THE CHARLES SCHWAB CORPORATION - About Schwab · PDF fileTHE CHARLES SCHWAB CORPORATION...

UNITED STATESSECURITIES 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, 2015

Commission File Number: 1-9700

THE CHARLES SCHWAB CORPORATION(Exact name of registrant as specified in its charter)

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 ⌧ 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 ⌧ 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.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes ☐ No ⌧Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

1,315,623,956 shares of $.01 par value Common StockOutstanding on July 27, 2015

Delaware(State or other jurisdiction

of incorporation or organization)

94-3025021(I.R.S. Employer Identification No.)

Large accelerated filer ⌧Non-accelerated filer ☐ (Do not check if a smaller reporting company)

Accelerated filer ☐Smaller reporting company ☐

THE CHARLES SCHWAB CORPORATION

Quarterly Report on Form 10-QFor the Quarter Ended June 30, 2015

Index

PagePart I - Financial Information

Item 1. Condensed Consolidated Financial Statements (Unaudited):

Statements of Income 29Statements of Comprehensive Income 30Balance Sheets 31Statements of Cash Flows 32Notes 33-53

Item 2. Management’s Discussion and Analysis of FinancialCondition and Results of Operations 1-26

Item 3. Quantitative and Qualitative Disclosures About Market Risk 27-28

Item 4. Controls and Procedures 54

Part II - Other Information

Item 1. Legal Proceedings 55

Item 1A. Risk Factors 55

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 55

Item 3. Defaults Upon Senior Securities 56

Item 4. Mine Safety Disclosures 56

Item 5. Other Information 56

Item 6. Exhibits 57

Signature 58

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

INTRODUCTION

The Charles Schwab Corporation (CSC) is a savings and loan holding company engaged, through its subsidiaries, in wealth management, securities brokerage, banking, money management, and financial advisory services. Charles Schwab & Co., Inc. (Schwab) is a securities broker-dealer with over 325 domestic branch offices in 45 states, as well as a branch in each of the Commonwealth of Puerto Rico and London, England. 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 for Schwab’s exchange-traded funds, which are referred to as the Schwab ETFs™.

CSC and its subsidiaries (collectively referred to as the Company) operate through two reportable segments – Investor Services and Advisor Services. The Investor Services segment provides retail brokerage and banking services to individual investors, retirement plan services, and corporate brokerage services. The Advisor Services segment provides custodial, trading, and support services to independent investment advisors, and retirement business services to independent retirement plan advisors and recordkeepers whose plan assets are held at Schwab Bank.

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,”“appear,” “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:

Part I – FINANCIAL INFORMATION

THE CHARLES SCHWAB CORPORATIONManagement’s Discussion and Analysis of Financial Condition and Results of Operations

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

the impact of current market conditions on the Company’s results of operations (see “Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations - Current Market and Regulatory Environment and Other Developments” and “- Results of Operations – Net Interest Revenue”);

the expected impact of the new liquidity coverage ratio (LCR) rules (see “Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations - Current Market and Regulatory Environment and Other Developments”);

sources of liquidity, capital, and level of dividends (see “Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources” and “Item 1 – Condensed Consolidated Financial Statements (Unaudited) – Notes – 11. Regulatory Requirements”);

target capital and debt ratios (see “Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources” and “Item 1 – Condensed Consolidated Financial Statements (Unaudited) – Notes – 11. Regulatory Requirements”;);

capital expenditures (see “Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources - Capital Resources – Capital Expenditures”);

the impact of the revised underwriting criteria on the credit quality of the Company’s mortgage portfolio (see “Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations - Risk Management –Credit Risk Exposures”);

the impact of changes in the likelihood of indemnification and guarantee payment obligations on the Company’s results of operations (see “Item 1 – Condensed Consolidated Financial Statements (Unaudited) – Notes –6. Commitments and Contingencies”); and

the impact of legal proceedings and regulatory matters (see “Item 1 – Condensed Consolidated Financial Statements (Unaudited) – Notes – 6. Commitments and Contingencies – Legal contingencies” and “Part II – Other Information –Item 1 – Legal Proceedings”).

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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:

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, 2014, and “Part II –Other Information – Item 1A – Risk Factors.”



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 Company’s ability to monetize client assets; trading activity; the level of interest rates, including yields available on money market mutual fund eligible instruments; the adverse impact of financial reform legislation and related regulations; investment, structural and capital adjustments made by the Company in connection with the new LCR rule; the amount of loans to the Company’s brokerage and banking clients; the level of the Company’s stock repurchase activity; the level of brokerage client cash balances and bank deposits; the availability and terms of external financing; capital needs and management; the timing and impact of changes in the Company’s level of investments in software and equipment; the extent to which past performance of the Company’s mortgage portfolio is indicative of future performance; potential breaches of contractual terms for which the Company has indemnification and guarantee obligations; adverse developments in litigation or regulatory matters; the extent of any charges associated with litigation and regulatory matters; amounts recovered on insurance policies; timing and amount of severance and other costs related to reducing the Company’s San Francisco footprint; the Company’s ability to manage expenses; regulatory guidance; the level of client assets, including cash balances; competitive pressures on rates and fees; acquisition integration costs; and client use of the Company’s investment advisory services and other products and services.

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OVERVIEW

Management of the Company focuses on several key client activity and financial metrics in evaluating the Company’s financial position and operating performance. Management believes that net revenue growth, pre-tax profit margin, earnings per common share (EPS), and return on average common stockholders’ equity provide broad indicators of the Company’s overall financial health, operating efficiency, and ability to generate acceptable returns. Expenses excluding interest as a percentage of average client assets is considered by management to be a measure of operating efficiency. Results for the second quarters and first halves of 2015 and 2014 are:



Three Months Ended Six Months Ended June 30, Percent June 30, Percent

2015 2014 Change 2015 2014 ChangeClient Metrics:Net new client assets (in billions) $ 37.0 $ 22.7 63 % $ 65.7 $ 56.9 15 %Client assets (in billions, at quarter end) $ 2,543.3 $ 2,401.9 6 %Average client assets (in billions) $ 2,576.2 $ 2,365.1 9 % $ 2,542.3 $ 2,326.0 9 %New brokerage accounts (in thousands) 280 242 16 % 554 500 11 %Active brokerage accounts (in thousands,

at quarter end) 9,605 9,252 4 %Assets receiving ongoing advisory services

(in billions, at quarter end) $ 1,258.1 $ 1,191.4 6 %Client cash as a percentage of client assets

(at quarter end) 11.7 % 11.9 %Company Financial Metrics:Net revenues $ 1,566 $ 1,478 6 % $ 3,092 $ 2,956 5 %Expenses excluding interest 999 957 4 % 2,041 1,913 7 %Income before taxes on income 567 521 9 % 1,051 1,043 1 %Taxes on income 214 197 9 % 396 393 1 %Net income $ 353 $ 324 9 % $ 655 $ 650 1 %Preferred stock dividends and other $ 23 $ 22 5 % $ 34 $ 30 13 %Net income available to common stockholders $ 330 $ 302 9 % $ 621 $ 620 -Earnings per common share – diluted $ .25 $ .23 9 % $ .47 $ .47 -Net revenue growth from prior year 6 % 11 % 5 % 13 % Pre-tax profit margin 36.2 % 35.3 % 34.0 % 35.3 % Return on average common stockholders’

equity (annualized) 12 % 12 % 11 % 13 % Expenses excluding interest as a percentage

of average client assets (annualized) 0.16 % 0.16 % 0.16 % 0.16 %(1) Net new client assets is defined as the total inflows of client cash and securities to the firm less client outflows.

Management believes that this metric, along with core net new assets, depicts how well the Company’s products and services appeal to new and existing clients. Core net new assets were $37.0 billion and $71.2 billion during the second quarter and first half of 2015, respectively. See below for items excluded from core net new assets in 2015. There were no significant one-time flows during the second quarter and first half of 2014.

(2) Client assets represent the market value of all client assets custodied at the Company. Management considers client assets to be indicative of the Company’s appeal in the marketplace. Additionally, fluctuations in certain components of client assets (e.g., Mutual Fund OneSource funds) directly impact asset management and administration fees.

(3) Average client assets is defined as the daily average client asset balance for the period. (4) New brokerage accounts include all brokerage accounts opened during the period, as well as any accounts added via

acquisition. This metric measures the Company’s effectiveness in attracting new clients and building stronger relationships with existing clients.

(5) Active brokerage accounts include accounts with balances or activity within the preceding eight months. This metric is an indicator of the Company’s success in both attracting and retaining clients.

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Core net new client assets is defined as net new client assets before significant one-time flows. Management considers this to be a useful metric when comparing period-to-period client asset flows. The following one-time flows were excluded from core net new assets.

The Company’s operating environment included variable equity market performance during the second quarter of 2015; however, the markets ended the quarter largely unchanged from March 31, 2015. Compared to the second quarter of 2014, theNasdaq Composite Index, Standard & Poor’s 500 Index, and Dow Jones Industrial Average improved 13%, 5%, and 5%, respectively, at the end of the second quarter of 2015. Meanwhile, short-term interest rates continued to be constrained as the federal funds target rate remained unchanged at a range of zero to 0.25% and the average 3-month Treasury Bill yield decreased by 1 basis point to 0.01% compared to the second quarter of 2014. In addition, long-term interest rates decreased in the second quarter of 2015 compared to the same period in 2014. The average 10-year yield during the second quarter of 2015 was 2.16% which was 45 basis points lower than the average yield during the second quarter of 2014.

Strong client momentum continued as the Company’s innovative, full-service model continued to resonate with clients and drive growth during the second quarter of 2015. Core net new assets totaled $37.0 billion in the second quarter of 2015, which were up $14.3 billion compared to core net new client assets in the second quarter of 2014. Total client assets ended the second quarter of 2015 at $2.54 trillion, up 6% from the second quarter of 2014. The Company added 280,000 new brokerage accounts to its client base during the second quarter of 2015, up 16% compared to the second quarter of 2014. Active brokerage accounts ended the second quarter at 9.6 million, also up 4% on a year-over-year basis.

For the second quarter and first half of 2015, the Company’s net revenues increased 6% and 5% compared to the second quarter and first half of 2014, respectively, 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 balances of interest-earning assets, including margin loans and the Company’s investment portfolio (securities available for sale and securities held to maturity), partially offset by the effect lower average interest rates had on the Company’s average net interest margin. Asset management and administration fees increased due to higher client asset balances in mutual fund services, advice solutions, and other asset management and administration services and improved rates earned on money market funds. Trading revenue decreased primarily due to a decrease in commission revenue as a result of lower daily average revenue trades. Other revenue increased primarily due to litigation proceeds of $17 million in the second quarter of 2015 relating to the Company’s non-agency residential mortgage-backed securities portfolio, offset by decreases in order flow revenue.

Expenses excluding interest increased 4% and 7% in the second quarter and first half of 2015 compared to the same periods in 2014, respectively, primarily due to increases in compensation and benefits, professional services, and other expense.

The combined effect of the environment, strong business growth, and the Company’s overall spending resulted in a pre-tax profit margin of 36.2% and 34.0% in the second quarter and first half of 2015, respectively. Overall, net income increased by 9% and 1% in the second quarter and first half of 2015, compared to the same periods in 2014, respectively. The return on average common stockholders’ equity was 12% and 11% in the second quarter and first half of 2015, respectively.



(6) Assets receiving ongoing advisory services include relationships under the guidance of independent advisors and assets enrolled in one of the Company’s retail or other advisory solutions. This metric depicts how well the Company’s advisory products and services appeal to new and existing clients.

(7) Client cash as a percentage of client assets includes Schwab One , certain cash equivalents, bank deposits and money market fund balances, as a percentage of client assets. This measure is an indicator of clients’ engagement in the fixed income and equity markets.

(8) Calculated as net income available to common stockholders divided by average common stockholders’ equity.

An outflow of $11.6 billion relating to the Company’s planned resignation from an Advisor Services cash management relationship.

An inflow of $6.1 billion in the first half of 2015 to reflect the final impact of the consolidation of its retirement plan recordkeeping platforms as previously announced in the third quarter of 2013.

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Subsequent Event

On August 3, 2015, the Company issued and sold 24 million depositary shares, each representing a 1/40 ownership interest in a share of 6.00% non-cumulative perpetual preferred stock, Series C, $0.01 par value, with a liquidation preference of $1,000 per share (equivalent to $25 per depositary share) (Series C Preferred Stock). The Series C Preferred Stock has a fixed dividend rate of 6.00%. Net proceeds received from the sale were $581 million and are being used to support balance sheet growth, including the migration of certain client balances from sweep money market funds into Schwab Bank.

CURRENT MARKET AND REGULATORY ENVIRONMENT AND OTHER DEVELOPMENTS

To the extent short-term interest rates remain at current low levels, the Company’s net interest revenue will continue to be constrained, even as growth in average balances helps to increase such revenue. The low short-term interest rate environment also affects asset management and administration fees. The Company continues to waive a portion of its management fees, as the overall yields on certain Schwab-sponsored money market mutual funds have remained at levels at or below the management fees on those funds. These and certain other Schwab-sponsored money market mutual funds may not be able to replace maturing securities with securities of equal or higher yields. As a result, the yields on such funds may remain at or decline from their current levels and therefore, below the stated management fees on those funds. To the extent this occurs, asset management and administration fees may continue to be negatively affected.

In July 2013, the United States (U.S.) banking agencies issued regulatory capital rules that implemented BASEL III and relevant provisions of the “Dodd-Frank Wall Street Reform and Consumer Protection Act” (the Dodd-Frank Act) (Final Regulatory Capital Rules), which are applicable to savings and loan holding companies, such as CSC, and federal savings banks, such as Schwab Bank. The implementation of the rules began on January 1, 2015.

The Final Regulatory Capital Rules, among other things:

The application of the revised risk-weighting of assets resulted in a decrease in the Company’s Common Equity Tier 1 Risk-Based Capital, Tier 1 Risk-Based Capital, and Total Risk-Based Capital ratios of approximately 3.5% in 2015. The required minimum capital conservation buffer will be phased in incrementally, starting at 0.625% on January 1, 2016 and increasing to 1.25% on January 1, 2017, 1.875% on January 1, 2018 and 2.5% on January 1, 2019.

The Final Regulatory Capital Rules provide that the failure to maintain the minimum capital conservation buffer will result in restrictions on capital distributions and discretionary cash bonus payments to executive officers.

In September 2014, the Board of Governors of the Federal Reserve System (Federal Reserve), in collaboration with the Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation, issued a rule implementing a quantitative liquidity requirement generally consistent with the LCR standard established by Basel III. The LCR applies to all internationally active banking organizations. The Federal Reserve also issued a modified LCR that applies to the Company. Under the modified LCR, a depository institution holding company is required to maintain high-quality liquid assets in an amount related to its total estimated net cash outflows over a prospective period. The modified LCR will be phased in beginning on January 1, 2016, with a minimum requirement of 90%, increasing to 100% at January 1, 2017. The Company expects to be compliant with the modified LCR by January 1, 2016 and does not expect a material impact to the Company’s business, financial condition, and results of operations.



subject savings and loan holding companies to consolidated capital requirements; revise the required minimum risk-based and leverage capital requirements by (1) establishing a new minimum

Common Equity Tier 1 Risk-Based Capital Ratio (common equity Tier 1 capital to total risk-weighted assets) of 4.5%; (2) raising the minimum Tier 1 Risk-Based Capital Ratio from 4.0% to 6.0%; (3) maintaining the minimum Total Risk-Based Capital Ratio of 8.0%; and (4) maintaining a minimum Tier 1 Leverage Ratio (Tier 1 capital to adjusted average consolidated assets) of 4.0%;

add a requirement to maintain a minimum capital conservation buffer, composed of common equity Tier 1 capital, of 2.5% of risk-weighted assets, which means that banking organizations, on a fully phased-in basis no later than January 1, 2019, must maintain a Common Equity Tier 1 Risk-Based Capital Ratio greater than 7.0%; a Tier 1 Risk-Based Capital Ratio greater than 8.5% and a Total Risk-Based Capital Ratio greater than 10.5%;

change the definition of capital categories for insured depository: to be considered “well-capitalized”, Schwab Bank must have a Common Equity Tier 1 Risk-Based Capital Ratio of at least 6.5%, a Tier 1 Risk-Based Capital Ratio of at least 8%, a Total Risk-Based Capital Ratio of at least 10% and a Tier 1 Leverage Ratio of at least 5%; and

change the calculation of risk-weighted assets, including investment securities and unused commitments.

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In April 2015, the Department of Labor published notice of a rule proposal to significantly broaden the definition of “fiduciary”under the Employee Retirement Income Security Act of 1974. If adopted, among other things, the new rule would subject broker-dealers who provide non-discretionary investment advice to retirement plans and accounts to a “best interest” standard, as well as other conditions and requirements. The comment period for the rule proposal ended on July 21, 2015 and the rule proposal is subject to further modification. The Company will continue to evaluate the impact of the proposed rule.

The Company is pursuing lawsuits in state court in San Francisco for rescission and damages against issuers, underwriters, and dealers of individual non-agency residential mortgage-backed securities on which the Company experienced 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. On January 27, 2012, and July 24, 2012, the court denied defendants’ motions to dismiss the claims and discovery is proceeding. As of June 30, 2015, the Company has realized $45 million in net settlement proceeds on such claims, and an initial trial relating to certain of the defendants who remain in the case is set for February 2016.

RESULTS OF OPERATIONS

The following discussion presents an analysis of the Company’s results of operations for the second quarter and first half of 2015 compared to the same periods in 2014.

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 and first half of 2015 compared to the same periods in 2014. Other revenue in the second quarter and first six months of 2015 includes litigation proceeds of $17 million relating to the Company’s non-agency residential mortgage-backed securities.



Three Months Ended June 30, 2015 2014% of % of

Percent Total Net Total NetChange Amount Revenues Amount Revenues

Asset management and administration feesMutual funds service fees 5 % $ 318 20 % $ 303 21 % Advice solutions 9 % 228 15 % 209 14 % Other 3 % 124 8 % 120 8 %

Asset management and administration fees 6 % 670 43 % 632 43 % Net interest revenue

Interest revenue 10 % 645 41 % 588 40 % Interest expense 27 % (33) (2)% (26) (2)%

Net interest revenue 9 % 612 39 % 562 38 % Trading revenue

Commissions (4)% 191 12 % 199 13 % Principal transactions (8)% 12 1 % 13 1 %

Trading revenue (4)% 203 13 % 212 14 % Other 22 % 79 5 % 65 4 % Provision for loan losses (71)% 2 - 7 1 % Total net revenues 6 % $ 1,566 100 % $ 1,478 100 % (1) Beginning in the second quarter of 2015, certain Mutual Fund OneSource balances were reclassified to Other third-party

mutual funds. Related revenues have been reclassified to Other asset management and administration fees. Prior period information has been recast to reflect this change.

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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 advice solutions, which include advisory and managed account services that 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 third-party mutual fund service fees, trust fees, 401(k) recordkeeping fees, and mutual fund clearing and other service fees. Asset management and administration fees vary with changes in the balances of client assets due to market fluctuations and client activity. For a discussion of the impact of current market conditions on asset management and administration fees, see “Current Market and Regulatory Environment and Other Developments.”

The following tables present a roll forward of client assets for the Schwab money market funds, Schwab equity and bond funds and Mutual Fund OneSource:



Six Months Ended June 30, 2015 2014% of % of

Percent Total Net Total NetChange Amount Revenues Amount Revenues

Asset management and administration feesMutual funds service fees 4 % $ 621 20 % $ 599 21 % Advice solutions 10 % 448 14 % 408 14 % Other 4 % 245 8 % 236 7 %

Asset management and administration fees 6 % 1,314 42 % 1,243 42 % Net interest revenue

Interest revenue 8 % 1,262 41 % 1,167 40 % Interest expense 19 % (62) (2)% (52) (2)%

Net interest revenue 8 % 1,200 39 % 1,115 38 % Trading revenue

Commissions (6)% 409 13 % 433 15 % Principal transactions (19)% 21 1 % 26 1 %

Trading revenue (6)% 430 14 % 459 16 % Other 7 % 142 5 % 133 4 % Provision for loan losses - 6 - 6 -Total net revenues 5 % $ 3,092 100 % $ 2,956 100 % (1) Beginning in the second quarter of 2015, certain Mutual Fund OneSource balances were reclassified to Other third-party


Schwab Money Schwab Equity and Mutual FundMarket Funds Bond Funds OneSource

Three Months Ended June 30, 2015 2014 2015 2014 2015 2014Balance at beginning of period $ 162,473 $ 166,311 $ 95,161 $ 75,665 $ 239,140 $ 240,613 Net inflows/(outflows) (6,906) (6,366) 3,498 1,583 (6,282) (3,476)Net market gains and other 10 9 (260) 3,334 323 10,320 Balance at end of period $ 155,577 $ 159,954 $ 98,399 $ 80,582 $ 233,181 $ 247,457 (1) Includes Schwab exchange-traded funds.

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The following tables present asset management and administration fees, average client assets, and average fee rate:

N/A Not applicable.



Schwab Money Schwab Equity and Mutual FundMarket Funds Bond Funds OneSource

Six Months Ended June 30, 2015 2014 2015 2014 2015 2014Balance at beginning of period $ 167,909 $ 167,738 $ 88,450 $ 71,249 $ 236,183 $ 236,596 Net inflows/(outflows) (12,506) (7,806) 8,296 4,940 (8,875) (4,557)Net market gains and other 174 22 1,653 4,393 5,873 15,418 Balance at end of period $ 155,577 $ 159,954 $ 98,399 $ 80,582 $ 233,181 $ 247,457 (1) Includes Schwab exchange-traded funds.

Three Months Ended June 30, 2015 2014AverageClientAssets Revenue

AverageFee

AverageClientAssets Revenue

AverageFee

Schwab money market funds before fee waivers $ 157,418 $ 230 0.59% $ 162,683 $ 235 0.58%

Fee waivers (168) (183)Schwab money market funds 157,418 62 0.16% 162,683 52 0.13% Schwab equity and bond funds 103,986 56 0.22% 80,527 47 0.23% Mutual Fund OneSource 245,694 200 0.33% 247,107 204 0.33%

Total mutual funds $ 507,098 318 0.25% $ 490,317 303 0.25% Advice solutions :

Fee-based $ 174,657 228 0.52% $ 156,197 209 0.54% Intelligent Portfolios 2,159 - - N/A N/A N/ALegacy Non-Fee 16,783 N/A N/A 15,595 N/A N/A

Total advice solutions $ 193,599 228 0.47% $ 171,792 209 0.49% Other 124 120 Total asset management

and administration fees $ 670 $ 632 (1) Includes Schwab exchange-traded funds.(2) Beginning in the second quarter of 2015, certain Mutual Fund OneSource balances were reclassified to Other third-party


(3) Advice solutions include managed portfolios, specialized strategies and customized investment advice. Fee-based advice solutions include Schwab Private Client™, Schwab Managed Portfolios™, Managed Account Select , Schwab Advisor Network , Windhaven Strategies, ThomasPartners Dividend Growth Strategy, and Schwab Index Advantage advised retirement plan balances. Intelligent Portfolios include Schwab Intelligent Portfolios™, launched in March 2015, and Institutional Intelligent Portfolios™, launched in June 2015. Legacy Non-Fee advice solutions include superseded programs such as, Schwab Advisor Source and certain retirement plan balances. Average client assets for advice solutions may also include the asset balances contained in the three categories of mutual funds listed above.

(4) Includes various asset-based fees, such as trust fees, 401(k) recordkeeping fees, and mutual fund clearing fees and other service fees.

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N/A Not applicable.

Asset management and administration fees increased by $38 million, or 6%, and $71 million, or 6% in the second quarter and first half of 2015 compared to the same periods in 2014, due to the following items.

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.



Six Months Ended June 30, 2015 2014AverageClientAssets Revenue

AverageFee

AverageClientAssets Revenue

AverageFee

Schwab money market funds before fee waivers $ 161,411 $ 469 0.59% $ 164,868 $ 474 0.58%

Fee waivers (353) (368)Schwab money market funds 161,411 116 0.14% 164,868 106 0.13% Schwab equity and bond funds 100,556 108 0.22% 78,058 92 0.24% Mutual Fund OneSource 244,333 397 0.33% 244,601 401 0.33%

Total mutual funds $ 506,300 621 0.25% $ 487,527 599 0.25% Advice solutions :

Fee-based $ 172,405 448 0.52% $ 153,065 408 0.54% Intelligent Portfolios 1,725 - - N/A N/A N/ALegacy Non-Fee 16,815 N/A N/A 15,564 N/A N/A

Total advice solutions $ 190,945 448 0.47% $ 168,629 408 0.49% Other 245 236 Total asset management

and administration fees $ 1,314 $ 1,243 (1) Includes Schwab exchange-traded funds.(2) Beginning in the second quarter of 2015, certain Mutual Fund OneSource balances were reclassified to Other third-party


(3) Advice solutions include managed portfolios, specialized strategies and customized investment advice. Fee-based advice solutions include Schwab Private Client™, Schwab Managed Portfolios™, Managed Account Select , Schwab Advisor Network , Windhaven Strategies, ThomasPartners Dividend Growth Strategy, and Schwab Index Advantage advised retirement plan balances. Intelligent Portfolios include Schwab Intelligent Portfolios™, launched in March 2015, and Institutional Intelligent Portfolios™, launched in June 2015. Legacy Non-Fee advice solutions include superseded programs such as, Schwab Advisor Source and certain retirement plan balances. Average client assets for advice solutions may also include the asset balances contained in the three categories of mutual funds listed above.

(4) Includes various asset-based fees, such as trust fees, 401(k) recordkeeping fees, and mutual fund clearing fees and other service fees.

Mutual fund service fees increased by $15 million, or 5%, and $22 million, or 4%, in the second quarter and first half of 2015 compared to the same periods in 2014, primarily due to growth in client assets invested in equity and bond funds and higher net yields on money market fund assets.

Advice solutions fees increased by $19 million, or 9%, and $40 million, or 10%, in the second quarter and first half of 2015 compared to the same periods in 2014, primarily due to growth in client assets enrolled in advisory offers, including Schwab Private Client™, ThomasPartners , and Schwab Managed Portfolios™, partially offset by a decrease in Windhaven assets.

Other asset management and administration service fees increased by $4 million, or 3%, and $9 million, or 4%, in the second quarter and first half of 2015 compared to the same periods in 2014, primarily due to third-party mutual fund service fees on higher client asset balances invested in other third-party mutual funds.

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(1)

® (2)

(3)

(3)

(2,4)

®

® ® ® ®

®

®

Schwab Bank maintains available for sale and held to maturity investment portfolios for liquidity as well as to earn interest by investing funds from deposits that are in excess of bank loans and liquidity requirements. Schwab Bank lends funds to banking clients primarily in the form of mortgage loans, home equity lines of credit (HELOCs), and personal loans secured by securities. These loans are largely funded by interest-bearing bank deposits.

In clearing their clients’ trades, Schwab and optionsXpress, Inc., a securities broker-dealer and wholly-owned subsidiary of optionsXpress Holdings, Inc. (optionsXpress), hold cash balances payable to clients. In most cases, Schwab and optionsXpress, Inc. pay their clients interest on cash balances awaiting investment, and in turn invest these funds and earn interest revenue. Receivables from brokerage clients consist primarily of margin loans to brokerage clients. Margin loans are loans made to clients on a secured basis to purchase securities. Pursuant to applicable 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 sheets.

The Company’s interest-earning assets are primarily funded through brokerage client cash balances and bank deposits. These interest-bearing liabilities are primarily sensitive to short-term rates, and the Company establishes the rates paid on most of these liabilities. The Company expects that the rate paid on these liabilities will generally adjust at some fraction of the movement in short-term market rates. The rates on the majority of the firm’s investment securities and loans re-price or reset based on short-term market rates. A smaller portion is invested in fixed-rate loans and securities. As such, the Company expects that net interest revenue will increase as short-term market rates increase, and decline as rates fall from current levels. When interest rates fall, the Company may attempt to mitigate some of this negative impact by lowering rates paid to clients on interest-bearing liabilities. The current low interest rate environment limits the extent to which the Company can reduce interest expense on funding sources. The Company may also alter the amount and type of fixed-rate loans and securities that are added to the portfolio. Generally, increases in the percentage of fixed-rate assets relative to total interest-bearing liabilities will reduce the rate at which net interest revenue changes if rates move.

Non-interest-bearing funding sources include non-interest-bearing brokerage client cash balances, stockholders’ equity, and proceeds from stock-lending activities. Revenue from stock-lending activities is included in other interest revenue.



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



Three Months Ended June 30, 2015 2014Interest Average Interest Average

Average Revenue/ Yield/ Average Revenue/ Yield/Balance Expense Rate Balance Expense Rate

Interest-earning assets:Cash and cash equivalents $ 8,540 $ 6 0.28 % $ 6,001 $ 3 0.20 % Cash and investments segregated 18,265 7 0.15 % 19,614 6 0.12 % Broker-related receivables 261 - 0.02 % 312 - -Receivables from brokerage clients 15,105 125 3.32 % 13,634 120 3.53 % Securities available for sale 61,194 153 1.00 % 52,564 138 1.05 % Securities held to maturity 36,458 227 2.50 % 32,043 206 2.58 % Bank loans 13,866 91 2.63 % 12,775 88 2.76 %

Total interest-earning assets 153,689 609 1.59 % 136,943 561 1.64 % Other interest revenue 36 27 Total interest-earning assets $ 153,689 $ 645 1.68 % $ 136,943 $ 588 1.72 % Funding sources:Bank deposits $ 110,159 $ 6 0.02 % $ 94,938 $ 8 0.03 % Payables to brokerage clients 25,138 - 0.01 % 26,352 - 0.01 % Long-term debt 2,901 24 3.32 % 1,901 18 3.80 %

Total interest-bearing liabilities 138,198 30 0.09 % 123,191 26 0.08 % Non-interest-bearing funding sources 15,491 13,752 Other interest expense 3 -Total funding sources $ 153,689 $ 33 0.08 % $ 136,943 $ 26 0.07 % Net interest revenue $ 612 1.60 % $ 562 1.65 % (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.(3) Includes the impact of capitalizing interest on building construction and software development.

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(1)

(2)

(1)

(1,3)

Net interest revenue increased in the second quarter and first half of 2015 compared to the same periods in 2014, primarily due to higher balances of interest-earning assets, including the Company’s investment portfolio, partially offset by the effect lower average interest rates had on the Company’s average net interest margin. The growth in the average balances in bank deposits resulted from an increase in the excess cash held in certain brokerage client accounts swept to Schwab Bank. The growth in bank deposits contributed to the increase in interest-earning assets.

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 trading activity in client fixed income securities. To accommodate clients’ fixed income trading activity, the Company maintains positions in fixed income securities, including state and municipal debt obligations, U.S. Government, corporate debt, and other securities. The difference between the price at which the Company buys and sells securities to and from its clients and other broker-dealers is recognized as principal transaction revenue. Principal transaction revenue also includes adjustments to the fair value of these securities positions. Factors that influence principal transaction revenue include the volume of client trades and market price volatility.



Six Months Ended June 30, 2015 2014Interest Average Interest Average

Average Revenue/ Yield/ Average Revenue/ Yield/Balance Expense Rate Balance Expense Rate

Interest-earning assets:Cash and cash equivalents $ 8,959 $ 11 0.25 % $ 6,349 $ 7 0.22 % Cash and investments segregated 18,884 13 0.14 % 20,611 12 0.12 % Broker-related receivables 271 - 0.06 % 303 - 0.15 % Receivables from brokerage clients 14,763 244 3.33 % 13,397 236 3.55 % Securities available for sale 59,315 295 1.00 % 52,269 278 1.07 % Securities held to maturity 35,673 445 2.52 % 31,448 405 2.60 % Bank loans 13,701 181 2.66 % 12,661 175 2.79 %

Total interest-earning assets 151,566 1,189 1.58 % 137,038 1,113 1.64 % Other interest revenue 73 54 Total interest-earning assets $ 151,566 $ 1,262 1.68 % $ 137,038 $ 1,167 1.72 % Funding sources:Bank deposits $ 108,008 $ 14 0.03 % $ 94,360 $ 15 0.03 % Payables to brokerage clients 25,602 1 0.01 % 26,779 1 0.01 % Long-term debt 2,527 43 3.43 % 1,902 36 3.82 %

Total interest-bearing liabilities 136,137 58 0.09 % 123,041 52 0.09 % Non-interest-bearing funding sources 15,429 13,997 Other interest expense 4 -Total funding sources $ 151,566 $ 62 0.08 % $ 137,038 $ 52 0.08 % Net interest revenue $ 1,200 1.60 % $ 1,115 1.64 % (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.(3) Includes the impact of capitalizing interest on building construction and software development.

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(1)

(2)

(1)

(1,3)

Trading revenue decreased by $9 million, or 4%, in the second quarter of 2015 compared to the second quarter of 2014, primarily due to a decrease in commission revenue as a result of lower commissions per revenue trade and lower daily average revenue trades. Trading revenue decreased by $29 million or 6% in the first half of 2015 compared to the first half of 2014 primarily due to a decrease in commission revenue as a result of lower daily average revenue trades and commissions per revenue trades. Daily average revenue trades decreased in the second quarter and first half of 2015 compared to the same periods in 2014, primarily due to a lower volume of equity and option trades, offset by a higher volume of mutual fund trades. Average revenue per revenue trade decreased 2% and 1%, respectively, in the second quarter and first half of 2015 compared to the same periods in 2014.

Other Revenue

Other revenue includes order flow revenue, nonrecurring gains, software fees from the Company’s portfolio management services, exchange processing fees, and other service fees.

Other revenue increased by $14 million, or 22%, and $9 million, or 7%, in the second quarter and first half of 2015 compared to the same periods in 2014, respectively, primarily due to litigation proceeds of $17 million in the second quarter of 2015 relating to the Company’s non-agency residential mortgage-backed securities portfolio, partially offset by a decrease in order flow revenue.

Order flow revenue was $25 million and $52 million during the second quarter and first half of 2015, respectively, compared to $27 million and $59 million during the second quarter and first half of 2014, respectively. The decrease in order flow revenue in both periods was primarily due to changes in the composition and volume of different types of orders and the fees and rebates for such orders.




2015 2014 Change 2015 2014 ChangeDaily average revenue trades (in thousands) 267 274 (3) % 290 305 (5) %Clients’ daily average trades (in thousands) 494 483 2 % 537 518 4 %Number of trading days 63.0 63.0 - 124.0 124.0 -Average revenue per revenue trade $ 11.97 $ 12.26 (2) % $ 11.97 $ 12.13 (1) %(1) Includes all client trades that generate trading revenue (i.e., commission revenue or principal transaction revenue).(2) Includes daily average revenue trades, trades by clients in asset-based pricing relationships, and all commission-free trades,

including the Company’s Mutual Fund OneSource funds and exchange-traded funds (ETFs), and other proprietary products. Clients’ daily average trades is an indicator of client engagement with securities markets.

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(1)

(2)

Expenses Excluding Interest

As shown in the table below, expenses excluding interest increased in the second quarter and first half of 2015 compared to the same periods in 2014, primarily due to increases in compensation and benefits, depreciation and amortization, and other expense.

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 bonuses, and stock-based compensation. Variable compensation includes payments to certain individuals based on their sales performance. Discretionary bonuses are based on the Company’s overall performance as measured by EPS, and therefore will fluctuate with this measure. Stock-based compensation primarily includes employee and board of director stock options and restricted stock.

The following table shows a comparison of certain compensation and benefits components and employee data:

Salaries and wages increased in the second quarter and first half of 2015 compared to the same periods in 2014, primarily due to higher employee headcount and annual salary increases.

Incentive compensation decreased in the second quarter of 2015 compared to the second quarter of 2014, due to lower discretionary bonuses, partially offset by increases in equity-based incentives. Incentive compensation increased in the first half of 2015 compared to the first half of 2014, primarily due to the earlier recognition of certain equity-based incentives due to plan changes and higher field incentive plan costs relating to increased net client asset flows.




2015 2014 Change 2015 2014 ChangeCompensation and benefits $ 540 $ 520 4 % $ 1,121 $ 1,048 7 % Professional services 112 112 - 226 218 4 %Occupancy and equipment 85 80 6 % 168 160 5 % Advertising and market development 62 65 (5) % 131 128 2 % Communications 59 57 4 % 117 113 4 %Depreciation and amortization 55 48 15 % 109 96 14 % Other 86 75 15 % 169 150 13 %

Total expenses excluding interest $ 999 $ 957 4 % $ 2,041 $ 1,913 7 % Expenses as a percentage of total net revenues:

Compensation and benefits 34 % 35 % 36 % 35 % Advertising and market development 4 % 4 % 4 % 4 %


2015 2014 Change 2015 2014 ChangeSalaries and wages $ 313 $ 293 7 % $ 630 $ 588 7 % Incentive compensation 144 147 (2) % 301 294 2 % Employee benefits and other 83 80 4 % 190 166 14 %

Total compensation and benefits expense $ 540 $ 520 4 % $ 1,121 $ 1,048 7 % Full-time equivalent employees (in thousands)

At quarter end 15.0 14.1 6 % Average 15.0 14.0 7 % 14.9 14.0 6 %

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

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(1)

Employee benefits and other expense increased in the second quarter and first half of 2015 compared to the same periods in 2014, due to increases in payroll taxes as a result of higher employee headcount. The increase in employee benefits in the first half of 2015 was also due to the Company matching 401(k) contributions by pay period in 2015 instead of annually and more employees choosing to fund their 401(k) contributions from annual bonuses.

Expenses Excluding Compensation and Benefits

Professional services expense was flat in the second quarter of 2015 compared to the second quarter of 2014. Professional services increased in the first half of 2015 compared to the first half of 2014, primarily due to an increase in fees paid to outsourced service providers and consultants.

Occupancy and equipment expense increased in the second quarter and first half of 2015 compared to the same periods in 2014, primarily due to an increase in software maintenance expense relating to the Company’s information technology systems.

Depreciation and amortization expense increased in the second quarter and first half of 2015 compared to the same periods in 2014, primarily due to increased amortization of internally-developed software.

Other expense increased in the second quarter of 2015 compared to the second quarter of 2014, primarily due to increases in regulatory assessments, reserves for margin loss estimates, and travel costs.

Taxes on Income

The Company’s effective income tax rate on income before taxes was 37.7% and 37.8% for the second quarters of 2015 and 2014, respectively. The Company’s effective income tax rate on income before taxes was 37.7% for both first halves of 2015 and 2014, respectively.

Segment Information

The Company provides financial services to individuals and institutional clients through two segments – Investor Services and Advisor Services. The Investor Services segment provides retail brokerage and banking services to individual investors, retirement plan services, and corporate brokerage services. The Advisor Services segment provides custodial, trading, and support services to independent investment advisors, and retirement business services to independent retirement plan advisors and recordkeepers whose plan assets are held at Schwab Bank. 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 significant nonrecurring gains, impairment charges on non-financial assets, discontinued operations, extraordinary items, and significant restructuring and other charges. Segment assets and liabilities are not used for evaluating segment performance or in deciding how to allocate resources to segments.



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



Investor Services Advisor ServicesPercent Percent

Three Months Ended June 30, Change 2015 2014 Change 2015 2014 Net Revenues:Asset management and administration fees 7 % $ 474 $ 441 3 % $ 196 $ 191 Net interest revenue 4 % 524 504 52 % 88 58 Trading revenue (7)% 135 145 1 % 68 67 Other 23 % 58 47 17 % 21 18 Provision for loan losses (67)% 2 6 (100) % - 1

Total net revenues 4 % 1,193 1,143 11 % 373 335 Expenses Excluding Interest 5 % 770 734 3 % 229 223 Income before taxes on income 3 % $ 423 $ 409 29 % $ 144 $ 112

Unallocated TotalPercent Percent

Three Months Ended June 30, Change 2015 2014 Change 2015 2014 Net Revenues:Asset management and administration fees - $ - $ - 6 % $ 670 $ 632 Net interest revenue - - - 9 % 612 562 Trading revenue - - - (4) % 203 212 Other - - - 22 % 79 65 Provision for loan losses - - - (71) % 2 7

Total net revenues - - - 6 % 1,566 1,478 Expenses Excluding Interest - - - 4 % 999 957 Income before taxes on income - $ - $ - 9 % $ 567 $ 521 Net Income 9 % $ 353 $ 324

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Investor ServicesNet revenues increased by $50 million, or 4%, and $70 million, or 3%, in the second quarter and first half of 2015 compared to the same periods in 2014 primarily due to increases in asset management and administration fees, net interest revenue, and other revenue, partially offset by a decrease in trading revenue. Asset management and administration fees increased primarily due to fees from advice solutions. Advice solutions fees increased primarily due to growth in client assets enrolled in advisory offers. Net interest revenue increased primarily due to higher balances of interest-earning assets, including the Company’s investment portfolio, partially offset by the effect lower average interest rates had on the Company’s average net interest margin. Other revenue increased primarily due to litigation proceeds relating to the Company’s non-agency residential mortgage-backed securities portfolio, partially offset by a decrease in order flow revenue. Trading revenue decreased primarily due to a decrease in commission revenue as a result of lower commissions per revenue trades and lower daily average revenue trades.

Expenses excluding interest increased by $36 million, or 5%, and $92 million, or 6%, in the second quarter and first half of 2015 compared to the same periods in 2014, primarily due to increases in compensation and benefits, occupancy and equipment, and depreciation and amortization expense.

Advisor ServicesNet revenues increased by $38 million, or 11%, and $66 million, or 10%, in the second quarter and first half of 2015 compared to the same periods in 2014 primarily due to increases in net interest revenue and asset management and administration fees. Net interest revenue increased primarily due to higher balances of interest-earning assets, including the Company’s investment portfolio, partially offset by the effect lower average interest rates had on the Company’s average net interest margin. Asset management and administration fees increased due to fees from mutual fund services and other asset management and administration services. Mutual fund service fees increased primarily due to growth in client assets invested in equity and bond funds. Other asset management and administration service fees increased primarily due to third-party mutual fund service fees on higher client asset balances invested in other third-party mutual funds.



Investor Services Advisor ServicesPercent Percent

Six Months Ended June 30, Change 2015 2014 Change 2015 2014Net Revenues:Asset management and administration fees 7 % $ 928 $ 869 3 % $ 386 $ 374 Net interest revenue 4 % 1,034 999 43 % 166 116 Trading revenue (9)% 286 316 1 % 144 143 Other 5 % 103 98 11 % 39 35 Provision for loan losses 20 % 6 5 (100) % - 1

Total net revenues 3 % 2,357 2,287 10 % 735 669 Expenses Excluding Interest 6 % 1,564 1,472 8 % 477 441 Income before taxes on income (3)% $ 793 $ 815 13 % $ 258 $ 228

Unallocated TotalPercent Percent

Six Months Ended June 30, Change 2015 2014 Change 2015 2014Net Revenues:Asset management and administration fees - $ - $ - 6 % $ 1,314 $ 1,243 Net interest revenue - - - 8 % 1,200 1,115 Trading revenue - - - (6) % 430 459 Other - - - 7 % 142 133 Provision for loan losses - - - - 6 6

Total net revenues - - - 5 % 3,092 2,956 Expenses Excluding Interest - - - 7 % 2,041 1,913 Income before taxes on income - $ - $ - 1 % $ 1,051 $ 1,043 Net Income 1 % $ 655 $ 650

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Expenses excluding interest increased by $6 million, or 3%, and $36 million, or 8%, in the second quarter and first half of 2015 compared to the same periods in 2014, primarily due to increases in compensation and benefits and other expense.

LIQUIDITY AND CAPITAL RESOURCES

The Company’s cash position (reported as cash and cash equivalents on its condensed consolidated balance sheets) 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 security portfolios, 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 preferred and common stock. The combination of these factors can cause significant fluctuations in the cash position during specific time periods.

The Company monitors both the relative composition and absolute level of its capital structure. Management is focused on optimizing 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, 2015 was $15.3 billion, up $1.6 billion, or 12%, from December 31, 2014.

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. CSC is subject to supervision and regulation by the Federal Reserve and Schwab Bank is subject to supervision and regulation by the OCC.

CSC

CSC’s liquidity needs arise from funding its subsidiaries’ operations, including margin and mortgage lending, and transaction settlement, in addition to funding cash dividends, acquisitions, investments, short- and long-term debt, and managing statutory capital requirements.

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 shelf registration statement on file with the Securities and Exchange Commission (SEC) which enables CSC to issue debt, equity and other securities. CSC maintains excess liquidity in the form of overnight cash deposits,short-term investments to cover daily funding needs and to support growth in the Company’s business, and long-term investments to support contingent funding needs. 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, Schwab Bank, and optionsXpress, Inc. are subject to regulatory requirements that may restrict them from certain transactions with CSC, as further discussed below.

On March 10, 2015, CSC issued $625 million aggregate principal amount of Senior Notes that mature in 2018 and $375 million aggregate principal amount of Senior Notes that mature in 2025 under its universal shelf registration statement on file with the SEC. The Senior Notes due 2018 have a fixed interest rate of 1.50% with interest payable semi-annually. The Senior Notes due 2025 have a fixed interest rate of 3.00% with interest payable semi-annually.

In connection with the above Senior Note issuances, CSC purchased $575 million of 3-year Treasury securities and $225 million of 10-year Treasury securities that are held at CSC to augment its liquidity position.



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The following are details of CSC’s long-term debt:

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, 2015. CSC’s ratings for these short-term borrowings are P1 by Moody’s, A1 by Standard & Poor’s, and F1 by Fitch.

CSC maintains a $750 million committed, unsecured credit facility with a group of 11 banks, which is scheduled to expire in June 2016. This facility replaced a similar facility that expired in June 2015 and both facilities were unused during the first half of 2015. The funds under this facility are available for general corporate purposes. 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, excluding accumulated other comprehensive income. At June 30, 2015, the minimum level of stockholders’ equity required under this facility was $8.5 billion (CSC’s stockholders’ equity, excluding accumulated other comprehensive income, at June 30, 2015 was $12.2 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 certain of the 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 2015.

CSC is required to serve as a source of strength for Schwab Bank and must have the ability to provide financial assistance if Schwab Bank experiences financial distress. To manage capital adequacy, the Company currently utilizes a target Tier 1 Leverage Ratio for CSC, as currently defined by the Federal Reserve, of at least 6%. Beginning on January 1, 2015, CSC became subject to new capital requirements set by the Federal Reserve. Based on its regulatory capital ratios at June 30, 2015, CSC exceeded minimum capital requirements. See “Item 1 – Condensed Consolidated Financial Statements (Unaudited) –Notes – 11. Regulatory Requirements” for CSC’s regulatory capital and ratios.

Schwab

Schwab’s liquidity needs relating to client trading and margin borrowing activities are met primarily through cash balances in brokerage client accounts, which were $29.2 billion and $32.0 billion at June 30, 2015 and December 31, 2014, respectively. Management believes that brokerage client cash balances and operating earnings will continue to be the primary sources of liquidity for Schwab.

Most of Schwab’s assets are readily convertible to cash, consisting primarily of short-term 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.

Schwab has a finance lease obligation related to an office building and land under a 20-year lease. The remaining finance lease obligation of $79 million at June 30, 2015 is being reduced by a portion of the lease payments over the remaining lease term ofnine years.

To manage short-term liquidity, Schwab maintains uncommitted, unsecured bank credit lines with a group of banks. 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



Par StandardJune 30, 2015 Outstanding Maturity Interest Rate Moody’s & Poor’s FitchSenior Notes $ 2,581 2015 – 2025 0.850% to 4.45% fixed A2 A AMedium-Term Notes $ 250 2017 6.375% fixed A2 A A

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requirements. Schwab used such borrowings for six days during the first half of 2015, with average daily amounts borrowed of $137 million. There were no borrowings outstanding under these lines at June 30, 2015.

To partially satisfy the margin requirement of client option transactions with the Options Clearing Corporation, Schwab has unsecured standby letter of credit agreements (LOCs) with five banks in favor of the Options Clearing Corporation aggregating $225 million at June 30, 2015. There were no funds drawn under any of these LOCs during the first half of 2015. In connection with its securities lending activities, Schwab is required to provide collateral to certain brokerage clients. Schwab satisfies the collateral requirements by providing cash as collateral.

Schwab is subject to regulatory requirements of Rule 15c3-1 under the Securities Exchange Act of 1934 (the Uniform Net Capital Rule) 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 a net capital amount of less than 5% of aggregate debit balances or less than 120% of its minimum dollar requirement of $250,000. At June 30, 2015, Schwab’s net capital was $1.7 billion (9% of aggregate debit balances), which was $1.3 billion in excess of its minimum required net capital and $767 million in excess of 5% of aggregate debit balances.

Schwab is also subject to Rule 15c3-3 under the Securities Exchange Act of 1934 and other applicable regulations that require it to maintain cash or qualified securities in a segregated reserve account for the exclusive benefit of clients. These funds are included in cash and investments segregated and on deposit for regulatory purposes in the Company’s condensed consolidated balance sheets and are not available as a general source of liquidity.

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 2016. The amount outstanding under this facility at June 30, 2015 was $465 million. Borrowings under this subordinated lending arrangement qualify as regulatory capital for Schwab.

In addition, CSC provides Schwab with a $2.5 billion credit facility, which is scheduled to expire in December 2017. Borrowings under this facility do not qualify as regulatory capital for Schwab. There were no funds drawn under this facility at June 30, 2015.

Schwab Bank

Schwab Bank’s liquidity needs are met through bank deposits and equity capital.

Bank deposits at June 30, 2015 were $112.9 billion, which includes the excess cash held in certain Schwab and optionsXpress, Inc. brokerage client accounts that is swept into deposit accounts at Schwab Bank. At June 30, 2015, these balances totaled $92.2 billion.

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/or securities held to maturity that are pledged as collateral to the FRB. Schwab Bank maintains policies and procedures necessary to access this funding and tests discount window borrowing procedures annually. At June 30, 2015, $2.2 billion was available under this arrangement. There were no funds drawn under this arrangement during the first half of 2015.

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 HELOCs that are pledged as collateral. Schwab Bank maintains policies and procedures necessary to access this funding and tests borrowing procedures annually. At June 30, 2015, $9.2 billion was available under this facility. There were no funds drawn under this facility during the first halfof 2015.

Schwab Bank is subject to regulatory requirements that restrict and govern the terms of affiliate transactions, such as extensions of credit and repayment of loans between Schwab Bank and CSC or CSC’s other subsidiaries. In addition, Schwab



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Bank is required to provide notice to and may be required to obtain approval of the OCC and the Federal Reserve to declare dividends to CSC.

Schwab Bank is required to maintain capital levels as specified in federal banking laws and regulations. Failure to meet the minimum levels could result in certain mandatory and possibly additional discretionary actions by the regulators that, if undertaken, could have a direct material effect on Schwab Bank. The Company currently utilizes a target Tier 1 Leverage Ratio for Schwab Bank of at least 6.25%. Beginning on January 1, 2015, Schwab Bank is subject to new capital requirements set by the OCC. Based on its regulatory capital ratios at June 30, 2015, Schwab Bank is considered well capitalized. See “Item 1 –Condensed Consolidated Financial Statements (Unaudited) – Notes – 11. Regulatory Requirements” for Schwab Bank’s regulatory capital and ratios.

optionsXpress, Inc.

optionsXpress, Inc.’s liquidity needs relating to client trading and margin borrowing activities are met primarily through cash balances in brokerage client accounts, which were $1.1 billion and $942 million at June 30, 2015 and December 31, 2014, respectively. Management believes that brokerage client cash balances and operating earnings will continue to be the primary sources of liquidity for optionsXpress, Inc.

optionsXpress, Inc. is subject to regulatory requirements of the Uniform Net Capital Rule that are intended to ensure the general financial soundness and liquidity of broker-dealers. These regulations prohibit optionsXpress, Inc. from paying cash dividends or making unsecured advances or loans to its parent company or employees if such payment would result in a net capital amount of less than 5% of aggregate debit balances or less than 120% of its minimum dollar requirement of $250,000. At June 30, 2015, optionsXpress, Inc.’s net capital was $131 million (31% of aggregate debit balances), which was $123 million in excess of its minimum required net capital and $110 million in excess of 5% of aggregate debit balances.

optionsXpress, Inc. is also subject to Commodity Futures Trading Commission Regulation 1.17 (Reg. 1.17) under the Commodity Exchange Act, which also requires the maintenance of minimum net capital. optionsXpress, Inc. as a futures commission merchant, is required to maintain minimum net capital equal to the greater of its net capital requirement under Reg. 1.17 ($1 million), or the sum of 8% of the total risk margin requirements for all positions carried in customer accounts and 8% of the total risk margin requirements for all positions carried in non-customer accounts (as defined in Reg. 1.17). At June 30, 2015, optionsXpress, Inc. met the requirements of Reg. 1.17.

Additionally, optionsXpress, Inc. is subject to Rule 15c3-3 under the Securities Exchange Act of 1934 and other applicable regulations that require it to maintain cash or qualified securities in a segregated reserve account for the exclusive benefit of clients. These funds are included in cash and investments segregated and on deposit for regulatory purposes in the Company’s condensed consolidated balance sheets and are not available as a general source of liquidity.

To partially satisfy the margin requirement of client option transactions with the Options Clearing Corporation, optionsXpress, Inc. has an unsecured standby LOC with one bank in favor of the Options Clearing Corporation in the amount of $15 million at June 30, 2015. There were no funds drawn under this LOC during the first half of 2015.

CSC provides optionsXpress, Inc. with a $200 million credit facility, which is scheduled to expire in December 2016. Borrowings under this facility do not qualify as regulatory capital for optionsXpress, Inc. There was $20 million of borrowings outstanding under this facility at June 30, 2015.

optionsXpress has a term loan with CSC, of which $3 million was outstanding at June 30, 2015, and it matures in December 2017.

Long-term Debt

At June 30, 2015, the Company had long-term debt of $2.9 billion, or 19% of total financial capital, that bears interest at a weighted-average rate of 3.07%. At December 31, 2014, the Company had long term debt of $1.9 billion, or 14% of total financial capital. The Company repaid $4 million of long-term debt in the first half of 2015.



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On March 10, 2015, CSC issued $625 million aggregate principal amount of Senior Notes that mature in 2018 and $375 million aggregate principal amount of Senior Notes that mature in 2025 under its universal shelf registration statement on file with the SEC. The Senior Notes due 2018 have a fixed interest rate of 1.50% with interest payable semi-annually. The Senior Notes due 2025 have a fixed interest rate of 3.00% with interest payable semi-annually.

Capital Expenditures

The Company’s capital expenditures were $139 million and $168 million in the first halves of 2015 and 2014, respectively. The Company’s capital expenditures include $14 million and $3 million of accrued but unpaid capital expenditures at June 30, 2015 and 2014, respectively. Capital expenditures in the first half of 2015 were primarily for developing internal-use software, buildings, and software and equipment relating to the Company’s information technology systems. Capital expenditures for the first half of 2014 were primarily for buildings, developing internal-use software, and software and equipment relating to the Company’s information technology systems. Capitalized costs for developing internal-use software were $49 million and $36 million in the first halves of 2015 and 2014, respectively.

As discussed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014, management anticipated that the 2015 capital expenditures would be approximately 15% lower than 2014. However, management has revised the Company’s estimated full year 2015 capital expenditures to be approximately 5% less than 2014 levels primarily due to capitalized costs for developing internal-use software, and equipment relating to the Company’s information technology systems.

Dividends

CSC paid common stock cash dividends of $159 million ($0.12 per share) and $157 million ($0.12 per share) in the first halves of 2015 and 2014, respectively.

CSC paid Series A Preferred Stock cash dividends of $14 million ($35.00 per share) in both the first halves of 2015 and 2014. CSC paid Series B Preferred Stock cash dividends of $15 million ($30.00 per share) in both the first halves of 2015 and 2014, respectively.

Share Repurchases

There were no repurchases of CSC’s common stock in the first halves of 2015 and 2014. As of June 30, 2015, CSC had remaining authority from the Board of Directors to repurchase up to $596 million of its common stock, which is not subject to expiration.

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 – Off-Balance Sheet Arrangements” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014, and “Item 1 – Condensed Consolidated Financial Statements (Unaudited) – Notes – 6. Commitments and Contingencies.”

RISK MANAGEMENT

The Company’s business activities expose it to a variety of risks, including operational, credit, market, liquidity, complianceand legal risk. The Company has a comprehensive risk management program to identify and manage these risks and their associated potential for financial and reputational impact. 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 these risks.



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For a discussion on risks that the Company faces and the Company’s process of risk identification and assessment, risk measurement, risk monitoring and reporting and risk mitigation, 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, 2014. 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.

Credit Risk Exposures

The Company’s credit risk exposure related to bank loans is actively managed through individual and portfolio reviews performed by management. Management regularly reviews asset quality, including concentrations, delinquencies, nonaccrual loans, charge-offs, and recoveries. All are factors in the determination of an appropriate allowance for loan losses. The Company’s mortgage loan portfolios primarily include first lien residential real estate mortgage loans (First Mortgages) of $8.2 billion and HELOCs of $2.8 billion at June 30, 2015.

The Company’s underwriting guidelines include maximum loan-to-value (LTV) ratios, cash out limits, and minimum Fair Isaac Corporation (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. In January 2014, the Company revised its First Mortgage underwriting criteria in conformance with the Consumer Financial Protection Bureau’s new guidance on Qualified Mortgage lending and a borrower’s ability to repay. Revisions were made to requirements affecting debt to income ratio, LTV ratio, and liquid asset holdings. These revised underwriting criteria have not and are not expected to have a material impact on the credit quality of the Company’s First Mortgage or HELOC portfolios. The Company does not purchase loans that allow for negative amortization and does not purchase subprime loans (generally defined as extensions of credit to borrowers with a FICO score of less than 620 at origination), unless the borrower has compensating credit factors. At June 30, 2015, approximately 1% of both the First Mortgage and HELOC portfolios consisted of loans to borrowers with updated FICO scores of less than 620.

At June 30, 2015, the weighted-average originated LTV ratio was 59% for both the First Mortgage and HELOC portfolios. 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, 2015, 21% of HELOCs ($609 million of the HELOC portfolio) were in a first lien position. The weighted-average originated FICO score was 770 and 769 for the First Mortgage and HELOC portfolios, respectively.

The Company monitors the estimated current LTV ratios of its First Mortgage and HELOC portfolios on an ongoing basis. At June 30, 2015, the weighted-average estimated current LTV ratios were 48% and 52% for the First Mortgage and HELOC portfolios, respectively. The computation of the estimated current LTV ratio for a HELOC includes any first lien mortgage outstanding on the same property at the time of the HELOC’s origination. The Company estimates the current LTV ratio for each loan by reference to a home price appreciation index. The Company also monitors updated borrower FICO scores, delinquency trends, and verified liquid assets held by individual borrowers. At June 30, 2015, the weighted-average updated FICO scores were 773 and 770 for the First Mortgage and HELOC portfolios, respectively.

The majority of the Company’s HELOC portfolio is secured by second liens on the associated properties. Second lien mortgage loans possess a higher degree of credit risk given the subordination to the first lien holder in the event of default. At June 30, 2015, $2.2 billion, or 79%, of the HELOC portfolio was in a second lien position. In addition to the credit monitoring activities described above, the Company also monitors credit risk on second lien HELOC loans by reviewing the delinquency status of the first lien loan on the associated property. Additionally, at June 30, 2015, approximately 30% of the HELOC borrowers that had a balance only paid the minimum amount due.

For more information on the Company’s credit quality indicators relating to its First Mortgage and HELOC portfolios, including delinquency characteristics, borrower FICO scores at origination, updated borrower FICO scores, LTV ratios at origination, and estimated current LTV ratios, see “Item 1 – Condensed Consolidated Financial Statements (Unaudited) –Notes – 4. Bank Loans and Related Allowance for Loan Losses.”



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

The Company has exposure to credit risk associated with its securities available for sale and securities held to maturity portfolios, whose fair values totaled $63.4 billion and $38.0 billion at June 30, 2015, respectively. These portfolios include U.S. agency and non-agency mortgage-backed securities, asset-backed securities, corporate debt securities, U.S. agency notes, treasury securities, and certificates of deposit. U.S. agency mortgage-backed securities do not have explicit credit ratings;however, management considers these to be of the highest credit quality and rating given the guarantee of principal and interest by the U.S. government-sponsored enterprises.

At June 30, 2015, with the exception of certain non-agency residential mortgage-backed securities, all securities in the available for sale and held to maturity portfolios 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 within a particular industry.

The fair value of the Company’s investments in mortgage-backed securities totaled $58.9 billion at June 30, 2015. Of these, $57.6 billion were issued by U.S. agencies and $1.3 billion were issued by private entities (non-agency securities). These U.S. agency and non-agency securities are included in securities available for sale and securities held to maturity.

The fair value of the Company’s investments in asset-backed securities totaled $21.7 billion at June 30, 2015. Of these, $12.5 billion were securities backed by student loans, the majority of which are guaranteed by the U.S. federal government. These asset-backed securities are included in securities available for sale.

The fair value of the Company’s investments in corporate debt securities and commercial paper totaled $10.0 billion at June 30, 2015, with the majority issued by institutions in the financial services industry. These securities are included in securities available for sale, cash and cash equivalents, and other securities owned in the Company’s condensed consolidated balance sheets. Issuer, geographic, and sector concentrations are controlled by established credit policy limits to each concentration type.

The Company’s bank loans include $7.4 billion of adjustable rate First Mortgage loans at June 30, 2015. The Company’s adjustable rate mortgages have initial fixed interest rates for three to ten years and interest rates that adjust annually thereafter. Approximately 40% of these mortgages consisted of loans with interest-only payment terms. The interest rates on approximately 55% of these interest-only loans are not scheduled to reset for three or more years. The Company’s mortgage loans do not include interest terms described as temporary introductory rates below current market rates.

As of June 30, 2015, 48% of the Company’s HELOC and First Mortgage portfolio was concentrated in California. These loans have performed in a manner consistent with the portfolio as a whole.



June 30, December 31,2015 2014

Loan delinquencies 0.20 % 0.27 %Nonaccrual loans 0.22 % 0.26 %Allowance for loan losses 0.26 % 0.31 %(1) Loan delinquencies include loans that are 30 days or more past due and other nonaccrual loans.

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(1)

The Company’s HELOC product has a 30-year loan term with an initial draw period of ten years from the date of origination. After the initial draw period, the balance outstanding at such time is converted to a 20-year amortizing loan. The interest rate during the initial draw period and the 20-year amortizing period is a floating rate based on the prime rate plus a margin. HELOCs that convert to an amortizing loan may experience higher delinquencies and higher loss rates than those in the initial draw period. The Company’s allowance for loan loss methodology takes this increased inherent risk into consideration. The following table presents when current outstanding HELOCs will convert to amortizing loans:

The Company also has exposure to concentration risk from its margin and securities lending and client option and futures activities collateralized by or referencing securities of a single issuer, an index, or within a single industry. This concentration risk is mitigated by collateral arrangements that require the fair value of such collateral exceed the amounts loaned.

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 $8.6 billion at June 30, 2015.

European Holdings

The Company has exposure to non-sovereign financial and non-financial institutions in Europe. The following table shows the balances of this exposure by each country in Europe in which the issuer or counterparty is domiciled. The Company has no direct exposure to sovereign governments in Europe. The Company does not have unfunded commitments to counterparties in Europe, nor does it have exposure as a result of credit default protection purchased or sold separately as of June 30, 2015.

In addition to the direct holdings of European companies listed above, the Company also has indirect exposure to Europe through its investments in Schwab sponsored money market funds (collectively, the Funds) resulting from clearing activities. At June 30, 2015, the Company had $248 million in investments in these Funds. Certain of the Funds’ positions include certificates of deposits, time deposits, commercial paper and corporate debt securities issued by counterparties in Europe.



June 30, 2015 BalanceConverted to amortizing loan by period end $ 393 Within 1 year 229 > 1 year – 3 years 592 > 3 years – 5 years 797 > 5 years 832

Total $ 2,843

Fair Value as of June 30, 2015United

France Netherlands Norway Sweden Switzerland Kingdom TotalCash equivalents $ 250 $ - $ 200 $ - $ - $ - $ 450 Securities available for sale 85 35 75 521 650 750 2,116 Total fair value $ 335 $ 35 $ 275 $ 521 $ 650 $ 750 $ 2,566 Total amortized cost $ 335 $ 35 $ 275 $ 520 $ 650 $ 750 $ 2,565 Maturities:Overnight $ 250 $ - $ 200 $ - $ - $ - $ 450 1 day – < 6 months - - - - 275 150 425 6 months – < 1 year - - - 151 50 200 401 1 year – 2 years - - - 370 125 300 795 > 2 years 85 35 75 - 200 100 495 Total fair value $ 335 $ 35 $ 275 $ 521 $ 650 $ 750 $ 2,566

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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, 2014. There have been no changes to these critical accounting estimates during the first half of 2015.



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Item 3. Quantitative and Qualitative Disclosures About Market Risk

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

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. The majority of the Company’s interest-earning assets and interest-bearing liabilities are sensitive to changes in short-term interest rates. To a lesser degree, the Company is sensitive to changes in long-term interest rates through some of its investment portfolios. To manage the Company’s market risk related to interest rates, management utilizes simulation models, which include the net interest revenue sensitivity analysis described below.

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 reprice 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 that tend to increase in a declining rate environment and decrease in a rising rate environment. Because the Company establishes the rates paid on certain brokerage client cash balances and bank deposits and the rates charged on margin loans and bank 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.

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.

The Company is also subject to market risk as a result of fluctuations in option and equity prices. The Company’s direct holdings of option and equity securities and its associated exposure to option and equity prices are not material. The Company is indirectly exposed to option, futures, and equity market fluctuations in connection with client option and futures accounts, 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. Current 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.

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

The Company’s market risk related to financial instruments held for trading is not material.

Net Interest Revenue Simulation

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


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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.

If the Company’s guidelines for its net interest revenue sensitivity are breached, management must report the breach to the Company’s Corporate Asset-Liability Management and Pricing Committee (Corporate ALCO) and establish a plan to address the interest rate risk. This plan could include, but is not limited to, rebalancing certain investment portfolios or using derivative instruments to mitigate the interest rate risk. Depending on the severity and expected duration of the breach, as well as the then current interest rate environment, the plan could also be to take no action. Any plan that recommends taking action is required to be approved by the Company’s Corporate ALCO. There were no breaches of the Company’s net interest revenue sensitivity guidelines during the first half of 2015 or year ended December 31, 2014.

As represented by the simulations presented below, the Company’s investment strategy is structured to produce an increase in net interest revenue when interest rates rise and, conversely, a decrease in net interest revenue when interest rates fall.

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, 2015 and December 31, 2014.

The sensitivities shown in the simulation reflect the fact that short-term interest rates in the first half of 2015 remained at 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. A decline in interest rates could 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.



Increase of 100 basis points 10.6 % 11.8 % Decrease of 100 basis points (5.9)% (4.9) %

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See Notes to Condensed Consolidated Financial Statements.

Part I – FINANCIAL INFORMATIONItem 1. Condensed Consolidated Financial Statements

THE CHARLES SCHWAB CORPORATIONCondensed Consolidated Statements of Income

(In Millions, Except Per Share Amounts)(Unaudited)

Three Months Ended Six Months Ended June 30, June 30,

2015 2014 2015 2014Net Revenues

Asset management and administration fees $ 670 $ 632 $ 1,314 $ 1,243 Interest revenue 645 588 1,262 1,167 Interest expense (33) (26) (62) (52)

Net interest revenue 612 562 1,200 1,115 Trading revenue 203 212 430 459 Other 79 65 142 133 Provision for loan losses 2 7 6 6

Total net revenues 1,566 1,478 3,092 2,956 Expenses Excluding Interest

Compensation and benefits 540 520 1,121 1,048 Professional services 112 112 226 218 Occupancy and equipment 85 80 168 160 Advertising and market development 62 65 131 128 Communications 59 57 117 113 Depreciation and amortization 55 48 109 96 Other 86 75 169 150

Total expenses excluding interest 999 957 2,041 1,913 Income before taxes on income 567 521 1,051 1,043 Taxes on income 214 197 396 393 Net Income 353 324 655 650 Preferred stock dividends and other 23 22 34 30 Net Income Available to Common Stockholders $ 330 $ 302 $ 621 $ 620 Weighted-Average Common Shares Outstanding — Diluted 1,326 1,313 1,325 1,312 Earnings Per Common Share — Basic $ .25 $ .23 $ .47 $ .47Earnings Per Common Share — Diluted $ .25 $ .23 $ .47 $ .47(1) Includes preferred stock dividends and undistributed earnings and dividends allocated to non-vested restricted stock units.

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(1)


THE CHARLES SCHWAB CORPORATIONCondensed Consolidated Statements of Comprehensive Income

(In Millions)(Unaudited)


2015 2014 2015 2014Net Income $ 353 $ 324 $ 655 $ 650 Other comprehensive income (loss), before tax:

Change in net unrealized gain on securities available for sale:Net unrealized gain (loss) (91) 126 16 285 Other reclassifications included in other revenue - (1) - (2)

Other comprehensive income (loss), before tax (91) 125 16 283 Income tax effect 34 (47) (7) (106)

Other comprehensive income (loss), net of tax (57) 78 9 177 Comprehensive Income $ 296 $ 402 $ 664 $ 827

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THE CHARLES SCHWAB CORPORATIONCondensed Consolidated Balance Sheets(In Millions, Except Per Share and Share Amounts)

(Unaudited)


AssetsCash and cash equivalents $ 9,017 $ 11,363 Cash and investments segregated and on deposit for regulatory purposes

(including resale agreements of $8,422 at June 30, 2015 and $10,186at December 31, 2014) 17,884 20,781

Receivables from brokers, dealers, and clearing organizations 917 469 Receivables from brokerage clients — net 16,618 15,669 Other securities owned — at fair value 611 516 Securities available for sale 63,415 54,783 Securities held to maturity (fair value — $37,979 at June 30, 2015 and

$34,743 at December 31, 2014) 37,747 34,389 Bank loans — net 14,014 13,399 Equipment, office facilities, and property — net 1,091 1,039 Goodwill 1,227 1,227 Intangible assets — net 204 227 Other assets 882 780

Total assets $ 163,627 $ 154,642

Liabilities and Stockholders’ EquityBank deposits $ 112,911 $ 102,815 Payables to brokers, dealers, and clearing organizations 2,518 2,004 Payables to brokerage clients 31,480 34,305 Accrued expenses and other liabilities 1,401 1,816 Long-term debt 2,894 1,899

Total liabilities 151,204 142,839

Stockholders’ equity:Preferred stock — $.01 par value per share; aggregate liquidation

preference of $885 874 872 Common stock — 3 billion shares authorized; $.01 par value per share;

1,487,543,446 shares issued 15 15 Additional paid-in capital 4,124 4,050 Retained earnings 10,664 10,198 Treasury stock, at cost — 172,482,892 shares at June 30, 2015 and

176,821,202 shares at December 31, 2014 (3,428) (3,497)Accumulated other comprehensive income 174 165

Total stockholders’ equity 12,423 11,803 Total liabilities and stockholders’ equity $ 163,627 $ 154,642

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THE CHARLES SCHWAB CORPORATIONCondensed Consolidated Statements of Cash Flows

(In Millions)(Unaudited)

Six Months Ended June 30,

2015 2014Cash Flows from Operating Activities

Net income $ 655 $ 650 Adjustments to reconcile net income to net cash (used for) provided by operating activities:

Provision for loan losses (6) (6)Stock-based compensation 69 54 Depreciation and amortization 109 96 Premium amortization, net, on securities available for sale and securities held to maturity 77 58 Other 3 7

Net change in:Cash and investments segregated and on deposit for regulatory purposes 2,897 4,460 Receivables from brokers, dealers, and clearing organizations (445) (9)Receivables from brokerage clients (954) (722)Other securities owned (95) (66)Other assets (33) (47)Payables to brokers, dealers, and clearing organizations 269 95 Payables to brokerage clients (2,825) (3,849)Accrued expenses and other liabilities (458) (220)

Net cash (used for) provided by operating activities (737) 501 Cash Flows from Investing Activities

Purchases of securities available for sale (12,423) (6,493)Proceeds from sales of securities available for sale 594 2,045 Principal payments on securities available for sale 3,404 3,194 Purchases of securities held to maturity (5,070) (3,255)Principal payments on securities held to maturity 1,688 1,132 Net increase in bank loans (632) (460)Purchase of equipment, office facilities, and property (125) (165)Other investing activities (4) (8)

Net cash used for investing activities (12,568) (4,010)Cash Flows from Financing Activities

Net change in bank deposits 10,096 2,716 Issuance of long-term debt 998 -Repayment of long-term debt (4) (4)Dividends paid (188) (186)Proceeds from stock options exercised and other 50 81 Other financing activities 7 6

Net cash provided by financing activities 10,959 2,613 Decrease in Cash and Cash Equivalents (2,346) (896)Cash and Cash Equivalents at Beginning of Period 11,363 7,728 Cash and Cash Equivalents at End of Period $ 9,017 $ 6,832

Supplemental Cash Flow InformationCash paid during the period for:

Interest $ 53 $ 51 Income taxes $ 386 $ 403

Non-cash investing activity:Securities purchased during the period but settled after period end $ 245 $ 163

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1. Introduction and Basis of Presentation

The Charles Schwab Corporation (CSC) is a savings and loan holding company engaged, through its subsidiaries, in wealth management, securities brokerage, banking, money management, and financial advisory services. Charles Schwab & Co., Inc. (Schwab) is a securities broker-dealer with over 325 domestic branch offices in 45 states, as well as a branch in each of the Commonwealth of Puerto Rico and London, England. 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 for 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 (U.S.), which require management to make certain estimates and assumptions that affect the reported amounts in the accompanying financial statements. Certain estimates relate to valuation of goodwill, allowance for loan losses, legal and regulatory reserves, and other-than-temporary impairment (OTTI) of securities available for sale and securities held to maturity. 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. 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, 2014.

The Company’s significant accounting policies are included in note “2 – Summary of Significant Accounting Policies” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014. There have been no significant changes to these accounting policies during the first half of 2015.

Principles of Consolidation

The Company accounts for investments in entities for which it owns a voting interest and for which it has the ability to exercise significant influence over operating and financing decisions using the equity method of accounting. Investments in entities for which the Company does not have the ability to exercise significant influence are generally carried at cost. Both equity method and cost method investments are included in other assets.

The Company evaluates its initial and continuing involvement with certain entities to determine if the Company is required to consolidate the entities under the variable interest entity (VIE) model. For interests in entities other than the Company’s sponsored funds, the evaluation is based on a qualitative assessment of whether the Company is the primary beneficiary of the VIE. The primary beneficiary of a VIE has the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance and the obligation to absorb losses of the VIE that potentially could be significant to the VIE or the right to receive benefits from the VIE that potentially could be significant to the VIE.

The primary beneficiary determination for the Company’s sponsored funds is based on a quantitative assessment of whether the Company would absorb a majority of the VIE’s expected losses, receive a majority of the VIE’s expected residual returns, or both. Based upon the Company’s assessments, we have determined we are not the primary beneficiary of and, therefore, are not required to consolidate any VIEs.

2. New Accounting Standards

Adoption of New Accounting Standard

In January 2014, the Financial Accounting Standards Board (FASB) issued new guidance for creditors of consumer mortgage loans, which was effective January 1, 2015. The guidance clarifies when physical possession of a property underlying a consumer mortgage loan transfers to the creditor, and therefore when a loan receivable should be derecognized and the real estate property underlying the loan should be recognized. The adoption of this new guidance in the first quarter of 2015 did not have an impact on the Company’s financial statements or earnings per common share (EPS) as the Company’s practice for recognizing foreclosed real estate was already consistent with the guidance.

THE CHARLES SCHWAB CORPORATIONNotes to Condensed Consolidated Financial Statements

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

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®

New Accounting Standards Not Yet Adopted

In May 2014, the FASB issued new guidance on revenue recognition, which will become effective January 1, 2018. The guidance clarifies that revenue from contracts with customers should be recognized in a manner that depicts the timing of the related transfer of goods or performance of services at an amount that reflects the expected consideration. The Company is currently evaluating the impact of this new guidance on its financial statements and EPS.

In February 2015, the FASB issued new guidance that amends the analysis a reporting entity must perform to determine whether it should consolidate certain types of legal entities. The new guidance will become effective January 1, 2016, and is applicable to all entities but provides an exception for reporting entities with interests in legal entities that are required to comply with or operate in accordance with requirements that are similar to those in Rule 2a-7 of the Investment Company Act of 1940 for registered money market funds. The Company is currently evaluating the impact of this new guidance on its financial statements and EPS.

In April 2015, the FASB issued new guidance that changes the presentation of debt issuance costs. The new guidance will require debt issuance costs related to a recognized debt liability to be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. Currently, debt issuance costs are presented as a separate asset. The new guidance, which will become effective January 1, 2016, will not impact the Company’s financial results or EPS as the change only affects the balance sheet presentation of debt issuance costs; recognition and measurement of debt issuance costs will not be affected.

In April 2015, the FASB issued new guidance that clarifies customer’s accounting for fees paid in a cloud computing arrangement. Under the new guidance, if a cloud computing arrangement includes a software license, the customer shall account for the software license element of the arrangement consistent with the acquisition of other software licenses. If the cloud computing arrangement does not include a software license, the customer shall account for the arrangement as a service contract. The guidance will become effective January 1, 2016. The Company is currently evaluating the impact of this new guidance on its financial statements and EPS.

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:



Gross GrossAmortized Unrealized Unrealized Fair

June 30, 2015 Cost Gains Losses ValueSecurities available for sale:U.S. agency mortgage-backed securities $ 20,623 $ 221 $ 19 $ 20,825 Asset-backed securities 21,615 73 18 21,670 Corporate debt securities 9,534 30 10 9,554 U.S. agency notes 5,307 2 18 5,291 Treasury securities 3,818 13 - 3,831 Certificates of deposit 1,924 1 1 1,924 Non-agency commercial mortgage-backed securities 302 5 - 307 Other securities 13 - - 13

Total securities available for sale $ 63,136 $ 345 $ 66 $ 63,415 Securities held to maturity:U.S. agency mortgage-backed securities $ 36,524 $ 467 $ 223 $ 36,768 Non-agency commercial mortgage-backed securities 1,000 9 17 992 Treasury securities 223 - 4 219

Total securities held to maturity $ 37,747 $ 476 $ 244 $ 37,979

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Schwab Bank pledges securities issued by federal agencies to secure certain trust deposits. The fair value of these pledged securities was $170 million at June 30, 2015.

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



Gross GrossAmortized Unrealized Unrealized Fair

December 31, 2014 Cost Gains Losses ValueSecurities available for sale:Asset-backed securities $ 19,320 $ 64 $ 18 $ 19,366 U.S. agency mortgage-backed securities 18,487 242 12 18,717 Corporate debt securities 8,023 30 8 8,045 U.S. agency notes 3,839 - 44 3,795 Treasury securities 2,993 2 1 2,994 Certificates of deposit 1,533 1 - 1,534 Non-agency commercial mortgage-backed securities 310 7 - 317 Other securities 15 - - 15

Total securities available for sale $ 54,520 $ 346 $ 83 $ 54,783 Securities held to maturity:U.S. agency mortgage-backed securities $ 33,388 $ 531 $ 174 $ 33,745 Non-agency commercial mortgage-backed securities 1,001 11 14 998

Total securities held to maturity $ 34,389 $ 542 $ 188 $ 34,743

Less than 12 months12 months or longer Total

Fair Unrealized Fair Unrealized Fair UnrealizedJune 30, 2015 Value Losses Value Losses Value LossesSecurities available for sale:U.S. agency mortgage-backed securities $ 3,759 $ 14 $ 1,135 $ 5 $ 4,894 $ 19 Asset-backed securities 6,466 16 712 2 7,178 18 Corporate debt securities 2,739 8 654 2 3,393 10 U.S. agency notes 1,120 5 2,253 13 3,373 18 Certificates of deposit 898 1 - - 898 1

Total $ 14,982 $ 44 $ 4,754 $ 22 $ 19,736 $ 66 Securities held to maturity:U.S. agency mortgage-backed securities $ 13,093 $ 188 $ 1,968 $ 35 $ 15,061 $ 223 Non-agency commercial mortgage-backed

securities 657 17 - - 657 17 Treasury securities 219 4 - - 219 4

Total $ 13,969 $ 209 $ 1,968 $ 35 $ 15,937 $ 244 Total securities with unrealized losses $ 28,951 $ 253 $ 6,722 $ 57 $ 35,673 $ 310 (1) The number of investment positions with unrealized losses totaled 244 for securities available for sale and 171 for securities

held to maturity.

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(1)

Management evaluates whether securities available for sale and securities held to maturity are OTTI on a quarterly basis as described in note “2—Summary of Significant Accounting Policies” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014. There were no impairment charges recognized during the second quarters or first halves of 2015 and 2014.



Less than 12 months12 months or longer Total

Fair Unrealized Fair Unrealized Fair UnrealizedDecember 31, 2014 Value Losses Value Losses Value LossesSecurities available for sale:Asset-backed securities $ 5,754 $ 15 $ 792 $ 3 $ 6,546 $ 18 U.S. agency mortgage-backed securities 2,247 5 1,767 7 4,014 12 Corporate debt securities 1,781 4 552 4 2,333 8 U.S. agency notes - - 3,696 44 3,696 44 Treasury securities 1,246 1 - - 1,246 1

Total $ 11,028 $ 25 $ 6,807 $ 58 $ 17,835 $ 83 Securities held to maturity:U.S. agency mortgage-backed securities $ 264 $ 1 $ 10,415 $ 173 $ 10,679 $ 174 Non-agency commercial mortgage-backed

securities - - 660 14 660 14 Total $ 264 $ 1 $ 11,075 $ 187 $ 11,339 $ 188

Total securities with unrealized losses $ 11,292 $ 26 $ 17,882 $ 245 $ 29,174 $ 271 (1) The number of investment positions with unrealized losses totaled 173 for securities available for sale and 111 for securities

held to maturity.

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(1)

The maturities of securities available for sale and securities held to maturity at June 30, 2015 are as follows:

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

4. Bank Loans and Related Allowance for Loan Losses

The composition of bank loans by loan segment is as follows:



After 1 year After 5 yearsWithin through through After1 year 5 years 10 years 10 years Total

Securities available for sale:U.S. agency mortgage-backed securities $ - $ 1,220 $ 7,876 $ 11,729 $ 20,825 Asset-backed securities 1 4,287 5,309 12,073 21,670 Corporate debt securities 1,209 8,345 - - 9,554 U.S. agency notes - 5,291 - - 5,291 Treasury securities - 3,831 - - 3,831 Certificates of deposit 840 1,084 - - 1,924 Non-agency commercial mortgage-backed

securities - - - 307 307 Other securities - - - 13 13

Total fair value $ 2,050 $ 24,058 $ 13,185 $ 24,122 $ 63,415 Total amortized cost $ 2,048 $ 24,021 $ 13,106 $ 23,961 $ 63,136

Securities held to maturity:U.S. agency mortgage-backed securities $ - $ 938 $ 18,184 $ 17,646 $ 36,768 Non-agency commercial mortgage-backed

securities - - 359 633 992 Treasury securities - - 219 - 219

Total fair value $ - $ 938 $ 18,762 $ 18,279 $ 37,979 Total amortized cost $ - $ 923 $ 18,609 $ 18,215 $ 37,747

(1) Mortgage-backed securities have been allocated to 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.


2015 2014 2015 2014Proceeds $ 444 $ 760 $ 594 $ 2,045 Gross realized gains $ 1 $ 1 $ 1 $ 2 Gross realized losses $ 1 $ - $ 1 $ -


Residential real estate mortgages $ 8,236 $ 8,127 Home equity loans and lines of credit 2,843 2,955 Personal loans secured by securities 2,919 2,320 Other 52 39

Total bank loans 14,050 13,441 Allowance for loan losses (36) (42)

Total bank loans – net $ 14,014 $ 13,399 (1) All loans are evaluated for impairment by loan segment.

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(1)

(1)

(1)

(1)

(1)

The Company has commitments to extend credit related to unused home equity lines of credit (HELOCs), personal loans secured by securities, and other lines of credit, which totaled $7.1 billion and $6.7 billion at June 30, 2015 and December 31, 2014, respectively. All of the personal loans were fully collateralized by securities with fair values in excess of borrowings at June 30, 2015 and December 31, 2014.

Schwab Bank provides a co-branded loan origination program for Schwab Bank clients (the Program) with Quicken Loans, Inc. (Quicken Loans ). Pursuant to the Program, Quicken Loans originates and services first lien residential real estate mortgage loans (First Mortgages) and HELOCs for Schwab Bank clients. Under the Program, Schwab Bank purchases certain First Mortgages and HELOCs that are originated by Quicken Loans. Schwab Bank purchased First Mortgages of $542 million and $332 million during the second quarters of 2015 and 2014, respectively and $982 million and $618 million during the first halves of 2015 and 2014, respectively. Schwab Bank purchased HELOCs with commitments of $165 million and $175 million during the second quarters of 2015 and 2014, respectively, and $282 million and $347 million during the first halves of 2015 and 2014, respectively.

Credit Quality

Changes in the allowance for loan losses were as follows:

The delinquency and nonaccrual analysis by loan class is as follows:



Three Months Ended June 30, 2015 June 30, 2014Residential Home Equity Residential Home EquityReal Estate Loans and Real Estate Loans andMortgages Lines of Credit Total Mortgages Lines of Credit Total

Balance at beginning of period $ 26 $ 12 $ 38 $ 33 $ 15 $ 48 Charge-offs - (1) (1) - (1) (1)Recoveries - 1 1 1 - 1 Provision for loan losses (3) 1 (2) (6) (1) (7)Balance at end of period $ 23 $ 13 $ 36 $ 28 $ 13 $ 41

Six Months Ended June 30, 2015 June 30, 2014Residential Home Equity Residential Home EquityReal Estate Loans and Real Estate Loans andMortgages Lines of Credit Total Mortgages Lines of Credit Total

Balance at beginning of period $ 29 $ 13 $ 42 $ 34 $ 14 $ 48 Charge-offs - (2) (2) (1) (2) (3)Recoveries - 2 2 1 1 2 Provision for loan losses (6) - (6) (6) - (6)Balance at end of period $ 23 $ 13 $ 36 $ 28 $ 13 $ 41

>90 days past Total past due30-59 days 60-89 days due and other and other Total

June 30, 2015 Current past due past due nonaccrual loans nonaccrual loans loans

Residential real estate mortgages $ 8,206 $ 8 $ 1 $ 21 $ 30 $ 8,236 Home equity loans and lines of credit 2,830 2 1 10 13 2,843 Personal loans secured by securities 2,919 - - - - 2,919 Other 52 - - - - 52

Total bank loans $ 14,007 $ 10 $ 2 $ 31 $ 43 $ 14,050

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®

There were no loans accruing interest that were contractually 90 days or more past due at June 30, 2015 or December 31, 2014. Nonperforming assets, which include nonaccrual loans and other real estate owned, totaled $39 million and $44 million at June 30, 2015 and December 31, 2014, respectively. Troubled debt restructurings were not material at June 30, 2015 or December 31, 2014.

In addition to monitoring delinquency, the Company monitors the credit quality of residential real estate mortgages and HELOCs by stratifying the portfolios by the year of origination, borrower FICO scores at origination (Origination FICO), updated borrower FICO scores (Updated FICO), loan-to-value (LTV) ratios at origination (Origination LTV), and estimated current LTV ratios (Estimated Current 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 2015. The Origination LTV and Estimated Current LTV ratios for a HELOC include any first lien mortgage outstanding on the same property at the time of the HELOC’s origination. The Estimated Current LTV for each loan is estimated by reference to a home price appreciation index.

As of June 30, 2015, 48% of the Company’s HELOC and First Mortgage portfolio were concentrated in California. These loans have performed in a manner consistent with the portfolio as a whole.

N/A Not applicable.



>90 days past Total past due30-59 days 60-89 days due and other and other Total

December 31, 2014 Current past due past due nonaccrual loans nonaccrual loans loans

Residential real estate mortgages $ 8,092 $ 9 $ 2 $ 24 $ 35 $ 8,127 Home equity loans and lines of credit 2,942 1 1 11 13 2,955 Personal loans secured by securities 2,320 - - - - 2,320 Other 38 1 - - 1 39

Total bank loans $ 13,392 $ 11 $ 3 $ 35 $ 49 $ 13,441

Weighted Percent of LoansAverage Utilization that are on

June 30, 2015 Balance Updated FICO Rate Nonaccrual StatusResidential real estate mortgages:Estimated Current LTV

<70% $ 7,385 775 N/A 0.03 % >70% – <90% 763 764 N/A 0.48 % >90% – <100% 47 741 N/A 3.67 % >100% 41 721 N/A 10.57 %

Total $ 8,236 773 N/A 0.14 % Home equity loans and lines of credit:Estimated Current LTV

<70% $ 2,287 772 36 % 0.05 % >70% – <90% 436 762 49 % 0.36 % >90% – <100% 63 752 58 % 0.66 % >100% 57 744 65 % 1.23 %

Total $ 2,843 770 39 % 0.14 % (1) The Utilization Rate is calculated using the outstanding HELOC balance divided by the associated total line of credit.

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(1)

N/A Not applicable.



Residential Home EquityReal Estate Loans and

June 30, 2015 Mortgages Lines of CreditYear of origination

Pre-2011 $ 999 $ 2,085 2011 501 126 2012 1,886 134 2013 2,742 247 2014 1,140 188 2015 968 63

Total $ 8,236 $ 2,843 Origination FICO

<620 $ 9 $ -620 – 679 90 16 680 – 739 1,364 521 >740 6,773 2,306

Total $ 8,236 $ 2,843 Origination LTV

<70% $ 5,728 $ 1,919 >70% – <90% 2,493 905 >90% – <100% 15 19

Total $ 8,236 $ 2,843

Weighted Percent of LoansAverage Utilization that are on

December 31, 2014 Balance Updated FICO Rate Nonaccrual StatusResidential real estate mortgages:Estimated Current LTV

<70% $ 7,131 774 N/A 0.04 % >70% – <90% 882 765 N/A 0.50 % >90% – <100% 61 740 N/A 2.95 % >100% 53 726 N/A 10.95 %

Total $ 8,127 773 N/A 0.18 % Home equity loans and lines of credit:Estimated Current LTV

<70% $ 2,282 773 36 % 0.08 % >70% – <90% 526 762 48 % 0.34 % >90% – <100% 81 749 61 % 1.67 % >100% 66 742 63 % 1.54 %

Total $ 2,955 769 39 % 0.20 % (1) The Utilization Rate is calculated using the outstanding HELOC balance divided by the associated total line of credit.

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(1)

5. Borrowings

See note “13 – Borrowings” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014. There have been no significant changes to the Company’s borrowings with the exception of the issuance disclosed below.

Long-term debt, including unamortized debt discounts and premiums, where applicable, consists of the following:

On March 10, 2015, CSC issued $625 million aggregate principal amount of Senior Notes that mature in 2018 and $375 million aggregate principal amount of Senior Notes that mature in 2025 under its universal shelf registration statement on file with the Securities and Exchange Commission (SEC). The Senior Notes due 2018 have a fixed interest rate of 1.50% with interest payable semi-annually. The Senior Notes due 2025 have a fixed interest rate of 3.00% with interest payable semi-annually.



Residential Home EquityReal Estate Loans and

December 31, 2014 Mortgages Lines of CreditYear of origination

Pre-2011 $ 1,119 $ 2,244 2011 588 137 2012 2,107 147 2013 3,047 250 2014 1,266 177

Total $ 8,127 $ 2,955 Origination FICO

<620 $ 10 $ -620 – 679 97 18 680 – 739 1,366 549 >740 6,654 2,388

Total $ 8,127 $ 2,955 Origination LTV

<70% $ 5,572 $ 1,979 >70% – <90% 2,538 955 >90% – <100% 17 21

Total $ 8,127 $ 2,955


Senior Notes $ 2,566 $ 1,567 Senior Medium-Term Notes, Series A 249 249 Finance lease obligation 79 83

Total long-term debt $ 2,894 $ 1,899

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Annual maturities on long-term debt outstanding at June 30, 2015 are as follows:

6. Commitments and Contingencies

The Company has clients that sell (i.e., write) listed option contracts that are cleared by the Options Clearing Corporation – a clearing house that establishes 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 Options Clearing Corporation, which are issued by multiple banks. At June 30, 2015, the aggregate face amount of these LOCs totaled $240 million. There were no funds drawn under any of these LOCs at June 30, 2015. In connection with its securities lending activities, the Company is required to provide collateral to certain brokerage clients. The Company satisfies the collateral requirements by providing cash as collateral.

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.

The Company has recorded a liability of $46 million for unfunded commitments related to investments in qualified affordable housing projects at June 30, 2015, which is included in accrued expenses and other liabilities on the balance sheet. These commitments are expected to be paid during the years from 2015 to 2020. The Company also recorded a corresponding asset for the funded and unfunded investments in qualified affordable housing projects of $56 million at June 30, 2015, which is included in other assets on the balance sheet.

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.

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 could be incurred or where the matter may otherwise be of significant interest to stockholders. Unless otherwise noted, the Company is unable to provide a reasonable estimate of any potential liability given the stage of proceedings in the matter.

With respect to all other pending matters, based on current information and consultation with counsel, it does not appear reasonably possible that the outcome of any such matter would be material to the financial condition, operating results or cash flows of the Company. However, predicting the outcome of a litigation or regulatory matter is inherently difficult, 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. It may not be possible to reasonably estimate potential liability, if any, or a range of potential liability until the matter is closer to resolution – pending, for example, further proceedings, the outcome of key motions or appeals, or



2015 $ 353 2016 7 2017 258 2018 908 2019 8 Thereafter 1,376 Total maturities 2,910 Unamortized discount, net (16)

Total long-term debt $ 2,894

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discussions among the parties. Numerous issues may 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.

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, costs and attorneys’ fees. Plaintiffs’ federal securities law claim and certain of plaintiffs’ state law claims were dismissed. On August 8, 2011, the court dismissed plaintiffs’ remaining claims with prejudice. Plaintiffs appealed to the Ninth Circuit, which issued a ruling on March 9, 2015 reversing the district court’s dismissal of the case and remanding the case for further proceedings. Defendants petitioned for Supreme Court review of the Ninth Circuit decision on July 27, 2015. Concurrently, the case is proceeding in trial court, with plaintiff having filed a fourth amended complaint on June 25, 2015, and defendants filing a motion to dismiss on July 24, 2015.

Other Regulatory Matters: On April 16, 2012, optionsXpress, Inc. was charged by the SEC in an administrative proceeding alleging violations of the firm’s close-out obligations under Regulation SHO (short sale delivery rules) in connection with certain customer trading activity. Following trial, in a decision issued June 7, 2013, the judge held that the firm had violated Regulation SHO and aided and abetted fraudulent trading activity by its customer, and ordered the firm and the customer to pay disgorgement and penalties in an amount which would not be material. The Company continues to dispute the allegations and is appealing the decision.

7. Offsetting Assets and Liabilities

Resale and repurchase agreements: Schwab enters into collateralized resale agreements principally with other broker-dealers, which could result in losses in the event the counterparty fails to purchase the securities held as collateral for the cash advanced and the fair value of the securities declines. To mitigate this risk, Schwab requires that the counterparty deliver securities to a custodian, to be held as collateral, with a fair value in excess of the resale price. Schwab also sets standards for the credit quality of the counterparty, monitors the fair value of the underlying securities as compared to the related receivable, including accrued interest, and requires additional collateral where deemed appropriate. The fair value of collateral received in connection with resale agreements that are available to be repledged or sold was $8.6 billion at June 30, 2015 and $10.4 billion at December 31, 2014. Schwab utilizes the collateral provided under these resale agreements to meet obligations under broker-dealer client protection rules, which place limitations on its ability to access such segregated securities. For Schwab to repledge or sell this collateral, it would be required to deposit cash and/or securities of an equal amount into its segregated reserve bank accounts in order to meet its segregated cash and investment requirement. The Company’s resale agreements are not subject to master netting arrangements.

Securities lending: The Company loans client securities temporarily to other brokers in connection with its securities lending activities and receives cash as collateral for the securities loaned. Increases in security prices may cause the fair value of the securities loaned to exceed the amount of cash received as collateral. In the event the counterparty to these transactions does not return the loaned securities or provide additional cash collateral, the Company may be exposed to the risk of acquiring the securities at prevailing market prices in order to satisfy its client obligations. The Company mitigates this risk by requiring credit approvals for counterparties, monitoring the fair value of securities loaned, and requiring additional cash as collateral when necessary. The fair value of client securities pledged in securities lending transactions to other broker-dealers was $1.6 billion at June 30, 2015 and $1.3 billion at December 31, 2014. The Company has also pledged a portion of its securities owned in connection with securities lending transactions to other broker-dealers. Additionally, the Company borrows securities from other broker-dealers to fulfill short sales by clients and delivers cash to the lender in exchange for the securities. The fair value of these borrowed securities was $399 million at June 30, 2015 and $88 million at December 31, 2014. All of the Company’s securities lending transactions are subject to enforceable master netting arrangements with other broker-dealers. However, the Company does not net securities lending transactions and therefore, the Company’s securities loaned and securities borrowed are presented gross in the consolidated balance sheets.



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The following table presents information about the Company’s resale agreements and securities lending activity to enable the users of the Company’s financial statements to evaluate the potential effect of rights of setoff between these recognized assets and recognized liabilities at June 30, 2015 and December 31, 2014.

8. Fair Values of Assets and Liabilities

Assets and liabilities recorded at fair value

The Company uses the market and income approaches to determine the fair value of assets and liabilities. When available, the Company uses quoted prices in active markets to measure the fair value of assets and liabilities. When utilizing market data and bid-ask spread, the Company uses the price within the bid-ask spread that best represents fair value. 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 generally obtains prices from at least three independent pricing sources for assets recorded at fair value and may obtain up to five prices on assets with higher risk of limited observable information, such as non-agency residential mortgage-backed securities. The Company’s primary independent pricing service provides prices based on observable trades and discounted cash flows that incorporate observable information such as yields for similar types of securities (a benchmark interest rate plus observable spreads) and weighted-average maturity for the same or similar “to-be-issued” securities. The Company compares the prices obtained from its primary independent pricing service to the prices obtained from the additional independent pricing services to determine if the price obtained from the primary independent pricing service is reasonable. 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.



Gross Amounts Net Amounts Gross Amounts Not Offset in theGross Offset in the Presented in the Consolidated Balance Sheet

Assets/ Consolidated Consolidated Counterparty NetLiabilities Balance Sheet Balance Sheet Offsetting Collateral Amount

June 30, 2015Assets:

Resale agreements $ 8,422 $ - $ 8,422 $ - $ (8,422) $ -Securities borrowed 533 - 533 (410) (123) -

Total $ 8,955 $ - $ 8,955 $ (410) $ (8,545) $ -Liabilities:

Securities loaned $ 1,894 $ - $ 1,894 $ (410) $ (1,361) $ 123 Total $ 1,894 $ - $ 1,894 $ (410) $ (1,361) $ 123

December 31, 2014Assets:

Resale agreements $ 10,186 $ - $ 10,186 $ - $ (10,186) $ -Securities borrowed 187 - 187 (69) (117) 1

Total $ 10,373 $ - $ 10,373 $ (69) $ (10,303) $ 1 Liabilities:

Securities loaned $ 1,477 $ - $ 1,477 $ (69) $ (1,293) $ 115 Total $ 1,477 $ - $ 1,477 $ (69) $ (1,293) $ 115

(1) Included in cash and investments segregated and on deposit for regulatory purposes in the Company’s consolidated balance sheets.

(2) Actual collateral was greater than 102% of the related assets.(3) Included in receivables from brokers, dealers, and clearing organizations in the Company’s consolidated balance sheets.(4) Included in payables to brokers, dealers, and clearing organizations in the Company’s consolidated balance sheets.(5) Securities loaned are predominantly comprised of equity securities with overnight and continuous remaining contractual

maturities.

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(1) (2)

(3)

(4,5)

(1) (2)

(3)

(4,5)

Financial instruments not recorded at fair value

Descriptions of the valuation methodologies and assumptions used to estimate the fair value of financial instruments not recorded at fair value are described below. The Company’s financial instruments not recorded at fair value but for which fair value can be approximated and disclosed include:

For a description of the fair value hierarchy, see “Note 2 – Summary of Significant Accounting Policies” in the Company’s annual report on Form 10-K for the year ended December 31, 2014. There were no significant changes in these policies and methodologies during the first half of 2015. The Company did not transfer any assets or liabilities between Level 1, Level 2, or Level 3 during the six months ended June 30, 2015, or the year ended December 31, 2014. In addition, the Company did not adjust prices received from the primary independent third-party pricing service at June 30, 2015 or December 31, 2014.



Cash and cash equivalents 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 cash and securities purchased under resale agreements. 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.

Receivables from/payables to brokers, dealers, and clearing organizations are recorded at contractual amounts and historically have been settled at those values and are short-term in nature, and therefore approximate fair value.

Receivables from/payables to brokerage clients — net are recorded at contractual amounts and historically have been settled at those values and are short-term in nature, and therefore approximate fair value.

Securities held to maturity – The fair values of securities held to maturity are obtained using an independent third-party pricing service similar to investment assets recorded at fair value as discussed above.

Bank loans – The fair values of the Company’s residential real estate mortgages and HELOCs are estimated based on prices of mortgage-backed securities collateralized by similar types of loans. Personal loans secured by securities are short-term, variable interest rate loans; accordingly, the carrying values of these loans approximate their fair values.

Financial instruments included in other assets primarily consist of cost method investments and Federal Home Loan Bank (FHLB) stock, whose carrying values approximate their fair values. FHLB stock is recorded at par, which approximates fair value.

Bank deposits have no stated maturity and are recorded at the amount payable on demand as of the balance sheet date. The Company considers the carrying value of these deposits to approximate their fair values.

Financial instruments included in accrued expenses and other liabilities consist of commercial paper, drafts payable and certain amounts due under contractual obligations which are short-term in nature and accordingly are recorded at amounts that approximate fair value.

Long-term debt – Except for the finance lease obligation, the fair values of long-term debt are estimated using indicative, non-binding quotes from independent brokers. The Company validates indicative prices for its debt through comparison to other independent non-binding quotes. The finance lease obligation is recorded at carrying value, which approximates fair value.

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Financial Instruments Recorded at Fair Value

The following tables present the fair value hierarchy for assets measured at fair value. Liabilities recorded at fair value were not material, and therefore are not included in the following tables:



Quoted Pricesin Active Markets Significant Significant

for Identical Other Observable UnobservableAssets Inputs Inputs Balance at

June 30, 2015 (Level 1) (Level 2) (Level 3) Fair Value

Cash equivalents:Money market funds $ 758 $ - $ - $ 758 Commercial paper - 417 - 417

Total cash equivalents 758 417 - 1,175 Investments segregated and on deposit for regulatory

purposes:Certificates of deposit - 3,077 - 3,077 U.S. Government securities - 1,858 - 1,858

Total investments segregated and on deposit forregulatory purposes - 4,935 - 4,935

Other securities owned:Schwab Funds money market funds 248 - - 248 Equity and bond mutual funds 292 - - 292 State and municipal debt obligations - 43 - 43 Equity, U.S. Government and corporate debt, and

other securities 2 26 - 28 Total other securities owned 542 69 - 611

Securities available for sale:U.S. agency mortgage-backed securities - 20,825 - 20,825 Asset-backed securities - 21,670 - 21,670 Corporate debt securities - 9,554 - 9,554 U.S. agency notes - 5,291 - 5,291 Treasury securities - 3,831 - 3,831 Certificates of deposit - 1,924 - 1,924 Non-agency commercial mortgage-backed securities - 307 - 307 Other securities - 13 - 13

Total securities available for sale - 63,415 - 63,415 Total $ 1,300 $ 68,836 $ - $ 70,136

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®




for Identical Other Observable Unobservable Assets Inputs Inputs Balance at

December 31, 2014 (Level 1) (Level 2) (Level 3) Fair Value

Cash equivalents:Money market funds $ 2,142 $ - $ - $ 2,142 Commercial paper - 32 - 32

Total cash equivalents 2,142 32 - 2,174 Investments segregated and on deposit for regulatory

purposes:Certificates of deposit - 4,125 - 4,125 U.S. Government securities - 2,186 - 2,186

Total investments segregated and on deposit forregulatory purposes - 6,311 - 6,311

Other securities owned:Schwab Funds money market funds 224 - - 224 Equity and bond mutual funds 215 - - 215 State and municipal debt obligations - 51 - 51 Equity, U.S. Government and corporate debt, and

other securities 2 24 - 26 Total other securities owned 441 75 - 516

Securities available for sale:Asset-backed securities - 19,366 - 19,366 U.S. agency mortgage-backed securities - 18,717 - 18,717 Corporate debt securities - 8,045 - 8,045 U.S. agency notes - 3,795 - 3,795 Treasury securities - 2,994 - 2,994 Certificates of deposit - 1,534 - 1,534 Non-agency commercial mortgage-backed securities - 317 - 317 Other securities - 15 - 15

Total securities available for sale - 54,783 - 54,783 Total $ 2,583 $ 61,201 $ - $ 63,784

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®

Financial Instruments Not Recorded at Fair Value

The following tables present the fair value hierarchy for financial instruments not recorded at fair value:




for Identical Other Observable UnobservableCarrying Assets Inputs Inputs Balance at

June 30, 2015 Amount (Level 1) (Level 2) (Level 3) Fair Value

Assets:Cash and cash equivalents $ 7,842 $ - $ 7,842 $ - $ 7,842 Cash and investments segregated and

on deposit for regulatory purposes 12,949 - 12,949 - 12,949 Receivables from brokers, dealers, and

clearing organizations 917 - 917 - 917 Receivables from brokerage clients – net 16,618 - 16,618 - 16,618 Securities held to maturity:

U.S. agency mortgage-backed securities 36,524 - 36,768 - 36,768 Non-agency commercial mortgage-backed securities 1,000 - 992 - 992 Treasury securities 223 - 219 - 219

Total securities held to maturity 37,747 - 37,979 - 37,979 Bank loans:

Residential real estate mortgages 8,236 - 8,263 - 8,263 Home equity loans and lines of credit 2,843 - 2,920 - 2,920 Personal loans secured by securities 2,919 - 2,919 - 2,919 Other 52 - 52 - 52

Total bank loans 14,050 - 14,154 - 14,154 Other assets 125 - 125 - 125

Total $ 90,248 $ - $ 90,584 $ - $ 90,584

Liabilities:Bank deposits $ 112,911 $ - $ 112,911 $ - $ 112,911 Payables to brokers, dealers, and clearing

organizations 2,518 - 2,518 - 2,518 Payables to brokerage clients 31,480 - 31,480 - 31,480 Accrued expenses and other liabilities 468 - 468 - 468 Long-term debt 2,894 - 3,010 - 3,010

Total $ 150,271 $ - $ 150,387 $ - $ 150,387 (1) The carrying value of bank loans excludes the allowance for loan losses of $36 million at June 30, 2015.

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(1)

9. Accumulated Other Comprehensive Income

Accumulated other comprehensive income represents cumulative gains and losses that are not reflected in earnings. The components of other comprehensive income are as follows:




for Identical Other Observable UnobservableCarrying Assets Inputs Inputs Balance at

December 31, 2014 Amount (Level 1) (Level 2) (Level 3) Fair Value

Assets:Cash and cash equivalents $ 9,189 $ - $ 9,189 $ - $ 9,189 Cash and investments segregated and

on deposit for regulatory purposes 14,466 - 14,466 - 14,466 Receivables from brokers, dealers, and

clearing organizations 469 - 469 - 469 Receivables from brokerage clients – net 15,666 - 15,666 - 15,666 Securities held to maturity:

U.S. agency mortgage-backed securities 33,388 - 33,745 - 33,745 Non-agency commercial mortgage-backed

securities 1,001 - 998 - 998 Total securities held to maturity 34,389 - 34,743 - 34,743

Bank loans: Residential real estate mortgages 8,127 - 8,158 - 8,158 Home equity loans and lines of credit 2,955 - 3,026 - 3,026 Personal loans secured by securities 2,320 - 2,320 - 2,320 Other 39 - 38 - 38

Total bank loans 13,441 - 13,542 - 13,542 Other assets 76 - 76 - 76

Total $ 87,696 $ - $ 88,151 $ - $ 88,151

Liabilities:Bank deposits $ 102,815 $ - $ 102,815 $ - $ 102,815 Payables to brokers, dealers, and clearing

organizations 2,004 - 2,004 - 2,004 Payables to brokerage clients 34,305 - 34,305 - 34,305 Accrued expenses and other liabilities 687 - 687 - 687 Long-term debt 1,899 - 2,010 - 2,010

Total $ 141,710 $ - $ 141,821 $ - $ 141,821 (1) The carrying value of bank loans excludes the allowance for loan losses of $42 million at December 31, 2014.

Three Months Ended June 30, 2015 2014Before Tax Net of Before Tax Net of

Tax Effect Tax Tax Effect TaxChange in net unrealized gain on

securities available for sale:Net unrealized (loss) gain $ (91) $ 34 $ (57) $ 126 $ (47) $ 79 Other reclassifications included in

other revenue - - - (1) - (1) Change in net unrealized (loss) gain on

securities available for sale (91) 34 (57) 125 (47) 78 Other comprehensive (loss) income $ (91) $ 34 $ (57) $ 125 $ (47) $ 78

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(1)

Accumulated other comprehensive income balances are as follows:

10. Earnings Per Common 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, if dilutive, the effect of outstanding stock options and unvested restricted stock awards and units. EPS under the basic and diluted computations is as follows:



Six Months Ended June 30, 2015 2014Before Tax Net of Before Tax Net of

Tax Effect Tax Tax Effect TaxChange in net unrealized gain on

securities available for sale:Net unrealized gain $ 16 $ (7) $ 9 $ 285 $ (106) $ 179 Other reclassifications included in

other revenue - - - (2) - (2) Change in net unrealized gain on

securities available for sale 16 (7) 9 283 (106) 177 Other comprehensive income $ 16 $ (7) $ 9 $ 283 $ (106) $ 177

TotalAccumulated Other

Comprehensive IncomeBalance at December 31, 2013 $ 9

Net unrealized gain on securities available for sale 177 Balance at June 30, 2014 $ 186 Balance at December 31, 2014 $ 165

Net unrealized gain on securities available for sale 9 Balance at June 30, 2015 $ 174


2015 2014 2015 2014Net income $ 353 $ 324 $ 655 $ 650 Preferred stock dividends and other (23) (22) (34) (30)Net income available to common stockholders $ 330 $ 302 $ 621 $ 620 Weighted-average common shares outstanding — basic 1,314 1,302 1,313 1,301 Common stock equivalent shares related to stock incentive plans 12 11 12 11 Weighted-average common shares outstanding — diluted 1,326 1,313 1,325 1,312 Basic EPS $ .25 $ .23 $ .47 $ .47Diluted EPS $ .25 $ .23 $ .47 $ .47(1) Includes preferred stock dividends and undistributed earnings and dividends allocated to non-vested restricted stock units.(2) Antidilutive stock options and restricted stock awards excluded from the calculation of diluted EPS totaled 15 million and

16 million shares for the second quarters of 2015 and 2014, respectively, and 16 million and 17 million shares for the first halves of 2015 and 2014, respectively.

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(1)

(2)

11. Regulatory Requirements

CSC is a savings and loan holding company and Schwab Bank, CSC’s depository institution subsidiary, is a federal savings bank. CSC is subject to supervision and regulation by the Board of Governors of the Federal Reserve System (the Federal Reserve). Schwab Bank is subject to supervision and regulation by the Office of the Comptroller of the Currency (the OCC), as its primary regulator, the Federal Deposit Insurance Corporation, as its deposit insurer, and the Consumer Financial Protection Bureau. CSC is required to serve as a source of strength for Schwab Bank. Prior to January 1, 2015, CSC, as a savings and loan holding company, was not subject to certain statutory capital requirements. Beginning on January 1, 2015, CSC became subject to new capital requirements set by the Federal Reserve.

Schwab Bank is subject to regulation and supervision and to various requirements and restrictions under federal and state laws, including regulatory capital guidelines. Among other things, these requirements also restrict and govern the terms of affiliate transactions, such as extensions of credit and repayment of loans between Schwab Bank and CSC or CSC’s other subsidiaries. In addition, Schwab Bank is required to provide notice to and may be required to obtain approval of the OCC and the Federal Reserve to declare dividends to CSC. The federal banking agencies have broad powers to enforce these regulations, including the power to terminate deposit insurance, impose substantial fines and other civil and criminal penalties, and appoint a conservator or receiver. Under the Federal Deposit Insurance Act, Schwab Bank could be subject to restrictive actions if it were to fall within one of the lowest three of five capital categories. CSC and Schwab Bank are required to maintain minimum capital levels as specified in federal banking laws and regulations. Failure to meet the minimum levels could result in certain mandatory and possibly additional discretionary actions by the regulators that, if undertaken, could have a direct material effect on CSC and Schwab Bank. At June 30, 2015, CSC and Schwab Bank met the capital level requirements.

The regulatory capital and ratios for CSC and Schwab Bank at June 30, 2015 are as follows:

N/A Not applicable.

Based on its regulatory capital ratios at June 30, 2015, Schwab Bank is considered well capitalized (the highest category) pursuant to banking regulatory guidelines. There are no conditions or events since June 30, 2015, that management believes have changed Schwab Bank’s capital category.

CSC’s principal U.S. broker-dealers are Schwab and optionsXpress, Inc. Schwab and optionsXpress, Inc. are both subject to Rule 15c3-1 under the Securities Exchange Act of 1934 (the Uniform Net Capital Rule). Schwab and optionsXpress, Inc. compute 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 ($250,000), 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 a net capital amount of less than 5% of aggregate debit balances or less than 120% of its minimum dollar requirement.



Minimum to be Minimum CapitalActual Well Capitalized Requirement

Amount Ratio Amount Ratio Amount RatioCSCCommon Equity Tier 1 Risk-Based Capital $ 10,140 14.8 % N/A $ 3,094 4.5 % Tier 1 Risk-Based Capital $ 11,014 16.0 % N/A $ 4,125 6.0 % Total Risk-Based Capital $ 11,051 16.1 % N/A $ 5,501 8.0 % Tier 1 Leverage $ 11,014 7.0 % N/A $ 6,342 4.0 % Schwab BankCommon Equity Tier 1 Risk-Based Capital $ 8,365 17.7 % $ 3,071 6.5 % $ 2,126 4.5 % Tier 1 Risk-Based Capital $ 8,365 17.7 % $ 3,779 8.0 % $ 2,834 6.0 % Total Risk-Based Capital $ 8,401 17.8 % $ 4,724 10.0 % $ 3,779 8.0 % Tier 1 Leverage $ 8,365 7.0 % $ 5,962 5.0 % $ 4,770 4.0 %

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optionsXpress, Inc. is also subject to Commodity Futures Trading Commission Regulation 1.17 (Reg. 1.17) under the Commodity Exchange Act, which also requires the maintenance of minimum net capital. optionsXpress, Inc., as a futures commission merchant, is required to maintain minimum net capital equal to the greater of its net capital requirement under Reg. 1.17 ($1 million), or the sum of 8% of the total risk margin requirements for all positions carried in client accounts and 8% of the total risk margin requirements for all positions carried in non-client accounts (as defined in Reg. 1.17).

Net capital and net capital requirements for Schwab and optionsXpress, Inc. at June 30, 2015 are as follows:

12. Segment Information

The Company’s two reportable segments are Investor Services and Advisor Services. The Company structures its operating segments according to its clients and the services provided to those clients. The Investor Services segment provides retail brokerage and banking services to individual investors, retirement plan services, and corporate brokerage services. The Advisor Services segment provides custodial, trading, and support services to independent investment advisors, and retirement business services to independent retirement plan advisors and recordkeepers whose plan assets are held at Schwab Bank. 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 extraordinary or significant non-recurring items and results of discontinued operations. Segment assets and liabilities are not used for evaluating segment performance or in deciding how to allocate resources to segments. There are no revenues from transactions between the segments.

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



Net Capital Net Capital% of Minimum 2% of in Excess of in Excess of 5%

Aggregate Net Capital Aggregate Required of AggregateNet Capital Debit Balances Required Debit Balances Net Capital Debit Balances

Schwab $ 1,650 9 % $ 0.250 $ 353 $ 1,297 $ 767 optionsXpress, Inc. $ 131 31 % $ 1 $ 8 $ 123 $ 110

Investor Services Advisor Services Unallocated TotalThree Months Ended June 30, 2015 2014 2015 2014 2015 2014 2015 2014Net Revenues:Asset management and administration fees $ 474 $ 441 $ 196 $ 191 $ - $ - $ 670 $ 632 Net interest revenue 524 504 88 58 - - 612 562 Trading revenue 135 145 68 67 - - 203 212 Other 58 47 21 18 - - 79 65 Provision for loan losses 2 6 - 1 - - 2 7

Total net revenues 1,193 1,143 373 335 - - 1,566 1,478 Expenses Excluding Interest 770 734 229 223 - - 999 957 Income before taxes on income $ 423 $ 409 $ 144 $ 112 $ - $ - $ 567 $ 521

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13. Subsequent Event

On August 3, 2015, the Company issued and sold 24 million depositary shares, each representing a 1/40 ownership interest in a share of 6.00% non-cumulative perpetual preferred stock, Series C, $0.01 par value, with a liquidation preference of $1,000per share (equivalent to $25 per depositary share) (Series C Preferred Stock). The Series C Preferred Stock has a fixed dividend rate of 6.00%. Net proceeds received from the sale were $581 million and are being used to support balance sheet growth, including the migration of certain client balances from sweep money market funds into Schwab Bank.



Investor Services Advisor Services Unallocated TotalSix Months Ended June 30, 2015 2014 2015 2014 2015 2014 2015 2014Net Revenues:Asset management and administration fees $ 928 $ 869 $ 386 $ 374 $ - $ - $ 1,314 $ 1,243 Net interest revenue 1,034 999 166 116 - - 1,200 1,115 Trading revenue 286 316 144 143 - - 430 459 Other 103 98 39 35 - - 142 133 Provision for loan losses 6 5 - 1 - - 6 6

Total net revenues 2,357 2,287 735 669 - - 3,092 2,956 Expenses Excluding Interest 1,564 1,472 477 441 - - 2,041 1,913 Income before taxes on income $ 793 $ 815 $ 258 $ 228 $ - $ - $ 1,051 $ 1,043

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th

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, 2015. 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, 2015.

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, 2015, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.


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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 – 6. Commitments and Contingencies.”

Item 1A. Risk Factors

During the first half of 2015, 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, 2014.

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 2015:

N/A Not applicable.


Total Number of Approximate DollarShares Purchased Value of Shares that

Total Number of Average as Part of Publicly May Yet be PurchasedShares Purchased Price Paid Announced Program Under the Program

Month (in thousands) per Share (in thousands) (in millions)

April:Share repurchase program - $ - - $ 596 Employee transactions 5 $ 30.16 N/A N/A

May:Share repurchase program - $ - - $ 596 Employee transactions 5 $ 31.05 N/A N/A

June:Share repurchase program - $ - - $ 596 Employee transactions 5 $ 31.82 N/A N/A

Total:Share repurchase program - $ - - $ 596 Employee transactions 15 $ 30.96 N/A N/A

(1) There were no share repurchases under the Share Repurchase Program during the second quarter. There were two authorizations under this program 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 delivered or attested to pay the exercise price and/or to satisfy tax withholding obligations by employees who exercise stockoptions (granted under employee stock incentive plans), which are commonly referred to as stock swap exercises.

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(1)

(1)

(2)

(1)

(2)

(1)

(2)

(1)

(2)

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.


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Item 6. Exhibits

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


ExhibitNumber Exhibit

10.365 The Charles Schwab Corporation Corporate Executive Bonus Plan, restated to include amendments approved at the Annual Meeting of Stockholders on May 13, 2015 (supersedes Exhibit 10.331). (1)

10.366 Credit Agreement (364 – Day Commitment) dated as of June 5, 2015, between the Registrant and financial institutions therein (supersedes Exhibit 10.363)

12.1 Computation of Ratio of Earnings to Fixed Charges and Ratio of Earnings to Fixed Charges and Preferred Stock Dividends.

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. (1)

32.2 Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of The Sarbanes-Oxley Act of 2002. (1)

101.INS XBRL Instance Document (2)

101.SCH XBRL Taxonomy Extension Schema (2)

101.CAL XBRL Taxonomy Extension Calculation (2)

101.DEF XBRL Extension Definition (2)

101.LAB XBRL Taxonomy Extension Label (2)

101.PRE XBRL Taxonomy Extension Presentation (2)

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

(2) Attached as Exhibit 101 to this Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2015 are the following materials formatted in XBRL (Extensible Business Reporting Language) (i) the Condensed Consolidated Statements of Income, (ii) the Condensed Consolidated Statements of Comprehensive Income, (iii) the Condensed Consolidated Balance Sheets, (iv) the Condensed Consolidated Statements of Cash Flows, and (v) Notes to Condensed Consolidated Financial Statements.

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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 6, 2015 /s/ Joseph R. MartinettoJoseph R. MartinettoSenior Executive Vice President andChief Financial Officer

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Exhibit 10.365

Corporate Executive Bonus Plan

-----------------------------------------------------------------------

The Charles Schwab Corporation

Corporate Executive Bonus Plan

(As Amended and Restated as of February 23, 2005)

(Approved by Stockholders on May 19, 2005)

(Amended and Restated December 12, 2007)

(Amended and Restated October 23, 2008)

(Amended and Restated December 9, 2009)


(Amended and Restated January 29, 2015)


-----------------------------------------------------------------------

SECTION 1. PURPOSE OF THE PLAN

The Charles Schwab Corporation Corporate Executive Bonus Plan (the "Plan") is established to promote the interests of The Charles Schwab Corporation (the “Corporation”) and its Subsidiaries (as defined in Section 3.(b) below and, collectively with the Corporation, the "Company"), by creating an incentive program to (a) attract and retain employees with outstanding competencies who will strive for excellence; (b) motivate those individuals to exert their best efforts on behalf of the Company by providing them with compensation in addition to their base salaries; and (c) further link theinterests of such employees with those of the Corporation's stockholders through a strong performance-based reward system.

SECTION 2. ADMINISTRATION OF THE PLAN

The Compensation Committee of the Board of Directors of the Corporation (the "Committee") shall administer the Plan. The Committee shall be composed solely of two or more "outside directors" within the meaning of Treasury Regulations Section 1.162-27 (or any successor regulation) and shall be appointed pursuant to the Bylaws of the

1

Corporation. The members of the Committee shall be ineligible for awards under this Plan for services performed while serving on the Committee. The Committee shall have discretionary authority to interpret the Plan, establish rules and regulations to implement the Plan, and make all determinations deemed necessary or advisable for the administration of the Plan, in its sole discretion. Decisions of the Committee shall be final and binding on all parties who have an interest in the Plan.

SECTION 3. ELIGIBILITY FOR AWARDS

(a) Eligibility Requirements. Awards under the Plan may be granted by the Committee to those Employees holding Executive Vice President or comparable or higher executive-level positions with the Company (each an “eligible Employee”).

(b) Definition of Employee. For purposes of the Plan, an individual shall be considered an "Employee" if he or she is employed by the Corporation or other business entity in which the Corporation shall directly or indirectly own, at the time of determination, stock possessing 50% or more of the total combined voting power of all classes of stock or other ownership interest (each a "Subsidiary"). No award may be granted to a member of the Corporation’s Board of Directors except for services performed as an employee of the Company.

SECTION 4. BONUS AWARDS

(a) Form of Awards. Bonus awards under this Plan shall be paid, less applicable withholdings and deductions, in (i) cash and/or (ii) stock and/or stock-based awards granted under The Charles Schwab Corporation 2013 Stock Incentive Plan.

(b) Target Award Amounts. Target award amounts shall be based on a percentage of each eligible Employee’s annual base salary or expressed as a dollar amount for each performance period as determined by the Committee in its sole discretion at the time specified in Section 4.(c)(1) below.

(c) Bonus Formula and Award Amounts.

(1) The bonus awards for each eligible Employee shall be determined according to a formula and/or a matrix or matrices that shall be adopted by the Committee not later than 90 days after the commencement of the performance period, i.e., the period of service to which the performance goal relates, and at a time when the outcome of the performance goal is substantially uncertain. Notwithstanding the 90-day deadline specified in the prior sentence, in the event that a performance period is less than 12 months, the Committee shall establish the performance formula and/or performance matrix or matrices on or before the date when 25 percent of the performance period (as scheduled in good faith at the time the performance goal is established) has elapsed.

2

(2) The formula or matrix or matrices may be different for each eligible Employee and shall be based on one or more objective performance criteria to be selected by the Committee from among the following performance criteria measured on a pre- tax, post-tax, operating, reported, consolidated, Generally Accepted Accounting Principles (“GAAP”), adjusted GAAP, and/or non-GAAP basis: income; profit; profit margin; revenue; 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 stockholders’ common equity; return on investment; earnings; earnings before interest and taxes (EBIT); earnings before interest, taxes, depreciation and amortization (EBITDA); 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; stockholder value; debt/capital ratio; return on total capital; market share of assets; return on assets; return on net assets; return on capital employed; cost control; Corporation common stock price; capital expenditures; price/earnings growth ratio; sales; sales volume; 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 may be measured solely on a corporate, subsidiary, enterprise or business unit basis, or a combination thereof. Further, performance criteria may reflect absolute entity performance or a relative comparison of entity performance to the performance of a peer group of entities or other external measure of the selected performance criteria.

(3) In determining whether any performance goals have been satisfied, the Committee may exclude any or all extraordinary items (as determined under GAAP, unless otherwise specified by the Committee), and any other unusual or non-recurring items, including but not limited to, (i) charges, costs, benefits, gains or income associated with reorganizations or restructurings of the Company, discontinued operations, goodwill, other intangible assets, long-lived assets (non-cash), real estate (e.g., costs related to lease terminations or facility closure obligations), litigation or the resolution of litigation (e.g., attorneys’ fees, settlement amounts or judgments), or currency/commodity fluctuations; and (ii) the effects of changes in applicable laws, regulations or accounting principles. 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 law or accounting procedures, mergers, acquisitions and divestitures, or any other factors as the Committee may determine. To the extent that a performance goal is based on the Corporation’s 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 Corporation, 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 eligible Employees. The Committee shall also adjust the terms and conditions of, and the criteria included in, awards in recognition of unusual or nonrecurring events affecting the Company or the

3

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 Committee shall only make exclusions and adjustments described in this paragraph when (i) the Committee specifies in writing (not later than the time the performance goals are required to be established) which exclusions and adjustments the Committee will apply to determine whether a performance goal has been satisfied, as well as an objective manner for applying them, and (ii) the Committee determines that such exclusions and adjustments may apply without causing the award to fail to qualify as performance-based compensation under Section 162(m) of the Internal Revenue Code of 1986, as amended, (the “Code”).

(4) Awards shall be determined by applying the bonus formula to the target award amount of each eligible Employee. Except in the case of the Chief Executive Officer, payouts described in this subsection shall be calculated and paid on the basis of a quarterly or annual performance period, or a combination thereof, as determined by the Committee in its sole discretion. In the case of the Chief Executive Officer, payouts described in this subsection shall be made on an annual basis, based on the Company’s results for the full year. Unless otherwise provided by the Committee, awards that become payable shall be paid not later than 2½ months after the end of the applicable performance period.

(d) Maximum Award Amounts. The maximum award that may be paid to any eligible Employee (other than the Chief Executive Officer) under this Plan for any calendar year shall not exceed $8 million as calculated by the Committee at the end of the performance period. The maximum award that may be paid to the Chief Executive Officer under this Plan for any calendar year shall not exceed $15 million as calculated by the Committee at the end of the performance period. An eligible Employee may only receive one award under this Plan for any calendar year.

(e) Power to Reduce Bonus Amounts. Notwithstanding anything to the contrary contained in this Plan, the Committee shall have the power, in its sole discretion, to reduce, but not increase, the amount payable to any eligible Employee including the Chief Executive Officer (or to determine that no amount shall be payable to such eligible Employee) with respect to any award prior to the time the amount otherwise would have become payable hereunder. It is expressly permissible to reduce the amount otherwise payable to zero. Such reductions may be based upon the recommendations of the Chief Executive Officer. In the event of such a reduction, the amount of such reduction shall not increase the amounts payable to other eligible Employees under the Plan.

(f) Entitlement to Bonus. No eligible Employee shall earn any portion of a bonus award under the Plan until the last day of the relevant performance period and only if the Committee has approved the bonus award and, to the extent required by section 162(m) of the Code, has certified that the applicable performance criteria have been satisfied.

4

(g) Termination of Employment and Leaves of Absence. Except in the event of retirement, death, or disability, if an Employee ceases to be employed by the Company for any reason on or before the date when a bonus is earned, then he or she shall not earn or receive payment of such bonus under the Plan. If an eligible Employee is on an unpaid leave of absence for a portion of the relevant performance period, the Committee may award a bonus at the end of the performance period based on the achievement of the performance criteria, and such bonus shall be prorated to reflect only the time when he or she was actively employed and not any period when he or she was on leave, except to the extent the Committee determines in its sole discretion that it will not prorate such bonus. In the event of retirement, death, or disability before the last day of the relevant performance period, the Committee shall have the sole discretion to waive the requirement of being employed on the last day of the relevant performance period and award a bonus at the end of the performance period based on the achievement of the performance criteria. For all purposes of the Plan, “retirement” will mean any termination of employment with the Company for any reason other than death at any time after the Employee has attained age 55, but only if, at the time of termination, the Employee has been credited with at least ten (10) Years of Service under the Schwab Plan Retirement Savings and Investment Plan.

(h) Change in Control. The Committee may, in its sole discretion, provide that an eligible Employee shall be eligible for a full or prorated award in the event of a change in control of the Corporation. In the Committee’s sole discretion, any such full or prorated award may be paid under the provisions of this Section 4.(h) prior to when the applicable performance target is certified (or without regard to whether it is certified).

SECTION 5. PAYMENT OF BONUS AWARDS

Bonus awards that are earned and payable shall be paid to each eligible Employee on or after January 1 and on or before March 15 of the calendar year immediately following the end of the Corporation’s fiscal year on which the award is based, regardless of whether the individual has remained in Employee status through the date of payment.

SECTION 6. GENERAL PROVISIONS

(a) Plan Amendments. The Board of Directors of the Corporation or the Committee may at any time amend, suspend or terminate the Plan, provided that it must do so in a written resolution and such action shall not adversely affect rights and interests of eligible Employees to individual bonus awards granted to such amendment, suspension or termination. Stockholder approval shall be obtained for any amendment to the extent necessary and desirable to qualify the awards hereunder as performance-based compensation under section 162(m) of the Code and to comply with applicable laws, regulations or rules.

(b) Benefits Unfunded. No amounts awarded or accrued under this Plan shall be funded, set aside or otherwise segregated prior to payment. The obligation to pay the bonuses awarded hereunder shall at all times be an unfunded and unsecured obligation of

5

st th

the Company. Eligible Employees shall have the status of general creditors and shall look solely to the general assets of the Company for the payment of their bonus awards.

(c) Benefits Nontransferable. No eligible Employee shall have the right to alienate, pledge or encumber his or her interest in this Plan, and such interest shall not (to the extent permitted by law) be subject in any way to the claims of the Employee's creditors or to attachment, execution or other process of law. In the event of the death of an eligible Employee, the payment, if any, shall be made to the persons identified in the applicable beneficiary designation form. In the event there is no applicable beneficiary designation form, the payment, if any, shall be made to the executor or administrator of the estate of the deceased eligible Employee.

(d) No Employment Rights. No action of the Company in establishing the Plan, no action taken under the Plan by the Committee and no provision of the Plan itself shall be construed to grant any person the right to remain in the employ of the Company for any period of specific duration. Rather, each Employee will be employed "at will," which means that either such Employee or the Company may terminate the employment relationship at any time and for any reason, with or without cause or notice. Only the Chief Executive Officer has the authority to enter into an agreement on any other terms, and he or she can only do so in a writing signed by him or her. No Employee shall have the right to any future award under the Plan.

(e) Exclusive Agreement. This Plan document is the full and complete agreement between the eligible Employees and the Company on the terms described herein.

(f) 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).

(g) Section 162(m) of the Code. The Plan will be interpreted and administered in a manner that will qualify bonus awards as performance-based compensation under section 162(m) of the Code, except when the Committee determines such compliance is not necessary or desirable. In the event that changes are made to section 162(m) of the Code that permit greater flexibility with respect to bonus awards made under the Plan, the Committee may make related adjustments that it deems appropriate.

(h) Section 409A of the Code. Payments under the Plan are intended to qualify as short-term deferrals exempt from the requirements of section 409A of the Code. To the extent that any payment under this Plan does not qualify for exemption from section 409Aof the Code, the Company intends for such payment to comply with the requirements of section 409A and the Department of Treasury rulings and regulations thereunder (collectively, “Section 409A”). Accordingly, to the extent applicable, this Plan shall at all times be interpreted and operated in accordance with the requirements of Section 409A. The Company shall take action, or refrain from taking any action, with respect to the payments and benefits under this Plan that is reasonably necessary to comply with Section 409A. In the event that any payment under the Plan shall be deemed

6

not to comply with Section 409A, then neither the Company, the Board of Directors of the Corporation, the Committee nor their designees, agents, affiliates, assigns or successors (each a “protected party”) shall be liable to any eligible Employee 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.

(i) Recoupment Policy. Notwithstanding other provisions of the Plan, awards under the Plan are subject to the Corporation’s recoupment policy as in effect from time to time and, in accordance with such policy, may be subject to the requirement that the Awards be repaid to the Company after they have been distributed to the eligible Employee.

7

EXECUTION COPY

$750,000,000CREDIT AGREEMENT

(364-DAY COMMITMENT)dated as of June 5, 2015

Among


and

CITIBANK, N.A.as Administrative Agent

and

THE OTHER FINANCIAL INSTITUTIONS PARTY HERETOand

THE BANK OF NEW YORK MELLONCREDIT SUISSE AG, CAYMAN ISLANDS BRANCH

andWELLS FARGO BANK, NATIONAL ASSOCIATION

as Co-Documentation Agentsand

JPMORGAN CHASE BANK, N.A.as Syndication Agent

and

CITIGROUP GLOBAL MARKETS INC.and

J.P. MORGAN SECURITIES LLCas Joint Lead Arrangers and Bookrunners

Exhibit 10.366

NYDOCS01/1613908

1. DEFINITIONS 1

2. THE CREDIT FACILITY. 13 2.1 The Revolving Credit Facility 13 2.2 Term Loan Facility 13 2.3 Evidence of Borrowing/Promissory Notes 14 2.4 Making of Revolving Loans and Term Loands, Borrowings; Interest Periods; Notice 14 2.5 Conversion and Continuation Elections 16 2.6 Interest Periods 17 2.7 Interest Rates 17 2.8 Substitute Rates 18 2.9 Fees 19 2.10 Reduction of Credit 19 2.11 Termination Date; Extensions 20 2.12 Payments by the Lenders to the Agent 20 2.13 Sharing of Payments, Etc. 21 2.14 Computation of Fees and Interest 21 2.15 Defaulting Lenders 22

3. PAYMENT. 23 3.1 Repayment 23 3.2 Method of Payment 23 3.3 Optional Prepayment 23 3.4 Taxes/Net Payments 24 3.5 Illegality 24 3.6 Increased Costs and Reduction of Return 25 3.7 Funding Losses 26 3.8 Certificates of Lenders 26 3.9 Substitution of Lenders 27 3.10 Survival 27

4. CONDITIONS. 27 4.1 Conditions Precedent to the Effectiveness of this Agreement 27 4.2 Conditions Precedent to Revolving Loans and Term Loans 28

5. REPRESENTATIONS AND WARRANTIES. 29 5.1 Organization and Good Standing 29 5.2 Corporate Power and Authority 29 5.3 Enforceability 29 5.4 No Violation of Laws or Agreements 29 5.5 No Consents 30

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5.6 Financial Statements 30 5.7 Broker Subsidiary Licenses, Etc 30 5.8 Broker Subsidiary/Broker Registration 30 5.9 Broker Subsidiary/SIPC 30 5.10 Taxes 30 5.11 ERISA 30 5.12 No Extension of Credit for Default Remedy/Hostile Acquisition 31 5.13 Use of Proceeds/Margin Regulations 31 5.14 Authorized Persons 31 5.15 Material Contracts 31 5.16 Litigation 31 5.17 Investment Company 31 5.18 Designated Persons 31

6. AFFIRMATIVE COVENANTS. 31 6.1 Notice of Events of Default 32 6.2 Financial Statements 32 6.3 Insurance 32 6.4 Books and Records 32 6.5 Change in Business 32 6.6 Capital Requirements 32 6.7 Anti-Corruption Laws and Sanctions 32

7. NEGATIVE COVENANTS. 33 7.1 Net Capital 33 7.2 Minimum Stockholders' Equity 33 7.3 Merger/Disposition of Assets 33 7.4 Broker Subsidiary Indebtedness 33 7.5 Indebtedness Secured by Subsidiary Stock 33 7.6 Liens and Encumbrances 34 7.7 Use of Proceeds 34

8. EVENTS OF DEFAULT. 34 8.1 Defaults 34 8.2 Remedies 36

9. THE AGENT. 36 9.1 Appointment and Authorization 36 9.2 Delegation of Duties 37 9.3 Liability of Agent 37 9.4 Reliance by Agent 37 9.5 Notice of Default 38 9.6 Credit Decision 38 9.7 Indemnification of Agent 38

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9.8 Agent in Individual Capacity 39 9.9 Successor Agent 39 9.10 Withholding Tax 39 9.11 Co-Agents 41

10. MISCELLANEOUS. 41 10.1 Amendments and Waivers 41 10.2 Notices 42 10.3 No Waiver-Cumulative Remedies 43 10.4 Costs and Expenses 44 10.5 Borrower Indemnification 44 10.6 Payments Set Aside 45 10.7 Successors and Assigns 45 10.8 Assignments, Participations Etc 45 10.9 Confidentiality 48 10.10 Notification of Addresses, Lending Offices, Etc 49 10.11 Counterparts 49 10.12 Severability 49 10.13 No Third Parties Benefited 50 10.14 Governing Law and Jurisdiction 50 10.15 Waiver of Jury Trial 50 10.16 Entire Agreement 52 10.17 Headings 52 10.18 USA Patriot Act 52

NYDOCS01/1613908 iii

SCHEDULES:

Schedule 1 - Lenders’ CommitmentsSchedule 2 - List of Borrowing AgreementsSchedule 6.2 - Compliance CertificateSchedule 10.2 - Notices

EXHIBITS:

Exhibit A-1 - Revolving NoteExhibit A-2 - Term NoteExhibit B - Borrowing AdviceExhibit C - Notice of Conversion/ContinuationExhibit D - Commitment and Termination Date Extension RequestExhibit E - Borrower’s Opinion of CounselExhibit F - Form of Assignment and Acceptance

NYDOCS01/1613908 iv

CREDIT AGREEMENT (364-DAY COMMITMENT)

THIS CREDIT AGREEMENT (364-DAY COMMITMENT) ("this Agreement") is entered into as of June 5, 2015, 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 3, 2016, and to make Term Loans to the Borrower on or before June 3, 2016 and maturing no later than June 2, 2017, 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-RelatedPersons: 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’sPayment 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.

Anti-CorruptionLaws The U.S. Foreign Corrupt Practices Act and the U.K. Bribery Act,

each as may be amended, and any rules or regulations thereunder.

NYDOCS01/1613908

Applicable Margin: (i) with respect to Eurodollar Rate Loans, 0.875% per annum; and

(ii) with respect to Base Rate Loans, 0.00% per annum.

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 ICE Benchmark Administration Interest Settlement Rate (or the successor thereto if the ICE Benchmark Administration is no longer making such a rate available) 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); provided that, if One Month LIBOR shall be less than zero, such rate shall be deemed zero for purposes of this Agreement. 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.

NYDOCS01/1613908 2

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.

BorrowingAgreements: 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 AdequacyRegulation: 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 inControl: 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

NYDOCS01/1613908 3

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 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 5, 2015) 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).

ConsolidatedStockholders' 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, including any preferred stock, but excluding accumulated other comprehensive income (or loss).

ControlledSubsidiary: 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 Seven Hundred Fifty Million and no/100 Dollars

NYDOCS01/1613908 4

($750,000,000.00), as the same may be reduced under Section 2.10.

Debtor Relief Laws: The Bankruptcy Code of the United States of America, and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief Laws of the United States or other applicable jurisdictions from time to time in effect.

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.

Defaulting Lender: Subject to Section 2.15(b), any Lender that (a) has failed to (i) fund all or any portion of its Loans within two Business Days of the date such Loans were required to be funded hereunder unless such Lender notifies the Agent and the Borrower in writing that such failure is the result of such Lender’s determination that one or more conditions precedent to funding (each of which conditions precedent, together with any applicable default, shall be specifically identified in such writing) has not been satisfied, or (ii) pay to the Agent or any other Lender any other amount required to be paid by it hereunder within two Business Days of the date when due, (b) has notified the Borrower or the Agent in writing that it does not intend to comply with its funding obligations hereunder, or has made a public statement to that effect (unless such writing or public statement relates to such Lender’s obligation to fund a Loan hereunder and states that such position is based on such Lender’s determination that a condition precedent to funding (which condition precedent, together with any applicable default, shall be specifically identified in such writing or public statement) cannot be satisfied), (c) has failed, within three Business Days after written request by the Agent or the Borrower, to confirm in writing to the Agent and the Borrower that it will comply with its prospective funding obligations hereunder (provided that such Lender shall cease to be a Defaulting Lender pursuant to this clause (c) upon receipt of such written confirmation by the Agent and the Borrower), or (d) has, or has a direct or indirect parent company that has, (i) become the subject of a proceeding under any Debtor Relief Law, or (ii) had appointed for it a receiver, custodian, conservator, trustee, administrator, assignee for the benefit of creditors or similar Person charged with reorganization or liquidation of its business or assets, including the Federal Deposit Insurance Corporation or any other state or federal regulatory authority acting in such a capacity; provided that a Lender shall not be a Defaulting Lender solely by virtue of the

NYDOCS01/1613908 5

ownership or acquisition of any equity interest in that Lender or any direct or indirect parent company thereof by a Governmental Authority so long as such ownership interest does not result in or provide such Lender with immunity from the jurisdiction of courts within the United States or from the enforcement of judgments or writs of attachment on its assets or permit such Lender (or such Governmental Authority) to reject, repudiate, disavow or disaffirm any contracts or agreements made with such Lender. Any determination by the Agent that a Lender is a Defaulting Lender under any one or more of clauses (a) through (d) above shall be conclusive and binding absent manifest error, and such Lender shall be deemed to be a Defaulting Lender (subject to Section 2.15(b)) upon delivery of written notice of such determination to the Borrower and each Lender.

Designated Person: A Person named on (a) the list of Specially Designated Nationals and Blocked Persons issued by OFAC or any successor office or agency within the U.S. Department of the Treasury, or similar issuance by the U.S. Department of State, or (b) any similar list issued by the United Nations Security Council, the European Union or Her Majesty’s Treasury of the United Kingdom.

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 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.

NYDOCS01/1613908 6

EurodollarBase 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 ICE Benchmark Administration Interest Settlement Rate (or the successor thereto if the ICE Benchmark Administration is no longer making such a rate available) 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 ICE Benchmark Administration Interest Settlement Rate (or the successor thereto if the ICE Benchmark Administration is no longer making such a rate available) 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;

provided that, if the Eurodollar Base shall be less than zero, such rate shall be deemed zero for purposes of this Agreement.

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 RateLoan: A Revolving Loan or Term Loan that bears interest based on the

Eurodollar Rate.

Eurodollar RateReserve 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

NYDOCS01/1613908 7

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.

FATCA: Sections 1471 through 1474 of the Code, as of the date of this Agreement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), any current or future regulations or official interpretations thereof and any agreements entered into pursuant to Section 1471(b)(1) of the Code, any intergovernmental agreement entered into in connection with the implementation of such Sections of the Code and any fiscal or regulatory legislation, rules or practices adopted pursuant to such intergovernmental agreement.

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.

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.

GovernmentalAuthority: 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,

NYDOCS01/1613908 8

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, (iv) direct or contingent obligations under letters of credit issued for the account of such corporation or (v) net obligations in respect of Hedge Agreements entered into with any counterparty.

IndemnifiedLiabilities: The meaning specified in Section 10.5.

Indemnified Person: The meaning specified in Section 10.5.

InsolvencyProceeding: 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.

InterestPayment 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

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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.

MinimumStockholders' Equity: As of the Closing Date, and the last day of each fiscal quarter

thereafter, the greater of:

(a) $8,300,000,000, or

(b) the sum of –

(i) $8,300,000,000, plus

(ii) 50% of the sum of cumulative Net Earnings for each fiscal quarter commencing with the fiscal quarter ended June 30, 2015.

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 GAAP, consistently applied.

Non-DefaultingLender: At any time, each Lender that is not a Defaulting Lender at such time.

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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.

OFAC: The U.S. Department of the Treasury’s Office of Foreign Assets Control.

Person: An individual, partnership, corporation, limited liability company, business trust, unincorporated association, trust, joint venture or other entity 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.

Reference Banks: Citibank, N.A. 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. The Loans owing to, and Commitments of, any Defaulting Lender shall be disregarded in determining Required Lenders at any time.

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-

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finance, controller or the treasurer of the Borrower, or any other officer having substantially the same authority and responsibility.

Revolving CreditFacility: 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.

RevolvingTermination Date: The earlier to occur of:

(a) June 3, 2016; and

(b) the date on which the Commitments terminate in accordance with the provisions of this Agreement.

Sanctions: Economic or financial sanctions or trade embargoes imposed, administered or enforced from time to time by (a) OFAC or any successor office or agency within the U.S. Department of the Treasury or the U.S. Department of State, or (b) the United Nations Security Council, the European Union or Her Majesty’s Treasury of the United Kingdom.

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 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.

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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.

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 3, 2016, 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 3, 2016, 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

Term Commitment: Seven Hundred Fifty Million and no/100 Dollars ($750,000,000.00), 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 2.2hereof.

Term Loan MaturityDate: 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".

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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 3, 2016, 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 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

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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.

With respect to any Borrowing having an Interest Period ending on or before June 3, 2016, 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, (iii) 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

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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;

(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

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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 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 2, 2017.

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

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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; or

(d) the applicable Reuters screen (or any successor page of such service, or any successor or substitute for such service, as provided in the definition herein for Eurodollar Base Rate) is unavailable and fewer than two Reference Banks furnish timely information to the Agent for determining the Eurodollar Base Rate for any Eurodollar Rate Loans, after the Agent has requested such information;

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

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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 4, 2015.

(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 seven one hundredths of one percent (0.07%) 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, 2015 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 3, 2016, 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 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

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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 3, 2016. 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 3, 2016 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 3, 2016", and "June 2, 2017" (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 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

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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, (a) 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 and (b) the provisions of this paragraph shall not be construed to apply to (x) any payment made by the Borrower pursuant to and in accordance with the express terms of this Agreement (including the application of funds arising from the existence of a Defaulting Lender), or (y) any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans to any assignee or participant, other than to the Borrower or any Subsidiary thereof (as to which the provisions of this paragraph shall apply). 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) Each Reference Bank may, if requested by the Agent, furnish to the Agent timely information for the purpose of determining each Eurodollar Base Rate. If any one or more of the Reference Banks shall not furnish such timely information to the Agent for the purpose of determining any such interest rate, the Agent shall determine such interest rate on the basis of timely information furnished by the remaining Reference Banks, subject to the provisions of Section 2.8. The Agent shall give prompt notice to the Borrower and the Lenders of the applicable interest rate determined by the Agent for purposes of Section 2.7(a) (it being understood that the Agent shall not be required to disclose to any party hereto (other than the Borrower) any information regarding any Reference Bank or any rate provided by such Reference Bank in accordance with this subsection, including, without limitation, whether a Reference Bank has provided a rate or the rate provided by any individual Reference Bank).

2.15 Defaulting Lenders.

(a) Defaulting Lender Adjustments. Notwithstanding anything to the contrary contained in this Agreement, if any Lender becomes a Defaulting Lender, then, until such time as such Lender is no longer a Defaulting Lender, to the extent permitted by applicable law:

(i) Waivers and Amendments. Such Defaulting Lender’s right to approve or disapprove any amendment, waiver or consent with respect to this Agreement shall be restricted as set forth in the definition of Required Lenders.

(ii) Defaulting Lender Waterfall. Any payment of principal, interest, fees or other amounts received by the Agent for the account of such Defaulting Lender (whether voluntary or mandatory, at maturity, pursuant to Section 8 or otherwise) shall be applied at such time or times as may be determined by the Agent as follows: first, to the payment of any amounts owing by such Defaulting Lender to the Agent hereunder; second, as the Borrower may request (so long as no Event of Default exists), to the funding of any Loan in respect of which such Defaulting Lender has failed to fund its portion thereof as required by this Agreement, as determined by the Agent; third, if so determined by the Agent and the Borrower, to be held in a deposit account and released pro rata in order to satisfy such Defaulting Lender’s potential future funding obligations with respect to Loans under this Agreement; fourth, to the payment of any amounts owing to the Lenders as a result of any judgment of a court of competent jurisdiction obtained by any Lender against such Defaulting Lender as a result of such Defaulting Lender’s breach of its obligations under this Agreement; fifth, so long as no Event of Default exists, to the payment of any amounts owing to the Borrower as a result of any judgment of a court of competent jurisdiction obtained by the Borrower against such Defaulting Lender as a result of such Defaulting Lender's breach of its obligations under this Agreement; and sixth, to such Defaulting Lender or as otherwise directed by a court of competent jurisdiction; provided that if (x) such payment is a payment of the principal amount of any Loans in respect of which such Defaulting Lender has not fully funded its appropriate share, and (y) such Loans were made

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at a time when the conditions set forth in Section 4.2 were satisfied or waived, such payment shall be applied solely to pay the Loans of all Non-Defaulting Lenders on a pro rata basis prior to being applied to the payment of any Loans of such Defaulting Lender until such time as all Loans are held by the Lenders pro rata in accordance with the Commitments. Any payments, prepayments or other amounts paid or payable to a Defaulting Lender that are applied (or held) to pay amounts owed by a Defaulting Lender shall be deemed paid to and redirected by such Defaulting Lender, and each Lender irrevocably consents hereto.

(iii) Certain Fees. No Defaulting Lender shall be entitled to receive any Commitment Fee for any period during which that Lender is a Defaulting Lender (and the Borrower shall not be required to pay any such fee that otherwise would have been required to have been paid to that Defaulting Lender).

(b) Defaulting Lender Cure. If the Borrower and the Agent agree in writing that a Lender is no longer a Defaulting Lender, the Agent will so notify the parties hereto, whereupon as of the effective date specified in such notice and subject to any conditions set forth therein, that Lenderwill, to the extent applicable, purchase at par that portion of outstanding Loans of the other Lenders or take such other actions as the Agent may determine to be necessary to cause the Loans to be held pro rata by the Lenders in accordance with the Commitments, whereupon such Lender will cease to be a Defaulting Lender; provided that no adjustments will be made retroactively with respect to fees accrued or payments made by or on behalf of the Borrower while that Lender was a Defaulting Lender; and provided, further, that except to the extent otherwise expressly agreed by the affected parties, no change hereunder from Defaulting Lender to Lender will constitute a waiver or release of any claim of any party hereunder arising from that Lender’s having been a Defaulting Lender.

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

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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 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, (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 or (z) to any taxes imposed pursuant to FATCA.

3.5 Illegality.

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(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 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

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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 or liquidity required or expected to be maintained by the Lender or any corporation controlling the Lender and determines that the amount of such capital or liquidity 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:

(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.

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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, of if any Lender is a Defaulting Lender (an Affected Lender or a Defaulting Lender is a “Replaceable Lender”), the Borrower may: (i) request the Replaceable 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 Replaceable 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 Replaceable 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.

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, 2014 not reflected on its Quarterly Report on Form 10-Q filed with the SEC for the period ending March 31, 2015.

(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.

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(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.

(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

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(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:

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

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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.

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

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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. The Borrower will not use the proceeds of any loan provided hereby in 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 7, 2015, 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.

5.18 Designated Persons. None of the Borrower, the Broker Subsidiary or any Bank Subsidiary, nor, to the knowledge of the Borrower, any of their respective directors or officers, is a Designated Person. No Borrowing or the use of proceeds thereof by the Borrower or any Subsidiary will, directly or, to the knowledge of the Borrower, indirectly, violate Anti-Corruption Laws or Sanctions.

6. AFFIRMATIVE COVENANTS.

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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.

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.

6.7 Anti-Corruption Laws and Sanctions. The Borrower has implemented and will maintain in effect policies and procedures reasonably designed to ensure compliance with Anti-Corruption Laws and Sanctions.

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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:

(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

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"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 any liens permitted pursuant to subsections (a) through (d) 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:

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

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

(e) liens in respect of Hedge Agreements securing net payment obligations in an aggregate amount not to exceed $500,000,000 at any time outstanding.

7.7 Use of Proceeds. The Borrower will not request any Borrowing, and shall not use the proceeds of any Borrowing, in any manner that, directly or, to the knowledge of the Borrower, indirectly, would result in the violation of any Anti-Corruption Laws or Sanctions.

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.

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(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 is issued, or by which there is secured or evidenced, any Indebtedness (other than in respect of Hedge Agreements) of the Borrower in a principal amount not less than $100,000,000 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 $100,000,000 in aggregate for all such Hedge Agreements; 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, 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

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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 $100,000,000 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 (ii) 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, 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

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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 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

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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 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,

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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 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:

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(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 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.

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(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:

(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;

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(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 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

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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 [email protected]. 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 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.

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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 (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,

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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 such set-off 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.

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(a) (i) 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 (x) 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 and (y) no such assignment shall be made to any Defaulting Lender or any of its Subsidiaries, or any Person who, upon becoming a Lender hereunder, would constitute a Defaulting Lender.

(ii) Certain Additional Payments. In connection with any assignment of rights and obligations of any Defaulting Lender hereunder, no such assignment shall be effective unless and until, in addition to the other conditions thereto set forth herein, the parties to the assignment shall make such additional payments to the Agent in an aggregate amount sufficient, upon distribution thereof as appropriate (which may be outright payment, purchases by the assignee of participations, or other compensating actions, including funding, with the consent of the Borrower and the Agent, the applicable pro rata share of Loans previously requested but not funded by the Defaulting Lender, to each of which the applicable assignee and assignor hereby irrevocably consent), to (x) pay and satisfy in full all payment liabilities then owed by such Defaulting Lender to the Agent, and each other Lender hereunder (and interest accrued thereon), and (y) acquire (and fund as appropriate) its full Pro Rata Share of all Loans in accordance with its Pro Rata Share. Notwithstanding the foregoing, in the event that any assignment of rights and obligations of any Defaulting Lender hereunder shall become effective under applicable law without compliance with the provisions of this paragraph, then the assignee of such interest shall be deemed to be a Defaulting Lender for all purposes of this Agreement until such compliance occurs.

(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.

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(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 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

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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 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, however, that (i) as to any such Affiliate, such Affiliate has delivered to such Lender a written confidentiality agreement substantially similar to this Section 10.9, and (ii) as to any such agent, such agent has been informed by such Lender of the confidential nature of such confidential information and has been instructed by such Lender to maintain the confidentiality of such confidential information; 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

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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.

The Agent agrees to provide to the Borrower, upon the Borrower’s request, each interest rate that is furnished by any Reference Bank to the Agent pursuant to Section 2.14(b) (each, a “Reference Bank Rate”), which information is to be treated by the Borrower as confidential except (i) the Borrower may disclose any actual interest rate payable under this Agreement, and (ii) the Borrower may disclose any Reference Bank Rate (a) to legal counsel and accountants for Borrower; (b) to other professional advisors to Borrower, provided that the recipient has delivered to the Borrower a written confidentiality agreement substantially similar to this Section 10.9; (c) to regulatory officials having jurisdiction over the Borrower; (d) as required by applicable law, legal process, the New York Stock Exchange or any similar self-regulatory exchange of which Borrower is a member, or in connection with any legal proceeding in which any Lender and Borrower are adverse parties; (e) to Affiliates or agents of the Borrower to the extent the Affiliate or agent is involved in the administration of the credit facilities extended to the Borrower and its Subsidiaries hereunder, provided, however, that (i) as to any such Affiliate, such Affiliate has delivered to the Borrower a written confidentiality agreement substantially similar to this Section 10.9, and (ii) as to any such agent, such agent has been informed by the Borrower of the confidential nature of such confidential information and has been instructed by the Borrower to maintain the confidentiality of such Reference Bank Rate. The Borrower further agrees that it will not use such confidential information in any activity or for any purpose other than the administration of this Agreement 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 the Borrower, or by an affiliate of the Borrower, who is not involved in the administration of this Agreement.

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, 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

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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) EACH PARTY HERETO IRREVOCABLY AND UNCONDITIONALLY AGREES THAT IT WILL NOT COMMENCE ANY ACTION, LITIGATION OR PROCEEDING OF ANY KIND OR DESCRIPTION, WHETHER IN LAW OR EQUITY, WHETHER IN CONTRACT OR IN TORT OR OTHERWISE, AGAINST ANY OTHER PARTY HERETO OR ANY AGENT-RELATED PARTY IN ANY WAY RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS RELATING HERETO OR THERETO, IN ANY FORUM OTHER THAN THE COURTS OF THE STATE OF CALIFORNIA THE COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY, AND OF THE UNITED STATES DISTRICT COURT OF THE NORTHERN DISTRICT OF CALIFORNIA OR THE SOUTHERN DISTRICT OF NEW YORK, AND ANY APPELLATE COURT FROM ANY THEREOF, AND EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY SUBMITS TO THE JURISDICTION OF SUCH COURTS AND AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION, LITIGATION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH CALIFORNIA OR NEW YORK STATE COURT OR, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN SUCH FEDERAL COURT. 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:


By: /s/ William F. QuinnName: William F. QuinnTitle: Senior Vice President and Treasurer

NYDOCS01/1613908

Lenders:

CITIBANK, N.A., as Agent andindividually as Lender

By: /s/ Maureen MaroneyName: Maureen MaroneyTitle: Vice President

JPMORGAN CHASE BANK, N.A.

By: /s/ Catherine GrossmanName: Catherine GrossmanTitle: Vice President

CREDIT SUISSE AG, CAYMAN ISLANDS BRANCH

By: /s/ Doreen BarrName: Doreen BarrTitle: Authorized Signatory

By: /s/ Karim RahimtoolaName: Karim RahimtoolaTitle: Authorized Signator

THE BANK OF NEW YORK MELLON

By: /s/ Stephen MannersName: Stephen MannersTitle: Vice President

WELLS FARGO BANK, NATIONAL ASSOCIATION

By: /s/ Karen HankeName: Karen HankeTitle: Managing Director

NYDOCS01/1613908

BANK OF AMERICA, N.A.

By: /s/ Maryanne FitzmauriceName: Maryanne FitzmauriceTitle: Director

GOLDMAN SACHS BANK USA

By: /s/ Rebecca KratzName: Rebecca KratzTitle: Authorized Signatory

HSBC BANK USA, NATIONAL ASSOCIATION

By: /s/ Raymond ChoName: Raymond ChoTitle: Vice President

LLOYDS BANK PLC

By: /s/ Erin DohertyName: Erin DohertyTitle: Assistant Vice President

By: /s/ Veronica CrannyName: Veronica CrannyTitle: Manager

STATE STREET BANK AND TRUST COMPANY

By: /s/ Andrei BourdineName: Andrei BourdineTitle: Vice President

U.S. BANK NATIONAL ASSOCIATION

By: /s/ William J. CoupeName: William J. CoupeTitle: Senior Vice President

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Schedule 1

LENDERS’ COMMITMENTS

The Charles Schwab Corporation $750,000,000 Credit Agreement (364-Day Commitment) dated as of June 5, 2015.

.Lender Commitment Amount

1. Citibank, N.A. 1 $90,000,000 2. JPMorgan Chase Bank, N.A. 2. $90,000,000 3. Credit Suisse AG, Cayman Islands Branch 3. $80,000,000 4. The Bank of New York Mellon 4. $80,000,000 5. Wells Fargo Bank, National Association 5. $80,000,000 6. Bank of America, N.A. 6. $55,000,000 7. Goldman Sachs Bank USA 7. $55,000,000 8. HSBC Bank USA, National Association 8. $55,000,000 9. Lloyds Bank plc 9. $55,000,000 10. State Street Bank and Trust Company 10. $55,000,000 11. U.S. Bank National Association 11. $55,000,000

Total $750,000,000

NYDOCS01/1613908

Schedule 2

LIST OF BORROWING AGREEMENTS

1. $800,000,000 Credit Agreement (364-Day Commitment) dated as of June 6, 2014 among the Borrower, the lenders party thereto, and Citibank, N.A., as administrative agent for such lenders.

NYDOCS01/1613908

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 5, 2015 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:

NYDOCS01/1613908


Credit Agreement (364-Day Commitment)Dated as of June 5, 2015

Schedule Ito

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

2. Minimum Stockholders' Equity of Borrower.

Requirement: As of _____________, 20____, required Minimum Stockholders' Equity is the greater of (a) $8,300,000,000 or (b) $8,300,000,000 plus 50% of the sum of cumulative Net Earnings for each fiscal quarter commencing with the fiscal quarter ended June 30, 2015.

Month Month-end Ratio

NYDOCS01/1613908

Schedule 10.2

NOTICES

If to the Borrower:

If to the Agent:

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

If to the Lenders:

If by U.S. mail: The Charles Schwab CorporationTreasury DepartmentAttn: William F. Quinn or Successor211 Main Street (Mail Stop SF215FMT-04-100)San Francisco, CA 94105

If by hand delivery(including courierand overnightmessenger service): The Charles Schwab Corporation

Treasury DepartmentAttn: William F. Quinn or Successor215 Fremont Street, 4 FloorSan Francisco, CA 94105

Telephone: (415) 667-7337Facsimile: (415) 667-8565

Credit Contact Operations Contact Lending Office Payment InstructionsBank of America, N.A. Bank of America, N.A. Bank of America, N.A. Bank of America, N.A.One Bryant Park, 18 Floor 901 S. Main St. 2001 Clayton Road ABA #: 026009593New York, NY 10036 Dallas, TX 75202 Concord, California 94520 Charlotte, NCAttention: Maryanne Fitzmaurice Attention: Tammi Reddy Acct #: 4426457864

Director (415) 436-3685 ext. 65843 Attention: Bilateral Clearing Account(646) 556-0343 Fax: (312) 453-5129 Ref: Charles Schwab CorporationFax: 704 683-9184The Bank of New York Mellon The Bank of New York Mellon The Bank of New York Mellon The Bank of New York One Wall Street, 19 Floor 6023 Airport Road One Wall Street, 19 Floor ABA #: 021-000-018New York, NY 10286 Oriskany, NY 13424 New York, NY 10286 Acct #: GLA111-231Attention: Steve Manners Attention: Richard Scalice Acct name: Broker Services

Vice President (315)765-4192 Attn: Bradley Fike(212) 635-6316 Fax: (315) 765-4783 Ref: Charles Schwab CorporationFax: (212) 635-1194

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Credit Contact Operations Contact Lending Office Payment InstructionsCitibank, N.A. Citibank, N.A. Citibank, N.A. Citibank NA388 Greenwich Street 1615 Brett Road, Bldg #3 399 Park Avenue ABA #: 021-000-089New York, NY 10013 New Castle, DE 19720 New York, NY 10043 New York, NYAttention: Dane Graham Attention: Investor Relations Acct #: 36852248Director (302) 894-6010 Acct Name: Agency/Medium Term (212) 816-8219 Fax: (212) 994-0961 FinanceFax: (212) 816-1212 Ref: The Charles Schwab

Corporation

Credit Suisse AG, Cayman Credit Suisse AG, Cayman Credit Suisse AG, Cayman Credit SuisseIslands Branch Islands Branch Islands Branch ABA #: 021-000-018Eleven Madison Avenue One Madison Avenue Eleven Madison Avenue New York, NYNew York, NY 10010 New York, NY 10010 New York, NY 10010 Acct #: 890-0492-627Attention:Doreen Barr / Attention: Jason Golz Acct Name: CS Agency Cayman

Alex Verdone Loan Closers / Ref: The Charles Schwab CorporationPhone: (212) 325-9914 / Cecelia Harrison

(212) 325- 0703 AdministratorFax: (212) 743-2737 / Phone: (919) 994-6378 /

(919) 994-6359Fax: (866) 469-3871

Goldman Sachs Bank USA Goldman Sachs Bank USA Goldman Sachs Bank USA Goldman Sachs Bank USAMichelle Latzoni c/o Goldman, Sachs & Co. 200 West Street Swift Code: CITIUS33c/o Goldman, Sachs & Co. 30 Hudson Street, 5th Floor New York, NY 10282 Aba: 02100008930 Hudson Street, 5th Floor Jersey City, NJ 07302 Bank Name: Citibank N.A.Jersey City, NJ 07302 gs-sbd-admin- City: New YorkEmail: [email protected] [email protected] A/C #: 30627664Tel: (212)934-3921 Tel: (212)902-1099 Entity Name: Goldman Sachs Bank

Fax: (917)977-3966 USAHSBC Bank USA, National HSBC Bank USA, New York HSBC Bank USA, National HSBC Bank USA, NationalAssociation 452 Fifth Avenue Association Association452 Fifth Avenue New York, NY 10018 452 fifth Avenue ABA #: 021-000-1088New York, NY 10018 Attention: CTLA Lan Admin New York, NY 10018 Acct #: 713011777Attention:Jeffrey Roth / Phone: (212) 525-1529 / Acct Name: NY Loan Agency

Stephen J. Contino Fax: (847) 793- 3415 Attn: CTLA Laon AdminPhone: (212) 525-4341 / Ref: The Charles Schwab

(212) 525-7054 Corporation

JPMorgan Chase Bank, N.A. JPMorgan Chase Bank, N.A. JPMorgan Chase Bank, N.A. JPMorgan Chase Bank, N.A. 383 Madison Avenue, Floor 23 JPM-Bangalore Loan Operations 500 Stanton Christiana Road, New York, NYNew York, NY 10179 Prestige Tech Park, Floor 4 Ops 2, Floor 3 ABA #: 021000021Attention:Catherine Grossman Sarjapur outer Ring Rd, Vathur Newark, DE 19713-2107 Acct #: 9008113381H2832

Vice President / Hobli Acct Name: LS2 Incoming Account(212) 270-1153 Bangalore, India 560 087 Attn: Loan & AgencyFax: (212) 270-1511 91 80 66761709 Ref: Charles Schwab

Fax: (201) 244-3885

Lloyds Bank plc Lloyds Bank plc Lloyds Bank plc Bank of America1095 Avenue of the Americas, 1095 Avenue of the Americas, 1095 Avenue of the Americas, International, New York34th Floor 34th Floor 34th Floor New York, NY New York , NY 10036 New York , NY 10036 New York , NY 10036 ABA #: 026-009-593Attention:Sammy Asoli Attention: Indira Girisankar / Acct #: 655-010-1938

Vice President Ramona Rojas Acct Name: Lloyds (212) 284-0418 (212) 930-5051/8978 Bank plc, New YorkFax: (212) 930-5098 Fax: (212) 930-5098 Ref: Charles Schwab

NYDOCS01/1613908 2

Credit Contact Operations Contact Lending Office Payment InstructionsState Street Bank and Trust State Street Bank and Trust State Street Bank and Trust State Street Bank and Trust Company Company Company Company, Boston, MABox 5303 Mail Code: CPH0427, 100 Huntington Ave., Tower ABA#: 011-000-028Boston, MA 02206 100 Huntington Avenue, Tower 2, Floor 4 Acct #: 0006-332-1Attention: Andrei Bourdine 2, 4th Floor Boston, MA 02206 Acct. Name: IS Loan Operations /

Vice President / Boston, MA 02116 CSU InternalCharlie Garrity Attention: Peter Connolly Ref: The Charles SchwabVice President (617) 662-8588 Corporation

(617) 662-8616 / 8827 Fax: (617) 988-6677 Attn: Peter Connolly, ext 2-8588Fax: (617) 662-8664

U.S. Bank National Association U.S. Bank National Association U.S. Bank National U.S. Bank National Association461 Fifth Avenue, 7 Floor 400 City Center Association ABA#: 091000022New York, NY 10017-6234 Oshkosh, WI 54901 800 Nicollet Mall Acct. #: 0068542160600Attention: Angela (Zhanglan) CLS Syndication Services Team Minneapolis, MN 55402 Account Name: CLS Syndication Cheng, Portfolio Manager – East Services GL Acct.(917) 326-3101 (920) 237-7601 Ref.: Charles Schwab Corporation [email protected] Fax: (920) 237-7993 (Type of pymt)

Attn: CLS Syndication Team

Wells Fargo Bank, Wells Fargo Bank, Wells Fargo Bank, Wells Fargo Bank, National Association National Association National Association National Association301 S. College St. 14 Floor 1700 Lincoln Street, 5 Floor 90 South 7 Street, 7 Floor ABA #: 121000248MAC D1053-144 MAC C7300-059 MAC N9305-075 Acct #: 00029694050720Charlotte, NC 28202 Denver, CO 80203-4500 Minneapolis, MN 55402-3903 Account Name: WLS DenverAttention:Karen Hanke Attention:Dorothy Cardenas Attn: Dorothy Cardenas

Managing Director / Loan Servicing Spec. Ref: Charles Schwab(704) 374-3061 (303) 863-5917Fax: (704) 715--1486 Fax: (303) 863-2729

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EXHIBIT A-1

REVOLVING NOTE

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 3, 2016. 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 5, 2015 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.

$____________________ (Amount of Commitment) Date: June 5, 2015

NYDOCS01/1613908

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


By:Name:Title:

NYDOCS01/1613908 2

EXHIBIT A-1

SCHEDULE TO REVOLVING NOTE

Date Amount of UnpaidMade, Principal Principal Name of

Continued, Continued, Balance of PersonConverted, Type of Amount Converted, Revolving Making

or Paid Loan of Loan or Paid Note Notation

NYDOCS01/1613908 3

EXHIBIT A-2

TERM NOTE

Date: June 5, 2015

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 5, 2015, 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.


By:Name:Title:

NYDOCS01/1613908

EXHIBIT A-2

SCHEDULE TO TERM NOTE

Date Amount of UnpaidMade, Principal Principal Name of

Continued, Type of Amount Term Loan Continued, Balance of PersonConverted, Loan of Loan Maturity Date Converted, Term Note Making

or Paid or Paid Notation

NYDOCS01/1613908 2

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 5, 2015 (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 2.4of 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.

NYDOCS01/1613908

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

BORROWER:

THE CHARLES SCHWAB CORPORATION,a Delaware Corporation

By:Name:Title:

NYDOCS01/1613908 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 5, 2015 (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 _____________________.

NYDOCS01/1613908

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 __________, _____.


By:Name:Title:

[must be signed by an Authorized Officer]

NYDOCS01/1613908

EXHIBIT D

COMMITMENT AND TERMINATION DATE EXTENSION REQUEST

Reference is made to that certain Credit Agreement (364-Day Commitment) dated as of June 5, 2015 ("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 ________________.

[Bank name and address] [Date]

BORROWER:

THE CHARLES SCHWAB CORPORATION,a Delaware Corporation

By:Name:Title:

ACCEPTED AND AGREED:

Agent, on Behalf of Lenders

By:Name:Title:

NYDOCS01/1613908

EXHIBIT E

BORROWER’S OPINION OF COUNSEL

[Arnold & Porter LLP Letterhead]

[Date]

Citibank, N.A., as Agent______________________________________________________


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 5, 2015 (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 5, 2015 (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.

Re: Credit Agreement (364-Day Commitment), dated June 5, 2015, amongThe Charles Schwab Corporation, Citibank, N.A., as Agentand the Lenders party thereto

NYDOCS01/1613908

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) he 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;

NYDOCS01/1613908 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 the foregoing shall not preclude any Lender from describing or otherwise disclosing the

NYDOCS01/1613908 3

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,

ARNOLD & PORTER LLP

By:

NYDOCS01/1613908 4

EXHIBIT F

FORM OF ASSIGNMENT AND ACCEPTANCE

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


Reference is made to that certain Credit Agreement (364-Day Commitment) dated as of June 5, 2015 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.

NYDOCS01/1613908

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 nameAddress:

Attention:Telephone:Telecopier:

(b) Operations Contract:


Attention:Telephone:Telecopier:

(c) Lending Office:


(d) Payment Instructions:

Assignee nameABA No.:Account No.:Attention:Reference:

NYDOCS01/1613908 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.

We hereby consent to theforegoing assignment.

Very truly yours,

[ASSIGNOR]

By:Name:Title:

[ASSIGNEE]

By:Name:Title:

THE CHARLES SCHWAB CORPORATION,as Borrower

By:Name:Title:

CITIBANK, N.A.,as Administrative Agent

By:Name:Title:

NYDOCS01/1613908 3

EXHIBIT 12.1

Computation of Ratio of Earnings to Fixed Charges andRatio of Earnings to Fixed Charges and Preferred Stock Dividends

(Dollar Amounts in Millions)(Unaudited)



2015 2014 2015 2014

Earnings before taxes on earnings $ 567 $ 521 $ 1,051 $ 1,043

Fixed chargesInterest expense:

Bank deposits 6 8 14 15 Payables to brokerage clients - - 1 1 Long-term debt 24 18 43 36 Other 3 - 4 -

Total 33 26 62 52 Interest portion of rental expense 19 18 37 36

Total fixed charges (A) 52 44 99 88 Earnings before taxes on earnings and fixed charges (B) $ 619 $ 565 $ 1,150 $ 1,131

Ratio of earnings to fixed charges (B) ÷ (A) 11.9 12.8 11.6 12.9

Ratio of earnings to fixed charges, excluding bank deposits and payablesto brokerage clients interest expense 13.3 15.5 13.5 15.5

Total fixed charges $ 52 $ 44 $ 99 $ 88 Preferred stock dividends 37 35 55 48 Total fixed charges and preferred stock dividends (C) $ 89 $ 79 $ 154 $ 136

Ratio of earnings to fixed charges and preferred stock dividends (B) ÷ (C) 7.0 7.2 7.5 8.3

Ratio of earnings to fixed charges and preferred stock dividends, excludingbank deposits and payables to brokerage clients interest expense 7.4 7.8 8.2 9.3

(1) The ratios of earnings to fixed charges and earnings to fixed charges and preferred stock dividends are 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 bank deposits and payables to brokerage clients is completely offset by interestrevenue on related investments and loans, the Company considers such interest to be an operating expense. Accordingly, the ratio of earnings to fixed charges, excluding bank deposits and payables to brokerage clients interest expense, and the ratio of earnings to fixed charges and preferred stock dividends, excluding bank deposits and payables to brokerage clients interest expense, reflect the elimination of such interest expense as a fixed charge.

(3) The preferred stock dividend amounts represent the pre-tax earnings that would be required to pay the dividends on outstanding preferred stock.

(1)

(2)

(3)

(1)

(2)

EXHIBIT 31.1

CERTIFICATION PURSUANT TO RULE 13a-14(a)/15d-14(a), AS ADOPTED PURSUANT TOSECTION 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 6, 2015 /s/ Walter W. Bettinger IIWalter W. Bettinger IIPresident and Chief Executive Officer

EXHIBIT 31.2

CERTIFICATION PURSUANT TO RULE 13a-14(a)/15d-14(a), AS ADOPTED PURSUANT TOSECTION 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 6 , 2015 /s/ Joseph R. MartinettoJoseph R. MartinettoSenior Executive Vice President and Chief Financial Officer

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, 2015 (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:

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.


(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 6, 2015Walter W. Bettinger IIPresident and Chief Executive Officer

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, 2015 (the Report), I, Joseph R. Martinetto, Senior 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:

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.


(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 6, 2015Joseph R. MartinettoSenior Executive Vice President andChief Financial Officer

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