Fair Values of Assets and Liabilities

6 Months Ended

Jun. 30, 2020

Fair Value Disclosures [Abstract]

Fair Values of Assets and Liabilities

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, AFS securities, and certain other assets. 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. Quoted prices for investments in exchange-traded securities represent end-of-day close prices published by exchanges. Quoted prices for money market funds and other mutual funds represent reported net asset values. 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 in active markets 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 three independent third-party pricing sources for assets recorded at fair value.

Our primary independent pricing service provides prices for our fixed income investments such as commercial paper; certificates of deposit; U.S. government and agency securities; state and municipal securities; corporate debt securities; asset-backed securities; foreign government agency securities; and non-agency commercial mortgage-backed securities. Such prices are based on observable trades, broker/dealer quotes, 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 services 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 material differences in the amounts recorded.

For a description of the fair value hierarchy and Schwab’s fair value methodologies, see Note 2 in the 2019 Form 10-K. The Company did not adjust prices received from the primary independent third-party pricing service at June 30, 2020 or December 31, 2019.

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:

June 30, 2020	Level 1		Level 2		Level 3		Balance at Fair Value
Cash equivalents:
Money market funds	$	5,516	$	—	$	—	$	5,516
Total cash equivalents	5,516		—		—		5,516
Investments segregated and on deposit for regulatory purposes:
Certificates of deposit	—		1,378		—		1,378
U.S. Government securities	—		20,157		—		20,157
Total investments segregated and on deposit for regulatory purposes	—		21,535		—		21,535
Available for sale securities:
U.S. agency mortgage-backed securities	—		237,087		—		237,087
Asset-backed securities	—		22,119		—		22,119
Corporate debt securities	—		13,039		—		13,039
U.S. Treasury securities	—		4,771		—		4,771
U.S. state and municipal securities	—		1,620		—		1,620
Non-agency commercial mortgage-backed securities	—		1,254		—		1,254
Certificates of deposit	—		803		—		803
Commercial paper	—		200		—		200
Foreign government agency securities	—		301		—		301
Other	—		22		—		22
Total available for sale securities	—		281,216		—		281,216
Other assets:
Equity and bond mutual funds	375		—		—		375
U.S. Government securities	—		278		—		278
State and municipal debt obligations	—		30		—		30
Equity, corporate debt, and other securities	7		28		—		35
Total other assets	382		336		—		718
Total	$	5,898	$	303,087	$	—	$	308,985

December 31, 2019	Level 1		Level 2		Level 3		Balance at Fair Value
Cash equivalents:
Money market funds	$	5,179	$	—	$	—	$	5,179
Commercial paper	—		2,498		—		2,498
Total cash equivalents	5,179		2,498		—		7,677
Investments segregated and on deposit for regulatory purposes:
Certificates of deposit	—		1,351		—		1,351
U.S. Government securities	—		7,276		—		7,276
Total investments segregated and on deposit for regulatory purposes	—		8,627		—		8,627
Available for sale securities:
U.S. agency mortgage-backed securities	—		46,155		—		46,155
Corporate debt securities	—		5,484		—		5,484
Asset-backed securities	—		4,987		—		4,987
U.S. Treasury securities	—		3,384		—		3,384
Certificates of deposit	—		1,004		—		1,004
Commercial paper	—		395		—		395
Non-agency commercial mortgage-backed securities	—		13		—		13
Total available for sale securities	—		61,422		—		61,422
Other assets:
Equity and bond mutual funds	442		—		—		442
U.S. Government securities	—		202		—		202
State and municipal debt obligations	—		47		—		47
Equity, corporate debt, and other securities	5		22		—		27
Total other assets	447		271		—		718
Total	$	5,626	$	72,818	$	—	$	78,444

 

Fair Value of Other Financial Instruments

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

June 30, 2020	Carrying Amount		Level 1		Level 2		Level 3		Balance at Fair Value
Assets
Cash and cash equivalents	$	28,058	$	28,058	$	—	$	—	$	28,058
Cash and investments segregated and on deposit for regulatory purposes	11,643		2,230		9,413		—		11,643
Receivables from brokerage clients — net	21,418		—		21,418		—		21,418
Bank loans — net:
First Mortgages	13,971		—		14,344		—		14,344
HELOCs	977		—		973		—		973
Pledged asset lines	5,734		—		5,734		—		5,734
Other	189		—		189		—		189
Total bank loans — net	20,871		—		21,240		—		21,240
Other assets	1,272		—		1,272		—		1,272
Liabilities
Bank deposits	$	301,566	$	—	$	301,566	$	—	$	301,566
Payables to brokerage clients	50,135		—		50,135		—		50,135
Accrued expenses and other liabilities	3,827		—		3,827		—		3,827
Long-term debt	8,526		—		9,381		—		9,381

December 31, 2019	Carrying Amount		Level 1		Level 2		Level 3		Balance at Fair Value
Assets
Cash and cash equivalents	$	21,668	$	21,668	$	—	$	—	$	21,668
Cash and investments segregated and on deposit for regulatory purposes	11,807		2,792		9,015		—		11,807
Receivables from brokerage clients — net	21,763		—		21,763		—		21,763
Held to maturity securities:
U.S. agency mortgage-backed securities	109,325		—		110,566		—		110,566
Asset-backed securities	17,806		—		17,771		—		17,771
Corporate debt securities	4,661		—		4,718		—		4,718
U.S. state and municipal securities	1,301		—		1,404		—		1,404
Non-agency commercial mortgage-backed securities	1,119		—		1,141		—		1,141
U.S. Treasury securities	223		—		228		—		228
Certificates of deposit	200		—		200		—		200
Foreign government agency securities	50		—		50		—		50
Other	21		—		21		—		21
Total held to maturity securities	134,706		—		136,099		—		136,099
Bank loans — net:
First Mortgages	11,693		—		11,639		—		11,639
HELOCs	1,113		—		1,153		—		1,153
Pledged asset lines	5,206		—		5,206		—		5,206
Other	200		—		200		—		200
Total bank loans — net	18,212		—		18,198		—		18,198
Other assets	1,014		—		1,014		—		1,014
Liabilities
Bank deposits	$	220,094	$	—	$	220,094	$	—	$	220,094
Payables to brokerage clients	39,220		—		39,220		—		39,220
Accrued expenses and other liabilities	1,882		—		1,882		—		1,882
Long-term debt	7,430		—		7,775		—		7,775