Loans (Tables)

6 Months Ended

Jun. 30, 2013

Loans Receivable, Net [Abstract]

Components of Loans

Loans consisted of the following:

	June 30, 2013		December 31, 2012
	(in millions)
Commercial loans:
Construction and other real estate	$	8,529	$	8,457
Business and corporate banking	12,391		12,608
Global banking(1)(2)	23,339		20,009
Other commercial	3,005		3,076
Total commercial	47,264		44,150
Consumer loans:
Home equity mortgages	2,172		2,324
Residential mortgages, excluding home equity mortgages	15,837		15,371
Credit cards	858		815
Other consumer	574		598
Total consumer	19,441		19,108
Total loans	$	66,705	$	63,258

⁽¹⁾  Represents large multinational firms including globally focused U.S. corporate and financial institutions and U.S. Dollar lending to select high quality Latin American and other multinational banking customers managed by HSBC on a global basis as well as loans to HSBC affiliates.

⁽²⁾  Includes loans to HSBC affiliates of $7.0 billion and $4.5 billion at June 30, 2013 and December 31, 2012, respectively. See Note 15, "Related Party Transactions" for additional information regarding loans to HSBC affiliates.

Summary of Past Due Status of Loans

The following table summarizes the past due status of our loans at June 30, 2013 and December 31, 2012. The aging of past due amounts is determined based on the contractual delinquency status of payments under the loan. An account is generally considered to be contractually delinquent when payments have not been made in accordance with the loan terms. Delinquency status may be affected by customer account management policies and practices such as re-age, which results in the re-setting of the contractual delinquency status to current.

	Past Due				Total Past Due 30 Days or More
At June 30, 2013	30 - 89 days		90+ days				Current(1)		Total Loans
	(in millions)
Commercial loans:
Construction and other real estate	$	79	$	38	$	117	$	8,412	$	8,529
Business and corporate banking	25		39		64		12,327		12,391
Global banking	—		8		8		23,331		23,339
Other commercial	20		16		36		2,969		3,005
Total commercial	124		101		225		47,039		47,264
Consumer loans:
Home equity mortgages	37		64		101		2,071		2,172
Residential mortgages, excluding home equity mortgages	487		978		1,465		14,372		15,837
Credit cards	11		11		22		836		858
Other consumer	3		26		29		545		574
Total consumer	538		1,079		1,617		17,824		19,441
Total loans	$	662	$	1,180	$	1,842	$	64,863	66,705

	Past Due				Total Past Due 30 Days or More
At December 31, 2012	30 - 89 days		90+ days				Current(1)		Total Loans
	(in millions)
Commercial loans:
Construction and other real estate	$	89	$	152	$	241	$	8,216	$	8,457
Business and corporate banking	73		70		143		12,465		12,608
Global banking	30		8		38		19,971		20,009
Other commercial	16		31		47		3,029		3,076
Total commercial	208		261		469		43,681		44,150
Consumer loans:
Home equity mortgages	40		82		122		2,202		2,324
Residential mortgages, excluding home equity mortgages	493		976		1,469		13,902		15,371
Credit cards	14		15		29		786		815
Other consumer	5		33		38		560		598
Total consumer	552		1,106		1,658		17,450		19,108
Total loans	$	760	$	1,367	$	2,127	$	61,131	$	63,258

⁽¹⁾ Loans less than 30 days past due are presented as current.

Summary of Nonaccrual Loans and Accruing Receivables 90 Days or More Delinquent

Nonaccrual loans and accruing receivables 90 days or more delinquent are summarized in the following table:

	June 30, 2013		December 31, 2012
	(in millions)
Nonaccrual loans:
Commercial:
Real Estate:
Construction and land loans	$	47	$	104
Other real estate	132		281
Business and corporate banking	44		47
Global banking	18		18
Other commercial	5		13
Total commercial	246		463
Consumer:
Residential mortgages, excluding home equity mortgages	1,013		1,038
Home equity mortgages	89		86
Total residential mortgages(1)	1,102		1,124
Other consumer loans	5		5
Total consumer loans	1,107		1,129
Nonaccrual loans held for sale	50		37
Total nonaccruing loans	1,403		1,629
Accruing loans contractually past due 90 days or more:
Commercial:
Real Estate:
Construction and land loans	—		—
Other real estate	1		8
Business and corporate banking	6		28
Other commercial	1		1
Total commercial	8		37
Consumer:
Credit card receivables	11		15
Other consumer	21		28
Total consumer loans	32		43
Total accruing loans contractually past due 90 days or more	40		80
Total nonperforming loans	$	1,443	$	1,709

⁽¹⁾ Nonaccrual residential mortgages includes all receivables which are 90 or more days contractually delinquent as well as loans discharged under Chapter 7 bankruptcy and not re-affirmed and second lien loans where the first lien loan that we own or service is 90 or more days contractually delinquent.

Summary of Receivables which were Modified and as a Result Became Classified as TDR Loans

The following table presents information about receivables which were modified during the three and six months ended June 30, 2013 and 2012 and as a result of this action became classified as TDR Loans.

	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
	(in millions)
Commercial loans:
Construction and other real estate	$	32	$	—	$	32	$	70
Business and corporate banking	5		—		9		22
Total commercial	37		—		41		92
Consumer loans:
Residential mortgages	49		52		92		108
Credit cards	1		—		1		—
Total consumer	50		52		93		108
Total	$	87	$	52	$	134	$	200

Summary of TDR and Related Credit Loss Reserves for TDR Loans

The following tables present information about our TDR Loans and the related credit loss reserves for TDR Loans:

	June 30, 2013		December 31, 2012
	(in millions)
TDR Loans(1)(2):
Commercial loans:
Construction and other real estate	$	435	$	343
Business and corporate banking	27		86
Other commercial	28		31
Total commercial	490		460
Consumer loans:
Residential mortgages (3)	890		960
Credit cards	11		14
Total consumer	901		974
Total TDR Loans(4)	$	1,391	$	1,434

	June 30, 2013		December 31, 2012
	(in millions)
Allowance for credit losses for TDR Loans(5):
Commercial loans:
Construction and other real estate	$	25	$	23
Business and corporate banking	1		3
Other commercial	—		—
Total commercial	26		26
Consumer loans:
Residential mortgages	77		109
Credit cards	4		5
Total consumer	81		114
Total allowance for credit losses for TDR Loans	$	107	$	140

⁽¹⁾  TDR Loans are considered to be impaired loans. For consumer loans, all such loans are considered impaired loans regardless of accrual status. For commercial loans, impaired loans include other loans in addition to TDRs which totaled $125 million and $237 million at June 30, 2013 and December 31, 2012, respectively.

⁽²⁾  The TDR Loan balances included in the table above reflect the current carrying amount of TDR Loans and includes all basis adjustments on the loan, such as unearned income, unamortized deferred fees and costs on originated loans, partial charge-offs and premiums or discounts on purchased loans. The following table reflects the unpaid principal balance of TDR Loans:

	June 30, 2013		December 31, 2012
	(in millions)
Commercial loans:
Construction and other real estate	$	451	$	398
Business and corporate banking	68		137
Other commercial	31		34
Total commercial	550		569
Consumer loans:
Residential mortgages	1,059		1,118
Credit cards	11		14
Total consumer	1,070		1,132
Total	$	1,620	$	1,701

⁽³⁾  Includes $657 million and $608 million at June 30, 2013 and December 31, 2012, respectively, of loans that are recorded at the lower of amortized cost or fair value of the collateral less cost to sell.

⁽⁴⁾  Includes balances of $404 million and $519 million at June 30, 2013 and December 31, 2012, respectively, which are classified as nonaccrual loans.

⁽⁵⁾  Included in the allowance for credit losses.

Trouble Debt Restructuring Additional Information

Additional information relating to TDR Loans is presented in the table below.

	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
	(in millions)
Average balance of TDR Loans
Commercial loans:
Construction and other real estate	$	290	$	360	$	307	$	354
Business and corporate banking	30		96		49		96
Other commercial	29		35		30		36
Total commercial	349		491		386		486
Consumer loans:
Residential mortgages(1)	890		669		906		648
Credit cards	12		18		13		19
Total consumer	902		687		919		667
Total average balance of TDR Loans	$	1,251	$	1,178	$	1,305	$	1,153
Interest income recognized on TDR Loans
Commercial loans:
Construction and other real estate	$	3	$	2	$	5	$	4
Business and corporate banking	—		—		—		—
Other commercial	1		2		2		3
Total commercial	4		4		7		7
Consumer loans:
Residential mortgages	8		7		17		13
Credit cards	—		—		—		—
Total consumer	8		7		17		13
Total interest income recognized on TDR Loans	$	12	$	11	$	24	$	20

⁽¹⁾ As of the third quarter of 2012, average balances for residential mortgages includes loans discharged under Chapter 7 bankruptcy and not re-affirmed.

Loans Classified as TDR Loans

The following table presents loans which were classified as TDR Loans during the previous 12 months which for commercial loans became 90 days or greater contractually delinquent or for consumer loans became 60 days or greater contractually delinquent during the three and six months ended June 30, 2013 and 2012:

	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
	(in millions)
Commercial loans:
Construction and other real estate	$	—	$	—	$	—	$	—
Business and corporate banking	—		—		—		—
Other commercial	—		—		—		—
Total commercial	—		—		—		—
Consumer loans:
Residential mortgages	11		7		24		13
Credit cards	—		—		—		—
Total consumer	11		7		24		13
Total	$	11	$	7	$	24	$	13

Impaired Commercial Loans Considered as TDR Loans

Impaired commercial loan statistics are summarized in the following table:

	Amount with Impairment Reserves		Amount without Impairment Reserves		Total Impaired Commercial Loans(1)(2)(3)		Impairment Reserve
	(in millions)
At June 30, 2013
Construction and other real estate	$	224	$	241	$	465	$	26
Business and corporate banking	48		20		68		12
Global banking	—		18		18		—
Other commercial	10		54		64		—
Total	$	282	$	333	$	615	$	38
At December 31, 2012
Construction and other real estate	$	192	$	305	$	497	$	86
Business and corporate banking	57		49		106		10
Global banking	—		18		18		—
Other commercial	1		75		76		—
Total	$	250	$	447	$	697	$	96

⁽¹⁾  The reduction in impaired commercial loans for construction and other real estate loans includes the charge-off of a single loan totaling $57 million in the first quarter of 2013 which was fully reserved.

⁽²⁾  Includes impaired commercial loans which are also considered TDR Loans as follows:

	June 30, 2013		December 31, 2012
	(in millions)
Construction and other real estate	$	435	$	343
Business and corporate banking	27		86
Other commercial	28		31
Total	$	490	$	460

⁽³⁾  The impaired commercial loan balances included in the table above reflect the current carrying amount of the loan and includes all basis adjustments, such as unamortized deferred fees and costs on originated loans and any premiums or discounts. The unpaid principal balance of impaired commercial loans included in the table above are as follows:

	June 30, 2013		December 31, 2012
	(in millions)
Construction and other real estate	$	481	$	552
Business and corporate banking	109		157
Global banking	18		18
Other commercial	67		79
Total	$	675	$	806

Average Balance and Interest Income Recognized on Impaired Commercial Loans

The following table presents information about average impaired commercial loan balances and interest income recognized on the impaired commercial loans:

	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
					(in millions)
Average balance of impaired commercial loans:
Construction and other real estate	$	353	$	624	$	401	$	660
Business and corporate banking	58		127		74		127
Global banking	18		66		18		90
Other commercial	69		88		71		89
Total average balance of impaired commercial loans	$	498	$	905	$	564	$	966
Interest income recognized on impaired commercial loans:
Construction and other real estate	$	1	$	1	$	2	$	3
Business and corporate banking	—		1		—		2
Global banking	—		—		—		—
Other commercial	1		1		1		1
Total interest income recognized on impaired commercial loans	$	2	$	3	$	3	$	6

Summary of Criticized Assets for Commercial Loans

Criticized assets for commercial loans are summarized in the following table:

	Special Mention		Substandard		Doubtful		Total
	(in millions)
At June 30, 2013
Construction and other real estate	$	455	$	494	$	23	$	972
Business and corporate banking	372		147		10		529
Global banking	72		124		—		196
Other commercial	10		53		3		66
Total	$	909	$	818	$	36	$	1,763
At December 31, 2012
Construction and other real estate	$	627	$	677	$	105	$	1,409
Business and corporate banking	369		115		10		494
Global banking	93		50		—		143
Other commercial	36		74		2		112
Total	$	1,125	$	916	$	117	$	2,158

Status of Commercial Loan Portfolio

The status of our commercial loan portfolio is summarized in the following table:

	Performing Loans		Nonaccrual Loans		Accruing Loans Contractually Past Due 90 days or More		Total
	(in millions)
At June 30, 2013
Commercial:
Construction and other real estate	$	8,349	$	179	$	1	$	8,529
Business and corporate banking	12,341		44		6		12,391
Global banking	23,321		18		—		23,339
Other commercial	2,999		5		1		3,005
Total commercial	$	47,010	$	246	$	8	$	47,264
At December 31, 2012
Commercial:
Construction and other real estate	$	8,064	$	385	$	8	$	8,457
Business and corporate banking	12,533		47		28		12,608
Global banking	19,991		18		—		20,009
Other commercial	3,062		13		1		3,076
Total commercial	$	43,650	$	463	$	37	$	44,150

Credit Risk Profile of Commercial Loan

The following table shows the credit risk profile of our commercial loan portfolio:

	Investment Grade(1)		Non-Investment Grade		Total
	(in millions)
At June 30, 2013
Construction and other real estate	$	5,010	$	3,519	$	8,529
Business and corporate banking	5,912		6,479		12,391
Global banking	19,927		3,412		23,339
Other commercial	1,198		1,807		3,005
Total commercial	$	32,047	$	15,217	$	47,264
At December 31, 2012
Construction and other real estate	$	4,727	$	3,730	$	8,457
Business and corporate banking	6,012		6,596		12,608
Global banking	16,206		3,803		20,009
Other commercial	1,253		1,823		3,076
Total commercial	$	28,198	$	15,952	$	44,150

⁽¹⁾  Investment grade includes commercial loans with credit ratings of at least BBB- or above or the equivalent based on our internal credit rating system.

Delinquency Ratio for Consumer Loan

The following table summarizes dollars of two-months-and-over contractual delinquency and as a percent of total loans and loans held for sale (“delinquency ratio”) for our consumer loan portfolio:

	June 30, 2013				December 31, 2012
	Delinquent Loans		Delinquency Ratio		Delinquent Loans		Delinquency Ratio
	(dollars are in millions)
Consumer:
Residential mortgage, excluding home equity mortgages(1)	$	1,170	7.26	%	$	1,233	7.78	%
Home equity mortgages	77		3.55		75		3.23
Total residential mortgages	1,247		6.82		1,308		7.20
Credit cards	15		1.75		21		2.58
Other consumer	26		4.08		30		4.52
Total consumer	$	1,288	6.51	%	$	1,359	6.92	%

⁽¹⁾  At June 30, 2013 and December 31, 2012, residential mortgage loan delinquency includes $1.1 billion and $1.0 billion, respectively, of loans that are carried at the lower of amortized cost or fair value of the collateral less cost to sell.

Status of Consumer Loan Portfolio

The status of our consumer loan portfolio is summarized in the following table:

	Performing Loans		Nonaccrual Loans		Accruing Loans Contractually Past Due 90 days or More		Total
	(in millions)
At June 30, 2013
Consumer:
Residential mortgage, excluding home equity mortgages	$	14,824	$	1,013	$	—	$	15,837
Home equity mortgages	2,083		89		—		2,172
Total residential mortgages	16,907		1,102		—		18,009
Credit cards	847		—		11		858
Other consumer	548		5		21		574
Total consumer	$	18,302	$	1,107	$	32	$	19,441
At December 31, 2012
Consumer:
Residential mortgage, excluding home equity mortgages	$	14,333	$	1,038	$	—	$	15,371
Home equity mortgages	2,238		86		—		2,324
Total residential mortgages	16,571		1,124		—		17,695
Credit cards	800		—		15		815
Other consumer	565		5		28		598
Total consumer	$	17,936	$	1,129	$	43	$	19,108

High LTV, Interest-only and ARM Loans

The following table summarizes the balances of high LTV, interest-only and ARM loans in our loan portfolios, including certain loans held for sale, at June 30, 2013 and December 31, 2012, respectively. Each category is not mutually exclusive and loans may appear in more than one category below.

	June 30, 2013		December 31, 2012
	(in billions)
Residential mortgage loans with high LTV and no mortgage insurance(1)	$	.8	$	.9
Interest-only residential mortgage loans	3.8		4.0
ARM loans(2)	10.6		10.4

⁽¹⁾  Residential mortgage loans with high LTV and no mortgage insurance includes both fixed rate and adjustable rate mortgages. Excludes $17 million and $20 million of subprime residential mortgage loans held for sale at June 30, 2013 and December 31, 2012, respectively.

⁽²⁾  ARM loan balances above exclude $19 million and $19 million of subprime residential mortgage loans held for sale at June 30, 2013 and December 31, 2012, respectively. In 2013 and 2014, approximately $140 million and $304 million, respectively, of the ARM loans will experience their first interest rate reset.

First and Second Liens within Outstanding Residential Mortgage Loan Portfolio

Concentrations of first and second liens within the outstanding residential mortgage loan portfolio are summarized in the following table. Amounts in the table exclude residential mortgage loans held for sale of $275 million and $472 million at June 30, 2013 and December 31, 2012, respectively.

	June 30, 2013		December 31, 2012
	(in millions)
Closed end:
First lien	$	15,837	$	15,371
Second lien	159		186
Revolving:
Second lien	2,013		2,138
Total	$	18,009	$	17,695