Allowance for Credit Losses

The following table summarizes the changes in the allowance for credit losses by product and the related loan balance by product during the three and six months ended June 30, 2017 and 2016:



	Commercial												Consumer
	Real Estate, including Construction			Business and Corporate Banking⁽¹⁾			Global Banking⁽¹⁾			Other Comm'l			Residential Mortgages			Home Equity Mortgages			Credit Cards			Other Consumer			Total
	(in millions)
Three Months Ended June 30, 2017
Allowance for credit losses – beginning of period	$	92		$	266		$	470		$	15		$	24		$	17		$	31		$	6		$	921
Provision charged (credited) to income	(9		)	(5		)	—			—			(8		)	(4		)	6			(1		)	(21		)
Charge-offs	(2		)	(2		)	(45		)	(1		)	—			(2		)	(8		)	(1		)	(61		)
Recoveries	—			2			—			—			4			1			1			1			9
Net (charge-offs) recoveries	(2		)	—			(45		)	(1		)	4			(1		)	(7		)	—			(52		)
Allowance for credit losses – end of period	$	81		$	261		$	425		$	14		$	20		$	12		$	30		$	5		$	848

Three Months Ended June 30, 2016
Allowance for credit losses – beginning of period	$	95		$	334		$	457		$	16		$	55		$	25		$	31		$	10		$	1,023
Provision charged (credited) to income	(3		)	5			136			(1		)	(7		)	(6		)	9			1			134
Charge-offs	—			(11		)	(78		)	—			—			(2		)	(8		)	(4		)	(103		)
Recoveries	—			3			—			—			2			2			1			1			9
Net (charge-offs) recoveries	—			(8		)	(78		)	—			2			—			(7		)	(3		)	(94		)
Allowance for credit losses – end of period	$	92		$	331		$	515		$	15		$	50		$	19		$	33		$	8		$	1,063

Six Months Ended June 30, 2017
Allowance for credit losses – beginning of period	$	92		$	317		$	508		$	13		$	26		$	20		$	34		$	7		$	1,017
Provision charged (credited) to income	(8		)	(47		)	(39		)	2			(8		)	(6		)	9			(1		)	(98		)
Charge-offs	(3		)	(23		)	(45		)	(1		)	(3		)	(4		)	(16		)	(2		)	(97		)
Recoveries	—			14			1			—			5			2			3			1			26
Net (charge-offs) recoveries	(3		)	(9		)	(44		)	(1		)	2			(2		)	(13		)	(1		)	(71		)
Allowance for credit losses – end of period	$	81		$	261		$	425		$	14		$	20		$	12		$	30		$	5		$	848
Ending balance: collectively evaluated for impairment	$	74		$	221		$	223		$	14		$	13		$	11		$	29		$	5		$	590
Ending balance: individually evaluated for impairment	7			40			202			—			7			1			1			—			258
Total allowance for credit losses	$	81		$	261		$	425		$	14		$	20		$	12		$	30		$	5		$	848

Loans:
Collectively evaluated for impairment⁽²⁾	$	10,197		$	12,584		$	20,446		$	4,427		$	16,114		$	1,215		$	643		$	424		$	66,050
Individually evaluated for impairment⁽³⁾	43			284			601			6			58			3			4			—			999
Loans carried at lower of amortized cost or fair value less cost to sell	—			—			—			—			947			67			—			—			1,014
Total loans	$	10,240		$	12,868		$	21,047		$	4,433		$	17,119		$	1,285		$	647		$	424		$	68,063



	Commercial											Consumer
	Real Estate, including Construction		Business and Corporate Banking⁽¹⁾			Global Banking⁽¹⁾			Other Comm'l			Residential Mortgages			Home Equity Mortgages			Credit Cards			Other Consumer			Total
	(in millions)
Six Months Ended June 30, 2016
Allowance for credit losses – beginning of period	$	86	$	407		$	267		$	19		$	68		$	24		$	32		$	9		$	912
Provision charged (credited) to income	6		(42		)	333			(4		)	(16		)	(3		)	14			3			291
Charge-offs	—		(39		)	(85		)	—			(9		)	(5		)	(16		)	(5		)	(159		)
Recoveries	—		5			—			—			7			3			3			1			19
Net (charge-offs) recoveries	—		(34		)	(85		)	—			(2		)	(2		)	(13		)	(4		)	(140		)
Allowance for credit losses – end of period	$	92	$	331		$	515		$	15		$	50		$	19		$	33		$	8		$	1,063
Ending balance: collectively evaluated for impairment	$	90	$	228		$	268		$	14		$	22		$	18		$	32		$	8		$	680
Ending balance: individually evaluated for impairment	2		103			247			1			28			1			1			—			383
Total allowance for credit losses	$	92	$	331		$	515		$	15		$	50		$	19		$	33		$	8		$	1,063

Loans:
Collectively evaluated for impairment⁽²⁾	$	10,875	$	14,180		$	25,036		$	8,202		$	16,423		$	1,433		$	663		$	421		$	77,233
Individually evaluated for impairment⁽³⁾	98		456			688			8			188			5			5			—			1,448
Loans carried at lower of amortized cost or fair value less cost to sell	—		—			—			—			1,056			73			—			—			1,129
Total loans	$	10,973	$	14,636		$	25,724		$	8,210		$	17,667		$	1,511		$	668		$	421		$	79,810

⁽¹⁾

During the fourth quarter of 2016, we transferred certain client relationships from Commercial Banking to Global Banking and Markets as discussed further in Note 13, "Business Segments." As a result, we reclassified $4.4 billion of loans and $27 million of allowance for credit losses from business and corporate banking to global banking at June 30, 2016 to conform with the current year presentation.

⁽²⁾

During the first quarter of 2017, in conjunction with the creation of the new Corporate Center segment as discussed further in Note 13, "Business Segments," we reclassified loans to HSBC affiliates from global banking to other commercial and revised the prior period to conform with the current year presentation. As a result, other commercial includes loans to HSBC affiliates totaling $1,423 million and $5,072 million at June 30, 2017 and 2016, respectively, for which we do not carry an associated allowance for credit losses.

⁽³⁾

For consumer loans and certain small business loans, these amounts represent TDR Loans for which we evaluate reserves using a discounted cash flow methodology. Each loan is individually identified as a TDR Loan and then grouped together with other TDR Loans with similar characteristics. The discounted cash flow analysis is then applied to these groups of TDR Loans. Loans individually evaluated for impairment exclude TDR Loans that are carried at the lower of amortized cost or fair value of the collateral less cost to sell which totaled $670 million and $763 million at June 30, 2017 and 2016, respectively.