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Bank Loans and Related Allowance for Credit Losses
 12 Months Ended
Dec. 31, 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:
December 31, 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)
$14,804 $27 $1 $72 $100 $14,904 $22 $14,882 
HELOCs (1,2)
823 1 1 17 19 842 5 837 
Total residential real estate15,627 28 2 89 119 15,746 27 15,719 
Pledged asset lines7,901 10 5 — 15 7,916 — 7,916 
Other181 — — — — 181 3 178 
Total bank loans$23,709 $38 $7 $89 $134 $23,843 $30 $23,813 
       
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 $72 million and $74 million at December 31, 2020 and 2019, respectively.
(2) At December 31, 2020 and 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 December 31, 2020 or 2019.

At December 31, 2020, CSB had pledged the full balance of First Mortgages and HELOCs pursuant to a blanket lien status collateral arrangement to secure borrowing capacity on a secured credit facility with the FHLB (see Note 13).

Changes in the allowance for credit losses on bank loans were as follows:
December 31, 2020December 31, 2019December 31, 2018
First MortgagesHELOCsTotal residential real estateOther
Total (1)
First MortgagesHELOCsTotal residential real estateOther
Total (1)
First MortgagesHELOCsTotal residential real estateOther
Total (1)
Balance at beginning of year$11 $4 $15 $3 $18 $14 $5 $19 $2 $21 $16 $8 $24 2 $26 
Adoption of ASU 2016-131 — 1 — 1 — — — — — — — — — — 
Charge-offs— — — — — — — — — — — — — (1)(1)
Recoveries1 — 1 — 1 1 1 2 — 2 1 1 2 — 2 
Provision for credit losses9 1 10 — 10 (4)(2)(6)1 (5)(3)(4)(7)1 (6)
Balance at end of year$22 $5 $27 $3 $30 $11 $4 $15 $3 $18 $14 $5 $19 $2 $21 
Note: Substantially all of the bank loans were collectively evaluated for impairment at December 31, 2019 and 2018.
(1) All PALs were fully collateralized by securities with fair values in excess of borrowings as of each period presented.

Despite the impact of COVID-19 on the economy and the continued uncertainty of the economic outlook, credit quality metrics and overall performance of the bank loan portfolios remained strong in 2020. The ACL increased from January 1, 2020 to December 31, 2020, primarily due to growth in mortgage loan origination during the year, driven by the continued low interest rate environment, and also reflects management’s consideration of qualitative factors associated with the potential persistence and effects of COVID-19 on the economic recovery. At December 31, 2020, management’s reasonable and supportable forecast period extends through 2024, with limited growth in home prices anticipated over the near term and unemployment expected to remain above 5% through the end of 2022.
A summary of bank loan-related nonperforming assets and troubled debt restructurings is as follows:
December 31,20202019
Nonaccrual loans (1)
$89 $22 
Other real estate owned (2)
1 1 
Total nonperforming assets90 23 
Troubled debt restructurings1 2 
Total nonperforming assets and troubled debt restructurings$91 $25 
(1) Nonaccrual loans include nonaccrual troubled debt restructurings.
(2) Included in other assets on the 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.

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
December 31, 202020202019201820172016pre-2016Total First MortgagesRevolving HELOCs amortized cost basisHELOCs converted to term loansTotal HELOCs
Origination FICO
<620$1 $— $— $— $— $2 $3 $— $— $— 
620 – 67929 13 3 8 17 14 84 1 3 4 
680 – 739794 355 105 181 166 253 1,854 82 80 162 
≥7407,150 2,452 449 858 1,029 1,025 12,963 380 296 676 
Total$7,974 $2,820 $557 $1,047 $1,212 $1,294 $14,904 $463 $379 $842 
Origination LTV
≤70%$6,653 $2,211 $396 $793 $1,024 $911 $11,988 $351 $269 $620 
>70% – ≤90%1,321 609 161 254 188 380 2,913 112 107 219 
>90% – ≤100%— — — — — 3 3 — 3 3 
Total$7,974 $2,820 $557 $1,047 $1,212 $1,294 $14,904 $463 $379 $842 
Weighted Average
Updated FICO
<620$5 $2 $1 $4 $2 $17 $31 $3 $9 $12 
620 – 67967 34 16 21 20 40 198 12 20 32 
680 – 739784 252 66 121 110 171 1,504 58 55 113 
≥7407,118 2,532 474 901 1,080 1,066 13,171 390 295 685 
Total$7,974 $2,820 $557 $1,047 $1,212 $1,294 $14,904 $463 $379 $842 
Estimated Current LTV (1)
≤70%$6,999 $2,582 $533 $1,034 $1,207 $1,283 $13,638 $452 $368 $820 
>70% – ≤90%975 238 24 13 5 11 1,266 11 9 20 
>90% – ≤100%— — — — — — — — 1 1 
>100%— — — — — — — — 1 1 
Total$7,974 $2,820 $557 $1,047 $1,212 $1,294 $14,904 $463 $379 $842 
Percent of Loans on
Nonaccrual Status		0.09 %0.38 %1.02 %0.87 %0.24 %2.82 %0.48 %1.37 %2.80 %2.02 %
(1) Represents the LTV for the full line of credit (drawn and undrawn) for revolving HELOCs.

December 31, 2020BalanceWeighted Average Updated FICOPercent of Loans on Nonaccrual Status
Pledged Asset Lines
Weighted-Average LTV (1)
=70%$7,916 770 — 
(1) Represents the LTV for the full line of credit (drawn and undrawn).
First Mortgages Amortized Cost Basis by Origination Year
December 31, 20192019201820172016pre-2016Total First MortgagesRevolving HELOCs amortized cost basisHELOCs converted to term loansTotal HELOCs
Origination FICO
<620$— $— $— $— $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 December 31, 2020, First Mortgage loans of $12.9 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 77% 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 December 31, 2020 and 2019, Schwab had $43 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 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:
December 31,20202019
HELOCs converted to amortizing loans$26 $44 

The following table presents when current outstanding HELOCs will convert to amortizing loans:
December 31, 2020Balance
Converted to an amortizing loan by period end$379 
Within 1 year31 
> 1 year – 3 years88 
> 3 years – 5 years95 
> 5 years249 
Total$842 

At December 31, 2020, $664 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 December 31, 2020, the borrowers on approximately 52% of HELOC loan balances outstanding only paid the minimum amount due.