Variable Interest Entities

3 Months Ended

Mar. 31, 2017

Variable Interest Entities [Abstract]

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 at March 31, 2017 and December 31, 2016.

As of March 31, 2017 and December 31, 2016, the majority of the Company’s VIEs related to Schwab Bank’s Low-Income Housing Tax Credit (LIHTC) investments. Schwab Bank’s LIHTC investments are accounted for using the proportional amortization method. Amortization, tax credits, and other tax benefits recognized in relation to LIHTC investments are included in taxes on income in the condensed consolidated statements of income. For further information on the Community Reinvestment Act (CRA) and Schwab Bank’s LIHTC investments, see Note 2 and Note 10 in the 2016 Form 10-K.

The carrying value of the LIHTC investments was $201 million and $189 million as of March 31, 2017 and December 31, 2016, respectively, which is included in other assets on the condensed consolidated balance sheets. Schwab Bank recorded liabilities of $139 million and $135 million for unfunded commitments related to LIHTC investments at March 31, 2017 and December 31, 2016, respectively, which are included in accrued expenses and other liabilities on the condensed 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:



	March 31, 2017						December 31, 2016
	Aggregate assets		Aggregate liabilities		Maximum exposure to loss		Aggregate assets		Aggregate liabilities		Maximum exposure to loss
LIHTC investments	$	201	$	139	$	201	$	189	$	135	$	189
Other CRA investments⁽¹⁾	63		—		84		60		—		80
Total	$	264	$	139	$	285	$	249	$	135	$	269


⁽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 condensed consolidated balance sheets.

The Company’s maximum exposure to loss would result from the loss of the investments, including any committed amounts. During the three months ended March 31, 2017 and 2016, the Company did not provide or intend to provide financial or other support to the VIEs that it was not contractually required to provide.