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Loans (Tables)

9 Months Ended

Sep. 30, 2015

Loans consisted of the following:



	September 30, 2015		December 31, 2014
	(in millions)
Commercial loans:
Construction and other real estate	$	12,096	$	10,300
Business and corporate banking	19,514		17,819
Global banking⁽¹⁾	29,808		26,387
Other commercial	3,334		3,581
Total commercial	64,752		58,087
Consumer loans:
Residential mortgages	17,460		16,661
Home equity mortgages	1,639		1,784
Credit cards	682		720
Other consumer	409		489
Total consumer	20,190		19,654
Total loans	$	84,942	$	77,741

⁽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 $5,447 million and $4,821 million at September 30, 2015 and December 31, 2014, respectively. See Note 13, "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, excluding loans held for sale, at September 30, 2015 and December 31, 2014. 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 September 30, 2015	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	$	15	$	5	$	20	$	12,076	$	12,096
Business and corporate banking	10		24		34		19,480		19,514
Global banking	—		—		—		29,808		29,808
Other commercial	3		6		9		3,325		3,334
Total commercial	28		35		63		64,689		64,752
Consumer loans:
Residential mortgages	373		800		1,173		16,287		17,460
Home equity mortgages	14		49		63		1,576		1,639
Credit cards	10		9		19		663		682
Other consumer	7		8		15		394		409
Total consumer	404		866		1,270		18,920		20,190
Total loans	$	432	$	901	$	1,333	$	83,609	$	84,942



	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


⁽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, including nonaccrual loans held for sale, and accruing loans 90 days or more delinquent consisted of the following:



	September 30, 2015		December 31, 2014
	(in millions)
Nonaccrual loans:
Commercial:
Construction and other real estate	$	49	$	65
Business and corporate banking	74		74
Global banking	21		—
Commercial nonaccrual loans held for sale	58		43
Total commercial	202		182
Consumer:
Residential mortgages^(1)(2)(3)	790		847
Home equity mortgages⁽¹⁾⁽²⁾	67		68
Consumer nonaccrual loans held for sale	3		4
Total consumer	860		919
Total nonaccruing loans	1,062		1,101
Accruing loans contractually past due 90 days or more:
Commercial:
Business and corporate banking	1		1
Total commercial	1		1
Consumer:
Credit cards	9		10
Other consumer	10		10
Total consumer	19		20
Total accruing loans contractually past due 90 days or more	20		21
Total nonperforming loans	$	1,082	$	1,122


⁽¹⁾	At September 30, 2015 and December 31, 2014, nonaccrual consumer mortgage loans include $740 million and $817 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 consumer mortgage loans include 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⁾	Nonaccrual consumer mortgage 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 consumer loan portfolio.

Schedule of Additional Information on Nonaccrual Loans

The following table provides additional information on our nonaccrual loans:



	Three Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014
	(in millions)
Interest income that would have been recorded if the nonaccrual loans had been current in accordance with contractual terms during the period	$	21	$	23	$	65	$	77
Interest income that was recorded on nonaccrual loans and included in interest income during the period	5		6		17		20

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

The following table presents information about loans which were modified during the three and nine months ended September 30, 2015 and 2014 and as a result of this action became classified as TDR Loans:



	Three Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014
	(in millions)
Commercial loans:
Construction and other real estate	$	—	$	—	$	4	$	—
Business and corporate banking	87		5		137		16
Global banking	—		—		13		—
Other commercial	—		—		—		10
Total commercial	87		5		154		26
Consumer loans:
Residential mortgages	47		38		117		117
Home equity mortgages	1		1		2		3
Credit cards	1		1		3		4
Total consumer	49		40		122		124
Total	$	136	$	45	$	276	$	150

Summary of TDR and Related Credit Loss Reserves for TDR Loans

The following table presents information about our TDR Loans and the related allowance for credit losses for TDR Loans:



	September 30, 2015				December 31, 2014
	Carrying Value		Unpaid Principal Balance		Carrying Value		Unpaid Principal Balance
	(in millions)
TDR Loans⁽¹⁾⁽²⁾:
Commercial loans:
Construction and other real estate	$	104	$	115	$	186	$	201
Business and corporate banking	145		160		24		51
Global banking	21		22		—		—
Total commercial	270		297		210		252
Consumer loans:
Residential mortgages⁽³⁾	1,055		1,226		972		1,139
Home equity mortgages⁽³⁾	22		49		20		44
Credit cards	5		5		6		6
Total consumer	1,082		1,280		998		1,189
Total TDR Loans⁽⁴⁾	$	1,352	$	1,577	$	1,208	$	1,441
Allowance for credit losses for TDR Loans⁽⁵⁾:
Commercial loans:
Construction and other real estate	$	—			$	4
Business and corporate banking	3				5
Global banking	—				—
Total commercial	3				9
Consumer loans:
Residential mortgages	38				43
Home equity mortgages	1				2
Credit cards	1				2
Total consumer	40				47
Total allowance for credit losses for TDR Loans	$	43			$	56


⁽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 $62 million and $85 million at September 30, 2015 and December 31, 2014, respectively.


⁽²⁾	The carrying value of TDR Loans includes basis adjustments on the loans, such as unearned income, unamortized deferred fees and costs on originated loans, partial charge-offs and premiums or discounts on purchased loans.


⁽³⁾	At September 30, 2015 and December 31, 2014, the carrying value reflected above includes $858 million and $763 million, respectively, of loans that are recorded at the lower of amortized cost or fair value of the collateral less cost to sell.


⁽⁴⁾	At September 30, 2015 and December 31, 2014, the carrying value reflected above includes $520 million and $485 million, respectively, of loans which are classified as nonaccrual.


⁽⁵⁾	Included in the allowance for credit losses.

Trouble Debt Restructuring Additional Information



	Three Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014
	(in millions)
Average balance of TDR Loans:
Commercial loans:
Construction and other real estate	$	112	$	202	$	147	$	233
Business and corporate banking	106		29		70		24
Global banking	17		—		12		13
Other commercial	—		—		—		9
Total commercial	235		231		229		279
Consumer loans:
Residential mortgages	1,037		949		1,004		935
Home equity mortgages	22		19		20		19
Credit cards	6		8		6		8
Total consumer	1,065		976		1,030		962
Total average balance of TDR Loans	$	1,300	$	1,207	$	1,259	$	1,241
Interest income recognized on TDR Loans:
Commercial loans:
Construction and other real estate	$	1	$	2	$	3	$	9
Business and corporate banking	1		—		2		—
Total commercial	2		2		5		9
Consumer loans:
Residential mortgages	9		9		27		26
Home equity mortgages	—		—		1		1
Total consumer	9		9		28		27
Total interest income recognized on TDR Loans	$	11	$	11	$	33	$	36

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 nine months ended September 30, 2015 and 2014:



	Three Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014
	(in millions)
Commercial loans:
Construction and other real estate	$	—	$	—	$	2	$	12
Business and corporate banking	7		—		10		—
Total commercial	7		—		12		12
Consumer loans:
Residential mortgages	6		10		23		27
Home equity mortgages	1		—		1		—
Total consumer	7		10		24		27
Total	$	14	$	10	$	36	$	39

Impaired Commercial Loans Considered as TDR Loans

The following table presents information about impaired commercial loans and the related impairment reserve for impaired commercial loans:



	Amount with Impairment Reserves⁽¹⁾		Amount without Impairment Reserves⁽¹⁾		Total Impaired Commercial Loans⁽¹⁾⁽²⁾		Impairment Reserve		Unpaid Principal Balance
	(in millions)
At September 30, 2015
Construction and other real estate	$	2	$	114	$	116	$	1	$	136
Business and corporate banking	59		130		189		14		226
Global banking	—		21		21		—		22
Other commercial	—		6		6		—		6
Total commercial	$	61	$	271	$	332	$	15	$	390
At December 31, 2014
Construction and other real estate	$	18	$	179	$	197	$	5	$	224
Business and corporate banking	72		18		90		24		122
Global banking	—		—		—		—		—
Other commercial	2		6		8		1		8
Total commercial	$	92	$	203	$	295	$	30	$	354


⁽¹⁾	Reflects the carrying value of impaired commercial loans and includes basis adjustments on the loans, such as partial charge-offs, unamortized deferred fees and costs on originated loans and any premiums or discounts on purchased loans.


⁽²⁾	Includes impaired commercial loans that are also considered TDR Loans which totaled $270 million and $210 million at September 30, 2015 and December 31, 2014, respectively.

Average Balance and Interest Income Recognized on Impaired Commercial Loans

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



	Three Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014
	(in millions)
Average balance of impaired commercial loans:
Construction and other real estate	$	124	$	208	$	161	$	252
Business and corporate banking	139		40		116		37
Global banking	17		—		12		16
Other commercial	7		10		7		21
Total average balance of impaired commercial loans	$	287	$	258	$	296	$	326
Interest income recognized on impaired commercial loans:
Construction and other real estate	$	1	$	2	$	3	$	9
Business and corporate banking	2		—		3		—
Total interest income recognized on impaired commercial loans	$	3	$	2	$	6	$	9

Summary of Criticized Assets for Commercial Loans

The following table summarizes criticized commercial loans:



	Special Mention		Substandard		Doubtful		Total
	(in millions)
At September 30, 2015
Construction and other real estate	$	119	$	193	$	—	$	312
Business and corporate banking	1,031		578		16		1,625
Global banking	2,424		634		—		3,058
Other commercial	2		6		—		8
Total commercial	$	3,576	$	1,411	$	16	$	5,003
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

Status of Commercial Loan Portfolio

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 September 30, 2015
Construction and other real estate	$	12,047	$	49	$	—	$	12,096
Business and corporate banking	19,439		74		1		19,514
Global banking	29,787		21		—		29,808
Other commercial	3,334		—		—		3,334
Total commercial	$	64,607	$	144	$	1	$	64,752
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

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 September 30, 2015
Construction and other real estate	$	9,674	$	2,422	$	12,096
Business and corporate banking	10,896		8,618		19,514
Global banking	23,632		6,176		29,808
Other commercial	1,851		1,483		3,334
Total commercial	$	46,053	$	18,699	$	64,752
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


⁽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:



	September 30, 2015				December 31, 2014
	Delinquent Loans		Delinquency Ratio		Delinquent Loans		Delinquency Ratio
	(dollars are in millions)
Residential mortgages⁽¹⁾⁽²⁾	$	868	4.97	%	$	1,013	6.07	%
Home equity mortgages⁽¹⁾⁽²⁾	54		3.29		62		3.48
Credit cards	13		1.91		14		1.94
Other consumer	13		2.64		14		2.52
Total consumer	$	948	4.67	%	$	1,103	5.59	%


⁽¹⁾	At September 30, 2015 and December 31, 2014, consumer mortgage loan delinquency includes $794 million and $936 million, respectively, of loans that are carried at the lower of amortized cost or fair value of the collateral less cost to sell.


⁽²⁾	At September 30, 2015 and December 31, 2014, consumer mortgage loans include $598 million and $658 million, respectively, of loans that were in the process of foreclosure.

Status of Consumer Loan Portfolio

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 September 30, 2015
Residential mortgages	$	16,670	$	790	$	—	$	17,460
Home equity mortgages	1,572		67		—		1,639
Credit cards	673		—		9		682
Other consumer	399		—		10		409
Total consumer	$	19,314	$	857	$	19	$	20,190
At December 31, 2014
Residential mortgages	$	15,814	$	847	$	—	$	16,661
Home equity mortgages	1,716		68		—		1,784
Credit cards	710		—		10		720
Other consumer	479		—		10		489
Total consumer	$	18,719	$	915	$	20	$	19,654