10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2011

Commission File Number: 1-9700

THE CHARLES SCHWAB CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	94-3025021
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

211 Main Street, San Francisco, CA 94105

(Address of principal executive offices and zip code)

Registrant’s telephone number, including area code: (415) 667-7000

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	x	Accelerated filer	¨
Non-accelerated filer	¨  (Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

1,209,410,221 shares of $.01 par value Common Stock

Outstanding on July 22, 2011

THE CHARLES SCHWAB CORPORATION

Quarterly Report on Form 10-Q

For the Quarter Ended June 30, 2011

Index

		Page
Part I - Financial Information
Item 1.	Condensed Consolidated Financial Statements (Unaudited):
	Statements of Income		1
	Balance Sheets		2
	Statements of Cash Flows		3
	Notes		4 – 21
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		22 – 44
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		45 – 46
Item 4.	Controls and Procedures		46
Part II - Other Information
Item 1.	Legal Proceedings		47
Item 1A.	Risk Factors		47
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		47
Item 3.	Defaults Upon Senior Securities		47
Item 5.	Other Information		48
Item 6.	Exhibits		48
Signature			49

Part I – FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

THE CHARLES SCHWAB CORPORATION

Condensed Consolidated Statements of Income

(In millions, except per share amounts)

(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2011			2010			2011			2010
Net Revenues
Asset management and administration fees	$	502		$	437		$	1,004		$	857
Interest revenue		496			428			977			819
Interest expense		(45	)		(45	)		(90	)		(96	)
Net interest revenue		451			383			887			723
Trading revenue		205			233			446			442
Other		35			36			74			67
Provision for loan losses		(1	)		(1	)		(5	)		(15	)
Net impairment losses on securities (1)		(2	)		(8	)		(9	)		(16	)
Total net revenues		1,190			1,080			2,397			2,058
Expenses Excluding Interest
Compensation and benefits		430			393			867			795
Professional services		92			84			184			164
Occupancy and equipment		73			68			144			136
Advertising and market development		51			43			111			105
Communications		54			53			110			105
Depreciation and amortization		33			36			68			73
Class action litigation and regulatory reserve		7			—			7			196
Other		64			65			126			133
Total expenses excluding interest		804			742			1,617			1,707
Income before taxes on income		386			338			780			351
Taxes on income		(148	)		(133	)		(299	)		(140	)
Net Income	$	238		$	205		$	481		$	211
Weighted-Average Common Shares Outstanding — Diluted		1,210			1,195			1,208			1,191
Earnings Per Share — Basic	$	.20		$	.17		$	.40		$	.18
Earnings Per Share — Diluted	$	.20		$	.17		$	.40		$	.18

⁽¹⁾  Net impairment losses on securities include total other-than-temporary impairment losses of $11 and $13, net of $9 and $5 recognized in other comprehensive income, for the three months ended June 30, 2011 and 2010, respectively. Net impairment losses on securities include total other-than-temporary impairment losses of $11 and $41, net of $2 and $25 recognized in other comprehensive income, for the six months ended June 30, 2011 and 2010, respectively.

See Notes to Condensed Consolidated Financial Statements.

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THE CHARLES SCHWAB CORPORATION

Condensed Consolidated Balance Sheets

(In millions, except share and per share amounts)

(Unaudited)

	June 30, 2011			December 31, 2010
Assets
Cash and cash equivalents	$	6,466		$	4,931
Cash and investments segregated and on deposit for regulatory purposes (including resale agreements of $15,802 at June 30, 2011 and $12,697 at December 31, 2010)		23,842			22,749
Receivables from brokers, dealers, and clearing organizations		456			415
Receivables from brokerage clients — net		11,644			11,235
Other securities owned — at fair value		410			337
Securities available for sale		27,208			23,993
Securities held to maturity (fair value — $16,071 at June 30, 2011 and $17,848 at December 31, 2010)		15,799			17,762
Loans to banking clients — net		9,471			8,725
Loans held for sale		49			185
Equipment, office facilities, and property — net		639			624
Goodwill		631			631
Other assets		957			981
Total assets	$	97,572		$	92,568
Liabilities and Stockholders’ Equity
Deposits from banking clients	$	52,339		$	50,590
Payables to brokers, dealers, and clearing organizations		1,356			1,389
Payables to brokerage clients		33,917			30,861
Accrued expenses and other liabilities		1,222			1,496
Long-term debt		2,004			2,006
Total liabilities		90,838			86,342
Stockholders’ equity:
Preferred stock — 9,940,000 shares authorized; $.01 par value per share; none issued		—			—
Common stock — 3 billion shares authorized; $.01 par value per share; 1,428,604,522 shares issued		14			14
Additional paid-in capital		3,087			3,034
Retained earnings		7,745			7,409
Treasury stock, at cost — 219,684,046 shares at June 30, 2011 and 226,222,313 shares at December 31, 2010		(4,157	)		(4,247	)
Accumulated other comprehensive income		45			16
Total stockholders’ equity		6,734			6,226
Total liabilities and stockholders’ equity	$	97,572		$	92,568

See Notes to Condensed Consolidated Financial Statements.

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THE CHARLES SCHWAB CORPORATION

Condensed Consolidated Statements of Cash Flows

(In millions)

(Unaudited)

	Six Months Ended June 30,
	2011			2010
Cash Flows from Operating Activities
Net income	$	481		$	211
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		5			15
Net impairment losses on securities		9			16
Stock-based compensation		47			43
Excess tax benefits from stock-based compensation		(10	)		(3	)
Depreciation and amortization		68			73
Other		38			(14	)
Originations of loans held for sale		(809	)		(810	)
Proceeds from sales of loans held for sale		954			870
Net change in:
Cash and investments segregated and on deposit for regulatory purposes		(1,093	)		(500	)
Receivables from brokers, dealers, and clearing organizations		(47	)		57
Receivables from brokerage clients		(413	)		(1,248	)
Other securities owned		(80	)		517
Other assets		(1	)		116
Payables to brokers, dealers, and clearing organizations		(33	)		299
Payables to brokerage clients		3,056			441
Accrued expenses and other liabilities		(254	)		193
Net cash provided by operating activities		1,918			276
Cash Flows from Investing Activities
Purchases of securities available for sale		(7,167	)		(8,542	)
Proceeds from sales of securities available for sale		450			125
Principal payments on securities available for sale		3,548			7,028
Purchases of securities held to maturity		—			(4,506	)
Principal payments on securities held to maturity		1,926			598
Net increase in loans to banking clients		(753	)		(504	)
Purchase of equipment, office facilities, and property		(77	)		(54	)
Other investing activities		6			4
Net cash used for investing activities		(2,067	)		(5,851	)
Cash Flows from Financing Activities
Net change in deposits from banking clients		1,749			6,625
Repayment of long-term debt		(3	)		(203	)
Net proceeds from common stock offering		—			543
Excess tax benefits from stock-based compensation		10			3
Dividends paid		(145	)		(143	)
Proceeds from stock options exercised and other		73			19
Net cash provided by financing activities		1,684			6,844
Increase in Cash and Cash Equivalents		1,535			1,269
Cash and Cash Equivalents at Beginning of Period		4,931			8,241
Cash and Cash Equivalents at End of Period	$	6,466		$	9,510
Supplemental Cash Flow Information
Cash paid during the period for:
Interest	$	86		$	93
Income taxes	$	325		$	130

See Notes to Condensed Consolidated Financial Statements.

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THE CHARLES SCHWAB CORPORATION

Notes to Condensed Consolidated Financial Statements

(Tabular Amounts in Millions, Except Per Share Data, Ratios, or as Noted)

(Unaudited)

1. Introduction and Basis of Presentation

The Charles Schwab Corporation (CSC) is a savings and loan holding company engaged, through its subsidiaries, in securities brokerage, banking, and related financial services. Charles Schwab & Co., Inc. (Schwab) is a securities broker-dealer with 302 domestic branch offices in 45 states, as well as a branch in each of the Commonwealth of Puerto Rico and London, U.K. In addition, Schwab serves clients in Hong Kong through one of CSC’s subsidiaries. Other subsidiaries include Charles Schwab Bank (Schwab Bank), a federal savings bank, and Charles Schwab Investment Management, Inc. (CSIM), the investment advisor for Schwab’s proprietary mutual funds, which are referred to as the Schwab Funds^®, and Schwab’s exchange-traded funds, which are referred to as the Schwab ETFs™.

The accompanying unaudited condensed consolidated financial statements include CSC and its majority-owned subsidiaries (collectively referred to as the Company). Intercompany balances and transactions have been eliminated. These condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States, which require management to make certain estimates and assumptions that affect the reported amounts in the accompanying financial statements. Certain estimates relate to other-than-temporary impairment of securities available for sale and securities held to maturity, the valuation of goodwill, the allowance for loan losses, and legal reserves. Actual results may differ from those estimates. These condensed consolidated financial statements reflect all adjustments that are, in the opinion of management, necessary for a fair presentation of the results for the periods presented. These adjustments are of a normal recurring nature. Certain prior-year amounts have been reclassified to conform to the 2011 presentation. The Company’s results for any interim period are not necessarily indicative of results for a full year or any other interim period. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010.

2. New Accounting Standards

Adoption of New Accounting Standards

Goodwill Impairment Test: In December 2010, the Financial Accounting Standards Board (FASB) issued new guidance on when to perform the second step in the two-step goodwill impairment test, which is effective for all goodwill impairment tests performed after January 1, 2011. Specifically, if the carrying value of a reporting unit, as computed in step one of the goodwill impairment test, is zero or negative, step two must be performed when it is “more likely than not” that goodwill is impaired; under these circumstances, entities can no longer assume that no impairment exists because fair value, as computed in step two, would generally be greater than zero. The adoption of this new guidance did not have a material impact on the Company’s financial position, results of operations, earnings per share (EPS), or cash flows.

A Creditor’s Determination of Whether a Restructuring Is a Troubled Debt Restructuring: In April 2011, the FASB issued new guidance clarifying when a debt restructuring by a creditor constitutes a troubled debt restructuring, which is effective July 1, 2011 for all restructurings that occur on or after January 1, 2011. This guidance clarifies that a troubled debt restructuring only exists when a creditor makes a concession in interest rates or payment terms to a debtor experiencing financial difficulties. It provides additional guidance on determining what constitutes a concession, and on the use of probability in determining if a debtor could be experiencing financial difficulty prior to defaulting on payments. The adoption of this new guidance did not have a material impact on the Company’s financial position, results of operations, EPS, or cash flows.

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THE CHARLES SCHWAB CORPORATION

Notes to Condensed Consolidated Financial Statements

(Tabular Amounts in Millions, Except Per Share Data, Ratios, or as Noted)

(Unaudited)

3. Securities Available for Sale and Securities Held to Maturity

The amortized cost, gross unrealized gains and losses, and fair value of securities available for sale and securities held to maturity are as follows:

June 30, 2011	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Securities available for sale:
U.S. agency residential mortgage-backed securities	$	15,639	$	236	$	11	$	15,864
Non-agency residential mortgage-backed securities		1,374		1		189		1,186
U.S. agency notes		2,783		14		—		2,797
Corporate debt securities		2,761		10		1		2,770
Asset-backed securities		2,680		8		—		2,688
Certificates of deposit		1,898		5		—		1,903
Total securities available for sale	$	27,135	$	274	$	201	$	27,208
Securities held to maturity:
U.S. agency residential mortgage-backed securities	$	15,405	$	308	$	43	$	15,670
Asset-backed securities		228		4		—		232
Corporate debt securities		166		3		—		169
Total securities held to maturity	$	15,799	$	315	$	43	$	16,071
December 31, 2010	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Securities available for sale:
U.S. agency residential mortgage-backed securities	$	12,879	$	222	$	3	$	13,098
Non-agency residential mortgage-backed securities		1,701		3		234		1,470
U.S. agency notes		2,757		23		—		2,780
Corporate debt securities		2,261		8		1		2,268
Asset-backed securities		2,495		9		2		2,502
Certificates of deposit		1,874		1		—		1,875
Total securities available for sale	$	23,967	$	266	$	240	$	23,993
Securities held to maturity:
U.S. agency residential mortgage-backed securities	$	16,722	$	209	$	137	$	16,794
Asset-backed securities		702		9		—		711
Corporate debt securities		338		5		—		343
Total securities held to maturity	$	17,762	$	223	$	137	$	17,848

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THE CHARLES SCHWAB CORPORATION

Notes to Condensed Consolidated Financial Statements

(Tabular Amounts in Millions, Except Per Share Data, Ratios, or as Noted)

(Unaudited)

A summary of securities with unrealized losses, aggregated by category and period of continuous unrealized loss, is as follows:

	Less than 12 months				12 months or longer				Total
June 30, 2011	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Securities available for sale:
U.S. agency residential mortgage-backed securities	$	1,558	$	11	$	—	$	—	$	1,558	$	11
Non-agency residential mortgage-backed securities		129		4		923		185		1,052		189
Corporate debt securities		517		1		—		—		517		1
Total	$	2,204	$	16	$	923	$	185	$	3,127	$	201
Securities held to maturity:
U.S. agency residential mortgage-backed securities	$	2,780	$	43	$	—	$	—	$	2,780	$	43
Total	$	2,780	$	43	$	—	$	—	$	2,780	$	43
Total securities with unrealized losses (1)	$	4,984	$	59	$	923	$	185	$	5,907	$	244

⁽¹⁾  The number of investment positions with unrealized losses totaled 165 for securities available for sale and 17 for securities held to maturity.

	Less than 12 months				12 months or longer				Total
December 31, 2010	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Securities available for sale:
U.S. agency residential mortgage-backed securities	$	707	$	3	$	—	$	—	$	707	$	3
Non-agency residential mortgage-backed securities		—		—		1,207		234		1,207		234
Corporate debt securities		549		1		—		—		549		1
Asset-backed securities		873		2		—		—		873		2
Total	$	2,129	$	6	$	1,207	$	234	$	3,336	$	240
Securities held to maturity:
U.S. agency residential mortgage-backed securities	$	6,880	$	137	$	—	$	—	$	6,880	$	137
Total	$	6,880	$	137	$	—	$	—	$	6,880	$	137
Total securities with unrealized losses (1)	$	9,009	$	143	$	1,207	$	234	$	10,216	$	377

⁽¹⁾ The number of investment positions with unrealized losses totaled 178 for securities available for sale and 37 for securities held to maturity.

Unrealized losses in securities available for sale of $201 million as of June 30, 2011, were concentrated in non-agency residential mortgage-backed securities. Included in non-agency residential mortgage-backed securities are securities collateralized by loans that are considered to be “Prime” (defined as loans to borrowers with a Fair Isaac & Company credit score of 620 or higher at origination), and “Alt-A” (defined as Prime loans with reduced documentation at origination). At June 30, 2011, the amortized cost and fair value of Alt-A residential mortgage-backed securities were $438 million and $335 million, respectively.

Certain Alt-A and Prime residential mortgage-backed securities experienced continued credit deterioration in the first half of 2011, including increased payment delinquency rates and losses on foreclosures of underlying mortgages. Additionally, the securities have experienced a decrease in prepayment rates. Based on the Company’s cash flow projections, management determined that it does not expect to recover all of the amortized cost of these securities and therefore determined that these securities were other-than-temporarily impaired (OTTI). The Company employs a buy and hold strategy relative to its mortgage-related securities, and does not intend to sell these securities and it will not be required to sell these securities before anticipated recovery of the unrealized losses on these securities. Further, the Company has an adequate liquidity position at June 30, 2011, with cash and cash equivalents totaling $6.5 billion, a loan-to-deposit ratio of 18%, adequate

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THE CHARLES SCHWAB CORPORATION

Notes to Condensed Consolidated Financial Statements

(Tabular Amounts in Millions, Except Per Share Data, Ratios, or as Noted)

(Unaudited)

access to short-term borrowing facilities and regulatory capital ratios in excess of “well capitalized” levels. Because the Company does not intend to sell these securities and it is not “more likely than not” that the Company will be required to sell these securities, the Company recognized an impairment charge equal to the securities’ expected credit losses of $2 million and $9 million during the second quarter and first half of 2011, respectively. The expected credit losses were measured as the difference between the present value of expected cash flows and the amortized cost of the securities. Further deterioration in the performance of the underlying loans in the Company’s residential mortgage-backed securities portfolio could result in the recognition of additional impairment charges.

Actual credit losses on the Company’s residential mortgage-backed securities were not material during the second quarters or first halves of 2011 and 2010.

The following table is a rollforward of the amount of credit losses recognized in earnings for OTTI securities held by the Company during the period for which a portion of the impairment was recognized in other comprehensive income:

	Three Months Ended June 30,				Six Months Ended June 30,
	2011		2010		2011		2010
Balance at beginning of period	$	103	$	68	$	96	$	60
Credit losses recognized into current period earnings on debt securities for which an other-than-temporary impairment was not previously recognized		2		1		2		4
Credit losses recognized into current period earnings on debt securities for which an other-than-temporary impairment was previously recognized		—		7		7		12
Balance at end of period	$	105	$	76	$	105	$	76

The maturities of securities available for sale and securities held to maturity at June 30, 2011, are as follows:

	Within 1 year		After 1 year through 5 years		After 5 years through 10 years		After 10 years		Total
Securities available for sale:
U.S. agency residential mortgage-backed securities (1)	$	—	$	9	$	1,521	$	14,334	$	15,864
Non-agency residential mortgage-backed securities (1)		—		—		16		1,170		1,186
U.S. agency notes		—		2,797		—		—		2,797
Corporate debt securities		567		2,203		—		—		2,770
Asset-backed securities		—		849		546		1,293		2,688
Certificates of deposit		802		1,101		—		—		1,903
Total fair value	$	1,369	$	6,959	$	2,083	$	16,797	$	27,208
Total amortized cost	$	1,365	$	6,930	$	2,064	$	16,776	$	27,135
Securities held to maturity:
U.S. agency residential mortgage-backed securities (1)	$	—	$	—	$	988	$	14,682	$	15,670
Asset-backed securities		—		232		—		—		232
Corporate debt securities		51		118		—		—		169
Total fair value	$	51	$	350	$	988	$	14,682	$	16,071
Total amortized cost	$	50	$	345	$	1,023	$	14,381	$	15,799

⁽¹⁾  Residential mortgage-backed securities have been allocated over maturity groupings based on final contractual maturities. Actual maturities will differ from final contractual maturities because borrowers on a certain portion of loans underlying these securities have the right to prepay their obligations.

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THE CHARLES SCHWAB CORPORATION

Notes to Condensed Consolidated Financial Statements

(Tabular Amounts in Millions, Except Per Share Data, Ratios, or as Noted)

(Unaudited)

Proceeds and gross realized gains (losses) from sales of securities available for sale are as follows:

	Three Months Ended June 30,				Six Months Ended   June 30,
	2011		2010		2011		2010
Proceeds	$	250	$	125	$	450	$	125
Gross realized gains	$	1	$	—	$	1	$	—
Gross realized losses	$	—	$	—	$	—	$	—

4. Loans to Banking Clients and Related Allowance for Loan Losses

The composition of loans to banking clients by loan segment is as follows:

	June 30, 2011			December 31, 2010
Residential real estate mortgages	$	5,312		$	4,695
Home equity lines of credit		3,513			3,500
Personal loans secured by securities		675			562
Other		21			21
Total loans to banking clients (1)		9,521			8,778
Allowance for loan losses		(50	)		(53	)
Total loans to banking clients – net	$	9,471		$	8,725

⁽¹⁾  All loans are collectively evaluated for impairment by loan segment.

Changes in the allowance for loan losses were as follows:

	June 30, 2011													June 30, 2010
Three Months Ended	Residential real estate mortgages			Home equity lines of credit			Personal loans secured by securities		Other		Total
Balance at beginning of period	$	37		$	16		$	—	$	—	$	53		$	53
Charge-offs		(3	)		(2	)		—		—		(5	)		(4	)
Recoveries		—			1			—		—		1			1
Provision for loan losses		—			1			—		—		1			1
Balance at end of period	$	34		$	16		$	—	$	—	$	50		$	51
	June 30, 2011													June 30, 2010
Six Months Ended	Residential real estate mortgages			Home equity lines of credit			Personal loans secured by securities		Other		Total
Balance at beginning of period	$	38		$	15		$	—	$	—	$	53		$	45
Charge-offs		(6	)		(3	)		—		—		(9	)		(10	)
Recoveries		—			1			—		—		1			1
Provision for loan losses		2			3			—		—		5			15
Balance at end of period	$	34		$	16		$	—	$	—	$	50		$	51

Included in the loan portfolio are nonaccrual loans totaling $46 million and $51 million at June 30, 2011 and December 31, 2010, respectively. There were no loans accruing interest that were contractually 90 days or more past due at June 30, 2011 or December 31, 2010. The amount of interest revenue that would have been earned on nonaccrual loans, versus actual interest revenue recognized on these loans, was not material to the Company’s results of operations in the first halves of

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THE CHARLES SCHWAB CORPORATION

Notes to Condensed Consolidated Financial Statements

(Tabular Amounts in Millions, Except Per Share Data, Ratios, or as Noted)

(Unaudited)

2011 or 2010. Nonperforming assets, which include nonaccrual loans and other real estate owned, totaled $53 million and $54 million at June 30, 2011 and December 31, 2010, respectively. The Company considers loan modifications in which it makes an economic concession to a borrower experiencing financial difficulty to be a troubled debt restructuring. Troubled debt restructurings were not material at June 30, 2011 or December 31, 2010.

The delinquency aging analysis by loan class is as follows:

June 30, 2011	Current		30-59 days past due		60-89 days past due		Greater than 90 days		Total past due		Total loans
Residential real estate mortgages:
Originated first mortgages	$	5,155	$	14	$	4	$	30	$	48	$	5,203
Purchased first mortgages		102		2		—		5		7		109
Home equity lines of credit		3,501		5		1		6		12		3,513
Personal loans secured by securities		670		—		—		5		5		675
Other		21		—		—		—		—		21
Total loans to banking clients	$	9,449	$	21	$	5	$	46	$	72	$	9,521
December 31, 2010
Residential real estate mortgages:
Originated first mortgages	$	4,527	$	18	$	5	$	38	$	61	$	4,588
Purchased first mortgages		100		2		1		4		7		107
Home equity lines of credit		3,489		5		2		4		11		3,500
Personal loans secured by securities		557		—		—		5		5		562
Other		21		—		—		—		—		21
Total loans to banking clients	$	8,694	$	25	$	8	$	51	$	84	$	8,778

- 9 -

THE CHARLES SCHWAB CORPORATION

Notes to Condensed Consolidated Financial Statements

(Tabular Amounts in Millions, Except Per Share Data, Ratios, or as Noted)

(Unaudited)

In addition to monitoring the delinquency characteristics as presented in the aging analysis above, the Company monitors the credit quality of residential real estate mortgages and home equity lines of credit (HELOCs) by stratifying the portfolios by the year of origination, borrower Fair Issac & Company (FICO) scores at origination, updated FICO scores, and loan-to-value ratios at origination (Origination LTV), as presented in the following tables. Borrowers’ FICO scores are provided by an independent third party credit reporting service and were last updated in June 2011. The Company monitors the credit quality of personal loans secured by securities by reviewing the fair value of collateral to ensure adequate collateralization of at least 100% of the principal amount of the loans. All of these loans were fully collateralized by securities with fair values in excess of borrowing amounts at June 30, 2011 and December 31, 2010.

	Residential real estate mortgages						Home equity lines of credit
June 30, 2011	Originated first mortgages		Purchased first mortgages		Total
Year of origination
Pre-2007	$	322	$	55	$	377	$	1,097
2007		338		9		347		237
2008		606		7		613		1,300
2009		704		11		715		443
2010		2,094		20		2,114		321
2011		1,139		7		1,146		115
Total	$	5,203	$	109	$	5,312	$	3,513
Origination FICO
< 620	$	10	$	2	$	12	$	—
620 - 679		118		14		132		24
680 - 739		1,018		33		1,051		675
³ 740		4,057		60		4,117		2,814
Total	$	5,203	$	109	$	5,312	$	3,513
Updated FICO
< 620	$	66	$	3	$	69	$	45
620 - 679		153		17		170		94
680 - 739		787		28		815		480
³ 740		4,197		61		4,258		2,894
Total	$	5,203	$	109	$	5,312	$	3,513
Origination LTV (1)
£ 70%	$	3,335	$	57	$	3,392	$	2,376
71% - 89%		1,839		50		1,889		1,137
³ 90%		29		2		31		—
Total	$	5,203	$	109	$	5,312	$	3,513

⁽¹⁾  The computation of the Origination LTV ratio for a HELOC includes any first lien mortgage outstanding on the same property at the time of origination. At June 30, 2011, $750 million of $3.5 billion in HELOCs were in a first lien position.

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THE CHARLES SCHWAB CORPORATION

Notes to Condensed Consolidated Financial Statements

(Tabular Amounts in Millions, Except Per Share Data, Ratios, or as Noted)

(Unaudited)

	Residential real estate mortgages						Home equity lines of credit
December 31, 2010	Originated first mortgages		Purchased first mortgages		Total
Year of origination
Pre-2007	$	352	$	58	$	410	$	1,132
2007		384		9		393		245
2008		728		8		736		1,345
2009		884		12		896		466
2010		2,240		20		2,260		312
Total	$	4,588	$	107	$	4,695	$	3,500
Origination FICO
< 620	$	9	$	2	$	11	$	—
620 - 679		115		15		130		26
680 - 739		907		33		940		677
³ 740		3,557		57		3,614		2,797
Total	$	4,588	$	107	$	4,695	$	3,500
Updated FICO
< 620	$	63	$	9	$	72	$	49
620 - 679		147		8		155		99
680 - 739		730		29		759		499
³ 740		3,648		61		3,709		2,853
Total	$	4,588	$	107	$	4,695	$	3,500
Origination LTV (1)
£ 70%	$	2,911	$	55	$	2,966	$	2,375
71% - 89%		1,659		51		1,710		1,092
³ 90%		18		1		19		33
Total	$	4,588	$	107	$	4,695	$	3,500

⁽¹⁾  The computation of the Origination LTV ratio for a HELOC includes any first lien mortgage outstanding on the same property at the time of origination. At December 31, 2010, $742 million of $3.5 billion in HELOCs were in a first lien position.

5. Commitments and Contingent Liabilities

The Company has clients that sell (i.e., write) listed option contracts that are cleared by various clearing houses. The clearing houses establish margin requirements on these transactions. The Company partially satisfies the margin requirements by arranging unsecured standby letter of credit agreements (LOCs), in favor of the clearing houses, which are issued by multiple banks. At June 30, 2011, the aggregate face amount of these LOCs totaled $445 million. In connection with its securities lending activities, Schwab is required to provide collateral to certain brokerage clients. Schwab satisfies the collateral requirements by arranging LOCs in favor of these brokerage clients, which are issued by multiple banks. At June 30, 2011, the aggregate face amount of these LOCs totaled $61 million. There were no funds drawn under any of these LOCs at June 30, 2011.

The Company also provides guarantees to securities clearing houses and exchanges under standard membership agreements, which require members to guarantee the performance of other members. Under the agreements, if another member becomes unable to satisfy its obligations to the clearing houses and exchanges, other members would be required to meet shortfalls. The Company’s liability under these arrangements is not quantifiable and may exceed the cash and securities it has posted as collateral. However, the potential requirement for the Company to make payments under these arrangements is remote. Accordingly, no liability has been recognized for these guarantees.

On March 21, 2011, the Company announced a definitive agreement to acquire optionsXpress Holdings, Inc. (optionsXpress), an online brokerage firm primarily focused on equity option securities and futures. Under the terms of the agreement, optionsXpress^® stockholders will receive 1.02 shares of the Company’s common stock for each share of

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THE CHARLES SCHWAB CORPORATION

Notes to Condensed Consolidated Financial Statements

(Tabular Amounts in Millions, Except Per Share Data, Ratios, or as Noted)

(Unaudited)

optionsXpress stock. The value of the transaction is dependent on the value of the Company’s common stock at closing and therefore will fluctuate with the market price of the Company’s common stock. The transaction is expected to close in the third quarter of 2011, subject to optionsXpress stockholder approval, regulatory approvals, and customary closing conditions.

Legal contingencies: The Company is subject to claims and lawsuits in the ordinary course of business, including arbitrations, class actions and other litigation, some of which include claims for substantial or unspecified damages. The Company is also the subject of inquiries, investigations, and proceedings by regulatory and other governmental agencies. In addition, the Company is responding to certain litigation claims brought against former subsidiaries pursuant to indemnities it has provided to purchasers of those entities.

The Company believes it has strong defenses in all significant matters currently pending and is contesting liability and any damages claimed. Nevertheless, some of these matters may result in adverse judgments or awards, including penalties, injunctions or other relief, and the Company may also determine to settle a matter because of the uncertainty and risks of litigation. Described below are certain matters in which there is a reasonable possibility that a material loss will be incurred or where the matter may otherwise be of significant interest to stockholders. With respect to all other pending matters, based on current information and consultation with counsel, it does not appear that the outcome of any such matter will be material to the financial condition, operating results or cash flows of the Company.

Predicting the outcome of a litigation or regulatory matter is inherently difficult, however, requiring significant judgment and evaluation of various factors, including the procedural status of the matter and any recent developments; prior experience and the experience of others in similar cases; available defenses, including potential opportunities to dispose of a case on the merits or procedural grounds before trial (e.g., motions to dismiss or for summary judgment); the progress of fact discovery; the opinions of counsel and experts regarding potential damages; potential opportunities for settlement and the status of any settlement discussions; and potential insurance coverage and indemnification. Often when legal proceedings or regulatory investigations are at an early stage, as in the case of the Auction Rate Securities Regulatory Inquiries and Total Bond Market Fund Litigation matters described below, it is not possible to reasonably estimate potential liability, if any, or a range of potential liability until the matter is closer to resolution. Numerous issues have to be developed, such as discovery of important factual matters and determination of threshold legal issues, which may include novel or unsettled questions of law. Reserves are established or adjusted or further disclosure and estimates of potential loss are provided as the matter progresses and more information becomes available.

Auction Rate Securities Regulatory Inquiries: Schwab has been responding to industry wide inquiries from federal and state regulators regarding sales of auction rate securities to clients who were unable to sell their holdings when the normal auction process for those securities froze unexpectedly in February 2008. On August 17, 2009, a civil complaint was filed against Schwab in New York state court by the Attorney General of the State of New York alleging material misrepresentations and omissions by Schwab regarding the risks of auction rate securities, and seeking restitution, disgorgement, penalties and other relief, including repurchase of securities held in client accounts. As reflected in a statement issued August 17, 2009, Schwab has responded that the allegations are without merit and that Schwab intends to contest any charges. On March 15, 2010, Schwab filed a motion to dismiss the case and various claims in the civil complaint, which remains pending.

Total Bond Market Fund Litigation: On August 28, 2008, a class action lawsuit was filed in the U.S. District Court for the Northern District of California on behalf of investors in the Schwab Total Bond Market Fund™. The lawsuit, which alleges violations of state law and federal securities law in connection with the fund’s investment policy, names Schwab Investments (registrant and issuer of the fund’s shares) and CSIM as defendants. Allegations include that the fund improperly deviated from its stated investment objectives by investing in collateralized mortgage obligations (CMOs) and investing more than 25% of fund assets in CMOs and mortgage-backed securities without obtaining a shareholder vote. Plaintiffs seek unspecified compensatory and rescission damages, unspecified equitable and injunctive relief, and costs and attorneys’ fees. On February 19, 2009, the court denied defendants’ motion to dismiss plaintiffs’ federal securities law claim, and dismissed certain state law claims with leave to amend. On April 27, 2009, the court issued a stay of proceedings while defendants appealed the court’s February 19, 2009 decision refusing to dismiss plaintiffs’ federal securities law claim. On August 12, 2010, the Ninth Circuit Court of Appeals ruled in favor of the defendants and dismissed plaintiffs’ federal securities law claim.

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THE CHARLES SCHWAB CORPORATION

Notes to Condensed Consolidated Financial Statements

(Tabular Amounts in Millions, Except Per Share Data, Ratios, or as Noted)

(Unaudited)

On September 28, 2010, plaintiffs filed a second amended class action complaint which named Schwab Investments and current and former trustees and officers of the trust as defendants and dropped the federal securities law claim and certain of the state law claims. Defendants moved to dismiss the second amended complaint on November 10, 2010. On March 2, 2011, the court granted defendants’ motion to dismiss with leave to amend certain claims. On March 29, 2011, plaintiffs filed a third amended complaint; defendants’ motion to dismiss the third amended complaint was filed April 25, 2011, and remains pending.

optionsXpress Merger Litigation: Between March 21, 2011 and April 6, 2011, ten purported class action lawsuits were filed by optionsXpress stockholders challenging Schwab’s proposed acquisition of optionsXpress. Named defendants include the Company, optionsXpress and members of its board of directors. Seven lawsuits were filed in the Circuit Court of Cook County, Illinois and consolidated in a single amended complaint on May 9, 2011 (Consolidated Illinois Action); and three lawsuits were filed in the Court of Chancery of the State of Delaware and consolidated in a single amended complaint on April 25, 2011 (Consolidated Delaware Action). On April 28, 2011, the Delaware court stayed the Consolidated Delaware Action in favor of the Consolidated Illinois Action. The complaints generally allege that optionsXpress directors breached fiduciary duties owed to optionsXpress’ stockholders by allegedly approving the merger agreement at an unfair price and terms and through an unfair process, and that the Company aided and abetted the alleged fiduciary breaches. The lawsuits seek, among other relief, an injunction against the merger, rescission in the event the merger is completed, an accounting for alleged damages, and an award of costs and attorneys’ fees.

On May 20, 2011, defendants moved to dismiss the Consolidated Illinois Action. On June 16, 2011, the Illinois court dismissed all claims against the Company with prejudice. On July 29, 2011, the parties entered into a settlement agreement under which defendants would provide certain supplemental disclosures in exchange for full releases of all claims related to the merger, including all claims in the Consolidated Illinois Action and the Consolidated Delaware Action. Defendants also agreed not to oppose any fee application by plaintiffs’ counsel that does not exceed $650,000. The settlement is subject to court approval and is conditioned on consummation of the merger. Defendants deny any wrongdoing in connection with the merger and believe the claims lack merit. In the event the settlement is not finalized, the remaining defendants will continue to defend the claims vigorously.

YieldPlus Fund Litigation: As disclosed previously, the Company recorded total charges in 2010 of $199 million, net of insurance proceeds of $39 million under applicable policies, for settlements to resolve consolidated class action litigation in the U.S. District Court for the Northern District of California relating to the Schwab YieldPlus Fund^®. On April 19, 2011, the court granted final approval of the settlement agreements and entered final judgment in the litigation.

6. Fair Values of Assets and Liabilities

Fair value is defined as the price that would be received to sell an asset or the price paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurement accounting guidance describes the fair value hierarchy for disclosing assets and liabilities measured at fair value based on the inputs used to value them. The fair value hierarchy maximizes the use of observable inputs and minimizes the use of unobservable inputs. Observable inputs are based on market pricing data obtained from sources independent of the Company. A quoted price in an active market provides the most reliable evidence of fair value and is generally used to measure fair value whenever available. Unobservable inputs reflect management’s judgment about the assumptions market participants would use in pricing the asset or liability. Where inputs used to measure fair value of an asset or liability are from different levels of the hierarchy, the asset or liability is categorized based on the lowest level input that is significant to the fair value measurement in its entirety. Assessing the significance of a particular input requires judgment. The fair value hierarchy includes three levels based on the objectivity of the inputs as follows:

• Level 1 inputs are quoted prices in active markets as of the measurement date for identical assets or liabilities that the Company has the ability to access. This category includes active exchange-traded money market funds, mutual funds, and equity securities. The Company did not transfer any assets or liabilities between Level 1 and Level 2 during the first half of 2011, or the year ended December 31, 2010.

- 13 -

THE CHARLES SCHWAB CORPORATION

Notes to Condensed Consolidated Financial Statements

(Tabular Amounts in Millions, Except Per Share Data, Ratios, or as Noted)

(Unaudited)

• Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets and liabilities in active markets, and inputs other than quoted prices that are observable for the asset or liability, such as interest rates, benchmark yields, issuer spreads, new issue data, and collateral performance. This category includes residential mortgage-backed securities, asset-backed securities, corporate debt securities, certificates of deposit, U.S. agency and municipal debt securities, and U.S. Treasury securities.

• Level 3 inputs are unobservable inputs for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability. The Company did not have any financial assets or liabilities utilizing Level 3 inputs as of June 30, 2011, or December 31, 2010.

Assets and Liabilities Recorded at Fair Value

The Company’s assets recorded at fair value include certain cash equivalents, investments segregated and on deposit for regulatory purposes, other securities owned, and securities available for sale. The Company’s liabilities recorded at fair value include securities sold, not yet purchased. When available, the Company uses quoted prices in active markets to measure the fair value of assets and liabilities. When quoted prices do not exist, the Company uses prices obtained from independent third-party pricing services to measure the fair value of investment assets. The Company validates prices received from the pricing services using various methods, including comparison to prices received from additional pricing services, comparison to quoted market prices, where available, comparison to internal valuation models, and review of other relevant market data. The Company does not adjust the prices received from independent third-party pricing services unless such prices are inconsistent with the definition of fair value and result in a material difference in the recorded amounts. At June 30, 2011, and December 31, 2010, the Company did not adjust prices received from independent third-party pricing services.

- 14 -

THE CHARLES SCHWAB CORPORATION

Notes to Condensed Consolidated Financial Statements

(Tabular Amounts in Millions, Except Per Share Data, Ratios, or as Noted)

(Unaudited)

The following table presents the fair value hierarchy as of June 30, 2011, for assets and liabilities measured at fair value:

June 30, 2011	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance at Fair Value
Assets
Cash equivalents:
Money market funds	$	1,927	$	—	$	—	$	1,927
Total cash equivalents		1,927		—		—		1,927
Investments segregated and on deposit for regulatory purposes:
U.S. Government securities		—		1,318		—		1,318
Certificates of deposit		—		2,125		—		2,125
Corporate debt securities		—		1,386		—		1,386
Total investments segregated and on deposit for regulatory purposes		—		4,829		—		4,829
Other securities owned:
Schwab Funds® money market funds		230		—		—		230
Equity and bond mutual funds		91		—		—		91
State and municipal debt obligations		—		55		—		55
Equity, U.S. Government and corporate debt, and other securities		—		34		—		34
Total other securities owned		321		89		—		410
Securities available for sale:
U.S. agency residential mortgage-backed securities		—		15,864		—		15,864
Non-agency residential mortgage-backed securities		—		1,186		—		1,186
U.S. agency notes		—		2,797		—		2,797
Corporate debt securities		—		2,770		—		2,770
Asset-backed securities		—		2,688		—		2,688
Certificates of deposit		—		1,903		—		1,903
Total securities available for sale		—		27,208		—		27,208
Total	$	2,248	$	32,126	$	—	$	34,374
Liabilities
Securities sold, not yet purchased (1)	$	83	$	4	$	—	$	87

⁽¹⁾  Securities sold, not yet purchased are included in accrued expenses and other liabilities.

- 15 -

THE CHARLES SCHWAB CORPORATION

Notes to Condensed Consolidated Financial Statements

(Tabular Amounts in Millions, Except Per Share Data, Ratios, or as Noted)

(Unaudited)

The following table presents the fair value hierarchy as of December 31, 2010, for assets measured at fair value. Liabilities recorded at fair value as of December 31, 2010, are not material, and therefore are not included in the following table:

December 31, 2010	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance at Fair Value
Assets
Cash equivalents:
Money market funds	$	988	$	—	$	—	$	988
Commercial paper		—		242		—		242
Total cash equivalents		988		242		—		1,230
Investments segregated and on deposit for regulatory purposes:
U.S. Government securities		—		3,190		—		3,190
Certificates of deposit		—		2,201		—		2,201
Corporate debt securities		—		1,704		—		1,704
Total investments segregated and on deposit for regulatory purposes		—		7,095		—		7,095
Other securities owned:
Schwab Funds® money market funds		172		—		—		172
Equity and bond mutual funds		99		—		—		99
State and municipal debt obligations		—		47		—		47
Equity, U.S. Government and corporate debt, and other securities		1		18		—		19
Total other securities owned		272		65		—		337
Securities available for sale:
U.S. agency residential mortgage-backed securities		—		13,098		—		13,098
Non-agency residential mortgage-backed securities		—		1,470		—		1,470
U.S. agency notes		—		2,780		—		2,780
Corporate debt securities		—		2,268		—		2,268
Asset-backed securities		—		2,502		—		2,502
Certificates of deposit		—		1,875		—		1,875
Total securities available for sale		—		23,993		—		23,993
Total	$	1,260	$	31,395	$	—	$	32,655

Fair Value of Assets and Liabilities Not Recorded at Fair Value

Descriptions of the valuation methodologies and assumptions used to estimate the fair value of assets and liabilities not recorded at fair value are described below. There were no significant changes in these methodologies or assumptions during the first half of 2011.

Other cash equivalents, receivables, payables, and accrued expenses and other liabilities include cash and highly liquid investments, receivables and payables from/ to brokers, dealers and clearing organizations, receivables and payables from/ to brokerage clients, and drafts, accounts, taxes, interest, and compensation payable. Assets and liabilities in these categories are short-term in nature and accordingly are recorded at amounts that approximate fair value.

Cash and investments segregated and on deposit for regulatory purposes include securities purchased under resale agreements. Securities purchased under resale agreements are recorded at par value plus accrued interest. Securities purchased under resale agreements are short-term in nature and are backed by collateral that both exceeds the carrying value of the resale agreement and is highly liquid in nature. Accordingly, the carrying value approximates fair value.

Securities held to maturity include U.S. agency residential mortgage-backed securities, asset-backed securities collateralized by credit card, student, and auto loans, and corporate debt securities. Securities held to maturity are recorded at amortized cost. The fair value of these securities is obtained using an independent third-party pricing service, as discussed above.

- 16 -

THE CHARLES SCHWAB CORPORATION

Notes to Condensed Consolidated Financial Statements

(Tabular Amounts in Millions, Except Per Share Data, Ratios, or as Noted)

(Unaudited)

Loans to banking clients primarily include adjustable rate residential first-mortgage and HELOC loans. Loans to banking clients are recorded at carrying value net of an allowance for loan losses. The fair value of the Company’s loans to banking clients is estimated based on market prices for mortgage-backed securities collateralized by similar types of loans.

Loans held for sale include fixed rate residential first-mortgage loans intended for sale. Loans held for sale are recorded at the lower of cost or fair value. The fair value of the Company’s loans held for sale is estimated using quoted market prices for securities backed by similar types of loans.

Other assets include cost method investments whose carrying values approximate their fair values. Other assets also include Federal Home Loan Bank stock recorded at par, which approximates fair value.

Deposits from banking clients: The Company considers the fair value of deposits with no stated maturity, such as deposits from banking clients, to be equal to the amount payable on demand as of the balance sheet date.

Long-term debt includes Senior Notes, Senior Medium-Term Notes, Series A, Junior Subordinated Notes, and a finance lease obligation. The fair value of the Senior Notes, Senior Medium-Term Notes, Series A, and Junior Subordinated Notes is estimated using indicative, non-binding quotes from independent brokers. The finance lease obligation is recorded at carrying value, which approximates fair value.

Firm commitments to extend credit: The Company extends credit to banking clients through HELOC and personal loans secured by securities. The Company considers the fair value of these unused commitments to be not material because the interest rates earned on these balances are based on market interest rate indices and reset monthly. Future utilization of HELOC and personal loan commitments will earn a then-current market interest rate. The Company does not charge a fee to maintain a HELOC or personal loan.

The table below presents the Company’s fair value estimates for financial instruments excluding short-term financial assets and liabilities, for which carrying amounts approximate fair value, and excluding financial instruments recorded at fair value.

	June 30, 2011				December 31, 2010
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Financial Assets:
Securities held to maturity	$	15,799	$	16,071	$	17,762	$	17,848
Loans to banking clients – net	$	9,471	$	9,141	$	8,725	$	8,469
Loans held for sale	$	49	$	51	$	185	$	194
Financial Liabilities:
Long-term debt	$	2,004	$	2,141	$	2,006	$	2,116

- 17 -

THE CHARLES SCHWAB CORPORATION

Notes to Condensed Consolidated Financial Statements

(Tabular Amounts in Millions, Except Per Share Data, Ratios, or as Noted)

(Unaudited)

7. Comprehensive Income and Accumulated Other Comprehensive Income (Loss)

The components of comprehensive income are as follows:

	Three Months Ended June 30,						Six Months Ended June 30,
	2011			2010			2011			2010
Net income	$	238		$	205		$	481		$	211
Other comprehensive income:
Change in net unrealized gain (loss) on securities available for sale:
Net unrealized gain		16			67			37			189
Reclassification of impairment charges included in earnings		2			8			9			16
Other reclassification of gains in earnings		1			—			1			—
Income tax effect		(8	)		(29	)		(18	)		(79	)
Total other comprehensive income		11			46			29			126
Comprehensive income	$	249		$	251		$	510		$	337

Accumulated other comprehensive income (loss) represents cumulative gains and losses that are not reflected in earnings. Accumulated other comprehensive income (loss) balances were:

	Net unrealized gain (loss) on securities available for sale
	Portion of unrealized gain (loss) on Non-OTTI securities			Portion of unrealized loss on OTTI securities  (1)			Net unrealized loss on cash flow hedging instruments			Total accumulated other comprehensive income (loss)
Balance at December 31, 2009	$	(77	)	$	(114	)	$	—		$	(191	)
Reclassification of OTTI securities		21			(21	)		—			—
Other net changes		101			25			—			126
Balance at June 30, 2010	$	45		$	(110	)	$	—		$	(65	)
Balance at December 31, 2010	$	88		$	(71	)	$	(1	)	$	16
Reclassification of OTTI securities		6			(6	)		—			—
Other net changes		26			2			1			29
Balance at June 30, 2011	$	120		$	(75	)	$	—		$	45

⁽¹⁾  OTTI securities are securities for which the Company has recognized an impairment charge through earnings.

- 18 -

THE CHARLES SCHWAB CORPORATION

Notes to Condensed Consolidated Financial Statements

(Tabular Amounts in Millions, Except Per Share Data, Ratios, or as Noted)

(Unaudited)

8. Earnings Per Share

Basic EPS is computed by dividing net income available to common stockholders by the weighted-average number of common shares outstanding during the period. The computation of diluted EPS is similar to the computation of basic EPS except that the denominator is increased to include the number of additional common shares that would have been outstanding if dilutive potential common shares had been issued. Dilutive potential common shares include the effect of outstanding stock options and unvested restricted stock awards and units. EPS under the basic and diluted computations is as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2011		2010		2011		2010
Net income available to common stockholders (1)	$	238	$	205	$	481	$	211
Weighted-average common shares outstanding — basic		1,207		1,191		1,205		1,187
Common stock equivalent shares related to stock incentive plans		3		4		3		4
Weighted-average common shares outstanding — diluted (2)		1,210		1,195		1,208		1,191
Basic EPS	$	.20	$	.17	$	.40	$	.18
Diluted EPS	$	.20	$	.17	$	.40	$	.18

⁽¹⁾  Net income available to participating securities (unvested restricted shares) was not material for the second quarters and first halves of 2011 or 2010.

⁽²⁾  Antidilutive stock options and restricted stock awards excluded from the calculation of diluted EPS totaled 42 million and 38 million shares for the second quarters of 2011 and 2010, respectively, and 43 million and 38 million shares for the first halves of 2011 and 2010, respectively.

9. Regulatory Requirements

CSC is a savings and loan holding company and Schwab Bank, CSC’s depository institution subsidiary, is a federal savings bank. Through June 30, 2011, CSC and Schwab Bank were both subject to supervision and regulation by the Office of Thrift Supervision. As a savings and loan holding company, CSC was not subject to specific statutory capital requirements. However, CSC was required to maintain capital that was sufficient to support the holding company and its subsidiaries’ business activities, and the risks inherent in those activities.

The “Dodd-Frank Wall Street Reform and Consumer Protection Act” legislation eliminated the Office of Thrift Supervision effective July 21, 2011. As a result, the Federal Reserve became CSC’s primary regulator and the Office of the Comptroller of the Currency became the primary regulator of Schwab Bank.

Schwab Bank is required to maintain minimum capital levels as specified in federal banking laws and regulations. Failure to meet the minimum levels will result in certain mandatory, and possibly additional discretionary, actions by the regulators that, if undertaken, could have a direct material effect on Schwab Bank. At June 30, 2011, CSC and Schwab Bank met the capital level requirements.

The regulatory capital and ratios for Schwab Bank at June 30, 2011, are as follows:

	Actual					Minimum Capital Requirement					Minimum to be Well Capitalized
	Amount		Ratio			Amount		Ratio			Amount		Ratio
Tier 1 Risk-Based Capital	$	4,332		23.4	%	$	740		4.0	%	$	1,110		6.0	%
Total Risk-Based Capital	$	4,381		23.7	%	$	1,480		8.0	%	$	1,850		10.0	%
Tier 1 Core Capital	$	4,332		7.6	%	$	2,271		4.0	%	$	2,839		5.0	%
Tangible Equity	$	4,332		7.6	%	$	1,136		2.0	%		N/A

N/A Not applicable.

- 19 -

THE CHARLES SCHWAB CORPORATION

Notes to Condensed Consolidated Financial Statements

(Tabular Amounts in Millions, Except Per Share Data, Ratios, or as Noted)

(Unaudited)

Based on its regulatory capital ratios at June 30, 2011, Schwab Bank is considered well capitalized (the highest category) pursuant to banking regulatory guidelines. There are no conditions or events since June 30, 2011, that management believes have changed Schwab Bank’s capital category.

Schwab is subject to Rule 15c3-1 under the Securities Exchange Act of 1934 (the Uniform Net Capital Rule). Schwab computes net capital under the alternative method permitted by the Uniform Net Capital Rule. This method requires the maintenance of minimum net capital, as defined, of the greater of 2% of aggregate debit balances arising from client transactions or a minimum dollar requirement, which is based on the type of business conducted by the broker-dealer. Under the alternative method, a broker-dealer may not repay subordinated borrowings, pay cash dividends, or make any unsecured advances or loans to its parent company or employees if such payment would result in net capital of less than 5% of aggregate debit balances or less than 120% of its minimum dollar requirement. At June 30, 2011, 2% of aggregate debit balances was $258 million, which exceeded the minimum dollar requirement for Schwab of $250,000. At June 30, 2011, Schwab’s net capital was $1.3 billion (10% of aggregate debit balances), which was $1.0 billion in excess of its minimum required net capital and $649 million in excess of 5% of aggregate debit balances.

10. Segment Information

The Company structures its operating segments according to its various types of clients and the services provided to those clients. The Company’s two reportable segments are Investor Services and Institutional Services.

The Company evaluates the performance of its segments on a pre-tax basis, excluding items such as impairment charges on non-financial assets, discontinued operations, extraordinary items, and significant restructuring and other charges. Segment assets and liabilities are not disclosed because the balances are not used for evaluating segment performance and deciding how to allocate resources to segments. There are no revenues from transactions with other segments within the Company.

- 20 -

THE CHARLES SCHWAB CORPORATION

Notes to Condensed Consolidated Financial Statements

(Tabular Amounts in Millions, Except Per Share Data, Ratios, or as Noted)

(Unaudited)

Financial information for the Company’s reportable segments is presented in the following table:

	Investor Services						Institutional Services						Unallocated						Total
Three Months Ended June 30,	2011			2010			2011			2010			2011			2010			2011			2010
Net Revenues:
Asset management and administration fees	$	275		$	229		$	227		$	209		$	—		$	(1	)	$	502		$	437
Net interest revenue		387			326			64			58			—			(1	)		451			383
Trading revenue		136			157			70			76			(1	)		—			205			233
Other		16			17			19			17			—			2			35			36
Provision for loan losses		(1	)		(1	)		—			—			—			—			(1	)		(1	)
Net impairment losses on securities		(2	)		(7	)		—			(1	)		—			—			(2	)		(8	)
Total net revenues		811			721			380			359			(1	)		—			1,190			1,080
Expenses Excluding Interest		547			503			258			241			(1	)		(2	)		804			742
Income before taxes on income	$	264		$	218		$	122		$	118		$	—		$	2		$	386		$	338
Taxes on income																				(148	)		(133	)
Net Income																			$	238		$	205
	Investor Services						Institutional Services						Unallocated						Total
Six Months Ended June 30,	2011			2010			2011			2010			2011			2010			2011			2010
Net Revenues:
Asset management and administration fees	$	551		$	444		$	453		$	413		$	—		$	—		$	1,004		$	857
Net interest revenue		760			614			127			109			—			—			887			723
Trading revenue		296			297			150			145			—			—			446			442
Other		36			34			38			33			—			—			74			67
Provision for loan losses		(4	)		(13	)		(1	)		(2	)		—			—			(5	)		(15	)
Net impairment losses on securities		(8	)		(14	)		(1	)		(2	)		—			—			(9	)		(16	)
Total net revenues		1,631			1,362			766			696			—			—			2,397			2,058
Expenses Excluding Interest (1)		1,101			1,032			518			483			(2	)		192			1,617			1,707
Income before taxes on income	$	530		$	330		$	248		$	213		$	2		$	(192	)	$	780		$	351
Taxes on income																				(299	)		(140	)
Net Income																			$	481		$	211

⁽¹⁾  Unallocated amount includes a class action litigation reserve of $196 million in the first half of 2010.

- 21 -

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)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

OVERVIEW

Management of The Charles Schwab Corporation (CSC) and its subsidiaries (collectively referred to as the Company) focuses on several key financial and non-financial metrics in evaluating the Company’s financial position and operating performance. Results for the second quarters and first halves of 2011 and 2010 are shown in the following table:

	Three Months Ended June 30,						Percent      Change			Six Months Ended June 30,						Percent      Change
	2011			2010						2011			2010
Client Activity Metrics:
Net new client assets (1) (in billions)	$	15.4		$	(37.5	)		N/M		$	38.4		$	(14.2	)		N/M
Client assets (in billions, at quarter end)		1,655.5			1,361.5			22	%
Clients’ daily average trades (2) (in thousands)		397.1			436.6			(9	%)		434.5			426.2			2	%
Company Financial Metrics:
Net revenues	$	1,190		$	1,080			10	%	$	2,397		$	2,058			16	%
Expenses excluding interest		804			742			8	%		1,617			1,707			(5	%)
Income before taxes on income		386			338			14	%		780			351			122	%
Taxes on income		(148	)		(133	)		11	%		(299	)		(140	)		114	%
Net income	$	238		$	205			16	%	$	481		$	211			128	%
Earnings per share — diluted	$	.20		$	.17			18	%	$	.40		$	.18			122	%
Net revenue growth (decline) from prior year		10	%		—						16	%		(6	%)
Pre-tax profit margin		32.4	%		31.3	%					32.5	%		17.1	%
Return on stockholders’ equity (annualized)		14	%		14	%					15	%		8	%
Annualized net revenue per average full-time equivalent employee (in thousands)	$	361		$	343			5	%	$	366		$	327			12	%

⁽¹⁾  Includes net outflows of $51.5 billion in the second quarter of 2010 related to the planned deconversion of a mutual fund clearing services client.

⁽²⁾  Amounts include all commission free trades, including the Company’s Mutual Fund OneSource^® funds and Exchange-Traded Funds, and other proprietary products.

N/M Not meaningful.

The broad equity markets ended the second quarter of 2011 relatively flat compared to the first quarter of 2011. On a year-over-year basis, the Nasdaq Composite Index, the Standard & Poor’s 500 Index, and the Dow Jones Industrial Average grew 32%, 28%, and 27%, respectively. The low interest rate environment persisted in the second quarter as the federal funds target rate remained unchanged during the quarter at a range of zero to 0.25% and the three-month London Interbank Offered Rate (LIBOR) decreased by 29 basis points to 0.25% compared to the second quarter of 2010.

The Company’s long-term investment in expanding and improving product and service capabilities for its clients was reflected in continued strength in its key client activity metrics during the second quarter of 2011. Despite the challenging market environment, net new client assets totaled $15.4 billion and total client assets ended the second quarter at $1.66 trillion, up 22% from the second quarter of 2010. Although clients’ daily average trades of 397,100 in the second quarter of 2011 were down 9% on a year-over-year basis, clients’ daily average trades of 434,500 in the first half of 2011 were up 2% on a year-over-year basis.

For the second quarter of 2011, net revenues increased by 10% compared to the second quarter of 2010 primarily due to increases in net interest revenue and asset management and administration fees, partially offset by a decrease in trading revenue. Net interest revenue increased primarily due to higher average balances of interest-earning assets during the quarter. Asset management and administration fees increased due to higher average asset valuations, continued asset inflows, and increases in fees from the Company’s advice solutions, offset by money market mutual fund fee waivers, which were

- 22 -

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)

$128 million and $113 million in the second quarter of 2011 and 2010, respectively. Trading revenue decreased primarily due to lower daily average revenue trades.

For the first half of 2011, net revenues increased by 16% compared to the first half of 2010 primarily due to increases in net interest revenue and asset management and administration fees. Net interest revenue increased primarily due to higher average balances of interest-earning assets during the first half of 2011. Asset management and administration fees increased due to higher average asset valuations, continued asset inflows, and increases in fees from the Company’s advice solutions, offset by money market mutual fund fee waivers, which were $240 million and $238 million in the first half of 2011 and 2010, respectively. Trading revenue remained relatively flat in the first half of 2011 compared to the first half of 2010.

Expenses excluding interest increased by 8% in the second quarter of 2011 compared to the second quarter of 2010 primarily due to increases in compensation and benefits expense, professional services expense, and advertising and market development expense. The Company’s ongoing expense discipline combined with a 10% increase in net revenues resulted in a 32.4% pre-tax profit margin in the second quarter of 2011 – the second consecutive quarter in excess of 32.0% – and a 16% increase in net income from the second quarter of 2010.

Expenses excluding interest decreased by 5% in the first half of 2011 compared to the first half of 2010 primarily due to a class action litigation reserve of $196 million relating to the Schwab YieldPlus Fund^® in the first quarter of 2010, partially offset by increases in compensation and benefits expense and professional services expense.

Business Acquisition

On March 21, 2011, the Company announced a definitive agreement to acquire optionsXpress Holdings, Inc. (optionsXpress), an online brokerage firm primarily focused on equity option securities and futures. Under the terms of the agreement, optionsXpress^® stockholders will receive 1.02 shares of the Company’s common stock for each share of optionsXpress stock. The value of the transaction is dependent on the value of the Company’s common stock at closing and therefore will fluctuate with the market price of the Company’s common stock. The transaction is expected to close in the third quarter of 2011, subject to optionsXpress stockholder approval, regulatory approvals, and customary closing conditions.

CURRENT MARKET AND REGULATORY ENVIRONMENT

The equity markets showed improvement from 2010, which helped strengthen the Company’s net revenues in the second quarter and first half of 2011, however, the interest rate environment remains challenging and may continue to constrain growth in the Company’s net revenues.

Short-term interest rates remained at historically low levels during the second quarter of 2011, as the federal funds target rate was unchanged at a range of zero to 0.25%. Additionally, one-month and three-month LIBOR both decreased from the first quarter of 2011 by 6 basis points to 0.18% and 0.25%, respectively. To the extent rates remain at these low levels, the Company’s net interest revenue will continue to be constrained, even as growth in average balances helps increase net interest revenue. The low interest rate environment also affects asset management and administration fees. The overall yields on certain Schwab-sponsored money market mutual funds have remained at levels at or below the management fees on those funds. The Company continues to waive a portion of its management fees, which it began in the first quarter of 2009, so that the funds can continue providing a positive return to clients. These and other money market mutual funds may not be able to replace maturing securities with securities of equal or higher yields. As a result, the overall yield on such funds may remain around its current level, and therefore below the management fees on those funds, or it may decline further. To the extent this occurs, fees may be waived and waivers could increase from the second quarter 2011 level, which would negatively affect asset management and administration fees.

The Company recorded net impairment charges of $2 million and $9 million related to certain non-agency residential mortgage-backed securities in the second quarter and first half of 2011 due to credit deterioration of the securities’ underlying loans. Further deterioration in the performance of the underlying loans in the Company’s residential mortgage-backed securities portfolio could result in the recognition of additional impairment charges. The Company has filed lawsuits

- 23 -

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)

in state court in San Francisco for rescission and damages against issuers and underwriters of certain non-agency residential mortgage-backed securities on which the Company has experienced realized and unrealized losses. The lawsuits allege that offering documents for the securities contained material untrue and misleading statements about the securities and the underwriting standards and credit quality of the underlying loans. The cases, which had been removed to federal court by defendants, were recently remanded to state court and remain pending. As a result of the current U.S. budget deficit concerns, one or more credit rating agencies may downgrade the U.S. government’s credit rating. Any downgrade could decrease the value of the Company’s securities in both the available for sale and held to maturity portfolios.

The “Dodd-Frank Wall Street Reform and Consumer Protection Act” was signed into law in July 2010. Among other things, the legislation authorizes various assessments and fees and requires the establishment of minimum leverage and risk-based capital requirements for insured depository institutions. The legislation also eliminated the Office of Thrift Supervision effective July 21, 2011 and, as a result, the Federal Reserve became CSC’s primary regulator and the Office of the Comptroller of the Currency became the primary regulator of Schwab Bank. CSC is continuing to review the impact the legislation, studies and related rule-making will have on the Company’s business, financial condition, and results of operations.

- 24 -

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)

RESULTS OF OPERATIONS

The following discussion presents an analysis of the Company’s results of operations for the second quarter and first half of 2011 compared to the same periods in 2010.

Net Revenues

The Company’s major sources of net revenues are asset management and administration fees, net interest revenue, and trading revenue. Asset management and administration fees and net interest revenue increased, while trading revenue decreased in the second quarter of 2011 compared to the second quarter of 2010. Asset management and administration fees and net interest revenue increased, while trading revenue remained relatively flat in the first half of 2011 compared to the first half of 2010.

Three Months Ended June 30,				2011						2010
	Percent Change			Amount			% of Total Net  Revenues			Amount			% of Total Net  Revenues
Asset management and administration fees
Schwab money market funds before fee waivers		(3	%)	$	208					$	215
Fee waivers		13	%		(128	)					(113	)
Schwab money market funds after fee waivers		(22	%)		80			7	%		102			9	%
Equity and bond funds		15	%		31			3	%		27			3	%
Mutual Fund OneSource®		21	%		182			15	%		150			14	%
Total mutual funds		5	%		293			25	%		279			26	%
Advice solutions		51	%		134			11	%		89			8	%
Other		9	%		75			6	%		69			6	%
Asset management and administration fees		15	%		502			42	%		437			40	%
Net interest revenue
Interest revenue		16	%		496			42	%		428			39	%
Interest expense		—			(45	)		(4	%)		(45	)		(4	%)
Net interest revenue		18	%		451			38	%		383			35	%
Trading revenue
Commissions		(12	%)		189			16	%		214			20	%
Principal transactions		(16	%)		16			1	%		19			2	%
Trading revenue		(12	%)		205			17	%		233			22	%
Other		(3	%)		35			3	%		36			4	%
Provision for loan losses		—			(1	)		—			(1	)		—
Net impairment losses on securities		(75	%)		(2	)		—			(8	)		(1	%)
Total net revenues		10	%	$	1,190			100	%	$	1,080			100	%

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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)

Six Months Ended June 30,				2011						2010
	Percent Change			Amount			% of Total Net  Revenues			Amount			% of Total Net  Revenues
Asset management and administration fees
Schwab money market funds before fee waivers		(5	%)	$	419					$	439
Fee waivers		1	%		(240	)					(238	)
Schwab money market funds after fee waivers		(11	%)		179			7	%		201			10	%
Equity and bond funds		9	%		60			3	%		55			3	%
Mutual Fund OneSource®		20	%		356			15	%		297			14	%
Total mutual funds		8	%		595			25	%		553			27	%
Advice solutions		58	%		263			11	%		166			8	%
Other		6	%		146			6	%		138			7	%
Asset management and administration fees		17	%		1,004			42	%		857			42	%
Net interest revenue
Interest revenue		19	%		977			41	%		819			40	%
Interest expense		(6	%)		(90	)		(4	%)		(96	)		(5	%)
Net interest revenue		23	%		887			37	%		723			35	%
Trading revenue
Commissions		2	%		414			17	%		407			20	%
Principal transactions		(9	%)		32			2	%		35			1	%
Trading revenue		1	%		446			19	%		442			21	%
Other		10	%		74			3	%		67			4	%
Provision for loan losses		(67	%)		(5	)		—			(15	)		(1	%)
Net impairment losses on securities		(44	%)		(9	)		(1	%)		(16	)		(1	%)
Total net revenues		16	%	$	2,397			100	%	$	2,058			100	%

Asset Management and Administration Fees

Asset management and administration fees include mutual fund service fees and fees for other asset-based financial services provided to individual and institutional clients. The Company earns mutual fund service fees for shareholder services, administration, and investment management provided to its proprietary funds, and recordkeeping and shareholder services provided to third-party funds. These fees are based upon the daily balances of client assets invested in these funds. The Company also earns asset management fees for advisory and managed account services, which are based on the daily balances of client assets subject to the specific fee for service. The fair values of client assets included in proprietary and third-party mutual funds are based on quoted market prices and other observable market data. Other asset management and administration fees include various asset based fees, such as trust fees, 401k record keeping fees, and other service fees. Asset management and administration fees may vary with changes in the balances of client assets due to market fluctuations and client activity. For discussion of the impact of current market conditions on asset management and administration fees, see “Current Market and Regulatory Environment.”

Asset management and administration fees increased by $65 million, or 15%, and $147 million, or 17%, in the second quarter and first half of 2011 compared to the same periods in 2010, respectively, primarily due to increases in mutual fund service fees and advice solutions fees.

Mutual fund service fees increased by $14 million, or 5%, and $42 million, or 8%, in the second quarter and first half of 2011 compared to the same periods in 2010, respectively, primarily due to higher average balances of client assets invested in the Company’s Mutual Fund OneSource funds and equity and bond funds as a result of higher average asset valuations and continued asset inflows. The increase in mutual fund service fees was partially offset by an increase in money market mutual fund fee waivers. Given the low interest rate environment in the second quarters and first halves of 2011 and 2010,

- 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)

the overall yields on certain Schwab-sponsored money market mutual funds have remained at levels at or below the management fees on those funds. As a result, the Company waived a portion of its fees in the second quarters and first halves of 2011 and 2010 in order to provide a positive return to clients.

Advice solutions fees increased by $45 million, or 51%, and $97 million, or 58%, in the second quarter and first half of 2011 compared to the same periods in 2010, respectively, primarily due to higher average balances of client assets participating in advisory and managed account services programs, including Schwab Private Client and Schwab Managed Portfolios^™. The increase in advice solutions fees was also due to temporary fee rebates of $23 million and $52 million, which reduced advice solutions fees in the second quarter and first half of 2010, respectively, under a rebate program that ended in 2010.

Net Interest Revenue

Net interest revenue is the difference between interest earned on interest-earning assets and interest paid on funding sources. Net interest revenue is affected by changes in the volume and mix of these assets and liabilities, as well as by fluctuations in interest rates and portfolio management strategies. The Company is positioned so that the consolidated balance sheet produces an increase in net interest revenue when interest rates rise and, conversely, a decrease in net interest revenue when interest rates fall (i.e., interest-earning assets generally reprice more quickly than interest-bearing liabilities). When interest rates fall, the Company may attempt to mitigate some of this negative impact by extending the maturities of assets in investment portfolios to lock in asset yields as well as by lowering rates paid to clients on interest-bearing liabilities. Since the Company establishes the rates paid on certain brokerage client cash balances and deposits from banking clients, as well as the rates charged on receivables from brokerage clients, and also controls the composition of its investment securities, it has some ability to manage its net interest spread. However, the spread is influenced by external factors such as the interest rate environment and competition. For discussion of the impact of current market conditions on net interest revenue, see “Current Market and Regulatory Environment.”

In clearing its clients’ trades, Charles Schwab & Co., Inc. (Schwab) holds cash balances payable to clients. In most cases, Schwab pays its clients interest on cash balances awaiting investment, and may invest these funds and earn interest revenue. Receivables from brokerage clients consist primarily of margin loans to brokerage clients. Margin loans are loans made by Schwab to clients on a secured basis to purchase securities. Pursuant to SEC regulations, client cash balances that are not used for margin lending are generally segregated into investment accounts that are maintained for the exclusive benefit of clients, which are recorded in cash and investments segregated on the Company’s condensed consolidated balance sheet.

The Company’s interest-earning assets are financed primarily by brokerage client cash balances and deposits from banking clients. Noninterest-bearing funding sources include noninterest-bearing brokerage client cash balances and proceeds from stock-lending activities, as well as stockholders’ equity.

- 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)

The following table presents net interest revenue information corresponding to interest-earning assets and funding sources on the condensed consolidated balance sheet:

Three Months Ended June 30,	2011							2010
	Average Balance		Interest Revenue/ Expense		Average Yield/ Rate			Average Balance		Interest Revenue/ Expense		Average Yield/ Rate
Interest-earning assets:
Cash and cash equivalents	$	5,318	$	3		0.23	%	$	7,226	$	5		0.28	%
Cash and investments segregated		23,478		9		0.15	%		19,007		14		0.30	%
Broker-related receivables (1)		367		—		—			341		—		0.10	%
Receivables from brokerage clients		10,880		122		4.50	%		8,917		111		4.99	%
Other securities owned (1)		—		—		—			46		—		0.51	%
Securities available for sale (2)		26,105		110		1.69	%		23,615		124		2.11	%
Securities held to maturity		16,350		145		3.56	%		9,168		86		3.76	%
Loans to banking clients		9,366		77		3.30	%		7,785		68		3.50	%
Loans held for sale (1)		27		—		4.71	%		51		1		5.00	%
Total interest-earning assets		91,891		466		2.03	%		76,156		409		2.15	%
Other interest revenue				30							19
Total interest-earning assets	$	91,891	$	496		2.17	%	$	76,156	$	428		2.25	%
Funding sources:
Deposits from banking clients	$	51,338	$	16		0.13	%	$	43,076	$	25		0.23	%
Payables to brokerage clients (1)		28,086		—		0.01	%		22,168		1		0.02	%
Long-term debt		2,004		27		5.40	%		1,309		19		5.82	%
Total interest-bearing liabilities		81,428		43		0.21	%		66,553		45		0.27	%
Noninterest-bearing funding sources		10,463							9,603
Other interest expense				2							—
Total funding sources	$	91,891	$	45		0.20	%	$	76,156	$	45		0.23	%
Net interest revenue			$	451		1.97	%			$	383		2.02	%

⁽¹⁾  Interest revenue or expense was less than $500,000 in the period or periods presented.

⁽²⁾  Amounts have been calculated based on amortized cost.

- 28 -

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)

Six Months Ended June 30,	2011							2010
	Average Balance		Interest Revenue/ Expense		Average Yield/ Rate			Average Balance		Interest Revenue/ Expense		Average Yield/ Rate
Interest-earning assets:
Cash and cash equivalents	$	5,137	$	6		0.24	%	$	7,636	$	10		0.26	%
Cash and investments segregated		23,335		23		0.20	%		18,924		25		0.27	%
Broker-related receivables (1)		370		—		0.06	%		302		—		—
Receivables from brokerage clients		10,609		239		4.54	%		8,501		211		5.01	%
Other securities owned (1)		—		—		—			148		—		0.45	%
Securities available for sale (2)		25,563		216		1.70	%		23,177		252		2.19	%
Securities held to maturity		16,742		285		3.43	%		7,795		145		3.75	%
Loans to banking clients		9,188		152		3.34	%		7,675		135		3.55	%
Loans held for sale		70		1		4.50	%		68		2		4.91	%
Total interest-earning assets		91,014		922		2.04	%		74,226		780		2.12	%
Other interest revenue				55							39
Total interest-earning assets	$	91,014	$	977		2.16	%	$	74,226	$	819		2.22	%
Funding sources:
Deposits from banking clients	$	50,836	$	33		0.13	%	$	41,651	$	56		0.27	%
Payables to brokerage clients		27,573		1		0.01	%		21,708		1		0.01	%
Long-term debt		2,005		54		5.43	%		1,375		39		5.72	%
Total interest-bearing liabilities		80,414		88		0.22	%		64,734		96		0.30	%
Non-interest-bearing funding sources		10,600							9,492
Other interest expense				2							—
Total funding sources	$	91,014	$	90		0.20	%	$	74,226	$	96		0.26	%
Net interest revenue			$	887		1.96	%			$	723		1.96	%

⁽¹⁾  Interest revenue was less than $500,000 in the period or periods presented.

⁽²⁾  Amounts have been calculated based on amortized cost.

Net interest revenue increased in the second quarter and first half of 2011 compared to the same periods in 2010 due to higher average balances of interest-earning assets. This resulted from growth in the average balances of deposits from banking clients and payables to brokerage clients, which in turn funded increases in the average balances of securities held to maturity and securities available for sale. These interest-earning assets are invested at rates above the cost of funding sources. The increase in net interest revenue from increasing average balances was partially offset by a decline in the yields of all interest-earning assets compared to the same periods in 2010, driven by the low interest rate environment that persisted in the second quarter and first half of 2011.

Trading Revenue

Trading revenue includes commission and principal transaction revenues. Commission revenue is affected by the number of revenue trades executed and the average revenue earned per revenue trade. Principal transaction revenue is primarily comprised of revenue from client fixed income securities trading activity. Factors that influence principal transaction revenue include the volume of client trades and market price volatility.

- 29 -

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)

Trading revenue decreased by $28 million, or 12%, in the second quarter of 2011 compared to the second quarter of 2010 primarily due to lower daily average revenue trades. Trading revenue remained relatively flat in the first half of 2011 compared to the first half of 2010. Daily average revenue trades decreased 13% in the second quarter of 2011 primarily due to a lower volume of equity trades.

	Three Months Ended June 30,				Percent Change			Six Months Ended June 30,				Percent Change
	2011		2010					2011		2010
Daily average revenue trades (in thousands) (1)		264.9		302.9		(13	%)		292.2		289.5		1	%
Number of trading days		63.0		63.0		—			125.0		124.0		1	%
Average revenue earned per revenue trade	$	12.23	$	12.15		1	%	$	12.17	$	12.36		(2	%)

⁽¹⁾  Includes all client trades that generate trading revenue (i.e., commission revenue or revenue from fixed income securities trading).

Other Revenue

Other revenue includes gains on sales of mortgage loans, exchange processing fees, software maintenance fees, and other service fees. Other revenue increased by $7 million, or 10%, in the first half of 2011 compared to the first half of 2010 primarily due to increases in exchange processing fees and software maintenance fees.

Provision for Loan Losses

The provision for loan losses decreased by $10 million in the first half of 2011 from the first half of 2010, due to a decrease in overall expected loss rates resulting primarily from a decrease in first mortgage loan delinquencies, as well as a reduction in the Company’s estimated first mortgage loan loss severity assumption (i.e., the loss expected to be realized upon the default of a loan). Additionally, charge-offs remained relatively flat in the second quarter and first half of 2011 compared to the same periods in 2010. For further discussion on the Company’s credit risk and the allowance for loan losses, see “Risk Management – Credit Risk Exposures” and “Item 1 – Condensed Consolidated Financial Statements (Unaudited) – Notes – 4. Loans to Banking Clients and Related Allowance for Loan Losses.”

Net Impairment Losses on Securities

Net impairment losses on securities were $2 million and $9 million in the second quarter and first half of 2011, respectively. Net impairment losses on securities were $8 million and $16 million in the second quarter and first half of 2010, respectively. These charges related to certain non-agency residential mortgage-backed securities in the Company’s available for sale portfolio as a result of credit deterioration of the securities’ underlying loans. For further discussion, see “Item 1 – Condensed Consolidated Financial Statements (Unaudited) – Notes – 3. Securities Available for Sale and Securities Held to Maturity.”

- 30 -

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)

Expenses Excluding Interest

As shown in the table below, expenses excluding interest increased in the second quarter of 2011 compared to the second quarter of 2010 primarily due to increases in compensation and benefits expense, professional services expense, and advertising and market development expense. Expenses excluding interest decreased in the first half of 2011 compared to the first half of 2010 primarily due to a class action litigation reserve relating to the Schwab YieldPlus Fund in the first quarter of 2010. The decrease in expenses excluding interest in the first half of 2011 was partially offset by increases in compensation and benefits expense and professional services expense.

	Three Months Ended June 30,						Percent Change			Six Months Ended June 30,						Percent Change
	2011			2010						2011			2010
Compensation and benefits	$	430		$	393			9	%	$	867		$	795			9	%
Professional services		92			84			10	%		184			164			12	%
Occupancy and equipment		73			68			7	%		144			136			6	%
Advertising and market development		51			43			19	%		111			105			6	%
Communications		54			53			2	%		110			105			5	%
Depreciation and amortization		33			36			(8	%)		68			73			(7	%)
Class action litigation and regulatory reserve		7			—			N/M			7			196			N/M
Other		64			65			(2	%)		126			133			(5	%)
Total expenses excluding interest	$	804		$	742			8	%	$	1,617		$	1,707			(5	%)
Expenses as a percentage of total net revenues:
Total expenses excluding interest		68	%		69	%					67	%		83	%
Advertising and market development		4	%		4	%					5	%		5	%

N/M Not meaningful.

Compensation and Benefits

Compensation and benefits expense includes salaries and wages, incentive compensation, and related employee benefits and taxes. Incentive compensation includes variable compensation, discretionary bonus costs, and stock-based compensation. Variable compensation includes payments to certain individuals based on their sales performance. Discretionary bonus costs are based on the Company’s overall performance as measured by earnings per share, and therefore will fluctuate with this measure.

- 31 -

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)

Compensation and benefits expense increased by $37 million, or 9%, and $72 million, or 9%, in the second quarter and first half of 2011 compared to the second quarter and first half of 2010, respectively, due to increases in salaries and wages, incentive compensation, and employee benefits and other expense. The following table shows a comparison of certain compensation and benefits components and employee data:

	Three Months Ended June 30,						Percent Change			Six Months Ended June 30,						Percent Change
	2011			2010						2011			2010
Salaries and wages	$	247		$	237			4	%	$	498		$	473			5	%
Incentive compensation		114			97			18	%		224			195			15	%
Employee benefits and other		69			59			17	%		145			127			14	%
Total compensation and benefits expense	$	430		$	393			9	%	$	867		$	795			9	%
Compensation and benefits expense as a percentage of total net revenues:
Salaries and wages		21	%		22	%					21	%		23	%
Incentive compensation		10	%		9	%					9	%		10	%
Employee benefits and other		5	%		5	%					6	%		6	%
Total compensation and benefits expense		36	%		36	%					36	%		39	%
Full-time equivalent employees (in thousands) (1)
At quarter end		13.2			12.5			6	%
Average		13.2			12.6			5	%		13.1			12.6			4	%

⁽¹⁾  Includes full-time, part-time and temporary employees, and persons employed on a contract basis, and excludes employees of outsourced service providers.

Salaries and wages increased in the second quarter and first half of 2011 compared to the same periods in 2010 primarily due to increases in full-time employees and persons employed on a contract basis. Incentive compensation increased in the second quarter and first half of 2011 compared to the same periods in 2010 primarily due to higher discretionary bonus costs and higher variable compensation resulting from the acquisition of Windward Investment Management, Inc., in the fourth quarter of 2010. Employee benefits and other expense increased in the second quarter and first half of 2011 compared to the same periods in 2010 primarily due to increases in payroll taxes and the Company’s 401(k) plan contribution match expense as a result of increases in incentive compensation and full-time employees, as well as an increase in deferred compensation expense.

Expenses Excluding Compensation and Benefits

Professional services expense increased in the second quarter and first half of 2011 compared to the same periods in 2010 primarily due to an increase in fees relating to technology services and enhancements.

Occupancy and equipment expense increased in the second quarter and first half of 2011 compared to the same periods in 2010 primarily due to an increase in data processing equipment expense.

Advertising and market development expense increased in the second quarter and first half of 2011 compared to the same periods in 2010 primarily due to higher spending on customer promotions, regional events, and seminars.

Depreciation and amortization expense decreased in the second quarter and first half of 2011 compared to the same periods in 2010 primarily due to certain assets becoming fully depreciated.

In the second quarter of 2011 and first quarter of 2010, the Company recorded a regulatory reserve and a class action litigation reserve, respectively, relating to the Schwab YieldPlus Fund.

- 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)

Other expense decreased in the first half of 2011 compared to the first half of 2010 primarily due to a charge of $9 million in the first quarter of 2010 relating to the Company’s Invest First^® and WorldPoints^(a) Visa^(b) credit cards, as the Company ended its sponsorship due to challenging credit card industry economics.

Taxes on Income

The Company’s effective income tax rate on income before taxes was 38.3% and 39.3% for the second quarters of 2011 and 2010, respectively. The Company’s effective income tax rate on income before taxes was 38.3% and 39.9% for the first halves of 2011 and 2010, respectively. The higher rate in the first half of 2010 was primarily due to the impact of non-recurring items on the computation of the effective income tax rate.

Segment Information

The Company provides financial services to individuals and institutional clients through two segments – Investor Services and Institutional Services. The Investor Services segment includes the Company’s retail client offering. The Institutional Services segment provides custodial, trading, and support services to independent investment advisors, as well as retirement plan services, plan administrator services, equity compensation plan services, and mutual fund clearing services. In addition, the Institutional Services segment supports the availability of Schwab proprietary mutual funds and collective trust funds on third-party platforms. Banking revenues and expenses are allocated to the Company’s two segments based on which segment services the client. The Company evaluates the performance of its segments on a pre-tax basis, excluding items such as impairment charges on non-financial assets, discontinued operations, extraordinary items, and significant restructuring and other charges.

^(a)  WorldPoints is a registered trademark of FIA Card Services, N.A.

^(b)  Visa is a registered trademark of Visa International Service Association.

- 33 -

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)

Financial information for the Company’s reportable segments is presented in the following tables:

	Investor Services									Institutional Services
Three Months Ended June 30,	Percent Change			2011			2010			Percent Change			2011			2010
Net Revenues:
Asset management and administration fees		20	%	$	275		$	229			9	%	$	227		$	209
Net interest revenue		19	%		387			326			10	%		64			58
Trading revenue		(13	%)		136			157			(8	%)		70			76
Other		(6	%)		16			17			12	%		19			17
Provision for loan losses		—			(1	)		(1	)		—			—			—
Net impairment losses on securities		(71	%)		(2	)		(7	)		N/M			—			(1	)
Total net revenues		12	%		811			721			6	%		380			359
Expenses Excluding Interest		9	%		547			503			7	%		258			241
Income before taxes on income		21	%	$	264		$	218			3	%	$	122		$	118
	Unallocated									Total
Three Months Ended June 30,	Percent Change			2011			2010			Percent Change			2011			2010
Net Revenues:
Asset management and administration fees		N/M		$	—		$	(1	)		15	%	$	502		$	437
Net interest revenue		N/M			—			(1	)		18	%		451			383
Trading revenue		N/M			(1	)		—			(12	%)		205			233
Other		N/M			—			2			(3	%)		35			36
Provision for loan losses		—			—			—			—			(1	)		(1	)
Net impairment losses on securities		—			—			—			(75	%)		(2	)		(8	)
Total net revenues		N/M			(1	)		—			10	%		1,190			1,080
Expenses Excluding Interest		N/M			(1	)		(2	)		8	%		804			742
Income before taxes on income		N/M		$	—		$	2			14	%	$	386		$	338
Taxes on income														(148	)		(133	)
Net Income													$	238		$	205

N/M Not meaningful.

- 34 -

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)

	Investor Services									Institutional Services
Six Months Ended June 30,	Percent Change			2011			2010			Percent Change			2011			2010
Net Revenues:
Asset management and administration fees		24	%	$	551		$	444			10	%	$	453		$	413
Net interest revenue		24	%		760			614			17	%		127			109
Trading revenue		—			296			297			3	%		150			145
Other		6	%		36			34			15	%		38			33
Provision for loan losses		(69	%)		(4	)		(13	)		(50	%)		(1	)		(2	)
Net impairment losses on securities		(43	%)		(8	)		(14	)		(50	%)		(1	)		(2	)
Total net revenues		20	%		1,631			1,362			10	%		766			696
Expenses Excluding Interest		7	%		1,101			1,032			7	%		518			483
Income before taxes on income		61	%	$	530		$	330			16	%	$	248		$	213
	Unallocated									Total
Six Months Ended June 30,	Percent Change			2011			2010			Percent Change			2011			2010
Net Revenues:
Asset management and administration fees		—		$	—		$	—			17	%	$	1,004		$	857
Net interest revenue		—			—			—			23	%		887			723
Trading revenue		—			—			—			1	%		446			442
Other		—			—			—			10	%		74			67
Provision for loan losses		—			—			—			(67	%)		(5	)		(15	)
Net impairment losses on securities		—			—			—			(44	%)		(9	)		(16	)
Total net revenues		—			—			—			16	%		2,397			2,058
Expenses Excluding Interest		N/M			(2	)		192			(5	%)		1,617			1,707
Income before taxes on income		N/M		$	2		$	(192	)		122	%	$	780		$	351
Taxes on income														(299	)		(140	)
Net Income													$	481		$	211

N/M Not meaningful.

Investor Services

Net revenues increased by $90 million, or 12%, in the second quarter of 2011 compared to the second quarter of 2010 primarily due to increases in net interest revenue and asset management and administration fees, partially offset by a decrease in trading revenue. Net interest revenue increased primarily due to higher average balances of interest-earning assets during the quarter. Asset management and administration fees increased due to higher average asset valuations, continued asset inflows, and increases in fees from the Company’s advice solutions, offset by money market mutual fund fee waivers. Trading revenue decreased primarily due to lower daily average revenue trades. Expenses excluding interest increased by $44 million, or 9%, in the second quarter of 2011 compared to the second quarter of 2010 primarily due to increases in compensation and benefits expense, professional services expense, and advertising and market development expense.

Net revenues increased by $269 million, or 20%, in the first half of 2011 compared to the first half of 2010 primarily due to increases in net interest revenue and asset management and administration fees. Net interest revenue increased primarily due to higher average balances of interest-earning assets during the first half of 2011. Asset management and administration fees increased due to higher average asset valuations, continued asset inflows, and increases in fees from the Company’s advice solutions, offset by money market mutual fund fee waivers. Expenses excluding interest increased by $69 million, or 7%, in the first half of 2011 compared to the first half of 2010 primarily due to increases in compensation and benefits expense and professional services expense.

- 35 -

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)

Institutional Services

Net revenues increased by $21 million, or 6%, in the second quarter of 2011 compared to the second quarter of 2010 primarily due to increases in asset management and administration fees and net interest revenue, partially offset by a decrease in trading revenue. Asset management and administration fees increased due to higher average asset valuations and continued asset inflows, offset by money market mutual fund fee waivers. Net interest revenue increased primarily due to higher average balances of interest-earning assets during the quarter. Trading revenue decreased primarily due to lower daily average revenue trades. Expenses excluding interest increased by $17 million, or 7%, in the second quarter of 2011 compared to the second quarter of 2010 primarily due to increases in compensation and benefits expense, professional services expense, and advertising and market development expense.

Net revenues increased by $70 million, or 10%, in the first half of 2011 compared to the first half of 2010 primarily due to increases in asset management and administration fees and net interest revenue. Asset management and administration fees increased due to higher average asset valuations and continued asset inflows, offset by money market mutual fund fee waivers. Net interest revenue increased primarily due to higher average balances of interest-earning assets during the first half of 2011. Expenses excluding interest increased by $35 million, or 7%, in the first half of 2011 compared to the first half of 2010 primarily due to increases in compensation and benefits expense and professional services expense.

Unallocated

Expenses excluding interest decreased in the first half of 2011 compared to the first half of 2010 primarily due to a class action litigation reserve relating to the Schwab YieldPlus Fund in the first quarter of 2010.

LIQUIDITY AND CAPITAL RESOURCES

CSC conducts substantially all of its business through its wholly-owned subsidiaries. The Company’s capital structure is designed to provide each subsidiary with capital and liquidity to meet its operational needs and regulatory requirements.

CSC is a savings and loan holding company and Schwab Bank, CSC’s depository institution, is a federal savings bank. Through June 30, 2011, CSC and Schwab Bank were both subject to supervision and regulation by the Office of Thrift Supervision. The “Dodd-Frank Wall Street Reform and Consumer Protection Act” legislation eliminated the Office of Thrift Supervision effective July 21, 2011, and as a result, the Federal Reserve became CSC’s primary regulator and the Office of the Comptroller of the Currency became the primary regulator of Schwab Bank.

Liquidity

CSC

As a savings and loan holding company, CSC is not subject to specific statutory capital requirements. However, CSC is required to maintain capital that is sufficient to support the holding company and its subsidiaries’ business activities, and the risks inherent in those activities. To manage capital adequacy, CSC currently utilizes a target Tier 1 Leverage Ratio, as defined by the Board of Governors of the Federal Reserve System, of at least 6%. At June 30, 2011, CSC’s Tier 1 Leverage Ratio was 6.6%.

CSC’s liquidity needs are generally met through cash generated by its subsidiaries, as well as cash provided by external financing. CSC has a universal automatic shelf registration statement on file with the SEC which enables CSC to issue debt, equity and other securities. CSC maintains excess liquidity in the form of overnight cash deposits and short-term investments to cover daily funding needs and to support growth in the Company’s business. Generally, CSC does not hold liquidity at its subsidiaries in excess of amounts deemed sufficient to support the subsidiaries’ operations, including any regulatory capital requirements. Schwab and Schwab Bank are subject to regulatory requirements that may restrict them from certain transactions with CSC. Management believes that funds generated by the operations of CSC’s subsidiaries will continue to be the primary funding source in meeting CSC’s liquidity needs, providing adequate liquidity to meet Schwab Bank’s capital guidelines, and maintaining Schwab’s net capital.

- 36 -

THE CHARLES SCHWAB CORPORATION

Management’s Discussion and Analysis of Financial Condition and Results of Operations

(Tabular Amounts in Millions, Except Ratios, or as Noted)

CSC has liquidity needs that arise from the funding of cash dividends, acquisitions, and investments, as well as its Senior Notes, Senior Medium-Term Notes, Series A (Medium-Term Notes), and Junior Subordinated Notes. The following are details of CSC’s long-term debt:

June 30, 2011	Par Outstanding		Maturity	Interest Rate	Moody’s (1)	Standard & Poor’s (1)	Fitch (1)
Senior Notes	$	1,450	2014 - 2020	4.45% to 4.950% fixed	A2	A	A
Medium Term Notes	$	250	2017	6.375% fixed	A2	A	A
Junior Subordinated Notes (2)	$	202	2067	7.50% fixed until 2017, floating thereafter	Baa1	BBB+	BBB+

⁽¹⁾  Current ratings are provided by Moody’s Investors Service (Moody’s), Standard & Poor’s Ratings Group (Standard & Poor’s), and Fitch Ratings, Ltd. (Fitch).

⁽²⁾  The Junior Subordinated Notes themselves are not rated, however, the trust preferred securities related to these Junior Subordinated Notes are rated.

CSC has authorization from its Board of Directors to issue unsecured commercial paper notes (Commercial Paper Notes) not to exceed $1.5 billion. Management has set a current limit for the commercial paper program of $800 million. The maturities of the Commercial Paper Notes may vary, but are not to exceed 270 days from the date of issue. The commercial paper is not redeemable prior to maturity and cannot be voluntarily prepaid. The proceeds of the commercial paper program are to be used for general corporate purposes. There were no borrowings of Commercial Paper Notes outstanding at June 30, 2011. CSC’s ratings for these short-term borrowings are P1 by Moody’s, A1 by Standard & Poor’s, and F1 by Fitch.

CSC maintains an $800 million committed, unsecured credit facility with a group of eleven banks, which is scheduled to expire in June 2012. This facility replaced a similar facility that expired in June 2011 and was unused during the first half of 2011. The funds under this facility are available for general corporate purposes, including repayment of the Commercial Paper Notes discussed above. The financial covenants under this facility require Schwab to maintain a minimum net capital ratio, as defined, Schwab Bank to be well capitalized, as defined, and CSC to maintain a minimum level of stockholders’ equity. At June 30, 2011, the minimum level of stockholders’ equity required under this facility was $4.8 billion. Management believes that these restrictions will not have a material effect on CSC’s ability to meet foreseeable dividend or funding requirements.

CSC also has direct access to $690 million of the $765 million uncommitted, unsecured bank credit lines discussed below, that are primarily utilized by Schwab to manage short-term liquidity. These lines were not used by CSC during the first half of 2011.

In addition, Schwab provides CSC with a $1.0 billion credit facility, which matures in December 2011. There were no funds drawn under this facility at June 30, 2011.

Schwab

Schwab is subject to regulatory requirements that are intended to ensure the general financial soundness and liquidity of broker-dealers. These regulations prohibit Schwab from repaying subordinated borrowings from CSC, paying cash dividends, or making unsecured advances or loans to its parent company or employees if such payment would result in net capital of less than 5% of aggregate debit balances or less than 120% of its minimum dollar requirement of $250,000. At June 30, 2011, Schwab’s net capital was $1.3 billion (10% of aggregate debit balances), which was $1.0 billion in excess of its minimum required net capital and $649 million in excess of 5% of aggregate debit balances.

Most of Schwab’s assets are readily convertible to cash, consisting primarily of short-term (i.e., less than 150 days) investment-grade, interest-earning investments (the majority of which are segregated for the exclusive benefit of clients pursuant to regulatory requirements), receivables from brokerage clients, and receivables from brokers, dealers, and clearing organizations. Client margin loans are demand loan obligations secured by readily marketable securities. Receivables from and payables to brokers, dealers, and clearing organizations primarily represent current open transactions, which usually settle, or can be closed out, within a few business days.

- 37 -

THE CHARLES SCHWAB CORPORATION

Management’s Discussion and Analysis of Financial Condition and Results of Operations

(Tabular Amounts in Millions, Except Ratios, or as Noted)

Liquidity needs relating to client trading and margin borrowing activities are met primarily through cash balances in brokerage client accounts, which were $33.2 billion and $29.9 billion at June 30, 2011 and December 31, 2010, respectively. Management believes that brokerage client cash balances and operating earnings will continue to be the primary sources of liquidity for Schwab in the future.

Schwab has a finance lease obligation related to an office building and land under a 20-year lease. The remaining finance lease obligation of $103 million at June 30, 2011, is being reduced by a portion of the lease payments over the remaining lease term of 13 years.

To manage short-term liquidity, Schwab maintains uncommitted, unsecured bank credit lines with a group of six banks totaling $765 million at June 30, 2011. The need for short-term borrowings arises primarily from timing differences between cash flow requirements, scheduled liquidation of interest-earning investments, and movements of cash to meet regulatory brokerage client cash segregation requirements. Schwab used such borrowings for 4 days during the first half of 2011, with average daily amounts borrowed of $45 million. There were no borrowings outstanding under these lines at June 30, 2011.

To partially satisfy the margin requirement of client option transactions with the Options Clearing Corporation (OCC), Schwab has unsecured standby letter of credit agreements (LOCs) with seven banks in favor of the OCC aggregating $445 million at June 30, 2011. In connection with its securities lending activities, Schwab is required to provide collateral to certain brokerage clients. Schwab satisfies the collateral requirements by arranging LOCs, in favor of these brokerage clients, which are issued by multiple banks. At June 30, 2011, the aggregate face amount of these LOCs totaled $61 million. There were no funds drawn under any of these LOCs during the first half of 2011.

To manage Schwab’s regulatory capital requirement, CSC provides Schwab with a $1.4 billion subordinated revolving credit facility, which is scheduled to expire in March 2012. The amount outstanding under this facility at June 30, 2011, was $245 million. Borrowings under this subordinated lending arrangement qualify as regulatory capital for Schwab.

In addition, CSC provides Schwab with a $1.5 billion credit facility, which is scheduled to expire in December 2011. Borrowings under this facility do not qualify as regulatory capital for Schwab. There were no funds drawn under this facility at June 30, 2011.

Schwab Bank

Schwab Bank is required to maintain capital levels as specified in federal banking laws and regulations. Failure to meet the minimum levels will result in certain mandatory, and possibly additional discretionary, actions by the regulators that, if undertaken, could have a direct material effect on Schwab Bank. Based on its regulatory capital ratios at June 30, 2011, Schwab Bank is considered well capitalized. Schwab Bank’s regulatory capital and ratios at June 30, 2011, are as follows:

	Actual					Minimum Capital Requirement					Minimum to be Well Capitalized
	Amount		Ratio			Amount		Ratio			Amount		Ratio
Tier 1 Risk-Based Capital	$	4,332		23.4	%	$	740		4.0	%	$	1,110		6.0	%
Total Risk-Based Capital	$	4,381		23.7	%	$	1,480		8.0	%	$	1,850		10.0	%
Tier 1 Core Capital	$	4,332		7.6	%	$	2,271		4.0	%	$	2,839		5.0	%
Tangible Equity	$	4,332		7.6	%	$	1,136		2.0	%		N/A

N/A Not applicable.

Beginning in the first quarter of 2010, in light of the evolving regulatory environment and capitalization trends observed across the banking industry, management established a target Tier 1 Core Capital Ratio for Schwab Bank of at least 7.5%. Schwab Bank’s current liquidity needs are generally met through deposits from banking clients and equity capital.

The excess cash held in certain Schwab brokerage client accounts is swept into deposit accounts at Schwab Bank. At June 30, 2011, these balances totaled $33.0 billion.

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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)

Schwab Bank has access to traditional funding sources such as deposits, federal funds purchased, and repurchase agreements. Additionally, Schwab Bank has access to short-term funding through the Federal Reserve Bank (FRB) discount window. Amounts available under the FRB discount window are dependent on the fair value of certain of Schwab Bank’s securities available for sale and securities held to maturity that are pledged as collateral. At June 30, 2011, $837 million was available under this arrangement. There were no funds drawn under this arrangement during the first half of 2011.

Schwab Bank maintains a credit facility with the Federal Home Loan Bank System. Amounts available under this facility are dependent on the amount of Schwab Bank’s residential real estate mortgages and home equity lines of credit (HELOCs) that are pledged as collateral. At June 30, 2011, $4.9 billion was available under this facility. There were no funds drawn under this facility during the first half of 2011.

CSC provides Schwab Bank with a $100 million short-term credit facility, which is scheduled to expire in December 2011. Borrowings under this facility do not qualify as regulatory capital for Schwab Bank. There were no funds drawn under this facility during the first half of 2011.

Capital Resources

The Company monitors both the relative composition and absolute level of its capital structure. Management is focused on limiting the Company’s use of capital and currently targets a long-term debt to total financial capital ratio not to exceed 30%. The Company’s total financial capital (long-term debt plus stockholders’ equity) at June 30, 2011, was $8.7 billion, up $506 million, or 6%, from December 31, 2010.

At June 30, 2011, the Company had long-term debt of $2.0 billion, or 23% of total financial capital, that bears interest at a weighted-average rate of 5.24%. At December 31, 2010, the Company had long-term debt of $2.0 billion, or 24% of total financial capital. The Company repaid $3 million of long-term debt in the first half of 2011.

The Company’s cash position (reported as cash and cash equivalents on its condensed consolidated balance sheet) and cash flows are affected by changes in brokerage client cash balances and the associated amounts required to be segregated under regulatory guidelines. Timing differences between cash and investments actually segregated on a given date and the amount required to be segregated for that date may arise in the ordinary course of business and are addressed by the Company in accordance with applicable regulations. Other factors which affect the Company’s cash position and cash flows include investment activity in securities, levels of capital expenditures, acquisition and divestiture activity, banking client deposit activity, brokerage and banking client loan activity, financing activity in long-term debt, payments of dividends, and repurchases and issuances of CSC’s common stock. The combination of these factors can cause significant fluctuations in the cash position during specific time periods.

Capital Expenditures

The Company’s capital expenditures were $81 million and $49 million in the first halves of 2011 and 2010, respectively. Capital expenditures in the first half of 2011 were primarily for software and equipment relating to the Company’s information technology systems and capitalized costs for developing internal-use software. Capital expenditures in the first half of 2010 were primarily for software and equipment relating to the Company’s information technology systems and leasehold improvements. Capitalized costs for developing internal-use software were $22 million in the first half of 2011 and $10 million in the first half of 2010.

As discussed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010, management anticipated that 2011 capital expenditures would be 35% higher than 2010 spending. Due to increased spending on capitalized costs for developing internal-use software and software relating to the Company’s information technology systems, management currently anticipates that full-year 2011 capital expenditures will be approximately 60% higher than 2010 levels.

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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)

Dividends

CSC paid common stock cash dividends of $145 million ($0.12 per share) and $143 million ($0.12 per share) in the first half of 2011 and 2010, respectively.

Share Repurchases

There were no repurchases of CSC’s common stock in the first half of 2011 or 2010. As of June 30, 2011, CSC had remaining authority from the Board of Directors to repurchase up to $596 million of its common stock, which does not have an expiration date.

Business Acquisition

On March 21, 2011, the Company announced a definitive agreement to acquire optionsXpress, an online brokerage firm primarily focused on equity option securities and futures. Under the terms of the agreement, optionsXpress stockholders will receive 1.02 shares of the Company’s common stock for each share of optionsXpress stock. The value of the transaction is dependent on the value of the Company’s common stock at closing and therefore will fluctuate with the market price of the Company’s common stock. The transaction is expected to close in the third quarter of 2011, subject to optionsXpress stockholder approval, regulatory approvals, and customary closing conditions.

Off-Balance Sheet Arrangements

The Company enters into various off-balance sheet arrangements in the ordinary course of business, primarily to meet the needs of its clients. These arrangements include firm commitments to extend credit. Additionally, the Company enters into guarantees and other similar arrangements as part of transactions in the ordinary course of business. For discussion on the Company’s off-balance sheet arrangements, see “Part II – Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010, and “Item 1 – Condensed Consolidated Financial Statements (Unaudited) – Notes – 5. Commitments and Contingent Liabilities.”

RISK MANAGEMENT

The Company’s business activities expose it to a variety of risks, including technology, operations, credit, market, liquidity, legal, and reputational risk. Identification and management of these risks are essential to the success and financial soundness of the Company.

For a discussion on risks that the Company faces and the policies and procedures for risk identification, assessment, and management, see “Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations – Risk Management” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010. For updated information on the Company’s credit risk and concentration risk exposures, see below. See “Item 3 – Quantitative and Qualitative Disclosures About Market Risk” for additional information relating to market risk.

Risk is inherent in the Company’s business. Consequently, despite the Company’s efforts to identify areas of risk and implement risk management policies and procedures, there can be no assurance that the Company will not suffer unexpected losses due to operating or other risks.

Credit Risk Exposures

The Company has exposure to credit risk associated with the Company’s loans to banking clients. The Company’s mortgage loan portfolios primarily include first lien residential mortgage loans (First Mortgage portfolio) of $5.3 billion and HELOCs of $3.5 billion at June 30, 2011.

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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’s First Mortgage portfolio underwriting requirements are generally consistent with the underwriting requirements in the secondary market for loan portfolios. The Company’s guidelines include maximum loan-to-value (LTV) ratios, cash out limits, and minimum Fair Isaac & Company (FICO) credit scores. The specific guidelines are dependent on the individual characteristics of a loan (for example, whether the property is a primary or secondary residence, whether the loan is for investment property, whether the loan is for an initial purchase of a home or refinance of an existing home, and whether the loan is conforming or jumbo). These credit underwriting standards have limited the exposure to the types of loans that experienced high foreclosures and loss rates elsewhere in the industry in recent years. There have been no significant changes to the LTV ratio or FICO credit score guidelines related to the Company’s First Mortgage or HELOC portfolios during the first half of 2011. At June 30, 2011, the weighted-average originated LTV ratios were 60% and 59% for the First Mortgage and HELOC portfolios, respectively. The computation of the origination LTV ratio for a HELOC includes any first lien mortgage outstanding on the same property at the time of origination. At June 30, 2011, 22% of HELOCs ($750 million of the HELOC portfolio) were in a first lien position. The weighted-average originated FICO credit scores were 764 and 768 for the First Mortgage and HELOC portfolios, respectively.

The Company does not offer loans that allow for negative amortization and does not originate or purchase subprime loans (generally defined as extensions of credit to borrowers with a FICO credit score of less than 620 at origination), unless the borrower has compensating credit factors. At June 30, 2011, approximately 1% of both the First Mortgage and HELOC portfolios consisted of loans to borrowers with FICO credit scores of less than 620.

The following table presents certain of the Company’s loan quality metrics as a percentage of total outstanding loans:

	June 30, 2011			December 31, 2010
Loan delinquencies (1)		0.76	%		0.96	%
Nonaccrual loans		0.48	%		0.58	%
Allowance for loan losses		0.53	%		0.60	%

⁽¹⁾  Loan delinquencies are defined as loans that are 30 days or more past due.

The Company has exposure to credit risk associated with its securities available for sale and securities held to maturity portfolios, whose fair values totaled $27.2 billion and $16.1 billion at June 30, 2011, respectively. These portfolios include U.S. agency and non-agency residential mortgage-backed securities, U.S. agency notes, corporate debt securities, asset-backed securities, and certificates of deposit. U.S. agency residential 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. agencies. Included in non-agency residential mortgage-backed securities are securities collateralized by loans that are considered to be “Prime” (defined by the Company as loans to borrowers with a FICO credit score of 620 or higher at origination), and “Alt-A” (defined by the Company as Prime loans with reduced documentation at origination).

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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 table below presents the credit ratings for U.S. agency and non-agency residential mortgage-backed securities available for sale and securities held to maturity, including Prime and Alt-A residential mortgage-backed securities, by year of origination. In some instances securities have divergent ratings from Moody’s, Fitch, or Standard & Poor’s. In these instances, the Company has used the lowest rating as of June 30, 2011, for purposes of presenting the table below. Residential mortgage-backed securities, particularly Alt-A securities, experienced continued deteriorating credit characteristics, including increased payment delinquency rates, in the first half of 2011. For a discussion of the impact of current market conditions on residential mortgage-backed securities, see “Current Market and Regulatory Environment.”

	AAA					AA to A					BBB					BB or Lower						Total
	Amortized Cost			Net Unrealized Gain		Amortized Cost		Net Unrealized Loss			Amortized Cost		Net Unrealized Loss			Amortized Cost			Net Unrealized Loss			Amortized Cost			Net Unrealized Gain (Loss)
U.S. agency residential mortgage-backed securities:
2007 and prior	$	998		$	10	$	—	$	—		$	—	$	—		$	—		$	—		$	998		$	10
2008		2,186			70		—		—			—		—			—			—			2,186			70
2009		6,487			201		—		—			—		—			—			—			6,487			201
2010		17,564			168		—		—			—		—			—			—			17,564			168
2011		3,809			41		—		—			—		—			—			—			3,809			41
Total		31,044			490		—		—			—		—			—			—			31,044			490
Non-agency residential mortgage-backed securities
2003		14			—		30		(2	)		4		—			1			—			49			(2	)
2004		6			—		21		—			48		(4	)		51			(7	)		126			(11	)
2005		1			—		48		(2	)		26		—			435			(62	)		510			(64	)
2006		2			—		—		—			—		—			450			(88	)		452			(88	)
2007		30			—		—		—			—		—			207			(23	)		237			(23	)
Total		53			—		99		(4	)		78		(4	)		1,144			(180	)		1,374			(188	)
Total residential mortgage-backed securities	$	31,097		$	490	$	99	$	(4	)	$	78	$	(4	)	$	1,144		$	(180	)	$	32,418		$	302
% of Total residential mortgage-backed securities		96	%				—					—					4	%					100	%

At June 30, 2011, all of the corporate debt securities and non-mortgage asset-backed securities were rated investment grade (defined as a rating equivalent to a Moody’s rating of “Baa” or higher, or a Standard & Poor’s rating of “BBB-” or higher).

Concentration Risk Exposures

The Company has exposure to concentration risk when holding large positions in financial instruments collateralized by assets with similar economic characteristics or in securities of a single issuer or industry.

The fair value of the Company’s investments in residential mortgage-backed securities totaled $32.7 billion at June 30, 2011. Of these, $31.5 billion were U.S. agency securities and $1.2 billion were non-agency securities. The U.S. agency securities are included in securities available for sale and securities held to maturity and the non-agency securities are included in securities available for sale. Included in non-agency residential mortgage-backed securities are securities collateralized by Alt-A loans. At June 30, 2011, the amortized cost and fair value of Alt-A mortgage-backed securities were $438 million and $335 million, respectively.

The Company’s investments in corporate debt securities totaled $4.3 billion at June 30, 2011, with the majority issued by institutions in the financial services industry. These securities are included in securities available for sale, securities held to maturity, cash and investments segregated and on deposit for regulatory purposes, and other securities owned in the Company’s condensed consolidated balance sheets. At June 30, 2011, the Company held $1.5 billion of corporate debt securities issued by financial institutions and guaranteed under the FDIC Temporary Liquidity Guarantee Program.

The Company’s loans to banking clients include $5.3 billion of adjustable rate first lien residential real estate mortgage loans at June 30, 2011. The Company’s adjustable rate mortgages have initial fixed interest rates for three to ten years and interest rates that adjust annually thereafter. Approximately 60% of these mortgages consisted of loans with interest-only payment

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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)

terms. The interest rates on approximately 70% of these interest-only loans are not scheduled to reset for three or more years. The Company’s interest-only loans do not include interest terms described as temporary introductory rates below current market rates. At June 30, 2011, 43% of the residential real estate mortgages and 50% of the HELOC balances were secured by properties which are located in California.

The Company also has exposure to concentration risk from its margin and securities lending activities collateralized by securities of a single issuer or industry.

The Company has indirect exposure to U.S. Government and agency securities held as collateral to secure its resale agreements. The Company’s primary credit exposure on these resale transactions is with its counterparty. The Company would have exposure to the U.S. Government and agency securities only in the event of the counterparty’s default on the resale agreements. The fair value of U.S. Government and agency securities held as collateral for resale agreements totaled $16.1 billion at June 30, 2011.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company uses fair value measurements to record certain financial assets and liabilities at fair value, and to determine fair value disclosures. Assets are measured at fair value using quoted prices or market-based information and accordingly are classified as Level 1 or Level 2 measurements in accordance with the fair value hierarchy described in fair value measurement accounting guidance. Liabilities recorded at fair value were not material at either June 30, 2011, or December 31, 2010. See “Item 1 – Condensed Consolidated Financial Statements (Unaudited) – Notes – 6. Fair Values of Assets and Liabilities” for more information on the Company’s assets and liabilities recorded at fair value.

When available, the Company uses quoted prices in active markets to measure the fair value of assets. When quoted prices do not exist, the Company uses prices obtained from independent third-party pricing services to measure the fair value of investment assets. The Company validates prices received from pricing services using various methods, including comparison to prices received from other pricing services, comparison to available quoted market prices, internal valuation models, and review of other relevant market data. The Company does not adjust the prices received from independent third-party pricing services unless such prices are inconsistent with the definition of fair value and result in a material difference in the recorded amounts. At June 30, 2011, and December 31, 2010, the Company did not adjust prices received from independent third-party pricing services.

CRITICAL ACCOUNTING ESTIMATES

Certain of the Company’s accounting policies that involve a higher degree of judgment and complexity are discussed in “Part II – Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Estimates” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010. There have been no changes to these critical accounting estimate categories during the first half of 2011.

As disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010, the Company’s annual goodwill impairment testing date is April 1. In testing for a potential impairment of goodwill on April 1, 2011, management estimated the fair value of each of the Company’s reporting units (generally defined as the Company’s businesses for which financial information is available and reviewed regularly by management) and compared this value to the carrying value of the reporting unit. The estimated fair value of each reporting unit exceeded its carrying value, and therefore management concluded that no amount of goodwill was impaired.

FORWARD-LOOKING STATEMENTS

In addition to historical information, this Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act, and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are identified by words such as “believe,” “anticipate,” “expect,” “intend,” “plan,” “will,” “may,” “estimate,”

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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)

“aim,” “target,” “could,” and other similar expressions. In addition, any statements that refer to expectations, projections, or other characterizations of future events or circumstances are forward-looking statements.

These forward-looking statements, which reflect management’s beliefs, objectives, and expectations as of the date hereof, are necessarily estimates based on the best judgment of the Company’s senior management. These statements relate to, among other things:

• the impact of current market conditions on the Company’s results of operations (see “Item 1 – Condensed Consolidated Financial Statements (Unaudited) – Notes – 3. Securities Available for Sale and Securities Held to Maturity” and “Current Market and Regulatory Environment”);

• the impact of changes in the likelihood of guarantee payment obligations on the Company’s results of operations (see “Item 1 – Condensed Consolidated Financial Statements (Unaudited) – Notes – 5. Commitments and Contingent Liabilities”);

• the acquisition of optionsXpress (see “Item 1 – Condensed Consolidated Financial Statements (Unaudited) – Notes – 5. Commitments and Contingent Liabilities,” “Current Market and Regulatory Environment” and “Liquidity and Capital Resources – Capital Resources – Business Acquisition”);

• the impact of legal proceedings and regulatory matters (see “Item 1 – Condensed Consolidated Financial Statements (Unaudited) – Notes – 5. Commitments and Contingent Liabilities” and “Part II – Other Information – Item 1 – Legal Proceedings”);

• target capital ratios (see “Item 1 – Condensed Consolidated Financial Statements (Unaudited) – Notes – 9. Regulatory Requirements” and “Liquidity and Capital Resources”);

• capital expenditures (see “Liquidity and Capital Resources – Capital Resources – Capital Expenditures”); and

• sources of liquidity, capital, and level of dividends (see “Liquidity and Capital Resources”).

Achievement of the expressed beliefs, objectives, and expectations described in these statements is subject to certain risks and uncertainties that could cause actual results to differ materially from the expressed beliefs, objectives, and expectations. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q or, in the case of documents incorporated by reference, as of the date of those documents.

Important factors that may cause actual results to differ include, but are not limited to:

• changes in general economic and financial market conditions;

• changes in revenues and profit margin due to changes in interest rates;

• the Company’s ability to attract and retain clients and grow client assets and relationships;

• the Company’s ability to develop and launch new products, services and capabilities in a timely and successful manner;

• fluctuations in client asset values due to changes in equity valuations;

• the performance or valuation of securities available for sale and securities held to maturity;

• the level of interest rates, including yields available on money market mutual fund eligible instruments;

• potential breaches of contractual terms for which the Company has guarantee obligations;

• the timing and the ability of the Company and optionsXpress to satisfy the closing conditions in the merger agreement, including regulatory approvals and optionsXpress stockholder approval;

• adverse developments in litigation or regulatory matters;

• amounts recovered on insurance policies;

• the extent of any charges associated with litigation and regulatory matters;

• the adverse impact of financial reform legislation and related regulations;

• the amount of loans to the Company’s brokerage and banking clients;

• the level of the Company’s stock repurchase activity;

• the timing and impact of changes in the Company’s level of investments in software;

• the level of brokerage client cash balances and deposits from banking clients; and

• the availability and terms of external financing.

Certain of these factors, as well as general risk factors affecting the Company, are discussed in greater detail in “Part I –Item 1A – Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010, and “Part II – Other Information – Item 1A – Risk Factors.”

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THE CHARLES SCHWAB CORPORATION

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Market risk is the potential for changes in revenue or the value of financial instruments held by the Company as a result of fluctuations in interest rates, equity prices or market conditions.

For the Company’s market risk related to interest rates, a sensitivity analysis, referred to as a net interest revenue simulation model, is shown below. The Company is exposed to interest rate risk primarily from changes in market interest rates on its interest-earning assets relative to changes in the costs of its funding sources that finance these assets.

Net interest revenue is affected by various factors, such as the distribution and composition of interest-earning assets and interest-bearing liabilities, the spread between yields earned on interest-earning assets and rates paid on interest-bearing liabilities, which may re-price at different times or by different amounts, and the spread between short and long-term interest rates. Interest-earning assets include residential real estate loans and mortgage-backed securities. These assets are sensitive to changes in interest rates and to changes to prepayment levels, which tend to increase in a declining rate environment.

To mitigate the risk of loss, the Company has established policies and procedures which include setting guidelines on the amount of net interest revenue at risk, and monitoring the net interest margin and average maturity of its interest-earning assets and funding sources. To remain within these guidelines, the Company manages the maturity, repricing, and cash flow characteristics of the investment portfolios. Because the Company establishes the rates paid on certain brokerage client cash balances and deposits from banking clients, the rates charged on margin loans, and controls the composition of its investment securities, it has some ability to manage its net interest spread, depending on competitive factors and market conditions.

The Company is also subject to market risk as a result of fluctuations in equity prices. The Company’s direct holdings of equity securities and its associated exposure to equity prices are not material. The Company is indirectly exposed to equity market fluctuations in connection with securities collateralizing margin loans to brokerage customers, and customer securities loaned out as part of the Company’s securities lending activities. Equity market valuations may also affect the level of brokerage client trading activity, margin borrowing, and overall client engagement with the Company. Additionally, the Company earns mutual fund service fees and asset management fees based upon daily balances of certain client assets. Fluctuations in these client asset balances caused by changes in equity valuations directly impact the amount of fee revenue earned by the Company.

Financial instruments held by the Company are also subject to liquidity risk – that is, the risk that valuations will be negatively affected by changes in demand and the underlying market for a financial instrument. Recent conditions in the credit markets have significantly reduced market liquidity in a wide range of financial instruments, including the types of instruments held by the Company, and fair value can differ significantly from the value implied by the credit quality and actual performance of the instrument’s underlying cash flows.

Financial instruments held by the Company are also subject to valuation risk as a result of changes in valuations of the underlying collateral, such as housing prices in the case of residential real estate loans and mortgage-backed securities.

For discussion of the impact of current market conditions on asset management and administration fees, net interest revenue, and securities available for sale, see “Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations – Current Market and Regulatory Environment.”

The Company’s market risk related to financial instruments held for trading and forward sale and interest rate lock commitments related to its loans held for sale portfolio is not material.

Net Interest Revenue Simulation

The Company uses net interest revenue simulation modeling techniques to evaluate and manage the effect of changing interest rates. The simulation model (the model) includes all interest-sensitive assets and liabilities. Key variables in the model include the repricing of financial instruments, prepayment, reinvestment, and product pricing assumptions. The Company uses constant balances and market rates in the model assumptions in order to minimize the number of variables

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THE CHARLES SCHWAB CORPORATION

and to better isolate risks. The simulations involve assumptions that are inherently uncertain and, as a result, cannot precisely estimate net interest revenue or predict the impact of changes in interest rates on net interest revenue. Actual results may differ from simulated results due to balance growth or decline and the timing, magnitude, and frequency of interest rate changes, as well as changes in market conditions and management strategies, including changes in asset and liability mix.

As represented by the simulations presented below, the Company is positioned so that the consolidated balance sheet produces an increase in net interest revenue when interest rates rise and, conversely, a decrease in net interest revenue when interest rates fall (i.e., interest-earning assets generally reprice more quickly than interest-bearing liabilities).

The simulations in the following table assume that the asset and liability structure of the consolidated balance sheet would not be changed as a result of the simulated changes in interest rates. As the Company actively manages its consolidated balance sheet and interest rate exposure, in all likelihood the Company would take steps to manage any additional interest rate exposure that could result from changes in the interest rate environment. The following table shows the results of a gradual 100 basis point increase or decrease in market interest rates relative to the Company’s current market rates forecast on simulated net interest revenue over the next 12 months beginning June 30, 2011, and December 31, 2010.

	June 30, 2011			December 31, 2010
Increase of 100 basis points		15.3	%		13.5	%
Decrease of 100 basis points		(4.3	%)		(4.8	%)

The sensitivities shown in the simulation reflect the fact that short-term interest rates in the first half of 2011 remained at historically low levels, including the federal funds target rate, which was unchanged at a range of zero to 0.25%. The current low interest rate environment limits the extent to which the Company can reduce interest expense paid on funding sources in a declining interest rate scenario. A decline in interest rates could therefore negatively impact the yield on the Company’s investment portfolio to a greater degree than any offsetting reduction in interest expense, further compressing net interest margin. Any increases in short-term interest rates result in a greater impact as yields on interest-earning assets are expected to rise faster than the cost of funding sources.

Item 4. Controls and Procedures

Evaluation of disclosure controls and procedures: The management of the Company, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) as of June 30, 2011. Based on this evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures were effective as of June 30, 2011.

Changes in internal control over financial reporting: No change in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) was identified during the quarter ended June 30, 2011, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

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THE CHARLES SCHWAB CORPORATION

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

For a discussion of legal proceedings, see “Part I – Financial Information – Item 1 – Condensed Consolidated Financial Statements (Unaudited) – Notes – 5. Commitments and Contingent Liabilities.”

Item 1A. Risk Factors

During the first half of 2011, there have been no material changes to the risk factors in “Part I – Item 1A – Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

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 second quarter of 2011:

		of Shares Purchased		of Shares Purchased		of Shares Purchased		of Shares Purchased
Month	Total Number of Shares Purchased (in thousands)		Average Price Paid per  Share		Total Number of Shares  Purchased as Part of Publicly Announced Program (1) (in thousands)		Approximate Dollar Value of Shares that May Yet be Purchased Under the Program (in millions)
April:
Share repurchase program (1)		—	$	—		—	$	596
Employee transactions (2)		2	$	18.53		N/A		N/A
May:
Share repurchase program (1)		—	$	—		—	$	596
Employee transactions (2)		4	$	17.82		N/A		N/A
June:
Share repurchase program (1)		—	$	—		—	$	596
Employee transactions (2)		1	$	17.39		N/A		N/A
Total:
Share repurchase program (1)		—	$	—		—	$	596
Employee transactions (2)		7	$	17.90		N/A		N/A

N/A Not applicable.

⁽¹⁾  There were no share repurchases under the Share Repurchase Program during the second quarter. Repurchases under this program would occur under two authorizations by CSC’s Board of Directors, each covering up to $500 million of common stock that were publicly announced by the Company on April 25, 2007, and March 13, 2008. The remaining authorizations do not have an expiration date.

⁽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. The Company may receive shares to pay the exercise price and/or to satisfy tax withholding obligations by employees who exercise stock options (granted under employee stock incentive plans), which are commonly referred to as stock swap exercises.

Item 3. Defaults Upon Senior Securities

None.

- 47 -

THE CHARLES SCHWAB CORPORATION

Item 5. Other Information

None.

Item 6. Exhibits

The following exhibits are filed as part of this Quarterly Report on Form 10-Q.

Exhibit Number	Exhibit
10.338	The Charles Schwab Corporation 2004 Stock Incentive Plan, as approved at the Annual Meeting of Stockholders on May 17, 2011 (supersedes Exhibit 10.327).	(1	)
10.339	Credit Agreement (364 – Day Commitment) dated as of June 10, 2011, between the Registrant and financial institutions listed therein (supersedes Exhibit 10.332).
12.1	Computation of Ratio of Earnings to Fixed Charges.
31.1	Certification Pursuant to Rule 13a-14(a)/15d-14(a), As Adopted Pursuant to Section 302 of The Sarbanes-Oxley Act of 2002.
31.2	Certification Pursuant to Rule 13a-14(a)/15d-14(a), As Adopted Pursuant to Section 302 of The Sarbanes-Oxley Act of 2002.
32.1	Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of The Sarbanes-Oxley Act of 2002.	(2	)
32.2	Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of The Sarbanes-Oxley Act of 2002.	(2	)
101.INS	XBRL Instance Document	(2, 3	)
101.SCH	XBRL Taxonomy Extension Schema	(2, 3	)
101.CAL	XBRL Taxonomy Extension Calculation	(2, 3	)
101.DEF	XBRL Extension Definition	(2, 3	)
101.LAB	XBRL Taxonomy Extension Label	(2, 3	)
101.PRE	XBRL Taxonomy Extension Presentation	(2, 3	)

(1) Management contract or compensatory plan.

(2) Furnished as an exhibit to this Quarterly Report on Form 10-Q.

(3) Attached as Exhibit 101 to this Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2011 are the following materials formatted in XBRL (Extensible Business Reporting Language) (i) the Condensed Consolidated Statements of Income, (ii) the Condensed Consolidated Balance Sheets, (iii) the Condensed Consolidated Statements of Cash Flows, and (iv) Notes to Condensed Consolidated Financial Statements.

- 48 -

THE CHARLES SCHWAB CORPORATION

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		THE CHARLES SCHWAB CORPORATION
			(Registrant)
Date:	August 5, 2011			/s/ Joseph R. Martinetto
				Joseph R. Martinetto
				Executive Vice President and Chief Financial Officer

- 49 -

EX-10.338

Exhibit 10.338

THE CHARLES SCHWAB CORPORATION

2004 STOCK INCENTIVE PLAN

(Adopted by the Board on March 10, 2004)

(Approved by Stockholders on May 17, 2004)

(Amended by the Board on March 14, 2007)

(Amendment Approved by Stockholders on May 17, 2007)

(Amended and Restated December 12, 2007)

(Amended and Restated December 10, 2009)

(Amended and Restated January 27, 2011)

(Amended and Restated May 5, 2011)

(Approved by Stockholders on May 17, 2011)

TABLE OF CONTENTS

	Page
SECTION 1. ESTABLISHMENT AND PURPOSE		1
SECTION 2. ADMINISTRATION		1
(a) Committee Composition		1
(b) Committee Administration		1
SECTION 3. PARTICIPANTS		2
(a) General Rule		2
(b) Non-Employee Directors		2
SECTION 4. STOCK SUBJECT TO PLAN		3
(a) Basic Limitation		3
(b) Share Usage		3
(c) Participant Limits		4
(d) Adjustments		4
SECTION 5. AWARDS		4
(a) General		4
(b) Stock Options		4
(c) Stock Appreciation Rights		5
(d) Restricted Stock and Restricted Stock Units		5
(e) Performance Stock		6
(f) Other Stock or Cash Awards		6
(g) Performance Goals		6
SECTION 6. ADJUSTMENT OF SHARES		7
(a) Adjustments		7
(b) Corporate Transactions		8
(c) Substitution and Assumption of Benefits		8
(d) Reservation of Rights		8
SECTION 7. TERMS OF AWARDS		8
(a) Transferability		8
(b) Change in Control		8
(c) Taxes		9
(d) Effective Date, Amendment and Termination		10
(e) Fair Market Value		10
(f) Dividend Equivalents		10
(g) Other Provisions		10
(h) Non-U.S. Employees		10
(i) Governing Law		11
(j) Section 409A		11
SECTION 8. PAYMENT OF DIRECTORS’ FEES DEFERRALS IN SECURITIES		11
SECTION 9. DEFERRAL OF AWARDS		11
SECTION 10. DEFINED TERMS		12

THE CHARLES SCHWAB CORPORATION

2004 STOCK INCENTIVE PLAN

SECTION 1. ESTABLISHMENT AND PURPOSE.

The Plan was adopted by the Board of Directors on March 10, 2004, subject to stockholder approval, which was obtained on May 17, 2004 (the “Effective Date”). The purposes of The Charles Schwab Corporation 2004 Stock Incentive Plan (the “Plan”) are to promote the long-term success of The Charles Schwab Corporation (“Schwab” or the “Company”) and the creation of incremental stockholder value by (i) encouraging non-employee directors, employees and consultants to focus on long-range objectives, (ii) encouraging the attraction and retention of non-employee directors, employees and consultants with exceptional qualifications and (iii) linking non-employee directors, employees and consultants directly to stockholder interests by providing them stock options and other stock and cash incentives.

This Plan is a successor to The Charles Schwab Corporation 2001 Stock Incentive Plan, The Charles Schwab Corporation 1992 Stock Incentive Plan and The Charles Schwab Corporation Employee Stock Incentive Plan (the “Prior Plans”). As of the Effective Date, no further awards shall be made under the Prior Plans. However, unless a contrary rule is stated, the provisions of the Prior Plans shall continue to apply to awards granted to a participant under the Prior Plans prior to the Effective Date. In the event that this Plan is not approved by stockholders, awards shall continue to be made under the Prior Plans in accordance with their terms.

SECTION 2. ADMINISTRATION.

(a) Committee Composition. The Plan will be administered by a Committee (the “Committee”) of the Schwab Board of Directors (the “Board”) consisting of two or more directors as the Board may designate from time to time. The composition of the Committee shall satisfy such requirements as:

(i) the Securities and Exchange Commission may establish for administrators acting under plans intended to qualify for exemption under Rule 16b-3 or its successor under the Securities Exchange Act of 1934 (the “Exchange Act”);

(ii) may be established by the stock exchange or stock market on which Schwab’s common stock may be listed pursuant to the rule-making authority of such stock exchange or stock market; and

(iii) the Internal Revenue Service may establish for outside directors acting under plans intended to qualify for exemption under section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”).

(b) Committee Administration. The Committee shall have discretionary authority to construe and interpret the Plan and any benefits granted under the Plan, to establish, interpret and amend rules for Plan administration, to change the terms and conditions of options and other benefits at or after grant, and to make all other determinations which it deems necessary or advisable for the administration of the Plan. The determinations of the Committee shall be made in accordance with its judgment as to the best interests of Schwab and its stockholders and in accordance with the purposes of the Plan, and shall be final and conclusive on all persons. A majority of the members of the Committee shall constitute a quorum, and all determinations of the Committee shall be made by a majority of its members in person or by telephone. Any determination of the Committee under the Plan may be made without notice or meeting of the Committee, and shall be made in writing signed by all the Committee members. The Committee may authorize one or more officers of the Company to select employees to participate in the Plan and to determine the number of option shares and other rights to be granted to such participants (other than to the officer making such determination), except with respect to awards to officers subject to section 16 of the Exchange Act or officers who are or may become “covered employees” within the meaning of section 162(m) of the Code (“Covered Employees”) and any reference in the Plan to the Committee shall include such officer or officers. Subject to the requirements of applicable law, the Committee may also authorize one or more officers of the Company to administer claims under the Plan. No member of the Committee shall be liable

1

for any action that such member has taken or failed to take in good faith with respect to the Plan or any award under the Plan.

SECTION 3. PARTICIPANTS.

(a) General Rule. Participants may consist of all employees and consultants of Schwab and its subsidiaries, non-employee directors of the Board of Directors of Schwab (“Non-Employee Directors”) and non-employee directors of any subsidiary as determined by the Committee. Any corporation or other entity in which a 50% or greater interest is at the time directly or indirectly owned by Schwab shall be a subsidiary for purposes of the Plan. Designation of a participant in any year shall not require the Committee to designate that person to receive a benefit in any other year or to receive the same type or amount of benefit as granted to the participant in any other year or as granted to any other participant in any year. The Committee shall consider all factors that it deems relevant in selecting participants and in determining the type and amount of their respective benefits.

(b) Non-Employee Directors. In addition to any awards that may be granted to them under Section 3(a), each Non-Employee Director shall receive an automatic equity grant, subject to the terms of subparagraph (iv) below, as follows:

(i) For each calendar year for which he or she serves as a Non-Employee Director following the year in which the Non-Employee Director begins service, each Non-Employee Director shall receive an equity grant with an aggregate value equal to $125,000, consisting of 50 percent Stock Options and 50 percent Restricted Stock Units covering shares of Schwab common stock. The number of Stock Options granted shall be determined by dividing $62,500 by the binomial value of a share of Schwab common stock on the date of grant and the number of Restricted Stock Units shall be determined by dividing $62,500 by the fair market value (defined as the average of the high and low price) of a share of Schwab common stock on the date of grant.

(ii) In the first calendar year upon joining the Board, each Non-Employee Director shall receive an automatic equity grant calculated in the manner specified in Section 3(b)(i), except that the value of the grant shall be equal to $125,000 multiplied by the number of months remaining in the calendar year during which the Non-Employee Director will first serve as a Non-Employee Director divided by twelve.

(iii) The awards described in subparagraph (i) for a particular calendar year will be granted to each Non-Employee Director on the second business day following each regular annual meeting of the Company’s stockholders, provided that the Non-Employee Director continues to serve as a Non-Employee Director through the date of such annual meeting. Otherwise, no award shall be granted with respect to such calendar year. The awards described in subparagraph (ii) for a particular calendar year will be granted to each Non-Employee Director either (A) on the second business day following the regular annual meeting of the Company’s stockholders for the calendar year in which the Non-Employee Director is first appointed or elected to the Board, if the Non-Employee Director is elected or appointed to the Board on or before the date of such annual meeting or (B) on the date of the first meeting of the Board following the date the Non-Employee Director is first appointed or elected to the Board, if the Non-Employee Director is elected or appointed to the Board after the date of the regular annual meeting of the Company’s stockholders.

(iv) Each stock option shall be subject to the following terms and conditions:

(A) Each stock option shall be designated as a non-qualified stock option that is not intended to meet the specific requirements set forth in section 422 of the Code (“Nonqualified Stock Option”);

(B) The term of each Nonqualified Stock Option shall be 10 years; provided, however, that any unexercised Nonqualified Stock Option shall expire on the earlier of (I) the date 10 years after the date of grant; or (II) three (3) months following the date that the participant ceases to be a Non-Employee Director or an employee for any reason other than retirement (as defined in subparagraph (v) below), death or disability. If a participant ceases to be a Non-Employee Director or employee on account of death or disability, any unexercised

2

Nonqualified Stock Option shall expire on the earlier of the date 10 years after the date of grant or one year after the date of death or disability of such director, and if a participant ceases to be a Non-Employee Director or employee on account of retirement, any unexercised Nonqualified Stock Option shall expire on the earlier of the date 10 years after the date of grant or two years after the date of retirement of such Non-Employee Director; and

(C) The exercise price under each Nonqualified Stock Option shall be equal to the fair market value on the date of grant as determined by the Committee.

(v) The awards described in subparagraphs (i) and (ii) shall become vested and exercisable in accordance with the following schedule

	Cumulative Vesting Percentage of Award
1st anniversary of grant date	25%
2nd anniversary of grant date	50%
3rd anniversary of grant date	100%

Notwithstanding the foregoing, the awards described in subparagraphs (i) and (ii) shall be fully vested on the Non-Employee Director’s death, disability (as such term is defined in the applicable award agreement) or retirement from the Board. For purposes of this Section 3(b), “retirement” shall mean a Non-Employee Director’s resignation or removal from the Board at any time after he or she has either attained age 70 or completed five years of service as a Non-Employee Director.

(vi) Each Restricted Stock Unit represents the right to receive a share of Schwab common stock subject to the conditions set forth in the applicable award agreement. If Schwab pays cash dividends on shares of Schwab common stock, each Restricted Stock Unit shall receive a dividend equivalent payment equal to the dividend paid per share of Schwab common stock multiplied by the number of unvested Restricted Stock Units. Each such payment shall be made as soon as practicable following the payment of the actual dividend, but in no event beyond March 15^th of the year following the year the actual dividend is paid.

SECTION 4. STOCK SUBJECT TO PLAN.

(a) Basic Limitation. There is hereby reserved for issuance under the Plan an aggregate of:

(i) 90 million shares of Schwab common stock; plus

(ii) any shares of Schwab common stock subject to outstanding awards under the Prior Plans as of the Effective Date that on or after the Effective Date cease for any reason to be subject to such awards (other than by reason of exercise or settlement of the awards to the extent they are exercised for or settled in shares); plus

(iii) any shares of Schwab common stock that were issued under the Prior Plans and are reacquired by Schwab after the Effective Date.

The aggregate maximum number of shares of Schwab common stock available under subparagraphs (ii) and (iii) is 150 million. To the extent an award is paid in cash, it shall not reduce the limits of this Section 4(a).

(b) Share Usage. If there is a lapse, expiration, termination or cancellation of any stock option issued under the Plan prior to the issuance of shares under the Plan or if shares of common stock are issued under the Plan and thereafter are reacquired by Schwab, the shares subject to those options and the reacquired shares shall be added to the shares available for benefits under the Plan. Shares covered by a benefit granted

3

under the Plan or a Prior Plan shall not be counted as issued unless and until they are actually issued and delivered to a participant. Any shares covered by a Stock Appreciation Right shall be counted as issued only to the extent shares are actually issued to the participant upon exercise of the right. In addition, any shares of common stock exchanged by a participant as full or partial payment to Schwab of the exercise price under any Stock Option exercised under the Plan or a Prior Plan, any shares retained by Schwab pursuant to a participant’s tax withholding election, and any shares covered by a benefit which is settled in cash shall be added to the shares available for benefits under the Plan. All shares issued under the Plan may be authorized and unissued shares, issued shares reacquired by Schwab or other shares that are treasury shares.

(c) Participant Limits. Under the Plan, no participant may be granted in any fiscal year of the Company:

(i) Stock Options or SARs relating to more than 5 million shares of Schwab common stock in the aggregate, and

(ii) Restricted Stock, Restricted Stock Units, Performance Stock, Performance Units denominated in shares of Schwab common stock, or Other Stock Awards that are subject to the attainment of Performance Criteria described in Section 5(g) relating to more than 1 million shares of Schwab common stock in the aggregate, and

(iii) Performance Units denominated in cash or Other Cash Awards that are subject to the attainment of Performance Criteria described in Section 5(g) that could entitle the participant to more than $10 million in the aggregate from that year’s awards (considering for this purpose the maximum that could be payable, including for above-target performance).

With respect to any Stock Option or SAR granted to a participant who is a Covered Employee that is canceled, the number of shares of Schwab common stock originally subject to such Stock Option or SAR shall continue to count against the limit specified in subparagraph (i) above in accordance with Section 162(m) of the Code.

(d) Adjustments. The shares reserved for issuance and the limitations set forth in this Section 4 shall be subject to adjustment in accordance with Section 6.

SECTION 5. AWARDS.

(a) General. Benefits under the Plan shall consist of Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Stock, Performance Units, and Other Stock or Cash Awards, all as described below. Each award under the Plan shall be evidenced by a written award agreement in paper or electronic form approved by the Committee. Such agreement shall be subject to and incorporate the express terms and conditions, if any, required under the Plan or as required by the Committee for the form of award granted and such other terms and conditions as the Committee may specify.

(b) Stock Options. Stock Options may be granted to participants at any time as determined by the Committee. The Committee shall determine the number of shares subject to each option and whether the option is an incentive stock option described in section 422(b) of the Code (an “Incentive Stock Option”); provided that only a common-law employee shall be eligible for the grant of an Incentive Stock Option. No participant may be granted Incentive Stock Options (under this Plan or any other Incentive Stock Option plan of the Company and its affiliates) which are first exercisable in any calendar year for shares of Schwab common stock having an aggregate fair market value (determined as of the date an option is granted) that exceeds $100,000; any Stock Option granted under the Plan that exceeds this limit shall be a Nonqualified Stock Option. The option price for each option shall be determined by the Committee but shall not be less than 100% of the fair market value of Schwab’s common stock on the date the option is granted (110% in the case of an Incentive Stock Option granted to an individual who, at the time of grant, owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company (a “10% Stockholder”). Each option shall expire at such time as the Committee shall determine at the time of

4

grant. Options shall be exercisable at such time and subject to such terms and conditions as the Committee shall determine; provided, however, that no option shall be exercisable later than the tenth anniversary of its grant (five years in the case of an Incentive Stock Option granted to a 10% Stockholder). The option price, upon exercise of any option, shall be payable to Schwab in full by:

(i) cash payment or its equivalent;

(ii) surrendering, or attesting to the ownership of, shares of Schwab stock that are already owned by the participant;

(iii) delivery of a properly executed exercise notice, together with irrevocable instructions to a broker to promptly deliver to Schwab the amount of sale proceeds from the option shares or loan proceeds to pay the exercise price and any withholding taxes due to Schwab; and

(iv) such other methods of payment as the Committee, at its discretion, deems appropriate; provided, however, that no method of payment will be permitted if it would result in a violation of applicable law, as determined by the Committee in its sole discretion.

In no event shall the Committee cancel any outstanding Stock Option for the purpose of reissuing the option to the participant at a lower exercise price or reduce the option price of an outstanding option.

Notwithstanding anything in this Section 5(b) to the contrary, Stock Options may be granted only to individuals who provide direct services on the date of grant of the Stock Option to the Company or another entity in a chain of entities in which the Company or another such entity has a controlling interest within the meaning of Treasury Regulation section 1.409A-1(b)(iii)(E) in each entity in the chain.

(c) Stock Appreciation Rights. Stock Appreciation Rights (“SARs”) may be granted to participants at any time as determined by the Committee. An SAR may be granted in tandem with a Stock Option granted under this Plan or on a free-standing basis. The Committee also may, in its discretion, substitute SARs for outstanding Stock Options. The grant price of a tandem or substitute SAR shall be equal to the option price of the related option. The grant price of a free-standing SAR shall be equal to the fair market value of Schwab’s common stock on the date of its grant. An SAR may be exercised upon such terms and conditions and for such term as the Committee in its sole discretion determines; provided, however, that the term shall not exceed the option term in the case of a tandem or substitute SAR or ten years in the case of a free-standing SAR and the terms and conditions applicable to a substitute SAR shall be substantially the same as those applicable to the Stock Option which it replaces. Upon exercise of an SAR, the participant shall be entitled to receive payment from Schwab in an amount determined by multiplying the excess of the fair market value of a share of Schwab common stock on the date of exercise over the grant price of the SAR by the number of shares with respect to which the SAR is exercised. The payment may be made in cash or stock, at the discretion of the Committee. Notwithstanding anything in this Section 5(c) to the contrary, SARs may be granted only to individuals who provide direct services on the date of grant of the SAR to the Company or another entity in a chain of entities in which the Company or another such entity has a controlling interest within the meaning of Treasury Regulation section 1.409A-1(b)(iii)(E) in each entity in the chain.

(d) Restricted Stock and Restricted Stock Units. Restricted Stock and Restricted Stock Units may be awarded or sold to participants under such terms and conditions as shall be established by the Committee. Restricted Stock and Restricted Stock Units shall be subject to such restrictions as the Committee determines, including, without limitation, any of the following (i) a prohibition against sale, assignment, transfer, pledge, hypothecation or other encumbrance for a specified period; or (ii) a requirement that the holder forfeit (or in the case of shares or units sold to the participant resell to Schwab at cost) such shares or units in the event of termination of employment during the period of restriction. All restrictions shall expire at such times as the Committee shall specify. Settlement of vested Restricted Stock Units may be made in the form of (a) cash, (b) shares of Schwab common stock or (c) any combination of both, as determined by the Committee. Restricted Stock Units may be settled in a lump sum or in installments as specified in the applicable award agreement. The distribution may occur or commence when all vesting conditions

5

applicable to the Restricted Stock Units have been satisfied or have lapsed, or it may be deferred to any later date in accordance with Section 9, as provided for in the applicable award agreement.

(e) Performance Stock. The Committee shall designate the participants to whom long-term performance stock (“Performance Stock”) or long-term performance units (“Performance Units”) are to be awarded and determine the number of shares or units, the length of the performance period and the other terms and conditions of each such award. Each award of Performance Stock or Performance Units shall entitle the participant to a payment in the form of shares of common stock or cash (as provided in the award agreement) upon the attainment of performance goals and other terms and conditions specified by the Committee pursuant to Section 5(g) below. The Committee may, in its discretion, make a cash payment equal to the fair market value of shares of common stock otherwise required to be issued to a participant pursuant to a Performance Stock award.

(f) Other Stock or Cash Awards. In addition to the incentives described in paragraphs (b) through (e) of this Section 5, the Committee may grant other incentives payable in cash or in common stock under the Plan as it determines to be in the best interests of Schwab and subject to such other terms and conditions as it deems appropriate.

(g) Performance Goals.

(i) Awards of Restricted Stock, Restricted Stock Units, Performance Stock, Performance Units and Other Stock or Cash Awards under the Plan may be made subject to the attainment of performance goals for a specified period of time (a “Performance Period”). In the case of an award that is intended to satisfy the performance-based exception to the deductibility limitation of Section 162(m) of the Code (the “Performance-Based Exception”), the categories of permissible performance goals include: income; operating income; pre-tax income; after-tax income; profit; pre-tax operating profits; pre-tax reported profits; pre-tax operating profit margin; pre-tax reported profit margin; after-tax operating profit margin; after-tax reported profit margin; revenue; revenue growth; operating revenue growth; cash flow; stockholder return; net income; client net new assets; levels of client assets or sales (of products, offers or services); earnings per share; return on stockholders’ equity; return on investment; earnings; earnings before interest and taxes (EBIT); earnings before interest, taxes, depreciation and amortization (EBITDA); consolidated pre-tax earnings; net earnings; operating cash flow; free cash flow; free cash flow per share; cash flow return; economic value added; market value added; total stockholder return; debt/capital ratio; return on total capital; market share of assets; return on assets; return on net assets; return on capital employed; cost control; Schwab common stock price; capital expenditures; price/earnings growth ratio; sales; sales volume; and book value per share; cost of capital; cost of equity; and changes between years or periods that are determined with respect to any of the above-listed performance criteria (“Performance Criteria”). The Committee may establish other performance measures for awards that are not intended to qualify under the Performance-Based Exception. A performance goal may be measured relative to the performance of the Company as a whole or any business unit, department, division region or function of the Company or any subsidiary in which the participant is employed and may be measured relative to a peer group or index. If more than one performance goal is specified by the Committee for a Performance Period, the Committee shall also specify, in writing, whether one, all or some other number of such performance goals must be attained in order for the performance goals to be satisfied for the applicable award. Notwithstanding satisfaction of any performance goals, the number of shares issued or amounts paid under awards may be adjusted by the Committee on the basis of such further consideration as the Committee in its sole discretion shall determine, subject to the provisions of Section 5(g)(ii)(B) below.

(ii) For an award that is intended to qualify for the Performance-Based Exception:

(A) Not later than the 90th day of the Performance Period (or, in the event that a Performance Period is expected to be less than 12 months, not later than the date when 25% of the Performance Period has elapsed), the Committee shall select the participants for such period and establish in writing (I) the objective performance goals for each participant for that period

6

based on one or more of the Performance Criteria, (II) the definition of each applicable performance goal, (III) the maximum amount payable under the award for attainment of the performance goals and the threshold level of attainment below which no amount will be paid under the award, in all cases subject to the per-participant limits described in Section 4, (IV) the method by which such amounts will be calculated, and (V) how performance will be measured against a goal to reflect the impact of extraordinary items and any other unusual or non-recurring items as specified in Section 5(g)(iii) below.

(B) The Committee may not in any event increase the amount of compensation payable to a Covered Employee upon the attainment of a performance goal. The Committee shall determine and certify in writing, for each participant, the extent to which the performance goals have been met and the amount of the award, if any, to be made. The Committee has the absolute and unrestricted discretion to reduce the amount of the award that otherwise would be payable in connection with the attainment of the performance goals applicable to the award. It is expressly permissible to reduce the amount otherwise payable to zero.

(iii) In determining whether any performance goals have been satisfied, the Committee may exclude any or all extraordinary items (as determined under U.S. generally accepted accounting principles), and any other unusual or non-recurring items, including but not limited to, charges or costs associated with restructurings of the Company, discontinued operations and the cumulative effects of accounting changes. In addition, the Committee may adjust any performance goal for a year as it deems equitable to recognize unusual or non-recurring events affecting the Company, changes in tax laws or accounting procedures, mergers and acquisitions and any other factors as the Committee may determine. In the case of an award that is intended to qualify for the Performance-Based Exception, such exclusions and adjustments may only apply to the extent the Committee specifies in writing (not later than the time the performance targets are required to be established) which exclusions and adjustment the Committee will apply to determine whether a performance goal has been satisfied, as well as an objective manner for applying them, or to the extent that the Committee determined that they may apply without adversely affecting the award’s qualification for the Performance-Based Exception. To the extent that a performance goal is based on Schwab common stock, then in the event of any stock dividend, stock split, spin-off, split-off, spin-out, recapitalization or other change in the capital structure of the Company, merger, consolidation, reorganization, combination of shares, partial or complete liquidation or other distribution of assets (other than a normal cash dividend), issuance of rights or warrants to purchase securities or any other corporate transaction having an effect similar to any of the foregoing, the Committee shall make or provide for such adjustments in performance goals as the Committee in its sole discretion may in good faith determine to be equitably required in order to prevent dilution or enlargement of the rights of participants. In the case of an award intended to qualify for the Performance-Based Exception, this shall apply only to the extent the Committee determined it will not adversely affect such qualification.

SECTION 6. ADJUSTMENT OF SHARES.

(a) Adjustments. If Schwab shall at any time change the number of issued shares of common stock by stock dividend, stock split, spin-off, split-off, spin-out, recapitalization, or other change in the capital structure of the Company, merger, consolidation, reorganization, combination, exchange of shares, partial or complete liquidation or other distribution of assets (other than a normal cash dividend), issuance of rights or warrants to purchase securities or any other corporate transaction having an effect similar to any of the foregoing, then, in order to prevent unintended dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan, the Committee shall equitably adjust, as it determines to be necessary and appropriate, the total number of shares reserved for issuance under the Plan, the maximum number of shares that may be made subject to an award in any fiscal year, and the number of shares covered by each outstanding award and the price therefor, if any. Any such adjustment to an Incentive Stock Option shall be made in a manner that permits the Incentive Stock Option to continue to meet the requirements of Section 422 of the Code. The Committee shall also adjust the terms and conditions of, and the criteria included in, awards in recognition of unusual or nonrecurring events (including, without limitation, the

7

events described in the first sentence of this Section 6(a)) affecting the Company or the financial statements of the Company or of changes in applicable laws, regulations, or accounting principles, whenever the Committee determines that such adjustments are needed to prevent unintended dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan. The determination of the Committee as to the foregoing adjustments, if any, shall be conclusive and binding on all participants under the Plan.

(b) Corporate Transactions. In the event that the Schwab is a party to a merger or other reorganization, outstanding awards shall be subject to the agreement of merger or reorganization. Such agreement shall provide for (i) the continuation of the outstanding awards by Schwab, if Schwab is a surviving corporation, (ii) the assumption of the outstanding awards by the surviving corporation or its parent or subsidiary, (iii) the substitution by the surviving corporation or its parent or subsidiary of its own awards for the outstanding awards under this Plan, (iv) full exercisability or vesting and accelerated expiration of the outstanding awards or (v) settlement of the full value of the outstanding awards in cash or cash equivalents followed by cancellation of such awards.

(c) Substitution and Assumption of Benefits. Without affecting the number of shares reserved or available hereunder, the Board or the Committee may authorize the issuance of benefits under this Plan in connection with the assumption of, or substitution for, outstanding benefits previously granted to individuals who become employees of Schwab or any subsidiary as a result of any merger, consolidation, acquisition of property or stock, or reorganization, upon such terms and conditions as the Committee may deem appropriate, including but not limited to a Stock Option exercise price or SAR grant price that is less than fair market value, so long as such exercise price or grant price is determined in a manner that complies with the applicable requirements of Section 409A and Section 424 of the Code.

(d) Reservation of Rights. Except as provided in this Section 6, a participant shall have no rights by reason of any subdivision or consolidation of shares of stock of any class, the payment of any dividend or any other increase or decrease in the number of shares of stock of any class. Any issue by Schwab of shares of stock of any class, or securities convertible into shares of stock of any class, shall not affect, and no adjustment by reason thereof shall be made with respect to, the number, kind or exercise price of shares subject to a Stock Option or other award. The grant of an award pursuant to the Plan shall not affect in any way the right or power of the Company to make adjustments, reclassifications, reorganizations or changes of its capital or business structure, to merge or consolidate or to dissolve, liquidate, sell or transfer all or any part of its business or assets (or to undertake any other corporate action described in Section 6(a) above).

SECTION 7. TERMS OF AWARDS.

(a) Transferability. Except as otherwise determined by the Committee in the case of benefits other than Incentive Stock Options or SARs granted in tandem with Incentive Stock Options, each benefit granted under the Plan shall not be assigned, transferred, pledged or encumbered, either voluntarily or by operation of law, other than by will or the laws of descent and distribution and each Stock Option and SAR shall be exercisable during the participant’s lifetime only by the participant or, in the event of disability, by the participant’s personal representative. In the event of the death of a participant, the exercise of any benefit or payment with respect to any benefit shall be made only by or to the executor or administrator of the estate of the deceased participant or the person or persons to whom the deceased participant’s rights under the benefit shall pass by will or the laws of descent and distribution.

(b) Change in Control. The Committee (in its sole discretion) may determine at the time of (or at any time after) the grant of an award, that upon a Change in Control of Schwab, that any outstanding Stock Option or SAR shall become vested and exercisable; all restrictions on any Restricted Stock or Restricted Stock Unit shall lapse; all performance goals shall be deemed achieved at target levels and all other terms and conditions met; Performance Stock shall be delivered; a Performance Unit and Restricted Stock Unit shall be paid out as promptly as practicable; and any Other Stock or Cash Award shall be delivered or paid; provided, however, that this Section 7(b) shall not apply to awards pursuant to which a deferral election has been made in accordance with Section 9. A “Change in Control” shall mean the occurrence of any of the following events:

8

(i) Upon consummation of a reorganization, merger or consolidation (a “Business Combination”), in each case, unless, following such Business Combination:

(A) the individuals and entities who were the beneficial owners, respectively, of the then outstanding shares of Common Stock of the Company (the “Outstanding Common Stock”) and the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Voting Securities”) immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination, of the Outstanding Common Stock and Outstanding Voting Securities, as the case may be; and

(B) no Person (as defined in subparagraph (iii) below) (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) sponsored or maintained by the Company or such other corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation, except to the extent that such ownership of Outstanding Common Stock or Outstanding Voting Securities existed prior to the Business Combination; and

(C) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or

(ii) If individuals who, as of the Effective Date, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company’s stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of (A) an actual or threatened election contest with respect to the election or removal of directors; (B) an actual or threatened solicitation of proxies or consents; or (C) any other actual or threatened action by, or on behalf of, any Person other than the Board; or

(iii) Upon the acquisition after the Effective Date by any individual, entity or group (within the meaning of section 13(d)(3) or 14(d)(2) of the Exchange Act (a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (A) the then Outstanding Common Stock or (B) the combined voting power of the Outstanding Voting Securities; provided, however, that the following acquisitions shall not be deemed to be covered by this subparagraph (iii): (x) any acquisition of Outstanding Common Stock or Outstanding Voting Securities by the Company, (y) any acquisition of Outstanding Common Stock or Outstanding Voting Securities by any employee benefit plan (or related trust) sponsored or maintained by the Company or (z) any acquisition of Outstanding Common Stock or Outstanding Voting Securities by any corporation pursuant to a transaction which complies with clauses (A), (B) and (C) of subparagraph (i) above; or

(iv) The consummation of the sale of all or substantially all of the assets of the Company or approval by the stockholders of the Company of a complete liquidation or dissolution of the Company.

(c) Taxes. Schwab shall be entitled to withhold the amount of any tax attributable to any amounts payable or shares deliverable under the Plan, after giving the person entitled to receive such payment or delivery notice and Schwab may defer making payment or delivery as to any award, if any such tax is

9

payable until indemnified to its satisfaction. A participant may pay all or a portion of Schwab’s minimum statutory withholding obligation arising in connection with the exercise of a Stock Option or SAR or the receipt or vesting of shares hereunder by electing to have Schwab withhold shares of common stock having a fair market value equal to such amount. The Committee may permit a participant to pay the withholding obligation applicable to an award by delivery to the Company of shares of Schwab common stock owned by the participant having a fair market value equal to the amount of such taxes or permit cashless exercise.

(d) Effective Date, Amendment and Termination. The Plan is effective on the Effective Date and shall automatically terminate one day before the 10th anniversary of the date on which the Board adopted the Plan. The Board or the Committee may amend the Plan from time to time or terminate the Plan at any time. However, no such action shall reduce the amount of any existing award or change the terms and conditions thereof without the participant’s consent unless such action is necessary or desirable (i) for the continued validity of the Plan or its compliance with Rule 16b-3 of the Exchange Act or any other applicable law, rule or regulation or pronouncement, or (ii) to avoid any adverse consequences under Section 162(m) of the Code, Section 409A of the Code or any requirement of a securities exchange or association or regulation or self-regulatory body. Stockholder approval shall be obtained for any Plan amendment to the extent necessary or desirable to comply with applicable laws, regulations or rules.

(e) Fair Market Value. The fair market value of a share of Schwab common stock on a given determination date shall equal:

(i) The closing sales price of a share as reported on the New York Stock Exchange (NYSE) on the applicable determination date (except in the case of a share of Restricted Stock or a Restricted Stock Unit, which shall be the average of the high and low price of a share as reported on NYSE on the applicable determination date), or

(ii) If no sales of shares are reported for such date, the mean between the bid and asked price of a share on NYSE at the close of the market on such date, or

(iii) In the event that the method for determining fair market value described in clauses (i) and (ii) is not practicable, as determined by the Committee in its discretion, the fair market value of a share determined in accordance with any other reasonable method as the Committee, in its discretion, may deem equitable, or as required by applicable law or regulation, which method shall be one that is deemed to constitute fair market value for purposes of Section 409A of the Code to the extent it is used with respect to a Stock Option or SAR.

(f) Dividend Equivalents. Any participant selected by the Committee, in its sole discretion, may be granted dividend equivalents based on the dividends declared on shares that are subject to any award, to be credited as of dividend payment dates, during the period between the date the award is granted and the date the award is exercised, vests or expires, as determined by the Committee. Such dividend equivalents shall be converted to cash or additional shares by such formula and at such time and subject to such limitations as may be determined by the Committee. Notwithstanding the foregoing, no dividend equivalents will be paid contingent on the exercise of a Stock Option or SAR.

(g) Other Provisions. The award of any benefit under the Plan may also be subject to other provisions (whether or not applicable to the benefit awarded to any other participant) as the Committee determines appropriate, including provisions intended to comply with applicable securities laws and stock exchange or stock market requirements, understandings or conditions as to the participant’s employment, requirements or inducements for continued ownership of common stock after exercise or vesting of benefits, forfeiture of awards in the event of termination of employment shortly after exercise or vesting, or breach of noncompetition or confidentiality agreements following termination of employment, or provisions permitting the deferral of the receipt of a benefit for such period and upon such terms as the Committee shall determine.

(h) Non-U.S. Employees. In the event any benefit under this Plan is granted to an employee who is employed or providing services outside the United States and who is not compensated from a payroll maintained in the United States, the Committee may, in its sole discretion, modify the provisions of the Plan as they pertain to such individuals to comply with applicable law, regulation or accounting rules.

10

(i) Governing Law. The Plan and any actions taken in connection herewith shall be governed by and construed in accordance with the laws of the state of Delaware (without regard to applicable Delaware principles of conflict of laws).

(j) Section 409A. At all times, this Plan shall be interpreted and operated (i) with respect to awards subject to Section 409A of the Code (“Section 409A”), in accordance with the requirements of Section 409A and the regulatory guidance thereunder unless an exemption from Section 409A is available and applicable, (ii) to maintain the exemptions from Section 409A of Stock Options, SARs and Restricted Stock and any awards designed to meet the short-deferral exception under Section 409A, and (iii) to preserve the status of deferrals of compensation that were earned and vested prior to January 1, 2005 as exempt from Section 409A, i.e., to preserve the grandfathered status of such deferrals. To the extent there is a conflict between the provisions of the Plan relating to compliance with Section 409A and the provisions of any award agreement issued under the Plan, the provisions of the Plan control. Moreover, any discretionary authority that the Committee may have pursuant to the Plan shall not be applicable to an award that is subject to Section 409A to the extent such discretionary authority would conflict with Section 409A. In addition, to the extent required to avoid a violation of the applicable rules under Section 409A by reason of Section 409A(a)(2)(B)(i), any payment under an award shall be delayed until the earliest date of payment that will result in compliance with the rules of Section 409A(a)(2)(B)(i) (regarding the required six-month delay for distributions to specified employees that are related to a separation from service). In the event that any award shall be deemed not to comply with Section 409A, then neither the Company, the Board, the Committee nor its or their designees or agents, nor any of their affiliates, assigns or successors (each a “protected party”) shall be liable to any award recipient or other person for actions, inactions, decisions, indecisions or any other role in relation to the Plan by a protected party if made or undertaken in good faith or in reliance on the advice of counsel (who may be counsel for the Company), or made or undertaken by someone other than a protected party.

SECTION 8. PAYMENT OF DIRECTORS’ FEES DEFERRALS IN SECURITIES.

In the event a Non-Employee Director elects pursuant to and in accordance with the terms of Schwab’s Directors’ Deferred Compensation Plan II (or any predecessor or successor to such plan) to defer receipt of the payment of his or her annual cash retainer from Schwab in the form of Restricted Stock Units, Nonqualified Stock Options, Restricted Stock, Other Stock Awards or a combination thereof, such Nonqualified Stock Options, Restricted Stock Units, Restricted Stock, and Other Stock Awards shall be issued under this Plan. For purposes of this Section 8, the term “Non-Employee Director” shall also include a non-employee director of any Subsidiary, if the Committee has approved participation by such non-employee director in Schwab’s deferred compensation plan for directors. The number and form of each award to be granted to Non-Employee Directors pursuant to this Section 8 in connection with a deferral election under the Directors’ Deferred Compensation Plan II (or any predecessor or successor to such plan) shall be determined in accordance with the provisions of that plan, but the terms of each such award shall be determined by the Committee or its delegate in accordance with the provisions of this Plan.

SECTION 9. DEFERRAL OF AWARDS.

Subject to the requirements of Section 409A, the Committee (in its sole discretion) may permit or require a participant to have cash or shares that otherwise would be paid to such participant as a result of the settlement of a restricted stock unit or performance unit award credited to a deferred compensation account established for such participant by the Committee as an entry on Schwab’s books. A deferred compensation account may be credited with interest or other forms of investment return, as determined by the Committee. A participant for whom such an account is established shall have no rights other than those of a general creditor of Schwab. Such an account shall represent an unfunded and unsecured obligation of Schwab and shall be subject to the terms and conditions of the applicable agreement between such participant and Schwab. If the deferral or conversion of awards is permitted or required, the Committee (in its sole discretion) may, consistent with the requirements of Section 409A, establish rules, procedures and forms pertaining to such awards, including (without limitation) the settlement of deferred compensation accounts established under this Section 9 and such rules and procedures shall be set forth in detail in the applicable stock award agreement or other deferral agreement.

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SECTION 10. DEFINED TERMS.

“10% Stockholder”	5
“Board”	1
“Business Combination”	9
“Change in Control”	9
“Code”	1
“Committee”	1
“Company”	1
“Covered Employees”	2
“Effective Date”	1
“Exchange Act”	1
“Incentive Stock Option”	5
“Incumbent Board”	10
“Non-Employee Directors”	2
“Nonqualified Stock Option”	3
“Outstanding Common Stock”	9
“Outstanding Voting Securities”	9
“Performance Criteria”	7
“Performance Period”	6
“Performance Stock”	6
“Performance Units”	6
“Performance-Based Exception”	6
“Person”	10
“Plan”	1
“Prior Plans”	1
“SARs”	5
“Schwab”	1
“Section 409A”	11

12

EX-10.339

Exhibit 10.339

EXECUTION COPY

$800,000,000

CREDIT AGREEMENT

(364-DAY COMMITMENT)

dated as of June 10, 2011

Among

THE CHARLES SCHWAB CORPORATION

and

CITIBANK, N.A.

as Administrative Agent

and

THE OTHER FINANCIAL INSTITUTIONS PARTY HERETO

and

THE BANK OF NEW YORK MELLON

CREDIT SUISSE AG, CAYMAN ISLANDS BRANCH

UBS SECURITIES LLC

and

WELLS FARGO BANK, NATIONAL ASSOCIATION

as Co-Documentation Agents

and

JPMORGAN CHASE BANK, N.A.

as Syndication Agent

and

CITIGROUP GLOBAL MARKETS INC.

and

J.P. MORGAN SECURITIES LLC

as Joint Lead Arrangers and Book Managers

1.	DEFINITIONS		1
2.	THE CREDIT FACILITY		11
	2.1	The Revolving Credit Facility	11
	2.2	Term Loan Facility	12
	2.3	Evidence of Borrowing/Promissory Notes	12
	2.4	Making of Revolving Loans and Term Loans, Borrowings; Interest Periods; Notice	13
	2.5	Conversion and Continuation Elections	14
	2.6	Interest Periods	15
	2.7	Interest Rates	16
	2.8	Substitute Rates	16
	2.9	Fees	17
	2.10	Reduction of Credit	17
	2.11	Termination Date; Extensions	18
	2.12	Payments by the Lenders to the Agent	18
	2.13	Sharing of Payments, Etc.	19
	2.14	Computation of Fees and Interest	19
3.	PAYMENT		20
	3.1	Repayment	20
	3.2	Method of Payment	20
	3.3	Optional Prepayment	20
	3.4	Taxes/Net Payments	20
	3.5	Illegality	21
	3.6	Increased Costs and Reduction of Return	22
	3.7	Funding Losses	22
	3.8	Certificates of Lenders	23
	3.9	Substitution of Lenders	23
	3.10	Survival	23
4.	CONDITIONS		24
	4.1	Conditions Precedent to the Effectiveness of this Agreement	24
	4.2	Conditions Precedent to Revolving Loans and Term Loans	25
5.	REPRESENTATIONS AND WARRANTIES		25
	5.1	Organization and Good Standing	26
	5.2	Corporate Power and Authority	26
	5.3	Enforceability	26
	5.4	No Violation of Laws or Agreements	26
	5.5	No Consents	26
	5.6	Financial Statements	26

	5.7	Broker Subsidiary Licenses, Etc.	27
	5.8	Broker Subsidiary/Broker Registration	27
	5.9	Broker Subsidiary/SIPC	27
	5.10	Taxes	27
	5.11	ERISA	27
	5.12	No Extension of Credit for Default Remedy/Hostile Acquisition	27
	5.13	Use of Proceeds/Margin Regulations	27
	5.14	Authorized Persons	28
	5.15	Material Contracts	28
	5.16	Litigation	28
	5.17	Investment Company	28
6.	AFFIRMATIVE COVENANTS		28
	6.1	Notice of Events of Default	28
	6.2	Financial Statements	28
	6.3	Insurance	29
	6.4	Books and Records	29
	6.5	Change in Business	29
	6.6	Capital Requirements	29
7.	NEGATIVE COVENANTS		29
	7.1	Net Capital	29
	7.2	Minimum Stockholders’ Equity	29
	7.3	Merger/Disposition of Assets	29
	7.4	Broker Subsidiary Indebtedness	29
	7.5	Indebtedness Secured by Subsidiary Stock	30
	7.6	Liens and Encumbrances	30
8.	EVENTS OF DEFAULT		31
	8.1	Defaults	31
	8.2	Remedies	32
9.	THE AGENT		33
	9.1	Appointment and Authorization	33
	9.2	Delegation of Duties	33
	9.3	Liability of Agent	33
	9.4	Reliance by Agent	33
	9.5	Notice of Default	34
	9.6	Credit Decision	34
	9.7	Indemnification of Agent	35
	9.8	Agent in Individual Capacity	35
	9.9	Successor Agent	35
	9.10	Withholding Tax	36
	9.11	Co-Agents	37

10.	MISCELLANEOUS		37
	10.1	Amendments and Waivers	37
	10.2	Notices	38
	10.3	No Waiver-Cumulative Remedies	40
	10.4	Costs and Expenses	40
	10.5	Borrower Indemnification	40
	10.6	Payments Set Aside	41
	10.7	Successors and Assigns	42
	10.8	Assignments, Participations Etc.	42
	10.9	Confidentiality	44
	10.10	Notification of Addresses, Lending Offices, Etc.	44
	10.11	Counterparts	45
	10.12	Severability	45
	10.13	No Third Parties Benefited	45
	10.14	Governing Law and Jurisdiction	45
	10.15	Waiver of Jury Trial	45
	10.16	Entire Agreement	47
	10.17	Headings	47
	10.18	USA Patriot Act	47

SCHEDULES:

Schedule 1 - Lenders’ Commitments

Schedule 2 - List of Borrowing Agreements

Schedule 6.2 – Compliance Certificate

Schedule 10.2 - Notices

EXHIBITS:

Exhibit A-1 - Revolving Note

Exhibit A-2 - Term Note

Exhibit B - Borrowing Advice

Exhibit C - Notice of Conversion/Continuation

Exhibit D - Commitment and Termination Date Extension Request

Exhibit E - Borrower’s Opinion of Counsel

Exhibit F - Form of Assignment and Acceptance

CREDIT AGREEMENT (364-DAY COMMITMENT)

THIS CREDIT AGREEMENT (364-DAY COMMITMENT) (“this Agreement”) is entered into as of June 10, 2011, among The Charles Schwab Corporation, a Delaware corporation (the “Borrower”), the several financial institutions from time to time party to this Agreement (collectively the “Lenders”; individually each a “Lender”), and Citibank, N.A., as administrative agent for the Lenders (the “Agent”).

WHEREAS, the Lenders are willing to make from time to time Revolving Loans to the Borrower through June 8, 2012, and to make Term Loans to the Borrower on or before June 8, 2012 and maturing no later than June 7, 2013, upon the terms and subject to the conditions set forth in this Agreement.

NOW, THEREFORE, in consideration of the premises and of the mutual agreements and covenants herein contained, the parties hereto agree as follows:

1.    DEFINITIONS. The following terms have the following meanings:

Affiliate:	As to any Person, any other Person which, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person. A Person shall be deemed to control another Person if the controlling Person possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of the other Person, whether through the ownership of voting securities, membership interests, by contract, or otherwise.
Agent:	Citibank in its capacity as administrative agent for the Lenders hereunder and any successor agent appointed under Section 9.9.
Agent-Related
Persons:	Citibank and any successor agent appointed under Section 9.9, together with Citibank’s Affiliate, the Arranger, and the officers, directors, employees, agents and attorney-in-fact of such Persons and Affiliate.
Agreement:	This Credit Agreement.
Agent’s
Payment Office:	The address for payments set forth on the signature page hereto in relation to the Agent, or such other address as the Agent may from time to time specify.
Applicable Margin:	(i)     with respect to Eurodollar Rate Loans, the higher of 100% of the Index and 1.00% per annum; and
	(ii)     with respect to Base Rate Loans, the Applicable Margin set forth in clause (i) above minus 1.00% (but not less than 1.00%).

Arrangers:	Citigroup Global Markets Inc. and J.P. Morgan Securities LLC.
Assignee:	The meaning specified in Section 10.8.
Attorney Costs:	Without duplication, (1) all fees and disbursements of any law firm or other external counsel, and (2) the allocated cost of internal legal services and all disbursements of internal counsel.
Bank Subsidiary:	Any Federal savings association (as defined in 12 U.S.C. §1813(b)(2), any national member bank (as defined in 12 U.S.C. §1813(d)(1)) or state member bank (as defined in 12 U.S.C. §1813(d)(2)) that is a subsidiary (as defined in 12 U.S.C. §1841(d)) of the Borrower.
Bankruptcy Code:	The Federal Bankruptcy Reform Act of 1978 (11 U.S.C. §101, et seq.), as amended.
Base Rate:	For any day, the highest of: (a) 0.500% per annum above the Federal Funds Rate; (b) the rate of interest in effect for such day as publicly announced from time to time by Citibank, N.A. as its “Base Rate” and (c) the British Bankers Association Interest Settlement Rate applicable to Dollars for a period of one month (“One Month LIBOR”) plus 1.00% (for the avoidance of doubt, the One Month LIBOR for any day shall be based on the rate appearing on Reuters LIBOR01 Page (or other commercially available source providing such quotations as designated by the Agent from time to time) at approximately 11:00 a.m. London time on such day). The “Base Rate” described in clause (b) is a rate set by Citibank, N.A. based upon various factors including Citibank, N.A.’s costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above, or below such announced rate. Any change in such rate announced by Citibank, N.A. shall take effect at the opening of business on the day specified in the public announcement of such change.
Base Rate Loan:	A Revolving Loan or Term Loan that bears interest based on the Base Rate.
Borrowing:	A borrowing hereunder consisting of Revolving Loans or Term Loans of the same Type made to the Borrower on the same day by the Lenders under Section 2 and, other than in the case of a Base Rate Loan, having the same Interest Period.
Borrowing Advice:	A written request made by the Borrower with respect to any Loan substantially in the form of Exhibit B specifying the information required in Section 2.4 hereof and executed by the Borrower from time to time.

2

Borrowing
Agreements:	The credit agreement(s) between the Borrower and the lenders listed in Schedule 2.
Borrowing Date:	Any date on which a Borrowing occurs under Section 2.4.
Broker Subsidiary:	Charles Schwab & Co., Inc., a California corporation, and its successors and assigns.
Business Day:	A day other than a Saturday, Sunday or any other day on which commercial banks are authorized or required to close in California or New York and, if the applicable Business Day relates to a Eurodollar Rate Loan, such a day on which dealings are carried on in the applicable offshore dollar interbank market.
Capital Adequacy
Regulation:	Any guideline, directive or requirement of any central bank or other Governmental Authority, or any other law, rule or regulation, whether or not having the force of law, in each case, regarding capital adequacy of any bank or of any corporation controlling a bank. For the avoidance of doubt, Capital Adequacy Regulation shall include all rules, guidelines or directives concerning capital adequacy (x) issued in connection with the Dodd-Frank Wall Street Reform and Consumer Protection Act or (y) promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case pursuant to Basel III, regardless of the date enacted, adopted or issued.
Change in
Control:	The consummation of a reorganization, merger or consolidation by the Borrower or the sale or other disposition of all or substantially all of the assets of the Borrower (a “Business Combination”), unless, following such Business Combination, (i) no person or entity (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Borrower or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 35% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation (except to the extent that such ownership existed prior to the Business Combination); and (ii) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the board of directors of the Borrower as of the time of

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	the action of the board of directors of the Borrower providing for such Business Combination.
Citibank:	Citibank, N.A., a national banking association.
Closing Date:	The date (not before June 10, 2011) on which all conditions precedent set forth in Section 4 are satisfied or waived by all Lenders or, in the case of subsection 4.1(g), waived by the person entitled to receive such payment.
Code:	The Internal Revenue Code of 1986, as amended, and Regulations promulgated thereunder.
Commitment:	The meaning specified in Section 2.1.
Commitment Fee:	The meaning specified in subsection 2.9(b).
Consolidated
Stockholders’ Equity:	With respect to any Person, as of any date of determination, all amounts that would, in accordance with GAAP, be included under shareholders’ equity on a consolidated balance sheet of such Person as at such date, plus any preferred stock.
Controlled
Subsidiary:	Any corporation 80% of whose voting stock (except for any qualifying shares) is owned directly or indirectly by the Borrower.
Conversion/
Continuation Date:	Any date on which under Section 2.5, the Borrower (a) converts Loans of one Type to another Type, or (b) continues as Loans of the same Type, but with a new Interest Period, Loans having Interest Periods expiring on such date.
Credit:	The aggregate amount of the Commitments of all Lenders to make Revolving Loans under the Revolving Credit Facility and Term Loans under the Term Loan Facility in an amount not to exceed Eight Hundred Million and no/100 Dollars ($800,000,000.00), as the same may be reduced under Section 2.10.
Default:	Any event or circumstance which, with the giving of notice, the lapse of time, or both, would (if not cured or otherwise remedied during such time) constitute an Event of Default.
Dollars, dollars, and $:	Each mean lawful money of the United States.
Effective Amount:	With respect to any Revolving Loans and Term Loans on any date, the aggregate outstanding principal amount thereof after giving

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	effect to any Borrowings and prepayments or repayments of Revolving Loans and Term Loans occurring on such date.
Eligible Assignee:	(i) A commercial bank organized under the laws of the United States, or any state thereof, and having total equity capital of at least $1,000,000,000 and a senior debt rating of a least “A” by Standard & Poor’s Ratings Service, a Division of The McGraw-Hill Companies, Inc. or at least “A-2” by Moody’s Investors Service, Inc. or, if not rated by either of the foregoing organizations, an equivalent rating from a nationally recognized statistical rating organization; or (ii) a commercial bank organized under the laws of any other country which is a member of the Organization for Economic Cooperation and Development (the OECD), or a political subdivision of any such country, and having total equity capital of at least $1,000,000,000 and a senior debt rating of at least “A” by Standard & Poor’s Ratings Service, a Division of The McGraw-Hill Companies, Inc. or at least “A-2” by Moody’s Investors Service, Inc., or, if not rated by either of the foregoing organizations, an equivalent rating from a nationally recognized statistical rating organization; provided that such bank is acting through a branch or agency located in the United States.
Eurodollar
Base Rate:	For any Interest Period:
	(a)     the rate per annum equal to the rate determined by the Agent to be the offered rate that appears on the page of the Reuters screen (or any successor thereto) that displays an average British Bankers Association Interest Settlement Rate for deposits in Dollars (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period, determined as of approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period, or
	(b)     in the event the rate referenced in the preceding subsection (a) does not appear on such page or service or such page or service shall cease to be available, the rate per annum equal to the rate determined by the Agent to be the offered rate on such other page or other service that displays an average British Bankers Association Interest Settlement Rate for deposits in Dollars (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period, determined as of approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period, or
	(c)     in the event the rates referenced in the preceding subsections (a) and (b) are not available, the rate per annum equal

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	to the average (rounded upward to the next 1/100th of 1%) of the rates of interest per annum notified to the Agent by each Reference Lender as the rate at which deposits in Dollars for delivery on the first day of such Interest Period in same day funds in the approximate amount of the Eurodollar Rate Loan being made, continued or converted by such Reference Lender in its capacity as a Lender and with a term equivalent to such Interest Period would be offered by its Offshore Lending Office to major banks in the offshore Dollar market at their request at approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period.
Eurodollar Rate:	The rate obtained by dividing (i) Eurodollar Base Rate by (ii) a percentage (expressed as a decimal) equal to 1.00 minus the Eurodollar Rate Reserve Percentage.
Eurodollar Rate
Loan:	A Revolving Loan or Term Loan that bears interest based on the Eurodollar Rate.
Eurodollar Rate
Reserve Percentage:	For any Interest Period for any Loan for which the Eurodollar Rate has been selected or is applicable, the percentage (expressed as a decimal) as calculated by the Agent that is in effect on the first day of such Interest Period, as prescribed by the Board of Governors of the U.S. Federal Reserve System (or any successor), for determining reserve requirements to be maintained by the Agent under Regulation D (or any successor regulation thereof) as amended to the date hereof (including such reserve requirements as become applicable to the Agent pursuant to phase-in or other similar requirements of Regulation D at any time subsequent to the date hereof) in respect of “Eurocurrency liabilities” (as defined in Regulation D). The Eurodollar Rate shall be adjusted automatically on and as of the effective date of any change in the Eurodollar Rate Reserve Percentage.
Event of Default:	Any of the events or circumstances specified in Section 8.1.
Exchange Act:	The Securities and Exchange Act of 1934, as amended, and regulations promulgated thereunder.
Federal Funds Rate:	For any day, the interest rate per annum equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York.

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Fee Letters:	The meaning specified in subsection 2.9(a).
FRB:	The Board of Governors of the Federal Reserve System, and any Governmental Authority succeeding to any of its principal functions.
GAAP:	Generally accepted accounting principles set forth from time to time in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board (or agencies with similar functions of comparable stature and authority within the U.S. accounting profession), which are applicable to the circumstances as of the date of determination.
Governmental
Authority:	Any nation or government, any state or other political subdivision thereof, any central bank (or similar monetary or regulatory authority) thereof, any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, and any corporation or other entity owned or controlled, through stock or capital ownership or otherwise, by any of the foregoing.
Hedge Agreements:	Interest rate swap, interest rate cap or interest rate collar agreements.
Indebtedness:	As to any corporation, any obligation of, or guaranteed or assumed by, such corporation for (i) borrowed money evidenced by bonds, debentures, notes or other similar instruments, (ii) the deferred purchase price of property or services (excluding trade and other accounts payable), (iii) the leasing of tangible personal property under leases which, under any applicable Financial Accounting Standards Board Statement, have been or should be recorded as capitalized leases or (iv) direct or contingent obligations under letters of credit issued for the account of such corporation.
Indemnified
Liabilities:	The meaning specified in Section 10.5.
Indemnified Person:	The meaning specified in Section 10.5.
Index:	The average of the Markit CDX.NA.IG Series 15 or any successor series (5 Year Period) for the preceding 30 days or, if fewer, the number of days for which the then current series is then in effect, determined (i) if used in respect of determining the Applicable Margin for Eurodollar Rate Loans, on the date that is two Business Days before the first day of the applicable Interest Period, and (ii)

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	if used in respect of determining the Applicable Margin for Base Rate Loans, on the date of borrowing of such Loans and thereafter quarterly on the last day of each March, June, September and December.
Insolvency
Proceeding:	As to a debtor, (a) any case, action or proceeding before any court or other Governmental Authority relating to bankruptcy, reorganization, insolvency, liquidation, receivership, dissolution, winding-up or relief of debtors, or (b) any general assignment for the benefit of creditors, composition, marshaling of assets for creditors, or other similar arrangement in respect of its creditors generally or any substantial portion of its creditors, undertaken under U.S. Federal, state or foreign law, including the Bankruptcy Code.
Interest
Payment Date:	As to any Loan other than a Base Rate Loan, the last day of each Interest Period applicable to such Loan and, as to any Base Rate Loan, the last Business Day of each calendar quarter, provided, however, that if any Interest Period for a Eurodollar Rate Loan exceeds three months, the date that falls three months after the beginning of such Interest Period and after each Interest Payment Date thereafter is also an Interest Payment Date.
Interest Period:	Any period specified in accordance with Section 2.6 hereof.
Intermediate
Parent:	Schwab Holdings, Inc., a Delaware corporation and its successors and assigns.
Lender:	The meaning specified in the introductory clause hereto.
Lending Office:	As to any Lender, the office or offices of such Lender specified as its “Lending Office” or “Domestic Lending Office” or “Offshore Lending Office”, as the case may be, on Schedule 10.2, or such other office or offices as such Lender may from time to time notify the Borrower and the Agent.
Loan:	An extension of credit by a Lender to the Borrower under Section 2 in the form of a Revolving Loan or Term Loan.
Loan Document:	This Agreement, any Notes, the Fee Letters, and all other documents delivered to the Agent or any Lender in connection herewith.
Minimum

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Stockholders’ Equity:	As of the Closing Date, and the last day of each fiscal quarter thereafter, the greater of:
	(a)     $4,700,000,000, or
	(b)     the sum of –
	(i)     $4,700,000,000, plus
	(ii)     50% of the sum of cumulative Net Earnings for each fiscal quarter commencing with the fiscal quarter ended June 30, 2011.
Net Capital Ratio:	As of the date of determination, that percentage of net capital to aggregate debit items of any entity subject to the Net Capital Rule 15c3-1 promulgated by the Securities Exchange Commission pursuant to the Securities Exchange Act of 1934 and any successor or replacement rule or regulation therefor.
Net Earnings:	With respect to any fiscal period, the consolidated net income of the Borrower and its Subsidiaries, after taking into account all extraordinary items, taxes and other proper charges and reserves for the applicable period, determined in accordance with U.S. generally accepted accounting principles, consistently applied.
Note:	A promissory note executed by the Borrower in favor of a Lender pursuant to Section 2.3 in substantially the form of Exhibits A-1 and A-2.
Notice of Conversion/
Continuation:	A notice in substantially the form of Exhibit C.
Obligations:	All borrowings, debts, liabilities, obligations, covenants and duties arising under any Loan Document owing by the Borrower to any Lender, the Agent, or any Indemnified Person, whether direct or indirect (including those acquired by assignment), absolute or contingent, due or to become due, now existing or hereafter arising.
Person:	An individual, partnership, corporation, limited liability company, business trust, unincorporated association, trust, joint venture or Governmental Authority.
Pro Rata Share:	As to any Lender at any time, the percentage equivalent (expressed as a decimal, rounded to the ninth decimal place) at such time of such Lender’s Commitment divided by the combined Commitments of all Lenders.

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Reference Lenders:	Citibank and JPMorgan Chase Bank, N.A.
Replacement Lender:	The meaning specified in Section 3.9.
Required Lenders:	At any time at least two Lenders then holding in excess of 50% of the then aggregate unpaid principal amount of the Loans, or, if no such principal amount is then outstanding, at least two Lenders then having in excess of 50% of the Commitments.
Requirement of Law:	As to any Person, any law (statutory or common), treaty, rule or regulation or determination of an arbitrator or of a Governmental Authority, in each case applicable to or binding upon the Person or any of its property or to which the Person or any of its property is subject.
Responsible Officer:	Any senior vice president or more senior officer of the Borrower, or any other officer having substantially the same authority and responsibility; or, with respect to compliance with financial covenants, the chief financial officer, executive vice president-finance, controller or the treasurer of the Borrower, or any other officer having substantially the same authority and responsibility.
Revolving Credit
Facility:	The revolving credit facility available to the Borrower pursuant to Section 2.1 hereof.
Revolving Loan:	The meaning specified in Section 2.1, and may be a Base Rate Loan or a Eurodollar Rate Loan (each a “Type” of Revolving Loan).
Revolving Note:	The meaning specified in Section 2.3.
Revolving
Termination Date:	The earlier to occur of:
	(a)     June 8, 2012; and
	(b)     the date on which the Commitments terminate in accordance with the provisions of this Agreement.
SEC:	The Securities and Exchange Commission, or any Governmental Authority succeeding to any of its principal functions.
Senior Medium-
Term Notes,
Series A:	Senior debt securities or senior subordinated debt securities issued by The Charles Schwab Corporation with a maturity between 9 months and 30 years in accordance with the Senior Indenture, as

10

	amended, and the Senior Subordinated Indenture, as amended, both dated as of July 15, 1993 by and between The Charles Schwab Corporation and The Bank of New York Mellon Trust Company, N.A. as successor trustee to The Chase Manhattan Bank.
Subsidiary:	Any corporation or other entity of which a sufficient number of voting securities or other interests having power to elect a majority of the board of directors or other persons performing similar functions are at the time directly or indirectly owned by the Borrower.
Term Commitment:	Eight Hundred Million and no/100 Dollars ($800,000,000.00), as the same may be reduced under Section 2.10.
Term Loan:	The meaning specified in Section 2.2 and may be a Base Rate Loan or Eurodollar Rate Loan (each a “Type” of Term Loan).
Term Loan Facility:	The term loan facility available to the Borrower pursuant to Section 2.2 hereof.
Term Loan Maturity
Date:	The meaning specified in Section 2.2.
Term Note:	The meaning specified in Section 2.3.
Term Out Fee:	The meaning specified in subsection 2.9(c).
Type:	The meaning specified in the definition of “Revolving Loan”.

2. THE CREDIT FACILITY.

2.1     The Revolving Credit Facility Each Lender severally agrees, on the terms and conditions set forth herein, to make loans to the Borrower (each such loan, a “Revolving Loan”) from time to time on any Business Day during the period from the Closing Date to the Revolving Termination Date, in an aggregate amount not to exceed at any time outstanding, together with the principal amount of Term Loans outstanding in favor of such Lender at such time, the amount set forth next to such Lender’s name on Schedule 1 (such amount together with the Lender’s Pro Rata Share of the Term Commitment, as the same may be reduced under Section 2.10 or as a result of one or more assignments under Section 10.8, the Lender’s “Commitment”); provided, however, that, after giving effect to any Borrowing of Revolving Loans, the Effective Amount of all outstanding Revolving Loans shall not at any time exceed the combined Commitments; and provided further that the Effective Amount of the Revolving Loans, together with all Term Loans outstanding at such time, of any Lender shall not at any time exceed such Lender’s Commitment. Within the limits of each Lender’s Commitment, and subject to the other terms and conditions hereof, the Borrower may borrow under this Section 2.1, prepay under Section 3.3 and reborrow under this Section 2.1.

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2.2     Term Loan Facility. Each Lender severally agrees, on the terms and conditions set forth herein, to make Loans to the Borrower during the period from the Closing Date to June 8, 2012, in an aggregate amount not to exceed such Lender’s Pro Rata Share of the Term Commitment. The Borrower from time to time may borrow under the Term Loan Facility (and may reborrow any amount theretofore prepaid) until close of business on June 8, 2012, for a term not to exceed 364 days from the date of the Borrowing. Each such loan under the Term Loan Facility (a “Term Loan”) shall be in the minimum amount of $10,000,000 and shall become due and payable on the last day of the term selected by the Borrower for such Term Loan (the “Term Loan Maturity Date”), which shall in no event be later than 364 days from the date of such Term Loan. The maximum availability under the Term Loan Facility shall be the amount of the Credit minus the aggregate outstanding principal amount of Revolving Loans and Term Loans made by the Lenders; provided, however, that to the extent the proceeds of a Term Loan are used to repay an outstanding Revolving Loan (or a portion thereof), such Revolving Loan (or portion thereof) shall not be considered part of the aggregate principal amount of outstanding Revolving Loans made by the Lenders for purposes of this sentence (such maximum availability hereafter being referred to as the “Term Loan Availability”). Under no circumstances shall the aggregate outstanding principal amount of Term Loans and Revolving Loans made by the Lenders exceed the Credit, and under no circumstances shall any Lender be obligated (i) to make any Term Loan (nor may the Borrower reborrow any amount heretofore prepaid) after June 8, 2012, or (ii) to make any Term Loan in excess of the Term Loan Availability. Each Term Loan made hereunder shall fully and finally mature and be due and payable in full on the Term Loan Maturity Date specified in the Borrowing Advice for such Term Loan; provided, however, that to the extent the Borrowing Advice for any Term Loan selects an Interest Period that expires before the Term Loan Maturity Date specified in such Borrowing Advice, the Borrower may from time to time select additional interest rate options and Interest Periods (none of which shall extend beyond the Term Loan Maturity Date for such Term Loan) by delivering a Borrowing Advice or Notice of Conversion/Continuation, as applicable.

2.3     Evidence of Borrowing/Promissory Notes. The obligation of the Borrower to repay the aggregate unpaid principal amount of the Revolving Loans and Term Loans shall be evidenced by promissory notes of the Borrower (respectively the “Revolving Note and the Term Note”) in substantially the form attached hereto as Exhibits A-1 and A-2, with the blanks appropriately completed, payable to the order of each Lender in the principal amount of its Commitment, bearing interest as hereinafter specified. Each Revolving Note and Term Note shall be dated, and shall be delivered to each Lender, on the date of the execution and delivery of this Agreement by the Borrower. Each Lender shall, and is hereby authorized by the Borrower to, endorse on the schedule contained on the Revolving Note and Term Note, or on a continuation of such schedule attached thereto and made a part thereof, appropriate notations regarding the Revolving Loans and Term Loans evidenced by such Note as specifically provided therein and such Lender’s record shall be conclusive absent manifest error; provided, however, that the failure to make, or error in making, any such notation shall not limit or otherwise affect the obligations of the Borrower hereunder or under the Revolving Note and Term Note. The Agent, by notice to the Borrower (to be given not later than two Business Days prior to the initial Borrowing or Term Loan hereunder) may request that Revolving Loans or Term Loans made hereunder for which the interest calculation is to be based on the Eurodollar Rate be evidenced

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by separate Revolving Notes (in the case of Revolving Loans) and Term Notes (in the case of Term Loans), substantially in the form of Exhibit A-1 hereto (in the case of Revolving Loans) and Exhibit A-2 hereto (in the case of Term Loans), payable to the order of each Lender for the account of its office, branch or affiliate it may designate as its Lending Office.

2.4     Making of Revolving Loans and Term Loans, Borrowings; Interest Periods; Notice.

(a)     Each Borrowing of Revolving Loans or Term Loans shall be made upon Borrower’s irrevocable written notice delivered to the Agent in the form of a Borrowing Advice (which notice must be received by the Agent prior to 10:00 a.m. San Francisco time for a Eurodollar Rate Loan, and prior to 11:00 a.m. San Francisco time for a Base Rate Loan) (i) the same Business Day as the requested Borrowing Date in the case of Base Rate Loans to be made on such Business Day, or (ii) three Business Days prior to the requested Borrowing Date in the case of Eurodollar Rate Loans, with each Borrowing Advice setting forth the following information:

(A)     the requested Borrowing Date, which shall be a Business Day, on which such Revolving Loan or Term Loan is to be made;

(B)     for a Eurodollar Rate Loan, the duration of the Interest Period selected in accordance with Section 2.6 hereof (if the Borrowing Advice fails to specify the duration of the Interest Period for any Borrowing comprised of a Eurodollar Rate Loan, such Interest Period shall be three months);

(C)     the Type of Loans comprising the Borrowing and the interest rate option selected in accordance with Section 2.7 hereof; and

(D)     the aggregate principal amount of the Revolving Loan or Term Loan (which shall be in an aggregate minimum amount of $10,000,000) to which such Interest Period and interest rate shall apply.

(b)     The Agent will promptly notify each Lender of its receipt of any Borrowing Advice and of the amount of such Lender’s Pro Rata Share of that Borrowing.

(c)     Each Lender will make the amount of its Pro Rata Share of each Borrowing available to the Agent for the account of the Borrower at the Agent’s Payment Office by 1:00 p.m. San Francisco time on the Borrowing Date requested by the Borrower in funds immediately available to the Agent. Each Loan to the Borrower under this Agreement shall be made by 1:30 p.m. (San Francisco time) on the date of the Requested Borrowing Date, and shall be in immediately available funds (in the aggregate amount made available to the Agent by the Lenders) wired to the Borrower’s account at Citibank, N.A. or such other account as may be designated by the Borrower in writing.

(d)     After giving effect to any Borrowing, there may not be more than ten (10) different Interest Periods in effect.

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With respect to any Borrowing having an Interest Period ending on or before June 8, 2012, if prior to the last day of the Interest Period for such Borrowing the Borrower fails timely to provide a Notice of Conversion/Continuation in accordance with Section 2.5, such Borrowing shall, on the last day of the then-existing Interest Period for such Borrowing, automatically convert into a Base Rate Loan. In the event of any such automatic conversion, the Borrower on the date of such conversion shall be deemed to make a representation and warranty to the Lenders that, to the best of the Borrower’s knowledge, (i) neither the Borrower nor any Bank Subsidiary is in violation of the capital requirements as described in Section 6.6, (ii) the Broker Subsidiary is not in violation of minimum net capital requirements as described in Section 7.1, (ii) the Borrower’s Consolidated Stockholders’ Equity is not below the Minimum Stockholders’ Equity as described in Section 7.2, and (iv) no amount owing with respect to any Commitment Fee, any outstanding Borrowing, or any interest thereon, or any other amount hereunder, is due and unpaid. If prior to the last day of the Interest Period applicable to any Term Loan the Borrower fails timely to provide a Notice of Conversion/Continuation in accordance with Section 2.5, such Term Loan shall, on the last day of the then-existing Interest Period for such Term Loan, automatically convert into a Base Rate Loan.

2.5     Conversion and Continuation Elections.

(a)     The Borrower may, upon irrevocable written notice to the Agent in accordance with this Section 2.5:

(i)     elect, as of any Business Day, in the case of Base Rate Loans, or as of the last day of the applicable Interest Period, in the case of any other Type of Loan, to convert any such Loan (or any part thereof in an amount not less than $10,000,000), into Loans of any other Type; or

(ii)     elect as of the last day of the applicable Interest Period, to continue any Loans having Interest Periods expiring on such day (or any part thereof in an amount not less than $10,000,000);

provided, that if at any time the aggregate amount of Eurodollar Rate Loans in respect of any Borrowing is reduced, by payment, prepayment, or conversion of part thereof to be less than $10,000,000, such Eurodollar Rate Loans shall automatically convert into Base Rate Loans.

(b)     The Borrower shall deliver a Notice of Conversion/Continuation to be received by the Agent not later than 10:00 a.m. San Francisco time for a Eurodollar Rate Loan, and not later than 11:00 a.m. San Francisco time for a Base Rate Loan, at least (i) three Business Days in advance of the Conversion/Continuation Date, as to any Loan that is to be converted into or continued as a Eurodollar Rate Loan; and (ii) the same Business Day as the Conversion/Continuation Date, as to any Loan that is to be converted into a Base Rate Loan, specifying:

(A)     the proposed Conversion/Continuation Date;

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(B)     the aggregate amount of the Loan or Loans to be converted or renewed;

(C)     the Type of Loan or Loans resulting from the proposed conversion or continuation; and

(D)     other than in the case of conversions into Base Rate Loans, the duration of the requested Interest Period.

(c)     If upon the expiration of any Interest Period applicable to Eurodollar Rate Loans, the Borrower has failed to select timely a new Interest Period to be applicable to such Eurodollar Rate Loans, or if any Default or Event of Default then exists, the Borrower shall be deemed to have elected to convert such Eurodollar Rate Loans into Base Rate Loans effective as of the expiration date of such Interest Period.

(d)     The Agent will promptly notify each Lender of its receipt of a Notice of Conversion/Continuation, or, if no timely notice is provided by the Borrower, the Agent will promptly notify each Lender of the details of any automatic conversion. All conversions and continuations shall be made ratably according to the respective outstanding principal amounts of the Loans with respect to which the notice was given as held by each Lender.

(e)     Unless the Required Lenders otherwise agree, during the existence of a Default or Event of Default, the Borrower may not elect to have a Loan converted into or continued as a Eurodollar Rate Loan.

(f)     After giving effect to any conversion or continuation of Loans, there may not be more than ten (10) different Interest Periods in effect.

2.6     Interest Periods.   The Borrower may select for any Eurodollar Rate Loan the Interest Period (as defined in the next sentence) for each Borrowing, it being understood that the Borrower may request multiple Borrowings on the same day and may select a different Interest Period for each such Borrowing. An Interest Period shall be each period, as selected by the Borrower in accordance with the terms of this Agreement, beginning on the Borrowing Date of any Eurodollar Rate Loan, or on the Conversion/Continuation Date on which any Loan is converted into or continued as a Eurodollar Rate Loan, and ending on the date specified by the Borrower that is one, two, three or six months thereafter; provided that whenever the first day of any Interest Period occurs on a day of an initial calendar month for which there is no numerically corresponding day in the calendar month that succeeds such initial calendar month by the number of months equal to the number of months in such Interest Period, such Interest Period shall end on the last Business Day of such succeeding calendar month; and provided further that if the last day of an Interest Period would be a day that is not a Business Day, such Interest Period shall be extended to the next succeeding Business Day, unless such next succeeding Business Day is in a different calendar month, in which case such interest period shall end on the next preceding Business Day; but provided, however, that (i) no Interest Period applicable to any Revolving Loan shall extend beyond the Revolving Termination Date; and (ii) no Interest Period

15

applicable to any Term Loan shall extend beyond the Term Loan Maturity Date specified in the Borrowing Advice for such Term Loan, which in no event shall be later than June 7, 2013.

2.7     Interest Rates.

(a)     (i)   Each Revolving Loan, while outstanding, shall bear interest from the applicable Borrowing Date at a rate per annum equal to the Eurodollar Rate or the Base Rate, as the case may be, (and subject to the Borrower’s right to convert to other Types of Loans under Section 2.5) plus the Applicable Margin.

(ii)   Each Term Loan, while outstanding, shall bear interest from the applicable Borrowing Date at a rate per annum equal to the Eurodollar Rate or the Base Rate, as the case may be, (and subject to the Borrower’s right to convert to other Types of Loans under Section 2.5) plus the Applicable Margin.

(b)     Interest on each Revolving Loan and Term Loan shall be paid in arrears on each Interest Payment Date. Interest shall also be paid on the date of any prepayment of Loans under Section 3.3 for the portion of the Loan so prepaid and upon payment (including prepayment) in full thereof, and, during the existence of any Event of Default interest shall be paid on demand of the Agent at the request or with the consent of the Required Lenders.

(c)     After the principal amount of any Revolving Loan or Term Loan, accrued interest upon such Loan, the commitment fee, or any other amount hereunder shall have become due and payable by acceleration, or otherwise, it shall thereafter (until paid) bear interest, payable on demand, (i) until the end of the Interest Period with respect to such Loan at a rate per annum equal to 2% per annum in excess of the rate or rates in effect with respect to such Loan, and (ii) thereafter, at a rate per annum equal to 2% per annum in excess of the Base Rate.

2.8     Substitute Rates.   If upon receipt by the Agent of a Borrowing Advice relating to any Borrowing or of a Notice of Conversion/Continuation:

(a)     the Agent shall determine that by reason of changes affecting the London interbank market, adequate and reasonable means do not exist for ascertaining the applicable Eurodollar Rate with respect to any Interest Period; or

(b)     the Agent shall determine that by reason of any change since the date hereof in any applicable law or governmental regulation (other than any such change in the regulations described in the definition of Eurodollar Rate Reserve Percentage in Section 1 hereof), guideline or order (or any interpretation thereof), the adoption or enactment of any new law or governmental regulation or order or any other circumstance affecting the Lenders or the London interbank market, the Eurodollar Rate shall no longer represent the effective cost to the Lenders of U.S. dollar deposits in the relevant amount and for the relevant period; or

(c)     Agent shall determine that, as a result of any change since the date hereof in any applicable law or governmental regulation or as a result of the adoption of any new applicable law or governmental regulation, the applicable Eurodollar Rate would be unlawful;

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then, the Agent will promptly so notify the Borrower and each Lender, whereupon, the obligation of the Lenders to make or maintain Eurodollar Rate Loans hereunder shall be suspended until the Agent upon the instruction of the Required Lenders revokes such notice in writing. Upon receipt of such notice, the Borrower may revoke any Notice of Borrowing or Notice of Conversion/Continuation then submitted by it and, at its election, submit a Borrowing Advice or Notice of Conversion/Continuation selecting another Type of Loan. If the Borrower does not revoke such Notice or give a Notice as provided herein, the Lenders shall make, convert or continue the Loans, as proposed by the Borrower in the amount specified in the applicable notice submitted by the Borrower, but such Loans shall be made, converted or continued as Base Rate Loans instead of Eurodollar Rate Loans.

2.9    Fees.

(a)     Arrangement, Agency Fees.   The Borrower shall pay an arrangement fee to the Arrangers for their respective accounts, and shall pay an agency fee to the Agent for the Agent’s account, as required by the separate letter agreements (“Fee Letters”) between the Borrower and each of the Arrangers and between the Borrower and the Agent, each dated May 12, 2011.

(b)     Commitment Fee.   The Borrower shall pay to the Agent for the account of each Lender a commitment fee (the “Commitment Fee”) on the actual daily unused portion of such Lender’s Commitment computed on a quarterly basis in arrears on the last Business Day of each quarter based upon the daily utilization for that quarter as calculated by the Agent, equal to seventy-five one thousandths of one percent (0.075%) per annum. For purposes of calculating utilization under this subsection, the Commitments shall be deemed used to the extent of the Effective Amount of Revolving Loans and Term Loans then outstanding. Such Commitment Fee shall accrue from the Closing Date to the Revolving Termination Date and shall be due and payable quarterly in arrears on the last Business Day of each quarter commencing on the quarter ending June 30, 2011 through the Revolving Termination Date, with the final payment to be made on the Revolving Termination Date; provided that, in connection with any reduction or termination of Commitments under Section 2.10, the accrued commitment fee calculated for the period ending on such date shall also be paid on the date of such reduction or termination, with the following quarterly payment being calculated on the basis of the period from such reduction or termination date to such quarterly payment date.

(c)     Term Loan Fee.   The Borrower shall pay to the Agent for the account of each Lender a term loan fee (the “Term Out Fee”) equal to one percent (1.00%) of the aggregate principal amount of all Term Loans outstanding on June 8, 2012, payable on such date.

2.10     Reduction of Credit.   The Borrower, from time to time, upon at least three (3) Business Days’ written notice to the Agent, may terminate the commitments, or permanently reduce the Commitments by an aggregate minimum amount of $10,000,000, without penalty or premium; unless after giving effect thereto and to any prepayments of Loans made on the effective date thereof, the Effective Amount of all Revolving Loans and Term Loans together would exceed the amount of the combined Commitments then in effect. Once reduced in accordance with this Section, the Commitments may not be increased. Any reduction of the

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Commitments shall be applied to each Lender’s Commitment according to its Pro Rata Share. All accrued Commitment Fees to, but not including, the effective date of any reduction or termination of Commitments, shall be paid on the effective date of such reduction or termination. During the continuation of the Credit, the computation of the Commitment Fee and the Lenders’ obligations to make Revolving Loans or Term Loans shall be based upon such reduced Commitments. In the event the Credit shall be reduced to zero pursuant to this Section, the Credit shall be deemed terminated, and any Commitment Fee or any other amount payable hereunder then accrued shall become immediately payable. Such termination of the Credit shall terminate the Borrower’s obligations with respect to the Commitment Fee to the extent not theretofore accrued and shall terminate the Lenders’ obligations to make any further Revolving Loans or Term Loans under this Agreement.

2.11     Termination Date; Extensions.   The termination date of each Lender’s Commitment with respect to the Credit (the “Termination Date”), including both the Revolving Credit Facility under Section 2.1 hereof and the Term Loan Facility under Section 2.2 hereof, is initially June 8, 2012. At any time no earlier than forty-five (45) days and no later than thirty (30) days prior to the Termination Date then in effect (whether the initial Termination Date of June 8, 2012 or any later Termination Date as extended under this Section 2.11), the Borrower may, by written notice to the Agent in the form attached as Exhibit D hereto, request that the Termination Date be extended for a period of 364 calendar days. Such request shall be irrevocable and binding upon the Borrower. In no event will any Lender agree to approve any extension more than thirty (30) days before the Termination Date then in effect. Failure of any Lender to respond shall mean that such Lender has not approved such extension. If each Lender (in its sole discretion) agrees to so extend its Commitment and the Termination Date (which agreement may be given or withheld in such Lender’s sole and absolute discretion), the Agent shall evidence such agreement by executing and returning to the Borrower a copy of the Borrower’s written request no later than fifteen (15) days after the Agent’s receipt of the Borrower’s written request. If the Agent fails to so respond to and accept the Borrower’s request for extension of the Termination Date then in effect, the Lenders’ Commitments shall be terminated on the Termination Date then in effect. If, on the other hand, the Agent so responds to and accepts the Borrower’s request for extension of the Termination Date, then upon receipt by the Borrower of a copy of the Borrower’s written request countersigned by the Agent, (i) the Lenders’ Commitments then in effect and the Termination Date then in effect shall automatically be extended for the 364-day period specified in such written request, and (ii) each reference in this Agreement to “June 8, 2012”, and “June 7, 2013” (and any prior extension thereof pursuant to this Section 2.11) also shall automatically be correspondingly extended for 364 days.

2.12     Payments by the Lenders to the Agent.

(a)     Unless the Agent receives notice from a Lender on or prior to the Closing Date or, with respect to any Borrowing after the Closing Date, at least one Business Day before the date of such Borrowing in the case of a Eurodollar Rate Loan, or, in the case of a Base Rate Loan, prior to noon (12:00) San Francisco time on the date of such Borrowing, that such Lender will not make available as and when required hereunder to the Agent for the account of the Company the amount of that Lender’s Pro Rata Share of the Borrowing, the Agent may assume that each Lender has made such amount available to the Agent in immediately available

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funds on the Borrowing Date and the Agent may (but shall not be so required), in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If and to the extent any Lender shall not have made its full amount available to the Agent in immediately available funds and the Agent in such circumstances has made a corresponding amount available to the Borrower such Lender shall on the Business Day following such Borrowing Date make such amount available to the Agent, together with interest at the Federal Funds Rate for each day during such period. A notice of the Agent submitted to any Lender with respect to amounts owing under this subsection (a) shall be conclusive, absent manifest error. If such amount is so made available, such payment to the Agent shall constitute such Lender’s Loan on the date of Borrowing for all purposes of this Agreement. If such amount is not made available to the Agent on the Business Day following the Borrowing Date, the Agent will notify the Borrower of such failure to fund and, upon demand by the Agent, the Borrower shall pay such amount to the Agent for the Agent’s account, together with interest thereon for each day elapsed since the date of such Borrowing, at a rate per annum equal to the interest rate applicable at the time to the Loans comprising such Borrowing.

(b)     The failure of any Lender to make any Loan on any Borrowing Date shall not relieve any other Lender of any obligation hereunder to make a Loan on such Borrowing Date, but no Lender shall be responsible for the failure of any other Lender to make the Loan to be made by such other Lender on any Borrowing Date.

2.13     Sharing of Payments, Etc..   If, other than as expressly provided elsewhere herein, any Lender shall obtain on account of the Loans made by it any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) in excess of its Pro Rata Share, such Lender shall immediately (a) notify the Agent of such fact, and (b) purchase from the other Lenders such participation in the Loans made by them as shall be necessary to cause such purchasing Lender to share the excess payment pro rata with each of them; provided, however, that if all or any portion of such excess payment is thereafter recovered from the purchasing Lender, such purchase shall to that extent be rescinded and each other Lender shall repay to the purchasing Lender the purchase price paid therefor, together with an amount equal to such paying Lender’s ratable share (according to the proportion of (i) the amount of such paying Lender’s required repayment to (ii) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered. The Borrower agrees that any Lender so purchasing a participation from another Lender may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of set-off, but subject to Section 10.5) with respect to such participation as fully as if such Lender were the direct creditor of the Borrower in the amount of such participation. The Agent will keep records (which shall be conclusive and binding in the absence of manifest error) of participation purchased under this Section and will in each case notify the Lenders following any such purchase or repayment.

2.14     Computation of Fees and Interest.

(a)     All computations of interest for Base Rate Loans when the Base Rate is determined by Citibank N.A.’s “Base Rate” shall be made on the basis of a year of 365 or 366 days, as the case may be, and actual days elapsed. All other computations of interest, and all

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computation of fees under subsection 2.9(b) and (c) shall be made on the basis of a 360-day year and actual days elapsed. Interest and such fees shall accrue during each period during which interest or such fees are computed from and including the first day thereof to and excluding the last day thereof.

(b)     If any Reference Lender’s Commitment shall terminate (otherwise than on termination of all the Commitments), or for any reason whatsoever such Reference Lender shall cease to be a Lender hereunder, such Reference Lender shall thereupon cease to be a Reference Lender, and the determination of the Eurodollar Base Rate under subsection (c) of the definition of such term shall be determined on the basis of the rates as notified by the remaining Reference Lenders.

3. PAYMENT.

3.1     Repayment.

(a)     The Term Credit.   The Borrower shall repay to the Agent for the account of the Lenders the aggregate principal amount of the Term Loans outstanding on each Term Loan Maturity Date, as applicable.

(b)     The Revolving Credit.   The Borrower shall repay to the Agent, for the account of the Lenders, on the Revolving Termination Date the aggregate principal amount of Revolving Loans outstanding on such date.

3.2     Method of Payment.   All payments hereunder and under the Revolving Note and the Term Note shall be payable in lawful money of the United States of America and in immediately available funds not later than 12:00 noon (San Francisco time) on the date when due at the principal office of the Agent or at such other place as the Agent may, from time to time, designate in writing to the Borrower.

3.3     Optional Prepayment.   Subject to Section 3.7, the Borrower shall be entitled at any time or from time to time, upon not less than one (1) Business Day irrevocable notice to the Agent, to ratably prepay Loans in whole or in part in minimum amounts of $10,000,000 without premium or penalty. Each notice of payment shall specify the date and aggregate principal amount of any such prepayment and the Type(s) of Loans to be repaid. The Agent will promptly notify each Lender of its receipt of any such Notice and of such Lender’s Pro Rata Share of such prepayment. If such Notice is given by the Borrower, the Borrower shall make such prepayment and the payment amount, specified in such Notice shall be due and payable on the date specified therein, together with all accrued interest to each such date on the amount prepaid, and any amounts required in accordance with Section 3.7 hereof as a result of such prepayment.

3.4     Taxes/Net Payments.   All payments by Borrower hereunder and under the Revolving Note and the Term Note to the Agent or any Lender shall be made without set-off or counterclaim and in such amounts as may be necessary in order that all such payments, after deduction or withholding for or on account of any present or future taxes, levies, imposts, duties or other charges of whatsoever nature imposed by any Governmental Authority or taxing

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authority thereof (collectively, “Taxes”), shall not be less than the amounts otherwise specified to be paid under this Agreement. The Borrower shall pay all Taxes when due and shall promptly send to the Lender original tax receipts or copies thereof certified by the relevant taxing authority together with such other documentary evidence with respect to such payments as may be required from time to time by the Agent. If the Borrower fails to pay any Taxes to the appropriate taxing authorities when due or fails to remit to the Agent or Lender any such original tax receipts or certified copies thereof as aforesaid or other required documentary evidence, the Borrower shall indemnify the Agent or Lender within thirty (30) days of demand by the Lender or Agent for any taxes, interest or penalties that may become payable by the Agent or Lender as a result of such failure.

Notwithstanding the foregoing, (i) the Borrower shall not be liable for the payment of any tax on or measured by the net income of any Lender pursuant to the laws of the jurisdiction where an office of such Lender making any loan hereunder is located or does business, and (ii) the foregoing obligation to gross up the payments to any Lender so as not to deduct or offset any withholding taxes or Taxes paid or payable by the Borrower with respect to any payments to such Lender shall not apply (x) to any payment to any Lender which is a “foreign corporation, partnership or trust” within the meaning of the Code if such Lender is not, on the date hereof (or on the date it becomes a Lender under this Agreement pursuant to the assignment terms of this Agreement), or on any date hereafter that it is a Lender under this Agreement, entitled to submit either a Form W-8BEN or any successor form thereto (relating to such Lender and entitling it to a complete exemption from withholding on all interest to be received by it hereunder in respect of the Loans) or Form W-8ECI or any successor form thereto (relating to all interest to be received by such Lender hereunder in respect of the Loans) of the U.S. Department of Treasury, or (y) to any item referred to in the preceding sentence that would not have been imposed but for the failure by such Lender to comply with any applicable certification, information, documentation or other reporting requirements concerning the nationality, residence, identity or connections of such Lender with the United States if such compliance is required by statute or regulation of the United States as a precondition to relief or exemption from such item.

3.5     Illegality.

(a)     If any Lender determines that the introduction of any Requirement of Law, or any change in any Requirement of Law, or in the interpretation or administration of any Requirement of Law, has made it unlawful, or that any central bank or other Governmental Authority has asserted that it is unlawful, for any Lender or its applicable Lending Office to make Eurodollar Rate Loans, then, on notice thereof by the Lender to the Borrower through the Agent, any obligation of that Lender to make Eurodollar Rate Loans shall be suspended until the Lender notifies the Agent and the Borrower that the circumstances giving rise to such determination no longer exist.

(b)     If a Lender determines that it is unlawful to maintain any Eurodollar Rate Loan, the Borrower shall, upon its receipt of notice of such fact and demand from such Lender (with a copy to the Agent), prepay in full such Eurodollar Rate Loans of that Lender then outstanding, together with interest accrued thereon and amounts required under Section 3.7, either on the last day of the Interest Period thereof, if the Lender may lawfully

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continue to maintain such Eurodollar Rate Loans to such day, or immediately, if the Lender may not lawfully continue to maintain such Eurodollar Rate Loan. If the Borrower is required to so prepay any Eurodollar Rate Loan, then concurrently with such prepayment, the Borrower shall borrow from the affected Lender, in the amount of such repayment, a Base Rate Loan.

(c)     If the obligation of any Lender to make or maintain Eurodollar Rate Loans has been so terminated or suspended, the Borrower may elect, by giving notice to the Lender through the Agent that all Loans which would otherwise be made by the Lender as Eurodollar Rate Loans shall be instead Base Rate Loans.

(d)     Before giving any notice to the Agent under this Section, the affected Lender shall designate a different Lending Office with respect to its Eurodollar Rate Loans if such designation will avoid the need for giving such notice or making such demand and will not, in the judgment of the Lender, be illegal or otherwise disadvantageous to the Lender.

3.6     Increased Costs and Reduction of Return.

(a)     If any Lender determines that, due to either (i) the introduction of or any change (other than any change by way of imposition of or increase in reserve requirements included in the calculation of the Eurodollar Rate) in or in the interpretation of any law or regulation, or (ii) the compliance by that Lender with any guideline or request from any central bank or other Governmental Authority (whether or not having the force of law), there shall be any increase in the cost to such Lender of agreeing to make or making, funding or maintaining any Eurodollar Rate Loan, then the Borrower shall be liable for, and shall from time to time, upon demand (with a copy of such demand to be sent to the Agent), pay to the Agent for the account of such Lender, additional amounts as are sufficient to compensate such Lender for such increased costs.

(b)     If any Lender shall have determined that (i) the introduction of any Capital Adequacy Regulation, (ii) any change in any Capital Adequacy Regulation, (iii) any change in the interpretation or administration of any Capital Adequacy Regulation by any central bank or other Governmental Authority charged with the interpretation or administration thereof, or (iv) compliance by the Lender (or its Lending Office) or any corporation controlling the Lender with any Capital Adequacy Regulation, affects or would affect the amount of capital required or expected to be maintained by the Lender or any corporation controlling the Lender and determines that the amount of such capital is increased as a consequence of its Commitment, Loans, credits or obligations under this Agreement then, upon demand of such Lender to the Borrower through the Agent, the Borrower shall pay to the Lender, from time to time as specified by the Lender, additional amounts sufficient to compensate the Lender for the cost of such increase.

3.7     Funding Losses. The Borrower shall reimburse each Lender and hold each Lender harmless from any loss or expense which the Lender may sustain or incur as a consequence of:

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(a)     the failure of the Borrower to make on a timely basis any payment of principal of any Eurodollar Rate Loan;

(b)     the failure of the Borrower to borrow, continue or convert a Loan after the Borrower has given (or is deemed to have given) a Notice of Borrowing or a Notice of Conversion/Continuation;

(c)     the failure of the Borrower to make any prepayment in accordance with any notice delivered under Section 3.3;

(d)     the prepayment or other payment (including after acceleration thereof) of any Eurodollar Rate Loan on a day that is not the last day of the relevant Interest Period; or

(e)     the automatic conversion under Section 2.5 of any Eurodollar Rate Loan to a Base Rate Loan on a day that is not the last day of the relevant Interest Period,

including any such loss or expense arising from the liquidation or reemployment of funds obtained by it to maintain its Eurodollar Rate Loans or from fees payable to terminate the deposits from which such funds were obtained. For purposes of calculating amounts payable by the Borrower to the Lenders under this Section and under subsection 3.6(a), each Eurodollar Rate Loan made by a Lender and each related reserve, special deposit or similar requirement shall be conclusively deemed to have been funded at the LIBO-based rate used in determining the Eurodollar Rate for such Eurodollar Rate Loan by a matching deposit or other borrowing in the interbank eurodollar market for a comparable amount and for a comparable period, whether or not such Eurodollar Rate Loan is in fact so funded,.

3.8     Certificates of Lenders. Any Lender claiming reimbursement or compensation under this Section 3 shall deliver to the Borrower (with a copy to the Agent) a certificate setting forth in reasonable detail the amount payable to the Lender hereunder and such certificate shall be conclusive and binding on the Borrower in the absence of manifest error.

3.9     Substitution of Lenders. Upon the receipt by the Borrower from any Lender (an “Affected Lender”) of a claim for compensation under Section 3.6, the Borrower may: (i) request the Affected Lender to use its best efforts to obtain a replacement bank or financial institution satisfactory to the Borrower to acquire and assume all or a ratable part of all of such Affected Lender’s Loans and Commitment (a “Replacement Lender”); (ii) request one or more of the other Lenders to acquire and assume all or part of such Affected Lender’s Loans and Commitment (but no other Lender shall be required to do so); or (iii) designate a Replacement Lender. Any such designation of a Replacement Lender under clause (ii) or (iii) shall be subject to the prior written consent of the Agent (which consent shall not be unreasonably withheld).

3.10     Survival. The agreements and obligations of the Borrower in this Section 3 shall survive the payment of all other Obligations.

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4. CONDITIONS.

4.1     Conditions Precedent to the Effectiveness of this Agreement. The obligation of each Lender to make its initial extension of credit hereunder is subject to the condition that the Agent has received on or before the Closing Date all of the following in form and substance satisfactory to the Agent and each Lender, in sufficient copies for each Lender;

(a)     This Agreement and the Notes executed by each party thereto.

(b)     A copy of a resolution or resolutions adopted by the Board of Directors or Executive Committee of the Borrower, certified by the Secretary or an Assistant Secretary of the Borrower as being in full force and effect on the date hereof, authorizing the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby, and a copy of the Certificate of Incorporation and the By-Laws of the Borrower, similarly certified.

(c)     A certificate, signed by the Secretary or an Assistant Secretary of the Borrower and dated the date hereof, as to the incumbency of the person or persons authorized to execute and deliver this Agreement.

(d)     A certificate signed by the Chief Financial Officer, Treasurer or Corporate Controller of the Borrower that, as of the date hereof, there has been no material adverse change in its consolidated financial condition since December 31, 2010 not reflected on its Quarterly Report on Form 10-Q filed with the SEC for the period ending March 31, 2011.

(e)     A certificate, signed by the Secretary or an Assistant Secretary of the Borrower and dated the date hereof, as to the persons authorized to execute and deliver a Borrowing Advice, a Notice of Conversion/Continuation, and the Revolving Notes and the Term Notes. The Agent and each Lender may rely on such certificate with respect to the Revolving Loans and Term Loans hereunder unless and until it shall have received an updated certificate and, after receipt of such updated certificate, similarly may rely thereon.

(f)     A written opinion, dated the date hereof, of counsel for the Borrower, in the form of Exhibit E.

(g)     Evidence of payment by the Borrower of all accrued and unpaid fees, costs and expenses to the extent then due and payable on the Closing Date, together with Attorney Costs of Citibank to the extent invoiced prior to or on the Closing Date, plus such additional amounts of Attorney Costs as shall constitute Citibank’s reasonable estimate of Attorney Costs incurred or to be incurred by it through the closing proceedings (provided that such estimate shall not thereafter preclude final settling of accounts between the Borrower and Citibank); including any such costs, fees and expenses arising under or referenced in Sections 2.9 and 10.4.

(h)     Written evidence that all of the Borrowing Agreements have been or concurrently herewith are being terminated.

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(i)     A certificate, signed by the Chief Financial Officer, Treasurer or an Assistant Treasurer of the Borrower and dated as of the date hereof, which confirms that after giving effect to this Agreement, the aggregate principal amount of credit available under all of the Borrower’s committed unsecured revolving credit facilities combined will not exceed the amount authorized under the resolutions of the Borrower referenced in subsection 4.1(b).

4.2     Conditions Precedent to Revolving Loans and Term Loans. The obligation of each Lender to make any Revolving Loan or Term Loan to be made by it (including its initial Revolving Loan), or to continue or convert any Loan under Section 2.5 is subject to the satisfaction of the following conditions precedent on the relevant Borrowing Date or Conversion/Continuation Date:

The Agent shall have received a Borrowing Advice or a Notice of Conversion/Continuation, as applicable. Each Borrowing Advice or Notice of Conversion/Continuation given by the Borrower shall be deemed to be a representation and warranty by the Borrower to each Lender, effective on and as of the date of such Notice and as of such Borrowing Date for a Revolving Loan or Term Loan covered thereby, that (i) the representations and warranties set forth in Section 5 hereof are true and correct as of such date, and (ii) no Default or Event of Default has occurred and is continuing. No Lender shall be required to make any Loan hereunder if:

(a)     the Credit, the Revolving Credit Facility (in the case of a Revolving Loan) or the Term Loan Facility (in the case of a Term Loan) has been terminated; or

(b)     any of the representations or warranties of the Borrower set forth in Section 5 hereof shall prove to have been untrue in any material respect when made, or when any Default or Event of Default as defined in Section 8, has occurred; or

(c)     the Borrower or any Bank Subsidiary is in violation of the capital requirements as described in Section 6.6; or

(d)     the Broker Subsidiary is in violation of minimum net capital requirements as described in Section 7.1; or

(e)     the Borrower’s Consolidated Stockholders’ Equity is below the Minimum Stockholders’ Equity as described in Section 7.2; or

(f)     any amount owing with respect to any Commitment Fee or any outstanding Revolving Loan or Term Loan or any interest thereon or any other amount payable hereunder is due and unpaid.

5. REPRESENTATIONS AND WARRANTIES.

The Borrower represents and warrants to the Agent and each Lender, as of the date of delivery of this Agreement and as of the date of any Revolving Loan or Term Loan, as follows:

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5.1     Organization and Good Standing. The Borrower is a corporation duly organized, validly existing and in good standing under the laws of the state of Delaware and has full power, authority and legal right and has all governmental licenses, authorizations, qualifications and approvals required to own its property and assets and to transact the business in which it is engaged, except where the failure to have any such license, authorization, qualification or approval, individually or in the aggregate, could not reasonably be expected to have a material adverse effect on the Borrower and its Subsidiaries taken as a whole on a consolidated basis; and all of the outstanding shares of capital stock of Borrower have been duly authorized and validly issued, are fully paid and non-assessable.

5.2     Corporate Power and Authority. The Borrower has full power, authority and legal right to execute and deliver, and to perform its obligations under, this Agreement, and to borrow hereunder, and has taken all necessary corporate and legal action to authorize the borrowings hereunder on the terms and conditions of this Agreement and to authorize the execution and delivery of this Agreement, and the performance of the terms thereof.

5.3     Enforceability. This Agreement has been duly authorized and executed by the Borrower, and when delivered to the Lenders will be a legal, valid and binding agreement of the Borrower, enforceable against the Borrower in accordance with its terms, except, in each case, as enforcement thereof may be limited by bankruptcy, insolvency or other laws relating to or affecting enforcement of creditors’ rights or by general equity principles.

5.4     No Violation of Laws or Agreements. The execution and delivery of this Agreement by the Borrower and the performance of the terms hereof will not violate (i) any provision of any law or regulation or any judgment, order or determination of any court or governmental authority or of the charter or by-laws of the Borrower, or (ii) any securities issued by the Borrower or any provision of any mortgage, indenture, loan or security agreement, or other instrument, to which the Borrower is a party or which purports to be binding upon it or any of its assets, in each case in this clause (ii), in any respect that reasonably could be expected to have a material adverse effect on the Borrower and its Subsidiaries taken as a whole on a consolidated basis; nor will the execution and the delivery of this Agreement by the Borrower and the performance of the terms hereof result in the creation of any lien or security interest on any assets of the Borrower pursuant to the provisions of any of the foregoing.

5.5     No Consents. Except as disclosed in writing by Borrower, no consents of others (including, without limitation, stockholders and creditors of the Borrower) nor any consents or authorizations of, exemptions by, or registrations, filings or declarations with, any Governmental Authority are required to be obtained by the Borrower in connection with the execution and delivery of this Agreement and the performance of the terms thereof.

5.6     Financial Statements. The consolidated financial statements of the Borrower contained in the documents previously delivered to each Lender have been prepared in accordance with U.S. generally accepted accounting principles and present fairly the consolidated financial position of the Borrower.

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5.7     Broker Subsidiary Licenses, Etc. The Broker Subsidiary possesses all material licenses, permits and approvals necessary for the conduct of its business as now conducted and as presently proposed to be conducted as are required by law or the applicable rules of the SEC and the Financial Industry Regulatory Authority.

5.8     Broker Subsidiary/Broker Registration. The Broker Subsidiary is registered as a broker-dealer under the Securities Exchange Act of 1934, as amended.

5.9     Broker Subsidiary/SIPC. The Broker Subsidiary is not in arrears with respect to any assessment made upon it by the Securities Investor Protection Corporation, except for any assessment being contested by the Broker Subsidiary in good faith by appropriate proceedings and with respect to which adequate reserves or other provisions are being maintained to the extent required by U.S. generally accepted accounting principles.

5.10     Taxes. The Borrower has paid and discharged or caused to be paid and discharged all taxes, assessments, and governmental charges prior to the date on which the same would have become delinquent, except to the extent that such taxes, assessments or charges are being contested in good faith and by appropriate proceedings by or on behalf of the Borrower and with respect to which adequate reserves or other provisions are being maintained to the extent required by U.S. generally accepted accounting principles.

5.11     ERISA. The Borrower is in all material respects in compliance with the provisions of and regulations under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and the Code applicable to any pension or other employee benefit plan established or maintained by the Borrower or to which contributions are made by the Borrower (the “Plans”). The Borrower has met all of the funding standards applicable to each of its Plans, and there exists no event or condition that would permit the institution of proceedings to terminate any of the Plans under Section 4042 of ERISA. The estimated current value of the benefits vested under each of the Plans does not, and upon termination of any of the Plans will not, exceed the estimated current value of any such Plan’s assets. The Borrower has not, with respect to any of the Plans, engaged in a prohibited transaction set forth in Section 406 of ERISA or Section 4975(c) of the Code that could be expected to have a material adverse effect on the Borrower and its Subsidiaries taken as a whole on a consolidated basis.

5.12     No Extension of Credit for Default Remedy/Hostile Acquisition. The Borrower will not use any amounts borrowed by it under this Agreement to remedy a default under any mortgage, indenture, agreement or instrument under which there may be issued any Indebtedness of the Borrower to any bank or bank holding company, or their respective assignees, for borrowed money. Further, the Borrower will not use any amounts advanced to it under this Agreement for the immediate purpose of acquiring a company where the Board of Directors or other governing body of the entity being acquired has made (and not rescinded) a public statement opposing such acquisition.

5.13     Use of Proceeds/Margin Regulations. The Borrower will use the proceeds for general corporate purposes, including, without limitation, for the back-up of the issuance of commercial paper notes. The Borrower will not use the proceeds of any loan provided hereby in

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such a manner as to result in a violation of Regulations T, U or X of the Board of Governors of the Federal Reserve System.

5.14     Authorized Persons. The persons named for such purpose in the certificates delivered pursuant to subsection 4.1(e) hereof are authorized to execute Borrowing Advices.

5.15     Material Contracts. Borrower is not in default in the performance or observance of any material obligation, agreement, covenant or condition contained in any material contract, indenture, mortgage, loan agreement, note or lease to which the Borrower is a party or by which it may be bound.

5.16     Litigation. Except for any matter disclosed in the Form 10-Q filed by the Borrower with the SEC on May 6, 2011, there is no action, suit or proceeding pending against, or to the knowledge of the Borrower, threatened against or affecting, the Borrower or any of its Subsidiaries before any court, arbitrator, governmental body, agency or official in which there is a significant probability of an adverse decision which could have a material adverse effect on the business or the financial condition of the Borrower.

5.17     Investment Company. The Borrower is not an “investment company” or a company “controlled” by an “investment company” within the meaning of the Investment Company Act of 1940, as amended.

6. AFFIRMATIVE COVENANTS.

The Borrower covenants and agrees that so long as any Lender shall have a Commitment hereunder or any Loan or other obligation hereunder shall remain outstanding, unpaid or unsatisfied and until full payment of all amounts due to the Lenders hereunder, it will, unless and to the extent the Required Lenders waive compliance in writing:

6.1     Notice of Events of Default. Give prompt notice to the Agent and each Lender, no later than three Business Days after becoming aware thereof, of any Default or Event of Default.

6.2     Financial Statements. Deliver to the Agent, in form and detail satisfactory to the Agent and the Required Lenders with sufficient copies for each Lender, within ten Business Days of the filing thereof with the SEC, a copy of (i) each registration statement filed under the Securities Act of 1933, (ii) each Form 10-Q and Form 10-K (in each case including exhibits) filed by the Borrower with the SEC under the Securities Exchange Act of 1934, as amended, accompanied by a compliance certificate with an attached schedule of calculations (in the form attached hereto as Schedule 6.2) demonstrating compliance with the Section 7.1 and 7.2 financial covenants, and (iii) each Form 8-K (with exhibits) and proxy statement filed by the Borrower with the SEC under the Securities Exchange Act of 1934, as amended; and, in the event the Borrower requests an extension of any such filing from the SEC, promptly (but not later than the second Business Day following the filing of such request) deliver a copy of such request to the Agent.

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6.3     Insurance. Maintain and keep in force in adequate amounts such insurance as is usual in the business carried on by the Borrower and cause the Broker Subsidiary to maintain and keep in force in adequate amounts such insurance as is usual in the business carried on by the Broker Subsidiary.

6.4     Books and Records. Maintain adequate books, accounts and records and prepare all financial statements required hereunder in accordance with U.S. generally accepted accounting principles and practices and in compliance with the regulations of any governmental regulatory body having jurisdiction thereof.

6.5     Change in Business. Advise the Agent and each Lender, in a timely manner, of material changes to the nature of business of the Borrower or the Broker Subsidiary as at present conducted. The Broker Subsidiary is at present engaged in the business of providing financial services, primarily to individual investors and/or their advisors.

6.6     Capital Requirements. The Borrower will maintain, and cause each Bank Subsidiary to maintain, at all times such amount of capital as may be prescribed by such entity’s prudential supervisor, from time to time, whether by regulation, agreement or order. The Borrower shall at all times ensure that all Bank Subsidiaries shall be “well capitalized” within the meaning of 12 U.S.C. §1831(o), as amended, reenacted or redesignated from time to time.

7. NEGATIVE COVENANTS.

The Borrower covenants and agrees that so long as any Lender shall have any Commitment hereunder, or any Loan or other obligation, shall remain outstanding, unpaid or unsatisfied and until full payment of all amounts due to the Lenders hereunder, unless and to the extent the Required Lenders waive compliance in writing:

7.1     Net Capital. The Borrower will not permit the Broker Subsidiary to allow any month-end Net Capital Ratio to be less than 5%.

7.2     Minimum Stockholders’ Equity. The Borrower will not allow its Consolidated Stockholders’ Equity to fall below the Minimum Stockholders’ Equity.

7.3     Merger/Disposition of Assets. The Borrower will not (i) permit either Broker Subsidiary or Intermediate Parent to (a) merge or consolidate, unless the surviving company is a Controlled Subsidiary, or (b) convey or transfer its properties and assets substantially as an entirety except to one or more Controlled Subsidiaries; or (ii) except as permitted by subsection 7.3(i) sell, transfer or otherwise dispose of any voting stock of Broker Subsidiary or Intermediate Parent, or permit either Broker Subsidiary or Intermediate Parent to issue, sell or otherwise dispose of any of its voting stock, unless, after giving effect to any such transaction, Broker Subsidiary or Intermediate Parent, as the case may be, remains a Controlled Subsidiary.

7.4     Broker Subsidiary Indebtedness. The Borrower will not permit the Broker Subsidiary to create, incur or assume any Indebtedness other than:

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          (a)        (i)         Indebtedness to customers, other brokers or dealers, securities exchanges or securities markets, self-regulatory organizations, clearing houses and like institutions (including, without limitation, letters of credit or similar credit support devices issued for the account of Broker Subsidiary and for the benefit of any of the foregoing in order to comply with any margin, collateral or similar requirements imposed by or for the benefit of any of the foregoing), (ii) “broker call” credit, (iii) indebtedness consisting of borrowings secured solely by margin loans made by Broker Subsidiary, together with any underlying collateral of Broker Subsidiary, (iv) stock loans, (v) obligations to banks for disbursement accounts, (vi) Indebtedness incurred for the purchase of tangible personal property on a non-recourse basis or for the leasing of tangible personal property under a capitalized lease, (vii) Indebtedness incurred for the purchase, installation or servicing of computer equipment and software, and (viii) Indebtedness incurred in the ordinary course of the Broker Subsidiary’s business, to the extent not already included in the foregoing clauses (i) through (vii);

(b)     intercompany Indebtedness; and

(c)     other Indebtedness in the aggregate not exceeding $100,000,000.

7.5     Indebtedness Secured by Subsidiary Stock. The Borrower will not, and will not permit any Subsidiary at any time directly or indirectly to create, assume, incur or permit to exist any Indebtedness secured by a pledge, lien or other encumbrance (hereinafter referred to as a “lien”) on the voting stock of any Subsidiary without making effective provision whereby the Revolving Notes and the Term Notes shall be secured equally and ratably with such secured Indebtedness so long as other Indebtedness shall be so secured; provided, however, that the foregoing covenant shall not be applicable to Permitted Liens (as defined in Section 7.6 below).

7.6     Liens and Encumbrances. The Borrower will not create, incur, assume or suffer to exist any lien or encumbrance upon or with respect to any of its properties, whether now owned or hereafter acquired, except the following (the “Permitted Liens”):

(a)     liens securing taxes, assessments or governmental charges or levies, or in connection with workers’ compensation, unemployment insurance or social security obligations, or the claims or demands of materialmen, mechanics, carriers, warehousemen, landlords and other like persons not yet delinquent or which are being contested in good faith by appropriate proceedings with respect to which adequate reserves or other provisions are being maintained to the extent required by U.S. generally accepted accounting principles;

(b)     liens not for borrowed money incidental to the conduct of its business or the ownership of property that do not materially detract from the value of any item of property;

(c)     attachment, judgment or other similar liens arising in the connection with court proceedings that do not, in the aggregate, materially detract from the value of its property, materially impair the use thereof in the operation of its businesses and (i) that are discharged or stayed within sixty (60) days of attachment or levy, or (ii) payment of which is

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covered in full (subject to customary and reasonable deductibles) by insurance or surety bonds; and

(d)     liens existing at Closing Date provided that the obligations secured thereby are not increased.

8. EVENTS OF DEFAULT.

8.1     Defaults. The occurrence of any of the following events shall constitute an “Event of Default”:

(a)     The Borrower shall fail to pay any interest with respect to the Revolving Notes or the Term Notes or any Commitment Fee or Term Out Fee in accordance with the terms hereof within 10 days after such payment is due.

(b)     The Borrower shall fail to pay any principal with respect to the Revolving Notes or the Term Notes in accordance with the terms thereof on the date when due.

(c)     Any representation or warranty made by the Borrower herein or hereunder or in any certificate or other document furnished by the Borrower hereunder shall prove to have been incorrect when made (or deemed made) in any respect that is materially adverse to the interests of the Lenders or their rights and remedies hereunder.

(d)     Except as specified in (a) and (b) above, the Borrower shall default in the performance of, or breach, any covenant of the Borrower with respect to this Agreement, and such default or breach shall continue for a period of thirty days after there has been given, by registered or certified mail, to the Borrower by the Agent a written notice specifying such default or breach and requiring it to be remedied.

(e)     An event of default as defined in any mortgage, indenture, agreement or instrument under which there may be issued, or by which there may be secured or evidenced, any Indebtedness of the Borrower in a principal amount not less than $75,000,000, shall have occurred and shall result in such Indebtedness becoming or being declared due and payable prior to the date on which it otherwise would become due and payable, or an event of default or a termination event as defined in any Hedge Agreement shall have occurred and shall result in a net payment obligation of the Borrower thereunder of not less than $75,000,000; provided, however, that if such event of default shall be remedied or cured by the Borrower, or waived by the holders of such Indebtedness, within twenty days after the Borrower has received written notice of such event of default and acceleration, then the Event of Default hereunder by reason thereof shall be deemed likewise to have thereupon been remedied, cured or waived without further action upon the part of either the Borrower or the Agent and Lenders.

(f)     Any involuntary proceeding shall be commenced or an involuntary petition shall be filed in a court of competent jurisdiction seeking (i) relief against the Borrower or the Broker Subsidiary, or against all or a substantial part of the property of either of them, under Title 11 of the United States Code or any other federal, state or foreign bankruptcy,

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insolvency, reorganization or similar law, (ii) the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official for the Borrower or the Broker Subsidiary or for all or a substantial part of the property of either of them, or (iii) the winding-up or liquidation of the Borrower or the Broker Subsidiary; and, in any such case, such involuntary proceeding or involuntary petition shall continue undismissed for 60 days, or, before such 60-day period has elapsed, there shall be entered an order or decree ordering the relief requested in such involuntary proceeding or involuntary petition.

(g)     The Borrower or the Broker Subsidiary shall commence a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or shall consent to the entry of an order for relief in an involuntary case under such law, or shall consent to the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of the Borrower or Broker Subsidiary or for any substantial part of its respective properties, or shall make any general assignment for the benefit of creditors, or shall fail generally to pay its respective debts as they become due or shall take any corporate action in furtherance of any of the foregoing.

(h)     A final judgment or judgments for the payment of money in excess of $75,000,000 in the aggregate shall be entered against the Borrower by a court or courts of competent jurisdiction, and the same shall not be discharged (or provisions shall not be made for such discharge), or a stay of execution thereof shall not be procured, within 30 days from the date of entry thereof and the Borrower shall not, within said period of 30 days, or such longer period during which execution of the same shall have been stayed, appeal therefrom and cause the execution thereof to be stayed during such appeal.

(i)     At any time after a Change in Control, the Borrower fails to maintain at least one of the following credit ratings for its Senior Medium-Term Notes, Series A: (a) BBB- (or better) by Standard & Poor’s Ratings Service, a Division of The McGraw-Hill Companies, Inc., or (b) Baa3 (or better) by Moody’s Investors Service, Inc.

8.2     Remedies. If an Event of Default occurs and is continuing, then and in every such case the Agent shall, at the request of, or may, with the consent of, the Required Lenders (i) declare the Commitment of each Lender to make Loans to be terminated whereupon such Commitments and obligation shall be terminated, and declare the unpaid principal of all outstanding Loans, any and all accrued and unpaid interest, any accrued and unpaid Commitment Fees, or any other amounts owing or payable under the Notes, to be immediately due and payable, by a notice in writing to the Borrower, and upon such declaration such principal, interest, Commitment Fees, or other amounts payable hereunder and accrued thereon shall become immediately due and payable, together with any funding losses that may result as a consequence of such declaration, without presentment, demand, protest or other notice of any kind, all of which are expressly waived by the Borrower; provided, however, that in the case of any of the Events of Default specified in subsection (f) or (g) of Section 8.1, automatically without any notice to the Borrower or any other act by the Agent, the Credit and the obligations of each Lender to make Loans shall automatically terminate and the unpaid principal amount of all outstanding Loans, any accrued and unpaid interest, any accrued and unpaid Commitment Fees or any other amounts payable hereunder shall become immediately due and payable,

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together with any funding losses that may result as a consequence thereof, without further act of the Agent or any Lender and without presentment, demand, protest or other notice of any kind, all of which are expressly waived by the Borrower.

9. THE AGENT.

9.1     Appointment and Authorization. Each Lender hereby irrevocably (subject to Section 9.9) appoints, designates and authorizes the Agent to take such action on its behalf under the provisions of this Agreement and each other Loan Document and to exercise such powers and perform such duties as are expressly delegated to it by the terms of this Agreement or any other Loan Document, together with such powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary contained elsewhere in this Agreement or in any other Loan Document, the Agent shall not have any duties or responsibilities except those expressly set forth, nor shall the Agent have or be deemed to have any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against the Agent.

9.2     Delegation of Duties. The Agent may execute any of its duties under this Agreement or any other Loan Document by or through agents, employees or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Agent shall not be responsible for the negligence or misconduct of any agent or attorney-in-fact that it selects with reasonable care.

9.3     Liability of Agent. None of the Agent-Related Persons shall (i) be liable for any action taken or omitted to be taken by any of them under or in connection with this Agreement or any other Loan Document or the transactions contemplated hereby (except for its own gross negligence or willful misconduct), or (ii) be responsible in any manner to any of the Lenders for any recital, statement, representation or warranty made by the Borrower or any Subsidiary or Affiliate of the Borrower, or any officer thereof, contained in this Agreement or in any other Loan Document, or in any certificate, report, statement or other document referred to or provided for in, or received by the Agent under or in connection with, this Agreement or any other Loan Document, or the validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document, or for any failure of the Borrower or any other party to any Loan Document to perform its obligations hereunder or thereunder. No Agent-Related Person shall be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Loan Document, or to inspect the properties, books or records of the Borrower or any of the Borrower’s Subsidiaries or Affiliates.

9.4     Reliance by Agent.

(a)     The Agent shall be entitled to rely, and shall be fully protected in relying, upon any writing, resolution, notice, consent, certificate, affidavit, letter, facsimile, telex or telephone message, statement or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons, and upon

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advice and statements of legal counsel (including counsel to the Borrower), independent accountants and other experts selected by the Agent. The Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Loan Document unless it shall first receive such advice or concurrence of the Required Lenders as it deems appropriate and, if it so requests, it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement or any other Loan Document in accordance with a request or consent of the Required Lenders and such request and any action taken or failure to act pursuant thereto shall be binding upon all of the Lenders.

(b)     For purposes of determining compliance with the conditions specified in Section 4.1, each Lender that has executed this Agreement shall be deemed to have consented to, approved or accepted or to be satisfied with, each document or other matter either sent by Agent to such Lender for consent, approval, acceptance or satisfaction, or required thereunder to be consented to or approved by or acceptable or satisfactory to the Lender.

9.5     Notice of Default. The Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default, except with respect to defaults in the payment of principal, interest and fees required to be paid to the Agent for the account of the Lenders, unless the Agent shall have received written notice from a Lender or the Borrower referring to this Agreement, describing such Default or Event of Default and stating that such notice is a “notice of default”. The Agent will notify the Lenders of its receipt of any such notice. The Agent shall take such action with respect to such Default or Event of Default as may be requested by the Required Lenders in accordance with Section 8; provided, however, that unless and until the Agent has received any such request, the Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable or in the best interest of the Lenders.

9.6     Credit Decision. Each Lender acknowledges that none of the Agent-Related Persons has made any representation or warranty to it and that no act by the Agent hereinafter taken, including any review of the affairs of the Borrower and its Subsidiaries, shall be deemed to constitute any representation or warranty by any Agent-Related Person to any Lender. Each Lender represents to the Agent that it has, independently and without reliance upon any Agent-Related Person and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, prospects, operations, property, financial and other condition and creditworthiness of the Borrower and its Subsidiaries, and all applicable bank regulatory laws relating to the transactions contemplated hereby, and made its own decision to enter into this Agreement and to extend credit to the Borrower hereunder. Each Lender also represents that it will, independently and without reliance upon any Agent-Related Person and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigations as it deems necessary to inform itself as to the business, prospects, operations, property, financial and other condition and creditworthiness of the Borrower. Except for notices, reports and other documents expressly herein required to be furnished to the Lenders by the Agent, the Agent shall

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not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, prospects, operations, property, financial and other condition or creditworthiness of the Borrower which may come into the possession of any of the Agent-Related Persons.

9.7     Indemnification of Agent. Whether or not the transactions contemplated hereby are consummated, the Lenders shall indemnify upon demand the Agent-Related Persons (to the extent not reimbursed by or on behalf of the Borrower and without limiting the obligation of the Borrower to do so), pro rata, from and against any and all Indemnified Liabilities; provided, however, that no Lender shall be liable for the payment to the Agent-Related Persons of any portion of such Indemnified Liabilities resulting solely from any such Person’s gross negligence or willful misconduct. Without limitation of the foregoing, each Lender shall reimburse the Agent upon demand for its ratable share, of any costs or out-of-pocket expenses (including Attorney Costs) incurred by the Agent in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, any other Loan Document, or any document contemplated by or referred to herein to the extent that the Agent is not reimbursed for such expenses by or on behalf of the Borrower. The undertaking in this Section shall survive the payment of all Obligations hereunder and the resignation or replacement of the Agent.

9.8     Agent in Individual Capacity. Citibank and its Affiliates may make loans to, issue letters of credit for the account of, accept deposits from, acquire equity interests in and generally engage in any kind of banking, trust, financial advisory, underwriting or other business with the Borrower and its Subsidiaries and Affiliates as though Citibank were not the Agent hereunder and without notice to or consent of the Lenders. The Lenders acknowledge that, pursuant to such activities, Citibank or its Affiliates may receive information regarding the Borrower or its Affiliates (including information that may be subject to confidentiality obligations in favor of the Borrower or such Subsidiary) and acknowledge that the Agent shall be under no obligation to provide such information to them. With respect to its Loans, Citibank shall have the same rights and powers under this Agreement as any other Lender and may exercise the same as though it were not the Agent.

9.9     Successor Agent. The Agent may, and at the request of the Required Lenders shall, resign as Agent upon 30 days’ notice to the Lenders and Borrower. If the Agent resigns under this Agreement, the Required Lenders, with the consent of the Borrower, which consent shall not be unreasonably withheld, shall appoint from among the Lenders a successor agent for the Lenders which successor agent shall be approved by the Borrower. If no successor agent is appointed prior to the effective date of the resignation of the Agent, the Agent with the consent of the Borrower, which consent shall not be unreasonably withheld, may appoint, after consulting with the Lenders and the Borrower, a successor agent from among the Lenders. Upon the acceptance of its appointment as successor agent hereunder, such successor agent shall succeed to all the rights, powers and duties of the retiring Agent and the term “Agent” shall mean such successor agent and the retiring Agent’s appointment, powers and duties as Agent shall be terminated. After any retiring Agent’s resignation hereunder as Agent, the provisions of this Section 9 and Sections 10.4 and 10.5 shall inure to its benefit as to any actions taken or omitted

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to be taken by it while it was Agent under this Agreement. If no successor agent has accepted appointment as Agent by the date which is 30 days following a retiring Agent’s notice of resignation, the retiring Agent’s resignation shall nevertheless thereupon become effective and the Lenders shall perform all of the duties of the Agent hereunder until such time, if any, as the Required Lenders appoint a successor agent as provided for above. The retiring Agent shall refund to Borrower that portion of any agency fee paid to such Agent as is not earned due to such Agent’s resignation, prorated to the date of such Agent’s resignation.

9.10     Withholding Tax.

(a)     If any Lender is a “foreign corporation, partnership or trust” within the meaning of the Code and such Lender claims exemption from, or a reduction of, U.S. withholding tax under Section 1441 or 1442 of the Code, such Lender agrees with and in favor of the Agent, to deliver to the Agent:

(i)     if such Lender claims an exemption from, or a reduction of, withholding tax under a United States tax treaty, properly completed IRS Form W-8BEN before the payment of any interest in the first calendar year and before the payment of any interest in any subsequent calendar year during which the Form W-8BEN (or any successor thereto) then in effect expires;

(ii)     if such Lender claims that interest paid under this Agreement is exempt from United States withholding tax because it is effectively connected with a United States trade or business of such Lender, two properly completed copies of IRS Form W-8ECI or any successor form thereto before the payment of any interest is due in the first taxable year of such Lender and before the payment of any interest in any subsequent calendar year during which the Form W-8ECI (or any successor thereto) then in effect expires; and

(iii)     such other form or forms as may be required under the Code or other laws of the United States as a condition to exemption from, or reduction of, United States withholding tax.

Such Lender agrees to promptly notify the Agent of any change in circumstances which would render invalid any claimed exemption or reduction.

(b)     If any Lender claims exemption from, or reduction of, withholding tax under a United States tax treaty by providing IRS Form W-8BEN and such Lender sells, assigns, grants a participation in, or otherwise transfers all or part of the Obligations of the Company to such Lender, such Lender agrees to notify the Agent of the percentage amount in which it is no longer the beneficial owner of Obligations of the Company to such Lender. To the extent of such percentage amount, the Agent will treat such Lender’s IRS Form W-8BEN or any successor form thereto as no longer valid.

(c)     If any Lender claiming exemption from United States withholding tax by filing IRS Form W-8ECI or any successor form thereto with the Agent sells, assigns, grants a participation in, or otherwise transfers all or part of the Obligations of the Company to

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such Lender, such Lender agrees to undertake sole responsibility for complying with the withholding tax requirements imposed by Sections 1441 and 1442 of the Code.

(d)     If any Lender is entitled to a reduction in the applicable withholding tax, the Agent may withhold from any interest payment to such Lender an amount equivalent to the applicable withholding tax after taking into account such reduction. If the forms or other documentation required by subsection (a) of this Section are not delivered to the Agent or if any Lender which is a “foreign corporation, partnership or trust” within the meaning of the Code is not entitled to claim exemption from or a reduction of U.S. withholding tax under Section 1441 or 1442 of the Code, then the Agent shall withhold from any interest payment to such Lender not providing such forms or other documentation an amount equivalent to the applicable withholding tax.

(e)     If the IRS or any other Governmental Authority of the United States or other jurisdiction asserts a claim that the Agent did not properly withhold tax from amounts paid to or for the account of any Lender (because the appropriate form was not delivered, was not properly executed, or because such Lender failed to notify the Agent of a change in circumstances which rendered the exemption from, or reduction of, withholding tax ineffective, or for any other reason other than the Agent’s gross negligence or willful misconduct) such Lender shall indemnify the Agent fully for all amounts paid, directly or indirectly, by the Agent as tax or otherwise, including penalties and interest, and including any taxes imposed by any jurisdiction on the amounts payable to the Agent under this Section, together with all costs and expenses (including Attorney Costs). The obligation of the Lenders under this subsection shall survive the payment of all Obligations and the resignation or replacement of the Agent.

9.11     Co-Agents. None of the Lenders identified on the facing page or signature pages of this Agreement as a “co-agent”, “managing agent”, “syndication agent” or “documentation agent” shall have any right, power, obligation, liability, responsibility or duty under this Agreement other than those applicable to all Lenders as such. Without limiting the foregoing, none of the Lenders so identified as a “co-agent”, “syndication agent” or “documentation agent” shall have or be deemed to have any fiduciary relationship with any Lender. Each Lender acknowledges that it has not relied, and will not rely, on any of the Lenders so identified in deciding to enter into this Agreement or in taking or not taking action hereunder.

10. MISCELLANEOUS.

10.1     Amendments and Waivers. No amendment or waiver of any provision of this Agreement or any other Loan Document, and no consent with respect to any departure by the Borrower or any applicable Subsidiary therefrom, shall be effective unless the same shall be in writing and signed by the Required Lenders (or by the Agent at the written request of the Required Lenders) and the Borrower and acknowledged by the Agent, and then any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no such waiver, amendment, or consent shall, unless in writing and signed by all the Lenders and the Borrower and acknowledged by the Agent, do any of the following:

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(a)     increase or extend the Commitment of any Lender (or reinstate any Commitment terminated pursuant to Section 8.2);

(b)     postpone or delay any date fixed by this Agreement or any other Loan Document for any payment of principal, interest, fees or other amounts due to the Lenders (or any of them) hereunder or under any other Loan Document;

(c)     reduce the principal of, or the rate of interest specified herein on any Loan, or (subject to clause (ii) below) any fees or other amounts payable hereunder or under any other Loan Document;

(d)     change the percentage of the Commitments or of the aggregate unpaid principal amount of the Loans which is required for the Lenders or any of them to take any action hereunder; or

(e)     amend this Section, or Section 2.13, or any provision herein providing for consent or other action by all Lenders;

and, provided further, that (i) no amendment, waiver or consent shall, unless in writing and signed by the Agent in addition to the Required Lenders or all the Lenders, as the case may be, affect the rights or duties of the Agent under this Agreement or any other Loan Document, and (ii) the respective Fee Letters may be amended or rights or privileges thereunder waived, in a writing executed by the parties thereto.

10.2    Notices.

(a)     All notices, requests and other communications shall be either (i) in writing (including, unless the context expressly otherwise provides, by facsimile transmission, provided that any matter transmitted by the Borrower by facsimile shall be immediately confirmed by a telephone call to the recipient at the number specified on Schedule 10.2) or (ii) as and to the extent set forth in clause (d) below, by electronic mail.

(b)     All such notices, requests and communications shall, when transmitted by overnight delivery, faxed or e-mailed, be effective when delivered for overnight (next-day) delivery, transmitted in legible form by facsimile machine (provided that the sender has retained its facsimile machine-generated confirmation of the receipt of such fax by the recipient’s facsimile machine) or transmitted by e-mail (provided that the e-mail was sent to the e-mail address provided by the recipient and that the e-mail was not returned to the sender as undeliverable), respectively, or if mailed, upon the third Business Day after the date deposited into the U.S. mail, or if delivered, upon delivery; except that notices pursuant to Section 2 or 9 shall not be effective until actually received by the Agent.

(c)     The agreement of the Agent and the Lenders herein to receive certain notices by telephone, facsimile or e-mail is solely for the convenience of the Borrower, the Agent and the Lenders. The Agent and the Lenders shall be entitled to rely on the authority of any Person purporting to be a Person who is named in the then-current certificate delivered

38

pursuant to subsection 4.1(e) hereof as authorized to execute Borrowing Advices (each an “Authorized Person”) and the Lenders shall not have any liability to the Borrower or other Person on account of any action taken or not taken by the Agent or the Lenders in reliance upon such telephonic, facsimile or e-mail notice, provided the Agent and the Lenders reasonably believe such Person to be an Authorized Person. The obligation of the Borrower to repay the Loans shall not be affected in any way to any extent by any failure by the Agent and the Lenders to receive written confirmation of any telephonic, facsimile or e-mail notice or the receipt by the Agent and the Lenders of a confirmation which is at variance with the terms understood by the Agent and the Lenders to be contained in the telephonic, facsimile or e-mail notice.

(d)     The compliance certificate described in Section 6.2 shall be delivered to the Agent by the Borrower by mail or overnight delivery. Except for the compliance certificate described in Section 6.2, materials required to be delivered pursuant to Section 6.2 shall be delivered to the Agent in an electronic medium format reasonably acceptable to the Agent by e-mail at oploanswebadmin@citigroup.com. The Borrower agrees that the Agent may make such materials (collectively, the “Communications”) available to the Lenders by posting such materials on Debt Domain or a substantially similar electronic transmission system (collectively, the “Platform”). In addition, to the extent the Borrower in its sole discretion so elects and confirms in writing or by e-mail to the Agent, any other written information, documents, instruments or other material relating to the Borrower, any of its Subsidiaries or any other materials or matters relating to this Agreement, the Notes or any of the transactions contemplated hereby and supplied by the Borrower to the Agent (other than any such communication that (i) relates to a request for a new, or a conversion of an existing, Borrowing (including any election of an interest rate or Interest Period relating thereto), (ii) relates to the payment of any principal or other amount due hereunder prior to the scheduled date therefor, (iii) provides notice of any Default or Event of Default or (iv) is required to be delivered to satisfy any condition precedent set forth in Section 4.1 or Section 4.2), shall, to the extent of such election and confirmation by the Borrower, constitute materials that are “Communications” for purposes of this subparagraph (d). The Borrower and each of the Lenders acknowledges that (i) the distribution of material through an electronic medium is not necessarily secure and that there are confidentiality and other risks associated with such distribution, (ii) the Platform is provided “as is” and “as available” and (iii) neither the Agent nor any of its Affiliates warrants the accuracy, adequacy or completeness of the Communications or the Platform and each expressly disclaims liability for errors or omissions in the Communications or the Platform (provided, as to such disclaimer, that the Agent and its Affiliates have not been grossly negligent or engaged in any willful misconduct in respect of the Platform). No warranty of any kind, express, implied or statutory, including, without limitation, any warranty of merchantability, fitness for a particular purpose, non-infringement of third party rights or freedom from viruses or other code defects, is made by the Agent or any of its Affiliates in connection with the Platform.

(e)     Each Lender agrees that notice to it (as provided in the next sentence) (a “Notice”) specifying that any Communications have been posted to the Platform shall constitute effective delivery of such information, documents or other materials to such Lender for purposes of this Agreement. Each Lender agrees (i) to notify the Agent in writing of such Lender’s e-mail address to which a Notice may be sent by electronic transmission (including by electronic communication) on or before the date such Lender becomes a party to this Agreement (and from time to time thereafter to ensure that the Agent has on record an

39

effective e-mail address for such Lender) and (ii) that any Notice may be sent to such e-mail address.

(f)     The Agent agrees to give to each Lender prompt notice of all materials delivered by the Borrower pursuant to Section 6.2.

10.3    No Waiver-Cumulative Remedies. No failure to exercise and no delay in exercising, on the part of the Agent or any Lender, any right, remedy, power or privilege hereunder, shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.

10.4    Costs and Expenses. The Borrower shall:

(a)     whether or not the transactions contemplated hereby are consummated, pay or reimburse Citibank including in its capacity as Agent and Lender within five Business Days after demand, subject to subsection 4.1(g) for all reasonable costs and expenses incurred by Citibank including in its capacity as Agent and Lender in connection with the development, preparation, delivery, administration and execution of, and any amendment, supplement, waiver or modification to (in each case, whether or not consummated), this Agreement, any Loan Document and any other documents prepared in connection herewith or therewith, and the consummation of the transactions contemplated hereby and thereby, including reasonable Attorney Costs incurred by Citibank (including in its capacity as Agent and Lender with respect thereto); and

(b)     pay or reimburse the Agent, the Arranger and each Lender within five Business Days after demand (subject to subsection 4.1(g)) for all reasonable costs and expenses (including reasonable Attorney Costs) incurred by them in connection with the enforcement, attempted enforcement, or preservation of any rights or remedies under this Agreement or any other Loan Document during the existence of an Event of Default or after acceleration of the Loans (including in connection with any “workout” or restructuring regarding the Loans, and including in any Insolvency Proceeding or appellate proceeding). In connection with any claim, demand, action or cause of action relating to the enforcement, preservation or exercise of any rights or remedies covered by this Section 10.4 against the Borrower, all Lenders shall be represented by the same legal counsel selected by such Lenders; provided, that if such legal counsel determines in good faith that representing all such Lenders would or could result in a conflict of interest under laws or ethical principles applicable to such legal counsel or that a claim is available to a Lender that is not available to all such Lenders, then to the extent reasonably necessary to avoid such a conflict of interest or to permit an unqualified assertion of such a claim, each Lender shall be entitled to separate representation by legal counsel selected by that Lender, with all such legal counsel using reasonable efforts to avoid unnecessary duplication of effort by counsel for all Lenders.

10.5    Borrower Indemnification. Whether or not the transactions contemplated hereby are consummated, the Borrower shall indemnify and hold the Agent-Related Persons, and each Lender and each of its respective officers, directors, employees, counsel, agents and attorneys-in-fact

40

(each, an “Indemnified Person”) harmless from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, charges, expenses and disbursements (including Attorney Costs) of any kind or nature whatsoever which may at any time (including at any time following repayment of the Loans and the termination, resignation or replacement of the Agent or replacement of any Lender) be imposed on, incurred by or asserted against any such Person in any way relating to or arising out of this Agreement or any document contemplated by or referred to herein, or the transactions contemplated hereby, or any action taken or omitted by any such Person under or in connection with any of the foregoing, including with respect to any investigation, litigation or proceeding (including any Insolvency Proceeding or appellate proceeding) related to or arising out of this Agreement or the Loans or the use of the proceeds thereof, whether or not any Indemnified Person is a party thereto (all the foregoing, collectively, the “Indemnified Liabilities”); provided, that the Borrower shall have no obligation hereunder to any Indemnified Person with respect to Indemnified Liabilities resulting from the gross negligence or willful misconduct of such Indemnified Person. If any claim, demand, action or cause of action is asserted against any Indemnified Person, such Indemnified Person shall promptly notify Borrower, but the failure to so promptly notify Borrower shall not affect Borrower’s obligations under this Section unless such failure materially prejudices Borrower’s right to participate in the contest of such claim, demand, action or cause of action, as hereinafter provided. If requested by Borrower in writing, such Indemnified Person shall in good faith contest the validity, applicability and amount of such claim, demand, action or cause of action and shall permit Borrower to participate in such contest. Any Indemnified Person that proposes to settle or compromise any claim or proceeding for which Borrower may be liable for payment of indemnity hereunder shall give Borrower written notice of the terms of such proposed settlement or compromise reasonably in advance of settling or compromising such claim or proceeding and shall obtain Borrower’s prior consent. In connection with any claim, demand, action or cause of action covered by this Section 10.5 against more than one Indemnified Person, all such Indemnified Persons shall be represented by the same legal counsel selected by the Indemnified Persons and reasonably acceptable to Borrower; provided, that if such legal counsel determines in good faith that representing all such Indemnified Persons would or could result in a conflict of interest under laws or ethical principles applicable to such legal counsel or that a defense or counterclaim is available to an Indemnified Person that is not available to all such Indemnified Persons, then to the extent reasonably necessary to avoid such a conflict of interest or to permit unqualified assertion of such a defense or counterclaim, each Indemnified Person shall be entitled to separate representation by legal counsel selected by that Indemnified Person and reasonably acceptable to Borrower, with all such legal counsel using reasonable efforts to avoid unnecessary duplication of effort by counsel for all Indemnified Persons. The agreements in this Section shall survive payment of all other Obligations.

10.6     Payments Set Aside. To the extent that the Borrower makes a payment to the Agent or the Lenders, or the Agent or the Lenders exercise any right of set-off, and such payment or the proceeds of such set-off or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by the Agent or such Lender in its discretion) to be repaid to a trustee, receiver or any other party, in connection with any Insolvency Proceeding or otherwise, then (a) to the extent of such recovery the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or

41

such setoff had not occurred, and (b) each Lender severally agrees to pay to the Agent upon demand its pro rata share of any amount so recovered from or repaid by the Agent.

10.7     Successors and Assigns. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that the Borrower may not assign or transfer any of its rights or obligations under this Agreement without the prior written consent of the Agent and each Lender.

10.8    Assignments, Participations Etc.

(a)     Any Lender may, with the written consent of the Agent and the Borrower, which consent shall not be unreasonably withheld (except Borrower’s consent shall not be required if a Default or an Event of Default exists and is continuing), at any time assign and delegate to one or more Eligible Assignees (provided that no written consent of the Agent shall be required in connection with any assignment and delegation by a Lender to an Eligible Assignee that is an Affiliate of such Lender) (each an “Assignee”) all, or any ratable part of all, of the Loans, the Commitments, and the other rights and obligations of such Lender hereunder, in a minimum amount of $10,000,000; provided, however, that the Borrower and, the Agent may continue to deal solely and directly with such Lender in connection with the interest so assigned to an Assignee until (A) written notice of such assignment, together with payment instructions, addresses and related information with respect to the Assignee, shall have been given to the Borrower and the Agent by such Lender and the Assignee; (B) such Lender and its Assignee shall have delivered to the Borrower and the Agent an Assignment and Acceptance in the form of Exhibit F (“Assignment and Acceptance”) together with any Note or Notes subject to such assignment; and (C) the assignor Lender or Assignee has paid to the Agent a processing fee in the amount of $3,500.

(b)     From and after the date that the Agent notifies the assignor Lender and the Borrower that it has received (and the Borrower and the Agent have provided their consent with respect to) an executed Assignment and Acceptance and payment of the above-referenced processing fee, (i) the Assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment and Acceptance, shall have the rights and obligations of a Lender under the Loan Documents, and (ii) the assignor Lender shall, to the extent that rights and obligations hereunder and under the other Loan Documents have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights and be released from its obligations under the Loan Documents.

(c)     Within five Business Days after its receipt of notice by the Agent that it has received an executed Assignment and Acceptance and payment of the processing fee (and provided that it consents to such assignment in accordance with subsection 10.8(a)), the Borrower shall execute and deliver to the Agent, new Notes evidencing such Assignee’s assigned Loans and Commitment and, if the assignor Lender has retained a portion of its Loans and its Commitment, replacement Notes in the principal amount of the Commitment retained by the assignor Lender (such Notes to be in exchange for, but not in payment of, the Notes held by such Lender). Immediately upon each Assignee’s making its processing fee payment under the Assignment and Acceptance, this Agreement shall be deemed to be amended to the extent, but

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only to the extent, necessary to reflect the addition of the Assignee and the resulting adjustment of the Commitments arising therefrom. The Commitment allocated to each Assignee shall reduce such Commitments of the assignor Lender pro tanto.

(d)     Any Lender may at any time sell to one or more commercial banks or other Persons not Affiliates of the Borrower (a “Participant”) participating interests in any Loans, the Commitment of that Lender and the other interests of that Lender (the “originating Lender”) hereunder and under the other Loan Documents; provided, however, that (i) the originating Lender’s obligations under this Agreement shall remain unchanged, (ii) the originating Lender shall remain solely responsible for the performance of such obligations, (iii) the Borrower, and the Agent shall continue to deal solely and directly with the originating Lender in connection with the originating Lender’s rights and obligations under this Agreement and the other Loan Documents, and (iv) no Lender shall transfer or grant any participating interest under which the Participant has rights to approve any amendment to, or any consent or waiver with respect to, this Agreement or any other Loan Document. Any Lender that sells a participation to any Person that is a “foreign corporation, partnership or trust” within the meaning of the Code shall include in its participation agreement with such Person a covenant by such Person that such Person will comply with the provisions of Section 9.10 as if such Person were a Lender and provide that the Agent and the Borrower shall be third party beneficiaries of such covenant.

(e)     Notwithstanding any other provision in this Agreement, any Lender may at any time create a security interest in, or pledge, all or any portion of its rights under and interest in this Agreement and the Note held by it in favor of any Federal Reserve Bank in accordance with Regulation A of the FRB or U.S. Treasury Regulation 31 CFR §203.14, and such Federal Reserve Bank may enforce such pledge or security interest in any manner permitted under applicable law.

(f)     Any Lender (a “Granting Lender”) may, with notice to the Agent, grant to a special purpose funding vehicle (an “SPC”) the option to fund all or any part of any Loan that such Granting Lender would otherwise be obligated to fund pursuant to this Agreement. The funding of a Loan by an SPC hereunder shall utilize the Revolving Credit Commitment of the Granting Lender to the same extent, and as if, such Loan were funded by such Granting Lender. Each party hereto hereby agrees that no SPC shall be liable for any indemnity or payment under this Agreement for which a Lender would otherwise be liable for so long as, and to the extent, the Granting Lender provides such indemnity or makes such payment. Notwithstanding anything to the contrary contained in the foregoing or anywhere else in this Agreement, (i) nothing herein shall constitute a commitment by any SPC to fund any Loan, (ii) if an SPC elects not to exercise such option or otherwise fails to fund all or any part of such Loan, the Granting Lender shall be obligated to fund such Loan pursuant to the terms hereof, and (iii) the Borrower and Agent shall continue to deal exclusively with the Granting Lender and any funding by an SPC hereunder shall not constitute an assignment, assumption or participation of any rights or obligations of the Granting Lender. Any SPC may disclose on a confidential basis any non-public information relating to its funding of Loans to any rating agency, commercial paper dealer or provider of any surety or guarantee to such SPC, provided, as a condition precedent to such disclosure, (A) such agency, dealer or provider has delivered to such Granting

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Lender for the benefit of Borrower a written confidentiality agreement substantially similar to Section 10.9, and (B) simultaneous with or prior to such disclosure, such Granting Lender has given written notice to Borrower of the agency, dealer or provider to which such disclosure is being made and the contents of such disclosure. This Section may not be amended without the prior written consent of each Granting Lender, all or any part of whose Loan is being funded by an SPC at the time of such amendment.

10.9    Confidentiality. Each Lender agrees to hold any confidential information that it may receive from Borrower or from the Agent on such Borrower’s behalf, pursuant to this Agreement in confidence, except for disclosure: (a) to legal counsel and accountants for Borrower or any Lender; (b) to other professional advisors to Borrower or any Lender, provided that the recipient has delivered to such Lender a written confidentiality agreement substantially similar to this Section 10.9; (c) to regulatory officials having jurisdiction over any Lender; (d) as required by applicable law or legal process or in connection with any legal proceeding in which any Lender and Borrower are adverse parties; (e) to Affiliates or agents of such Lender to the extent the Affiliate or agent is involved in the administration of the credit facilities extended to Borrower and its Subsidiaries hereunder, provided that any such Affiliate or agent has delivered to such Lender a written confidentiality agreement substantially similar to this Section 10.9 and (f) to another financial institution in connection with a disposition or proposed disposition to that financial institution of all or part of any Lender’s interests hereunder or a participation interest in the Revolving Note and/or the Term Note, each in accordance with Section 10.8 hereof, provided that the recipient has delivered to such Lender a written confidentiality agreement substantially similar to this Section 10.9. Each Lender further agrees that it will not use such confidential information in any activity or for any purpose other than the administration of credit facilities extended to Borrower and its Subsidiaries and, without limitation, will take such steps as are reasonably appropriate to preclude access to any such confidential information to be obtained by any Person employed by any Lender, or by an affiliate of any Lender, who is not involved in the administration of credit facilities extended to Borrower and its Subsidiaries. For purposes of the foregoing, “confidential information” shall mean any information respecting Borrower or its Subsidiaries reasonably specified by Borrower as confidential, other than (i) information filed with any governmental agency and available to the public, and (ii) information disclosed by Borrower to any Person not associated with Borrower without a written confidentiality agreement substantially similar to this Section 10.9. Certain of the confidential information pursuant to this Agreement is or may be valuable proprietary information that constitutes a trade secret of Borrower or its Subsidiaries; neither the provision of such confidential information to any Lender or the limited disclosures thereof permitted by this Section 10.9 shall affect the status of any such confidential information as a trade secret of Borrower and its Subsidiaries. Each Lender, and each other Person who agrees to be bound by this Section 10.9, acknowledges that any breach of the agreements contained in this Section 10.9 would result in losses that could not be reasonably or adequately compensated by money damages. Accordingly, if any Lender or any other person breaches its obligations hereunder, such Lender or such other Person recognizes and consents to the right of Borrower, Intermediate Parent, and/or Broker Subsidiary to seek injunctive relief to compel such Lender or other Person to abide by the terms of this Section 10.9.

10.10    Notification of Addresses, Lending Offices, Etc. Each Lender shall notify the Agent in writing of any changes in the address to which notices to the Lender should be directed,

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of addresses of any Lending Office, of payment instructions in respect of all payments to be made to it hereunder and of such other administrative information as the Agent shall reasonably request.

10.11    Counterparts. This Agreement may be executed in any number of separate counterparts, each of which, when so executed, shall be deemed an original, and all of said counterparts taken together shall be deemed to constitute but one and the same instrument.

10.12    Severability. The illegality or unenforceability of any provision of this Agreement or any instrument or agreement required hereunder shall not in any way affect or impair the legality or enforceability of the remaining provisions of this Agreement or any instrument or agreement required hereunder.

10.13    No Third Parties Benefited. This Agreement is made and entered into for the sole protection and legal benefit of the Borrower, the Lenders, the Agent and the Arranger, and their permitted successors and assigns, and no other Person shall be a direct or indirect legal beneficiary of, or have any direct or indirect cause of action or claim in connection with, this Agreement or any of the other Loan Documents.

10.14    Governing Law and Jurisdiction.

(a)     THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF CALIFORNIA; PROVIDED THAT THE AGENT AND THE LENDERS SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.

(b)     ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF CALIFORNIA OR OF THE UNITED STATES FOR THE NORTHERN DISTRICT OF CALIFORNIA, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE BORROWER, THE AGENT AND THE LENDERS CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE BORROWER, THE AGENT AND THE LENDERS IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO.

10.15    Waiver of Jury Trial.

(a)     TO THE FULL EXTENT PERMITTED BY LAW, THE BORROWER, THE LENDERS AND THE AGENT EACH WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE TRANSACTION CONTEMPLATED HEREBY OR THEREBY, IN

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ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR ANY AGENT-RELATED PERSON, PARTICIPANT OR ASSIGNEE, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. TO THE FULL EXTENT PERMITTED BY LAW, THE BORROWER, THE LENDERS AND THE AGENT EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.

(b)     WITHOUT INTENDING IN ANY WAY TO LIMIT THE PARTIES’ AGREEMENT IMMEDIATELY ABOVE TO WAIVE THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY, if such waiver of the right to a trial by jury is not enforceable, the parties hereto agree that any and all disputes or controversies of any nature between the Borrower, on the one hand, and any one or more of the other parties to this Agreement, on the other, arising out of this Agreement at any time shall be decided by a reference to a private judge, mutually selected by the parties to such dispute (or, if they cannot agree, by the Presiding Judge of the California Superior Court in and for the County of San Francisco) appointed in accordance with California Code of Civil Procedure Section 638 (or pursuant to comparable provisions of federal law if the dispute falls within the exclusive jurisdiction of the federal courts), sitting without a jury, in San Francisco County, California; and the parties hereby submit to the jurisdiction of such court. The reference proceedings shall be conducted pursuant to and in accordance with the provisions of California Code of Civil Procedure §§ 638 through 645.1, inclusive. The private judge shall have the power, among others, to grant provisional relief, including without limitation, entering temporary restraining orders, issuing preliminary and permanent injunctions and appointing receivers. All such proceedings shall be closed to the public and confidential, and all records relating thereto shall be permanently sealed. If during the course of any dispute, a party desires to seek provisional relief, but a judge has not been appointed at that point pursuant to the judicial reference procedures, then such party may apply to the California Superior Court in and for the County of San Francisco for such relief. The proceeding before the private judge shall be conducted in the same manner as it would be before a court under the rules of evidence applicable to judicial proceedings. The parties shall be entitled to discovery which shall be conducted in the same manner as it would be before a court under the rules of discovery applicable to judicial proceedings. The private judge shall oversee discovery and may enforce all discovery rules and orders applicable to judicial proceedings in the same manner as a trial court judge. The parties agree that the selected or appointed private judge shall have the power to decide all issues in the action or proceeding, whether of fact or of law, and shall report a statement of decision thereon pursuant to the California Code of Civil Procedure § 644(a). Nothing in this paragraph shall limit the right of any party at any time to exercise self-help remedies, foreclose against collateral (if any), or obtain provisional remedies.

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The private judge shall also determine all issues relating to the applicability, interpretation, and enforceability of this paragraph.

10.16    Entire Agreement. This Agreement, together with the other Loan Documents, embodies the entire agreement and understanding among the Borrower, the Lenders and the Agent, and supersedes all prior or contemporaneous agreements and understandings of such Persons, verbal or written, relating to the subject matter hereof and thereof.

10.17    Headings. Articles and Section headings in this Agreement are included herein for the convenience of reference only.

10.18    USA Patriot Act. Each Lender hereby notifies the Borrower that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Act”), it is required to obtain, verify and record information that identifies each borrower, guarantor or grantor (the “Loan Parties”), which information includes the name and address of each Loan Party and other information that will allow such Lender to identify such Loan Party in accordance with the Act.

(SIGNATURE PAGE FOLLOWS)

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement by their duly authorized officers as of the date first above written.

Borrower: THE CHARLES SCHWAB CORPORATION
By:	/s/  William F. Quinn
Name: William F. Quinn
Title: Senior Vice President and Treasurer

Lenders: CITIBANK, N.A., as Agent and individually as Lender
By:	/s/  Maureen Maroney
Name: Maureen Maroney
Title: Vice President
JPMORGAN CHASE BANK, N.A.
By:	/s/  Catherine Grossman
Name: Catherine Grossman
Title: Vice President
CREDIT SUISSE AG, CAYMAN ISLANDS BRANCH
By:	/s/  Jay Chall
Name: Jay Chall
Title: Director
By:	/s/  Philipp Nufer
Name: Philipp Nufer
Title: Assistant Vice President
THE BANK OF NEW YORK MELLON
By:	/s/  Thomas Caruso
Name: Thomas Caruso
Title: Managing Director
UBS LOAN FINANCE LLC
By:	/s/  Irja R. Otsa
Name: Irja R. Otsa
Title: Associate Director
By:	/s/  Mary E. Evans
Name: Mary E. Evans
Title: Associate Director

WELLS FARGO BANK, NATIONAL ASSOCIATION
By:	/s/  David J. Bendel
Name: David J. Bendel
Title: Director
BANK OF AMERICA, N.A.
By:	/s/  Maryanne Fitzmaurice
Name: Maryanne Fitzmaurice
Title: Director
LLOYDS TSB BANK PLC
By:	/s/  Shane Klein
Name: Shane Klein
Title: Senior Vice President
By:	/s/  Candi Obrentz
Name: Candi Obrentz
Title: Vice President
PNC BANK, NATIONAL ASSOCIATION
By:	/s/  Alaa Shraim
Name: Alaa Shraim
Title: Assistant Vice President
STATE STREET BANK AND TRUST COMPANY
By:	/s/  James H. Reichert
Name: James H. Reichert
Title: Vice President
COMERICA BANK
By:	/s/  Thomas G. Hoger
Name: Thomas G. Hoger
Title: Vice President

Schedule 1

LENDERS’ COMMITMENTS

The Charles Schwab Corporation $800,000,000 Credit Agreement (364-Day Commitment) dated as of June 10, 2011.

	Lender Commitment Amount
1.   Citibank, N.A.	1.    $95,000,000
2.   JPMorgan Chase Bank, N.A.	2.    $95,000,000
3.   Credit Suisse AG, Cayman Islands Branch	3.    $85,000,000
4.   The Bank of New York Mellon	4.    $85,000,000
5.   UBS Loan Finance LLC	3.    $85,000,000
6.   Wells Fargo Bank, National Association	6.    $85,000,000
7.   Bank of America, N.A.	7.    $55,000,000
8.   Lloyds TSB Bank plc	8.    $55,000,000
9.   PNC Bank, National Association	9.    $55,000,000
10. State Street Bank and Trust Company	10.    $55,000,000
11. Comerica Bank	11.    $50,000,000
Total	$800,000,000

Schedule 2

LIST OF BORROWING AGREEMENTS

1.         $800,000,000 Credit Agreement (364-Day Commitment) dated as of June 11, 2010 among the Borrower, the lenders party thereto, and Citibank, N.A., as administrative agent for such lenders.

Schedule 6.2

COMPLIANCE CERTIFICATE

I,                     , certify that I am the                      of The Charles Schwab Corporation (the “Borrower”), and that as such I am authorized to execute this Compliance Certificate on behalf of the Borrower, and do hereby further certify on behalf of the Borrower that:

1.         I have reviewed the terms of that certain Credit Agreement (364-Day Commitment) dated as of June 10, 2011 among the Borrower, the financial institutions named therein (the “Lenders”) and Citibank, N.A., as Agent for the Lenders (the “Credit Agreement”), and I have made, or have caused to be made by employees or agents under my supervision, a detailed review of the transactions and conditions of the Borrower during the accounting period covered by the attached financial statements dated                     , 20        .

2.         The examination described in paragraph 1 did not disclose, and I have no knowledge of the existence of any condition or event which constitutes a Default or Event of Default during or at the end of the accounting period covered by the attached financial statements or as of the date of this Compliance Certificate, except as set forth below.

3.         Schedule I attached hereto sets forth financial data and computations evidencing compliance with the covenants set forth in Sections 7.1 and 7.2 of the Credit Agreement, all of which data and computations are true, complete and correct. Capitalized terms not otherwise defined herein are defined in the Credit Agreement.

4.         Described below are the exceptions, if any, to paragraph 2 by listing, in detail, the nature of the condition or event, the period during which it has existed and the action which the Borrower has taken, is taking, or proposes to take with respect to each such condition or event.

The foregoing certifications, together with the computations set forth in Schedule I hereto and the financial statements delivered with this Compliance Certificate in support hereof, are made and delivered this          day of                     20        .

By:

Name:

Title:

The Charles Schwab Corporation

Credit Agreement (364-Day Commitment)

Dated as of June 10, 2011

Schedule I

to

Compliance Certificate

(Dollars in Thousands)

1. Net Capital Ratio of the Broker Subsidiary.

Requirement: Broker Subsidiary - month-end ratio not less than 5%.

Net Capital Ratio for Broker Subsidiary

Month                     Month-end Ratio

2. Minimum Stockholders’ Equity of Borrower.

Requirement: As of                     , 20        , required Minimum Stockholders’ Equity is $4,700,000,000 plus 50% of cumulative Net Earnings from June 30, 2011.

Schedule 10.2

NOTICES

If to the Borrower:
If by U.S. mail:	The Charles Schwab Corporation
	Treasury Department
	Attn: Bruce C. Marcellus or Successor
	211 Main Street (Mail Stop SF215FMT-04-120)
	San Francisco, CA 94105
If by hand delivery
(including courier and overnight messenger service):	The Charles Schwab Corporation
	Treasury Department
	Attn: Bruce C. Marcellus or Successor
	215 Fremont Street, 4th Floor
	San Francisco, CA 94105
Telephone:	(415) 667-8880
Facsimile:	(415) 667-8565

If to the Agent:

See information under Citibank, N.A. in table below pertaining to Lenders.

If to the Lenders:

Credit Contact	Operations Contact	Lending Office	Payment Instructions
Bank of America, N.A. 335 Madison Ave. New York, NY 10017 Attention: Marianne Fitzmaurice                   Director (646) 556-0343 Fax: (704) 683-9184	Bank of America, N.A. Building #5A Mindspace Ranejait Park Hitech City, Madhapur Hyderabad India Attention: Aditya Tha +91040 23145000 ext. 66898 Fax: (312) 453-3849	Bank of America, N.A. 2001 Clayton Road Concord, California 94520	Bank of America, N.A. ABA #: 026009593 Charlotte, NC Acct #: 4426457864 Attention: Bilateral Clearing Account Ref: Charles Schwab Corporation
The Bank of New York Mellon One Wall Street, 19th Floor New York, NY 10286 Attention: Thomas Caruso                   Managing Director (212) 635-6745 Fax: (212) 635-1194	The Bank of New York Mellon 6023 Airport Road Oriskany, NY 13424 Attention: Richard Scalice (315)765-4192 Fax: (315) 765-4783	The Bank of New York Mellon One Wall Street, 19th Floor New York, NY 10286	The Bank of New York ABA #: 021-000-018 Acct #: GLA111-231 Acct name: Broker Services Attn: Bradley Fike Ref: Charles Schwab Corporation

Credit Contact	Operations Contact	Lending Office	Payment Instructions
Citibank, N.A. 388 Greenwich Street New York, NY 10013 Attention: William Mandaro                   Vice President (212) 816-0852 Fax: (212) 816-1212	Citibank, N.A. 1615 Brett Road, Bldg #3 New Castle, DE 19720 Attention: Lee Ocasio                   Assistant Manager (302) 894-6065 Fax: (212) 994-0961	Citibank, N.A. 399 Park Avenue New York, NY 10043	Citibank NA ABA #: 021-000-089 New York, NY Acct #: 40610794 Acct Name: Wall Street Fees Attention: Lee Ocasio Ref: The Charles Schwab Corporation
Comerica Bank 39200 Six Mile Rd. Mail Code 7619 Livonia, MI 48152 Attention: Thomas G. Hoger                   Vice President /                   Chris Georvassilis                   Senior Vice President (734) 632-4511 / (734) 632-4553 Fax: (734) 632-4540	Comerica Bank 500 Woodward Avenue, 9th Flr. Mail Code 3266 Detroit, MI 48226 Attention: Debra M. Borthwick                   Lending Assistant (313) 222-7805 Fax: (313) 222-3420	Comerica Bank 500 Woodward Avenue, 9th Flr. Detroit, MI 48226	Comerica Bank ABA #: 072000096 Acct #: 02-21585-90010 Acct Name: Commercial Loans Attention: Thomas G. Hoger Ref: The Charles Schwab Corporation
Credit Suisse AG, Cayman Islands Branch Eleven Madison Avenue New York, NY 10010 Attention: Jay Chall                   Kathrin Marti (212) 325-9010 / (212) 538-1241 Fax: (212) 743-1843	Credit Suisse AG, Cayman Islands Branch One Madison Avenue New York, NY 10010 Attention: Candace Sorina                   Loan Closers (212) 538-2903 Fax: (866) 469-3871	Credit Suisse AG, Cayman Islands Branch Eleven Madison Avenue New York, NY 10010	Credit Suisse ABA #: 021-000-018 New York, NY Acct #: 890-0492-627 Acct Name: CS Agency Cayman Ref: The Charles Schwab Corporation
JPMorgan Chase Bank, N.A. 277 Park Avenue, 11th Floor New York, NY 10172 Attention: Catherine Grossman                   Vice President /                   Thomas Poz                   Executive Director (212) 270-1153 / 1236 Fax: (212) 270-1511	JPMorgan Chase Bank, N.A. 500 Stanton Cristiana Road Ops 2, Floor 3 Newark, Delaware 19713-2107 Attention: Jenna Poore (302) 634-1574 Fax: (201) 244-3885	JPMorgan Chase Bank, N.A. 270 Park Avenue New York, NY 10017	JPMorgan Chase Bank, N.A. New York, NY ABA #: 021000021 Acct #: 9008113381H2602 Acct Name: Attn: Loan & Agency Ref: The Charles Schwab Corporation
Lloyds TSB Bank plc 1095 Avenue of the Americas, 34th Floor New York , NY 10036 Attention: Shane Klein                   Senior Vice President /                   Victor Crome                   Assistant Vice President (212) 930-8967 / 8965 Fax: (212) 930-5098	Lloyds TSB Bank plc 1095 Avenue of the Americas, 34th Floor New York , NY 10036 Attention: Indira Girisankar /                   Ramona Rojas (212) 930-5051/8978 Fax: (212) 930-5098	Lloyds TSB Bank plc 1095 Avenue of the Americas, 34th Floor New York , NY 10036	Bank of America International, New York New York, NY ABA #: 026-009-593 Acct #: 655-010-1938 Acct Name: Lloyds TSB Bank plc, New York Ref: Charles Schwab
PNC Bank, N. A. One PNC Plaza 249 Fifth Avenue Pittsburgh, PA 15222 Attention: Howard Potter                   Senior Vice President /                   Van Paul                   Assistant Vice President (412) 762-7348 / (412) 768-3326 Fax: (412) 768-5151	PNC Bank, N. A. 6750 Miller Road Mail Stop: BR-YB58-01O Brecksville, OH 44141 Attention: Brian Kus                   Loan Administration (440) 546-7399 Fax: (877) 718-2651	PNC Bank, N. A. One PNC Plaza 249 Fifth Avenue Pittsburgh, PA 15222	PNC Bank, N.A. Pittsburgh, PA ABA #: 043-000-096 Acct #: 13076-0016-803 Acct Name: Commercial Loan Operations Attn: Brian Kus Ref: Charles Schwab Corp

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Credit Contact	Operations Contact	Lending Office	Payment Instructions
State Street Bank and Trust Company Box 5303 Boston, MA 02206 Attention: James Reichert                   Vice President /                   Charlie Garrity                   Vice President (617) 662-8620 / 8827 Fax: (617) 662-8664	State Street Bank and Trust Company Box 5302 Boston, MA 02206 Attention: Voy Pearson (617) 662-8577 Fax: (617) 662-8833	State Street Bank and Trust Company 100 Huntington Ave., Tower 1, Floor 4 Boston, MA 02206	State Street Bank and Trust Company, Boston, MA ABA#: 011-000-028 Acct #: 0006-332-1 Acct. Name: IS Loan Operations / CSU Internal Attn: Robyn Shepard
UBS Loan Finance LLC 677 Washington Boulevard Stamford, CT 06901 Attention: Denise Bushee (203) 719-3167 Fax: (203) 719-3390	UBS Loan Finance LLC 677 Washington Boulevard Stamford, CT 06901 Attention: Denise Bushee (203) 719-3167 Fax: (203) 719-3390	UBS Loan Finance LLC 677 Washington Boulevard Stamford, CT 06901	UBS Loan Finance LLC Stamford, CT ABA #: 026 007 993 Acct #: WA-894001-001 Acct. Name: BPS Loan Finance Account Attn: Denise Bushee Ref: The Charles Schwab Corporation
Wells Fargo Bank, National Association 90 S. 7th Street Minneapolis, MN 55402 Attention: David Bendel                   Director /                   Beth McGinnis                   Managing Director (612) 667-3518 / (612) 667-9551 Fax: (612) 667-7251	Wells Fargo Bank, National Association 1700 Lincoln Street, 5th Floor Denver, CO 80203 Attention: Claire Gerndt, Jr.                   Loan Servicing Spec. (303) 863-5917 Fax: (303) 863-2729	Wells Fargo Bank, National Association 90 South 7th Street, 7th Floor MAC N9305-075 Minneapolis, MN 55402-3903	Wells Fargo Bank, National Association San Francisco, CA ABA #: 121000248 Acct #: 00029690050720 Account Name: WLS Denver Attn: Dorothy Cardenas Ref: The Charles Schwab Corporation (Obligor # 1582242431)

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EXHIBIT A-1

REVOLVING NOTE

$                                  (Amount of Commitment) Date: June 10, 2011

For Value Received, The Charles Schwab Corporation (“Schwab”) hereby promises to pay to the order of                          (the “Lender”) to Citibank, N.A., as Agent, at Agent’s office located at 388 Greenwich Street, New York, New York 10013, for the account of the applicable Lending Office of the Lender, the principal amount of                             ($             ) or the aggregate amount of all Revolving Loans made to Schwab by the Lender, whichever is less, on June 8, 2012. The undersigned also promises to pay interest on the unpaid principal amount of each Borrowing from the date of such Borrowing until such principal amount is paid, at the rates per annum, and payable at such times, as are specified in the Credit Agreement. This Note shall be subject to the terms of the Credit Agreement, and all principal and interest payable hereunder shall be due and payable in accordance with the terms of the Credit Agreement.

Schwab hereby authorizes the Lender to endorse on the Schedule attached to this Note the amount and Type of Revolving Loans made to Schwab by the Lender and all renewals, conversions, and payments of principal amounts in respect of such Revolving Loans, which endorsements shall, in the absence of manifest error, be conclusive as to the outstanding principal amount of all such Revolving Loans, provided, however, that the failure to make such notation with respect to any Revolving Loans or payments shall not limit or otherwise affect the obligation of Schwab under the Credit Agreement or this Note.

This Note is the Revolving Note referred to in the Credit Agreement (364-Day Commitment), dated as of June 10, 2011 among Schwab, the Lender, certain other Lenders party thereto, and Citibank, N.A., as Agent for the Lenders (the “Credit Agreement”). Terms defined in the Credit Agreement are used herein with the same meanings. The Credit Agreement, among other things, contains provisions for acceleration of the maturity of this Note, upon the happening of certain stated events and also for prepayments on account of the principal of this Note prior to the maturity of this Note upon the terms and conditions specified in the Credit Agreement.

Principal and interest payments shall be in money of the United States of America, lawful at such times for the satisfaction of public and private debts, and shall be in immediately available funds.

Schwab promises to pay the costs of collection, including reasonable attorney’s fees, if default is made in the payment of this Note.

The terms and provisions of this Note shall be governed by the applicable laws of the State of California.

IN WITNESS WHEREOF, the undersigned has caused this Note to be executed by its officers thereunto duly authorized and directed by appropriate corporate authority.

The Charles Schwab Corporation

By:

Name:

Title:

2

EXHIBIT A-1

SCHEDULE TO REVOLVING NOTE

Date Made, Continued, Converted, or Paid Type of Loan Amount of Loan Amount of Principal
Continued,
Converted, or Paid Unpaid Principal Balance of
Revolving Note Name of Person Making
Notation

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EXHIBIT A-2

TERM NOTE

Date: June 10, 2011

FOR VALUE RECEIVED, the undersigned, The Charles Schwab Corporation (“Schwab”) hereby promises to pay to the order of                                      (the “Lender”) to Citibank, N.A., as Agent, at the Agent’s office located at 388 Greenwich Street, New York, New York 10013, for the account of the applicable Lending Office of the Lender, the principal amount of each Term Loan made by the Lender to Schwab pursuant to the terms of the Credit Agreement (364-Day Commitment), dated as of June 10, 2011, as amended, among Schwab, the Lender, certain other Lenders party thereto, and Citibank, N.A., as Agent for the Lenders (the “Credit Agreement”), as shown in the schedule attached hereto and any continuation thereof, in lawful money of the United States and in immediately available funds on the Term Loan Maturity Date for such Term Loan. The undersigned also promises to pay interest on the unpaid principal amount of each Term Loan from the date of such Term Loan until such principal amount is paid, in like money, at said office for the account of the Lender’s applicable Lending Office, at the rates per annum, and payable at such times as are specified in the Credit Agreement. This Term Note shall be subject to the terms of the Credit Agreement and all principal and interest payable hereunder should be due and payable in accordance with the terms of the Credit Agreement. Terms defined in the Credit Agreement are used herein with the same meanings.

This Term Note is one of the Term Notes referred to in, and is entitled to the benefits of, the Credit Agreement. The Credit Agreement, among other things, contains provisions for acceleration of the maturity of this Term Note upon the happening of certain stated events and also for prepayments on account of principal hereof prior to the maturity of the Term Note upon the terms and conditions specified in the Credit Agreement.

Schwab promises to pay costs of collection, including reasonable attorney’s fees, if default is made in the payment of this Note.

The terms and provisions of this Term Note shall be governed by the applicable laws of the State of California.

IN WITNESS WHEREOF, the undersigned has caused this Term Note to be executed by its officer thereunto duly authorized and directed by appropriate corporate authority.

The Charles Schwab Corporation

By:

Name:

Title:

EXHIBIT A-2

SCHEDULE TO TERM NOTE

Date Made, Continued,
Converted, or Paid Type of Loan Amount of Loan Term Loan Maturity Date Amount of Principal Continued,
Converted, or Paid Unpaid Principal Balance of Term Note Name of Person Making Notation

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EXHIBIT B

BORROWING ADVICE

1.     This Borrowing Advice is executed and delivered by The Charles Schwab Corporation (“Borrower”) to you pursuant to that certain Credit Agreement dated as of June 10, 2011 (the “Credit Agreement”), entered into by Borrower, Citibank, N.A. (“Citibank”) and certain other Lenders parties thereto, collectively with Citibank (the “Lenders”) and Citibank as Agent for the Lenders (herein “Agent”). Terms defined in the Credit Agreement and not otherwise defined herein are used herein as defined in the Credit Agreement.

2.     Borrower hereby requests that the Lenders make a Revolving [or Term Loan] for the account of Borrower (at                         , Account No.                         ) pursuant to Section 2.4 of the Credit Agreement as follows:

(a) Amount of Revolving [or Term Loan]:                                                 .

(b) Borrowing Date of Revolving [or Term Loan]:                                              .

(c) [If a Revolving Loan] Type of Revolving Loan (check one only):

             Eurodollar Rate with             - day Interest Period

             Base Rate

(d) [If a Term Loan] Type of Term Loan (check one only):

             Eurodollar Rate with initial             - day Interest Period

             Base Rate

(e) [If a Term Loan] Maturity Date of Term Loan: .

3.     Following this request for a Revolving Loan [or Term Loan], the aggregate outstanding amount of all Revolving Loans and Term Loans under the Revolving Note will not exceed the aggregate amount of the Commitments.

4.     This Borrowing Advice is executed on                          by the Borrower.

BORROWER:

THE CHARLES SCHWAB CORPORATION,

a Delaware Corporation

By:

Name:

Title:

2

EXHIBIT C

NOTICE OF CONVERSION/CONTINUATION

Dated as of:                                 

Citibank, N.A., as Agent

_________________________________

_________________________________

Ladies and Gentlemen:

This irrevocable Notice of Conversion/Continuation (this “Notice”) is delivered to you under the Credit Agreement (364-Day Commitment) dated as of June 10, 2011 (as amended, restated or otherwise modified, the “Credit Agreement”) by and among The Charles Schwab Corporation, a Delaware corporation (the “Company”) (herein “Borrower”); and Citibank, N.A., a Delaware corporation (herein “Citibank”) and the other Lenders signatory thereto (together with Citibank, collectively “Lenders”), and Citibank as agent for the Lenders (herein “Agent”).

1.     This Notice is submitted for the purpose of:

(check one and complete applicable information in accordance with the Credit Agreement)

[__] Converting or [__] continuing all or a portion of the following type of Loan:

(a) (check, as applicable)

Base Rate Loan                                         ;

Eurodollar Rate Loan                                 .

(b) The aggregate outstanding principal balance of the above Loan is $                                .

(c) As applicable, the last day of the current Interest Period for such Loan is                             .

(d) The principal amount of such Loan to be [converted or continued] is $                                .

(e) Such principal amount should be converted/continued into the following type of Loan:

Base Rate Loan                                         ;

Eurodollar Rate Loan                                     .

(f) The requested effective date of the [conversion/continuation] of such Loan is                             .

(g) As applicable, the requested Interest Period applicable to the new Loan is                             .

2.     No Default or Event of Default under the Credit Agreement has occurred and is continuing or will be caused by the advance requested hereby.

3.     The representations and warranties set forth in Section 5 of the Credit Agreement are true and correct as if made on the date hereof (except for such representations and warranties as expressly relate to a prior date).

Capitalized terms used herein which are not defined herein shall have the respective meanings set forth in the Credit Agreement.

IN WITNESS WHEREOF, the undersigned officer of the Company has executed this Notice of Conversion/Continuation this      day of                     ,             .

THE CHARLES SCHWAB CORPORATION

By:

Name:

Title:

[must be signed by an Authorized Officer]

2

EXHIBIT D

COMMITMENT AND TERMINATION DATE EXTENSION REQUEST

[Bank name and address] [Date]

Reference is made to that certain Credit Agreement (364-Day Commitment) dated as of June 10, 2011 (“Credit Agreement”) entered into by The Charles Schwab Corporation (“Borrower”), Citibank, N.A., as Agent and Lenders party thereto. Terms defined in the Credit Agreement and not otherwise defined herein are used herein as defined in the Credit Agreement.

Pursuant to Section 2.11 of the Credit Agreement, Borrower hereby requests Agent to obtain each Lender’s agreement to the extension of such Lender’s Commitment presently in effect, in the amount of $[specify amount of existing Commitment], and the Termination Date presently in effect, for an additional 364 days.

Agent’s execution of a copy of this letter in the space provided below and the transmission of such executed copy to Borrower shall constitute all Lenders’ acceptance of Borrower’s request and all Lenders’ agreement to the 364-day extension sought herein. More specifically, upon the execution of a copy of this letter by Agent on behalf of Lenders and the transmission thereof to Borrower within 15 days after Agent’s receipt of this letter, (1) the Termination Date as defined in Section 2.11 of the Credit Agreement shall be extended 364 days and deemed changed to                                     , and (2) all other dates appearing in the Credit Agreement that are referred to in Section 2.11 of the Credit Agreement shall correspondingly be extended 364 days.

This Commitment and Termination Date Extension Request is executed by Borrower on                             .

BORROWER:

THE CHARLES SCHWAB CORPORATION,

a Delaware Corporation

By:

Name:

Title:

ACCEPTED AND AGREED:

Agent, on Behalf of Lenders

By:

Name:

Title:

EXHIBIT E

BORROWER’S OPINION OF COUNSEL

[Howard Rice Letterhead]

[Date]

Citibank, N.A., as Agent

Re: Credit Agreement (364-Day Commitment), dated June 10, 2011, among

The Charles Schwab Corporation, Citibank, N.A., as Agent

and the Lenders party thereto

Ladies and Gentlemen:

This opinion is delivered at the request of The Charles Schwab Corporation to you in your capacity as Agent, on behalf of the Lenders, under the Credit Agreement (364-Day Commitment) dated as of June 10, 2011 (the “Credit Agreement”) among The Charles Schwab Corporation, a Delaware corporation (“Borrower”), Citibank, N.A., as the Administrative Agent and the Lenders signatories thereto (each a “Lender” and collectively, the “Lenders”). This opinion letter speaks as of close of business on June 10, 2011 (hereafter the “operative date”).

We have acted as special counsel to Borrower in connection with the Credit Agreement. In such capacity we have examined originals, or copies represented to us by Borrower to be true copies, of the Credit Agreement; and we have obtained such certificates of such responsible officials of Borrower and of public officials as we have deemed necessary for purposes of this opinion. We have assumed without investigation the genuineness of all signatures on original documents, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as photostatic copies of originals, and the accuracy and completeness of all corporate records certified to us by the Borrower to be accurate and complete. We have further assumed that the Credit Agreement is binding upon and enforceable against the Agent and the Lenders. As to factual matters, we have relied upon the representations and warranties contained in and made pursuant to the Credit Agreement.

Capitalized terms not otherwise defined herein have the meanings given for such terms in the Credit Agreement. For the purpose of this opinion, “Loan Documents” as used herein means the Credit Agreement and the Notes.

Based upon the foregoing and in reliance thereon, and subject to the exceptions and qualifications set forth herein, we are of the opinion that:

1.     Borrower is a corporation duly formed, validly existing, and in good standing under the laws of Delaware.

2.     Borrower has all requisite corporate power and authority to execute, deliver and perform all of its obligations under the Loan Documents.

3.     Each Loan Document has been duly authorized, executed and delivered by Borrower. Each Loan Document constitutes the legal, valid and binding obligation of Borrower, enforceable against Borrower in accordance with its terms, except as such validity, binding nature or enforceability may be limited by:

(a)     the effect of applicable federal or state bankruptcy, reorganization, insolvency, fraudulent conveyance, moratorium or other similar laws and court decisions relating to or affecting creditors’ rights generally;

(b)     the effect of legal and equitable principles upon the availability of creditors’ remedies, regardless of whether considered in a proceeding in equity or at law;

(c)     the effect of California judicial decisions involving statutes or principles of equity which have held that certain covenants or other provisions of agreements, including without limitation those providing for the acceleration of indebtedness due under debt instruments upon the occurrence of events therein described, are unenforceable under circumstances where it cannot be demonstrated that the enforcement of such provisions is reasonably necessary for the protection of the lender, has been undertaken in good faith under the circumstances then existing, and is commercially reasonable;

(d)     the effect of Section 1670.5 of the California Civil Code, which provides that a court may refuse to enforce a contract or may limit the application thereof or any clause thereof which the court finds as a matter of law to have been unconscionable at the time it was made;

(e)     the unenforceability, under certain circumstances, of provisions purporting to require the award of attorneys’ fees, expenses, or costs, where such provisions do not satisfy the requirements of California Civil Code Section 1717 et seq., or in any action where the lender is not the prevailing party;

(f)     the unenforceability, under certain circumstances, of provisions waiving stated rights or unknown future rights and waiving defenses to obligations, where such waivers are contrary to applicable law or against public policy;

(g)     the unenforceability, under certain circumstances, of provisions which provide for penalties, late charges, additional interest in the event of a default by the borrower or fees or costs related to such charges;

(h)     the unenforceability, under certain circumstances, of provisions to the effect that rights or remedies are not exclusive, that every right or remedy is cumulative and may be exercised in addition to or with any other right or remedy, or that the election of some particular remedy or remedies does not preclude recourse to one or another remedy;

(i)     the unenforceability of provisions prohibiting waivers of provisions of either of the Loan Documents otherwise than in writing to the extent that Section 1698 of the California Civil Code permits oral modifications that have been executed;

2

(j)     limitations on the enforceability of release, contribution, exculpatory, or nonliability provisions, under federal or state securities laws, Sections 1542 and 1543 of the California Civil Code, and any other applicable statute or court decisions;

(k)     limitations on the enforceability of any indemnity obligations imposed upon or undertaken by the borrower to the extent that such obligations do not satisfy the requirements of Sections 2772 et seq. of the California Civil Code and any judicial decisions thereunder; provided that the limitations and qualifications set forth in the immediately preceding sub-paragraphs (b) through (k) do not, in our opinion, render the remedies available to the Lenders under the Loan Documents inadequate for the practical realization of the primary rights and benefits reasonably expected by an institutional lender in a comparable unsecured credit facility transaction governed by California law; and

(l)     the effect of Grafton Partners L.P. v. Superior Court, 36 Cal. 4th 944, 2005 WL 1831995 (Cal. 2005), in which the California Supreme Court held that predispute contractual waivers of trial by jury are invalid, as well as the effect of Section 631(d) of the California Code of Civil Procedure, which provides that a court may, in its discretion upon just terms, allow a trial by jury although there may have been a waiver of trial by jury.

The foregoing opinions are subject to the following exceptions and qualifications:

a.     We have not been requested to verify and have not verified the validity, accuracy, or reasonableness of any of the factual representations contained in either or both of the Loan Documents, and we express no opinion with respect to any of such matters.

b.     We are members of the bar of the State of California. We are opining herein only concerning matters governed by the Federal laws of the United States of America, the substantive laws of the State of California, and the General Corporation Law of the State of Delaware, and only with respect to Borrower. We express no opinion concerning the applicability to either or both of the Loan Documents, or the effect thereon, of the laws of any other jurisdiction. Furthermore, we express no opinion with respect to choice of law or conflicts of law, and none of the opinions stated herein shall be deemed to include or refer to choice of law or conflict of law.

c.     We express no opinion on any Federal or state securities laws as they may relate to either or both of the Loan Documents.

d.     We express no opinion as to compliance with the usury laws of any jurisdiction.

The opinions set forth herein are given as of the operative date. We disclaim any obligation to notify you or any other person or entity after the operative date if any change in fact and/or law should change our opinion with respect to any matters set forth herein. This opinion letter is rendered to you in your capacity as the Agent on behalf of the Lenders under the Credit Agreement and may not be relied upon, circulated or quoted, in whole or in part, by any other person or entity (other than the Lenders and a person or entity who becomes an assignee or successor in interest of any Lender or acquires a participation from any Lender consistent with the terms of the Loan Documents) and shall not be referred to in any report or document furnished to any other person or entity without our prior written consent; provided, however, that

3

the foregoing shall not preclude any Lender from describing or otherwise disclosing the existence or contents of this letter to (i) any bank regulatory authority having jurisdiction over such Lender, as required by such authority, (ii) a person or entity who, in good-faith discussions between such Lender and such person or entity, is proposed to become an assignee or successor in interest of such Lender or to acquire a participation from the Bank consistent with the terms of the Loan Documents, and (iii) counsel to the Agent and the Lenders.

Very truly yours,

HOWARD RICE NEMEROVSKI

CANADY FALK & RABKIN

A Professional Corporation

By:

4

EXHIBIT F

FORM OF ASSIGNMENT AND ACCEPTANCE

To: CITIBANK, N.A., as Administrative Agent

Ladies and Gentlemen:

Reference is made to that certain Credit Agreement (364-Day Commitment) dated as of June 10, 2011 between THE CHARLES SCHWAB CORPORATION, a Delaware corporation (“Borrower”), Lenders from time to time party thereto, and CITIBANK, N.A., as Administrative Agent (as amended, restated, extended, supplemented or otherwise modified in writing from time to time, the “Agreement”, the terms defined therein being used herein as therein defined).

1.     We hereby give you notice of, and request your consent to, the assignment by                                          (the “Assignor”) to                                               (the “Assignee”) of             % of the right, title and interest of the Assignor in and to the Loan Documents, including, without limitation, the right, title and interest of the Assignor in and to the Commitment of the Assignor, and all outstanding Loans made by the Assignor. Before giving effect to such assignment:

(a) the aggregate amount of the Assignor’s Commitment is $                        .

(b) the aggregate principal amount of its outstanding Loans is $                        .

2.     The Assignee hereby represents and warrants that it has complied with the requirements of Section 10.8 of the Agreement in connection with this assignment and acknowledges and agrees that: (a) other than the representation and warranty that it is the legal and beneficial owner of the Pro Rata Share being assigned hereby free and clear of any adverse claim, the Assignor has made no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Agreement or the execution, legality, validity, enforceability, genuineness or sufficiency of the Agreement of any other Loan Document; (b) the Assignor had made no representation or warranty and assumes no responsibility with respect to the financial condition of Borrower or the performance by Borrower of the Obligations; (c) it has received a copy of the Agreement, together with copies of the most recent financial statements delivered pursuant to Section 6.2 thereof and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Acceptance; (d) it will independently and without reliance upon Administrative Agent or any Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Agreement; (e) it appoints and authorizes Administrative Agent to take such action and to exercise such powers under the Agreement and the other Loan Documents as are delegated to Administrative Agent by the Agreement and such other Loan Documents; and (f) it will perform in accordance with their terms all of the obligations which by the terms of the Agreement are required to be performed by it as a Lender.

3.     The Assignee agrees that, upon receiving your consent to such assignment and form and after                                 , the Assignee will be bound by the terms of the Loan Documents, with respect to the interest in the Loan Documents assigned to it as specified above, as fully and to the same extent as if the Assignee were a Lender originally holding such interest in the Loan Documents.

4.     The following administrative details apply to the Assignee:

(a) Credit Contact:

Assignee name:                                                  

Address:                                                             

_____________________________________

Attention:                                                           

Telephone:                                                         

Telecopier:                                                         

(b) Operations Contract:

Assignee name:                                                  

Address:                                                             

_____________________________________

Attention:                                                           

Telephone:                                                         

Telecopier:                                                         

(c) Lending Office:

Assignee name:                                                  

Address:                                                             

_____________________________________

(d) Payment Instructions:

Assignee name:                                                  

ABA No.:                                                           

Account No.:                                                      

Attention:                                                           

Reference:                                                          

2

IN WITNESS WHEREOF, the Assignor and the Assignee have caused this Assignment and Acceptance to be executed by their respective duly authorized officials, officers or agents as of the date first above mentioned.

Very truly yours,

[ASSIGNOR]

By:

Name:

Title:

[ASSIGNEE]

By:

Name:

Title:

We hereby consent to the

foregoing assignment.

THE CHARLES SCHWAB CORPORATION,

as Borrower

By:

Name:

Title:

CITIBANK, N.A.,

as Administrative Agent

By:

Name:

Title:

3

EX-12.1

THE CHARLES SCHWAB CORPORATION

Exhibit 12.1

Computation of Ratio of Earnings to Fixed Charges

(Dollar amounts in millions)

(Unaudited)

	Three Months Ended June 30,				Six Months Ended June 30,
	2011		2010		2011		2010
Earnings before taxes on earnings	$	386	$	338	$	780	$	351
Fixed charges
Interest expense :
Deposits from banking clients		16		25		33		56
Payables to brokerage clients		—		1		1		1
Long-term debt		27		19		54		39
Other		2		—		2		—
Total		45		45		90		96
Interest portion of rental expense		15		14		30		28
Total fixed charges (A)		60		59		120		124
Earnings before taxes on earnings and fixed charges (B)	$	446	$	397	$	900	$	475
Ratio of earnings to fixed charges (B) ÷ (A) (1)		7.4		6.7		7.5		3.8
Ratio of earnings to fixed charges, excluding deposits from banking clients and payables to brokerage clients interest expense (2)		9.8		11.2		10.1		6.2

⁽¹⁾  The ratio of earnings to fixed charges is calculated in accordance with SEC requirements. For such purposes, “earnings” consist of earnings before taxes on earnings and fixed charges. “Fixed charges” consist of interest expense as listed above, and one-third of rental expense, which is estimated to be representative of the interest factor.

⁽²⁾  Because interest expense incurred in connection with both deposits from banking clients and payables to brokerage clients is completely offset by interest revenue on related investments and loans, the Company considers such interest to be an operating expense. Accordingly, the ratio of earnings to fixed charges, excluding deposits from banking clients and payables to brokerage clients interest expense, reflects the elimination of such interest expense as a fixed charge.

EX-31.1

THE CHARLES SCHWAB CORPORATION

Exhibit 31.1

CERTIFICATION PURSUANT TO RULE 13a-14(a)/15d-14(a), AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Walter W. Bettinger II, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of The Charles Schwab Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	August 5, 2011	/s/ Walter W. Bettinger II
		Walter W. Bettinger II
		President and Chief Executive Officer

EX-31.2

THE CHARLES SCHWAB CORPORATION

Exhibit 31.2

CERTIFICATION PURSUANT TO RULE 13a-14(a)/15d-14(a), AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Joseph R. Martinetto, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of The Charles Schwab Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	August 5, 2011	/s/ Joseph R. Martinetto
		Joseph R. Martinetto
		Executive Vice President and Chief Financial Officer

EX-32.1

THE CHARLES SCHWAB CORPORATION

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of The Charles Schwab Corporation (the Company) on Form 10-Q for the quarter ended June 30, 2011 (the Report), I, Walter W. Bettinger II, President and Chief Executive Officer of the Company, hereby certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company for the periods presented therein.

/s/ Walter W. Bettinger II	Date:	August 5, 2011
Walter W. Bettinger II
President and Chief Executive Officer

A signed original of this written statement required by Section 906 has been provided to The Charles Schwab Corporation and will be retained by The Charles Schwab Corporation and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

THE CHARLES SCHWAB CORPORATION

Exhibit 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of The Charles Schwab Corporation (the Company) on Form 10-Q for the quarter ended June 30, 2011 (the Report), I, Joseph R. Martinetto, Executive Vice President and Chief Financial Officer of the Company, hereby certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company for the periods presented therein.

/s/ Joseph R. Martinetto	Date:	August 5, 2011
Joseph R. Martinetto
Executive Vice President and Chief Financial Officer

A signed original of this written statement required by Section 906 has been provided to The Charles Schwab Corporation and will be retained by The Charles Schwab Corporation and furnished to the Securities and Exchange Commission or its staff upon request.

XML



Condensed Consolidated Statements of Income (Parenthetical) (USD $) In Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010
Total other-than-temporary impairment losses	$ 11	$ 13	$ 11	$ 41
Other-than-temporary impairment losses recognized in other comprehensive income	$ 9	$ 5	$ 2	$ 25

XML



Condensed Consolidated Balance Sheets (USD $) In Millions	Jun. 30, 2011	Dec. 31, 2010
Assets
Cash and cash equivalents	$ 6,466	$ 4,931
Cash and investments segregated and on deposit for regulatory purposes (including resale agreements of $15,802 at June 30, 2011 and $12,697 at December 31, 2010)	23,842	22,749
Receivables from brokers, dealers, and clearing organizations	456	415
Receivables from brokerage clients - net	11,644	11,235
Other securities owned - at fair value	410	337
Securities available for sale	27,208	23,993
Securities held to maturity (fair value - $16,071 at June 30, 2011 and $17,848 at December 31, 2010)	15,799	17,762
Loans to banking clients - net	9,471	8,725
Loans held for sale	49	185
Equipment, office facilities, and property - net	639	624
Goodwill	631	631
Other assets	957	981
Total assets	97,572	92,568
Liabilities and Stockholders' Equity
Deposits from banking clients	52,339	50,590
Payables to brokers, dealers, and clearing organizations	1,356	1,389
Payables to brokerage clients	33,917	30,861
Accrued expenses and other liabilities	1,222	1,496
Long-term debt	2,004	2,006
Total liabilities	90,838	86,342
Stockholders' equity:
Preferred stock - 9,940,000 shares authorized; $.01 par value per share; none issued
Common stock - 3 billion shares authorized; $.01 par value per share; 1,428,604,522 shares issued	14	14
Additional paid-in capital	3,087	3,034
Retained earnings	7,745	7,409
Treasury stock, at cost - 219,684,046 shares at June 30, 2011 and 226,222,313 shares at December 31, 2010	(4,157)	(4,247)
Accumulated other comprehensive income	45	16
Total stockholders' equity	6,734	6,226
Total liabilities and stockholders' equity	$ 97,572	$ 92,568

XML



Segment Information (Tables)

6 Months Ended

Jun. 30, 2011

Financial Information for the Company's Reportable Segments

Financial information for the Company’s reportable segments is presented in the following table:

	Investor Services						Institutional Services						Unallocated						Total
Three Months Ended June 30,	2011			2010			2011			2010			2011			2010			2011			2010
Net Revenues:
Asset management and administration fees	$	275		$	229		$	227		$	209		$	—		$	(1	)	$	502		$	437
Net interest revenue		387			326			64			58			—			(1	)		451			383
Trading revenue		136			157			70			76			(1	)		—			205			233
Other		16			17			19			17			—			2			35			36
Provision for loan losses		(1	)		(1	)		—			—			—			—			(1	)		(1	)
Net impairment losses on securities		(2	)		(7	)		—			(1	)		—			—			(2	)		(8	)
Total net revenues		811			721			380			359			(1	)		—			1,190			1,080
Expenses Excluding Interest		547			503			258			241			(1	)		(2	)		804			742
Income before taxes on income	$	264		$	218		$	122		$	118		$	—		$	2		$	386		$	338
Taxes on income																				(148	)		(133	)
Net Income																			$	238		$	205
	Investor Services						Institutional Services						Unallocated						Total
Six Months Ended June 30,	2011			2010			2011			2010			2011			2010			2011			2010
Net Revenues:
Asset management and administration fees	$	551		$	444		$	453		$	413		$	—		$	—		$	1,004		$	857
Net interest revenue		760			614			127			109			—			—			887			723
Trading revenue		296			297			150			145			—			—			446			442
Other		36			34			38			33			—			—			74			67
Provision for loan losses		(4	)		(13	)		(1	)		(2	)		—			—			(5	)		(15	)
Net impairment losses on securities		(8	)		(14	)		(1	)		(2	)		—			—			(9	)		(16	)
Total net revenues		1,631			1,362			766			696			—			—			2,397			2,058
Expenses Excluding Interest (1)		1,101			1,032			518			483			(2	)		192			1,617			1,707
Income before taxes on income	$	530		$	330		$	248		$	213		$	2		$	(192	)	$	780		$	351
Taxes on income																				(299	)		(140	)
Net Income																			$	481		$	211

⁽¹⁾  Unallocated amount includes a class action litigation reserve of $196 million in the first half of 2010.

XML



Document and Entity Information	6 Months Ended
	Jun. 30, 2011	Jul. 22, 2011
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2011
Document Fiscal Year Focus	2011
Document Fiscal Period Focus	Q2
Trading Symbol	SCHW
Entity Registrant Name	SCHWAB CHARLES CORP
Entity Central Index Key	0000316709
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		1,209,410,221

XML



Financial Information for the Company's Reportable Segments (Parenthetical) (Detail) (USD $) In Millions	3 Months Ended	6 Months Ended
	Jun. 30, 2011	Jun. 30, 2011	Jun. 30, 2010
Segment Reporting Information [Line Items]
Class action litigation and regulatory reserve	$ 7	$ 7	$ 196

XML



Securities with Unrealized Losses, Aggregated by Category and Period of Continuous Unrealized Loss (Detail) (USD $) In Millions	Jun. 30, 2011		Dec. 31, 2010
Gain (Loss) on Investments [Line Items]
Securities Less than 12 months Fair Value	$ 4,984	[1]	$ 9,009	[2]
Securities Less than 12 months Unrealized Losses	59	[1]	143	[2]
Securities 12 months or longer Fair Value	923	[1]	1,207	[2]
Securities 12 months or longer Unrealized Losses	185	[1]	234	[2]
Total securities with unrealized losses Total Fair Value	5,907	[1]	10,216	[2]
Total securities with unrealized losses Total Unrealized Losses	244	[1]	377	[2]
U.S. agency residential mortgage-backed securities | Securities available for sale
Gain (Loss) on Investments [Line Items]
Securities Less than 12 months Fair Value	1,558		707
Securities Less than 12 months Unrealized Losses	11		3
Total securities with unrealized losses Total Fair Value	1,558		707
Total securities with unrealized losses Total Unrealized Losses	11		3
Non-agency residential mortgage-backed securities | Securities available for sale
Gain (Loss) on Investments [Line Items]
Securities Less than 12 months Fair Value	129
Securities Less than 12 months Unrealized Losses	4
Securities 12 months or longer Fair Value	923		1,207
Securities 12 months or longer Unrealized Losses	185		234
Total securities with unrealized losses Total Fair Value	1,052		1,207
Total securities with unrealized losses Total Unrealized Losses	189		234
Corporate debt securities | Securities available for sale
Gain (Loss) on Investments [Line Items]
Securities Less than 12 months Fair Value	517		549
Securities Less than 12 months Unrealized Losses	1		1
Total securities with unrealized losses Total Fair Value	517		549
Total securities with unrealized losses Total Unrealized Losses	1		1
Asset-backed securities | Securities available for sale
Gain (Loss) on Investments [Line Items]
Securities Less than 12 months Fair Value			873
Securities Less than 12 months Unrealized Losses			2
Total securities with unrealized losses Total Fair Value			873
Total securities with unrealized losses Total Unrealized Losses			2
Securities available for sale
Gain (Loss) on Investments [Line Items]
Securities Less than 12 months Fair Value	2,204		2,129
Securities Less than 12 months Unrealized Losses	16		6
Securities 12 months or longer Fair Value	923		1,207
Securities 12 months or longer Unrealized Losses	185		234
Total securities with unrealized losses Total Fair Value	3,127		3,336
Total securities with unrealized losses Total Unrealized Losses	201		240
U.S. agency residential mortgage-backed securities | Securities held to maturity
Gain (Loss) on Investments [Line Items]
Securities Less than 12 months Fair Value	2,780		6,880
Securities Less than 12 months Unrealized Losses	43		137
Total securities with unrealized losses Total Fair Value	2,780		6,880
Total securities with unrealized losses Total Unrealized Losses	43		137
Securities held to maturity
Gain (Loss) on Investments [Line Items]
Securities Less than 12 months Fair Value	2,780		6,880
Securities Less than 12 months Unrealized Losses	43		137
Total securities with unrealized losses Total Fair Value	2,780		6,880
Total securities with unrealized losses Total Unrealized Losses	$ 43		$ 137

[1] The number of investment positions with unrealized losses totaled 165 for securities available for sale and 17 for securities held to maturity.

[2] The number of investment positions with unrealized losses totaled 178 for securities available for sale and 37 for securities held to maturity.

XML



Financial Information for the Company's Reportable Segments (Detail) (USD $) In Millions	3 Months Ended				6 Months Ended
	Jun. 30, 2011		Jun. 30, 2010		Jun. 30, 2011		Jun. 30, 2010
Net Revenues:
Asset management and administration fees	$ 502		$ 437		$ 1,004		$ 857
Net interest revenue	451		383		887		723
Trading revenue	205		233		446		442
Other	35		36		74		67
Provision for loan losses	(1)		(1)		(5)		(15)
Net impairment losses on securities	(2)	[1]	(8)	[1]	(9)	[1]	(16)	[1]
Total net revenues	1,190		1,080		2,397		2,058
Expenses Excluding Interest	804		742		1,617	[2]	1,707	[2]
Income before taxes on income	386		338		780		351
Taxes on income	(148)		(133)		(299)		(140)
Net Income	238		205		481		211
Investor Services
Net Revenues:
Asset management and administration fees	275		229		551		444
Net interest revenue	387		326		760		614
Trading revenue	136		157		296		297
Other	16		17		36		34
Provision for loan losses	(1)		(1)		(4)		(13)
Net impairment losses on securities	(2)		(7)		(8)		(14)
Total net revenues	811		721		1,631		1,362
Expenses Excluding Interest	547		503		1,101	[2]	1,032	[2]
Income before taxes on income	264		218		530		330
Institutional Services
Net Revenues:
Asset management and administration fees	227		209		453		413
Net interest revenue	64		58		127		109
Trading revenue	70		76		150		145
Other	19		17		38		33
Provision for loan losses					(1)		(2)
Net impairment losses on securities			(1)		(1)		(2)
Total net revenues	380		359		766		696
Expenses Excluding Interest	258		241		518	[2]	483	[2]
Income before taxes on income	122		118		248		213
Unallocated
Net Revenues:
Asset management and administration fees			(1)
Net interest revenue			(1)
Trading revenue	(1)
Other			2
Total net revenues	(1)
Expenses Excluding Interest	(1)		(2)		(2)	[2]	192	[2]
Income before taxes on income			$ 2		$ 2		$ (192)

[1] Net impairment losses on securities include total other-than-temporary impairment losses of $11 and $13, net of $9 and $5 recognized in other comprehensive income, for the three months ended June 30, 2011 and 2010, respectively. Net impairment losses on securities include total other-than-temporary impairment losses of $11 and $41, net of $2 and $25 recognized in other comprehensive income, for the six months ended June 30, 2011 and 2010, respectively.

[2] Unallocated amount includes a class action litigation reserve of $196 million in the first half of 2010.

XML



Fair Values of Assets and Liabilities

6 Months Ended

Jun. 30, 2011

Fair Values of Assets and Liabilities

6. Fair Values of Assets and Liabilities

Fair value is defined as the price that would be received to sell an asset or the price paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurement accounting guidance describes the fair value hierarchy for disclosing assets and liabilities measured at fair value based on the inputs used to value them. The fair value hierarchy maximizes the use of observable inputs and minimizes the use of unobservable inputs. Observable inputs are based on market pricing data obtained from sources independent of the Company. A quoted price in an active market provides the most reliable evidence of fair value and is generally used to measure fair value whenever available. Unobservable inputs reflect management’s judgment about the assumptions market participants would use in pricing the asset or liability. Where inputs used to measure fair value of an asset or liability are from different levels of the hierarchy, the asset or liability is categorized based on the lowest level input that is significant to the fair value measurement in its entirety. Assessing the significance of a particular input requires judgment. The fair value hierarchy includes three levels based on the objectivity of the inputs as follows:

• Level 1 inputs are quoted prices in active markets as of the measurement date for identical assets or liabilities that the Company has the ability to access. This category includes active exchange-traded money market funds, mutual funds, and equity securities. The Company did not transfer any assets or liabilities between Level 1 and Level 2 during the first half of 2011, or the year ended December 31, 2010.

• Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets and liabilities in active markets, and inputs other than quoted prices that are observable for the asset or liability, such as interest rates, benchmark yields, issuer spreads, new issue data, and collateral performance. This category includes residential mortgage-backed securities, asset-backed securities, corporate debt securities, certificates of deposit, U.S. agency and municipal debt securities, and U.S. Treasury securities.

• Level 3 inputs are unobservable inputs for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability. The Company did not have any financial assets or liabilities utilizing Level 3 inputs as of June 30, 2011, or December 31, 2010.

Assets and Liabilities Recorded at Fair Value

The Company’s assets recorded at fair value include certain cash equivalents, investments segregated and on deposit for regulatory purposes, other securities owned, and securities available for sale. The Company’s liabilities recorded at fair value include securities sold, not yet purchased. When available, the Company uses quoted prices in active markets to measure the fair value of assets and liabilities. When quoted prices do not exist, the Company uses prices obtained from independent third-party pricing services to measure the fair value of investment assets. The Company validates prices received from the pricing services using various methods, including comparison to prices received from additional pricing services, comparison to quoted market prices, where available, comparison to internal valuation models, and review of other relevant market data. The Company does not adjust the prices received from independent third-party pricing services unless such prices are inconsistent with the definition of fair value and result in a material difference in the recorded amounts. At June 30, 2011, and December 31, 2010, the Company did not adjust prices received from independent third-party pricing services.

The following table presents the fair value hierarchy as of June 30, 2011, for assets and liabilities measured at fair value:

June 30, 2011	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance at Fair Value
Assets
Cash equivalents:
Money market funds	$	1,927	$	—	$	—	$	1,927
Total cash equivalents		1,927		—		—		1,927
Investments segregated and on deposit for regulatory purposes:
U.S. Government securities		—		1,318		—		1,318
Certificates of deposit		—		2,125		—		2,125
Corporate debt securities		—		1,386		—		1,386
Total investments segregated and on deposit for regulatory purposes		—		4,829		—		4,829
Other securities owned:
Schwab Funds® money market funds		230		—		—		230
Equity and bond mutual funds		91		—		—		91
State and municipal debt obligations		—		55		—		55
Equity, U.S. Government and corporate debt, and other securities		—		34		—		34
Total other securities owned		321		89		—		410
Securities available for sale:
U.S. agency residential mortgage-backed securities		—		15,864		—		15,864
Non-agency residential mortgage-backed securities		—		1,186		—		1,186
U.S. agency notes		—		2,797		—		2,797
Corporate debt securities		—		2,770		—		2,770
Asset-backed securities		—		2,688		—		2,688
Certificates of deposit		—		1,903		—		1,903
Total securities available for sale		—		27,208		—		27,208
Total	$	2,248	$	32,126	$	—	$	34,374
Liabilities
Securities sold, not yet purchased (1)	$	83	$	4	$	—	$	87

⁽¹⁾  Securities sold, not yet purchased are included in accrued expenses and other liabilities.

The following table presents the fair value hierarchy as of December 31, 2010, for assets measured at fair value. Liabilities recorded at fair value as of December 31, 2010, are not material, and therefore are not included in the following table:

December 31, 2010	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance at Fair Value
Assets
Cash equivalents:
Money market funds	$	988	$	—	$	—	$	988
Commercial paper		—		242		—		242
Total cash equivalents		988		242		—		1,230
Investments segregated and on deposit for regulatory purposes:
U.S. Government securities		—		3,190		—		3,190
Certificates of deposit		—		2,201		—		2,201
Corporate debt securities		—		1,704		—		1,704
Total investments segregated and on deposit for regulatory purposes		—		7,095		—		7,095
Other securities owned:
Schwab Funds® money market funds		172		—		—		172
Equity and bond mutual funds		99		—		—		99
State and municipal debt obligations		—		47		—		47
Equity, U.S. Government and corporate debt, and other securities		1		18		—		19
Total other securities owned		272		65		—		337
Securities available for sale:
U.S. agency residential mortgage-backed securities		—		13,098		—		13,098
Non-agency residential mortgage-backed securities		—		1,470		—		1,470
U.S. agency notes		—		2,780		—		2,780
Corporate debt securities		—		2,268		—		2,268
Asset-backed securities		—		2,502		—		2,502
Certificates of deposit		—		1,875		—		1,875
Total securities available for sale		—		23,993		—		23,993
Total	$	1,260	$	31,395	$	—	$	32,655

Fair Value of Assets and Liabilities Not Recorded at Fair Value

Descriptions of the valuation methodologies and assumptions used to estimate the fair value of assets and liabilities not recorded at fair value are described below. There were no significant changes in these methodologies or assumptions during the first half of 2011.

Other cash equivalents, receivables, payables, and accrued expenses and other liabilities include cash and highly liquid investments, receivables and payables from/ to brokers, dealers and clearing organizations, receivables and payables from/ to brokerage clients, and drafts, accounts, taxes, interest, and compensation payable. Assets and liabilities in these categories are short-term in nature and accordingly are recorded at amounts that approximate fair value.

Cash and investments segregated and on deposit for regulatory purposes include securities purchased under resale agreements. Securities purchased under resale agreements are recorded at par value plus accrued interest. Securities purchased under resale agreements are short-term in nature and are backed by collateral that both exceeds the carrying value of the resale agreement and is highly liquid in nature. Accordingly, the carrying value approximates fair value.

Securities held to maturity include U.S. agency residential mortgage-backed securities, asset-backed securities collateralized by credit card, student, and auto loans, and corporate debt securities. Securities held to maturity are recorded at amortized cost. The fair value of these securities is obtained using an independent third-party pricing service, as discussed above.

Loans to banking clients primarily include adjustable rate residential first-mortgage and HELOC loans. Loans to banking clients are recorded at carrying value net of an allowance for loan losses. The fair value of the Company’s loans to banking clients is estimated based on market prices for mortgage-backed securities collateralized by similar types of loans.

Loans held for sale include fixed rate residential first-mortgage loans intended for sale. Loans held for sale are recorded at the lower of cost or fair value. The fair value of the Company’s loans held for sale is estimated using quoted market prices for securities backed by similar types of loans.

Other assets include cost method investments whose carrying values approximate their fair values. Other assets also include Federal Home Loan Bank stock recorded at par, which approximates fair value.

Deposits from banking clients: The Company considers the fair value of deposits with no stated maturity, such as deposits from banking clients, to be equal to the amount payable on demand as of the balance sheet date.

Long-term debt includes Senior Notes, Senior Medium-Term Notes, Series A, Junior Subordinated Notes, and a finance lease obligation. The fair value of the Senior Notes, Senior Medium-Term Notes, Series A, and Junior Subordinated Notes is estimated using indicative, non-binding quotes from independent brokers. The finance lease obligation is recorded at carrying value, which approximates fair value.

Firm commitments to extend credit: The Company extends credit to banking clients through HELOC and personal loans secured by securities. The Company considers the fair value of these unused commitments to be not material because the interest rates earned on these balances are based on market interest rate indices and reset monthly. Future utilization of HELOC and personal loan commitments will earn a then-current market interest rate. The Company does not charge a fee to maintain a HELOC or personal loan.

The table below presents the Company’s fair value estimates for financial instruments excluding short-term financial assets and liabilities, for which carrying amounts approximate fair value, and excluding financial instruments recorded at fair value.

	June 30, 2011				December 31, 2010
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Financial Assets:
Securities held to maturity	$	15,799	$	16,071	$	17,762	$	17,848
Loans to banking clients – net	$	9,471	$	9,141	$	8,725	$	8,469
Loans held for sale	$	49	$	51	$	185	$	194
Financial Liabilities:
Long-term debt	$	2,004	$	2,141	$	2,006	$	2,116

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Securities with Unrealized Losses, Aggregated by Category and Period of Continuous Unrealized Loss (Parenthetical) (Detail)	Jun. 30, 2011 Investment	Dec. 31, 2010 Investment
Securities available for sale
Gain (Loss) on Investments [Line Items]
Number of investment positions with Unrealized Losses	165	178
Securities held to maturity
Gain (Loss) on Investments [Line Items]
Number of investment positions with unrealized losses	17	37

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EPS under Basic and Diluted Computations (Detail) (USD $) In Millions, except Per Share data	3 Months Ended				6 Months Ended
	Jun. 30, 2011		Jun. 30, 2010		Jun. 30, 2011		Jun. 30, 2010
Earnings Per Share Disclosure [Line Items]
Net income available to common stockholders	$ 238	[1]	$ 205	[1]	$ 481	[1]	$ 211	[1]
Weighted-average common shares outstanding - basic	1,207		1,191		1,205		1,187
Common stock equivalent shares related to stock incentive plans	3		4		3		4
Weighted-average common shares outstanding - diluted	1,210	[2]	1,195	[2]	1,208	[2]	1,191	[2]
Basic EPS	$ 0.20		$ 0.17		$ 0.40		$ 0.18
Diluted EPS	$ 0.20		$ 0.17		$ 0.40		$ 0.18

[1] Net income available to participating securities (unvested restricted shares) was not material for the second quarters and first halves of 2011 or 2010.

[2] Antidilutive stock options and restricted stock awards excluded from the calculation of diluted EPS totaled 42 million and 38 million shares for the second quarters of 2011 and 2010, respectively, and 43 million and 38 million shares for the first halves of 2011 and 2010, respectively.

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Commitments and Contingent Liabilities - Additional Information (Detail) (USD $)	3 Months Ended	6 Months Ended					6 Months Ended			6 Months Ended		12 Months Ended
	Jun. 30, 2011	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011 Margin requirements	Jun. 30, 2011 Collateral Requirements	Aug. 28, 2008 Total Bond Market Fund Litigation	Jun. 30, 2011 optionsXpress Merger Litigation LegalMatter	Jun. 30, 2011 optionsXpress Merger Litigation Settlement of Litigation	Jun. 30, 2011 optionsXpress Merger Litigation Settlement of Litigation Maximum	Jun. 30, 2011 optionsXpress Merger Litigation Circuit Court of Cook County, Illinois LegalMatter	Jun. 30, 2011 optionsXpress Merger Litigation Court of Chancery of the State of Delaware LegalMatter	Dec. 31, 2010 YieldPlus Fund Litigation	Jun. 30, 2011 optionsXpress Holdings, Inc.
Commitments and Contingencies Disclosure [Line Items]
Aggregate face amount of letter of credit agreements				$ 445,000,000	$ 61,000,000
Number of the Company's shares to be received by optionsXpress stockholders for each share of optionsXpress stock													1.02
Alleged minimum percentage of fund assets invested in CMOs and mortgage-backed securities without obtaining shareholder vote						25.00%
Number of class action lawsuits filed Between March 21, 2011 and April 6, 2011							10			7	3
Number of consolidated amended complaints										1	1
Settlement agreement date								Jul. 29, 2011
Fee application by plaintiff's counsel									650,000
Class action litigation charges	(7,000,000)	(7,000,000)	(196,000,000)									199,000,000
Insurance Proceeds												$ 39,000,000

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Amortized Cost, Gross Unrealized Gains and Losses, and Fair Value of Securities Available for Sale and Securities Held to Maturity (Detail) (USD $) In Millions	Jun. 30, 2011		Dec. 31, 2010
Gain (Loss) on Investments [Line Items]
Securities available for sale Amortized Cost	$ 27,135		$ 23,967
Securities available for sale Gross Unrealized Gains	274		266
Securities available for sale Gross Unrealized Losses	201		240
Securities available for sale	27,208		23,993
Securities held to maturity	15,799		17,762
Securities held to maturity Gross Unrealized Gains	315		223
Securities held to maturity Gross Unrealized Losses	43		137
Securities held to maturity, fair value	16,071		17,848
U.S. agency residential mortgage-backed securities
Gain (Loss) on Investments [Line Items]
Securities available for sale Amortized Cost	15,639		12,879
Securities available for sale Gross Unrealized Gains	236		222
Securities available for sale Gross Unrealized Losses	11		3
Securities available for sale	15,864	[1]	13,098
Securities held to maturity	15,405		16,722
Securities held to maturity Gross Unrealized Gains	308		209
Securities held to maturity Gross Unrealized Losses	43		137
Securities held to maturity, fair value	15,670	[1]	16,794
Non-agency residential mortgage-backed securities
Gain (Loss) on Investments [Line Items]
Securities available for sale Amortized Cost	1,374		1,701
Securities available for sale Gross Unrealized Gains	1		3
Securities available for sale Gross Unrealized Losses	189		234
Securities available for sale	1,186	[1]	1,470
Corporate debt securities
Gain (Loss) on Investments [Line Items]
Securities available for sale Amortized Cost	2,761		2,261
Securities available for sale Gross Unrealized Gains	10		8
Securities available for sale Gross Unrealized Losses	1		1
Securities available for sale	2,770		2,268
Securities held to maturity	166		338
Securities held to maturity Gross Unrealized Gains	3		5
Securities held to maturity, fair value	169		343
U.S. agency notes
Gain (Loss) on Investments [Line Items]
Securities available for sale Amortized Cost	2,783		2,757
Securities available for sale Gross Unrealized Gains	14		23
Securities available for sale	2,797		2,780
Asset-backed securities
Gain (Loss) on Investments [Line Items]
Securities available for sale Amortized Cost	2,680		2,495
Securities available for sale Gross Unrealized Gains	8		9
Securities available for sale Gross Unrealized Losses			2
Securities available for sale	2,688		2,502
Securities held to maturity	228		702
Securities held to maturity Gross Unrealized Gains	4		9
Securities held to maturity, fair value	232		711
Certificates of deposit
Gain (Loss) on Investments [Line Items]
Securities available for sale Amortized Cost	1,898		1,874
Securities available for sale Gross Unrealized Gains	5		1
Securities available for sale	$ 1,903		$ 1,875

[1] Residential mortgage-backed securities have been allocated over maturity groupings based on final contractual maturities. Actual maturities will differ from final contractual maturities because borrowers on a certain portion of loans underlying these securities have the right to prepay their obligations.

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Securities Available for Sale and Securities Held to Maturity (Tables)

6 Months Ended

Jun. 30, 2011

Amortized Cost, Gross Unrealized Gains and Losses, and Fair Value of Securities Available for Sale and Securities Held to Maturity

The amortized cost, gross unrealized gains and losses, and fair value of securities available for sale and securities held to maturity are as follows:

June 30, 2011	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Securities available for sale:
U.S. agency residential mortgage-backed securities	$	15,639	$	236	$	11	$	15,864
Non-agency residential mortgage-backed securities		1,374		1		189		1,186
U.S. agency notes		2,783		14		—		2,797
Corporate debt securities		2,761		10		1		2,770
Asset-backed securities		2,680		8		—		2,688
Certificates of deposit		1,898		5		—		1,903
Total securities available for sale	$	27,135	$	274	$	201	$	27,208
Securities held to maturity:
U.S. agency residential mortgage-backed securities	$	15,405	$	308	$	43	$	15,670
Asset-backed securities		228		4		—		232
Corporate debt securities		166		3		—		169
Total securities held to maturity	$	15,799	$	315	$	43	$	16,071
December 31, 2010	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Securities available for sale:
U.S. agency residential mortgage-backed securities	$	12,879	$	222	$	3	$	13,098
Non-agency residential mortgage-backed securities		1,701		3		234		1,470
U.S. agency notes		2,757		23		—		2,780
Corporate debt securities		2,261		8		1		2,268
Asset-backed securities		2,495		9		2		2,502
Certificates of deposit		1,874		1		—		1,875
Total securities available for sale	$	23,967	$	266	$	240	$	23,993
Securities held to maturity:
U.S. agency residential mortgage-backed securities	$	16,722	$	209	$	137	$	16,794
Asset-backed securities		702		9		—		711
Corporate debt securities		338		5		—		343
Total securities held to maturity	$	17,762	$	223	$	137	$	17,848

Securities with Unrealized Losses, Aggregated by Category and Period of Continuous Unrealized Loss

A summary of securities with unrealized losses, aggregated by category and period of continuous unrealized loss, is as follows:

	Less than 12 months				12 months or longer				Total
June 30, 2011	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Securities available for sale:
U.S. agency residential mortgage-backed securities	$	1,558	$	11	$	—	$	—	$	1,558	$	11
Non-agency residential mortgage-backed securities		129		4		923		185		1,052		189
Corporate debt securities		517		1		—		—		517		1
Total	$	2,204	$	16	$	923	$	185	$	3,127	$	201
Securities held to maturity:
U.S. agency residential mortgage-backed securities	$	2,780	$	43	$	—	$	—	$	2,780	$	43
Total	$	2,780	$	43	$	—	$	—	$	2,780	$	43
Total securities with unrealized losses (1)	$	4,984	$	59	$	923	$	185	$	5,907	$	244

⁽¹⁾  The number of investment positions with unrealized losses totaled 165 for securities available for sale and 17 for securities held to maturity.

	Less than 12 months				12 months or longer				Total
December 31, 2010	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Securities available for sale:
U.S. agency residential mortgage-backed securities	$	707	$	3	$	—	$	—	$	707	$	3
Non-agency residential mortgage-backed securities		—		—		1,207		234		1,207		234
Corporate debt securities		549		1		—		—		549		1
Asset-backed securities		873		2		—		—		873		2
Total	$	2,129	$	6	$	1,207	$	234	$	3,336	$	240
Securities held to maturity:
U.S. agency residential mortgage-backed securities	$	6,880	$	137	$	—	$	—	$	6,880	$	137
Total	$	6,880	$	137	$	—	$	—	$	6,880	$	137
Total securities with unrealized losses (1)	$	9,009	$	143	$	1,207	$	234	$	10,216	$	377

⁽¹⁾ The number of investment positions with unrealized losses totaled 178 for securities available for sale and 37 for securities held to maturity.

Rollforward Amount of Credit Losses Recognized in Earnings for OTTI Securities Held by Company for Portion of Impairment Recognized in Other Comprehensive Income

The following table is a rollforward of the amount of credit losses recognized in earnings for OTTI securities held by the Company during the period for which a portion of the impairment was recognized in other comprehensive income:

	Three Months Ended June 30,				Six Months Ended June 30,
	2011		2010		2011		2010
Balance at beginning of period	$	103	$	68	$	96	$	60
Credit losses recognized into current period earnings on debt securities for which an other-than-temporary impairment was not previously recognized		2		1		2		4
Credit losses recognized into current period earnings on debt securities for which an other-than-temporary impairment was previously recognized		—		7		7		12
Balance at end of period	$	105	$	76	$	105	$	76

Maturities of Securities Available for Sale and Securities Held to Maturity

The maturities of securities available for sale and securities held to maturity at June 30, 2011, are as follows:

	Within 1 year		After 1 year through 5 years		After 5 years through 10 years		After 10 years		Total
Securities available for sale:
U.S. agency residential mortgage-backed securities (1)	$	—	$	9	$	1,521	$	14,334	$	15,864
Non-agency residential mortgage-backed securities (1)		—		—		16		1,170		1,186
U.S. agency notes		—		2,797		—		—		2,797
Corporate debt securities		567		2,203		—		—		2,770
Asset-backed securities		—		849		546		1,293		2,688
Certificates of deposit		802		1,101		—		—		1,903
Total fair value	$	1,369	$	6,959	$	2,083	$	16,797	$	27,208
Total amortized cost	$	1,365	$	6,930	$	2,064	$	16,776	$	27,135
Securities held to maturity:
U.S. agency residential mortgage-backed securities (1)	$	—	$	—	$	988	$	14,682	$	15,670
Asset-backed securities		—		232		—		—		232
Corporate debt securities		51		118		—		—		169
Total fair value	$	51	$	350	$	988	$	14,682	$	16,071
Total amortized cost	$	50	$	345	$	1,023	$	14,381	$	15,799

⁽¹⁾  Residential mortgage-backed securities have been allocated over maturity groupings based on final contractual maturities. Actual maturities will differ from final contractual maturities because borrowers on a certain portion of loans underlying these securities have the right to prepay their obligations.

Proceeds and Gross Realized Gains (Losses) from Sales of Securities Available for Sale

Proceeds and gross realized gains (losses) from sales of securities available for sale are as follows:

	Three Months Ended June 30,				Six Months Ended   June 30,
	2011		2010		2011		2010
Proceeds	$	250	$	125	$	450	$	125
Gross realized gains	$	1	$	—	$	1	$	—
Gross realized losses	$	—	$	—	$	—	$

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New Accounting Standards

6 Months Ended

Jun. 30, 2011

New Accounting Standards

2. New Accounting Standards

Adoption of New Accounting Standards

Goodwill Impairment Test: In December 2010, the Financial Accounting Standards Board (FASB) issued new guidance on when to perform the second step in the two-step goodwill impairment test, which is effective for all goodwill impairment tests performed after January 1, 2011. Specifically, if the carrying value of a reporting unit, as computed in step one of the goodwill impairment test, is zero or negative, step two must be performed when it is “more likely than not” that goodwill is impaired; under these circumstances, entities can no longer assume that no impairment exists because fair value, as computed in step two, would generally be greater than zero. The adoption of this new guidance did not have a material impact on the Company’s financial position, results of operations, earnings per share (EPS), or cash flows.

A Creditor’s Determination of Whether a Restructuring Is a Troubled Debt Restructuring: In April 2011, the FASB issued new guidance clarifying when a debt restructuring by a creditor constitutes a troubled debt restructuring, which is effective July 1, 2011 for all restructurings that occur on or after January 1, 2011. This guidance clarifies that a troubled debt restructuring only exists when a creditor makes a concession in interest rates or payment terms to a debtor experiencing financial difficulties. It provides additional guidance on determining what constitutes a concession, and on the use of probability in determining if a debtor could be experiencing financial difficulty prior to defaulting on payments. The adoption of this new guidance did not have a material impact on the Company’s financial position, results of operations, EPS, or cash flows.

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Delinquency Aging Analysis by Loan Class (Detail) (USD $) In Millions	Jun. 30, 2011		Dec. 31, 2010
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	$ 9,449		$ 8,694
30-59 days past due	21		25
60-89 days past due	5		8
Greater than 90 days	46		51
Total past due	72		84
Total loans to banking clients	9,521	[1]	8,778	[1]
Residential real estate mortgages, originated first mortgages
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	5,155		4,527
30-59 days past due	14		18
60-89 days past due	4		5
Greater than 90 days	30		38
Total past due	48		61
Total loans to banking clients	5,203	[2]	4,588	[3]
Residential real estate mortgages, purchased first mortgages
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	102		100
30-59 days past due	2		2
60-89 days past due			1
Greater than 90 days	5		4
Total past due	7		7
Total loans to banking clients	109	[2]	107	[3]
Home equity lines of credit
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	3,501		3,489
30-59 days past due	5		5
60-89 days past due	1		2
Greater than 90 days	6		4
Total past due	12		11
Total loans to banking clients	3,513	[2]	3,500	[3]
Personal loans secured by securities
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	670		557
Greater than 90 days	5		5
Total past due	5		5
Total loans to banking clients	675		562
Other
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	21		21
Total loans to banking clients	$ 21		$ 21

[1] All loans are collectively evaluated for impairment by loan segment.

[2] The computation of the Origination LTV ratio for a HELOC includes any first lien mortgage outstanding on the same property at the time of origination. At June 30, 2011, $750 million of $3.5 billion in HELOCs were in a first lien position.

[3] The computation of the Origination LTV ratio for a HELOC includes any first lien mortgage outstanding on the same property at the time of origination. At December 31, 2010, $742 million of $3.5 billion in HELOCs were in a first lien position.

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Earnings Per Share

6 Months Ended

Jun. 30, 2011

Earnings Per Share

8. Earnings Per Share

Basic EPS is computed by dividing net income available to common stockholders by the weighted-average number of common shares outstanding during the period. The computation of diluted EPS is similar to the computation of basic EPS except that the denominator is increased to include the number of additional common shares that would have been outstanding if dilutive potential common shares had been issued. Dilutive potential common shares include the effect of outstanding stock options and unvested restricted stock awards and units. EPS under the basic and diluted computations is as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2011		2010		2011		2010
Net income available to common stockholders (1)	$	238	$	205	$	481	$	211
Weighted-average common shares outstanding — basic		1,207		1,191		1,205		1,187
Common stock equivalent shares related to stock incentive plans		3		4		3		4
Weighted-average common shares outstanding — diluted (2)		1,210		1,195		1,208		1,191
Basic EPS	$	.20	$	.17	$	.40	$	.18
Diluted EPS	$	.20	$	.17	$	.40	$	.18

⁽¹⁾  Net income available to participating securities (unvested restricted shares) was not material for the second quarters and first halves of 2011 or 2010.

⁽²⁾  Antidilutive stock options and restricted stock awards excluded from the calculation of diluted EPS totaled 42 million and 38 million shares for the second quarters of 2011 and 2010, respectively, and 43 million and 38 million shares for the first halves of 2011 and 2010, respectively.

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Fair Values of Assets and Liabilities (Tables)

6 Months Ended

Jun. 30, 2011

Fair Value Hierarchy for Assets and Liabilities Measured at Fair Value

The following table presents the fair value hierarchy as of June 30, 2011, for assets and liabilities measured at fair value:

June 30, 2011	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance at Fair Value
Assets
Cash equivalents:
Money market funds	$	1,927	$	—	$	—	$	1,927
Total cash equivalents		1,927		—		—		1,927
Investments segregated and on deposit for regulatory purposes:
U.S. Government securities		—		1,318		—		1,318
Certificates of deposit		—		2,125		—		2,125
Corporate debt securities		—		1,386		—		1,386
Total investments segregated and on deposit for regulatory purposes		—		4,829		—		4,829
Other securities owned:
Schwab Funds® money market funds		230		—		—		230
Equity and bond mutual funds		91		—		—		91
State and municipal debt obligations		—		55		—		55
Equity, U.S. Government and corporate debt, and other securities		—		34		—		34
Total other securities owned		321		89		—		410
Securities available for sale:
U.S. agency residential mortgage-backed securities		—		15,864		—		15,864
Non-agency residential mortgage-backed securities		—		1,186		—		1,186
U.S. agency notes		—		2,797		—		2,797
Corporate debt securities		—		2,770		—		2,770
Asset-backed securities		—		2,688		—		2,688
Certificates of deposit		—		1,903		—		1,903
Total securities available for sale		—		27,208		—		27,208
Total	$	2,248	$	32,126	$	—	$	34,374
Liabilities
Securities sold, not yet purchased (1)	$	83	$	4	$	—	$	87

⁽¹⁾  Securities sold, not yet purchased are included in accrued expenses and other liabilities.

The following table presents the fair value hierarchy as of December 31, 2010, for assets measured at fair value. Liabilities recorded at fair value as of December 31, 2010, are not material, and therefore are not included in the following table:

December 31, 2010	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance at Fair Value
Assets
Cash equivalents:
Money market funds	$	988	$	—	$	—	$	988
Commercial paper		—		242		—		242
Total cash equivalents		988		242		—		1,230
Investments segregated and on deposit for regulatory purposes:
U.S. Government securities		—		3,190		—		3,190
Certificates of deposit		—		2,201		—		2,201
Corporate debt securities		—		1,704		—		1,704
Total investments segregated and on deposit for regulatory purposes		—		7,095		—		7,095
Other securities owned:
Schwab Funds® money market funds		172		—		—		172
Equity and bond mutual funds		99		—		—		99
State and municipal debt obligations		—		47		—		47
Equity, U.S. Government and corporate debt, and other securities		1		18		—		19
Total other securities owned		272		65		—		337
Securities available for sale:
U.S. agency residential mortgage-backed securities		—		13,098		—		13,098
Non-agency residential mortgage-backed securities		—		1,470		—		1,470
U.S. agency notes		—		2,780		—		2,780
Corporate debt securities		—		2,268		—		2,268
Asset-backed securities		—		2,502		—		2,502
Certificates of deposit		—		1,875		—		1,875
Total securities available for sale		—		23,993		—		23,993
Total	$	1,260	$	31,395	$	—	$	32,655

Fair Value Estimates for Financial Instruments Excluding Short Term Financial Assets and Liabilities and Financial Instruments Recorded at Fair Value

The table below presents the Company’s fair value estimates for financial instruments excluding short-term financial assets and liabilities, for which carrying amounts approximate fair value, and excluding financial instruments recorded at fair value.

	June 30, 2011				December 31, 2010
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Financial Assets:
Securities held to maturity	$	15,799	$	16,071	$	17,762	$	17,848
Loans to banking clients – net	$	9,471	$	9,141	$	8,725	$	8,469
Loans held for sale	$	49	$	51	$	185	$	194
Financial Liabilities:
Long-term debt	$	2,004	$	2,141	$	2,006	$	2,116

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Regulatory Requirements

6 Months Ended

Jun. 30, 2011

Regulatory Requirements

9. Regulatory Requirements

CSC is a savings and loan holding company and Schwab Bank, CSC’s depository institution subsidiary, is a federal savings bank. Through June 30, 2011, CSC and Schwab Bank were both subject to supervision and regulation by the Office of Thrift Supervision. As a savings and loan holding company, CSC was not subject to specific statutory capital requirements. However, CSC was required to maintain capital that was sufficient to support the holding company and its subsidiaries’ business activities, and the risks inherent in those activities.

The “Dodd-Frank Wall Street Reform and Consumer Protection Act” legislation eliminated the Office of Thrift Supervision effective July 21, 2011. As a result, the Federal Reserve became CSC’s primary regulator and the Office of the Comptroller of the Currency became the primary regulator of Schwab Bank.

Schwab Bank is required to maintain minimum capital levels as specified in federal banking laws and regulations. Failure to meet the minimum levels will result in certain mandatory, and possibly additional discretionary, actions by the regulators that, if undertaken, could have a direct material effect on Schwab Bank. At June 30, 2011, CSC and Schwab Bank met the capital level requirements.

The regulatory capital and ratios for Schwab Bank at June 30, 2011, are as follows:

	Actual					Minimum Capital Requirement					Minimum to be Well Capitalized
	Amount		Ratio			Amount		Ratio			Amount		Ratio
Tier 1 Risk-Based Capital	$	4,332		23.4	%	$	740		4.0	%	$	1,110		6.0	%
Total Risk-Based Capital	$	4,381		23.7	%	$	1,480		8.0	%	$	1,850		10.0	%
Tier 1 Core Capital	$	4,332		7.6	%	$	2,271		4.0	%	$	2,839		5.0	%
Tangible Equity	$	4,332		7.6	%	$	1,136		2.0	%		N/A

N/A Not applicable.

Based on its regulatory capital ratios at June 30, 2011, Schwab Bank is considered well capitalized (the highest category) pursuant to banking regulatory guidelines. There are no conditions or events since June 30, 2011, that management believes have changed Schwab Bank’s capital category.

Schwab is subject to Rule 15c3-1 under the Securities Exchange Act of 1934 (the Uniform Net Capital Rule). Schwab computes net capital under the alternative method permitted by the Uniform Net Capital Rule. This method requires the maintenance of minimum net capital, as defined, of the greater of 2% of aggregate debit balances arising from client transactions or a minimum dollar requirement, which is based on the type of business conducted by the broker-dealer. Under the alternative method, a broker-dealer may not repay subordinated borrowings, pay cash dividends, or make any unsecured advances or loans to its parent company or employees if such payment would result in net capital of less than 5% of aggregate debit balances or less than 120% of its minimum dollar requirement. At June 30, 2011, 2% of aggregate debit balances was $258 million, which exceeded the minimum dollar requirement for Schwab of $250,000. At June 30, 2011, Schwab’s net capital was $1.3 billion (10% of aggregate debit balances), which was $1.0 billion in excess of its minimum required net capital and $649 million in excess of 5% of aggregate debit balances.

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Composition of Loans to Banking Clients (Detail) (USD $) In Millions	Jun. 30, 2011		Mar. 31, 2011	Dec. 31, 2010		Jun. 30, 2010	Mar. 31, 2010	Dec. 31, 2009
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans to banking clients	$ 9,521	[1]		$ 8,778	[1]
Allowance for loan losses	(50)		(53)	(53)		(51)	(53)	(45)
Total loans to banking clients - net	9,471			8,725
Residential real estate mortgages
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans to banking clients	5,312	[2]		4,695	[3]
Allowance for loan losses	(34)		(37)	(38)
Home equity lines of credit
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans to banking clients	3,513	[2]		3,500	[3]
Allowance for loan losses	(16)		(16)	(15)
Personal loans secured by securities
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans to banking clients	675			562
Other
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans to banking clients	$ 21			$ 21

[1] All loans are collectively evaluated for impairment by loan segment.

[2] The computation of the Origination LTV ratio for a HELOC includes any first lien mortgage outstanding on the same property at the time of origination. At June 30, 2011, $750 million of $3.5 billion in HELOCs were in a first lien position.

[3] The computation of the Origination LTV ratio for a HELOC includes any first lien mortgage outstanding on the same property at the time of origination. At December 31, 2010, $742 million of $3.5 billion in HELOCs were in a first lien position.

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Comprehensive Income and Accumulated Other Comprehensive Income (Loss)

6 Months Ended

Jun. 30, 2011

Comprehensive Income and Accumulated Other Comprehensive Income (Loss)

7. Comprehensive Income and Accumulated Other Comprehensive Income (Loss)

The components of comprehensive income are as follows:

	Three Months Ended June 30,						Six Months Ended June 30,
	2011			2010			2011			2010
Net income	$	238		$	205		$	481		$	211
Other comprehensive income:
Change in net unrealized gain (loss) on securities available for sale:
Net unrealized gain		16			67			37			189
Reclassification of impairment charges included in earnings		2			8			9			16
Other reclassification of gains in earnings		1			—			1			—
Income tax effect		(8	)		(29	)		(18	)		(79	)
Total other comprehensive income		11			46			29			126
Comprehensive income	$	249		$	251		$	510		$	337

Accumulated other comprehensive income (loss) represents cumulative gains and losses that are not reflected in earnings. Accumulated other comprehensive income (loss) balances were:

	Net unrealized gain (loss) on securities available for sale
	Portion of unrealized gain (loss) on Non-OTTI securities			Portion of unrealized loss on OTTI securities  (1)			Net unrealized loss on cash flow hedging instruments			Total accumulated other comprehensive income (loss)
Balance at December 31, 2009	$	(77	)	$	(114	)	$	—		$	(191	)
Reclassification of OTTI securities		21			(21	)		—			—
Other net changes		101			25			—			126
Balance at June 30, 2010	$	45		$	(110	)	$	—		$	(65	)
Balance at December 31, 2010	$	88		$	(71	)	$	(1	)	$	16
Reclassification of OTTI securities		6			(6	)		—			—
Other net changes		26			2			1			29
Balance at June 30, 2011	$	120		$	(75	)	$	—		$	45

⁽¹⁾  OTTI securities are securities for which the Company has recognized an impairment charge through earnings.

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Condensed Consolidated Statements of Cash Flows (USD $) In Millions	6 Months Ended
	Jun. 30, 2011		Jun. 30, 2010
Cash Flows from Operating Activities
Net income	$ 481		$ 211
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses	5		15
Net impairment losses on securities	9	[1]	16	[1]
Stock-based compensation	47		43
Excess tax benefits from stock-based compensation	(10)		(3)
Depreciation and amortization	68		73
Other	38		(14)
Originations of loans held for sale	(809)		(810)
Proceeds from sales of loans held for sale	954		870
Net change in:
Cash and investments segregated and on deposit for regulatory purposes	(1,093)		(500)
Receivables from brokers, dealers, and clearing organizations	(47)		57
Receivables from brokerage clients	(413)		(1,248)
Other securities owned	(80)		517
Other assets	(1)		116
Payables to brokers, dealers, and clearing organizations	(33)		299
Payables to brokerage clients	3,056		441
Accrued expenses and other liabilities	(254)		193
Net cash provided by operating activities	1,918		276
Cash Flows from Investing Activities
Purchases of securities available for sale	(7,167)		(8,542)
Proceeds from sales of securities available for sale	450		125
Principal payments on securities available for sale	3,548		7,028
Purchases of securities held to maturity			(4,506)
Principal payments on securities held to maturity	1,926		598
Net increase in loans to banking clients	(753)		(504)
Purchase of equipment, office facilities, and property	(77)		(54)
Other investing activities	6		4
Net cash used for investing activities	(2,067)		(5,851)
Cash Flows from Financing Activities
Net change in deposits from banking clients	1,749		6,625
Repayment of long-term debt	(3)		(203)
Net proceeds from common stock offering			543
Excess tax benefits from stock-based compensation	10		3
Dividends paid	(145)		(143)
Proceeds from stock options exercised and other	73		19
Net cash provided by financing activities	1,684		6,844
Increase in Cash and Cash Equivalents	1,535		1,269
Cash and Cash Equivalents at Beginning of Period	4,931		8,241
Cash and Cash Equivalents at End of Period	6,466		9,510
Cash paid during the period for:
Interest	86		93
Income taxes	$ 325		$ 130

[1] Net impairment losses on securities include total other-than-temporary impairment losses of $11 and $13, net of $9 and $5 recognized in other comprehensive income, for the three months ended June 30, 2011 and 2010, respectively. Net impairment losses on securities include total other-than-temporary impairment losses of $11 and $41, net of $2 and $25 recognized in other comprehensive income, for the six months ended June 30, 2011 and 2010, respectively.

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Securities Available for Sale and Securities Held to Maturity

6 Months Ended

Jun. 30, 2011

Securities Available for Sale and Securities Held to Maturity

3. Securities Available for Sale and Securities Held to Maturity

The amortized cost, gross unrealized gains and losses, and fair value of securities available for sale and securities held to maturity are as follows:

June 30, 2011	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Securities available for sale:
U.S. agency residential mortgage-backed securities	$	15,639	$	236	$	11	$	15,864
Non-agency residential mortgage-backed securities		1,374		1		189		1,186
U.S. agency notes		2,783		14		—		2,797
Corporate debt securities		2,761		10		1		2,770
Asset-backed securities		2,680		8		—		2,688
Certificates of deposit		1,898		5		—		1,903
Total securities available for sale	$	27,135	$	274	$	201	$	27,208
Securities held to maturity:
U.S. agency residential mortgage-backed securities	$	15,405	$	308	$	43	$	15,670
Asset-backed securities		228		4		—		232
Corporate debt securities		166		3		—		169
Total securities held to maturity	$	15,799	$	315	$	43	$	16,071
December 31, 2010	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Securities available for sale:
U.S. agency residential mortgage-backed securities	$	12,879	$	222	$	3	$	13,098
Non-agency residential mortgage-backed securities		1,701		3		234		1,470
U.S. agency notes		2,757		23		—		2,780
Corporate debt securities		2,261		8		1		2,268
Asset-backed securities		2,495		9		2		2,502
Certificates of deposit		1,874		1		—		1,875
Total securities available for sale	$	23,967	$	266	$	240	$	23,993
Securities held to maturity:
U.S. agency residential mortgage-backed securities	$	16,722	$	209	$	137	$	16,794
Asset-backed securities		702		9		—		711
Corporate debt securities		338		5		—		343
Total securities held to maturity	$	17,762	$	223	$	137	$	17,848

A summary of securities with unrealized losses, aggregated by category and period of continuous unrealized loss, is as follows:

	Less than 12 months				12 months or longer				Total
June 30, 2011	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Securities available for sale:
U.S. agency residential mortgage-backed securities	$	1,558	$	11	$	—	$	—	$	1,558	$	11
Non-agency residential mortgage-backed securities		129		4		923		185		1,052		189
Corporate debt securities		517		1		—		—		517		1
Total	$	2,204	$	16	$	923	$	185	$	3,127	$	201
Securities held to maturity:
U.S. agency residential mortgage-backed securities	$	2,780	$	43	$	—	$	—	$	2,780	$	43
Total	$	2,780	$	43	$	—	$	—	$	2,780	$	43
Total securities with unrealized losses (1)	$	4,984	$	59	$	923	$	185	$	5,907	$	244

⁽¹⁾  The number of investment positions with unrealized losses totaled 165 for securities available for sale and 17 for securities held to maturity.

	Less than 12 months				12 months or longer				Total
December 31, 2010	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Securities available for sale:
U.S. agency residential mortgage-backed securities	$	707	$	3	$	—	$	—	$	707	$	3
Non-agency residential mortgage-backed securities		—		—		1,207		234		1,207		234
Corporate debt securities		549		1		—		—		549		1
Asset-backed securities		873		2		—		—		873		2
Total	$	2,129	$	6	$	1,207	$	234	$	3,336	$	240
Securities held to maturity:
U.S. agency residential mortgage-backed securities	$	6,880	$	137	$	—	$	—	$	6,880	$	137
Total	$	6,880	$	137	$	—	$	—	$	6,880	$	137
Total securities with unrealized losses (1)	$	9,009	$	143	$	1,207	$	234	$	10,216	$	377

⁽¹⁾ The number of investment positions with unrealized losses totaled 178 for securities available for sale and 37 for securities held to maturity.

Unrealized losses in securities available for sale of $201 million as of June 30, 2011, were concentrated in non-agency residential mortgage-backed securities. Included in non-agency residential mortgage-backed securities are securities collateralized by loans that are considered to be “Prime” (defined as loans to borrowers with a Fair Isaac & Company credit score of 620 or higher at origination), and “Alt-A” (defined as Prime loans with reduced documentation at origination). At June 30, 2011, the amortized cost and fair value of Alt-A residential mortgage-backed securities were $438 million and $335 million, respectively.

Certain Alt-A and Prime residential mortgage-backed securities experienced continued credit deterioration in the first half of 2011, including increased payment delinquency rates and losses on foreclosures of underlying mortgages. Additionally, the securities have experienced a decrease in prepayment rates. Based on the Company’s cash flow projections, management determined that it does not expect to recover all of the amortized cost of these securities and therefore determined that these securities were other-than-temporarily impaired (OTTI). The Company employs a buy and hold strategy relative to its mortgage-related securities, and does not intend to sell these securities and it will not be required to sell these securities before anticipated recovery of the unrealized losses on these securities. Further, the Company has an adequate liquidity position at June 30, 2011, with cash and cash equivalents totaling $6.5 billion, a loan-to-deposit ratio of 18%, adequate access to short-term borrowing facilities and regulatory capital ratios in excess of “well capitalized” levels. Because the Company does not intend to sell these securities and it is not “more likely than not” that the Company will be required to sell these securities, the Company recognized an impairment charge equal to the securities’ expected credit losses of $2 million and $9 million during the second quarter and first half of 2011, respectively. The expected credit losses were measured as the difference between the present value of expected cash flows and the amortized cost of the securities. Further deterioration in the performance of the underlying loans in the Company’s residential mortgage-backed securities portfolio could result in the recognition of additional impairment charges.

Actual credit losses on the Company’s residential mortgage-backed securities were not material during the second quarters or first halves of 2011 and 2010.

The following table is a rollforward of the amount of credit losses recognized in earnings for OTTI securities held by the Company during the period for which a portion of the impairment was recognized in other comprehensive income:

	Three Months Ended June 30,				Six Months Ended June 30,
	2011		2010		2011		2010
Balance at beginning of period	$	103	$	68	$	96	$	60
Credit losses recognized into current period earnings on debt securities for which an other-than-temporary impairment was not previously recognized		2		1		2		4
Credit losses recognized into current period earnings on debt securities for which an other-than-temporary impairment was previously recognized		—		7		7		12
Balance at end of period	$	105	$	76	$	105	$	76

The maturities of securities available for sale and securities held to maturity at June 30, 2011, are as follows:

	Within 1 year		After 1 year through 5 years		After 5 years through 10 years		After 10 years		Total
Securities available for sale:
U.S. agency residential mortgage-backed securities (1)	$	—	$	9	$	1,521	$	14,334	$	15,864
Non-agency residential mortgage-backed securities (1)		—		—		16		1,170		1,186
U.S. agency notes		—		2,797		—		—		2,797
Corporate debt securities		567		2,203		—		—		2,770
Asset-backed securities		—		849		546		1,293		2,688
Certificates of deposit		802		1,101		—		—		1,903
Total fair value	$	1,369	$	6,959	$	2,083	$	16,797	$	27,208
Total amortized cost	$	1,365	$	6,930	$	2,064	$	16,776	$	27,135
Securities held to maturity:
U.S. agency residential mortgage-backed securities (1)	$	—	$	—	$	988	$	14,682	$	15,670
Asset-backed securities		—		232		—		—		232
Corporate debt securities		51		118		—		—		169
Total fair value	$	51	$	350	$	988	$	14,682	$	16,071
Total amortized cost	$	50	$	345	$	1,023	$	14,381	$	15,799

⁽¹⁾  Residential mortgage-backed securities have been allocated over maturity groupings based on final contractual maturities. Actual maturities will differ from final contractual maturities because borrowers on a certain portion of loans underlying these securities have the right to prepay their obligations.

Proceeds and gross realized gains (losses) from sales of securities available for sale are as follows:

	Three Months Ended June 30,				Six Months Ended   June 30,
	2011		2010		2011		2010
Proceeds	$	250	$	125	$	450	$	125
Gross realized gains	$	1	$	—	$	1	$	—
Gross realized losses	$	—	$	—	$	—	$

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Fair Value Estimates for Financial Instruments Excluding Short Term Financial Assets and Liabilities and Financial Instruments Recorded at Fair Value (Detail) (USD $) In Millions	Jun. 30, 2011	Dec. 31, 2010
Financial Assets:
Securities held to maturity	$ 15,799	$ 17,762
Loans to banking clients - net	9,471	8,725
Loans held for sale	49	185
Financial Liabilities:
Long-term debt	2,004	2,006
Carrying Amount
Financial Assets:
Securities held to maturity	15,799	17,762
Loans to banking clients - net	9,471	8,725
Loans held for sale	49	185
Financial Liabilities:
Long-term debt	2,004	2,006
Fair Value
Financial Assets:
Securities held to maturity	16,071	17,848
Loans to banking clients - net	9,141	8,469
Loans held for sale	51	194
Financial Liabilities:
Long-term debt	$ 2,141	$ 2,116

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Proceeds and Gross Realized Gains (Losses) from Sales of Securities Available for Sale (Detail) (USD $) In Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010
Schedule of Available-for-sale Securities [Line Items]
Proceeds	$ 250	$ 125	$ 450	$ 125
Gross realized gains	1		1
Gross realized losses

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Loans to Banking Clients and Related Allowance for Loan Losses

6 Months Ended

Jun. 30, 2011

Loans to Banking Clients and Related Allowance for Loan Losses

4. Loans to Banking Clients and Related Allowance for Loan Losses

The composition of loans to banking clients by loan segment is as follows:

	June 30, 2011			December 31, 2010
Residential real estate mortgages	$	5,312		$	4,695
Home equity lines of credit		3,513			3,500
Personal loans secured by securities		675			562
Other		21			21
Total loans to banking clients (1)		9,521			8,778
Allowance for loan losses		(50	)		(53	)
Total loans to banking clients – net	$	9,471		$	8,725

⁽¹⁾  All loans are collectively evaluated for impairment by loan segment.

Changes in the allowance for loan losses were as follows:

	June 30, 2011													June 30, 2010
Three Months Ended	Residential real estate mortgages			Home equity lines of credit			Personal loans secured by securities		Other		Total
Balance at beginning of period	$	37		$	16		$	—	$	—	$	53		$	53
Charge-offs		(3	)		(2	)		—		—		(5	)		(4	)
Recoveries		—			1			—		—		1			1
Provision for loan losses		—			1			—		—		1			1
Balance at end of period	$	34		$	16		$	—	$	—	$	50		$	51
	June 30, 2011													June 30, 2010
Six Months Ended	Residential real estate mortgages			Home equity lines of credit			Personal loans secured by securities		Other		Total
Balance at beginning of period	$	38		$	15		$	—	$	—	$	53		$	45
Charge-offs		(6	)		(3	)		—		—		(9	)		(10	)
Recoveries		—			1			—		—		1			1
Provision for loan losses		2			3			—		—		5			15
Balance at end of period	$	34		$	16		$	—	$	—	$	50		$	51

Included in the loan portfolio are nonaccrual loans totaling $46 million and $51 million at June 30, 2011 and December 31, 2010, respectively. There were no loans accruing interest that were contractually 90 days or more past due at June 30, 2011 or December 31, 2010. The amount of interest revenue that would have been earned on nonaccrual loans, versus actual interest revenue recognized on these loans, was not material to the Company’s results of operations in the first halves of 2011 or 2010. Nonperforming assets, which include nonaccrual loans and other real estate owned, totaled $53 million and $54 million at June 30, 2011 and December 31, 2010, respectively. The Company considers loan modifications in which it makes an economic concession to a borrower experiencing financial difficulty to be a troubled debt restructuring. Troubled debt restructurings were not material at June 30, 2011 or December 31, 2010.

The delinquency aging analysis by loan class is as follows:

June 30, 2011	Current		30-59 days past due		60-89 days past due		Greater than 90 days		Total past due		Total loans
Residential real estate mortgages:
Originated first mortgages	$	5,155	$	14	$	4	$	30	$	48	$	5,203
Purchased first mortgages		102		2		—		5		7		109
Home equity lines of credit		3,501		5		1		6		12		3,513
Personal loans secured by securities		670		—		—		5		5		675
Other		21		—		—		—		—		21
Total loans to banking clients	$	9,449	$	21	$	5	$	46	$	72	$	9,521
December 31, 2010
Residential real estate mortgages:
Originated first mortgages	$	4,527	$	18	$	5	$	38	$	61	$	4,588
Purchased first mortgages		100		2		1		4		7		107
Home equity lines of credit		3,489		5		2		4		11		3,500
Personal loans secured by securities		557		—		—		5		5		562
Other		21		—		—		—		—		21
Total loans to banking clients	$	8,694	$	25	$	8	$	51	$	84	$	8,778

In addition to monitoring the delinquency characteristics as presented in the aging analysis above, the Company monitors the credit quality of residential real estate mortgages and home equity lines of credit (HELOCs) by stratifying the portfolios by the year of origination, borrower Fair Issac & Company (FICO) scores at origination, updated FICO scores, and loan-to-value ratios at origination (Origination LTV), as presented in the following tables. Borrowers’ FICO scores are provided by an independent third party credit reporting service and were last updated in June 2011. The Company monitors the credit quality of personal loans secured by securities by reviewing the fair value of collateral to ensure adequate collateralization of at least 100% of the principal amount of the loans. All of these loans were fully collateralized by securities with fair values in excess of borrowing amounts at June 30, 2011 and December 31, 2010.

	Residential real estate mortgages						Home equity lines of credit
June 30, 2011	Originated first mortgages		Purchased first mortgages		Total
Year of origination
Pre-2007	$	322	$	55	$	377	$	1,097
2007		338		9		347		237
2008		606		7		613		1,300
2009		704		11		715		443
2010		2,094		20		2,114		321
2011		1,139		7		1,146		115
Total	$	5,203	$	109	$	5,312	$	3,513
Origination FICO
< 620	$	10	$	2	$	12	$	—
620 - 679		118		14		132		24
680 - 739		1,018		33		1,051		675
³ 740		4,057		60		4,117		2,814
Total	$	5,203	$	109	$	5,312	$	3,513
Updated FICO
< 620	$	66	$	3	$	69	$	45
620 - 679		153		17		170		94
680 - 739		787		28		815		480
³ 740		4,197		61		4,258		2,894
Total	$	5,203	$	109	$	5,312	$	3,513
Origination LTV (1)
£ 70%	$	3,335	$	57	$	3,392	$	2,376
71% - 89%		1,839		50		1,889		1,137
³ 90%		29		2		31		—
Total	$	5,203	$	109	$	5,312	$	3,513

⁽¹⁾  The computation of the Origination LTV ratio for a HELOC includes any first lien mortgage outstanding on the same property at the time of origination. At June 30, 2011, $750 million of $3.5 billion in HELOCs were in a first lien position.

	Residential real estate mortgages						Home equity lines of credit
December 31, 2010	Originated first mortgages		Purchased first mortgages		Total
Year of origination
Pre-2007	$	352	$	58	$	410	$	1,132
2007		384		9		393		245
2008		728		8		736		1,345
2009		884		12		896		466
2010		2,240		20		2,260		312
Total	$	4,588	$	107	$	4,695	$	3,500
Origination FICO
< 620	$	9	$	2	$	11	$	—
620 - 679		115		15		130		26
680 - 739		907		33		940		677
³ 740		3,557		57		3,614		2,797
Total	$	4,588	$	107	$	4,695	$	3,500
Updated FICO
< 620	$	63	$	9	$	72	$	49
620 - 679		147		8		155		99
680 - 739		730		29		759		499
³ 740		3,648		61		3,709		2,853
Total	$	4,588	$	107	$	4,695	$	3,500
Origination LTV (1)
£ 70%	$	2,911	$	55	$	2,966	$	2,375
71% - 89%		1,659		51		1,710		1,092
³ 90%		18		1		19		33
Total	$	4,588	$	107	$	4,695	$	3,500

⁽¹⁾  The computation of the Origination LTV ratio for a HELOC includes any first lien mortgage outstanding on the same property at the time of origination. At December 31, 2010, $742 million of $3.5 billion in HELOCs were in a first lien position.

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Accumulated Other Comprehensive Income (loss) Balances (Detail) (USD $) In Millions	6 Months Ended
	Jun. 30, 2011		Jun. 30, 2010
Beginning Balance	$ 16		$ (191)
Other net changes	29		126
Ending Balance	45		(65)
Net unrealized gain (loss) on securities available for sale Portion of unrealized gain (loss) on Non-OTTI securities
Beginning Balance	88		(77)
Reclassification of OTTI securities	6		21
Other net changes	26		101
Ending Balance	120		45
Net unrealized gain (loss) on securities available for sale Portion of unrealized loss on OTTI securities
Beginning Balance	(71)	[1]	(114)	[1]
Reclassification of OTTI securities	(6)	[1]	(21)	[1]
Other net changes	2	[1]	25	[1]
Ending Balance	(75)	[1]	(110)	[1]
Net unrealized loss on cash flow hedging instruments
Beginning Balance	(1)
Other net changes	$ 1

[1] OTTI securities are securities for which the Company has recognized an impairment charge through earnings.

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Securities Available for Sale and Securities Held to Maturity - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	3 Months Ended				6 Months Ended
	Jun. 30, 2011 Location CreditScore		Jun. 30, 2010		Jun. 30, 2011 Location CreditScore		Jun. 30, 2010		Dec. 31, 2010	Dec. 31, 2009
Gain (Loss) on Investments [Line Items]
Securities available for sale Gross Unrealized Losses	$ 201				$ 201				$ 240
Fair Isaac & Company minimum credit score for Prime loan origination	620				620
Cash and cash equivalents	6,466		9,510		6,466		9,510		4,931	8,241
Loan-to-deposit ratio	18.00%				18.00%
Net impairment losses on securities	2	[1]	8	[1]	9	[1]	16	[1]
Securities available for sale Amortized Cost	27,135				27,135				23,967
Securities available for sale	27,208				27,208				23,993
Alt-A residential mortgage backed securities
Gain (Loss) on Investments [Line Items]
Securities available for sale Amortized Cost	438				438
Securities available for sale	$ 335				$ 335

[1] Net impairment losses on securities include total other-than-temporary impairment losses of $11 and $13, net of $9 and $5 recognized in other comprehensive income, for the three months ended June 30, 2011 and 2010, respectively. Net impairment losses on securities include total other-than-temporary impairment losses of $11 and $41, net of $2 and $25 recognized in other comprehensive income, for the six months ended June 30, 2011 and 2010, respectively.

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Changes in the Allowance for Loan Losses (Detail) (USD $) In Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010
Financing Receivable, Allowance for Credit Losses [Line Items]
Balance at beginning of period	$ 53	$ 53	$ 53	$ 45
Charge-offs	(5)	(4)	(9)	(10)
Recoveries	1	1	1	1
Provision for loan losses	1	1	5	15
Balance at end of period	50	51	50	51
Residential real estate mortgages
Financing Receivable, Allowance for Credit Losses [Line Items]
Balance at beginning of period	37		38
Charge-offs	(3)		(6)
Provision for loan losses			2
Balance at end of period	34		34
Home equity lines of credit
Financing Receivable, Allowance for Credit Losses [Line Items]
Balance at beginning of period	16		15
Charge-offs	(2)		(3)
Recoveries	1		1
Provision for loan losses	1		3
Balance at end of period	$ 16		$ 16

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Components of Comprehensive Income (Detail) (USD $) In Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010
Net income	$ 238	$ 205	$ 481	$ 211
Change in net unrealized gain (loss) on securities available for sale:
Net unrealized gain	16	67	37	189
Reclassification of impairment charges included in earnings	2	8	9	16
Other reclassification of gains in earnings	1		1
Income tax effect	(8)	(29)	(18)	(79)
Total other comprehensive income	11	46	29	126
Comprehensive income	$ 249	$ 251	$ 510	$ 337

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Maturities of Securities Available for Sale and Securities Held to Maturity (Detail) (USD $) In Millions	Jun. 30, 2011		Dec. 31, 2010
Gain (Loss) on Investments [Line Items]
Securities available for sale fair value Within 1 year	$ 1,369
Securities available for sale fair value After 1 year through 5 years	6,959
Securities available for sale fair value After 5 years through 10 years	2,083
Securities available for sale fair value After 10 years	16,797
Securities available for sale	27,208		23,993
Securities available for sale Within 1 year amortized cost	1,365
Securities available for sale After 1 year through 5 years amortized cost	6,930
Securities available for sale After 5 years through 10 years amortized cost	2,064
Securities available for sale After 10 years amortized cost	16,776
Securities available for sale Amortized Cost	27,135		23,967
Securities held to maturity Within 1 year	51
Securities held to maturity After 1 year through 5 years	350
Securities held to maturity After 5 years through 10 years	988
Securities held to maturity After 10 years	14,682
Securities held to maturity, fair value	16,071		17,848
Securities held to maturity Within 1 year amortized cost	50
Securities held to maturity After 1 year through 5 years amortized cost	345
Securities held to maturity After 5 years through 10 years amortized cost	1,023
Securities held to maturity After 10 years amortized cost	14,381
Securities held to maturity	15,799		17,762
U.S. agency residential mortgage-backed securities
Gain (Loss) on Investments [Line Items]
Securities available for sale fair value After 1 year through 5 years	9	[1]
Securities available for sale fair value After 5 years through 10 years	1,521	[1]
Securities available for sale fair value After 10 years	14,334	[1]
Securities available for sale	15,864	[1]	13,098
Securities available for sale Amortized Cost	15,639		12,879
Securities held to maturity After 5 years through 10 years	988	[1]
Securities held to maturity After 10 years	14,682	[1]
Securities held to maturity, fair value	15,670	[1]	16,794
Securities held to maturity	15,405		16,722
Non-agency residential mortgage-backed securities
Gain (Loss) on Investments [Line Items]
Securities available for sale fair value After 5 years through 10 years	16	[1]
Securities available for sale fair value After 10 years	1,170	[1]
Securities available for sale	1,186	[1]	1,470
Securities available for sale Amortized Cost	1,374		1,701
U.S. agency notes
Gain (Loss) on Investments [Line Items]
Securities available for sale fair value After 1 year through 5 years	2,797
Securities available for sale	2,797		2,780
Securities available for sale Amortized Cost	2,783		2,757
Asset-backed securities
Gain (Loss) on Investments [Line Items]
Securities available for sale fair value After 1 year through 5 years	849
Securities available for sale fair value After 5 years through 10 years	546
Securities available for sale fair value After 10 years	1,293
Securities available for sale	2,688		2,502
Securities available for sale Amortized Cost	2,680		2,495
Securities held to maturity After 1 year through 5 years	232
Securities held to maturity, fair value	232		711
Securities held to maturity	228		702
Corporate debt securities
Gain (Loss) on Investments [Line Items]
Securities available for sale fair value Within 1 year	567
Securities available for sale fair value After 1 year through 5 years	2,203
Securities available for sale	2,770		2,268
Securities available for sale Amortized Cost	2,761		2,261
Securities held to maturity Within 1 year	51
Securities held to maturity After 1 year through 5 years	118
Securities held to maturity, fair value	169		343
Securities held to maturity	166		338
Certificates of deposit
Gain (Loss) on Investments [Line Items]
Securities available for sale fair value Within 1 year	802
Securities available for sale fair value After 1 year through 5 years	1,101
Securities available for sale	1,903		1,875
Securities available for sale Amortized Cost	$ 1,898		$ 1,874

[1] Residential mortgage-backed securities have been allocated over maturity groupings based on final contractual maturities. Actual maturities will differ from final contractual maturities because borrowers on a certain portion of loans underlying these securities have the right to prepay their obligations.

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Loans to Banking Clients and Related Allowance for Loan Losses (Tables)

6 Months Ended

Jun. 30, 2011

Composition of Loans to Banking Clients

The composition of loans to banking clients by loan segment is as follows:

	June 30, 2011			December 31, 2010
Residential real estate mortgages	$	5,312		$	4,695
Home equity lines of credit		3,513			3,500
Personal loans secured by securities		675			562
Other		21			21
Total loans to banking clients (1)		9,521			8,778
Allowance for loan losses		(50	)		(53	)
Total loans to banking clients – net	$	9,471		$	8,725

⁽¹⁾  All loans are collectively evaluated for impairment by loan segment.

Changes in the Allowance for Loan Losses

Changes in the allowance for loan losses were as follows:

	June 30, 2011													June 30, 2010
Three Months Ended	Residential real estate mortgages			Home equity lines of credit			Personal loans secured by securities		Other		Total
Balance at beginning of period	$	37		$	16		$	—	$	—	$	53		$	53
Charge-offs		(3	)		(2	)		—		—		(5	)		(4	)
Recoveries		—			1			—		—		1			1
Provision for loan losses		—			1			—		—		1			1
Balance at end of period	$	34		$	16		$	—	$	—	$	50		$	51
	June 30, 2011													June 30, 2010
Six Months Ended	Residential real estate mortgages			Home equity lines of credit			Personal loans secured by securities		Other		Total
Balance at beginning of period	$	38		$	15		$	—	$	—	$	53		$	45
Charge-offs		(6	)		(3	)		—		—		(9	)		(10	)
Recoveries		—			1			—		—		1			1
Provision for loan losses		2			3			—		—		5			15
Balance at end of period	$	34		$	16		$	—	$	—	$	50		$	51

Delinquency Aging Analysis by Loan Class

The delinquency aging analysis by loan class is as follows:

June 30, 2011	Current		30-59 days past due		60-89 days past due		Greater than 90 days		Total past due		Total loans
Residential real estate mortgages:
Originated first mortgages	$	5,155	$	14	$	4	$	30	$	48	$	5,203
Purchased first mortgages		102		2		—		5		7		109
Home equity lines of credit		3,501		5		1		6		12		3,513
Personal loans secured by securities		670		—		—		5		5		675
Other		21		—		—		—		—		21
Total loans to banking clients	$	9,449	$	21	$	5	$	46	$	72	$	9,521
December 31, 2010
Residential real estate mortgages:
Originated first mortgages	$	4,527	$	18	$	5	$	38	$	61	$	4,588
Purchased first mortgages		100		2		1		4		7		107
Home equity lines of credit		3,489		5		2		4		11		3,500
Personal loans secured by securities		557		—		—		5		5		562
Other		21		—		—		—		—		21
Total loans to banking clients	$	8,694	$	25	$	8	$	51	$	84	$	8,778

Credit Quality of Residential Real Estate Mortgages and HELOCs by Reviewing FICO Scores at Origination, Current FICO Scores, Loan-To-Value Ratio

In addition to monitoring the delinquency characteristics as presented in the aging analysis above, the Company monitors the credit quality of residential real estate mortgages and home equity lines of credit (HELOCs) by stratifying the portfolios by the year of origination, borrower Fair Issac & Company (FICO) scores at origination, updated FICO scores, and loan-to-value ratios at origination (Origination LTV), as presented in the following tables. Borrowers’ FICO scores are provided by an independent third party credit reporting service and were last updated in June 2011. The Company monitors the credit quality of personal loans secured by securities by reviewing the fair value of collateral to ensure adequate collateralization of at least 100% of the principal amount of the loans. All of these loans were fully collateralized by securities with fair values in excess of borrowing amounts at June 30, 2011 and December 31, 2010.

	Residential real estate mortgages						Home equity lines of credit
June 30, 2011	Originated first mortgages		Purchased first mortgages		Total
Year of origination
Pre-2007	$	322	$	55	$	377	$	1,097
2007		338		9		347		237
2008		606		7		613		1,300
2009		704		11		715		443
2010		2,094		20		2,114		321
2011		1,139		7		1,146		115
Total	$	5,203	$	109	$	5,312	$	3,513
Origination FICO
< 620	$	10	$	2	$	12	$	—
620 - 679		118		14		132		24
680 - 739		1,018		33		1,051		675
³ 740		4,057		60		4,117		2,814
Total	$	5,203	$	109	$	5,312	$	3,513
Updated FICO
< 620	$	66	$	3	$	69	$	45
620 - 679		153		17		170		94
680 - 739		787		28		815		480
³ 740		4,197		61		4,258		2,894
Total	$	5,203	$	109	$	5,312	$	3,513
Origination LTV (1)
£ 70%	$	3,335	$	57	$	3,392	$	2,376
71% - 89%		1,839		50		1,889		1,137
³ 90%		29		2		31		—
Total	$	5,203	$	109	$	5,312	$	3,513

⁽¹⁾  The computation of the Origination LTV ratio for a HELOC includes any first lien mortgage outstanding on the same property at the time of origination. At June 30, 2011, $750 million of $3.5 billion in HELOCs were in a first lien position.

	Residential real estate mortgages						Home equity lines of credit
December 31, 2010	Originated first mortgages		Purchased first mortgages		Total
Year of origination
Pre-2007	$	352	$	58	$	410	$	1,132
2007		384		9		393		245
2008		728		8		736		1,345
2009		884		12		896		466
2010		2,240		20		2,260		312
Total	$	4,588	$	107	$	4,695	$	3,500
Origination FICO
< 620	$	9	$	2	$	11	$	—
620 - 679		115		15		130		26
680 - 739		907		33		940		677
³ 740		3,557		57		3,614		2,797
Total	$	4,588	$	107	$	4,695	$	3,500
Updated FICO
< 620	$	63	$	9	$	72	$	49
620 - 679		147		8		155		99
680 - 739		730		29		759		499
³ 740		3,648		61		3,709		2,853
Total	$	4,588	$	107	$	4,695	$	3,500
Origination LTV (1)
£ 70%	$	2,911	$	55	$	2,966	$	2,375
71% - 89%		1,659		51		1,710		1,092
³ 90%		18		1		19		33
Total	$	4,588	$	107	$	4,695	$	3,500

⁽¹⁾  The computation of the Origination LTV ratio for a HELOC includes any first lien mortgage outstanding on the same property at the time of origination. At December 31, 2010, $742 million of $3.5 billion in HELOCs were in a first lien position.

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Commitments and Contingent Liabilities

6 Months Ended

Jun. 30, 2011

Commitments and Contingent Liabilities

5. Commitments and Contingent Liabilities

The Company has clients that sell (i.e., write) listed option contracts that are cleared by various clearing houses. The clearing houses establish margin requirements on these transactions. The Company partially satisfies the margin requirements by arranging unsecured standby letter of credit agreements (LOCs), in favor of the clearing houses, which are issued by multiple banks. At June 30, 2011, the aggregate face amount of these LOCs totaled $445 million. In connection with its securities lending activities, Schwab is required to provide collateral to certain brokerage clients. Schwab satisfies the collateral requirements by arranging LOCs in favor of these brokerage clients, which are issued by multiple banks. At June 30, 2011, the aggregate face amount of these LOCs totaled $61 million. There were no funds drawn under any of these LOCs at June 30, 2011.

The Company also provides guarantees to securities clearing houses and exchanges under standard membership agreements, which require members to guarantee the performance of other members. Under the agreements, if another member becomes unable to satisfy its obligations to the clearing houses and exchanges, other members would be required to meet shortfalls. The Company’s liability under these arrangements is not quantifiable and may exceed the cash and securities it has posted as collateral. However, the potential requirement for the Company to make payments under these arrangements is remote. Accordingly, no liability has been recognized for these guarantees.

On March 21, 2011, the Company announced a definitive agreement to acquire optionsXpress Holdings, Inc. (optionsXpress), an online brokerage firm primarily focused on equity option securities and futures. Under the terms of the agreement, optionsXpress^® stockholders will receive 1.02 shares of the Company’s common stock for each share of optionsXpress stock. The value of the transaction is dependent on the value of the Company’s common stock at closing and therefore will fluctuate with the market price of the Company’s common stock. The transaction is expected to close in the third quarter of 2011, subject to optionsXpress stockholder approval, regulatory approvals, and customary closing conditions.

Legal contingencies: The Company is subject to claims and lawsuits in the ordinary course of business, including arbitrations, class actions and other litigation, some of which include claims for substantial or unspecified damages. The Company is also the subject of inquiries, investigations, and proceedings by regulatory and other governmental agencies. In addition, the Company is responding to certain litigation claims brought against former subsidiaries pursuant to indemnities it has provided to purchasers of those entities.

The Company believes it has strong defenses in all significant matters currently pending and is contesting liability and any damages claimed. Nevertheless, some of these matters may result in adverse judgments or awards, including penalties, injunctions or other relief, and the Company may also determine to settle a matter because of the uncertainty and risks of litigation. Described below are certain matters in which there is a reasonable possibility that a material loss will be incurred or where the matter may otherwise be of significant interest to stockholders. With respect to all other pending matters, based on current information and consultation with counsel, it does not appear that the outcome of any such matter will be material to the financial condition, operating results or cash flows of the Company.

Predicting the outcome of a litigation or regulatory matter is inherently difficult, however, requiring significant judgment and evaluation of various factors, including the procedural status of the matter and any recent developments; prior experience and the experience of others in similar cases; available defenses, including potential opportunities to dispose of a case on the merits or procedural grounds before trial (e.g., motions to dismiss or for summary judgment); the progress of fact discovery; the opinions of counsel and experts regarding potential damages; potential opportunities for settlement and the status of any settlement discussions; and potential insurance coverage and indemnification. Often when legal proceedings or regulatory investigations are at an early stage, as in the case of the Auction Rate Securities Regulatory Inquiries and Total Bond Market Fund Litigation matters described below, it is not possible to reasonably estimate potential liability, if any, or a range of potential liability until the matter is closer to resolution. Numerous issues have to be developed, such as discovery of important factual matters and determination of threshold legal issues, which may include novel or unsettled questions of law. Reserves are established or adjusted or further disclosure and estimates of potential loss are provided as the matter progresses and more information becomes available.

Auction Rate Securities Regulatory Inquiries: Schwab has been responding to industry wide inquiries from federal and state regulators regarding sales of auction rate securities to clients who were unable to sell their holdings when the normal auction process for those securities froze unexpectedly in February 2008. On August 17, 2009, a civil complaint was filed against Schwab in New York state court by the Attorney General of the State of New York alleging material misrepresentations and omissions by Schwab regarding the risks of auction rate securities, and seeking restitution, disgorgement, penalties and other relief, including repurchase of securities held in client accounts. As reflected in a statement issued August 17, 2009, Schwab has responded that the allegations are without merit and that Schwab intends to contest any charges. On March 15, 2010, Schwab filed a motion to dismiss the case and various claims in the civil complaint, which remains pending.

Total Bond Market Fund Litigation: On August 28, 2008, a class action lawsuit was filed in the U.S. District Court for the Northern District of California on behalf of investors in the Schwab Total Bond Market Fund™. The lawsuit, which alleges violations of state law and federal securities law in connection with the fund’s investment policy, names Schwab Investments (registrant and issuer of the fund’s shares) and CSIM as defendants. Allegations include that the fund improperly deviated from its stated investment objectives by investing in collateralized mortgage obligations (CMOs) and investing more than 25% of fund assets in CMOs and mortgage-backed securities without obtaining a shareholder vote. Plaintiffs seek unspecified compensatory and rescission damages, unspecified equitable and injunctive relief, and costs and attorneys’ fees. On February 19, 2009, the court denied defendants’ motion to dismiss plaintiffs’ federal securities law claim, and dismissed certain state law claims with leave to amend. On April 27, 2009, the court issued a stay of proceedings while defendants appealed the court’s February 19, 2009 decision refusing to dismiss plaintiffs’ federal securities law claim. On August 12, 2010, the Ninth Circuit Court of Appeals ruled in favor of the defendants and dismissed plaintiffs’ federal securities law claim.

On September 28, 2010, plaintiffs filed a second amended class action complaint which named Schwab Investments and current and former trustees and officers of the trust as defendants and dropped the federal securities law claim and certain of the state law claims. Defendants moved to dismiss the second amended complaint on November 10, 2010. On March 2, 2011, the court granted defendants’ motion to dismiss with leave to amend certain claims. On March 29, 2011, plaintiffs filed a third amended complaint; defendants’ motion to dismiss the third amended complaint was filed April 25, 2011, and remains pending.

optionsXpress Merger Litigation: Between March 21, 2011 and April 6, 2011, ten purported class action lawsuits were filed by optionsXpress stockholders challenging Schwab’s proposed acquisition of optionsXpress. Named defendants include the Company, optionsXpress and members of its board of directors. Seven lawsuits were filed in the Circuit Court of Cook County, Illinois and consolidated in a single amended complaint on May 9, 2011 (Consolidated Illinois Action); and three lawsuits were filed in the Court of Chancery of the State of Delaware and consolidated in a single amended complaint on April 25, 2011 (Consolidated Delaware Action). On April 28, 2011, the Delaware court stayed the Consolidated Delaware Action in favor of the Consolidated Illinois Action. The complaints generally allege that optionsXpress directors breached fiduciary duties owed to optionsXpress’ stockholders by allegedly approving the merger agreement at an unfair price and terms and through an unfair process, and that the Company aided and abetted the alleged fiduciary breaches. The lawsuits seek, among other relief, an injunction against the merger, rescission in the event the merger is completed, an accounting for alleged damages, and an award of costs and attorneys’ fees.

On May 20, 2011, defendants moved to dismiss the Consolidated Illinois Action. On June 16, 2011, the Illinois court dismissed all claims against the Company with prejudice. On July 29, 2011, the parties entered into a settlement agreement under which defendants would provide certain supplemental disclosures in exchange for full releases of all claims related to the merger, including all claims in the Consolidated Illinois Action and the Consolidated Delaware Action. Defendants also agreed not to oppose any fee application by plaintiffs’ counsel that does not exceed $650,000. The settlement is subject to court approval and is conditioned on consummation of the merger. Defendants deny any wrongdoing in connection with the merger and believe the claims lack merit. In the event the settlement is not finalized, the remaining defendants will continue to defend the claims vigorously.

YieldPlus Fund Litigation: As disclosed previously, the Company recorded total charges in 2010 of $199 million, net of insurance proceeds of $39 million under applicable policies, for settlements to resolve consolidated class action litigation in the U.S. District Court for the Northern District of California relating to the Schwab YieldPlus Fund^®. On April 19, 2011, the court granted final approval of the settlement agreements and entered final judgment in the litigation.

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Earnings Per Share (Tables)

6 Months Ended

Jun. 30, 2011

EPS under Basic and Diluted Computations

EPS under the basic and diluted computations is as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2011		2010		2011		2010
Net income available to common stockholders (1)	$	238	$	205	$	481	$	211
Weighted-average common shares outstanding — basic		1,207		1,191		1,205		1,187
Common stock equivalent shares related to stock incentive plans		3		4		3		4
Weighted-average common shares outstanding — diluted (2)		1,210		1,195		1,208		1,191
Basic EPS	$	.20	$	.17	$	.40	$	.18
Diluted EPS	$	.20	$	.17	$	.40	$	.18

⁽¹⁾  Net income available to participating securities (unvested restricted shares) was not material for the second quarters and first halves of 2011 or 2010.

⁽²⁾  Antidilutive stock options and restricted stock awards excluded from the calculation of diluted EPS totaled 42 million and 38 million shares for the second quarters of 2011 and 2010, respectively, and 43 million and 38 million shares for the first halves of 2011 and 2010, respectively.

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Fair Value Hierarchy for Assets and Liabilities Measured at Fair Value (Detail) (USD $) In Millions	Jun. 30, 2011		Dec. 31, 2010
Assets
Other securities owned	$ 410		$ 337
Securities available for sale	27,208		23,993
Fair Value, Measurements, Recurring
Assets
Cash equivalents	1,927		1,230
Investments segregated and on deposit for regulatory purposes	4,829		7,095
Other securities owned	410		337
Securities available for sale	27,208		23,993
Total	34,374		32,655
Liabilities
Securities sold, not yet purchased	87	[1]
Fair Value, Measurements, Recurring | Quoted Prices in Active Markets for Identical Assets (Level 1)
Assets
Cash equivalents	1,927		988
Other securities owned	321		272
Total	2,248		1,260
Liabilities
Securities sold, not yet purchased	83	[1]
Fair Value, Measurements, Recurring | Quoted Prices in Active Markets for Identical Assets (Level 1) | Money market funds
Assets
Cash equivalents	1,927		988
Fair Value, Measurements, Recurring | Quoted Prices in Active Markets for Identical Assets (Level 1) | Schwab Funds money market funds
Assets
Other securities owned	230		172
Fair Value, Measurements, Recurring | Quoted Prices in Active Markets for Identical Assets (Level 1) | Equity and bond mutual funds
Assets
Other securities owned	91		99
Fair Value, Measurements, Recurring | Quoted Prices in Active Markets for Identical Assets (Level 1) | Equity, U.S. Government and corporate debt, and other securities
Assets
Other securities owned			1
Fair Value, Measurements, Recurring | Significant Other Observable Inputs (Level 2)
Assets
Cash equivalents			242
Investments segregated and on deposit for regulatory purposes	4,829		7,095
Other securities owned	89		65
Securities available for sale	27,208		23,993
Total	32,126		31,395
Liabilities
Securities sold, not yet purchased	4	[1]
Fair Value, Measurements, Recurring | Significant Other Observable Inputs (Level 2) | U.S. Government securities
Assets
Investments segregated and on deposit for regulatory purposes	1,318		3,190
Fair Value, Measurements, Recurring | Significant Other Observable Inputs (Level 2) | Certificates of deposit
Assets
Investments segregated and on deposit for regulatory purposes	2,125		2,201
Securities available for sale	1,903		1,875
Fair Value, Measurements, Recurring | Significant Other Observable Inputs (Level 2) | Corporate debt securities
Assets
Investments segregated and on deposit for regulatory purposes	1,386		1,704
Securities available for sale	2,770		2,268
Fair Value, Measurements, Recurring | Significant Other Observable Inputs (Level 2) | State and municipal debt obligations
Assets
Other securities owned	55		47
Fair Value, Measurements, Recurring | Significant Other Observable Inputs (Level 2) | Equity, U.S. Government and corporate debt, and other securities
Assets
Other securities owned	34		18
Fair Value, Measurements, Recurring | Significant Other Observable Inputs (Level 2) | U.S. agency residential mortgage-backed securities
Assets
Securities available for sale	15,864		13,098
Fair Value, Measurements, Recurring | Significant Other Observable Inputs (Level 2) | Non-agency residential mortgage-backed securities
Assets
Securities available for sale	1,186		1,470
Fair Value, Measurements, Recurring | Significant Other Observable Inputs (Level 2) | U.S. agency notes
Assets
Securities available for sale	2,797		2,780
Fair Value, Measurements, Recurring | Significant Other Observable Inputs (Level 2) | Asset-backed securities
Assets
Securities available for sale	2,688		2,502
Fair Value, Measurements, Recurring | Significant Other Observable Inputs (Level 2) | Commercial paper
Assets
Cash equivalents			242
Fair Value, Measurements, Recurring | Money market funds
Assets
Cash equivalents	1,927		988
Fair Value, Measurements, Recurring | U.S. Government securities
Assets
Investments segregated and on deposit for regulatory purposes	1,318		3,190
Fair Value, Measurements, Recurring | Certificates of deposit
Assets
Investments segregated and on deposit for regulatory purposes	2,125		2,201
Securities available for sale	1,903		1,875
Fair Value, Measurements, Recurring | Corporate debt securities
Assets
Investments segregated and on deposit for regulatory purposes	1,386		1,704
Securities available for sale	2,770		2,268
Fair Value, Measurements, Recurring | Schwab Funds money market funds
Assets
Other securities owned	230		172
Fair Value, Measurements, Recurring | Equity and bond mutual funds
Assets
Other securities owned	91		99
Fair Value, Measurements, Recurring | State and municipal debt obligations
Assets
Other securities owned	55		47
Fair Value, Measurements, Recurring | Equity, U.S. Government and corporate debt, and other securities
Assets
Other securities owned	34		19
Fair Value, Measurements, Recurring | U.S. agency residential mortgage-backed securities
Assets
Securities available for sale	15,864		13,098
Fair Value, Measurements, Recurring | Non-agency residential mortgage-backed securities
Assets
Securities available for sale	1,186		1,470
Fair Value, Measurements, Recurring | U.S. agency notes
Assets
Securities available for sale	2,797		2,780
Fair Value, Measurements, Recurring | Asset-backed securities
Assets
Securities available for sale	2,688		2,502
Fair Value, Measurements, Recurring | Commercial paper
Assets
Cash equivalents			$ 242

[1] Securities sold, not yet purchased are included in accrued expenses and other liabilities.

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Rollforward Amount of Credit Losses Recognized in Earnings for OTTI Securities Held by Company for Portion of Impairment Recognized in Other Comprehensive Income (Detail) (USD $) In Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010
Gain (Loss) on Investments [Line Items]
Balance at beginning of period	$ 103	$ 68	$ 96	$ 60
Credit losses recognized into current period earnings on debt securities for which an other-than-temporary impairment was not previously recognized	2	1	2	4
Credit losses recognized into current period earnings on debt securities for which an other-than-temporary impairment was previously recognized		7	7	12
Balance at end of period	$ 105	$ 76	$ 105	$ 76

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Condensed Consolidated Balance Sheets (Parenthetical) (USD $) In Millions, except Share data	Jun. 30, 2011	Dec. 31, 2010
Cash and investments segregated and on deposit for regulatory purposes, resale agreements	$ 15,802	$ 12,697
Securities held to maturity, fair value	$ 16,071	$ 17,848
Preferred stock, shares authorized	9,940,000	9,940,000
Preferred stock, par value	$ 0.01	$ 0.01
Preferred stock, issued	0	0
Common stock, shares authorized	3,000,000,000	3,000,000,000
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares issued	1,428,604,522	1,428,604,522
Treasury stock, shares	219,684,046	226,222,313

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Regulatory Requirements (Tables)

6 Months Ended

Jun. 30, 2011

Regulatory Capital and Ratios

The regulatory capital and ratios for Schwab Bank at June 30, 2011, are as follows:

	Actual					Minimum Capital Requirement					Minimum to be Well Capitalized
	Amount		Ratio			Amount		Ratio			Amount		Ratio
Tier 1 Risk-Based Capital	$	4,332		23.4	%	$	740		4.0	%	$	1,110		6.0	%
Total Risk-Based Capital	$	4,381		23.7	%	$	1,480		8.0	%	$	1,850		10.0	%
Tier 1 Core Capital	$	4,332		7.6	%	$	2,271		4.0	%	$	2,839		5.0	%
Tangible Equity	$	4,332		7.6	%	$	1,136		2.0	%		N/A

N/A Not applicable.

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EPS under Basic and Diluted Computations (Parenthetical) (Detail) In Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010
Earnings Per Share Disclosure [Line Items]
Antidilutive stock options and restricted stock awards excluded from the calculation of diluted EPS	42	38	43	38

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Introduction and Basis of Presentation - Additional Information (Detail)	Jun. 30, 2011 Location CreditScore
Organization, Consolidation and Presentation of Financial Statements Disclosure [Line Items]
Domestic branch offices	302
States with domestic branch offices	45

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Introduction and Basis of Presentation

6 Months Ended

Jun. 30, 2011

Introduction and Basis of Presentation

1. Introduction and Basis of Presentation

The Charles Schwab Corporation (CSC) is a savings and loan holding company engaged, through its subsidiaries, in securities brokerage, banking, and related financial services. Charles Schwab & Co., Inc. (Schwab) is a securities broker-dealer with 302 domestic branch offices in 45 states, as well as a branch in each of the Commonwealth of Puerto Rico and London, U.K. In addition, Schwab serves clients in Hong Kong through one of CSC’s subsidiaries. Other subsidiaries include Charles Schwab Bank (Schwab Bank), a federal savings bank, and Charles Schwab Investment Management, Inc. (CSIM), the investment advisor for Schwab’s proprietary mutual funds, which are referred to as the Schwab Funds^®, and Schwab’s exchange-traded funds, which are referred to as the Schwab ETFs™.

The accompanying unaudited condensed consolidated financial statements include CSC and its majority-owned subsidiaries (collectively referred to as the Company). Intercompany balances and transactions have been eliminated. These condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States, which require management to make certain estimates and assumptions that affect the reported amounts in the accompanying financial statements. Certain estimates relate to other-than-temporary impairment of securities available for sale and securities held to maturity, the valuation of goodwill, the allowance for loan losses, and legal reserves. Actual results may differ from those estimates. These condensed consolidated financial statements reflect all adjustments that are, in the opinion of management, necessary for a fair presentation of the results for the periods presented. These adjustments are of a normal recurring nature. Certain prior-year amounts have been reclassified to conform to the 2011 presentation. The Company’s results for any interim period are not necessarily indicative of results for a full year or any other interim period. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010.

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Segment Information

6 Months Ended

Jun. 30, 2011

Segment Information

10. Segment Information

The Company structures its operating segments according to its various types of clients and the services provided to those clients. The Company’s two reportable segments are Investor Services and Institutional Services.

The Company evaluates the performance of its segments on a pre-tax basis, excluding items such as impairment charges on non-financial assets, discontinued operations, extraordinary items, and significant restructuring and other charges. Segment assets and liabilities are not disclosed because the balances are not used for evaluating segment performance and deciding how to allocate resources to segments. There are no revenues from transactions with other segments within the Company.

Financial information for the Company’s reportable segments is presented in the following table:

	Investor Services						Institutional Services						Unallocated						Total
Three Months Ended June 30,	2011			2010			2011			2010			2011			2010			2011			2010
Net Revenues:
Asset management and administration fees	$	275		$	229		$	227		$	209		$	—		$	(1	)	$	502		$	437
Net interest revenue		387			326			64			58			—			(1	)		451			383
Trading revenue		136			157			70			76			(1	)		—			205			233
Other		16			17			19			17			—			2			35			36
Provision for loan losses		(1	)		(1	)		—			—			—			—			(1	)		(1	)
Net impairment losses on securities		(2	)		(7	)		—			(1	)		—			—			(2	)		(8	)
Total net revenues		811			721			380			359			(1	)		—			1,190			1,080
Expenses Excluding Interest		547			503			258			241			(1	)		(2	)		804			742
Income before taxes on income	$	264		$	218		$	122		$	118		$	—		$	2		$	386		$	338
Taxes on income																				(148	)		(133	)
Net Income																			$	238		$	205
	Investor Services						Institutional Services						Unallocated						Total
Six Months Ended June 30,	2011			2010			2011			2010			2011			2010			2011			2010
Net Revenues:
Asset management and administration fees	$	551		$	444		$	453		$	413		$	—		$	—		$	1,004		$	857
Net interest revenue		760			614			127			109			—			—			887			723
Trading revenue		296			297			150			145			—			—			446			442
Other		36			34			38			33			—			—			74			67
Provision for loan losses		(4	)		(13	)		(1	)		(2	)		—			—			(5	)		(15	)
Net impairment losses on securities		(8	)		(14	)		(1	)		(2	)		—			—			(9	)		(16	)
Total net revenues		1,631			1,362			766			696			—			—			2,397			2,058
Expenses Excluding Interest (1)		1,101			1,032			518			483			(2	)		192			1,617			1,707
Income before taxes on income	$	530		$	330		$	248		$	213		$	2		$	(192	)	$	780		$	351
Taxes on income																				(299	)		(140	)
Net Income																			$	481		$	211

⁽¹⁾  Unallocated amount includes a class action litigation reserve of $196 million in the first half of 2010.

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Loans to Banking Clients and Related Allowance for Loan Losses - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	Jun. 30, 2011	Dec. 31, 2010
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total nonaccrual loans	$ 46	$ 51
Loans accruing interest contractually 90 days or more past due	0	0
Nonperforming assets, including nonaccrual loans and other real estate owned	$ 53	$ 54
Minimum fair value percentage of collateral to principal amount of loan	100.00%	100.00%

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Comprehensive Income and Accumulated Other Comprehensive Income (Loss) (Tables)

6 Months Ended

Jun. 30, 2011

Components of Comprehensive Income

The components of comprehensive income are as follows:

	Three Months Ended June 30,						Six Months Ended June 30,
	2011			2010			2011			2010
Net income	$	238		$	205		$	481		$	211
Other comprehensive income:
Change in net unrealized gain (loss) on securities available for sale:
Net unrealized gain		16			67			37			189
Reclassification of impairment charges included in earnings		2			8			9			16
Other reclassification of gains in earnings		1			—			1			—
Income tax effect		(8	)		(29	)		(18	)		(79	)
Total other comprehensive income		11			46			29			126
Comprehensive income	$	249		$	251		$	510		$	337

Accumulated Other Comprehensive Income (loss) Balances

Accumulated other comprehensive income (loss) represents cumulative gains and losses that are not reflected in earnings. Accumulated other comprehensive income (loss) balances were:

	Net unrealized gain (loss) on securities available for sale
	Portion of unrealized gain (loss) on Non-OTTI securities			Portion of unrealized loss on OTTI securities  (1)			Net unrealized loss on cash flow hedging instruments			Total accumulated other comprehensive income (loss)
Balance at December 31, 2009	$	(77	)	$	(114	)	$	—		$	(191	)
Reclassification of OTTI securities		21			(21	)		—			—
Other net changes		101			25			—			126
Balance at June 30, 2010	$	45		$	(110	)	$	—		$	(65	)
Balance at December 31, 2010	$	88		$	(71	)	$	(1	)	$	16
Reclassification of OTTI securities		6			(6	)		—			—
Other net changes		26			2			1			29
Balance at June 30, 2011	$	120		$	(75	)	$	—		$	45

⁽¹⁾  OTTI securities are securities for which the Company has recognized an impairment charge through earnings.

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Condensed Consolidated Statements of Income (USD $) In Millions, except Per Share data	3 Months Ended				6 Months Ended
	Jun. 30, 2011		Jun. 30, 2010		Jun. 30, 2011		Jun. 30, 2010
Net Revenues
Asset management and administration fees	$ 502		$ 437		$ 1,004		$ 857
Interest revenue	496		428		977		819
Interest expense	(45)		(45)		(90)		(96)
Net interest revenue	451		383		887		723
Trading revenue	205		233		446		442
Other	35		36		74		67
Provision for loan losses	(1)		(1)		(5)		(15)
Net impairment losses on securities	(2)	[1]	(8)	[1]	(9)	[1]	(16)	[1]
Total net revenues	1,190		1,080		2,397		2,058
Expenses Excluding Interest
Compensation and benefits	430		393		867		795
Professional services	92		84		184		164
Occupancy and equipment	73		68		144		136
Advertising and market development	51		43		111		105
Communications	54		53		110		105
Depreciation and amortization	33		36		68		73
Class action litigation and regulatory reserve	7				7		196
Other	64		65		126		133
Total expenses excluding interest	804		742		1,617	[2]	1,707	[2]
Income before taxes on income	386		338		780		351
Taxes on income	(148)		(133)		(299)		(140)
Net Income	$ 238		$ 205		$ 481		$ 211
Weighted-Average Common Shares Outstanding - Diluted	1,210	[3]	1,195	[3]	1,208	[3]	1,191	[3]
Earnings Per Share - Basic	$ 0.20		$ 0.17		$ 0.40		$ 0.18
Earnings Per Share - Diluted	$ 0.20		$ 0.17		$ 0.40		$ 0.18

[1] Net impairment losses on securities include total other-than-temporary impairment losses of $11 and $13, net of $9 and $5 recognized in other comprehensive income, for the three months ended June 30, 2011 and 2010, respectively. Net impairment losses on securities include total other-than-temporary impairment losses of $11 and $41, net of $2 and $25 recognized in other comprehensive income, for the six months ended June 30, 2011 and 2010, respectively.

[2] Unallocated amount includes a class action litigation reserve of $196 million in the first half of 2010.

[3] Antidilutive stock options and restricted stock awards excluded from the calculation of diluted EPS totaled 42 million and 38 million shares for the second quarters of 2011 and 2010, respectively, and 43 million and 38 million shares for the first halves of 2011 and 2010, respectively.

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Credit Quality of Residential Real Estate Mortgages and HELOCs by Reviewing FICO Scores at Origination, Current FICO Scores, Loan-To-Value Ratio (Detail) (USD $) In Millions	Jun. 30, 2011		Dec. 31, 2010
Financing Receivable, Recorded Investment [Line Items]
Loans to banking clients	$ 9,521	[1]	$ 8,778	[1]
Residential real estate mortgages, originated first mortgages
Financing Receivable, Recorded Investment [Line Items]
Loans to banking clients	5,203	[2]	4,588	[3]
Residential real estate mortgages, originated first mortgages | Year of origination Pre 2007
Financing Receivable, Recorded Investment [Line Items]
Loans to banking clients	322		352
Residential real estate mortgages, originated first mortgages | Year of origination 2007
Financing Receivable, Recorded Investment [Line Items]
Loans to banking clients	338		384
Residential real estate mortgages, originated first mortgages | Year of origination 2008
Financing Receivable, Recorded Investment [Line Items]
Loans to banking clients	606		728
Residential real estate mortgages, originated first mortgages | Year of origination 2009
Financing Receivable, Recorded Investment [Line Items]
Loans to banking clients	704		884
Residential real estate mortgages, originated first mortgages | Year of origination 2010
Financing Receivable, Recorded Investment [Line Items]
Loans to banking clients	2,094		2,240
Residential real estate mortgages, originated first mortgages | Year of origination 2011
Financing Receivable, Recorded Investment [Line Items]
Loans to banking clients	1,139
Residential real estate mortgages, originated first mortgages | Origination FICO Score Below 620
Financing Receivable, Recorded Investment [Line Items]
Loans to banking clients	10		9
Residential real estate mortgages, originated first mortgages | Origination FICO Score 620 Through 679
Financing Receivable, Recorded Investment [Line Items]
Loans to banking clients	118		115
Residential real estate mortgages, originated first mortgages | Origination FICO Score 680 Through 739
Financing Receivable, Recorded Investment [Line Items]
Loans to banking clients	1,018		907
Residential real estate mortgages, originated first mortgages | Origination FICO Score 740 And Above
Financing Receivable, Recorded Investment [Line Items]
Loans to banking clients	4,057		3,557
Residential real estate mortgages, originated first mortgages | Updated FICO Score Below 620
Financing Receivable, Recorded Investment [Line Items]
Loans to banking clients	66		63
Residential real estate mortgages, originated first mortgages | Updated FICO Score 620 Through 679
Financing Receivable, Recorded Investment [Line Items]
Loans to banking clients	153		147
Residential real estate mortgages, originated first mortgages | Updated FICO Score 680 Through 739
Financing Receivable, Recorded Investment [Line Items]
Loans to banking clients	787		730
Residential real estate mortgages, originated first mortgages | Updated FICO Score 740 And Above
Financing Receivable, Recorded Investment [Line Items]
Loans to banking clients	4,197		3,648
Residential real estate mortgages, originated first mortgages | Origination Loan To Value Ratio 70 Percent And Below
Financing Receivable, Recorded Investment [Line Items]
Loans to banking clients	3,335	[2]	2,911	[3]
Residential real estate mortgages, originated first mortgages | Origination Loan to Value Ratio 71 Percent Through 89 Percent
Financing Receivable, Recorded Investment [Line Items]
Loans to banking clients	1,839	[2]	1,659	[3]
Residential real estate mortgages, originated first mortgages | Origination Loan to Value Ratio 90 Percent And Above
Financing Receivable, Recorded Investment [Line Items]
Loans to banking clients	29	[2]	18	[3]
Residential real estate mortgages, purchased first mortgages
Financing Receivable, Recorded Investment [Line Items]
Loans to banking clients	109	[2]	107	[3]
Residential real estate mortgages, purchased first mortgages | Year of origination Pre 2007
Financing Receivable, Recorded Investment [Line Items]
Loans to banking clients	55		58
Residential real estate mortgages, purchased first mortgages | Year of origination 2007
Financing Receivable, Recorded Investment [Line Items]
Loans to banking clients	9		9
Residential real estate mortgages, purchased first mortgages | Year of origination 2008
Financing Receivable, Recorded Investment [Line Items]
Loans to banking clients	7		8
Residential real estate mortgages, purchased first mortgages | Year of origination 2009
Financing Receivable, Recorded Investment [Line Items]
Loans to banking clients	11		12
Residential real estate mortgages, purchased first mortgages | Year of origination 2010
Financing Receivable, Recorded Investment [Line Items]
Loans to banking clients	20		20
Residential real estate mortgages, purchased first mortgages | Year of origination 2011
Financing Receivable, Recorded Investment [Line Items]
Loans to banking clients	7
Residential real estate mortgages, purchased first mortgages | Origination FICO Score Below 620
Financing Receivable, Recorded Investment [Line Items]
Loans to banking clients	2		2
Residential real estate mortgages, purchased first mortgages | Origination FICO Score 620 Through 679
Financing Receivable, Recorded Investment [Line Items]
Loans to banking clients	14		15
Residential real estate mortgages, purchased first mortgages | Origination FICO Score 680 Through 739
Financing Receivable, Recorded Investment [Line Items]
Loans to banking clients	33		33
Residential real estate mortgages, purchased first mortgages | Origination FICO Score 740 And Above
Financing Receivable, Recorded Investment [Line Items]
Loans to banking clients	60		57
Residential real estate mortgages, purchased first mortgages | Updated FICO Score Below 620
Financing Receivable, Recorded Investment [Line Items]
Loans to banking clients	3		9
Residential real estate mortgages, purchased first mortgages | Updated FICO Score 620 Through 679
Financing Receivable, Recorded Investment [Line Items]
Loans to banking clients	17		8
Residential real estate mortgages, purchased first mortgages | Updated FICO Score 680 Through 739
Financing Receivable, Recorded Investment [Line Items]
Loans to banking clients	28		29
Residential real estate mortgages, purchased first mortgages | Updated FICO Score 740 And Above
Financing Receivable, Recorded Investment [Line Items]
Loans to banking clients	61		61
Residential real estate mortgages, purchased first mortgages | Origination Loan To Value Ratio 70 Percent And Below
Financing Receivable, Recorded Investment [Line Items]
Loans to banking clients	57	[2]	55	[3]
Residential real estate mortgages, purchased first mortgages | Origination Loan to Value Ratio 71 Percent Through 89 Percent
Financing Receivable, Recorded Investment [Line Items]
Loans to banking clients	50	[2]	51	[3]
Residential real estate mortgages, purchased first mortgages | Origination Loan to Value Ratio 90 Percent And Above
Financing Receivable, Recorded Investment [Line Items]
Loans to banking clients	2	[2]	1	[3]
Residential real estate mortgages
Financing Receivable, Recorded Investment [Line Items]
Loans to banking clients	5,312	[2]	4,695	[3]
Residential real estate mortgages | Year of origination Pre 2007
Financing Receivable, Recorded Investment [Line Items]
Loans to banking clients	377		410
Residential real estate mortgages | Year of origination 2007
Financing Receivable, Recorded Investment [Line Items]
Loans to banking clients	347		393
Residential real estate mortgages | Year of origination 2008
Financing Receivable, Recorded Investment [Line Items]
Loans to banking clients	613		736
Residential real estate mortgages | Year of origination 2009
Financing Receivable, Recorded Investment [Line Items]
Loans to banking clients	715		896
Residential real estate mortgages | Year of origination 2010
Financing Receivable, Recorded Investment [Line Items]
Loans to banking clients	2,114		2,260
Residential real estate mortgages | Year of origination 2011
Financing Receivable, Recorded Investment [Line Items]
Loans to banking clients	1,146
Residential real estate mortgages | Origination FICO Score Below 620
Financing Receivable, Recorded Investment [Line Items]
Loans to banking clients	12		11
Residential real estate mortgages | Origination FICO Score 620 Through 679
Financing Receivable, Recorded Investment [Line Items]
Loans to banking clients	132		130
Residential real estate mortgages | Origination FICO Score 680 Through 739
Financing Receivable, Recorded Investment [Line Items]
Loans to banking clients	1,051		940
Residential real estate mortgages | Origination FICO Score 740 And Above
Financing Receivable, Recorded Investment [Line Items]
Loans to banking clients	4,117		3,614
Residential real estate mortgages | Updated FICO Score Below 620
Financing Receivable, Recorded Investment [Line Items]
Loans to banking clients	69		72
Residential real estate mortgages | Updated FICO Score 620 Through 679
Financing Receivable, Recorded Investment [Line Items]
Loans to banking clients	170		155
Residential real estate mortgages | Updated FICO Score 680 Through 739
Financing Receivable, Recorded Investment [Line Items]
Loans to banking clients	815		759
Residential real estate mortgages | Updated FICO Score 740 And Above
Financing Receivable, Recorded Investment [Line Items]
Loans to banking clients	4,258		3,709
Residential real estate mortgages | Origination Loan To Value Ratio 70 Percent And Below
Financing Receivable, Recorded Investment [Line Items]
Loans to banking clients	3,392	[2]	2,966	[3]
Residential real estate mortgages | Origination Loan to Value Ratio 71 Percent Through 89 Percent
Financing Receivable, Recorded Investment [Line Items]
Loans to banking clients	1,889	[2]	1,710	[3]
Residential real estate mortgages | Origination Loan to Value Ratio 90 Percent And Above
Financing Receivable, Recorded Investment [Line Items]
Loans to banking clients	31	[2]	19	[3]
Home equity lines of credit
Financing Receivable, Recorded Investment [Line Items]
Loans to banking clients	3,513	[2]	3,500	[3]
Home equity lines of credit | Year of origination Pre 2007
Financing Receivable, Recorded Investment [Line Items]
Loans to banking clients	1,097		1,132
Home equity lines of credit | Year of origination 2007
Financing Receivable, Recorded Investment [Line Items]
Loans to banking clients	237		245
Home equity lines of credit | Year of origination 2008
Financing Receivable, Recorded Investment [Line Items]
Loans to banking clients	1,300		1,345
Home equity lines of credit | Year of origination 2009
Financing Receivable, Recorded Investment [Line Items]
Loans to banking clients	443		466
Home equity lines of credit | Year of origination 2010
Financing Receivable, Recorded Investment [Line Items]
Loans to banking clients	321		312
Home equity lines of credit | Year of origination 2011
Financing Receivable, Recorded Investment [Line Items]
Loans to banking clients	115
Home equity lines of credit | Origination FICO Score 620 Through 679
Financing Receivable, Recorded Investment [Line Items]
Loans to banking clients	24		26
Home equity lines of credit | Origination FICO Score 680 Through 739
Financing Receivable, Recorded Investment [Line Items]
Loans to banking clients	675		677
Home equity lines of credit | Origination FICO Score 740 And Above
Financing Receivable, Recorded Investment [Line Items]
Loans to banking clients	2,814		2,797
Home equity lines of credit | Updated FICO Score Below 620
Financing Receivable, Recorded Investment [Line Items]
Loans to banking clients	45		49
Home equity lines of credit | Updated FICO Score 620 Through 679
Financing Receivable, Recorded Investment [Line Items]
Loans to banking clients	94		99
Home equity lines of credit | Updated FICO Score 680 Through 739
Financing Receivable, Recorded Investment [Line Items]
Loans to banking clients	480		499
Home equity lines of credit | Updated FICO Score 740 And Above
Financing Receivable, Recorded Investment [Line Items]
Loans to banking clients	2,894		2,853
Home equity lines of credit | Origination Loan To Value Ratio 70 Percent And Below
Financing Receivable, Recorded Investment [Line Items]
Loans to banking clients	2,376	[2]	2,375	[3]
Home equity lines of credit | Origination Loan to Value Ratio 71 Percent Through 89 Percent
Financing Receivable, Recorded Investment [Line Items]
Loans to banking clients	1,137	[2]	1,092	[3]
Home equity lines of credit | Origination Loan to Value Ratio 90 Percent And Above
Financing Receivable, Recorded Investment [Line Items]
Loans to banking clients			$ 33	[3]

[1] All loans are collectively evaluated for impairment by loan segment.

[2] The computation of the Origination LTV ratio for a HELOC includes any first lien mortgage outstanding on the same property at the time of origination. At June 30, 2011, $750 million of $3.5 billion in HELOCs were in a first lien position.

[3] The computation of the Origination LTV ratio for a HELOC includes any first lien mortgage outstanding on the same property at the time of origination. At December 31, 2010, $742 million of $3.5 billion in HELOCs were in a first lien position.

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Regulatory Capital and Ratios (Detail) (USD $) In Millions, unless otherwise specified	Jun. 30, 2011
Tier 1 Risk-Based Capital
Actual Amount	$ 4,332
Minimum Capital Requirement Amount	740
Minimum to be Well Capitalized Amount	1,110
Actual Ratio	23.40%
Minimum Capital Requirement Ratio	4.00%
Minimum to be Well Capitalized Ratio	6.00%
Total Risk-Based Capital
Actual Amount	4,381
Minimum Capital Requirement Amount	1,480
Minimum to be Well Capitalized Amount	1,850
Actual Ratio	23.70%
Minimum Capital Requirement Ratio	8.00%
Minimum to be Well Capitalized Ratio	10.00%
Tier 1 Core Capital
Actual Amount	4,332
Minimum Capital Requirement Amount	2,271
Minimum to be Well Capitalized Amount	2,839
Actual Ratio	7.60%
Minimum Capital Requirement Ratio	4.00%
Minimum to be Well Capitalized Ratio	5.00%
Tangible Equity
Actual Amount	4,332
Minimum Capital Requirement Amount	$ 1,136
Actual Ratio	7.60%
Minimum Capital Requirement Ratio	2.00%

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Regulatory Requirements - Additional Information (Detail) (USD $)	6 Months Ended
	Jun. 30, 2011
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Minimum percentage of aggregate debit balances arising from client transactions or a minimum dollar	2.00%
Net capital under the alternative method permitted by the Uniform Net Capital Rule	Under the alternative method, a broker-dealer may not repay subordinated borrowings, pay cash dividends, or make any unsecured advances or loans to its parent company or employees if such payment would result in net capital of less than 5% of aggregate debit balances or less than 120% of its minimum dollar requirement.
Percentage of net capital to aggregate debit balances required for a broker-dealer to repay subordinated borrowings, pay cash dividends, or make any unsecured advances or loans to its parent company or employees	5.00%
Percentage of net capital to the Company's minimum dollar requirement required for a broker-dealer to repay subordinated borrowings, pay cash dividends, or make any unsecured advances or loans to its parent company or employees	120.00%
2% of aggregate debits under the alternative method	$ 258,000,000
Alternative minimum net capital requirement	250,000
Net capital	1,300,000,000
Percentage of net capital to aggregate debit balances	10.00%
Capital in excess of minimum required net capital	1,000,000,000
Net capital in excess of 5% of aggregate debit balances	$ 649,000,000

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Credit Quality of Residential Real Estate Mortgages and HELOCs by Reviewing FICO Scores at Origination, Current FICO Scores, Loan-To-Value Ratio (Parenthetical) (Detail) (USD $) In Millions	Jun. 30, 2011		Dec. 31, 2010
Financing Receivable, Recorded Investment [Line Items]
Loans to banking clients	$ 9,521	[1]	$ 8,778	[1]
Home equity lines of credit
Financing Receivable, Recorded Investment [Line Items]
Amount of home equity line of credit in a first lien position	750		742
Loans to banking clients	$ 3,513	[2]	$ 3,500	[3]

[1] All loans are collectively evaluated for impairment by loan segment.

[2] The computation of the Origination LTV ratio for a HELOC includes any first lien mortgage outstanding on the same property at the time of origination. At June 30, 2011, $750 million of $3.5 billion in HELOCs were in a first lien position.

[3] The computation of the Origination LTV ratio for a HELOC includes any first lien mortgage outstanding on the same property at the time of origination. At December 31, 2010, $742 million of $3.5 billion in HELOCs were in a first lien position.