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Derivative Instruments and Hedging Activities
 3 Months Ended
Mar. 31, 2026
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Instruments and Hedging Activities Derivative Instruments and Hedging Activities
Risk Management Objective of Using Derivatives

The Company utilizes derivative instruments to manage interest rate risk exposures that arise from business activities related to changes in fair values or the receipt and payment of future known and uncertain cash amounts due to changes in interest rates. The Company uses derivative instruments to manage changes in the fair values of, as well as changes in the amounts and/or timing of known or expected cash receipts and payments related to, our AFS investment portfolio, margin loans, PALs, and Senior Notes.

For a description of how the Company accounts for derivative instruments, see Item 8 – Note 2 in the 2025 Form 10-K. For additional information on the basis of presentation for derivative instruments on the Company’s condensed consolidated balance sheets and related offsetting considerations, see Note 13. Cash flows associated with derivative instruments are reflected as cash flows from operating activities in the condensed consolidated statements of cash flows consistent with the treatment and nature of the items being hedged.
Fair Value Hedges of Interest Rate Risk

The Company is exposed to changes in the fair value of its fixed-rate AFS securities and Senior Notes, as well as its fixed-to-floating rate Senior Notes during the fixed-rate period, due to changes in benchmark interest rates. The Company uses cleared interest rate swaps to manage its exposure to changes in fair value of these instruments attributable to changes in the designated benchmark interest rate. Cleared interest rate swaps designated as fair value hedges of AFS securities involve the payment of fixed-rate amounts to a CCP in exchange for the Company receiving floating-rate payments over the life of the agreements. Cleared interest rate swaps designated as fair value hedges of Senior Notes involve the receipt of fixed-rate amounts from a CCP in exchange for the Company’s floating-rate payments over the life of the agreements.

Cash Flow Hedges of Interest Rate Risk

The Company uses cleared interest rate swaps designated as cash flows hedges as part of its interest rate risk management strategy to add stability to interest revenue and to manage its exposure to interest rate movements. Interest rate swaps designated as cash flow hedges involve the receipt of fixed-rate amounts from a CCP in exchange for the Company’s floating-rate payments over the life of the agreements. Such derivatives are used to hedge the variable cash flows associated with Schwab’s margin loans and PALs.

Notional Amounts of Derivative Instruments

The Company had outstanding interest rate swaps with aggregate notional amounts of $68.2 billion and $42.2 billion at March 31, 2026 and December 31, 2025, respectively, that were designated as fair value hedges of interest rate risk. The Company had outstanding interest rate swaps with aggregate notional amounts of $66.5 billion and $18.7 billion at March 31, 2026 and December 31, 2025, respectively, that were designated as cash flow hedges of interest rate risk.

The notional amount is the basis upon which the pay-fixed/receive-float and receive-fixed/pay-float payments are determined; however, the amount is not exchanged. While the notional amounts give an indication of the volume of our derivative activity, they do not necessarily provide information on the amount of the underlying exposure being hedged. For example, we may enter into multiple hedges covering different periods of time but relating to the same underlying principal balances to hedge interest receipts or payments on AFS securities, margin loans, PALs, and Senior Notes. As a result, at certain times the combined notional amount of hedges may exceed the underlying principal balances.

As of March 31, 2026, through its cash flow hedges, the Company hedged interest receipts on $20.0 billion of margin loans with a total notional outstanding of $43.6 billion, and interest receipts on $19.8 billion of PALs with a total outstanding notional of $22.9 billion. As of March 31, 2026, through fair value hedges, the Company hedged $19.5 billion of Senior Notes with a total outstanding notional amount of $57.0 billion and $11.2 billion of AFS securities with a total outstanding notional amount of $11.2 billion.

Fair Values of Derivative Instruments

The table below presents the gross fair values of the Company’s interest rate swaps designated as hedging instruments on the condensed consolidated balance sheets:
March 31, 2026December 31, 2025
AssetsLiabilitiesAssetsLiabilities
Interest rate swaps (1,2)
$1 $2 $1 $1 
(1) Derivative assets are included in other assets and derivative liabilities are included in accrued expenses and other liabilities on the condensed consolidated balance sheets.
(2) Includes reductions related to variation margin settlements. Settlements on derivative positions cleared through CCPs are reflected as reductions to the associated derivative asset and liability balances. As of March 31, 2026, there was a $53 million reduction of derivative assets and a $270 million reduction of derivative liabilities related to variation margin settlements. As of December 31, 2025, there was a $93 million reduction of derivative assets and a $21 million reduction of derivative liabilities related to variation margin settlements.
Effects of Fair Value Hedge Accounting

The following amounts are included on the condensed consolidated balance sheets related to fair value hedges:
Carrying Amount of the Hedged
Assets/(Liabilities)
Cumulative Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged
Assets and Liabilities
March 31, 2026December 31, 2025March 31, 2026December 31, 2025
Line item in which the hedged item is included:
Available for sale securities (1,2)
$11,216 $12,249 $(38)$(16)
Long-term debt (3)
$(19,370)$(20,726)$101 $(6)
(1) Includes the amortized cost basis of AFS securities included in PLM hedging relationships. At March 31, 2026 and December 31, 2025, the amortized cost basis of the closed portfolios used in these hedging relationships was $995 million and $1.1 billion, respectively, of which $663 million and $771 million was designated in a portfolio layer hedging relationship at March 31, 2026 and December 31, 2025, respectively. The cumulative basis adjustments associated with these hedging relationships were a reduction of $2 million and an increase of $2 million of the amortized cost basis of the closed portfolios at March 31, 2026 and December 31, 2025, respectively.
(2) Excludes the amortized cost and fair value hedging adjustment of AFS securities for which hedge accounting has been discontinued. The cumulative amount of fair value hedging adjustments remaining for these securities was a reduction of the amortized cost basis of $30 million and $26 million at March 31, 2026 and December 31, 2025, respectively, which are recorded in AFS securities on the condensed consolidated balance sheets and amortized to interest revenue as a yield adjustment over the lives of the securities.
(3) Excludes the carrying amount and fair value hedging adjustment of long-term debt for which hedge accounting has been discontinued. The cumulative amount of fair value hedging adjustments remaining for long-term debt was an increase of the carrying amount of $4 million and $5 million at March 31, 2026 and December 31, 2025, respectively, which is recorded in long-term debt on the condensed consolidated balance sheets and amortized to interest expense over the lives of the borrowings.

The table below presents the effect of the Company’s interest rate swaps designated as fair value hedges on the condensed consolidated statements of income:
Location and Amount of Gain (Loss) Recognized in Income
Interest Revenue
Interest Expense
Three Months Ended March 31,2026202520262025
Gain (loss) on fair value hedging relationships:
Hedged items$(31)$161 $107 $(25)
Derivatives designated as hedging instruments (1)
31 (161)(107)27 
(1) Interest revenue excludes net gain (loss) from periodic interest accruals and receipts (payments) of $1 million and $18 million for the three months ended March 31, 2026 and 2025, respectively. Interest expense excludes net gain (loss) from periodic interest accruals and receipts (payments) of $5 million and $(10) million for the three months ended March 31, 2026 and 2025, respectively.

Effects of Cash Flow Hedge Accounting

The table below presents the effect of the Company’s interest rate swaps designated as cash flow hedges on AOCI (pre-tax) and the condensed consolidated statements of income:
Balance at December 31, 2025$49 
Gain (loss) recognized in other comprehensive income (1)
(225)
Realized (gain) loss reclassified from AOCI to interest revenue18 
Balance at March 31, 2026$(158)
(1) Included in net unrealized gain (loss) on derivatives designated as cash flow hedging instruments on the condensed consolidated statements of comprehensive income.
For the twelve months following March 31, 2026, the Company expects to reclassify from AOCI into interest revenue approximately $74 million of pre-tax losses.