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Bank Loans and Related Allowance for Credit Losses
 12 Months Ended
Dec. 31, 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:
December 31, 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)
$21,022 $41 $1 $26 $68 $21,090 $13 $21,077 
HELOCs (1,2)
637 2 — 9 11 648 2 646 
Total residential real estate21,659 43 1 35 79 21,738 15 21,723 
Pledged asset lines12,698 3 8 — 11 12,709 — 12,709 
Other207 — — — — 207 3 204 
Total bank loans$34,564 $46 $9 $35 $90 $34,654 $18 $34,636 
       
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 $91 million and $72 million at December 31, 2021 and 2020, respectively.
(2) At December 31, 2021 and 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 December 31, 2021 or 2020.

At December 31, 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 13).

Changes in the allowance for credit losses on bank loans were as follows:
December 31, 2021December 31, 2020December 31, 2019
First MortgagesHELOCsTotal residential real estateOtherTotalFirst MortgagesHELOCsTotal residential real estateOtherTotalFirst MortgagesHELOCsTotal residential real estateOtherTotal
Balance at beginning of year$22 $5 $27 $3 $30 $11 $4 $15 $3 $18 $14 $5 $19 2 $21 
Adoption of ASU 2016-13— — — — — 1 — 1 — 1 — — — — — 
Charge-offs— — — (1)(1)— — — — — — — — — — 
Recoveries— 1 1 — 1 1 — 1 — 1 1 1 2 — 2 
Provision for credit losses(9)(4)(13)1 (12)9 1 10 — 10 (4)(2)(6)1 (5)
Balance at end of year$13 $2 $15 $3 $18 $22 $5 $27 $3 $30 $11 $4 $15 $3 $18 

As discussed in Note 2, 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 December 31, 2021 and 2020, respectively. Therefore, no allowance for credit losses for PALs as of those dates was required.

The economy continued to strengthen overall in 2021, however, COVID-19 has continued to affect the pace of 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:
December 31,20212020
Nonaccrual loans (1)
$35 $89 
Other real estate owned (2)
1 1 
Total nonperforming assets36 90 
Troubled debt restructurings— 1 
Total nonperforming assets and troubled debt restructurings$36 $91 
(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 (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 First Mortgages and HELOCs are detailed below:
First Mortgages Amortized Cost Basis by Origination Year
December 31, 202120212020201920182017pre-2017Total First MortgagesRevolving HELOCs amortized cost basisHELOCs converted to term loansTotal HELOCs
Origination FICO
<620$1 $1 $— $— $— $1 $3 $— $— $— 
620 – 67934 25 5 1 6 19 90 — 2 2 
680 – 7391,306 524 146 41 98 215 2,330 61 60 121 
≥74011,649 4,454 1,049 165 354 996 18,667 308 217 525 
Total$12,990 $5,004 $1,200 $207 $458 $1,231 $21,090 $369 $279 $648 
Origination LTV
≤70%$11,234 $4,159 $948 $160 $351 $909 $17,761 $305 $199 $504 
>70% – ≤90%1,756 845 252 47 107 319 3,326 64 78 142 
>90% – ≤100%— — — — — 3 3 — 2 2 
Total$12,990 $5,004 $1,200 $207 $458 $1,231 $21,090 $369 $279 $648 
Weighted Average
  Updated FICO
<620$5 $2 $1 $— $2 $12 $22 $2 $6 $8 
620 – 67996 69 19 7 8 30 229 6 14 20 
680 – 7391,265 421 115 24 53 149 2,027 51 39 90 
≥74011,624 4,512 1,065 176 395 1,040 18,812 310 220 530 
Total$12,990 $5,004 $1,200 $207 $458 $1,231 $21,090 $369 $279 $648 
Estimated Current LTV (1)
≤70%$11,707 $4,961 $1,196 $206 $455 $1,229 $19,754 $368 $277 $645 
>70% – ≤90%1,283 43 4 1 3 2 1,336 1 2 3 
>90% – ≤100%— — — — — — — — — — 
>100%— — — — — — — — — — 
Total$12,990 $5,004 $1,200 $207 $458 $1,231 $21,090 $369 $279 $648 
Percent of Loans on
Nonaccrual Status		0.03 %0.10 %0.03 %0.03 %0.03 %1.40 %0.12 %0.64 %2.33 %1.39 %
(1) Represents the LTV for the full line of credit (drawn and undrawn) for revolving HELOCs.
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.

At December 31, 2021, First Mortgage loans of $17.0 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 28% of the balance of these mortgages consisted of loans with interest-only payment terms. The interest rates on approximately 89% 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, 2021 and 2020, Schwab had $57 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 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 31,20212020
HELOCs converted to amortizing loans$19 $26 
The following table presents when current outstanding HELOCs will convert to amortizing loans:
December 31, 2021Balance
Converted to an amortizing loan by period end$279 
Within 1 year16 
> 1 year – 3 years72 
> 3 years – 5 years65 
> 5 years216 
Total$648 

At December 31, 2021, $495 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, 2021, the borrowers on approximately 53% of HELOC loan balances outstanding only paid the minimum amount due.