Loans

Loans consisted of the following:



At December 31,	2019		2018
	(in millions)
Commercial loans:
Real estate, including construction	$	11,501	$	11,344
Business and corporate banking	13,479		13,066
Global banking⁽¹⁾	17,915		20,167
Other commercial:
Affiliates⁽²⁾	2,343		2,274
Other	2,973		2,491
Total other commercial	5,316		4,765
Total commercial	48,211		49,342
Consumer loans:
Residential mortgages	17,801		17,383
Home equity mortgages	853		982
Credit cards	1,405		1,019
Other consumer	283		252
Total consumer	20,342		19,636
Total loans	$	68,553	$	68,978


⁽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⁾	See Note 23, "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 total equity at either December 31, 2019 or 2018.

Net deferred origination costs totaled $79 million and $77 million at December 31, 2019 and 2018, respectively. At December 31, 2019 and 2018, we had a net unamortized premium on our loans of $3 million and $11 million, respectively.

Aging Analysis of Past Due Loans The following table summarizes the past due status of our loans at December 31, 2019 and 2018. 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, 2019	30 - 89 Days		90+ Days		Total Past Due 30 Days or More		Current⁽¹⁾		Total Loans
	(in millions)
Commercial loans:
Real estate, including construction	$	7	$	1	$	8	$	11,493	$	11,501
Business and corporate banking	60		35		95		13,384		13,479
Global banking	—		—		—		17,915		17,915
Other commercial	22		—		22		5,294		5,316
Total commercial	89		36		125		48,086		48,211
Consumer loans:
Residential mortgages	342		272		614		17,187		17,801
Home equity mortgages	10		24		34		819		853
Credit cards	24		24		48		1,357		1,405
Other consumer	5		5		10		273		283
Total consumer	381		325		706		19,636		20,342
Total loans	$	470	$	361	$	831	$	67,722	$	68,553



	Past Due				Total Past Due 30 Days or More
At December 31, 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	$	76	$	3	$	79	$	11,265	$	11,344
Business and corporate banking	79		38		117		12,949		13,066
Global banking	—		—		—		20,167		20,167
Other commercial	15		—		15		4,750		4,765
Total commercial	170		41		211		49,131		49,342
Consumer loans:
Residential mortgages	469		254		723		16,660		17,383
Home equity mortgages	14		27		41		941		982
Credit cards	13		14		27		992		1,019
Other consumer	5		5		10		242		252
Total consumer	501		300		801		18,835		19,636
Total loans	$	671	$	341	$	1,012	$	67,966	$	68,978


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

Contractual Maturities Contractual maturities of loans outstanding at December 31, 2019 were as follows:



	2020		2021		2022		2023		2024		Thereafter		Total
	(in millions)
Commercial loans:
Real estate, including construction	$	4,517	$	1,676	$	1,712	$	1,609	$	1,515	$	472	$	11,501
Business and corporate banking	5,293		1,964		2,006		1,885		1,775		556		13,479
Global banking	7,157		2,610		2,667		2,506		2,238		737		17,915
Other commercial	2,088		775		791		744		700		218		5,316
Consumer loans:
Residential mortgages	393		504		501		509		518		15,376		17,801
Home equity mortgages⁽¹⁾	356		189		114		70		45		79		853
Credit cards⁽²⁾	—		1,405		—		—		—		—		1,405
Other consumer	110		133		16		9		6		9		283
Total	$	19,914	$	9,256	$	7,807	$	7,332	$	6,797	$	17,447	$	68,553


⁽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 an average estimate 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 outstanding at December 31, 2019 due after one year by repricing characteristic:



December 31, 2019	After One But Within Five Years		After Five Years
	(in millions)
Receivables at predetermined interest rates	$	1,733	$	4,929
Receivables at floating or adjustable rates	29,459		12,518
Total	$	31,192	$	17,447

Nonperforming Loans Nonperforming loans, including nonaccrual loans and accruing loans 90 days or more delinquent, consisted of the following:



At December 31,	2019		2018
	(in millions)
Nonaccrual loans:
Commercial:
Real estate, including construction	$	6	$	7
Business and corporate banking	82		70
Global banking	149		65
Other commercial	—		1
Total commercial	237		143
Consumer:
Residential mortgages^(1)(2)(3)	381		341
Home equity mortgages⁽¹⁾⁽²⁾	46		55
Total consumer	427		396
Total nonaccruing loans	664		539
Accruing loans contractually past due 90 days or more:
Commercial:
Business and corporate banking	1		1
Total commercial	1		1
Consumer:
Credit cards	24		14
Other consumer	5		6
Total consumer	29		20
Total accruing loans contractually past due 90 days or more	30		21
Total nonperforming loans	$	694	$	560


⁽¹⁾	At both December 31, 2019 and 2018, nonaccrual consumer mortgage loans include $289 million 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 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.

The following table provides additional information on our nonaccrual loans:



Year Ended December 31,	2019		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	$	35	$	46	$	68
Interest income that was recorded on nonaccrual loans and included in interest income during the period	15		31		24

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 primarily based on the present value of expected future cash flows, discounted at the loan's original effective interest rate, which generally results in a higher reserve requirement for these loans, or as a practical expedient, the fair value of the collateral if the loan is collateral dependent or, for commercial loans, the observable market price if the loan is traded in the market. 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 2019, a $12 million commercial loan met this criterion and was removed from TDR Loan classification. There were no loans removed from TDR Loan classification during 2018 and 2017.

The following table presents information about loans which were modified during 2019, 2018 and 2017 and as a result of this action became classified as TDR Loans:



Year Ended December 31,	2019		2018		2017
	(in millions)
Commercial loans:
Business and corporate banking	$	—	$	6	$	40
Global banking	—		—		160
Total commercial	—		6		200
Consumer loans:
Residential mortgages	8		26		34
Home equity mortgages	1		5		9
Credit cards	3		4		4
Total consumer	12		35		47
Total	$	12	$	41	$	247

The weighted-average contractual rate reduction for consumer loans which became classified as TDR Loans during 2019, 2018 and 2017 was 2.18 percent, 1.93 percent and 1.91 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:



	December 31, 2019				December 31, 2018
	Carrying Value		Unpaid Principal Balance		Carrying Value		Unpaid Principal Balance
	(in millions)
TDR Loans:⁽¹⁾⁽²⁾
Commercial loans:
Business and corporate banking	$	36	$	61	$	68	$	86
Global banking	68		78		113		119
Total commercial⁽³⁾	104		139		181		205
Consumer loans:
Residential mortgages⁽⁴⁾	580		663		640		730
Home equity mortgages⁽⁴⁾	32		60		35		65
Credit cards	4		4		3		4
Total consumer	616		727		678		799
Total TDR Loans⁽⁵⁾	$	720	$	866	$	859	$	1,004
Allowance for credit losses for TDR Loans:⁽⁶⁾
Commercial loans:
Business and corporate banking	$	1			$	12
Global banking	—				—
Total commercial	1				12
Consumer loans:
Residential mortgages	4				3
Home equity mortgages	1				1
Credit cards	1				1
Total consumer	6				5
Total allowance for credit losses for TDR Loans	$	7			$	17


⁽¹⁾	TDR Loans are considered to be impaired loans. For commercial loans, impaired loans include other loans in addition to TDR Loans which totaled $164 million and $54 million at December 31, 2019 and 2018, respectively.


⁽²⁾	The carrying value of TDR Loans includes basis adjustments on the loans, such as partial charge-offs.


⁽³⁾	Additional commitments to lend to commercial borrowers whose loans have been modified in TDR Loans totaled $222 million and $151 million at December 31, 2019 and 2018, respectively.


⁽⁴⁾	At December 31, 2019 and 2018, the carrying value of consumer mortgage TDR Loans includes $557 million and $615 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 December 31, 2019 and 2018, the carrying value of TDR Loans includes $230 million and $286 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:



Year Ended December 31,	2019		2018		2017
	(in millions)
Average balance of TDR Loans:
Commercial loans:
Real estate, including construction	$	—	$	—	$	19
Business and corporate banking	55		122		246
Global banking	81		124		154
Total commercial	136		246		419
Consumer loans:
Residential mortgages	608		660		704
Home equity mortgages	33		35		31
Credit cards	4		4		4
Total consumer	645		699		739
Total average balance of TDR Loans	$	781	$	945	$	1,158
Interest income recognized on TDR Loans:
Commercial loans:
Business and corporate banking	$	2	$	12	$	7
Global banking	2		3		2
Total commercial	4		15		9
Consumer loans:
Residential mortgages	26		27		28
Home equity mortgages	2		2		2
Total consumer	28		29		30
Total interest income recognized on TDR Loans	$	32	$	44	$	39

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 years ended December 31, 2019, 2018 and 2017:



Year Ended December 31,	2019		2018		2017
	(in millions)
Consumer loans:
Residential mortgages	$	3	$	8	$	9
Home equity mortgages	—		2		2
Total consumer	$	3	$	10	$	11

During the years ended December 31, 2019, 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:



	Amount with Impairment Reserves⁽¹⁾		Amount without Impairment Reserves⁽¹⁾		Total Impaired Commercial Loans⁽¹⁾⁽²⁾		Impairment Reserve		Unpaid Principal Balance
	(in millions)
At December 31, 2019
Real estate, including construction	$	2	$	3	$	5	$	—	$	5
Business and corporate banking	57		33		90		23		109
Global banking	32		141		173		15		183
Total commercial	$	91	$	177	$	268	$	38	$	297
At December 31, 2018
Real estate, including construction	$	3	$	3	$	6	$	1	$	6
Business and corporate banking	58		37		95		18		109
Global banking	—		133		133		—		140
Other commercial	—		1		1		—		1
Total commercial	$	61	$	174	$	235	$	19	$	256


⁽¹⁾	Reflects the carrying value of impaired commercial loans and includes basis adjustments on the loans, such as partial charge-offs.


⁽²⁾	Includes impaired commercial loans that are also considered TDR Loans which totaled $104 million and $181 million at December 31, 2019 and 2018, respectively.

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



Year Ended December 31,	2019		2018		2017
	(in millions)
Average balance of impaired commercial loans:
Real estate, including construction	$	5	$	9	$	32
Business and corporate banking	111		200		304
Global banking	127		239		554
Other commercial	—		—		4
Total average balance of impaired commercial loans	$	243	$	448	$	894
Interest income recognized on impaired commercial loans:
Business and corporate banking	$	4	$	15	$	9
Global banking	3		7		2
Total interest income recognized on impaired commercial loans	$	7	$	22	$	11

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 December 31, 2019
Real estate, including construction	$	516	$	203	$	—	$	719
Business and corporate banking	467		386		23		876
Global banking	184		196		15		395
Other commercial	11		—		—		11
Total commercial	$	1,178	$	785	$	38	$	2,001
At December 31, 2018
Real estate, including construction	$	452	$	93	$	4	$	549
Business and corporate banking	193		314		15		522
Global banking	262		277		—		539
Other commercial	—		1		—		1
Total commercial	$	907	$	685	$	19	$	1,611

Nonperforming The following table summarizes the status of our commercial loan portfolio:



	Performing Loans		Nonaccrual Loans		Accruing Loans Contractually Past Due 90 days or More		Total
	(in millions)
At December 31, 2019
Real estate, including construction	$	11,495	$	6	$	—	$	11,501
Business and corporate banking	13,396		82		1		13,479
Global banking	17,766		149		—		17,915
Other commercial	5,316		—		—		5,316
Total commercial	$	47,973	$	237	$	1	$	48,211
At December 31, 2018
Real estate, including construction	$	11,337	$	7	$	—	$	11,344
Business and corporate banking	12,995		70		1		13,066
Global banking	20,102		65		—		20,167
Other commercial	4,764		1		—		4,765
Total commercial	$	49,198	$	143	$	1	$	49,342

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, 2019
Real estate, including construction	$	6,332	$	5,169	$	11,501
Business and corporate banking	6,029		7,450		13,479
Global banking	12,981		4,934		17,915
Other commercial	4,649		667		5,316
Total commercial	$	29,991	$	18,220	$	48,211
At December 31, 2018
Real estate, including construction	$	6,769	$	4,575	$	11,344
Business and corporate banking	5,674		7,392		13,066
Global banking	14,764		5,403		20,167
Other commercial	3,990		775		4,765
Total commercial	$	31,197	$	18,145	$	49,342


⁽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 ("delinquency ratio") for our consumer loan portfolio:



	December 31, 2019				December 31, 2018
	Delinquent Loans		Delinquency Ratio		Delinquent Loans		Delinquency Ratio
	(dollars are in millions)
Residential mortgages⁽¹⁾⁽²⁾	$	350	1.96	%	$	347	1.99	%
Home equity mortgages⁽¹⁾⁽²⁾	25		2.93		30		3.05
Credit cards	34		2.42		20		1.96
Other consumer	7		2.47		8		2.62
Total consumer	$	416	2.04	%	$	405	2.05	%


⁽¹⁾	At December 31, 2019 and 2018, consumer mortgage loan delinquency includes $256 million and $254 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 December 31, 2019 and 2018, consumer mortgage loans include $142 million and $125 million, respectively, of loans that were in the process of foreclosure.

Nonperforming The following table summarizes the status of our consumer loan portfolio:



	Performing Loans		Nonaccrual Loans		Accruing Loans Contractually Past Due 90 days or More		Total
	(in millions)
At December 31, 2019
Residential mortgages	$	17,420	$	381	$	—	$	17,801
Home equity mortgages	807		46		—		853
Credit cards	1,381		—		24		1,405
Other consumer	278		—		5		283
Total consumer	$	19,886	$	427	$	29	$	20,342
At December 31, 2018
Residential mortgages	$	17,042	$	341	$	—	$	17,383
Home equity mortgages	927		55		—		982
Credit cards	1,005		—		14		1,019
Other consumer	246		—		6		252
Total consumer	$	19,220	$	396	$	20	$	19,636

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

Concentration of Credit Risk At December 31, 2019 and 2018, our loan portfolios included interest-only residential mortgage and home equity mortgage loans totaling $3,362 million and $3,208 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.