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Bank Loans and Related Allowance for Credit Losses
 9 Months Ended
Sep. 30, 2020
Receivables [Abstract]  
Bank Loans and Related Allowance for Credit Losses Bank Loans and Related Allowance for Credit Losses
The composition of bank loans and delinquency analysis by portfolio segment and class of financing receivable is as follows:
September 30, 2020Current30-59 days
past due		60-89 days
past due
>90 days past
due and other
nonaccrual loans (3)
Total past due
and other
nonaccrual loans		Total
loans		Allowance
for credit
losses		Total
bank
loans – net
Residential real estate:
First Mortgages (1,2)
$14,294 $19 $1 $26 $46 $14,340 $21 $14,319 
HELOCs (1,2)
898 1 — 15 16 914 6 908 
Total residential real estate15,192 20 1 41 62 15,254 27 15,227 
Pledged asset lines6,875 4 6 — 10 6,885 — 6,885 
Other176 — — 1 1 177 3 174 
Total bank loans$22,243 $24 $7 $42 $73 $22,316 $30 $22,286 
December 31, 2019        
Residential real estate:
First Mortgages (1,2)
$11,665 $24 $4 $11 $39 $11,704 $11 $11,693 
HELOCs (1,2)
1,105 2 1 9 12 1,117 4 1,113 
Total residential real estate12,770 26 5 20 51 12,821 15 12,806 
Pledged asset lines5,202 4 — — 4 5,206 — 5,206 
Other201 — — 2 2 203 3 200 
Total bank loans$18,173 $30 $5 $22 $57 $18,230 $18 $18,212 
(1) First Mortgages and HELOCs include unamortized premiums and discounts and direct origination costs of $75 million and $74 million at September 30, 2020 and December 31, 2019, respectively.
(2) At September 30, 2020 and December 31, 2019, 45% of the First Mortgage and HELOC portfolios were concentrated in California. These loans have performed in a manner consistent with the portfolio as a whole.
(3) There were no loans accruing interest that were contractually 90 days or more past due at September 30, 2020 or December 31, 2019.

At September 30, 2020, CSB had pledged $13.6 billion of First Mortgages and HELOCs as collateral to secure borrowing capacity on a secured credit facility with the FHLB (see Note 9).

Changes in the allowance for credit losses on bank loans were as follows:
September 30, 2020September 30, 2019
Three Months EndedFirst MortgagesHELOCsTotal residential real estateOther
Total (1)
First MortgagesHELOCsTotal residential real estateOther
Total (1)
Balance at beginning of period$22 $4 $26 $4 $30 $12 $5 $17 $2 $19 
Provision for credit losses(1)2 1 (1)— (2)(1)(3)1 (2)
Balance at end of period$21 $6 $27 $3 $30 $10 $4 $14 $3 $17 
September 30, 2020September 30, 2019
Nine Months EndedFirst MortgagesHELOCsTotal residential real estateOther
Total (1)
First MortgagesHELOCsTotal residential real estateOther
Total (1)
Balance at beginning of
period		$11 $4 $15 $3 $18 $14 $5 $19 $2 $21 
Adoption of ASU
2016-13		1 — 1 — 1 — — — — — 
Recoveries1 — 1 — 1 1 1 2 — 2 
Provision for credit
losses		8 2 10 — 10 (5)(2)(7)1 (6)
Balance at end of period$21 $6 $27 $3 $30 $10 $4 $14 $3 $17 
Note:    Substantially all of the bank loans were collectively evaluated for impairment at December 31, 2019.
(1) All PALs were fully collateralized by securities with fair values in excess of borrowings as of each period presented.

Although uncertainty around the economic outlook persists due to the ongoing COVID-19 pandemic, credit quality metrics and overall performance of the bank loan portfolios remained strong. Management’s reasonable and supportable forecast period extends through 2024, with limited growth in home prices anticipated over the near term and a return to full employment not expected until 2024. During the third quarter of 2020, continued strong credit quality metrics and a modestly improved macroeconomic outlook relative to June 30, 2020 produced a stable projection of loss rates. The ACL has increased from January 1, 2020 to September 30, 2020, primarily due to growth in mortgage loan origination during the first nine months of 2020, driven by the continued low interest rate environment.

A summary of bank loan-related nonperforming assets and troubled debt restructurings is as follows:
September 30, 2020December 31, 2019
Nonaccrual loans (1)
$42 $22 
Other real estate owned (2)
1 1 
Total nonperforming assets43 23 
Troubled debt restructurings1 2 
Total nonperforming assets and troubled debt restructurings$44 $25 
(1) Nonaccrual loans include nonaccrual troubled debt restructurings.
(2) Included in other assets on the condensed consolidated balance sheets.

Credit Quality
In addition to monitoring delinquency, Schwab monitors the credit quality of First Mortgages and HELOCs by stratifying the portfolios by the following:
•Year of origination;
•Borrower FICO scores at origination (Origination FICO);
•Updated borrower FICO scores (Updated FICO);
•Loan-to-value (LTV) ratios at origination (Origination LTV); and
•Estimated current LTV ratios (Estimated Current LTV).
Borrowers’ FICO scores are provided by an independent third-party credit reporting service and updated quarterly. The Origination LTV and Estimated Current LTV for a HELOC include any first lien mortgage outstanding on the same property at the time of the HELOC’s origination. The Estimated Current LTV for each loan is updated on a monthly basis by reference to a home price appreciation index.
The credit quality indicators of the Company’s bank loan portfolio are detailed below:
First Mortgages Amortized Cost Basis by Origination Year
September 30, 202020202019201820172016pre-2016Total First MortgagesRevolving HELOCs amortized cost basisHELOCs converted to term loansTotal HELOCs
Origination FICO
<620$— $— $— $— $— $2 $2 $— $— $— 
620 – 67922 14 4 11 17 17 85 1 3 4 
680 – 739626 405 132 214 200 287 1,864 91 88 179 
≥7405,443 2,837 582 1,058 1,249 1,220 12,389 406 325 731 
Total$6,091 $3,256 $718 $1,283 $1,466 $1,526 $14,340 $498 $416 $914 
Origination LTV
≤70%$5,064 $2,552 $506 $967 $1,243 $1,081 $11,413 $368 $294 $662 
>70% – ≤90%1,027 704 212 316 223 442 2,924 130 118 248 
>90% – ≤100%— — — — — 3 3 — 4 4 
Total$6,091 $3,256 $718 $1,283 $1,466 $1,526 $14,340 $498 $416 $914 
Weighted Average
Updated FICO
<620$6 $4 $2 $3 $1 $18 $34 $3 $11 $14 
620 – 67947 37 18 24 20 38 184 15 22 37 
680 – 739514 300 92 148 129 196 1,379 65 61 126 
≥7405,524 2,915 606 1,108 1,316 1,274 12,743 415 322 737 
Total$6,091 $3,256 $718 $1,283 $1,466 $1,526 $14,340 $498 $416 $914 
Estimated Current LTV (1)
≤70%$5,198 $2,802 $650 $1,251 $1,457 $1,512 $12,870 $478 $400 $878 
>70% – ≤90%893 454 68 32 9 13 1,469 20 13 33 
>90% – ≤100%— — — — — — — — 2 2 
>100%— — — — — 1 1 — 1 1 
Total$6,091 $3,256 $718 $1,283 $1,466 $1,526 $14,340 $498 $416 $914 
Percent of Loans on
Nonaccrual Status		0.09 %0.05 %0.01 %0.15 %0.17 %0.99 %0.18 %0.63 %2.74 %1.64 %
(1) Represents the LTV for the full line of credit (drawn and undrawn) for revolving HELOCs.

September 30, 2020BalanceWeighted Average Updated FICOPercent of Loans on Nonaccrual Status
Pledged Asset Lines
Weighted-Average LTV (1)
=70%$6,885 772 — 
(1) Represents the LTV for the full line of credit (drawn and undrawn).
First Mortgages Amortized Cost Basis by Origination Year
December 31, 20192019201820172016pre-2016Total First MortgagesRevolving HELOCs amortized cost basisHELOCs converted to term loansTotal HELOCs
Origination FICO
<620$— $— $— $— $3 $3 $— $— $— 
620 – 67912 6 14 20 25 77 1 4 5 
680 – 739478 220 304 290 421 1,713 114 105 219 
≥7403,512 1,058 1,593 1,839 1,909 9,911 496 397 893 
Total$4,002 $1,284 $1,911 $2,149 $2,358 $11,704 $611 $506 $1,117 
Origination LTV
≤70%$3,104 $906 $1,427 $1,812 $1,679 $8,928 $444 $354 $798 
>70% – ≤90%898 378 484 337 676 2,773 167 147 314 
>90% – ≤100%— — — — 3 3 — 5 5 
Total$4,002 $1,284 $1,911 $2,149 $2,358 $11,704 $611 $506 $1,117 
Weighted Average
Updated FICO
<620$5 $4 $5 $3 $25 $42 $6 $15 $21 
620 – 67945 36 32 26 68 207 18 22 40 
680 – 739474 153 213 199 307 1,346 92 80 172 
≥7403,478 1,091 1,661 1,921 1,958 10,109 495 389 884 
Total$4,002 $1,284 $1,911 $2,149 $2,358 $11,704 $611 $506 $1,117 
Estimated Current LTV (1)
≤70%$3,125 $1,018 $1,790 $2,119 $2,330 $10,382 $578 $478 $1,056 
>70% – ≤90%877 265 121 30 27 1,320 33 23 56 
>90% – ≤100%— 1 — — 1 2 — 3 3 
>100%— — — — — — — 2 2 
Total$4,002 $1,284 $1,911 $2,149 $2,358 $11,704 $611 $506 $1,117 
Percent of Loans on
Nonaccrual Status		0.04 %0.04 %0.04 %0.08 %0.25 %0.09 %0.19 %1.57 %0.83 %
(1) Represents the LTV for the full line of credit (drawn and undrawn) for revolving HELOCs.
December 31, 2019BalanceWeighted Average Updated FICOPercent of Loans on Nonaccrual Status
Pledged Asset Lines
Weighted-Average LTV (1)
=70%$5,206 766 — 
(1) Represents the LTV for the full line of credit (drawn and undrawn).

At September 30, 2020, First Mortgage loans of $12.6 billion had adjustable interest rates. Substantially all of these mortgages have initial fixed interest rates for three to ten years and interest rates that adjust annually thereafter. Approximately 26% of the balance of these mortgages consisted of loans with interest-only payment terms. The interest rates on approximately 76% of the balance of these interest-only loans are not scheduled to reset for three or more years. Schwab’s mortgage loans do not include interest terms described as temporary introductory rates below current market rates.
At September 30, 2020 and December 31, 2019, Schwab had $45 million and $46 million, respectively, of accrued interest on bank loans, which is excluded from the amortized cost basis of bank loans and included in other assets on the condensed consolidated balance sheets.
The HELOC product has a 30-year loan term with an initial draw period of ten years from the date of origination. After the initial draw period, the balance outstanding at such time is converted to a 20-year amortizing loan. The interest rate during the initial draw period and the 20-year amortizing period is a floating rate based on the prime rate plus a margin.

The following table presents HELOCs converted to amortizing loans during each period presented:
Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
HELOCs converted to amortizing loans$9 $13 $25 $41 

The following table presents when current outstanding HELOCs will convert to amortizing loans:
September 30, 2020Balance
Converted to an amortizing loan by period end$416 
Within 1 year37 
> 1 year – 3 years83 
> 3 years – 5 years112 
> 5 years266 
Total$914 

At September 30, 2020, $731 million of the HELOC portfolio was secured by second liens on the associated properties. Second lien mortgage loans typically possess a higher degree of credit risk given the subordination to the first lien holder in the event of default. In addition to the credit monitoring activities described previously, Schwab also monitors credit risk by reviewing the delinquency status of the first lien loan on the associated property. At September 30, 2020, the borrowers on approximately 53% of HELOC loan balances outstanding only paid the minimum amount due.