Loans

Loans consisted of the following:



At December 31,	2014		2013
	(in millions)
Commercial loans:
Construction and other real estate	$	10,300	$	9,034
Business and corporate banking	17,819		14,446
Global banking⁽¹⁾	26,387		21,625
Other commercial	3,581		3,389
Total commercial	58,087		48,494
Consumer loans:
Residential mortgages	16,661		15,826
Home equity mortgages	1,784		2,011
Credit cards	720		854
Other consumer	489		510
Total consumer	19,654		19,201
Total loans	$	77,741	$	67,695

⁽¹⁾

Represents large multinational firms including globally focused U.S. corporate and financial institutions and U.S. dollar lending to multinational banking customers managed by HSBC on a global basis. Also includes loans to HSBC affiliates which totaled $4,821 million and $5,328 million at December 31, 2014 and 2013, respectively. See Note 22, "Related Party Transactions," for additional information regarding loans to HSBC affiliates.

We have loans outstanding to certain executive officers and directors. The loans were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons and do not involve more than normal risk of collectibility. The aggregate amount of such loans did not exceed 5 percent of shareholders’ equity at either December 31, 2014 or 2013.

Net deferred origination fees totaled $34 million and $23 million at December 31, 2014 and 2013, respectively. At December 31, 2014 and 2013, we had a net unamortized premium on our loans of $10 million and $16 million, respectively.

Age Analysis of Past Due Loans The following table summarizes the past due status of our loans at December 31, 2014 and 2013. 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 is 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 December 31, 2014	30 - 89 days		90+ days		Total Past Due 30 Days or More		Current⁽¹⁾		Total Loans
	(in millions)
Commercial loans:
Construction and other real estate	$	25	$	22	$	47	$	10,253	$	10,300
Business and corporate banking	32		9		41		17,778		17,819
Global banking	—		—		—		26,387		26,387
Other commercial	15		6		21		3,560		3,581
Total commercial	72		37		109		57,978		58,087
Consumer loans:
Residential mortgages	390		931		1,321		15,340		16,661
Home equity mortgages	21		56		77		1,707		1,784
Credit cards	11		10		21		699		720
Other consumer	9		9		18		471		489
Total consumer	431		1,006		1,437		18,217		19,654
Total loans	$	503	$	1,043	$	1,546	$	76,195	$	77,741



	Past Due				Total Past Due 30 Days or More
At December 31, 2013	30 - 89 days		90+ days		Total Past Due 30 Days or More		Current⁽¹⁾		Total Loans
	(in millions)
Commercial loans:
Construction and other real estate	$	6	$	58	$	64	$	8,970	$	9,034
Business and corporate banking	48		36		84		14,362		14,446
Global banking	8		3		11		21,614		21,625
Other commercial	27		9		36		3,353		3,389
Total commercial	89		106		195		48,299		48,494
Consumer loans:
Residential mortgages	443		1,037		1,480		14,346		15,826
Home equity mortgages	28		59		87		1,924		2,011
Credit cards	16		14		30		824		854
Other consumer	12		13		25		485		510
Total consumer	499		1,123		1,622		17,579		19,201
Total loans	$	588	$	1,229	$	1,817	$	65,878	$	67,695


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

Contractual Maturities Contractual maturities of loans were as follows:



	At December 31,
	2015		2016		2017		2018		2019		Thereafter		Total
	(in millions)
Commercial loans:
Construction and other real estate	$	3,455	$	1,205	$	1,104	$	1,673	$	1,811	$	1,052	$	10,300
Business and corporate banking	5,977		2,084		1,910		2,894		3,133		1,821		17,819
Global banking	8,851		3,086		2,829		4,285		4,640		2,696		26,387
Other commercial	1,200		419		384		582		630		366		3,581
Consumer loans:
Residential mortgages	1,584		401		397		411		404		13,464		16,661
Home equity mortgages⁽¹⁾	622		435		263		160		99		205		1,784
Credit cards⁽²⁾	—		720		—		—		—		—		720
Other consumer	262		223		3		—		—		1		489
Total	$	21,951	$	8,573	$	6,890	$	10,005	$	10,717	$	19,605	$	77,741


⁽¹⁾	Home equity mortgage maturities reflect estimates based on historical payment patterns.


⁽²⁾	As credit card receivables do not have stated maturities, the table reflects estimates based on historical payment patterns.

As a substantial portion of consumer loans, based on our experience, will be renewed or repaid prior to contractual maturity, the above maturity schedule should not be regarded as a forecast of future cash collections. The following table summarizes contractual maturities of loans due after one year by repricing characteristic:



	At December 31, 2014
	Over 1 But Within 5 Years		Over 5 Years
	(in millions)
Receivables at predetermined interest rates	$	5,616	$	4,221
Receivables at floating or adjustable rates	30,569		15,384
Total	$	36,185	$	19,605

Nonaccrual Loans Nonaccrual loans totaled $1,101 million and $1,305 million at December 31, 2014 and 2013, respectively. For an analysis of reserves for credit losses, see Note 7, "Allowance for Credit Losses." Nonaccrual loans and accruing receivables 90 days or more delinquent consisted of the following:



At December 31,	2014		2013
	(in millions)
Nonaccrual loans:
Commercial:
Construction and other real estate	$	65	$	166
Business and corporate banking	74		21
Global banking	—		65
Other commercial	—		2
Commercial nonaccrual loans held for sale	43		—
Total commercial	182		254
Consumer:
Residential mortgages	847		949
Home equity mortgages	68		77
Total residential mortgages^(1)(2)(3)	915		1,026
Consumer nonaccrual loans held for sale	4		25
Total consumer loans	919		1,051
Total nonaccruing loans	1,101		1,305
Accruing loans contractually past due 90 days or more:
Commercial:
Business and corporate banking	1		5
Other commercial	—		1
Total commercial	1		6
Consumer:
Credit card receivables	10		14
Other consumer	10		14
Total consumer loans	20		28
Total accruing loans contractually past due 90 days or more	21		34
Total nonperforming loans	$	1,122	$	1,339


⁽¹⁾	At December 31, 2014 and 2013, residential mortgage loan nonaccrual balances include $817 million and $841 million, respectively, of loans that are carried at the lower of amortized cost or fair value of the collateral less cost to sell.


⁽²⁾	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.


⁽³⁾	Residential mortgage nonaccrual loans for all periods does not include guaranteed loans purchased from the Government National Mortgage Association ("GNMA"). Repayment of these loans are predominantly insured by the Federal Housing Administration and as such, these loans have different risk characteristics from the rest of our customer loan portfolio.

The following table provides additional information on our nonaccrual loans:



Year Ended December 31,	2014		2013		2012
	(in millions)
Interest income that would have been recorded if the nonaccrual loans had been current in accordance with contractual terms during the period	$	96	$	107	$	125
Interest income that was recorded on nonaccrual loans and included in interest income during the period	23		23		13

Impaired Loans A loan is considered to be impaired when it is deemed probable that not all principal and interest amounts due according to the contractual terms of the loan agreement will be collected. Probable losses from impaired loans are quantified and recorded as a component of the overall allowance for credit losses. Commercial and consumer loans for which we have modified the loan terms as part of a troubled debt restructuring are considered to be impaired loans. Additionally, commercial loans in nonaccrual status, or that have been partially charged-off or assigned a specific allowance for credit losses are also considered impaired loans.

Troubled debt restructurings TDR Loans represent loans for which the original contractual terms have been modified to provide for terms that are less than what we would be willing to accept for new loans with comparable risk because of deterioration in the borrower’s financial condition.

Modifications for consumer or commercial loans may include changes to one or more terms of the loan, including, but not limited to, a change in interest rate, extension of the amortization period, reduction in payment amount and partial forgiveness or deferment of principal or accrued interest . A substantial amount of our modifications involve interest rate reductions which lower the amount of interest income we are contractually entitled to receive in future periods. Through lowering the interest rate and other loan term changes, we believe we are able to increase the amount of cash flow that will ultimately be collected from the loan, given the borrower’s financial condition. TDR Loans are reserved for either based on the present value of expected future cash flows discounted at the loans’ original effective interest rates which generally results in a higher reserve requirement for these loans or in the case of certain secured loans, the estimated fair value of the underlying collateral. Once a consumer loan is classified as a TDR Loan, it continues to be reported as such until it is paid off or charged-off. For commercial loans, if subsequent performance is in accordance with the new terms and such terms reflect current market rates at the time of restructure, they will no longer be reported as a TDR Loan beginning in the year after restructuring. During the years ended 2014, 2013 and 2012 there were no commercial loans that met this criteria and were removed from TDR Loan classification.

The following table presents information about receivables which were modified during 2014, 2013 and 2012 and as a result of this action became classified as TDR Loans:



Year Ended December 31,	2014		2013		2012
	(in millions)
Commercial loans:
Construction and other real estate	$	5	$	59	$	78
Business and corporate banking	16		4		21
Global banking	—		51		—
Other commercial	10		—		—
Total commercial	31		114		99
Consumer loans:
Residential mortgages	157		225		451
Home equity mortgages	4		5		1
Credit cards	5		2		4
Total consumer	166		232		456
Total	$	197	$	346	$	555

The weighted-average contractual rate reduction for consumer loans which became classified as TDR Loans during 2014, 2013 and 2012 was 1.64 percent, 1.94 percent and 1.85 percent, respectively. The weighted-average contractual rate reduction for commercial loans was not significant in either the number of loans or rate.

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



At December 31,	2014		2013
	(in millions)
TDR Loans⁽¹⁾⁽²⁾:
Commercial loans:
Construction and other real estate	$	186	$	292
Business and corporate banking	24		21
Global banking	—		51
Other commercial	—		25
Total commercial	210		389
Consumer loans:
Residential mortgages⁽³⁾	972		953
Home equity mortgages⁽³⁾	20		20
Credit cards	6		8
Total consumer	998		981
Total TDR Loans⁽⁴⁾	$	1,208	$	1,370
Allowance for credit losses for TDR Loans⁽⁵⁾:
Commercial loans:
Construction and other real estate	$	4	$	16
Business and corporate banking	5		1
Total commercial	9		17
Consumer loans:
Residential mortgages	43		66
Home equity mortgages	2		2
Credit cards	2		2
Total consumer	47		70
Total allowance for credit losses for TDR Loans	$	56	$	87


⁽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 TDR Loans which totaled $85 million and $92 million at December 31, 2014 and 2013, 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:



At December 31,	2014		2013
	(in millions)
Commercial loans:
Construction and other real estate	$	201	$	309
Business and corporate banking	51		60
Global banking	—		51
Other commercial	—		28
Total commercial	252		448
Consumer loans:
Residential mortgages	1,139		1,113
Home equity mortgages	44		40
Credit cards	6		8
Total consumer	1,189		1,161
Total	$	1,441	$	1,609


⁽³⁾	Includes $763 million and $706 million at December 31, 2014 and 2013, respectively, of loans, primarily residential mortgages, that are recorded at the lower of amortized cost or fair value of the collateral less cost to sell.


⁽⁴⁾	Includes $485 million and $528 million at December 31, 2014 and 2013, respectively, of loans which are classified as nonaccrual.


⁽⁵⁾	Included in the allowance for credit losses.

The following table presents information about average TDR Loans and interest income recognized on TDR Loans:



Year Ended December 31,	2014		2013		2012
	(in millions)
Average balance of TDR Loans:
Commercial loans:
Construction and other real estate	$	224	$	349	$	360
Business and corporate banking	24		44		91
Global banking	10		20		—
Other commercial	7		28		33
Total commercial	265		441		484
Consumer loans:
Residential mortgages	942		902		722
Home equity mortgages	19		20		16
Credit cards	8		11		16
Total consumer	969		933		754
Total average balance of TDR Loans	$	1,234	$	1,374	$	1,238
Interest income recognized on TDR Loans:
Commercial loans:
Construction and other real estate	$	10	$	12	$	8
Business and corporate banking	1		—		—
Other commercial	—		3		4
Total commercial	11		15		12
Consumer loans:
Residential mortgages	36		32		32
Home equity mortgages	1		1		1
Credit cards	—		1		1
Total consumer	37		34		34
Total interest income recognized on TDR Loans	$	48	$	49	$	46

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 years ended December 31, 2014 and 2013:



Year Ended December 31,	2014		2013
	(in millions)
Commercial loans:
Construction and other real estate	$	12	$	12
Business and corporate banking	2		2
Total commercial	14		14
Consumer loans:
Residential mortgages	34		43
Home equity mortgages	—		1
Total consumer	34		44
Total	$	48	$	58

Impaired commercial loans The following table summarizes impaired commercial loan statistics:



	Amount with Impairment Reserves		Amount without Impairment Reserves		Total Impaired Commercial Loans⁽¹⁾⁽²⁾		Impairment Reserve
	(in millions)
At December 31, 2014
Construction and other real estate	$	18	$	179	$	197	$	5
Business and corporate banking	72		18		90		24
Global banking	—		—		—		—
Other commercial	2		6		8		1
Total commercial	$	92	$	203	$	295	$	30
At December 31, 2013
Construction and other real estate	$	122	$	211	$	333	$	32
Business and corporate banking	28		12		40		3
Global banking	14		51		65		5
Other commercial	1		42		43		—
Total commercial	$	165	$	316	$	481	$	40


⁽¹⁾	Includes impaired commercial loans that are also considered TDR Loans which totaled $210 million and $389 million at December 31, 2014 and 2013, respectively.


⁽²⁾	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 partial charge-offs, unamortized deferred fees and costs on originated loans and any premiums or discounts. The following table reflects the unpaid principal balance of impaired commercial loans included in the table above:



At December 31,	2014		2013
	(in millions)
Construction and other real estate	$	224	$	380
Business and corporate banking	122		91
Global banking	—		123
Other commercial	8		47
Total commercial	$	354	$	641

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



Year Ended December 31,	2014		2013		2012
	(in millions)
Average balance of impaired commercial loans:
Construction and other real estate	$	241	$	422	$	602
Business and corporate banking	48		63		119
Global banking	13		37		86
Other commercial	18		64		86
Total average balance of impaired commercial loans	$	320	$	586	$	893
Interest income recognized on impaired commercial loans:
Construction and other real estate	$	10	$	13	$	11
Business and corporate banking	2		—		5
Other commercial	—		5		4
Total interest income recognized on impaired commercial loans	$	12	$	18	$	20

Commercial Loan Credit Quality Indicators The following credit quality indicators are monitored for our commercial loan portfolio:

Criticized loans Criticized loan classifications are based on the risk rating standards of our regulator. Problem loans are assigned various criticized facility grades. We also assign obligor grades which are used under our allowance for credit losses methodology. The following table summarizes criticized commercial loans:



	Special Mention		Substandard		Doubtful		Total
	(in millions)
At December 31, 2014
Construction and other real estate	$	310	$	230	$	7	$	547
Business and corporate banking	1,001		238		22		1,261
Global banking	1,770		202		—		1,972
Other commercial	1		6		—		7
Total commercial	$	3,082	$	676	$	29	$	3,787
At December 31, 2013
Construction and other real estate	$	351	$	346	$	30	$	727
Business and corporate banking	557		156		2		715
Global banking	367		112		5		484
Other commercial	79		33		—		112
Total commercial	$	1,354	$	647	$	37	$	2,038

The increase in special mention commercial loans at December 31, 2014 was largely due to the downgrade of a single customer relationship.

Nonperforming The following table summarizes the status of our commercial loan portfolio, excluding loans held for sale:



	Performing Loans		Nonaccrual Loans		Accruing Loans Contractually Past Due 90 days or More		Total
	(in millions)
At December 31, 2014
Construction and other real estate	$	10,235	$	65	$	—	$	10,300
Business and corporate banking	17,744		74		1		17,819
Global banking	26,387		—		—		26,387
Other commercial	3,581		—		—		3,581
Total commercial	$	57,947	$	139	$	1	$	58,087
At December 31, 2013
Construction and other real estate	$	8,868	$	166	$	—	$	9,034
Business and corporate banking	14,420		21		5		14,446
Global banking	21,560		65		—		21,625
Other commercial	3,386		2		1		3,389
Total commercial	$	48,234	$	254	$	6	$	48,494

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



	Investment Grade⁽¹⁾		Non-Investment Grade		Total
	(in millions)
At December 31, 2014
Construction and other real estate	$	7,820	$	2,480	$	10,300
Business and corporate banking	8,835		8,984		17,819
Global banking	23,400		2,987		26,387
Other commercial	1,873		1,708		3,581
Total commercial	$	41,928	$	16,159	$	58,087
At December 31, 2013
Construction and other real estate	$	6,069	$	2,965	$	9,034
Business and corporate banking	7,279		7,167		14,446
Global banking	18,636		2,989		21,625
Other commercial	1,583		1,806		3,389
Total commercial	$	33,567	$	14,927	$	48,494


⁽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.

Consumer Loan Credit Quality Indicators The following credit quality indicators are utilized for our consumer loan portfolio:

Delinquency 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:



	December 31, 2014				December 31, 2013
	Delinquent Loans		Delinquency Ratio		Delinquent Loans		Delinquency Ratio
	(dollars are in millions)
Residential mortgages	$	1,013	6.07	%	$	1,208	7.59	%
Home equity mortgages	62		3.48		68		3.38
Total residential mortgages⁽¹⁾	1,075		5.82		1,276		7.11
Credit cards	14		1.94		21		2.46
Other consumer	14		2.52		19		3.32
Total consumer	$	1,103	5.59	%	$	1,316	6.80	%


⁽¹⁾	At December 31, 2014 and 2013, residential mortgage loan delinquency includes $936 million and $1,074 million, respectively, of loans that are carried at the lower of amortized cost or fair value of the collateral less cost to sell.

Nonperforming The following table summarizes the status of our consumer loan portfolio, excluding loans held for sale:



	Performing Loans		Nonaccrual Loans		Accruing Loans Contractually Past Due 90 days or More		Total
	(in millions)
At December 31, 2014
Residential mortgages	$	15,814	$	847	$	—	$	16,661
Home equity mortgages	1,716		68		—		1,784
Total residential mortgages	17,530		915		—		18,445
Credit cards	710		—		10		720
Other consumer	479		—		10		489
Total consumer	$	18,719	$	915	$	20	$	19,654
At December 31, 2013
Residential mortgages	$	14,877	$	949	$	—	$	15,826
Home equity mortgages	1,934		77		—		2,011
Total residential mortgages	16,811		1,026		—		17,837
Credit cards	840		—		14		854
Other consumer	496		—		14		510
Total consumer	$	18,147	$	1,026	$	28	$	19,201

Troubled debt restructurings See discussion of impaired loans above for further details on this credit quality indicator.

Concentration of Credit Risk At December 31, 2014 and 2013, our loan portfolio included interest-only residential mortgage loans totaling $3,531 million and $3,643 million, respectively. An interest-only residential mortgage loan allows a customer to pay the interest-only portion of the monthly payment for a period of time which results in lower payments during the initial loan period. However, subsequent events affecting a customer's financial position could affect the ability of customers to repay the loan in the future when the principal payments are required which increases the credit risk of this loan type.