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Loans (Tables)

6 Months Ended

Jun. 30, 2018

Loans consisted of the following:



	June 30, 2018		December 31, 2017
	(in millions)
Commercial loans:
Real estate, including construction	$	11,245	$	10,533
Business and corporate banking	12,109		12,504
Global banking⁽¹⁾	18,877		20,088
Other commercial⁽²⁾	4,612		9,910
Total commercial	46,843		53,035
Consumer loans:
Residential mortgages	17,326		17,273
Home equity mortgages	1,086		1,191
Credit cards	841		721
Other consumer	303		343
Total consumer	19,556		19,528
Total loans	$	66,399	$	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 $1,895 million and $6,750 million at June 30, 2018 and December 31, 2017, respectively. See Note 14, "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 June 30, 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 June 30, 2018	30 - 89 Days		90+ Days		Total Past Due 30 Days or More		Current⁽¹⁾		Total Loans
	(in millions)
Commercial loans:
Real estate, including construction	$	18	$	9	$	27	$	11,218	$	11,245
Business and corporate banking	11		4		15		12,094		12,109
Global banking	—		—		—		18,877		18,877
Other commercial	1		—		1		4,611		4,612
Total commercial	30		13		43		46,800		46,843
Consumer loans:
Residential mortgages	365		297		662		16,664		17,326
Home equity mortgages	8		31		39		1,047		1,086
Credit cards	11		11		22		819		841
Other consumer	5		5		10		293		303
Total consumer	389		344		733		18,823		19,556
Total loans	$	419	$	357	$	776	$	65,623	$	66,399



	Past Due				Total Past Due 30 Days or More
At December 31, 2017	30 - 89 Days		90+ Days		Total Past Due 30 Days or More		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.

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:



	June 30, 2018		December 31, 2017
	(in millions)
Nonaccrual loans:
Commercial:
Real estate, including construction	$	13	$	12
Business and corporate banking	218		215
Global banking	117		385
Other commercial	—		1
Commercial nonaccrual loans held for sale	—		—
Total commercial	348		613
Consumer:
Residential mortgages^(1)(2)(3)	405		414
Home equity mortgages⁽¹⁾⁽²⁾	63		67
Consumer nonaccrual loans held for sale	1		1
Total consumer	469		482
Total nonaccruing loans	817		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	11		9
Other consumer	5		8
Total consumer	16		17
Total accruing loans contractually past due 90 days or more	17		18
Total nonperforming loans	$	834	$	1,113


⁽¹⁾	At June 30, 2018 and December 31, 2017, nonaccrual consumer mortgage loans held for investment include $348 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 is 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 June 30,				Six Months Ended June 30,
	2018		2017		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	$	13	$	18	$	27	$	38
Interest income that was recorded on nonaccrual loans and included in interest income during the period	6		2		15		13

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 six months ended June 30, 2018 and 2017 and as a result of this action became classified as TDR Loans:



	Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017		2018		2017
	(in millions)
Commercial loans:
Business and corporate banking	$	—	$	24	$	—	$	24
Global banking	—		86		—		86
Total commercial	—		110		—		110
Consumer loans:
Residential mortgages	12		10		17		16
Home equity mortgages	1		2		3		4
Credit cards	1		1		2		2
Total consumer	14		13		22		22
Total	$	14	$	123	$	22	$	132

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:



	June 30, 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	$	117	$	139	$	194	$	266
Global banking	124		130		175		180
Total commercial⁽³⁾	241		269		369		446
Consumer loans:
Residential mortgages⁽⁴⁾	663		754		683		779
Home equity mortgages⁽⁴⁾	34		67		33		66
Credit cards	4		4		4		4
Total consumer	701		825		720		849
Total TDR Loans⁽⁵⁾	$	942	$	1,094	$	1,089	$	1,295
Allowance for credit losses for TDR Loans:⁽⁶⁾
Commercial loans:
Business and corporate banking	$	3			$	12
Global banking	—				19
Total commercial	3				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	$	10			$	40


⁽¹⁾	TDR Loans are considered to be impaired loans. For commercial loans, impaired loans include other loans in addition to TDR Loans which totaled $200 million and $329 million at June 30, 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 $121 million and $245 million at June 30, 2018 and December 31, 2017, respectively.


⁽⁴⁾	At June 30, 2018 and December 31, 2017, the carrying value of consumer mortgage TDR Loans held for investment includes $635 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 June 30, 2018 and December 31, 2017, the carrying value of TDR Loans includes $433 million and $559 million, respectively, of loans which are classified as nonaccrual.


⁽⁶⁾	Included in the allowance for credit losses.

Trouble Debt Restructuring Additional Information

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



	Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017		2018		2017
	(in millions)
Average balance of TDR Loans:
Commercial loans:
Real estate, including construction	$	—	$	31	$	—	$	31
Business and corporate banking	137		265		156		277
Global banking	110		143		132		145
Total commercial	247		439		288		453
Consumer loans:
Residential mortgages	664		708		670		712
Home equity mortgages	35		30		34		29
Credit cards	4		4		4		4
Total consumer	703		742		708		745
Total average balance of TDR Loans	$	950	$	1,181	$	996	$	1,198
Interest income recognized on TDR Loans:
Commercial loans:
Business and corporate banking	$	—	$	1	$	4	$	4
Global banking	1		1		2		1
Total commercial	1		2		6		5
Consumer loans:
Residential mortgages	7		7		14		14
Home equity mortgages	1		1		1		1
Total consumer	8		8		15		15
Total interest income recognized on TDR Loans	$	9	$	10	$	21	$	20

Loans Classified as TDR Loans

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 and six months ended June 30, 2018 and 2017:



	Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017		2018		2017
	(in millions)
Consumer loans:
Residential mortgages	$	—	$	2	$	2	$	5
Home equity mortgages	1		—		2		—
Total consumer	$	1	$	2	$	4	$	5

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 June 30, 2018
Real estate, including construction	$	3	$	8	$	11	$	1	$	12
Business and corporate banking	137		120		257		27		288
Global banking	28		145		173		15		179
Total commercial	$	168	$	273	$	441	$	43	$	479
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 $241 million and $369 million at June 30, 2018 and December 31, 2017, 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 June 30,				Six Months Ended June 30,
	2018		2017		2018		2017
	(in millions)
Average balance of impaired commercial loans:
Real estate, including construction	$	12	$	44	$	11	$	43
Business and corporate banking	272		304		264		317
Global banking	248		577		311		605
Other commercial	—		7		—		7
Total average balance of impaired commercial loans	$	532	$	932	$	586	$	972
Interest income recognized on impaired commercial loans:
Business and corporate banking	$	1	$	1	$	6	$	5
Global banking	1		1		2		1
Total interest income recognized on impaired commercial loans	$	2	$	2	$	8	$	6

Summary of Criticized Assets for Commercial Loans

The following table summarizes criticized commercial loans:



	Special Mention		Substandard		Doubtful		Total
	(in millions)
At June 30, 2018
Real estate, including construction	$	480	$	85	$	4	$	569
Business and corporate banking	368		334		25		727
Global banking	297		1,059		14		1,370
Other commercial	10		—		—		10
Total commercial	$	1,155	$	1,478	$	43	$	2,676
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

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 June 30, 2018
Real estate, including construction	$	11,232	$	13	$	—	$	11,245
Business and corporate banking	11,890		218		1		12,109
Global banking	18,760		117		—		18,877
Other commercial	4,612		—		—		4,612
Total commercial	$	46,494	$	348	$	1	$	46,843
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 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, 2018
Real estate, including construction	$	8,132	$	3,113	$	11,245
Business and corporate banking	5,331		6,778		12,109
Global banking	13,208		5,669		18,877
Other commercial	3,426		1,186		4,612
Total commercial	$	30,097	$	16,746	$	46,843
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.

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, 2018				December 31, 2017
	Delinquent Loans		Delinquency Ratio		Delinquent Loans		Delinquency Ratio
	(dollars are in millions)
Residential mortgages⁽¹⁾⁽²⁾	$	356	2.05	%	$	425	2.46	%
Home equity mortgages⁽¹⁾⁽²⁾	32		2.95		39		3.27
Credit cards	15		1.78		12		1.66
Other consumer	8		2.23		10		2.48
Total consumer	$	411	2.09	%	$	486	2.48	%


⁽¹⁾	At June 30, 2018 and December 31, 2017, consumer mortgage loan delinquency includes $285 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 June 30, 2018 and December 31, 2017, consumer mortgage loans and loans held for sale include $162 million and $159 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 June 30, 2018
Residential mortgages	$	16,921	$	405	$	—	$	17,326
Home equity mortgages	1,023		63		—		1,086
Credit cards	830		—		11		841
Other consumer	298		—		5		303
Total consumer	$	19,072	$	468	$	16	$	19,556
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