Investment Securities |
Investment Securities The amortized cost, gross unrealized gains and losses, and fair value of AFS and HTM securities are as follows: | | | | | | | | | | | | | | | | | | June 30, 2017 | | Amortized Cost | | Gross Unrealized Gains | | Gross Unrealized Losses | | Fair Value | Available for sale securities: | | | | | | | | | U.S. agency mortgage-backed securities | | $ | 17,604 |
| | $ | 56 |
| | $ | 27 |
| | $ | 17,633 |
| Asset-backed securities | | 9,858 |
| | 40 |
| | 4 |
| | 9,894 |
| Corporate debt securities | | 6,603 |
| | 23 |
| | 1 |
| | 6,625 |
| U.S. Treasury securities | | 7,740 |
| | 8 |
| | 51 |
| | 7,697 |
| Certificates of deposit | | 1,620 |
| | 2 |
| | — |
| | 1,622 |
| U.S. agency notes | | 1,914 |
| | — |
| | 7 |
| | 1,907 |
| Commercial paper | | 214 |
| | — |
| | — |
| | 214 |
| Non-agency commercial mortgage-backed securities | | 42 |
| | — |
| | — |
| | 42 |
| Total available for sale securities | | $ | 45,595 |
| | $ | 129 |
| | $ | 90 |
| | $ | 45,634 |
| Held to maturity securities: | | | | | | | | | U.S. agency mortgage-backed securities | | $ | 89,250 |
| | $ | 499 |
| | $ | 805 |
| | $ | 88,944 |
| Non-agency commercial mortgage-backed securities | | 995 |
| | 12 |
| | 3 |
| | 1,004 |
| Asset-backed securities | | 12,493 |
| | 70 |
| | 2 |
| | 12,561 |
| Corporate debt securities | | 3,181 |
| | 23 |
| | — |
| | 3,204 |
| U.S. Treasury securities | | 223 |
| | — |
| | 1 |
| | 222 |
| Commercial paper | | 100 |
| | — |
| | — |
| | 100 |
| U.S. state and municipal securities | | 1,168 |
| | 43 |
| | — |
| | 1,211 |
| Certificates of deposit | | 200 |
| | — |
| | — |
| | 200 |
| Total held to maturity securities | | $ | 107,610 |
| | $ | 647 |
| | $ | 811 |
| | $ | 107,446 |
|
| | | | | | | | | | | | | | | | | | December 31, 2016 | | | | | | | | | Available for sale securities: | | | | | | | | | U.S. agency mortgage-backed securities | | $ | 33,167 |
| | $ | 120 |
| | $ | 92 |
| | $ | 33,195 |
| Asset-backed securities | | 20,520 |
| | 29 |
| | 214 |
| | 20,335 |
| Corporate debt securities | | 9,850 |
| | 20 |
| | 18 |
| | 9,852 |
| U.S. Treasury securities | | 8,679 |
| | 3 |
| | 59 |
| | 8,623 |
| Certificates of deposit | | 2,070 |
| | 2 |
| | 1 |
| | 2,071 |
| U.S. agency notes | | 1,915 |
| | — |
| | 8 |
| | 1,907 |
| U.S. state and municipal securities | | 1,167 |
| | 2 |
| | 46 |
| | 1,123 |
| Commercial paper | | 214 |
| | — |
| | — |
| | 214 |
| Non-agency commercial mortgage-backed securities | | 45 |
| | — |
| | — |
| | 45 |
| Total available for sale securities | | $ | 77,627 |
| | $ | 176 |
| | $ | 438 |
| | $ | 77,365 |
| Held to maturity securities: | | | | | | | | | U.S. agency mortgage-backed securities | | $ | 72,439 |
| | $ | 324 |
| | $ | 1,086 |
| | $ | 71,677 |
| Non-agency commercial mortgage-backed securities | | 997 |
| | 11 |
| | 4 |
| | 1,004 |
| Asset-backed securities | | 941 |
| | — |
| | — |
| | 941 |
| Corporate debt securities | | 436 |
| | — |
| | — |
| | 436 |
| U.S. Treasury securities | | 223 |
| | — |
| | 4 |
| | 219 |
| Commercial paper | | 99 |
| | — |
| | — |
| | 99 |
| U.S. state and municipal securities | | 68 |
| | 1 |
| | 1 |
| | 68 |
| Total held to maturity securities | | $ | 75,203 |
| | $ | 336 |
| | $ | 1,095 |
| | $ | 74,444 |
|
The increase in the HTM portfolio at June 30, 2017 compared to December 31, 2016 was primarily attributable to the transfer of $24.7 billion of investment securities from the AFS category to the HTM category during the first quarter of 2017. These securities had a total net unrealized loss of $227 million before income tax in AOCI on the date of transfer. The transfer was made to mitigate the potential volatility in regulatory capital from changes in market values in the AFS securities portfolio and the related impact to AOCI once the Company crosses $250 billion in consolidated assets. The year after the Company surpasses $250 billion in consolidated assets, it can no longer exclude AOCI from regulatory capital. The transfer included U.S. agency mortgage-backed securities, asset-backed securities, corporate debt securities, and U.S. state and municipal securities. The unrealized holding gains and losses on the date of transfer are reported as a separate component of AOCI and as an adjustment to the purchase premium and discount on the securities transferred. The separate component of AOCI will be amortized or accreted into interest income over the remaining life of the securities transferred, offsetting the revised premium or discount amortization or accretion on the transferred assets.
Schwab Bank pledges securities issued by federal agencies to secure certain trust deposits. The fair value of these pledged securities was $967 million at June 30, 2017.
A summary of securities with unrealized losses, aggregated by category and period of continuous unrealized loss, is as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | Less than | | 12 months | | | | | | 12 months | | or longer | | Total | June 30, 2017 | Fair Value | | Unrealized Losses | | Fair Value | | Unrealized Losses | | Fair Value | | Unrealized Losses | Available for sale securities: | | | | | | | | | | | | U.S. agency mortgage-backed securities | $ | 1,817 |
| | $ | 6 |
| | $ | 2,976 |
| | $ | 21 |
| | $ | 4,793 |
| | $ | 27 |
| Asset-backed securities | 866 |
| | — |
| | 550 |
| | 4 |
| | 1,416 |
| | 4 |
| Corporate debt securities | 867 |
| | 1 |
| | 303 |
| | — |
| | 1,170 |
| | 1 |
| U.S. Treasury securities | 6,418 |
| | 51 |
| | — |
| | — |
| | 6,418 |
| | 51 |
| U.S. agency notes | 1,907 |
| | 7 |
| | — |
| | — |
| | 1,907 |
| | 7 |
| Total | $ | 11,875 |
| | $ | 65 |
| | $ | 3,829 |
| | $ | 25 |
| | $ | 15,704 |
| | $ | 90 |
| Held to maturity securities: | |
| | |
| | |
| | |
| | |
| | |
| U.S. agency mortgage-backed securities | $ | 174 |
| | $ | — |
| | $ | 48,699 |
| | $ | 805 |
| | $ | 48,873 |
| | $ | 805 |
| Non-agency commercial mortgage-backed securities | — |
| | — |
| | 535 |
| | 3 |
| | 535 |
| | 3 |
| Asset-backed securities | 945 |
| | 1 |
| | 779 |
| | 1 |
| | 1,724 |
| | 2 |
| U.S. Treasury securities | — |
| | — |
| | 222 |
| | 1 |
| | 222 |
| | 1 |
| Total | $ | 1,119 |
| | $ | 1 |
| | $ | 50,235 |
| | $ | 810 |
| | $ | 51,354 |
| | $ | 811 |
| Total securities with unrealized losses (1) | $ | 12,994 |
| | $ | 66 |
| | $ | 54,064 |
| | $ | 835 |
| | $ | 67,058 |
| | $ | 901 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | December 31, 2016 | | | | | | | | | | | | Available for sale securities: | | | | | | | | | | | | U.S. agency mortgage-backed securities | $ | 14,816 |
| | $ | 69 |
| | $ | 2,931 |
| | $ | 23 |
| | $ | 17,747 |
| | $ | 92 |
| Asset-backed securities | 1,670 |
| | 13 |
| | 9,237 |
| | 201 |
| | 10,907 |
| | 214 |
| Corporate debt securities | 2,407 |
| | 17 |
| | 653 |
| | 1 |
| | 3,060 |
| | 18 |
| U.S. Treasury securities | 6,926 |
| | 59 |
| | — |
| | — |
| | 6,926 |
| | 59 |
| Certificates of deposit | 474 |
| | — |
| | 100 |
| | 1 |
| | 574 |
| | 1 |
| U.S. agency notes | 1,907 |
| | 8 |
| | — |
| | — |
| | 1,907 |
| | 8 |
| U.S. state and municipal securities | 956 |
| | 46 |
| | — |
| | — |
| | 956 |
| | 46 |
| Total | $ | 29,156 |
| | $ | 212 |
| | $ | 12,921 |
| | $ | 226 |
| | $ | 42,077 |
| | $ | 438 |
| Held to maturity securities: | |
| | |
| | |
| | |
| | |
| | |
| U.S. agency mortgage-backed securities | $ | 51,361 |
| | $ | 1,086 |
| | $ | — |
| | $ | — |
| | $ | 51,361 |
| | $ | 1,086 |
| Non-agency commercial mortgage-backed securities | 591 |
| | 4 |
| | — |
| | — |
| | 591 |
| | 4 |
| U.S. Treasury securities | 219 |
| | 4 |
| | — |
| | — |
| | 219 |
| | 4 |
| U.S. state and municipal securities | 14 |
| | 1 |
| | — |
| | — |
| | 14 |
| | 1 |
| Total | $ | 52,185 |
| | $ | 1,095 |
| | $ | — |
| | $ | — |
| | $ | 52,185 |
| | $ | 1,095 |
| Total securities with unrealized losses (2) | $ | 81,341 |
| | $ | 1,307 |
| | $ | 12,921 |
| | $ | 226 |
| | $ | 94,262 |
| | $ | 1,533 |
|
| | (1) | The number of investment positions with unrealized losses totaled 205 for AFS securities and 625 for HTM securities. |
| | (2) | The number of investment positions with unrealized losses totaled 627 for AFS securities and 612 for HTM securities. |
At June 30, 2017, substantially all securities in the investment portfolios were rated investment grade. U.S. agency mortgage-backed securities do not have explicit credit ratings; however, management considers these to be of the highest credit quality and rating given the guarantee of principal and interest by the U.S. government-sponsored enterprises. Management evaluates whether investment securities are OTTI on a quarterly basis as described in Note 2 in the 2016 Form 10-K.
The maturities of AFS and HTM securities are as follows: | | | | | | | | | | | | | | | | | | | | | | June 30, 2017 | | Within 1 year | | After 1 year through 5 years | | After 5 years through 10 years | | After 10 years | | Total | Available for sale securities: | | | | | | | | | | | U.S. agency mortgage-backed securities (1) | | $ | 108 |
| | $ | 1,884 |
| | $ | 6,306 |
| | $ | 9,335 |
| | $ | 17,633 |
| Asset-backed securities | | 23 |
| | 8,019 |
| | 1,126 |
| | 726 |
| | 9,894 |
| Corporate debt securities | | 2,851 |
| | 3,774 |
| | — |
| | — |
| | 6,625 |
| U.S. Treasury securities | | 1,619 |
| | 6,078 |
| | — |
| | — |
| | 7,697 |
| Certificates of deposit | | 951 |
| | 671 |
| | — |
| | — |
| | 1,622 |
| U.S. agency notes | | 847 |
| | 1,060 |
| | — |
| | — |
| | 1,907 |
| Commercial paper | | 214 |
| | — |
| | — |
| | — |
| | 214 |
| Non-agency commercial mortgage-backed securities (1) | | — |
| | — |
| | — |
| | 42 |
| | 42 |
| Total fair value | | $ | 6,613 |
| | $ | 21,486 |
| | $ | 7,432 |
| | $ | 10,103 |
| | $ | 45,634 |
| Total amortized cost | | $ | 6,612 |
| | $ | 21,476 |
| | $ | 7,427 |
| | $ | 10,080 |
| | $ | 45,595 |
| Held to maturity securities: | | | | | | | | | | | U.S. agency mortgage-backed securities (1) | | $ | — |
| | $ | 9,695 |
| | $ | 30,224 |
| | $ | 49,025 |
| | $ | 88,944 |
| Non-agency commercial mortgage-backed securities (1) | | — |
| | — |
| | 363 |
| | 641 |
| | 1,004 |
| Asset-backed securities | | — |
| | 1,019 |
| | 5,395 |
| | 6,147 |
| | 12,561 |
| Corporate debt securities | | — |
| | 3,204 |
| | — |
| | — |
| | 3,204 |
| U.S. Treasury securities | | — |
| | — |
| | 222 |
| | — |
| | 222 |
| Commercial paper | | 100 |
| | — |
| | — |
| | — |
| | 100 |
| U.S. state and municipal securities | | — |
| | — |
| | 88 |
| | 1,123 |
| | 1,211 |
| Certificates of deposit | | — |
| | 200 |
| | — |
| | — |
| | 200 |
| Total fair value | | $ | 100 |
| | $ | 14,118 |
| | $ | 36,292 |
| | $ | 56,936 |
| | $ | 107,446 |
| Total amortized cost | | $ | 100 |
| | $ | 13,939 |
| | $ | 36,222 |
| | $ | 57,349 |
| | $ | 107,610 |
|
| | (1) | Mortgage-backed securities have been allocated to maturity groupings based on final contractual maturities. Actual maturities will differ from final contractual maturities because borrowers on a certain portion of loans underlying these securities have the right to prepay their obligations. |
Proceeds and gross realized gains and losses from sales of AFS securities are as follows: | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, | Six Months Ended June 30, |
| |
| | 2017 | | 2016 | 2017 | | 2016 | Proceeds | | $ | 4,421 |
| | $ | 3,774 |
| $ | 5,485 |
| | $ | 4,074 |
| Gross realized gains | | 6 |
| | 3 |
| 7 |
| | 3 |
|
|