SCHW Charles Schwab Corporation 10-Q 2026-09-30 section summaries

Cover page

Charles Schwab Corporation (NYSE: SCHW) filed a Form 10-Q for the quarter ended September 30, 2026. As of October 30, 2026, 1,726,007,705 common shares were outstanding. The cover also lists depositary shares representing the 5.95% Series D and 4.450% Series J non-cumulative preferred stock.

Charles Schwab (SCHW) — Q3 and first nine months of 2026

Financial results

Revenue growth outpaced expense growth, lifting pre-tax margin to 52.7% in Q3 from 49.2%, and to 51.3% for 9M from 47.1%. Net interest revenue benefited from lending growth and improved net interest margin (3.04% in Q3 versus 2.88%; 2.97% for 9M versus 2.69%). Lower yields on floating-rate assets partly offset those gains; in Q3, lending demand outpaced deposit growth, increasing reliance on more expensive wholesale funding.

Asset-management fees rose with higher average client assets and managed-investing growth. Trading revenue benefited from higher activity and order flow: daily average trades increased, but revenue per trade declined 20% in Q3 to $1.69 from $2.11, reflecting activity and trading mix. Bank-deposit-account fees grew as net yields rose (1.98% versus 1.21% in Q3; 1.81% versus 1.19% for 9M), despite lower average balances. The April SEC transaction-fee increase raised industry fees in both revenue and expense, with no net-income impact.

Segments

Advisor Services grew faster than Investor Services in revenue and pre-tax income. Segment expense growth was 9% for Investor Services and 8% for Advisor Services in Q3.

Client and business metrics

Core net new assets were $190.4B in Q3, up 38%, and $450.2B for 9M, up 27%. Total client assets reached $13.333T at quarter-end, up 15% year over year; average client assets were $13.281T in Q3 (+19%) and $12.685T for 9M (+21%). Active brokerage accounts grew 6% to 40.260M, and assets receiving ongoing advisory services rose 17% to $6.793T. Client cash declined to 8.9% of client assets from 9.4%.

Expenses, cash flows and investment

Compensation and benefits were $1.756B in Q3 versus $1.653B, and $5.358B for 9M versus $4.861B, reflecting merit increases, headcount, incentive compensation and Forge. Full-time employees were 33,900 at quarter-end, up from 32,700. Management expects 2026 expenses excluding interest to increase approximately 10%–11%.

The increase includes a $633M multi-year software-license agreement recorded with a corresponding long-term-debt liability. Full-year capital expenditures are expected to be slightly above the previously stated range of 3%–5% of net revenue.

For 9M, operating cash flow was $13.3B, investing cash outflow was $5.3B and financing cash outflow was $9.1B. Investing outflows included $14.4B of bank-loan growth, partly offset by $10.8B of net inflows from AFS and HTM securities. Financing outflows included an $11.6B net decrease in bank deposits and $5.8B of common-stock repurchases and dividends, partly offset by $7.1B of net proceeds from other short-term borrowings and $1.7B from long-term debt. Cash and cash equivalents, including restricted amounts, declined $1.1B to $68.5B.

Balance sheet, funding and capital

Total assets were $520.7B at quarter-end. Brokerage-client receivables were $128.1B, up 22% from year-end 2025, and bank loans were $72.3B, up 25%, mainly from pledged-asset lines and first mortgages. Client bank deposits and brokerage payables rose $20.0B (6%) year over year but declined $4.2B (1%) from year-end, while loan demand outpaced those balances.

Long-term debt was $23.8B, up from $22.2B at year-end. Schwab issued $5.85B of senior unsecured notes during 2026, with stated rates of 4.603%–5.655% and maturities from 2029 to 2037. The Series L preferred issuance generated $1.48B net proceeds; all Series I preferred stock was redeemed.

CSC and its banking subsidiaries were considered well capitalized, and CS&Co met net-capital requirements. CSC’s long-term adjusted leverage-ratio objective is 6.75%–7.00%. Declines in capital ratios mainly reflected capital returns and asset growth. Schwab repurchased $3.9B of common stock in 9M, paid $1.678B of common dividends, and had $10.6B remaining under its $20B repurchase authorization. The quarterly dividend increased 19% to $0.32 per share.

Schwab complied with the full liquidity coverage ratio (LCR) requirement and the 100% net stable funding ratio minimum. Average daily LCR was 125% in Q3, down from 135% in Q2, as average eligible high-quality liquid assets rose to $54.384B from $51.927B while net cash outflows increased to $43.629B from $38.534B. Schwab manages liquidity using client cash, liquid investments, stress testing and contingency funding plans; wholesale borrowing may support broker-dealer margin lending and liquidity needs.

Interest-rate exposure, strategy and risks

The modeled 12-month net-interest-revenue sensitivity to instantaneous rate changes was less adverse in falling-rate scenarios than at year-end 2025, but showed less benefit from a large increase:

Changes reflected hedging, balance-sheet composition and projected client cash behavior; simulations assume non-negative investment yields. Rapid rate increases may prompt clients to move sweep cash to higher-yielding alternatives, while falling rates may compress margins if asset yields decline faster than funding costs. Schwab uses derivatives, pricing and balance-sheet management to manage exposure.

Schwab completed its Forge Global acquisition for $636M cash and other consideration in March and is integrating private-company investment capabilities. A phased Schwab Crypto rollout began in May, initially offering bitcoin and ether trading, with in-kind transfers also being introduced. The company cites a U.S. investable-wealth opportunity exceeding $90T. Key risks include market and interest-rate changes, cash allocation and deposit-rate competition, trading and lending demand, funding costs, regulation, litigation, technology execution, and attracting and retaining clients and talent.

Charles Schwab (SCHW) — Financial statements

Unaudited; amounts in $ billions unless otherwise noted.

Earnings and comprehensive income

Net income increased 23.2% in Q3 and 28.0% in 9M. Comprehensive income moved in the opposite direction because of adverse after-tax other comprehensive income, primarily the swing in AFS securities’ net unrealized change: $(0.722) billion versus $0.592 billion in Q3, and $(0.724) billion versus $2.270 billion in 9M. These unrealized changes affected OCI, not net income.

Balance sheet and funding

Asset growth included higher brokerage-client and broker/dealer receivables and bank loans, while cash and regulatory-segregated balances declined. Bank deposits fell, while other short-term borrowings and long-term debt increased.

Preferred stock carrying amount was $6.213 billion at September 30, 2026, compared with $6.763 billion at year-end; aggregate liquidation preference was $6.315 billion and $6.871 billion, respectively. During 9M 2026, Schwab received $1.480 billion of net proceeds from preferred stock issuance and paid $2.055 billion to redeem preferred stock.

Cash flow and investment

Investing cash flow in 9M 2026 included a $14.369 billion net increase in bank loans and $0.577 billion of acquisition cash paid, net of cash acquired. Financing cash flow included an $11.639 billion net decline in bank deposits, $3.877 billion of common-stock repurchases, $1.912 billion of dividends paid, and $5.813 billion of long-term debt issuance. Period-end cash including restricted amounts was $68.527 billion, compared with $69.661 billion at the start of 2026.

Shares and distributions

For 9M 2026, common dividends declared were $0.96 per share, totaling $1.678 billion. Common-stock repurchases were $3.911 billion in the statement of stockholders’ equity. Share-based compensation was $270 million, compared with $237 million in 9M 2025.

Schwab (SCHW) — Notes for the quarter and nine months ended September 30, 2026

Results and revenue mix

Revenue grew 16.9% in Q3 and 17.9% for 9M. Consolidated pretax income growth was about 25.0% in Q3 and 28.4% for 9M. Advisor Services’ 9M pretax income grew about 47.5%, faster than its Q3 growth of about 38.9%.

Net interest revenue growth reflected higher Q3 interest on brokerage-client receivables ($1.792B from $1.454B) and bank loans ($775M from $557M), partly offset by lower interest on segregated cash and investments ($289M from $494M). Lower interest expense supported 9M growth. Higher managed-investing-solutions fees also contributed to fee growth; order-flow revenue was $638M in Q3, up from $490M.

Schwab allocates revenue and expenses based on the clients served, using activity-based costing and funds-transfer pricing; pretax income is the basis for segment resource allocation and performance evaluation.

Lending, securities and credit exposure

Most investment-security unrealized losses had persisted at least 12 months; substantially all rated securities were investment grade. Schwab recorded no 9M credit-loss expense, earnings write-downs, or AFS/HTM credit-loss allowances. Effective duration, including derivatives, was 1.8 years for AFS and 3.3 years for AFS and HTM combined. AFS sale proceeds were $0 in Q3 2026 versus $1.206B in Q3 2025; 9M proceeds were $6.091B versus $5.411B, with realized losses of $26M versus $50M.

Loan growth was concentrated in pledged asset lines (PALs, $37.296B from $26.603B) and first mortgages ($34.235B from $30.484B). Past-due and nonaccrual loans rose to $149M from $92M; no accruing loans were 90 or more days past due. The allowance was $38M versus $36M. Management maintained projected loss rates despite economic uncertainties; PALs were fully collateralized. Of first mortgages, $30.662B had origination FICO scores of at least 740 and $29.461B had refreshed LTV of 70% or less. California represented 40% of first-mortgage and HELOC balances, down from 41%.

Funding, hedging and commitments

Brokerage sweep deposits declined to $219.357B from $232.410B, while brokered CDs rose to $3.797B from $2.000B. Long-term debt included $12.216B of contractual maturities thereafter and $5.268B in 2029. Short-term borrowings increased: other short-term borrowings were $14.213B versus $6.9B; FHLB borrowings were $2.0B versus $1.9B. Additional collateral-backed FHLB capacity fell to $30.3B from $74.2B. Repo liabilities were $11.704B versus $1.301B; gross securities borrowed were $24.097B versus $4.797B and securities loaned were $37.562B versus $25.131B.

Cash-flow hedge swap notional rose to $82.6B from $18.7B; fair-value hedge notional rose to $61.2B from $42.2B. Cash-flow hedges drove pre-tax AOCI to a $1.066B loss at September 30; Schwab expects to reclassify approximately $417M of pre-tax losses into interest revenue over the following 12 months. Fair-value hedge derivative results substantially offset hedged-item gains and losses.

Under the TD deposit-sweep agreement, which runs through July 1, 2034, IDA balances were $68.1B versus $76.3B, within the required $60B–$90B range. Schwab transferred $3.0B of BDA balances onto its balance sheet during 9M. Mortgage purchases through Rocket Mortgage were $2.4B in Q3 versus $1.7B and $7.0B for 9M versus $4.4B. Unused-line and mortgage-purchase commitments totaled $3.001B, up from $2.718B.

Capital, acquisition and other matters

CSC’s CET1 ratio was 24.5% versus 30.4% at year-end; CSB’s was 29.0% versus 35.9%, and CSB remained well capitalized. CS&Co net capital was $16.929B, exceeding required net capital by $13.225B (versus $13.188B and $10.629B, respectively). CSC repurchased 4.7 million shares for $500M in Q3 and 40.2 million shares for $3.9B in 9M; $10.6B remained under its $20B authorization. CSC issued Series L preferred shares for approximately $1.5B net proceeds at a 6.10% dividend rate and redeemed Series I for $2.1B, recognizing a $25M deemed dividend.

Schwab acquired Forge on March 2, 2026, for $636M of cash and other consideration. Provisional accounting included $320M of amortizable intangibles and $339M of nondeductible goodwill assigned to Investor Services. Forge contributed Q3 revenue of $15M and a net loss of $13M; since acquisition, revenue was $69M and net loss was $52M.

Maximum exposure to nonconsolidated VIEs rose to $2.887B from $2.426B, including $2.532B of LIHTC investments. In 9M, LIHTC amortization was $182M and related tax credits and other tax benefits were $243M. Management said disclosure controls were effective and identified no material Q3 change in internal control over financial reporting. The Corrente settlement received final approval in November 2025, but objectors appealed; Schwab said it could not estimate potential liability for other significant matters.

Risk factors

Schwab reported no material changes to the risk factors described in its 2025 Form 10-K, other than risks related to its spot cryptocurrency offering.

• Crypto custody and client assets: Schwab Crypto holdings are neither bank deposits nor securities and are not protected by the FDIC or SIPC. The service depends on a sub-custodian to safeguard assets and manage private keys. A custodian failure, cyberattack, fraud, insolvency, private-key compromise, or disruption to blockchain infrastructure could result in asset loss or theft, limit clients’ ability to access or sell their holdings, and lead to remediation costs, regulatory scrutiny, litigation, and reputational harm. Crypto transactions are generally irreversible, so recovery of stolen assets may be difficult or impossible.
• Sub-custodian credit and insolvency risk: The sub-custodian is contractually liable for losses, but may not have sufficient resources to meet its obligations after a significant loss. In some circumstances, CSPB could face liability greater than the amounts recoverable from the sub-custodian. The treatment of client crypto in insolvency proceedings remains largely untested in U.S. courts. Despite anticipated segregated, bankruptcy-remote custody, clients could face competing claims, delayed or restricted access, or distributions in a different form or at a value different from market value.
• Accounting uncertainty: Accounting standards, regulatory expectations, and industry practices for customer crypto activities continue to evolve. Significant judgment is required in determining recognition of related revenue, assets, and liabilities. Changes in guidance or the views of regulators, standard setters, or auditors could change reported results, increase volatility, affect key metrics, and affect regulatory capital calculations.

Other disclosures

On July 24, 2025, CSC replaced its prior share-repurchase authorization with an open-ended authorization to repurchase up to $20.0 billion of common stock. In Q3 2026, CSC repurchased 4.661 million shares at an average price of $107.25 per share, all under the publicly announced program; approximately $10.628 billion remained authorized as of September 30, 2026. CSC made no program repurchases in July or August. Separately, it acquired 59,000 shares through employee transactions, primarily shares withheld for taxes on vested restricted stock.

During Q3 2026, Managing Director and Head of Advisor Services Jonathan S. Beatty adopted a Rule 10b5-1 plan covering 6,894 shares, with a latest expiration date of March 1, 2027. No defaults on senior securities were reported.

Exhibits

Exhibit 4.20 is the Fourth Supplemental Indenture dated August 12, 2026, between The Charles Schwab Corporation and The Bank of New York Mellon Trust Company, N.A., incorporated by reference from the company’s Form 8-K filed that day. The exhibits also include the CEO and CFO certifications under Sections 302 and 906, and Inline XBRL materials covering the September 30, 2026 quarterly financial statements, notes, and Part II, Item 5.

The 10-Q was signed on November 6, 2026, by Michael Verdeschi, Managing Director and Chief Financial Officer. This exhibits section contains no financial results, operating developments, or risk disclosures.