Charles Schwab 2008 Annual Report Download - page 79

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THE CHARLES SCHWAB CORPORATION
Notes to Consolidated Financial Statements
(Tabular Amounts in Millions, Except Per Share Data, Option Price Amounts, Ratios, or as Noted)
- 65 -
Loans to banking clients primarily include adjustable-rate first-mortgage and HELOC loans. Loans to banking clients are
recorded at carrying value net of an allowance for credit losses. The fair value of the Company’s loans to banking clients is
estimated based on market prices for mortgage-backed securities collateralized by similar types of loans.
Loans held for sale include fixed rate first-mortgage and HELOC loans. Loans held for sale are recorded at the lower of cost
or market value. The fair value of the Company’s loans held for sale is estimated using quoted market prices for securities
backed by similar types of loans.
Long-term debt includes medium term notes, junior subordinated notes, and a finance lease obligation. The fair value of the
Company’s long-term debt is estimated using indicative, non-binding quotes from independent brokers.
Firm commitments to extend credit: The Company extends credit to banking clients through HELOC commitments. The
Company considers the fair value of unused HELOC commitments to be not material because the interest rate earned on
HELOC outstanding balances is based on the Prime rate and resets monthly. Future utilization of HELOC commitments will
earn a then current market interest rate. The Company does not charge a fee to maintain a HELOC.
The table below presents the Company’s fair value estimates as of December 31, 2008 and 2007 for financial instruments
excluding short-term financial assets and liabilities, for which carrying amounts approximate fair value, and excluding
financial instruments recorded at fair value.
2008 2007
Carrying Fair Carrying Fair
December 31, Amount Value Amount Value
Financial Assets:
Securities held to maturity $ 243 $ 244 $ - $ -
Loans to banking clients – net $ 6,044 $ 5,389 $ 3,443 $ 3,422
Loans held for sale $ 41 $ 42 $ 44 $ 45
Financial Liabilities:
Long-term debt $ 883 $ 705 $ 899 $ 908