Investment Securities

3 Months Ended

Mar. 31, 2020

Investments, Debt and Equity Securities [Abstract]

The amortized cost, gross unrealized gains and losses, and fair value of the Company’s investment securities are as follows:



March 31, 2020	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Available for sale securities
U.S. agency mortgage-backed securities	$	173,812	$	6,007	$	224	$	179,595
Asset-backed securities ⁽¹⁾	23,077		49		645		22,481
Corporate debt securities ⁽²⁾	11,192		136		106		11,222
U.S. Treasury securities	3,616		48		—		3,664
U.S. state and municipal securities	1,493		96		11		1,578
Non-agency commercial mortgage-backed securities	1,215		16		5		1,226
Certificates of deposit	1,000		3		5		998
Commercial paper ^(2,3)	397		—		1		396
Foreign government agency securities	50		1		—		51
Other	21		—		—		21
Total available for sale securities	$	215,873	$	6,356	$	997	$	221,232



December 31, 2019
Available for sale securities
U.S. agency mortgage-backed securities	$	45,964	$	312	$	121	$	46,155
Corporate debt securities ⁽²⁾	5,427		57		—		5,484
Asset-backed securities ⁽¹⁾	4,970		30		13		4,987
U.S. Treasury securities	3,387		3		6		3,384
Certificates of deposit	1,000		4		—		1,004
Commercial paper ^(2,3)	394		1		—		395
Non-agency commercial mortgage-backed securities	13		—		—		13
Total available for sale securities	$	61,155	$	407	$	140	$	61,422
Held to maturity securities
U.S. agency mortgage-backed securities	$	109,325	$	1,521	$	280	$	110,566
Asset-backed securities ⁽¹⁾	17,806		50		85		17,771
Corporate debt securities ⁽²⁾	4,661		57		—		4,718
U.S. state and municipal securities	1,301		103		—		1,404
Non-agency commercial mortgage-backed securities	1,119		22		—		1,141
U.S. Treasury securities	223		5		—		228
Certificates of deposit	200		—		—		200
Foreign government agency securities	50		—		—		50
Other	21		—		—		21
Total held to maturity securities	$	134,706	$	1,758	$	365	$	136,099

⁽¹⁾Approximately 42% and 43% of asset-backed securities held as of March 31, 2020 and December 31, 2019, respectively, were Federal Family Education Loan Program Asset-Backed Securities. Asset-backed securities collateralized by credit card receivables represented approximately 43% and 42% of the asset-backed securities held as of March 31, 2020 and December 31, 2019, respectively.

⁽²⁾As of March 31, 2020 approximately 32% of the total AFS, and as of December 31, 2019 approximately 32%, of the total AFS and HTM investments in corporate debt securities and commercial paper were issued by institutions in the financial services industry.

⁽³⁾ Included in cash and cash equivalents on the condensed consolidated balance sheets, but excluded from this table is $4.1 billion and $2.5 billion of AFS commercial paper as of March 31, 2020 and December 31, 2019, respectively. These holdings have maturities of three months or less and an aggregate market value equal to amortized cost.

In October 2019, the Federal Reserve issued a final enhanced prudential standards rule, and the Federal Reserve, the Office of the Comptroller of the Currency, and the FDIC jointly issued a final regulatory capital and liquidity rule. With total consolidated assets of $294.0 billion at December 31, 2019, CSC is designated as a Category III firm pursuant to the framework established by the final rules. Accordingly, the Company opted to exclude AOCI from its regulatory capital as permitted by the regulatory capital and liquidity rule beginning January 1, 2020. In accordance with ASC 320 and as of January 1, 2020, the Company transferred all of its investment securities designated as HTM to the AFS category without tainting our intent to hold other debt securities to maturity. At the date of transfer, these securities had a total amortized cost of $134.7 billion and a total net unrealized gain of $1.4 billion.

At March 31, 2020, our banking subsidiaries had pledged securities with a fair value of $35.7 billion as collateral to secure borrowing capacity on secured credit facilities with the Federal Home Loan Bank (FHLB) (see Note 8). Our banking

subsidiaries also pledge investment securities as collateral to secure borrowing capacity at the Federal Reserve discount window, and had pledged securities with a fair value of $8.2 billion as collateral for this facility at March 31, 2020. The Company also pledges securities issued by federal agencies to secure certain trust deposits. The fair value of these pledged securities was $1.1 billion at March 31, 2020.

Securities with unrealized losses, aggregated by category and period of continuous unrealized loss, are as follows:



	Less than 12 months				12 months or longer				Total
	Less than 12 months				12 months or longer				Total
March 31, 2020	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Available for sale securities
Asset-backed securities	$	15,852	$	515	$	2,638	$	130	$	18,490	$	645
U.S. agency mortgage-backed securities	11,077		100		11,661		124		22,738		224
Corporate debt securities	4,835		106		—		—		4,835		106
Certificates of deposit	795		5		—		—		795		5
Non-agency commercial mortgage-backed securities	397		5		12		—		409		5
Commercial paper	396		1		—		—		396		1
U.S. state and municipal securities	182		11		—		—		182		11
Total	$	33,534	$	743	$	14,311	$	254	$	47,845	$	997



December 31, 2019
Available for sale securities
U.S. agency mortgage-backed securities	$	16,023	$	94	$	6,592	$	27	$	22,615	$	121
Asset-backed securities	960		6		298		7		1,258		13
U.S. Treasury securities	510		—		1,243		6		1,753		6
Total	$	17,493	$	100	$	8,133	$	40	$	25,626	$	140
Held to maturity securities
U.S. agency mortgage-backed securities	$	16,183	$	100	$	18,910	$	180	$	35,093	$	280
Asset-backed securities	7,507		63		2,898		22		10,405		85
Total	$	23,690	$	163	$	21,808	$	202	$	45,498	$	365
Total securities with unrealized losses	$	41,183	$	263	$	29,941	$	242	$	71,124	$	505

At March 31, 2020, substantially all rated securities in the investment portfolios were investment grade. U.S. agency mortgage-backed securities do not have explicit credit ratings; however, management considers these to be of the highest credit quality and rating given the guarantee of principal and interest by the U.S. government or U.S. government-sponsored enterprises.

The Company had $489 million of accrued interest receivable as of March 31, 2020 for AFS securities, and $471 million of accrued interest receivable for AFS and HTM securities as of December 31, 2019. These amounts are excluded from the amortized cost basis of AFS and HTM securities and included in other assets on the condensed consolidated balance sheets. There were no write-offs of accrued interest receivable on AFS securities during the three months ended March 31, 2020, or write-offs of accrued interest receivable on AFS securities or HTM securities during the year ended December 31, 2019.

Please refer to Note 2 for a description of management’s quarterly evaluation of AFS securities in unrealized loss positions. No amounts were recognized as credit loss expense and no securities were written down to fair value through earnings for the three months ended March 31, 2020. None of the Company’s AFS securities held as of March 31, 2020 had an allowance for credit losses. No amounts were recognized as OTTI in earnings or other comprehensive income during the year ended December 31, 2019, and as of December 31, 2019, Schwab did not hold any securities on which OTTI was previously recognized.

In the table below, mortgage-backed securities and other asset-backed securities have been allocated to maturity groupings based on final contractual maturities. As borrowers may have the right to call or prepay certain obligations underlying our investment securities, actual maturities may differ from the scheduled contractual maturities presented below.

The maturities of AFS securities are as follows:



March 31, 2020	Within 1 year		After 1 year through 5 years		After 5 years through 10 years		After 10 years		Total
Available for sale securities
U.S. agency mortgage-backed securities	$	1,158	$	18,885	$	51,687	$	107,865	$	179,595
Asset-backed securities	43		7,818		6,091		8,529		22,481
Corporate debt securities	2,410		7,612		1,200		—		11,222
U.S. Treasury securities	2,834		830		—		—		3,664
U.S. state and municipal securities	—		98		603		877		1,578
Non-agency commercial mortgage-backed securities	—		—		—		1,226		1,226
Certificates of deposit	702		296		—		—		998
Commercial paper	396		—		—		—		396
Foreign government agency securities	—		51		—		—		51
Other	—		—		—		21		21
Total fair value	$	7,543	$	35,590	$	59,581	$	118,518	$	221,232
Total amortized cost	$	7,531	$	35,024	$	57,258	$	116,060	$	215,873

Proceeds and gross realized gains and losses from sales of AFS securities are as follows:



	Three Months Ended March 31,
	Three Months Ended March 31,
	2020		2019
Proceeds	$	69	$	10,652
Gross realized gains	—		3
Gross realized losses	—		2