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Bank Loans and Related Allowance for Credit Losses
 6 Months Ended
Jun. 30, 2021
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:
June 30, 2021Current30-59 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)
$17,514 $22 $3 $39 $64 $17,578 $8 $17,570 
HELOCs (1,2)
711 1 — 14 15 726 2 724 
Total residential real estate18,225 23 3 53 79 18,304 10 18,294 
Pledged asset lines10,409 3 3 — 6 10,415 — 10,415 
Other189 — — — — 189 3 186 
Total bank loans$28,823 $26 $6 $53 $85 $28,908 $13 $28,895 
December 31, 2020        
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 
(1) First Mortgages and HELOCs include unamortized premiums and discounts and direct origination costs of $79 million and $72 million at June 30, 2021 and December 31, 2020, respectively.
(2) At June 30, 2021 and December 31, 2020, 46% and 45%, respectively, 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 June 30, 2021 or December 31, 2020.

At June 30, 2021, 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 9).

Changes in the allowance for credit losses on bank loans were as follows:
June 30, 2021June 30, 2020
Three Months EndedFirst MortgagesHELOCsTotal residential real estateOtherTotalFirst MortgagesHELOCsTotal residential real estateOtherTotal
Balance at beginning of
  period		$12 $3 $15 $3 $18 $21 $4 $25 $4 $29 
Recoveries— — — — — 1 — 1 — 1 
Provision for credit
  losses		(4)(1)(5)— (5)— — — — — 
Balance at end of period$8 $2 $10 $3 $13 $22 $4 $26 $4 $30 
June 30, 2021June 30, 2020
Six Months EndedFirst MortgagesHELOCsTotal residential real estateOtherTotal First MortgagesHELOCsTotal residential real estateOther
Total
Balance at beginning of
  period		$22 $5 $27 $3 $30 $11 $4 $15 $3 $18 
Adoption of ASU
  2016-13		— — — — — 1 — 1 — 1 
Recoveries— — — — — 1 — 1 — 1 
Provision for credit
  losses		(14)(3)(17)— (17)9 — 9 1 10 
Balance at end of period$8 $2 $10 $3 $13 $22 $4 $26 $4 $30 

As discussed in Item 8 – Note 2 in our 2020 Form 10-K, PALs are subject to the collateral maintenance practical expedient under ASC 326. All PALs were fully collateralized by securities with fair values in excess of borrowings as of June 30, 2021 and December 31, 2020. Therefore, no allowance for credit losses for PALs as of those dates was required.

The economy continues to improve as vaccinations appear to limit the spread of COVID-19 in the United States, though some risks to the economy remain. Management’s macroeconomic outlook reflects continued growth in home prices and lower unemployment anticipated over the near term. This macroeconomic outlook, along with the continued strong credit quality metrics in the bank loans portfolio, result in a lower modeled projection of loss rates compared to December 31, 2020.

A summary of bank loan-related nonperforming assets and troubled debt restructurings is as follows:
June 30, 2021December 31, 2020
Nonaccrual loans (1)
$53 $89 
Other real estate owned (2)
1 1 
Total nonperforming assets54 90 
Troubled debt restructurings— 1 
Total nonperforming assets and troubled debt restructurings$54 $91 
(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 generally 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
June 30, 202120212020201920182017pre-2017Total First MortgagesRevolving HELOCs amortized cost basisHELOCs converted to term loansTotal HELOCs
Origination FICO
<620$— $1 $— $— $— $1 $2 $— $— $— 
620 – 67915 29 7 1 8 22 82 — 3 3 
680 – 739660 678 228 60 124 300 2,050 70 68 138 
≥7405,774 5,919 1,563 274 533 1,381 15,444 333 252 585 
Total$6,449 $6,627 $1,798 $335 $665 $1,704 $17,578 $403 $323 $726 
Origination LTV
≤70%$5,556 $5,524 $1,409 $245 $507 $1,291 $14,532 $321 $229 $550 
>70% – ≤90%893 1,103 389 90 158 410 3,043 82 91 173 
>90% – ≤100%— — — — — 3 3 — 3 3 
Total$6,449 $6,627 $1,798 $335 $665 $1,704 $17,578 $403 $323 $726 
Weighted Average
  Updated FICO
<620$6 $3 $3 $1 $4 $16 $33 $3 $7 $10 
620 – 67949 78 27 8 13 45 220 10 16 26 
680 – 739630 524 172 40 80 207 1,653 50 46 96 
≥7405,764 6,022 1,596 286 568 1,436 15,672 340 254 594 
Total$6,449 $6,627 $1,798 $335 $665 $1,704 $17,578 $403 $323 $726 
Estimated Current LTV (1)
≤70%$5,731 $6,388 $1,768 $331 $658 $1,698 $16,574 $400 $319 $719 
>70% – ≤90%718 239 30 4 7 6 1,004 3 4 7 
>90% – ≤100%— — — — — — — — — — 
>100%— — — — — — — — — — 
Total$6,449 $6,627 $1,798 $335 $665 $1,704 $17,578 $403 $323 $726 
Percent of Loans on
  Nonaccrual Status		0.03 %0.09 %0.14 %0.65 %0.51 %1.38 %0.22 %1.38 %2.55 %1.93 %
(1) Represents the LTV for the full line of credit (drawn and undrawn) for revolving HELOCs.

June 30, 2021BalanceWeighted Average Updated FICOPercent of Loans on Nonaccrual Status
Pledged Asset Lines
Weighted-Average LTV (1)
=70%$10,415 770 — 
(1) Represents the LTV for the full line of credit (drawn and undrawn).
First Mortgages Amortized Cost Basis by Origination Year
December 31, 20202020201920182017pre-2017Total First MortgagesRevolving HELOCs amortized cost basisHELOCs converted to term loansTotal HELOCs
Origination FICO
<620$1 $— $— $— $2 $3 $— $— $— 
620 – 67929 13 3 8 31 84 1 3 4 
680 – 739794 355 105 181 419 1,854 82 80 162 
≥7407,150 2,452 449 858 2,054 12,963 380 296 676 
Total$7,974 $2,820 $557 $1,047 $2,506 $14,904 $463 $379 $842 
Origination LTV
≤70%$6,653 $2,211 $396 $793 $1,935 $11,988 $351 $269 $620 
>70% – ≤90%1,321 609 161 254 568 2,913 112 107 219 
>90% – ≤100%— — — — 3 3 — 3 3 
Total$7,974 $2,820 $557 $1,047 $2,506 $14,904 $463 $379 $842 
Weighted Average
  Updated FICO
<620$5 $2 $1 $4 $19 $31 $3 $9 $12 
620 – 67967 34 16 21 60 198 12 20 32 
680 – 739784 252 66 121 281 1,504 58 55 113 
≥7407,118 2,532 474 901 2,146 13,171 390 295 685 
Total$7,974 $2,820 $557 $1,047 $2,506 $14,904 $463 $379 $842 
Estimated Current LTV (1)
≤70%$6,999 $2,582 $533 $1,034 $2,490 $13,638 $452 $368 $820 
>70% – ≤90%975 238 24 13 16 1,266 11 9 20 
>90% – ≤100%— — — — — — — 1 1 
>100%— — — — — — — 1 1 
Total$7,974 $2,820 $557 $1,047 $2,506 $14,904 $463 $379 $842 
Percent of Loans on
  Nonaccrual Status		0.09 %0.38 %1.02 %0.87 %1.57 %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).

At June 30, 2021, First Mortgage loans of $14.6 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 83% 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 June 30, 2021 and December 31, 2020, Schwab had $50 million and $43 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
June 30,		Six Months Ended
June 30,
2021202020212020
HELOCs converted to amortizing loans$7 $8 $14 $18 

The following table presents when current outstanding HELOCs will convert to amortizing loans:
June 30, 2021Balance
Converted to an amortizing loan by period end$323 
Within 1 year16 
> 1 year – 3 years82 
> 3 years – 5 years76 
> 5 years229 
Total$726 

At June 30, 2021, $563 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 June 30, 2021, the borrowers on approximately 52% of HELOC loan balances outstanding only paid the minimum amount due.