Investment Securities

The amortized cost, gross unrealized gains and losses, and fair value of AFS and HTM securities are as follows:



December 31, 2017	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Available for sale securities:
U.S. agency mortgage-backed securities	$	20,915	$	53	$	39	$	20,929
U.S. Treasury securities	9,583		—		83		9,500
Asset-backed securities ⁽¹⁾	9,019		34		6		9,047
Corporate debt securities ⁽²⁾	6,154		16		1		6,169
Certificates of deposit	2,040		2		1		2,041
U.S. agency notes	1,914		—		8		1,906
Commercial paper ⁽²⁾	313		—		—		313
Foreign government agency securities	51		—		1		50
Non-agency commercial mortgage-backed securities	40		—		—		40
Total available for sale securities	$	50,029	$	105	$	139	$	49,995
Held to maturity securities:
U.S. agency mortgage-backed securities	$	101,197	$	290	$	1,034	$	100,453
Asset-backed securities ⁽¹⁾	12,937		127		2		13,062
Corporate debt securities ⁽²⁾	4,078		13		5		4,086
U.S. state and municipal securities	1,247		57		—		1,304
Non-agency commercial mortgage-backed securities	994		10		5		999
U.S. Treasury securities	223		—		3		220
Certificates of deposit	200		—		—		200
Foreign government agency securities	50		—		1		49
Total held to maturity securities	$	120,926	$	497	$	1,050	$	120,373

December 31, 2016
Available for sale securities:
U.S. agency mortgage-backed securities	$	33,167	$	120	$	92	$	33,195
U.S. Treasury securities	8,679		3		59		8,623
Asset-backed securities ⁽¹⁾	20,520		29		214		20,335
Corporate debt securities ⁽²⁾	9,850		20		18		9,852
Certificates of deposit	2,070		2		1		2,071
U.S. agency notes	1,915		—		8		1,907
Commercial paper ⁽²⁾	214		—		—		214
Non-agency commercial mortgage-backed securities	45		—		—		45
U.S. state and municipal securities	1,167		2		46		1,123
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
Asset-backed securities ⁽¹⁾	941		—		—		941
Corporate debt securities ⁽²⁾	436		—		—		436
U.S. state and municipal securities	68		1		1		68
Non-agency commercial mortgage-backed securities	997		11		4		1,004
U.S. Treasury securities	223		—		4		219
Commercial paper ⁽²⁾	99		—		—		99
Total held to maturity securities	$	75,203	$	336	$	1,095	$	74,444

⁽¹⁾ Approximately 42% and 47% of Asset-backed securities held as of December 31, 2017 and 2016, respectively, were Federal Family Education Loan Program Asset-Backed Securities. Asset-backed securities collateralized by credit cards represented approximately 40% and 36% of the asset-backed securities held as of December 31, 2017 and 2016, respectively.

⁽²⁾ As of December 31, 2017 and 2016, approximately 41% and 49%, respectively, of the total AFS and HTM investments in Corporate debt securities and Commercial paper were issued by institutions in the financial services industry. As of December 31, 2017 and 2016, approximately 22% and 19% of the holdings of these securities were issued by institutions in the information technology industry.

The increase in the HTM portfolio at December 31, 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 Schwab crosses $250 billion in consolidated assets. The year after Schwab 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 maintains a secured credit facility with the FHLB, and certain investment securities are pledged as collateral in order to secure borrowing capacity. At December 31, 2017, the Company had pledged securities with a fair value of $24.2 billion with the FHLB. Schwab Bank also pledges certain investment securities as collateral to secure borrowing capacity at the FRB discount window, and had pledged securities with a fair value of $2.5 billion as collateral for this facility at December 31, 2017. In addition, Schwab Bank pledges securities issued by federal agencies to secure certain trust deposits. The fair value of these pledged securities was $923 million at December 31, 2017.

Securities with unrealized losses, aggregated by category and period of continuous unrealized loss, are as follows:



	Less than 12 months				12 months or longer				Total
December 31, 2017	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Available for sale securities:
U.S. agency mortgage-backed securities	$	5,696	$	21	$	2,548	$	18	$	8,244	$	39
U.S. Treasury securities	4,625		11		4,875		72		9,500		83
Asset-backed securities	904		3		424		3		1,328		6
Corporate debt securities	736		1		120		—		856		1
Certificates of deposit	799		1		—		—		799		1
U.S. agency notes	99		—		1,807		8		1,906		8
Foreign government agency securities	50		1		—		—		50		1
Total	$	12,909	$	38	$	9,774	$	101	$	22,683	$	139
Held to maturity securities:
U.S. agency mortgage-backed securities	$	42,102	$	310	$	24,753	$	724	$	66,855	$	1,034
Asset-backed securities	1,124		2		72		—		1,196		2
Corporate debt securities	1,078		5		—		—		1,078		5
Non-agency commercial mortgage-backed securities	607		5		—		—		607		5
U.S. Treasury securities	220		3		—		—		220		3
Foreign government agency securities	49		1		—		—		49		1
Total	$	45,180	$	326	$	24,825	$	724	$	70,005	$	1,050
Total securities with unrealized losses ⁽¹⁾	$	58,089	$	364	$	34,599	$	825	$	92,688	$	1,189

December 31, 2016
Available for sale securities:
U.S. agency mortgage-backed securities	$	14,816	$	69	$	2,931	$	23	$	17,747	$	92
U.S. Treasury securities	6,926		59		—		—		6,926		59
Asset-backed securities	1,670		13		9,237		201		10,907		214
Corporate debt securities	2,407		17		653		1		3,060		18
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 251 for AFS securities and 938 for HTM securities.

⁽²⁾ The number of investment positions with unrealized losses totaled 627 for AFS securities and 612 for HTM securities.

At December 31, 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 or U.S. government-sponsored enterprises.

Management evaluates whether investment securities are OTTI on a quarterly basis as described in Note 2. Amounts recognized as OTTI in earnings or other comprehensive income were immaterial in 2017, 2016, and 2015. As of December 31, 2017 and 2016, the Company did not hold any securities on which OTTI was previously recognized.

The maturities of AFS and HTM securities are as follows:



December 31, 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⁾	$	61		$	2,253		$	8,282		$	10,333		$	20,929
U.S. Treasury securities	2,515			6,985			—			—			9,500
Asset-backed securities	251			6,924			1,261			611			9,047
Corporate debt securities	3,135			3,034			—			—			6,169
Certificates of deposit	575			1,466			—			—			2,041
U.S. agency notes	1,658			248			—			—			1,906
Commercial paper	313			—			—			—			313
Foreign government agency securities	—			50			—			—			50
Non-agency commercial mortgage-backed securities⁽¹⁾	—			—			—			40			40
Total fair value	$	8,508		$	20,960		$	9,543		$	10,984		$	49,995
Total amortized cost	$	8,517		$	20,999		$	9,546		$	10,967		$	50,029
Weighted-average yield ⁽²⁾	1.53		%	1.63		%	1.72		%	1.79		%	1.66		%
Held to maturity securities:
U.S. agency mortgage-backed securities ⁽¹⁾	$	441		$	12,680		$	29,511		$	57,821		$	100,453
Asset-backed securities	—			1,003			6,245			5,814			13,062
Corporate debt securities	351			3,206			454			75			4,086
U.S. state and municipal securities	—			—			121			1,183			1,304
Non-agency commercial mortgage-backed securities ⁽¹⁾	—			362			—			637			999
U.S. Treasury securities	—			—			220			—			220
Certificates of deposit	—			200			—			—			200
Foreign government agency securities	—			49			—			—			49
Total fair value	$	792		$	17,500		$	36,551		$	65,530		$	120,373
Total amortized cost	$	792		$	17,486		$	36,544		$	66,104		$	120,926
Weighted-average yield ⁽²⁾	1.97		%	2.45		%	2.35		%	2.16		%	2.26		%

⁽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.

⁽²⁾ The weighted-average yield is computed using the amortized cost at December 31, 2017.

Proceeds and gross realized gains and losses from sales of AFS securities are as follows:



Year Ended December 31,	2017		2016		2015
Proceeds	$	8,617	$	5,537	$	2,424
Gross realized gains	12		4		1
Gross realized losses	—		—		1