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Loans
3 Months Ended
Mar. 31, 2018
Receivables [Abstract]  
Loans
Loans
 
 
Loans consisted of the following:

March 31, 2018
 
December 31, 2017
 
(in millions)
Commercial loans:
 
 
 
Real estate, including construction
$
11,054

 
$
10,533

Business and corporate banking
12,818

 
12,504

Global banking(1)
19,289

 
20,088

Other commercial(2)
4,578

 
9,910

Total commercial
47,739

 
53,035

Consumer loans:
 
 
 
Residential mortgages
17,325

 
17,273

Home equity mortgages
1,139

 
1,191

Credit cards
770

 
721

Other consumer
365

 
343

Total consumer
19,599

 
19,528

Total loans
$
67,338

 
$
72,563

 
(1) 
Represents large multinational firms including globally focused U.S. corporate and financial institutions, U.S. dollar lending to multinational banking clients managed by HSBC on a global basis and complex large business clients supported by Global Banking and Markets relationship managers.
(2) 
Includes loans to HSBC affiliates which totaled $1,920 million and $6,750 million at March 31, 2018 and December 31, 2017, respectively. See Note 14, "Related Party Transactions," for additional information regarding loans to HSBC affiliates.
Net deferred origination costs totaled $88 million and $81 million at March 31, 2018 and December 31, 2017, respectively. At both March 31, 2018 and December 31, 2017, we had a net unamortized premium on our loans of $8 million.
Aging Analysis of Past Due Loans  The following table summarizes the past due status of our loans, excluding loans held for sale, at March 31, 2018 and December 31, 2017. 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 March 31, 2018
30 - 89 Days
 
90+ Days
 
 
Current(1)
 
Total Loans
 
(in millions)
Commercial loans:
 
 
 
 
 
 
 
 
 
Real estate, including construction
$
42

 
$
10

 
$
52

 
$
11,002

 
$
11,054

Business and corporate banking
36

 
2

 
38

 
12,780

 
12,818

Global banking

 

 

 
19,289

 
19,289

Other commercial
12

 

 
12

 
4,566

 
4,578

Total commercial
90

 
12

 
102

 
47,637

 
47,739

Consumer loans:
 
 
 
 
 
 
 
 
 
Residential mortgages
337

 
312

 
649

 
16,676

 
17,325

Home equity mortgages
10

 
34

 
44

 
1,095

 
1,139

Credit cards
10

 
8

 
18

 
752

 
770

Other consumer
5

 
5

 
10

 
355

 
365

Total consumer
362

 
359

 
721

 
18,878

 
19,599

Total loans
$
452

 
$
371

 
$
823

 
$
66,515

 
$
67,338

 
Past Due
 
Total Past Due 30 Days or More
 
 
 
 
At December 31, 2017
30 - 89 Days
 
90+ Days
 
 
Current(1)
 
Total Loans
 
(in millions)
Commercial loans:
 
 
 
 
 
 
 
 
 
Real estate, including construction
$
27

 
$
9

 
$
36

 
$
10,497

 
$
10,533

Business and corporate banking
25

 
5

 
30

 
12,474

 
12,504

Global banking

 
25

 
25

 
20,063

 
20,088

Other commercial
43

 

 
43

 
9,867

 
9,910

Total commercial
95

 
39

 
134

 
52,901

 
53,035

Consumer loans:
 
 
 
 
 
 
 
 
 
Residential mortgages
369

 
344

 
713

 
16,560

 
17,273

Home equity mortgages
11

 
36

 
47

 
1,144

 
1,191

Credit cards
8

 
9

 
17

 
704

 
721

Other consumer
5

 
7

 
12

 
331

 
343

Total consumer
393

 
396

 
789

 
18,739

 
19,528

Total loans
$
488

 
$
435

 
$
923

 
$
71,640

 
$
72,563


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

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

March 31, 2018
 
December 31, 2017
 
(in millions)
Nonaccrual loans:
 
 
 
Commercial:
 
 
 
Real estate, including construction
$
13

 
$
12

Business and corporate banking
258

 
215

Global banking
279

 
385

Other commercial

 
1

Commercial nonaccrual loans held for sale
31

 

Total commercial
581

 
613

Consumer:
 
 
 
Residential mortgages(1)(2)(3)
408

 
414

Home equity mortgages(1)(2)
66

 
67

Consumer nonaccrual loans held for sale
1

 
1

Total consumer
475

 
482

Total nonaccruing loans
1,056

 
1,095

Accruing loans contractually past due 90 days or more:
 
 
 
Commercial:
 
 
 
Business and corporate banking
1

 
1

Total commercial
1

 
1

Consumer:
 
 
 
Credit cards
8

 
9

Other consumer
6

 
8

Total consumer
14

 
17

Total accruing loans contractually past due 90 days or more
15

 
18

Total nonperforming loans
$
1,071

 
$
1,113

 
(1) 
At March 31, 2018 and December 31, 2017, nonaccrual consumer mortgage loans held for investment include $362 million and $360 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 held for investment include all loans 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. 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.
The following table provides additional information on our nonaccrual loans:    
Three Months Ended March 31,
2018
 
2017
 
(in millions)
Interest income that would have been recorded if the nonaccrual loans had been current in accordance with contractual terms during the period
14

 
20

Interest income that was recorded on nonaccrual loans and included in interest income during the period
9

 
11


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, accrued interest or other loan covenants. A substantial amount of our modifications involve interest rate reductions on consumer loans 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 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, the loan's observable market price 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 three months ended March 31, 2018 and 2017 there were no commercial loans that met this criteria and were removed from TDR Loan classification.
The following table presents information about loans which were modified during the three months ended March 31, 2018 and 2017 and as a result of this action became classified as TDR Loans:
Three Months Ended March 31,
2018
 
2017
 
(in millions)
Consumer loans:
 
 
 
Residential mortgages
$
5

 
$
6

Home equity mortgages
2

 
2

Credit cards
1

 
1

Total consumer
$
8

 
$
9


During the three months ended March 31, 2018 and 2017, there were no commercial TDR Loans which were modified and as a result of this action became classified as TDR Loans.
The weighted-average contractual rate reduction for consumer loans which became classified as TDR Loans during the three months ended March 31, 2018 and 2017 was 3.86 percent and 1.63 percent, respectively. The weighted-average contractual rate reduction for commercial loans was not significant in either the number of loans or rate.

The following table presents information about our TDR Loans and the related allowance for credit losses for TDR Loans:
 
March 31, 2018
 
December 31, 2017
 
Carrying Value
 
Unpaid Principal Balance
 
Carrying Value
 
Unpaid Principal Balance
 
(in millions)
TDR Loans:(1)(2)
 
 
 
 
 
 
 
Commercial loans:
 
 
 
 
 
 
 
Business and corporate banking
$
156

 
$
205

 
$
194

 
$
266

Global banking
96

 
101

 
175

 
180

Total commercial(3)
252

 
306

 
369

 
446

Consumer loans:
 
 
 
 
 
 
 
Residential mortgages(4)
668

 
762

 
683

 
779

Home equity mortgages(4)
34

 
66

 
33

 
66

Credit cards
4

 
4

 
4

 
4

Total consumer
706

 
832

 
720

 
849

Total TDR Loans(5)
$
958

 
$
1,138

 
$
1,089

 
$
1,295

Allowance for credit losses for TDR Loans:(6)
 
 
 
 
 
 
 
Commercial loans:
 
 
 
 
 
 
 
Business and corporate banking
$
16

 
 
 
$
12

 
 
Global banking

 
 
 
19

 
 
Total commercial
16

 
 
 
31

 
 
Consumer loans:
 
 
 
 
 
 
 
Residential mortgages
5

 
 
 
7

 
 
Home equity mortgages
1

 
 
 
1

 
 
Credit cards
1

 
 
 
1

 
 
Total consumer
7

 
 
 
9

 
 
Total allowance for credit losses for TDR Loans
$
23

 
 
 
$
40

 
 
 
(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 $368 million and $329 million at March 31, 2018 and December 31, 2017, respectively.
(2) 
The carrying value of TDR Loans includes basis adjustments on the loans, such as partial charge-offs, unamortized deferred fees and costs on originated loans and premiums or discounts on purchased loans.
(3) 
Additional commitments to lend to commercial borrowers whose loans have been modified in TDR Loans totaled $161 million and $245 million at March 31, 2018 and December 31, 2017, respectively.
(4) 
At March 31, 2018 and December 31, 2017, the carrying value of consumer mortgage TDR Loans held for investment includes $644 million and $655 million, respectively, of loans that are recorded at the lower of amortized cost or fair value of the collateral less cost to sell.
(5) 
At March 31, 2018 and December 31, 2017, the carrying value of TDR Loans includes $469 million and $559 million, respectively, of loans which are classified as nonaccrual.
(6) 
Included in the allowance for credit losses.
The following table presents information about average TDR Loans and interest income recognized on TDR Loans:
Three Months Ended March 31,
2018
 
2017
 
(in millions)
Average balance of TDR Loans:
 
 
 
Commercial loans:
 
 
 
Real estate, including construction
$

 
$
31

Business and corporate banking
175

 
285

Global banking
136

 
119

Total commercial
311

 
435

Consumer loans:
 
 
 
Residential mortgages
676

 
715

Home equity mortgages
34

 
29

Credit cards
4

 
4

Total consumer
714

 
748

Total average balance of TDR Loans
$
1,025

 
$
1,183

Interest income recognized on TDR Loans:
 
 
 
Commercial loans:
 
 
 
Business and corporate banking
$
4

 
$
3

Global banking
1

 

Total commercial
5

 
3

Consumer loans:
 
 
 
Residential mortgages
7

 
7

Total consumer
7

 
7

Total interest income recognized on TDR Loans
$
12

 
$
10


The following table presents consumer loans which were classified as TDR Loans during the previous 12 months which subsequently became 60 days or greater contractually delinquent during the three months ended March 31, 2018 and 2017:
Three Months Ended March 31,
2018
 
2017
 
(in millions)
Consumer loans:
 
 
 
Residential mortgages
$
2

 
$
3

Home equity mortgages
1

 

Total consumer
$
3

 
$
3


During the three months ended March 31, 2018 and 2017, there were no commercial TDR Loans which were classified as TDR Loans during the previous 12 months which subsequently became 90 days or greater contractually delinquent.

Impaired commercial 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 March 31, 2018
 
 
 
 
 
 
 
 
 
Real estate, including construction
$
2

 
$
10

 
$
12

 
$
1

 
$
12

Business and corporate banking
196

 
90

 
286

 
39

 
329

Global banking
188

 
134

 
322

 
62

 
391

Total commercial
$
386

 
$
234

 
$
620

 
$
102

 
$
732

At December 31, 2017
 
 
 
 
 
 
 
 
 
Real estate, including construction
$

 
$
11

 
$
11

 
$

 
$
11

Business and corporate banking
121

 
129

 
250

 
45

 
311

Global banking
262

 
175

 
437

 
82

 
520

Total commercial
$
383

 
$
315

 
$
698

 
$
127

 
$
842

 
(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 premiums or discounts on purchased loans.
(2) 
Includes impaired commercial loans that are also considered TDR Loans which totaled $252 million and $369 million at March 31, 2018 and December 31, 2017, respectively.
The following table presents information about average impaired commercial loans and interest income recognized on impaired commercial loans:
Three Months Ended March 31,
2018
 
2017
 
(in millions)
Average balance of impaired commercial loans:
 
 
 
Real estate, including construction
$
12

 
$
44

Business and corporate banking
268

 
333

Global banking
380

 
607

Other commercial

 
7

Total average balance of impaired commercial loans
$
660

 
$
991

Interest income recognized on impaired commercial loans:
 
 
 
Business and corporate banking
$
5

 
$
4

Global banking
1

 

Total interest income recognized on impaired commercial loans
$
6

 
$
4


Commercial Loan Credit Quality Indicators  The following credit quality indicators are monitored for our commercial loan portfolio:
Criticized loans  Criticized loan classifications presented in the table below are determined by the assignment of various criticized facility grades based on the risk rating standards of our regulator. The following table summarizes criticized commercial loans:
 
Special Mention
 
Substandard
 
Doubtful
 
Total
 
(in millions)
At March 31, 2018
 
 
 
 
 
 
 
Real estate, including construction
$
428

 
$
141

 
$
3

 
$
572

Business and corporate banking
452

 
456

 
37

 
945

Global banking
409

 
1,210

 
63

 
1,682

Other commercial
11

 

 

 
11

Total commercial
$
1,300

 
$
1,807

 
$
103

 
$
3,210

At December 31, 2017
 
 
 
 
 
 
 
Real estate, including construction
$
467

 
$
117

 
$
1

 
$
585

Business and corporate banking
477

 
519

 
44

 
1,040

Global banking
452

 
1,612

 
82

 
2,146

Other commercial
11

 

 

 
11

Total commercial
$
1,407

 
$
2,248

 
$
127

 
$
3,782


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 March 31, 2018
 
 
 
 
 
 
 
Real estate, including construction
$
11,041

 
$
13

 
$

 
$
11,054

Business and corporate banking
12,559

 
258

 
1

 
12,818

Global banking
19,010

 
279

 

 
19,289

Other commercial
4,578

 

 

 
4,578

Total commercial
$
47,188

 
$
550

 
$
1

 
$
47,739

At December 31, 2017
 
 
 
 
 
 
 
Real estate, including construction
$
10,521

 
$
12

 
$

 
$
10,533

Business and corporate banking
12,288

 
215

 
1

 
12,504

Global banking
19,703

 
385

 

 
20,088

Other commercial
9,909

 
1

 

 
9,910

Total commercial
$
52,421

 
$
613

 
$
1

 
$
53,035


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 March 31, 2018
 
 
 
 
 
Real estate, including construction
$
8,245

 
$
2,809

 
$
11,054

Business and corporate banking
5,762

 
7,056

 
12,818

Global banking
13,707

 
5,582

 
19,289

Other commercial
3,378

 
1,200

 
4,578

Total commercial
$
31,092

 
$
16,647

 
$
47,739

At December 31, 2017
 
 
 
 
 
Real estate, including construction
$
7,456

 
$
3,077

 
$
10,533

Business and corporate banking
5,752

 
6,752

 
12,504

Global banking
13,218

 
6,870

 
20,088

Other commercial
8,341

 
1,569

 
9,910

Total commercial
$
34,767

 
$
18,268

 
$
53,035

 
(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:
 
March 31, 2018
 
December 31, 2017
  
Delinquent Loans
 
Delinquency
Ratio
 
Delinquent Loans
 
Delinquency
Ratio
 
(dollars are in millions)
Residential mortgages(1)(2)
$
381

 
2.20
%
 
$
425

 
2.46
%
Home equity mortgages(1)(2)
37

 
3.25

 
39

 
3.27

Credit cards
13

 
1.69

 
12

 
1.66

Other consumer
9

 
2.13

 
10

 
2.48

Total consumer
$
440

 
2.24
%
 
$
486

 
2.48
%
 
(1) 
At March 31, 2018 and December 31, 2017, consumer mortgage loan delinquency includes $318 million and $342 million, respectively, of loans that are carried at the lower of amortized cost or fair value of the collateral less cost to sell, including $1 million and $1 million, respectively, relating to loans held for sale.
(2) 
At March 31, 2018 and December 31, 2017, consumer mortgage loans and loans held for sale include $177 million and $159 million, respectively, of loans that were in the process of foreclosure.
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 March 31, 2018
 
 
 
 
 
 
 
Residential mortgages
$
16,917

 
$
408

 
$

 
$
17,325

Home equity mortgages
1,073

 
66

 

 
1,139

Credit cards
762

 

 
8

 
770

Other consumer
359

 

 
6

 
365

Total consumer
$
19,111

 
$
474

 
$
14

 
$
19,599

At December 31, 2017
 
 
 
 
 
 
 
Residential mortgages
$
16,859

 
$
414

 
$

 
$
17,273

Home equity mortgages
1,124

 
67

 

 
1,191

Credit cards
712

 

 
9

 
721

Other consumer
335

 

 
8

 
343

Total consumer
$
19,030

 
$
481

 
$
17

 
$
19,528


Troubled debt restructurings  See discussion of impaired loans above for further details on this credit quality indicator.
Concentration of Credit Risk  At March 31, 2018 and December 31, 2017, our loan portfolios included interest-only residential mortgage and home equity mortgage loans totaling $3,383 million and $3,424 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.