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Derivative Instruments and Hedging Activities
 9 Months Ended
Sep. 30, 2025
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, PALs, and Senior Notes.

For a description of how the Company accounts for derivative instruments, see Item 8 – Note 2 in the 2024 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 12. 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.

The Company had outstanding interest rate swaps with aggregate notional amounts of $40.8 billion and $30.9 billion at September 30, 2025 and December 31, 2024, respectively, that were designated as fair value 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.

Cash Flow Hedges of Interest Rate Risk

Beginning in the second quarter of 2025, 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 without exchange of the underlying notional amount. Such derivatives are used to hedge the variable cash flows associated with Schwab’s PALs.

The Company had outstanding interest rate swaps with aggregate notional amounts of $16.1 billion at September 30, 2025 that were designated as cash flow hedges of interest rate risk.

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:
September 30, 2025December 31, 2024
AssetsLiabilitiesAssetsLiabilities
Interest rate swaps (1,2)
$— $— $— $— 
(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. Derivative assets and liabilities as of September 30, 2025 and December 31, 2024 were less than $500 thousand.
(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 September 30, 2025, there was a $69 million reduction of derivative assets and a $139 million reduction of derivative liabilities related to variation margin settlements. As of December 31, 2024, there was a $295 million reduction of derivative assets and a $10 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
September 30, 2025December 31, 2024September 30, 2025December 31, 2024
Line item in which the hedged item is included:
Available for sale securities (1,2)
$14,389 $15,686 $113 $(292)
Long-term debt (3)
$(18,733)$(14,908)$— $7 
(1) Includes the amortized cost basis of closed portfolios of AFS securities used to designate hedging relationships in which the hedged item is the stated amount of assets in the closed portfolios anticipated to be outstanding for the designated hedge period. At September 30, 2025 and December 31, 2024, the amortized cost basis of the closed portfolios used in these hedging relationships was $2.6 billion and $2.5 billion, respectively, of which $2.1 billion and $2.0 billion was designated in a portfolio layer hedging relationship at September 30, 2025 and December 31, 2024, respectively. The cumulative basis adjustments associated with these hedging relationships were an increase of $8 million and a reduction of $47 million of the amortized cost basis of the closed portfolios at September 30, 2025 and December 31, 2024, 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 $141 million at September 30, 2025 and $2 million at December 31, 2024, 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 $5 million at September 30, 2025, 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 September 30,2025202420252024
Gain (loss) on fair value hedging relationships:
Hedged items$(3)$216 $4 $— 
Derivatives designated as hedging instruments (1)
3 (214)(4)— 
Nine Months Ended September 30,2025202420252024
Gain (loss) on fair value hedging relationships:
Hedged items$252 $19 $(12)$— 
Derivatives designated as hedging instruments (1)
(252)(19)14 — 
(1) Interest revenue excludes net income (expense) from periodic interest accruals and receipts (payments) of $2 million and $34 million for the three and nine months ended September 30, 2025, respectively, and $20 million and $36 million for the three and nine months ended September 30, 2024, respectively. Interest expense excludes net income (expense) from periodic interest accruals and receipts (payments) of $(20) million and $(44) million, respectively, for the three and nine months ended September 30, 2025. We began designating swaps as fair value hedges of Senior Notes in the fourth quarter of 2024. As such, there was no impact to interest expense from periodic interest accruals and receipts (payments) for the three and nine months ended September 30, 2024.

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 and the condensed consolidated statements of income:
Three Months EndedNine Months Ended
September 30, 2025September 30, 2025
Gain (loss) recognized in other comprehensive income (1)
$11 $(4)
Gain (loss) reclassified from AOCI to interest revenue(28)(45)
(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 September 30, 2025, the Company estimates that an additional $11 million will be reclassified from AOCI as a reduction to interest revenue.