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Bank Loans and Related Allowance for Credit Losses
 9 Months Ended
Sep. 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:
September 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)
$19,226 $25 $3 $36 $64 $19,290 $8 $19,282 
HELOCs (1,2)
677 — — 11 11 688 2 686 
Total residential real estate19,903 25 3 47 75 19,978 10 19,968 
Pledged asset lines11,393 10 9 — 19 11,412 — 11,412 
Other193 — — — — 193 3 190 
Total bank loans$31,489 $35 $12 $47 $94 $31,583 $13 $31,570 
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 $85 million and $72 million at September 30, 2021 and December 31, 2020, respectively.
(2) At September 30, 2021 and December 31, 2020, 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, 2021 or December 31, 2020.

At September 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:
September 30, 2021September 30, 2020
Three Months EndedFirst MortgagesHELOCsTotal residential real estateOtherTotalFirst MortgagesHELOCsTotal residential real estateOtherTotal
Balance at beginning of
  period		$8 $2 $10 $3 $13 $22 $4 $26 $4 $30 
Charge-offs— — — (1)(1)— — — — — 
Recoveries— 1 1 — 1 — — — — — 
Provision for credit
  losses		— (1)(1)1 — (1)2 1 (1)— 
Balance at end of period$8 $2 $10 $3 $13 $21 $6 $27 $3 $30 
September 30, 2021September 30, 2020
Nine 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 
Charge-offs— — — (1)(1)— — — — — 
Recoveries— 1 1 — 1 1 — 1 — 1 
Provision for credit
  losses		(14)(4)(18)1 (17)8 2 10 — 10 
Balance at end of period$8 $2 $10 $3 $13 $21 $6 $27 $3 $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 September 30, 2021 and December 31, 2020. Therefore, no allowance for credit losses for PALs as of those dates was required.

The economy continued to strengthen throughout 2021, with sectors most adversely affected by the pandemic improving in recent months. However, COVID-19 has continued to affect the pace of the recovery. Management’s macroeconomic outlook reflects continued moderate 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:
September 30, 2021December 31, 2020
Nonaccrual loans (1)
$47 $89 
Other real estate owned (2)
— 1 
Total nonperforming assets47 90 
Troubled debt restructurings— 1 
Total nonperforming assets and troubled debt restructurings$47 $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
September 30, 202120212020201920182017pre-2017Total First MortgagesRevolving HELOCs amortized cost basisHELOCs converted to term loansTotal HELOCs
Origination FICO
<620$— $1 $— $— $— $1 $2 $— $— $— 
620 – 67921 28 5 1 7 21 83 — 3 3 
680 – 739934 611 179 51 112 256 2,143 65 63 128 
≥7408,820 5,163 1,281 218 430 1,150 17,062 323 234 557 
Total$9,775 $5,803 $1,465 $270 $549 $1,428 $19,290 $388 $300 $688 
Origination LTV
≤70%$8,464 $4,838 $1,161 $202 $417 $1,065 $16,147 $315 $214 $529 
>70% – ≤90%1,311 965 304 68 132 360 3,140 73 84 157 
>90% – ≤100%— — — — — 3 3 — 2 2 
Total$9,775 $5,803 $1,465 $270 $549 $1,428 $19,290 $388 $300 $688 
Weighted Average
  Updated FICO
<620$4 $4 $2 $— $3 $13 $26 $2 $7 $9 
620 – 67976 76 20 7 9 35 223 8 14 22 
680 – 739882 486 145 33 63 171 1,780 53 42 95 
≥7408,813 5,237 1,298 230 474 1,209 17,261 325 237 562 
Total$9,775 $5,803 $1,465 $270 $549 $1,428 $19,290 $388 $300 $688 
Estimated Current LTV (1)
≤70%$8,857 $5,727 $1,451 $268 $547 $1,426 $18,276 $387 $296 $683 
>70% – ≤90%918 76 14 2 2 2 1,014 1 3 4 
>90% – ≤100%— — — — — — — — 1 1 
>100%— — — — — — — — — — 
Total$9,775 $5,803 $1,465 $270 $549 $1,428 $19,290 $388 $300 $688 
Percent of Loans on
  Nonaccrual Status		0.05 %0.12 %0.14 %0.33 %0.36 %1.31 %0.19 %0.86 %2.48 %1.60 %
(1) Represents the LTV for the full line of credit (drawn and undrawn) for revolving HELOCs.

September 30, 2021BalanceWeighted Average Updated FICOPercent of Loans on Nonaccrual Status
Pledged Asset Lines
Weighted-Average LTV (1)
=70%$11,412 768 — 
(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 September 30, 2021, First Mortgage loans of $15.8 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 27% of the balance of these mortgages consisted of loans with interest-only payment terms. The interest rates on approximately 87% 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, 2021 and December 31, 2020, Schwab had $54 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
September 30,		Nine Months Ended
September 30,
2021202020212020
HELOCs converted to amortizing loans$5 $9 $17 $25 

The following table presents when current outstanding HELOCs will convert to amortizing loans:
September 30, 2021Balance
Converted to an amortizing loan by period end$300 
Within 1 year15 
> 1 year – 3 years81 
> 3 years – 5 years68 
> 5 years224 
Total$688 

At September 30, 2021, $530 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, 2021, the borrowers on approximately 55% of HELOC loan balances outstanding only paid the minimum amount due.