Mar		Apr		May		Jun		Mo.		Yr.
Market Indices (at month end)
Dow Jones Industrial Average^®	30,775		32,845		31,510		28,726		32,733		34,590		33,147		34,086		32,657		33,274		34,098		32,908		34,408		5	%	12	%
Nasdaq Composite^®	11,029		12,391		11,816		10,576		10,988		11,468		10,466		11,585		11,456		12,222		12,227		12,935		13,788		7	%	25	%
Standard & Poor’s^® 500	3,785		4,130		3,955		3,586		3,872		4,080		3,840		4,077		3,970		4,109		4,169		4,180		4,450		6	%	18	%
Client Assets (in billions of dollars)
Beginning Client Assets	7,301.7		6,832.5		7,304.8		7,127.6		6,644.2		7,004.6		7,320.6		7,049.8		7,480.6		7,380.2		7,580.0		7,631.5		7,650.2
Net New Assets⁽¹⁾	19.8		31.5		43.3		39.8		42.0		33.1		53.3		36.1		41.7		72.9		13.6		24.6		33.8		37	%	71	%
Net Market Gains (Losses)	(489.0	)	440.8		(220.5	)	(523.2	)	318.4		282.9		(324.1	)	394.7		(142.1	)	126.9		37.9		(5.9	)	331.8
Total Client Assets (at month end)	6,832.5		7,304.8		7,127.6		6,644.2		7,004.6		7,320.6		7,049.8		7,480.6		7,380.2		7,580.0		7,631.5		7,650.2		8,015.8		5	%	17	%
Core Net New Assets⁽²⁾	40.6		31.5		43.3		39.8		42.0		33.1		53.3		36.1		41.7		53.9		(2.3	)	20.7		33.8		63	%	(17	)%
Receiving Ongoing Advisory Services (at month end)
Investor Services	483.8		514.8		499.2		466.6		487.3		514.0		499.8		524.6		515.5		526.2		530.7		526.3		547.5		4	%	13	%
Advisor Services ⁽³⁾	3,040.4		3,222.5		3,150.5		2,950.9		3,106.0		3,270.5		3,173.4		3,345.4		3,289.6		3,369.3		3,394.9		3,377.8		3,527.8		4	%	16	%
Client Accounts (at month end, in thousands)
Active Brokerage Accounts ⁽⁴⁾	33,896		33,934		33,984		33,875		33,896		33,636		33,758		33,878		34,010		34,120		34,248		34,311		34,382		—		1	%
Banking Accounts	1,669		1,680		1,690		1,696		1,706		1,705		1,716		1,729		1,733		1,746		1,757		1,768		1,781		1	%	7	%
Corporate Retirement Plan Participants	2,275		2,267		2,285		2,305		2,322		2,336		2,351		2,369		2,384		2,379		2,391		2,401		2,443		2	%	7	%
Client Activity
New Brokerage Accounts (in thousands)	305		278		332		287		298		303		330		344		320		378		331		314		315		—		3	%
Client Cash as a Percentage of Client Assets⁽⁵⁾	12.8	%	12.0	%	12.1	%	12.9	%	12.2	%	11.5	%	12.3	%	11.6	%	11.7	%	11.6	%	11.3	%	11.5	%	11.0	%	(50) bp		(180) bp
Derivative Trades as a Percentage of Total Trades	22.3	%	24.2	%	23.3	%	23.6	%	24.1	%	24.6	%	23.2	%	23.0	%	23.5	%	22.8	%	23.4	%	23.5	%	23.9	%	40 bp		160 bp
Selected Average Balances (in millions of dollars)
Average Interest-Earning Assets ⁽⁶⁾	614,100		605,751		586,154		568,351		552,631		527,019		520,100		512,893		503,122		497,627		493,215		483,438		479,752		(1	)%	(22	)%
Average Margin Balances	74,577		72,177		72,855		73,224		69,188		66,011		64,759		60,211		60,575		60,848		60,338		60,250		61,543		2	%	(17	)%
Average Bank Deposit Account Balances ⁽⁷⁾	155,306		154,542		148,427		141,198		136,036		130,479		126,953		122,387		115,816		109,392		104,775		103,149		102,917		—		(34	)%
Mutual Fund and Exchange-Traded Fund
Net Buys (Sells)^(8,9) (in millions of dollars)
Equities	(1,586	)	5,589		10,465		(2,662	)	3,984		3,777		(1,837	)	7,236		5,850		(3,234	)	1,126		(1,366	)	9,190
Hybrid	(1,054	)	(2,041	)	(783	)	(938	)	(1,380	)	(2,052	)	(1,595	)	(433	)	47		(1,641	)	(462	)	(889	)	(903	)
Bonds	(5,631	)	729		(141	)	(5,801	)	(7,218	)	(3,721	)	(3,260	)	5,646		4,281		6,158		2,575		2,029		3,302
Net Buy (Sell) Activity (in millions of dollars)
Mutual Funds ⁽⁸⁾	(16,258	)	(8,674	)	(7,117	)	(15,200	)	(18,473	)	(17,143	)	(21,851	)	552		(2,338	)	(7,423	)	(4,904	)	(7,157	)	(4,485	)
Exchange-Traded Funds ⁽⁹⁾	7,987		12,951		16,658		5,799		13,859		15,147		15,159		11,897		12,516		8,706		8,143		6,931		16,074
Money Market Funds	11,544		13,711		19,702		17,018		21,542		16,929		27,778		24,285		23,347		27,106		6,291		15,256		9,112

Note: Certain supplemental details related to the information above can be found at: https://www.aboutschwab.com/financial-reports.
⁽¹⁾		Unless otherwise noted, differences between net new assets and core net new assets are net flows from off-platform Schwab Bank Retail CDs – including March 2023 which reflects inflows of $19.0 billion from off-platform Schwab Bank Retail CDs issued year-to-date through March 31, 2023. April 2023 also includes an inflow of $12.0 billion from a mutual fund clearing services client. June 2022 includes an outflow of $20.8 billion from a mutual fund clearing services client.
⁽²⁾		Net new assets before significant one-time inflows or outflows, such as acquisitions/divestitures or extraordinary flows (generally greater than $10 billion) relating to a specific client, and activity from off-platform Schwab Bank Retail CDs. These flows may span multiple reporting periods.
⁽³⁾		Excludes Retirement Business Services.
⁽⁴⁾		November 2022 includes the Company-initiated closure of approximately 350 thousand low-balance accounts. September 2022 includes the Company-initiated closure of 152 thousand low-balance accounts.
⁽⁵⁾		Schwab One^®, certain cash equivalents, bank deposits, third-party bank deposit accounts, and money market fund balances as a percentage of total client assets.
⁽⁶⁾		Represents average total interest-earning assets on the Company’s balance sheet. November 2022 includes the impact of transferring certain investment securities from the available for sale category to the held-to-maturity category.
⁽⁷⁾		Represents average clients’ uninvested cash sweep account balances held in deposit accounts at third-party financial institutions.
⁽⁸⁾		Represents the principal value of client mutual fund transactions handled by Schwab, including transactions in proprietary funds. Includes institutional funds available only to Investment Managers. Excludes money market fund transactions.
⁽⁹⁾		Represents the principal value of client ETF transactions handled by Schwab, including transactions in proprietary ETFs.

THE CHARLES SCHWAB CORPORATION
Non-GAAP Financial Measures
(In millions, except ratios and per share amounts)
(Unaudited)

In addition to disclosing financial results in accordance with generally accepted accounting principles in the U.S. (GAAP), Schwab’s second quarter earnings release 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. These non-GAAP measures should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and may not be comparable to non-GAAP financial measures presented by other companies.

Schwab’s use of non-GAAP measures is reflective of certain adjustments made to GAAP financial measures as described below.

Non-GAAP Adjustment or Measure	Definition	Usefulness to Investors and Uses by Management
Acquisition and integration-related costs 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. Adjustments made to exclude amortization of acquired intangible assets are reflective of all acquired intangible assets, which were recorded as part of purchase accounting. These acquired intangible assets contribute to the Company’s revenue generation. Amortization of acquired intangible assets will continue in future periods over their remaining useful lives.	We exclude acquisition and integration-related costs 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. 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.
Return on tangible common equity	Return on tangible common equity represents annualized adjusted net income available to common stockholders as a percentage of average tangible common equity. Tangible common equity represents common equity less goodwill, acquired intangible assets — net, and related deferred tax liabilities.	Acquisitions typically result in the recognition of significant amounts of goodwill and acquired intangible assets. We believe return on tangible common equity may be useful to investors as a supplemental measure to facilitate assessing capital efficiency and returns relative to the composition of Schwab’s balance sheet.

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

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

	Three Months Ended June 30,												Six Months Ended June 30,
	2023						2022						2023						2022
	Total Expenses Excluding Interest			Net Income			Total Expenses Excluding Interest			Net Income			Total Expenses Excluding Interest			Net Income			Total Expenses Excluding Interest			Net Income
Total expenses excluding interest (GAAP), Net income (GAAP)	$	2,965		$	1,294		$	2,819		$	1,793		$	5,971		$	2,897		$	5,652		$	3,195
Acquisition and integration-related costs ⁽¹⁾		(130	)		130			(94	)		94			(228	)		228			(190	)		190
Amortization of acquired intangible assets		(134	)		134			(154	)		154			(269	)		269			(308	)		308
Income tax effects ⁽²⁾		N/A			(64	)		N/A			(60	)		N/A			(120	)		N/A			(121	)
Adjusted total expenses (non-GAAP), Adjusted net income (non-GAAP)	$	2,701		$	1,494		$	2,571		$	1,981		$	5,474		$	3,274		$	5,154		$	3,572

⁽¹⁾		Acquisition and integration-related costs for the three and six months ended June 30, 2023 primarily consist of $48 million and $106 million of compensation and benefits, $41 million and $74 million of professional services, $10 million and $14 million of occupancy and equipment, and $20 million and $22 million of other. Acquisition and integration-related costs for the three and six months ended June 30, 2022 primarily consist of $53 million and $109 million of compensation and benefits, $35 million and $66 million of professional services, and $4 million and $8 million of occupancy and equipment.
⁽²⁾		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.
N/A Not applicable.

	Three Months Ended June 30,								Six Months Ended June 30,
	2023				2022				2023				2022
	Amount		% of Total Net Revenues		Amount		% of Total Net Revenues		Amount		% of Total Net Revenues		Amount		% of Total Net Revenues
Income before taxes on income (GAAP), Pre-tax profit margin (GAAP)	$	1,691	36.3	%	$	2,274	44.6	%	$	3,801	38.9	%	$	4,113	42.1	%
Acquisition and integration-related costs		130	2.8	%		94	1.8	%		228	2.3	%		190	1.9	%
Amortization of acquired intangible assets		134	2.9	%		154	3.1	%		269	2.8	%		308	3.2	%
Adjusted income before taxes on income (non-GAAP), Adjusted pre-tax profit margin (non-GAAP)	$	1,955	42.0	%	$	2,522	49.5	%	$	4,298	44.0	%	$	4,611	47.2	%

	Three Months Ended June 30,												Six Months Ended June 30,
	2023						2022						2023						2022
	Amount			Diluted EPS			Amount			Diluted EPS			Amount			Diluted EPS			Amount			Diluted EPS
Net income available to common stockholders (GAAP), Earnings per common share — diluted (GAAP)	$	1,173		$	.64		$	1,652		$	.87		$	2,706		$	1.48		$	2,930		$	1.54
Acquisition and integration-related costs		130			.07			94			.05			228			.12			190			.10
Amortization of acquired intangible assets		134			.07			154			.08			269			.15			308			.16
Income tax effects		(64	)		(.03	)		(60	)		(.03	)		(120	)		(.07	)		(121	)		(.06	)
Adjusted net income available to common stockholders (non-GAAP), Adjusted diluted EPS (non-GAAP)	$	1,373		$	.75		$	1,840		$	.97		$	3,083		$	1.68		$	3,307		$	1.74

	Three Months Ended June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
Return on average common stockholders’ equity (GAAP)		17	%		19	%		20	%		15	%
Average common stockholders’ equity	$	27,556		$	35,611		$	27,429		$	40,063
Less: Average goodwill		(11,951	)		(11,952	)		(11,951	)		(11,952	)
Less: Average acquired intangible assets — net		(8,591	)		(9,151	)		(8,657	)		(9,227	)
Plus: Average deferred tax liabilities related to goodwill and acquired intangible assets — net		1,834			1,868			1,837			1,877
Average tangible common equity	$	8,848		$	16,376		$	8,658		$	20,761
Adjusted net income available to common stockholders ⁽¹⁾	$	1,373		$	1,840		$	3,083		$	3,307
Return on tangible common equity (non-GAAP)		62	%		45	%		71	%		32	%

⁽¹⁾

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

MEDIA:
Mayura Hooper
Charles Schwab
Phone: 415-667-1525

INVESTORS/ANALYSTS:
Jeff Edwards
Charles Schwab
Phone: 415-667-1524

Source: The Charles Schwab Corporation

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	Three Months Ended June 30,						%		Six Months Ended June 30,						%
Financial Highlights ⁽¹⁾	2023			2022			Change		2023			2022			Change

Net revenues (in millions)	$	4,656		$	5,093		(9	)%	$	9,772		$	9,765		—
Net income (in millions)
GAAP	$	1,294		$	1,793		(28	)%	$	2,897		$	3,195		(9	)%
Adjusted ⁽¹⁾	$	1,494		$	1,981		(25	)%	$	3,274		$	3,572		(8	)%
Diluted earnings per common share
GAAP	$	.64		$	.87		(26	)%	$	1.48		$	1.54		(4	)%
Adjusted ⁽¹⁾	$	.75		$	.97		(23	)%	$	1.68		$	1.74		(3	)%
Pre-tax profit margin
GAAP		36.3	%		44.6	%				38.9	%		42.1	%
Adjusted ⁽¹⁾		42.0	%		49.5	%				44.0	%		47.2	%
Return on average common stockholders’ equity (annualized)		17	%		19	%				20	%		15	%
Return on tangible common equity (annualized) ⁽¹⁾		62	%		45	%				71	%		32	%

Note: All per-share results are rounded to the nearest cent, based on weighted-average diluted common shares outstanding.
⁽¹⁾		Further details on non-GAAP financial measures and a reconciliation of such measures to GAAP reported results are included on pages 10-11 of this release.

⁽¹⁾		Further details on non-GAAP financial measures and a reconciliation of such measures to GAAP reported results are included on pages 10-11 of this release.