10.Variable Interest Entities

A VIE requires consolidation by the entity’s primary beneficiary. The Company evaluates all entities in which it has a financial interest to determine if the entity is a VIE and if so, whether the Company is the primary beneficiary. See “Principles of Consolidation” in Note 1 for discussion of the Company’s evaluations of VIEs and whether it is deemed to be the primary beneficiary of any VIEs in which it holds an interest. The Company was not the primary beneficiary of, and therefore, not required to consolidate any VIEs during 2016, 2015, or 2014.

Community Reinvestment Act investments

Schwab Bank is subject to the CRA. The CRA is intended to encourage banks to help meet the credit needs of the communities in which they operate, including low and moderate income neighborhoods, consistent with safe and sound banking operations. As part of Schwab Bank’s community reinvestment initiatives, Schwab Bank invests with other institutional investors in funds that make equity investments in multifamily affordable housing properties. Schwab Bank receives tax credits and other tax benefits for these investments. Schwab Bank’s LIHTC investments are accounted for using the proportional amortization method. See Note 2 for discussion of the application of the proportional amortization method. Amortization, tax credits, and other tax benefits recognized in relation to LIHTC investments are included in taxes on income on the consolidated statements of income. As of December 31, 2016 and 2015, the majority of the Company’s VIEs related to Schwab Bank’s LIHTC investments.

The carrying value of the LIHTC investments was $189 million and $104 million as of December 31, 2016 and 2015, respectively, which is included in other assets on the consolidated balance sheets. Schwab Bank recorded liabilities of $135 million and $84 million for unfunded commitments related to LIHTC investments at December 31, 2016 and 2015, respectively, which are included in accrued expenses and other liabilities on the consolidated balance sheets. Schwab Bank’s funding of these remaining commitments is dependent upon the occurrence of certain conditions and Schwab Bank expects to pay substantially all of these commitments between 2017 and 2020.

Aggregate assets, liabilities and maximum exposure to loss

The aggregate assets, liabilities, and maximum exposure to loss from those VIEs in which the Company holds a variable interest, but as to which the Company has concluded it is not the primary beneficiary, are summarized in the table below:


		December 31, 2016						December 31, 2015
						Maximum						Maximum
		Aggregate		Aggregate		exposure		Aggregate		Aggregate		exposure
		assets		liabilities		to loss		assets		liabilities		to loss
LIHTC Investments	$	189	$	135	$	189	$	104	$	84	$	104
Other CRA Investments (1)		60		-		80		57		-		66
Total	$	249	$	135	$	269	$	161	$	84	$	170


(1)	Other CRA investments are recorded using either the cost method or the equity method. Aggregate assets are included in either other assets or bank loans – net on the consolidated balance sheets.

The Company’s maximum exposure to loss would result from the loss of the investments, including any committed amounts. During the years ended December 31, 2016 and 2015, the Company did not provide or intend to provide financial or other support to the VIEs that it was not contractually required to provide.