Offsetting Assets and Liabilities

Resale and repurchase agreements: Schwab enters into collateralized resale agreements principally with other broker-dealers, which could result in losses in the event the counterparty fails to purchase the securities held as collateral for the cash advanced and the fair value of the securities declines. To mitigate this risk, Schwab requires that the counterparty deliver securities to a custodian, to be held as collateral, with a fair value at or in excess of the resale price. Schwab also sets standards for the credit quality of the counterparty, monitors the fair value of the underlying securities as compared to the related receivable, including accrued interest, and requires additional collateral where deemed appropriate. Schwab utilizes the collateral provided under these resale agreements to meet obligations under broker-dealer client protection rules, which place limitations on its ability to access such segregated securities. For Schwab to repledge or sell this collateral, it would be required to deposit cash and/or securities of an equal amount into its segregated reserve bank accounts in order to meet its segregated cash and investment requirement. The Company’s resale agreements are not subject to master netting arrangements.

Securities lending: The Company loans brokerage client securities temporarily to other brokers and clearing houses in connection with its securities lending activities and receives cash as collateral for the securities loaned. Increases in security prices may cause the fair value of the securities loaned to exceed the amount of cash received as collateral. In the event the counterparty to these transactions does not return the loaned securities or provide additional cash collateral, the Company may be exposed to the risk of acquiring the securities at prevailing market prices in order to satisfy its client obligations. The Company mitigates this risk by requiring credit approvals for counterparties, monitoring the fair value of securities loaned, and requiring additional cash as collateral when necessary. The Company borrows securities from other broker-dealers to fulfill short sales by brokerage clients and delivers cash to the lender in exchange for the securities. The fair value of these borrowed securities was $336 million at September 30, 2017 and $213 million at December 31, 2016. All of the Company’s securities lending transactions are subject to enforceable master netting arrangements with other broker-dealers; however, the Company does not net securities lending transactions. Therefore, the Company’s securities loaned and securities borrowed are presented gross in the condensed consolidated balance sheets.

The following table presents information about the Company’s resale agreements and securities lending activity to enable the users of the Company’s financial statements to evaluate the potential effect of rights of setoff between these recognized assets and recognized liabilities at September 30, 2017 and December 31, 2016.



							Gross Amounts Not Offset in the Condensed Consolidated Balance Sheets
	Gross Assets/ Liabilities		Gross Amounts Offset in the Condensed Consolidated Balance Sheets		Net Amounts Presented in the Condensed Consolidated Balance Sheets		Counterparty Offsetting			Collateral				Net Amount
September 30, 2017
Assets:
Resale agreements ⁽¹⁾	$	7,247	$	—	$	7,247	$	—		$	(7,247	)	⁽²⁾	$	—
Securities borrowed ⁽³⁾	344		—		344		(297		)	(46		)		1
Total	$	7,591	$	—	$	7,591	$	(297	)	$	(7,293	)		$	1
Liabilities:
Securities loaned ^(4,5)	$	1,324	$	—	$	1,324	$	(297	)	$	(919	)		$	108
Total	$	1,324	$	—	$	1,324	$	(297	)	$	(919	)		$	108
December 31, 2016
Assets:
Resale agreements ⁽¹⁾	$	9,547	$	—	$	9,547	$	—		$	(9,547	)	⁽²⁾	$	—
Securities borrowed⁽³⁾	393		—		393		(200		)	(189		)		4
Total	$	9,940	$	—	$	9,940	$	(200	)	$	(9,736	)		$	4
Liabilities:
Securities loaned ^(4,5)	$	1,996	$	—	$	1,996	$	(200	)	$	(1,660	)		$	136
Total	$	1,996	$	—	$	1,996	$	(200	)	$	(1,660	)		$	136

⁽¹⁾ Included in cash and investments segregated and on deposit for regulatory purposes in the Company’s condensed consolidated balance sheets.

⁽²⁾ Actual collateral was greater than or equal to 102% of the related assets. At September 30, 2017 and December 31, 2016, the fair value of collateral received in connection with resale agreements that are available to be repledged or sold was $7.4 billion and $9.8 billion, respectively.

⁽³⁾ Included in receivables from brokers, dealers, and clearing organizations in the Company’s condensed consolidated balance sheets.

⁽⁴⁾ Included in payables to brokers, dealers, and clearing organizations in the Company’s condensed consolidated balance sheets.

⁽⁵⁾ Securities loaned are predominantly comprised of equity securities held in client brokerage accounts with overnight and continuous remaining contractual maturities.

Margin lending: Clients with margin loans have agreed to allow the Company to pledge collateralized securities in their brokerage accounts in accordance with federal regulations. The following table summarizes the fair value of client securities available, under such regulations, for the Company to utilize as collateral, and the amounts pledged by the Company:



	September 30, 2017		December 31, 2016
Fair value of client securities available to be pledged	$	23,520	$	21,516
Fair value of client securities pledged for:
Securities lending to other broker-dealers	1,115		1,626
Fulfillment of client short sales	2,281		2,048
Fulfillment of requirements with the Options Clearing Corporation ⁽¹⁾	1,949		1,519
Total collateral pledged	$	5,345	$	5,193

Note: Excludes amounts available and pledged for securities lending from fully-paid client securities. The fair value of fully-paid client securities available and pledged was $92 million as of September 30, 2017 and $58 million as of December 31, 2016.

⁽¹⁾Client securities pledged to fulfill client margin requirements for open option contracts established with the Options Clearing Corporation.