| Fair Values of Assets and Liabilities |
| 5. |
|
Fair Values of Assets
and Liabilities |
For a description of the
fair value hierarchy and the Company’s fair value
methodologies, including the use of independent third-party pricing
services, see note “2 – Summary of Significant
Accounting Policies” in the Company’s Annual Report on
Form 10-K for the year ended December 31, 2012. The Company
did not transfer any assets or liabilities between Level 1 and
Level 2 during the quarter ended March 31, 2013, or the year
ended December 31, 2012. In addition, the Company did not
adjust prices received from the primary independent third-party
pricing service at March 31, 2013, or December 31,
2012.
Financial Instruments
Recorded at Fair Value
The following tables
present the fair value hierarchy for assets measured at fair value.
Liabilities recorded at fair value were not material, and therefore
are not included in the following tables:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2013
|
|
Quoted Prices
in Active Markets
for Identical
Assets
(Level
1) |
|
|
Significant
Other Observable
Inputs
(Level
2) |
|
|
Significant
Unobservable
Inputs
(Level
3) |
|
|
Balance at
Fair Value |
|
|
Cash
equivalents:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market
funds
|
|
$ |
13 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
13 |
|
|
Commercial paper
|
|
|
— |
|
|
|
738 |
|
|
|
— |
|
|
|
738 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cash
equivalents
|
|
|
13 |
|
|
|
738 |
|
|
|
— |
|
|
|
751 |
|
|
Investments segregated and
on deposit for regulatory purposes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Certificates of
deposit
|
|
|
— |
|
|
|
2,626 |
|
|
|
— |
|
|
|
2,626 |
|
|
U.S. Government
securities
|
|
|
— |
|
|
|
1,766 |
|
|
|
— |
|
|
|
1,766 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investments
segregated and on deposit for regulatory purposes
|
|
|
— |
|
|
|
4,392 |
|
|
|
— |
|
|
|
4,392 |
|
|
Other securities
owned:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Schwab Funds® money
market funds
|
|
|
241 |
|
|
|
— |
|
|
|
— |
|
|
|
241 |
|
|
Equity and bond mutual
funds
|
|
|
217 |
|
|
|
1 |
|
|
|
— |
|
|
|
218 |
|
|
State and municipal debt
obligations
|
|
|
— |
|
|
|
48 |
|
|
|
— |
|
|
|
48 |
|
|
Equity, U.S. Government and
corporate debt, and other securities
|
|
|
7 |
|
|
|
31 |
|
|
|
— |
|
|
|
38 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other securities
owned
|
|
|
465 |
|
|
|
80 |
|
|
|
— |
|
|
|
545 |
|
|
Securities available for
sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. agency mortgage-backed
securities
|
|
|
— |
|
|
|
19,819 |
|
|
|
— |
|
|
|
19,819 |
|
|
Asset-backed
securities
|
|
|
— |
|
|
|
9,786 |
|
|
|
— |
|
|
|
9,786 |
|
|
Corporate debt
securities
|
|
|
— |
|
|
|
7,617 |
|
|
|
— |
|
|
|
7,617 |
|
|
Certificates of
deposit
|
|
|
— |
|
|
|
5,900 |
|
|
|
— |
|
|
|
5,900 |
|
|
U.S. agency
notes
|
|
|
— |
|
|
|
4,036 |
|
|
|
— |
|
|
|
4,036 |
|
|
Non-agency residential
mortgage-backed securities
|
|
|
— |
|
|
|
709 |
|
|
|
— |
|
|
|
709 |
|
|
Commercial paper
|
|
|
— |
|
|
|
649 |
|
|
|
— |
|
|
|
649 |
|
|
Other securities
|
|
|
— |
|
|
|
293 |
|
|
|
— |
|
|
|
293 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities available
for sale
|
|
|
— |
|
|
|
48,809 |
|
|
|
— |
|
|
|
48,809 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
478 |
|
|
$ |
54,019 |
|
|
$ |
— |
|
|
$ |
54,497 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2012
|
|
Quoted Prices
in Active Markets
for Identical
Assets
(Level
1) |
|
|
Significant
Other Observable
Inputs
(Level
2) |
|
|
Significant
Unobservable
Inputs
(Level
3) |
|
|
Balance at
Fair Value |
|
|
Cash
equivalents:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market
funds
|
|
$ |
413 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
413 |
|
|
Commercial paper
|
|
|
— |
|
|
|
1,076 |
|
|
|
— |
|
|
|
1,076 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cash
equivalents
|
|
|
413 |
|
|
|
1,076 |
|
|
|
— |
|
|
|
1,489 |
|
|
Investments segregated and
on deposit for regulatory purposes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Certificates of
deposit
|
|
|
— |
|
|
|
2,976 |
|
|
|
— |
|
|
|
2,976 |
|
|
U.S. Government
securities
|
|
|
— |
|
|
|
1,767 |
|
|
|
— |
|
|
|
1,767 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investments
segregated and on deposit for regulatory purposes
|
|
|
— |
|
|
|
4,743 |
|
|
|
— |
|
|
|
4,743 |
|
|
Other securities
owned:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Schwab Funds® money
market funds
|
|
|
329 |
|
|
|
— |
|
|
|
— |
|
|
|
329 |
|
|
Equity and bond mutual
funds
|
|
|
217 |
|
|
|
— |
|
|
|
— |
|
|
|
217 |
|
|
State and municipal debt
obligations
|
|
|
— |
|
|
|
48 |
|
|
|
— |
|
|
|
48 |
|
|
Equity, U.S. Government and
corporate debt, and other securities
|
|
|
2 |
|
|
|
40 |
|
|
|
— |
|
|
|
42 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other securities
owned
|
|
|
548 |
|
|
|
88 |
|
|
|
— |
|
|
|
636 |
|
|
Securities available for
sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. agency mortgage-backed
securities
|
|
|
— |
|
|
|
20,476 |
|
|
|
— |
|
|
|
20,476 |
|
|
Asset-backed
securities
|
|
|
— |
|
|
|
8,164 |
|
|
|
— |
|
|
|
8,164 |
|
|
Corporate debt
securities
|
|
|
— |
|
|
|
6,256 |
|
|
|
— |
|
|
|
6,256 |
|
|
Certificates of
deposit
|
|
|
— |
|
|
|
6,161 |
|
|
|
— |
|
|
|
6,161 |
|
|
U.S. agency
notes
|
|
|
— |
|
|
|
3,464 |
|
|
|
— |
|
|
|
3,464 |
|
|
Non-agency residential
mortgage-backed securities
|
|
|
— |
|
|
|
733 |
|
|
|
— |
|
|
|
733 |
|
|
Commercial paper
|
|
|
— |
|
|
|
574 |
|
|
|
— |
|
|
|
574 |
|
|
Other securities
|
|
|
— |
|
|
|
295 |
|
|
|
— |
|
|
|
295 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities available
for sale
|
|
|
— |
|
|
|
46,123 |
|
|
|
— |
|
|
|
46,123 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
961 |
|
|
$ |
52,030 |
|
|
$ |
— |
|
|
$ |
52,991 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Instruments
Not Recorded at Fair Value
Descriptions of the
valuation methodologies and assumptions used to estimate the fair
value of financial instruments not recorded at fair value are also
described in note “2 – Summary of Significant
Accounting Policies” in the Company’s Annual Report
on
Form 10-K for the year
ended December 31, 2012. There were no significant changes in
these methodologies or assumptions during the quarter ended
March 31, 2013. The following tables present the fair value
hierarchy for financial instruments not recorded at fair
value:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2013
|
|
Carrying
Amount |
|
|
Quoted Prices
in Active Markets
for
Identical
Assets
(Level
1) |
|
|
Significant
Other Observable
Inputs
(Level
2) |
|
|
Significant
Unobservable
Inputs
(Level
3) |
|
|
Balance at
Fair Value |
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$ |
6,180 |
|
|
$ |
— |
|
|
$ |
6,180 |
|
|
$ |
— |
|
|
$ |
6,180 |
|
|
Cash and investments
segregated and on deposit for regulatory purposes
|
|
|
22,501 |
|
|
|
— |
|
|
|
22,501 |
|
|
|
— |
|
|
|
22,501 |
|
|
Receivables from brokers,
dealers, and clearing organizations
|
|
|
467 |
|
|
|
— |
|
|
|
467 |
|
|
|
— |
|
|
|
467 |
|
|
Receivables from brokerage
clients – net
|
|
|
12,448 |
|
|
|
— |
|
|
|
12,448 |
|
|
|
— |
|
|
|
12,448 |
|
|
Securities held to
maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. agency mortgage-backed
securities
|
|
|
22,188 |
|
|
|
— |
|
|
|
22,595 |
|
|
|
— |
|
|
|
22,595 |
|
|
Other securities
|
|
|
732 |
|
|
|
— |
|
|
|
721 |
|
|
|
— |
|
|
|
721 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities held to
maturity
|
|
|
22,920 |
|
|
|
— |
|
|
|
23,316 |
|
|
|
— |
|
|
|
23,316 |
|
|
Loans to banking clients
– net:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate
mortgages
|
|
|
7,062 |
|
|
|
— |
|
|
|
7,231 |
|
|
|
— |
|
|
|
7,231 |
|
|
Home equity lines of
credit
|
|
|
3,174 |
|
|
|
— |
|
|
|
3,151 |
|
|
|
— |
|
|
|
3,151 |
|
|
Personal loans secured by
securities
|
|
|
1,035 |
|
|
|
— |
|
|
|
1,035 |
|
|
|
— |
|
|
|
1,035 |
|
|
Other
|
|
|
29 |
|
|
|
— |
|
|
|
29 |
|
|
|
— |
|
|
|
29 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans to banking
clients – net
|
|
|
11,300 |
|
|
|
— |
|
|
|
11,446 |
|
|
|
— |
|
|
|
11,446 |
|
|
Other assets
|
|
|
64 |
|
|
|
— |
|
|
|
64 |
|
|
|
— |
|
|
|
64 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
75,880 |
|
|
$ |
— |
|
|
$ |
76,422 |
|
|
$ |
— |
|
|
$ |
76,422 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits from banking
clients
|
|
$ |
82,424 |
|
|
$ |
— |
|
|
$ |
82,424 |
|
|
$ |
— |
|
|
$ |
82,424 |
|
|
Payables to brokers,
dealers, and clearing organizations
|
|
|
1,152 |
|
|
|
— |
|
|
|
1,152 |
|
|
|
— |
|
|
|
1,152 |
|
|
Payables to brokerage
clients
|
|
|
36,888 |
|
|
|
— |
|
|
|
36,888 |
|
|
|
— |
|
|
|
36,888 |
|
|
Accrued expenses and other
liabilities
|
|
|
528 |
|
|
|
— |
|
|
|
528 |
|
|
|
— |
|
|
|
528 |
|
|
Long-term debt
|
|
|
1,631 |
|
|
|
— |
|
|
|
1,794 |
|
|
|
— |
|
|
|
1,794 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
122,623 |
|
|
$ |
— |
|
|
$ |
122,786 |
|
|
$ |
— |
|
|
$ |
122,786 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2012
|
|
Carrying
Amount |
|
|
Quoted Prices
in Active Markets
for
Identical
Assets
(Level
1) |
|
|
Significant
Other Observable
Inputs
(Level
2) |
|
|
Significant
Unobservable
Inputs
(Level
3) |
|
|
Balance at
Fair Value |
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$ |
11,174 |
|
|
$ |
— |
|
|
$ |
11,174 |
|
|
$ |
— |
|
|
$ |
11,174 |
|
|
Cash and investments
segregated and on deposit for regulatory purposes
|
|
|
23,723 |
|
|
|
— |
|
|
|
23,723 |
|
|
|
— |
|
|
|
23,723 |
|
|
Receivables from brokers,
dealers, and clearing organizations
|
|
|
333 |
|
|
|
— |
|
|
|
333 |
|
|
|
— |
|
|
|
333 |
|
|
Receivables from brokerage
clients – net
|
|
|
13,453 |
|
|
|
— |
|
|
|
13,453 |
|
|
|
— |
|
|
|
13,453 |
|
|
Securities held to
maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. agency mortgage-backed
securities
|
|
|
17,750 |
|
|
|
— |
|
|
|
18,289 |
|
|
|
— |
|
|
|
18,289 |
|
|
Other securities
|
|
|
444 |
|
|
|
— |
|
|
|
443 |
|
|
|
— |
|
|
|
443 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities held to
maturity
|
|
|
18,194 |
|
|
|
— |
|
|
|
18,732 |
|
|
|
— |
|
|
|
18,732 |
|
|
Loans to banking clients
– net:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate
mortgages
|
|
|
6,471 |
|
|
|
— |
|
|
|
6,687 |
|
|
|
— |
|
|
|
6,687 |
|
|
Home equity lines of
credit
|
|
|
3,267 |
|
|
|
— |
|
|
|
3,295 |
|
|
|
— |
|
|
|
3,295 |
|
|
Personal loans secured by
securities
|
|
|
963 |
|
|
|
— |
|
|
|
963 |
|
|
|
— |
|
|
|
963 |
|
|
Other
|
|
|
25 |
|
|
|
— |
|
|
|
24 |
|
|
|
— |
|
|
|
24 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans to banking
clients – net
|
|
|
10,726 |
|
|
|
— |
|
|
|
10,969 |
|
|
|
— |
|
|
|
10,969 |
|
|
Other assets
|
|
|
64 |
|
|
|
— |
|
|
|
64 |
|
|
|
— |
|
|
|
64 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
77,667 |
|
|
$ |
— |
|
|
$ |
78,448 |
|
|
$ |
— |
|
|
$ |
78,448 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits from banking
clients
|
|
$ |
79,377 |
|
|
$ |
— |
|
|
$ |
79,377 |
|
|
$ |
— |
|
|
$ |
79,377 |
|
|
Payables to brokers,
dealers, and clearing organizations
|
|
|
1,068 |
|
|
|
— |
|
|
|
1,068 |
|
|
|
— |
|
|
|
1,068 |
|
|
Payables to brokerage
clients
|
|
|
40,330 |
|
|
|
— |
|
|
|
40,330 |
|
|
|
— |
|
|
|
40,330 |
|
|
Accrued expenses and other
liabilities
|
|
|
353 |
|
|
|
— |
|
|
|
353 |
|
|
|
— |
|
|
|
353 |
|
|
Long-term debt
|
|
|
1,632 |
|
|
|
— |
|
|
|
1,782 |
|
|
|
— |
|
|
|
1,782 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
122,760 |
|
|
$ |
— |
|
|
$ |
122,910 |
|
|
$ |
— |
|
|
$ |
122,910 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities lending:
Payables from brokers, dealers, and clearing organizations include
securities loaned. The Company loans client securities temporarily
to other brokers in connection with its securities lending
activities and receives cash as collateral for the securities
loaned. Increases in security prices may cause the fair value of
the securities loaned to exceed the amount of cash received as
collateral. In the event the counterparty to these transactions
does not return the loaned securities or provide additional cash
collateral, the Company may be exposed to the risk of acquiring the
securities at prevailing market prices in order to satisfy its
client obligations. The Company mitigates this risk by requiring
credit approvals for counterparties, monitoring the fair value of
securities loaned, and requiring additional cash as collateral when
necessary. The fair value of client securities pledged in
securities lending transactions to other broker-dealers was
$1.1 billion at March 31, 2013 and $852 million at
December 31, 2012. Additionally, the Company borrows
securities from other broker-dealers to fulfill short sales by
clients, which are included in receivables from brokers, dealers,
and clearing organizations. The fair value of these borrowed
securities was $279 million at March 31, 2013 and
$121 million at December 31, 2012. All of the
Company’s securities lending transactions are subject to
enforceable master netting arrangements with other broker-dealers.
However, the Company does not net securities lending transactions
and therefore, the Company’s securities loaned and securities
borrowed are presented gross in the condensed consolidated balance
sheets.
Resale agreements:
Cash and investments segregated and on deposit for regulatory
purposes include securities purchased under agreements to resell
(resale agreements), which are collateralized by U.S. Government
and agency securities. Schwab enters into collateralized resale
agreements principally with other broker-dealers, which could
result in losses in the event the counterparty fails to purchase
the securities held as collateral for the cash advanced and the
fair value of the securities declines. To mitigate this risk,
Schwab requires that the counterparty deliver securities to a
custodian, to be held as collateral, with a fair value in excess of
the resale price. Schwab utilizes the collateral provided under
these resale agreements to meet obligations under broker-dealer
client protection rules, which place limitations on its ability to
access such segregated securities. The Company’s resale
agreements are not subject to enforceable master netting
arrangements.
|