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

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


December 31,		2014		2013
Residential real estate mortgages	$	8,127	$	8,006
Home equity loans and lines of credit		2,955		3,041
Personal loans secured by securities		2,320		1,384
Other		39		36
Total loans to banking clients (1)		13,441		12,467
Allowance for loan losses		(42)		(48)
Total loans to banking clients – net	$	13,399	$	12,419

(1)	Loans are evaluated for impairment by loan segment.

The Company has commitments to extend credit related to unused HELOCs, personal loans secured by securities, and other lines of credit, which totaled $6.7 billion and $5.7 billion at December 31, 2014 and 2013, respectively. All personal loans were fully collateralized by securities with fair values in excess of borrowings at December 31, 2014 and 2013.

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 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 $1.4 billion and $3.5 billion during 2014 and 2013, respectively. Schwab Bank purchased HELOCs with commitments of $664 million and $917 million during 2014 and 2013, respectively.

Credit Quality

Changes in the allowance for loan losses were as follows:


Year Ended	December 31, 2014								December 31, 2013								December 31, 2012
	Residential			Home equity					Residential			Home equity					Residential			Home equity
	real estate			loans and					real estate			loans and					real estate			loans and
	mortgages			lines of credit			Total		mortgages			lines of credit			Total		mortgages			lines of credit			Total
Balance at beginning of year		$	34		$	14	$	48		$	36		$	20	$	56		$	40		$	14	$	54
Charge-offs			(3)			(2)		(5)			(5)			(6)		(11)			(7)			(9)		(16)
Recoveries			2			1		3			2			2		4			2			-		2
Provision for loan losses			(4)			-		(4)			1			(2)		(1)			1			15		16
Balance at end of year		$	29		$	13	$	42		$	34		$	14	$	48		$	36		$	20	$	56

The delinquency analysis by loan class is as follows:


									>90 days past			Total past due
			30-59 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 loans to banking clients	$	13,392		$	11		$	3		$	35		$	49	$	13,441

December 31, 2013
Residential real estate mortgages	$	7,962		$	4		$	4		$	36		$	44	$	8,006
Home equity loans and lines of credit		3,025			2			2			12			16		3,041
Personal loans secured by securities		1,384			-			-			-			-		1,384
Other		36			-			-			-			-		36
Total loans to banking clients	$	12,407		$	6		$	6		$	48		$	60	$	12,467

There were no loans accruing interest that were contractually 90 days or more past due at December 31, 2014 or 2013. Nonperforming assets, which include nonaccrual loans and other real estate owned, totaled $44 million and $53 million at December 31, 2014 and 2013, respectively. Troubled debt restructurings were not material at December 31, 2014 or 2013, respectively.

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), 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 December 2014. 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.


			Weighted				Percent of Loans
			Average		Utilization		that are on
December 31, 2014	Balance		Updated FICO		Rate (1)		Nonaccrual Status
Residential 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 Combined 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.

N/A Not applicable.


	Residential		Home equity
	real estate		loans and
December 31, 2014	mortgages		lines of credit
Year of origination
Pre-2010	$	749	$	2,076
2010		370		168
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


			Weighted				Percent of Loans
			Average		Utilization		that are on
December 31, 2013	Balance		Updated FICO		Rate (1)		Nonaccrual Status
Residential real estate mortgages:
Estimated Current LTV
<70%	$	6,649		775	N/A		0.05	%
>70% – <90%		1,181		763	N/A		0.34	%
>90% – <100%		86		732	N/A		4.77	%
>100%		90		730	N/A		10.50	%
Total	$	8,006		772	N/A		0.26	%
Home equity loans and lines of credit:
Estimated Current Combined LTV
<70%	$	2,127		773	36	%	0.13	%
>70% – <90%		664		762	48	%	0.22	%
>90% – <100%		127		752	59	%	1.22	%
>100%		123		743	63	%	1.34	%
Total	$	3,041		769	39	%	0.24	%

(1)	The Utilization Rate is calculated using the outstanding HELOC balance divided by the associated total line of credit.

N/A Not applicable.


	Residential		Home equity
	real estate		loans and
December 31, 2013	mortgages		lines of credit
Year of origination
Pre-2010	$	914	$	2,304
2010		510		191
2011		771		155
2012		2,429		162
2013		3,382		229
Total	$	8,006	$	3,041
Origination FICO
<620	$	11	$	-
620 – 679		110		20
680 – 739		1,384		576
>740		6,501		2,445
Total	$	8,006	$	3,041
Origination LTV
<70%	$	5,416	$	2,040
>70% – <90%		2,568		977
>90% – <100%		22		24
Total	$	8,006	$	3,041