Fair Values of Assets and Liabilities

Assets and liabilities measured at fair value on a recurring basis

Schwab’s assets and liabilities measured at fair value on a recurring basis include certain cash equivalents, certain investments segregated and on deposit for regulatory purposes, other securities owned, and AFS securities. The Company uses the market approach to determine the fair value of assets and liabilities. When available, the Company uses quoted prices in active markets to measure the fair value of assets and liabilities. When utilizing market data and bid-ask spread, the Company uses the price within the bid-ask spread that best represents fair value. When quoted prices do not exist, the Company uses prices obtained from independent third-party pricing services to measure the fair value of investment assets. We generally obtain prices from at least three independent pricing sources for assets recorded at fair value.

Our primary independent pricing service provides prices based on observable trades and discounted cash flows that incorporate observable information such as yields for similar types of securities (a benchmark interest rate plus observable spreads) and weighted-average maturity for the same or similar “to-be-issued” securities. We compare the prices obtained from the primary independent pricing service to the prices obtained from the additional independent pricing sources to determine if the price obtained from the primary independent pricing service is reasonable. Schwab does not adjust the prices received from independent third-party pricing services unless such prices are inconsistent with the definition of fair value and result in a material difference in the recorded amounts.

For a description of the fair value hierarchy and Schwab’s fair value methodologies, including the use of independent third-party pricing services, see Note 2 in the 2017 Form 10-K. We did not transfer any assets or liabilities between Level 1, Level 2, or Level 3 during the nine months ended September 30, 2018, or the year ended December 31, 2017. In addition, the Company did not adjust prices received from the primary independent third-party pricing service at September 30, 2018 or December 31, 2017.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following tables present the fair value hierarchy for assets measured at fair value on a recurring basis. Liabilities recorded at fair value were not material, and therefore are not included in the following tables:



September 30, 2018	Level 1		Level 2		Level 3		Balance at Fair Value
Cash equivalents:
Money market funds	$	552	$	—	$	—	$	552
Commercial paper	—		1,988		—		1,988
Total cash equivalents	552		1,988		—		2,540
Investments segregated and on deposit for regulatory purposes:
Certificates of deposit	—		1,950		—		1,950
Total investments segregated and on deposit for regulatory purposes	—		1,950		—		1,950
Other securities owned:
Equity and bond mutual funds	394		—		—		394
Schwab Funds^® money market funds	21		—		—		21
State and municipal debt obligations	—		44		—		44
Equity, U.S. Government and corporate debt, and other securities	3		38		—		41
Total other securities owned	418		82		—		500
Available for sale securities:
U.S. agency mortgage-backed securities	—		23,955		—		23,955
U.S. Treasury securities	—		12,243		—		12,243
Asset-backed securities	—		9,387		—		9,387
Corporate debt securities	—		6,922		—		6,922
Certificates of deposit	—		2,769		—		2,769
U.S. agency notes	—		1,682		—		1,682
Commercial paper	—		518		—		518
Foreign government agency securities	—		48		—		48
Non-agency commercial mortgage-backed securities	—		34		—		34
Total available for sale securities	—		57,558		—		57,558
Total	$	970	$	61,578	$	—	$	62,548



December 31, 2017	Level 1		Level 2		Level 3		Balance at Fair Value
Cash equivalents:
Money market funds	$	2,727	$	—	$	—	$	2,727
Total cash equivalents	2,727		—		—		2,727
Investments segregated and on deposit for regulatory purposes:
Certificates of deposit	—		2,198		—		2,198
U.S. Government securities	—		3,658		—		3,658
Total investments segregated and on deposit for regulatory purposes	—		5,856		—		5,856
Other securities owned:
Equity and bond mutual funds	318		—		—		318
Schwab Funds^® money market funds	135		—		—		135
State and municipal debt obligations	—		52		—		52
Equity, U.S. Government and corporate debt, and other securities	2		32		—		34
Total other securities owned	455		84		—		539
Available for sale securities:
U.S. agency mortgage-backed securities	—		20,929		—		20,929
U.S. Treasury securities	—		9,500		—		9,500
Asset-backed securities	—		9,047		—		9,047
Corporate debt securities	—		6,169		—		6,169
Certificates of deposit	—		2,041		—		2,041
U.S. agency notes	—		1,906		—		1,906
Commercial paper	—		313		—		313
Foreign government agency securities	—		50		—		50
Non-agency commercial mortgage-backed securities	—		40		—		40
Total available for sale securities	—		49,995		—		49,995
Total	$	3,182	$	55,935	$	—	$	59,117

Fair Value of Other Financial Instruments

The following tables present the fair value hierarchy for other financial instruments:



September 30, 2018	Carrying Amount		Level 1		Level 2		Level 3		Balance at Fair Value
Assets
Cash and cash equivalents	$	19,290	$	—	$	19,290	$	—	$	19,290
Cash and investments segregated and on deposit for regulatory purposes	6,526		—		6,526		—		6,526
Receivables from brokers, dealers, and clearing organizations	798		—		798		—		798
Receivables from brokerage clients — net	22,402		—		22,402		—		22,402
Held to maturity securities:
U.S. agency mortgage-backed securities	113,453		—		109,996		—		109,996
Asset-backed securities	17,964		—		18,074		—		18,074
Corporate debt securities	4,578		—		4,531		—		4,531
U.S. state and municipal securities	1,330		—		1,329		—		1,329
Non-agency commercial mortgage-backed securities	1,149		—		1,125		—		1,125
U.S. Treasury securities	223		—		212		—		212
Certificates of deposit	200		—		201		—		201
Foreign government agency securities	50		—		48		—		48
Other	5		—		5		—		5
Total held to maturity securities	138,952		—		135,521		—		135,521
Bank loans — net:
First Mortgages	10,239		—		9,963		—		9,963
HELOCs	1,595		—		1,664		—		1,664
Pledged asset lines	4,556		—		4,556		—		4,556
Other	174		—		174		—		174
Total bank loans — net	16,564		—		16,357		—		16,357
Other assets	463		—		463		—		463
Total	$	204,995	$	—	$	201,357	$	—	$	201,357
Liabilities
Bank deposits	$	213,408	$	—	$	213,408	$	—	$	213,408
Payables to brokers, dealers, and clearing organizations	1,522		—		1,522		—		1,522
Payables to brokerage clients	27,851		—		27,851		—		27,851
Accrued expenses and other liabilities	1,177		—		1,177		—		1,177
Long-term debt	5,790		—		5,687		—		5,687
Total	$	249,748	$	—	$	249,645	$	—	$	249,645



December 31, 2017	Carrying Amount		Level 1		Level 2		Level 3		Balance at Fair Value
Assets
Cash and cash equivalents	$	11,490	$	—	$	11,490	$	—	$	11,490
Cash and investments segregated and on deposit for regulatory purposes	9,277		—		9,277		—		9,277
Receivables from brokers, dealers, and clearing organizations	649		—		649		—		649
Receivables from brokerage clients — net	20,568		—		20,568		—		20,568
Held to maturity securities:
U.S. agency mortgage-backed securities	101,197		—		100,453		—		100,453
Asset-backed securities	12,937		—		13,062		—		13,062
Corporate debt securities	4,078		—		4,086		—		4,086
U.S. state and municipal securities	1,247		—		1,304		—		1,304
Non-agency commercial mortgage-backed securities	994		—		999		—		999
U.S. Treasury securities	223		—		220		—		220
Certificates of deposit	200		—		200		—		200
Foreign government agency securities	50		—		49		—		49
Total held to maturity securities	120,926		—		120,373		—		120,373
Bank loans — net:
First Mortgages	10,000		—		9,917		—		9,917
HELOCs	1,935		—		2,025		—		2,025
Pledged asset lines	4,369		—		4,369		—		4,369
Other	174		—		174		—		174
Total bank loans — net	16,478		—		16,485		—		16,485
Other assets	781		—		781		—		781
Total	$	180,169	$	—	$	179,623	$	—	$	179,623
Liabilities
Bank deposits	$	169,656	$	—	$	169,656	$	—	$	169,656
Payables to brokers, dealers, and clearing organizations	1,287		—		1,287		—		1,287
Payables to brokerage clients	31,243		—		31,243		—		31,243
Accrued expenses and other liabilities	1,463		—		1,463		—		1,463
Short-term borrowings	15,000		—		15,000		—		15,000
Long-term debt	4,753		—		4,811		—		4,811
Total	$	223,402	$	—	$	223,460	$	—	$	223,460