Fair Values of Assets and Liabilities

9 Months Ended

Sep. 30, 2022

Fair Value Disclosures [Abstract]

Fair Values of Assets and Liabilities

Fair Values of Assets and Liabilities

Assets and liabilities measured at fair value on a recurring basis

Schwab’s assets and liabilities measured at fair value on a recurring basis include: certain cash equivalents, certain investments segregated and on deposit for regulatory purposes, AFS securities, and certain other assets and accrued expenses and other liabilities. The Company uses the market approach to determine the fair value of assets and liabilities. When available, the Company uses quoted prices in active markets to measure the fair value of assets and liabilities. Quoted prices for investments in exchange-traded securities represent end-of-day close prices published by exchanges. Quoted prices for money market funds and other mutual funds represent reported net asset values. When utilizing market data and bid-ask spread, the Company uses the price within the bid-ask spread that best represents fair value. When quoted prices in active markets do not exist, the Company uses prices obtained from independent third-party pricing services to measure the fair value of investment assets. We generally obtain prices from three independent third-party pricing sources for assets recorded at fair value.

Our primary independent pricing service provides prices for our fixed income investments such as commercial paper; certificates of deposit; U.S. government and agency securities; state and municipal securities; corporate debt securities; asset-backed securities; foreign government agency securities; and non-agency commercial mortgage-backed securities. Such prices are based on observable trades, broker/dealer quotes, and discounted cash flows that incorporate observable information such as yields for similar types of securities (a benchmark interest rate plus observable spreads) and weighted-average maturity for the same or similar “to-be-issued” securities. We compare the prices obtained from the primary independent pricing service to the prices obtained from the additional independent pricing services to determine if the price obtained from the primary independent pricing service is reasonable. Schwab does not adjust the prices received from independent third-party pricing services unless such prices are inconsistent with the definition of fair value and result in material differences in the amounts recorded.

Liabilities measured at fair value on a recurring basis include repurchase liabilities related to client-held fractional shares of equities, ETFs, and other securities, which are included in other assets on the condensed consolidated balance sheets. The Company has elected the fair value option pursuant to ASC 825 Financial Instruments for the repurchase liabilities to match the measurement and accounting of the related client-held fractional shares. The fair values of the repurchase liabilities are based on quoted market prices or other observable market data consistent with the related client-held fractional shares. Gains and losses on client-held fractional shares offset the gains and losses on the corresponding repurchase liabilities, resulting in no impact to the consolidated statements of income. The Company’s liabilities to repurchase client-held fractional shares do not have credit risk, and, as a result, the Company has not recognized any gains or losses in the condensed consolidated statements of income or comprehensive income attributable to instrument-specific credit risk for these repurchase liabilities. The repurchase liabilities are included in accrued expenses and other liabilities on the condensed consolidated balance sheets.

For a description of the fair value hierarchy and Schwab’s fair value methodologies, see Item 8 – Note 2 in the 2021 Form 10-K. The Company did not adjust prices received from the primary independent third-party pricing service at September 30, 2022 or December 31, 2021.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following tables present the fair value hierarchy for assets and liabilities measured at fair value on a recurring basis:

September 30, 2022	Level 1		Level 2		Level 3		Balance at Fair Value
Cash equivalents:
Money market funds	$	16,825	$	—	$	—	$	16,825
Commercial paper	—		287		—		287
Total cash equivalents	16,825		287		—		17,112
Investments segregated and on deposit for regulatory purposes:
Certificates of deposit	—		350		—		350
U.S. Government securities	—		24,622		—		24,622
Total investments segregated and on deposit for regulatory purposes	—		24,972		—		24,972
Available for sale securities:
U.S. agency mortgage-backed securities	—		163,005		—		163,005
U.S. Treasury securities	—		40,346		—		40,346
Asset-backed securities	—		14,820		—		14,820
Corporate debt securities	—		13,007		—		13,007
U.S. state and municipal securities	—		662		—		662
Non-agency commercial mortgage-backed securities	—		777		—		777
Certificates of deposit	—		2,524		—		2,524
Foreign government agency securities	—		1,064		—		1,064
Other	—		312		—		312
Total available for sale securities	—		236,517		—		236,517
Other assets:
Equity, corporate debt, and other securities	665		57		—		722
Mutual funds and ETFs	518		—		—		518
State and municipal debt obligations	—		9		—		9
U.S. Government securities	—		25		—		25
Total other assets	1,183		91		—		1,274
Total assets	$	18,008	$	261,867	$	—	$	279,875
Accrued expenses and other liabilities	$	1,073	$	42	$	—	$	1,115
Total liabilities	$	1,073	$	42	$	—	$	1,115

December 31, 2021	Level 1		Level 2		Level 3		Balance at Fair Value
Cash equivalents:
Money market funds	$	11,719	$	—	$	—	$	11,719
Total cash equivalents	11,719		—		—		11,719
Investments segregated and on deposit for regulatory purposes:
Certificates of deposit	—		350		—		350
U.S. Government securities	—		36,349		—		36,349
Total investments segregated and on deposit for regulatory purposes	—		36,699		—		36,699
Available for sale securities:
U.S. agency mortgage-backed securities	—		334,355		—		334,355
U.S. Treasury securities	—		21,282		—		21,282
Asset-backed securities	—		17,546		—		17,546
Corporate debt securities	—		12,344		—		12,344
U.S. state and municipal securities	—		1,687		—		1,687
Non-agency commercial mortgage-backed securities	—		1,190		—		1,190
Certificates of deposit	—		999		—		999
Foreign government agency securities	—		425		—		425
Commercial paper	—		200		—		200
Other	—		26		—		26
Total available for sale securities	—		390,054		—		390,054
Other assets:
Equity, corporate debt, and other securities	854		59		—		913
Mutual funds and ETFs	636		—		—		636
State and municipal debt obligations	—		32		—		32
U.S. Government securities	—		3		—		3
Total other assets	1,490		94		—		1,584
Total assets	$	13,209	$	426,847	$	—	$	440,056
Accrued expenses and other liabilities	$	1,354	$	45	$	—	$	1,399
Total liabilities	$	1,354	$	45	$	—	$	1,399

Fair Value of Other Financial Instruments

The following tables present the fair value hierarchy for other financial instruments:

September 30, 2022	Carrying Amount		Level 1		Level 2		Level 3		Balance at Fair Value
Assets
Cash and cash equivalents	$	29,374	$	29,374	$	—	$	—	$	29,374
Cash and investments segregated and on deposit for   regulatory purposes	19,115		5,488		13,627		—		19,115
Receivables from brokerage clients — net	73,848		—		73,848		—		73,848
Held to maturity securities:
U.S. agency mortgage-backed securities	96,323		—		81,158		—		81,158
Total held to maturity securities	96,323		—		81,158		—		81,158
Bank loans — net:
First Mortgages	24,652		—		21,694		—		21,694
HELOCs	606		—		670		—		670
Pledged asset lines	14,940		—		14,940		—		14,940
Other	181		—		181		—		181
Total bank loans — net	40,379		—		37,485		—		37,485
Other assets	3,121		—		3,121		—		3,121
Liabilities
Bank deposits	$	395,715	$	—	$	395,715	$	—	$	395,715
Payables to brokerage clients	110,012		—		110,012		—		110,012
Accrued expenses and other liabilities	6,487		—		6,487		—		6,487
Short-term borrowings	500		—		500		—		500
Long-term debt	20,768		—		18,864		—		18,864

December 31, 2021	Carrying Amount		Level 1		Level 2		Level 3		Balance at Fair Value
Assets
Cash and cash equivalents	$	51,256	$	51,256	$	—	$	—	$	51,256
Cash and investments segregated and on deposit for   regulatory purposes	17,246		4,151		13,095		—		17,246
Receivables from brokerage clients — net	90,560		—		90,560		—		90,560
Bank loans — net:
First Mortgages	21,077		—		21,027		—		21,027
HELOCs	646		—		668		—		668
Pledged asset lines	12,709		—		12,709		—		12,709
Other	204		—		204		—		204
Total bank loans — net	34,636		—		34,608		—		34,608
Other assets	3,561		—		3,561		—		3,561
Liabilities
Bank deposits	$	443,778	$	—	$	443,778	$	—	$	443,778
Payables to brokerage clients	125,671		—		125,671		—		125,671
Accrued expenses and other liabilities	8,327		—		8,327		—		8,327
Short-term borrowings	4,855		—		4,855		—		4,855
Long-term debt	18,820		—		19,383		—		19,383