Loans

Loans consisted of the following:



	March 31, 2020		December 31, 2019
	(in millions)
Commercial loans:
Real estate, including construction	$	11,369	$	11,501
Business and corporate banking	19,620		13,479
Global banking⁽¹⁾	24,141		17,915
Other commercial:
Affiliates⁽²⁾	3,087		2,343
Other	3,029		2,973
Total other commercial	6,116		5,316
Total commercial	61,246		48,211
Consumer loans:
Residential mortgages	18,034		17,801
Home equity mortgages	814		853
Credit cards	1,300		1,405
Other consumer⁽³⁾	334		283
Total consumer	20,482		20,342
Total loans	$	81,728	$	68,553


⁽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 14, "Related Party Transactions," for additional information regarding loans to HSBC affiliates.


⁽³⁾	Includes certain student loans that we have elected to designate under the fair value option and are therefore carried at fair value, which totaled $37 million at March 31, 2020. See Note 10, "Fair Value Option," for further details.

Net deferred origination costs totaled $76 million and $79 million at March 31, 2020 and December 31, 2019, respectively. At March 31, 2020 and December 31, 2019, we had a net unamortized premium on our loans of $9 million and $3 million, respectively.

Aging Analysis of Past Due Loans The following table summarizes the past due status of our loans at March 31, 2020 and December 31, 2019. 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, 2020	30 - 89 Days		90+ Days		Total Past Due 30 Days or More		Current⁽¹⁾		Total Loans
	(in millions)
Commercial loans:
Real estate, including construction	$	4	$	2	$	6	$	11,363	$	11,369
Business and corporate banking	104		8		112		19,508		19,620
Global banking	—		—		—		24,141		24,141
Other commercial	32		—		32		6,084		6,116
Total commercial	140		10		150		61,096		61,246
Consumer loans:
Residential mortgages	366		259		625		17,409		18,034
Home equity mortgages	10		23		33		781		814
Credit cards	25		28		53		1,247		1,300
Other consumer	7		5		12		322		334
Total consumer	408		315		723		19,759		20,482
Total loans	$	548	$	325	$	873	$	80,855	$	81,728



	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


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

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



	Nonaccrual Loans		Accruing Loans Contractually Past Due 90 Days or More		Nonaccrual Loans With No Allowance For Credit Losses
	(in millions)
At March 31, 2020
Commercial:
Real estate, including construction	$	5	$	—	$	3
Business and corporate banking	112		2		2
Global banking	138		—		127
Total commercial	255		2		132
Consumer:
Residential mortgages^(1)(2)(3)	370		—		171
Home equity mortgages⁽¹⁾⁽²⁾	38		—		31
Credit cards	—		28		—
Other consumer	—		2		—
Total consumer	408		30		202
Total nonperforming loans	$	663	$	32	$	334
At December 31, 2019
Commercial:
Real estate, including construction	$	6	$	—	$	3
Business and corporate banking	82		1		19
Global banking	149		—		117
Total commercial	237		1		139
Consumer:
Residential mortgages^(1)(2)(3)	381		—		257
Home equity mortgages⁽¹⁾⁽²⁾	46		—		32
Credit cards	—		24		—
Other consumer	—		5		—
Total consumer	427		29		289
Total nonperforming loans	$	664	$	30	$	428

⁽¹⁾

At March 31, 2020 and December 31, 2019, nonaccrual consumer mortgage loans include $286 million and $289 million, respectively, of loans that are carried at the lower of amortized cost or fair value of the collateral less cost to sell. The decrease in nonaccrual consumer mortgage loans with no allowance for credit losses at March 31, 2020 reflects the impact of adopting new accounting guidance which requires expected recoveries related to subsequent increases in the fair value of collateral for collateral-dependent loans to be recognized in the allowance for credit losses beginning January 1, 2020. See Note 21, "New Accounting Pronouncements," for additional discussion.


⁽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:



Three Months Ended March 31,	2020		2019
	(in millions)
Interest income that would have been recorded if the nonaccrual loans had been current in accordance with contractual terms during the period	$	8	$	9
Interest income that was recorded on nonaccrual loans and included in interest income during the period	7		3

Collateral-Dependent Loans Loans for which the repayment is expected to be provided substantially through the operation or sale of the collateral and the borrower is experiencing financial difficulty are considered to be collateral-dependent loans. Collateral can have a significant financial effect in mitigating our exposure to credit risk and, where there is sufficient collateral, an allowance for expected credit losses is not recognized or is minimal.

Collateral-dependent residential mortgage loans are carried at the lower of amortized cost or fair value of the collateral less costs to sell, with any excess in the carrying amount of the loan generally charged off at the time foreclosure is initiated or when settlement is reached with the borrower, but not to exceed the end of the month in which the account becomes six months contractually delinquent. Collateral values are based on broker price opinions or appraisals which are updated at least every 180 days less estimated costs to sell. During the quarterly period between updates, real estate price trends are reviewed on a geographic basis and incorporated as necessary. At March 31, 2020 and December 31, 2019, we had collateral-dependent residential mortgage loans totaling $802 million and $803 million, respectively.

For collateral-dependent commercial loans, the allowance for expected credit losses is individually assessed based on the fair value of the collateral. Various types of collateral are used, including real estate, inventory, equipment, accounts receivable, securities and cash, among others. For commercial real estate loans, collateral values are generally based on appraisals which are updated based on management judgment under the specific circumstances on a case-by-case basis. In situations where an appraisal is not used, borrower-specific factors such as operating results, cash flows and debt service ratios are reviewed along with relevant market data of comparable properties in order to create a 10-year cash flow model to be discounted at appropriate rates to present value. The collateral value for securities is based on their quoted market prices or broker quotes. The collateral value for other financial assets is generally based on appraisals or is estimated using a discounted cash flow analysis. Commercial loan balances are charged off at the time all or a portion of the balance is deemed uncollectible. At March 31, 2020 and December 31, 2019, we had collateral-dependent commercial loans totaling $252 million and $227 million, respectively.

Troubled debt restructurings TDR Loans, including beginning in 2020 loans which we reasonably expect to become TDR Loans ("anticipatory TDRs"), 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. There were no anticipatory TDRs at March 31, 2020.

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. 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 the loan is upgraded, it is possible the loan will no longer be reported as a TDR Loan at the earliest one year after the restructure had been anticipated. During the three months ended March 31, 2020 and 2019 there were no commercial loans that met this criteria and were removed from TDR Loan classification.

The following table summarizes our TDR Loans at March 31, 2020 and December 31, 2019:



	March 31, 2020		December 31, 2019
	(in millions)
Commercial loans:
Business and corporate banking	$	32	$	36
Global banking	69		68
Total commercial⁽¹⁾	101		104
Consumer loans:
Residential mortgages⁽²⁾	561		580
Home equity mortgages⁽²⁾	32		32
Credit cards	4		4
Total consumer	597		616
Total TDR Loans⁽³⁾	$	698	$	720


⁽¹⁾	Additional commitments to lend to commercial borrowers whose loans have been modified in TDR Loans totaled $143 million and $222 million at March 31, 2020 and December 31, 2019, respectively.


⁽²⁾	At March 31, 2020 and December 31, 2019, the carrying value of consumer mortgage TDR Loans includes $508 million and $557 million, respectively, of loans that are recorded at the lower of amortized cost or fair value of the collateral less cost to sell.


⁽³⁾	At March 31, 2020 and December 31, 2019, the carrying value of TDR Loans includes $318 million and $230 million, respectively, of loans which are classified as nonaccrual.

The following table presents information about loans which were modified during the three months ended March 31, 2020 and 2019 and as a result of this action became classified as TDR Loans:



Three Months Ended March 31,	2020		2019
	(in millions)
Commercial loans:
Global banking	$	12	$	—
Total commercial	12		—
Consumer loans:
Residential mortgages	4		1
Home equity mortgages	1		—
Credit cards	1		1
Total consumer	6		2
Total	$	18	$	2

The weighted-average contractual rate reduction for consumer loans which became classified as TDR Loans during the three months ended March 31, 2020 and 2019 was 3.04 percent and 1.24 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 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, 2020 and 2019:



Three Months Ended March 31,	2020		2019
	(in millions)
Consumer loans:
Residential mortgages	$	1	$	2
Total consumer	$	1	$	2

During the three months ended March 31, 2020 and 2019, 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.

Commercial Loan Credit Quality Indicators The following credit quality indicators are utilized to monitor 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 facility grades are deemed to be criticized:

Special Mention - generally includes loans that are protected by collateral and/or the credit worthiness of the customer, but are potentially weak based upon economic or market circumstances which, if not checked or corrected, could weaken our credit position at some future date.

Substandard - includes loans that are inadequately protected by the underlying collateral and/or general credit worthiness of the customer. These loans present a distinct possibility that we will sustain some loss if the deficiencies are not corrected.

Doubtful - includes loans that have all the weaknesses exhibited by substandard loans, with the added characteristic that the weaknesses make collection or liquidation in full of the recorded loan highly improbable. However, although the possibility of loss is extremely high, certain factors exist which may strengthen the credit at some future date, and therefore the decision to charge-off the loan is deferred. Loans graded as doubtful are required to be placed in nonaccrual status.

The following table summarizes our criticized commercial loans, including a disaggregation of the loans by year of origination as of March 31, 2020:



	2020		2019		2018		2017		2016		Prior		Revolving Loans		Revolving Loans Converted to Term Loans		Total at Mar. 31, 2020		Total at Dec. 31, 2019
	(in millions)
Real estate, including construction:
Special mention	$	—	$	402	$	150	$	122	$	—	$	234	$	—	$	—	$	908	$	516
Substandard	—		130		7		—		—		45		—		—		182		203
Doubtful	—		—		—		—		—		—		—		—		—		—
Total real estate, including construction	—		532		157		122		—		279		—		—		1,090		719
Business and corporate banking:
Special mention	—		25		21		50		13		164		555		24		852		467
Substandard	—		29		24		24		2		121		367		2		569		386
Doubtful	—		16		13		—		—		18		64		2		113		23
Total business and corporate banking	—		70		58		74		15		303		986		28		1,534		876
Global banking:
Special mention	—		38		—		—		—		102		334		—		474		184
Substandard	—		—		—		—		—		86		270		—		356		196
Doubtful	—		—		—		—		—		13		—		—		13		15
Total global banking	—		38		—		—		—		201		604		—		843		395
Other commercial:
Special mention	—		24		11		—		3		20		—		—		58		11
Substandard	—		—		—		—		—		—		61		—		61		—
Doubtful	—		—		—		—		—		—		—		—		—		—
Total other commercial	—		24		11		—		3		20		61		—		119		11
Total commercial:
Special mention	—		489		182		172		16		520		889		24		2,292		1,178
Substandard	—		159		31		24		2		252		698		2		1,168		785
Doubtful	—		16		13		—		—		31		64		2		126		38
Total commercial	$	—	$	664	$	226	$	196	$	18	$	803	$	1,651	$	28	$	3,586	$	2,001

Nonperforming The following table summarizes the nonperforming status of our commercial loan portfolio, including a disaggregation of the loans by year of origination as of March 31, 2020:



	2020		2019		2018		2017		2016		Prior		Revolving Loans		Revolving Loans Converted to Term Loans		Total at Mar. 31, 2020		Total at Dec. 31, 2019
	(in millions)
Real estate, including construction:
Performing loans	$	405	$	3,800	$	3,095	$	1,389	$	335	$	2,169	$	147	$	24	$	11,364	$	11,495
Nonaccrual loans	—		—		—				1		2		—		2		5		6
Accruing loans contractually past due 90 days or more	—		—		—		—		—		—		—		—		—		—
Total real estate, including construction	405		3,800		3,095		1,389		336		2,171		147		26		11,369		11,501
Business and corporate banking:
Performing loans	619		1,509		840		415		540		3,428		11,808		347		19,506		13,396
Nonaccrual loans	—		16		13		—		—		16		66		1		112		82
Accruing loans contractually past due 90 days or more	—		—		—		—		—		—		2		—		2		1
Total business and corporate banking	619		1,525		853		415		540		3,444		11,876		348		19,620		13,479
Global banking:
Performing loans	378		1,832		1,501		842		564		4,386		14,500		—		24,003		17,766
Nonaccrual loans	—		—		—		—		19		51		68		—		138		149
Accruing loans contractually past due 90 days or more	—		—		—		—		—		—		—		—		—		—
Total global banking	378		1,832		1,501		842		583		4,437		14,568		—		24,141		17,915
Other commercial:
Performing loans	137		477		335		185		148		384		4,450		—		6,116		5,316
Nonaccrual loans	—		—		—		—		—		—		—		—		—		—
Accruing loans contractually past due 90 days or more	—		—		—		—		—		—		—		—		—		—
Total other commercial	137		477		335		185		148		384		4,450		—		6,116		5,316
Total commercial:
Performing loans	1,539		7,618		5,771		2,831		1,587		10,367		30,905		371		60,989		47,973
Nonaccrual loans	—		16		13		—		20		69		134		3		255		237
Accruing loans contractually past due 90 days or more	—		—		—		—		—		—		2		—		2		1
Total commercial	$	1,539	$	7,634	$	5,784	$	2,831	$	1,607	$	10,436	$	31,041	$	374	$	61,246	$	48,211

Credit risk profile Commercial loans are assigned a credit rating based on the estimated probability of default. Investment grade includes loans with credit ratings of at least BBB- or above or the equivalent based on our internal credit rating system. The following table shows the credit risk profile of our commercial loan portfolio, including a disaggregation of the loans by year of origination as of March 31, 2020:



	2020		2019		2018		2017		2016		Prior		Revolving Loans		Revolving Loans Converted to Term Loans		Total at Mar. 31, 2020		Total at Dec. 31, 2019
	(in millions)
Real estate, including construction:
Investment grade	$	287	$	1,392	$	1,500	$	515	$	202	$	1,205	$	6	$	4	$	5,111	$	6,332
Non-investment grade	118		2,408		1,595		874		134		966		141		22		6,258		5,169
Total real estate, including construction	405		3,800		3,095		1,389		336		2,171		147		26		11,369		11,501
Business and corporate banking:
Investment grade	459		611		202		104		389		1,744		5,219		87		8,815		6,029
Non-investment grade	160		914		651		311		151		1,700		6,657		261		10,805		7,450
Total business and corporate banking	619		1,525		853		415		540		3,444		11,876		348		19,620		13,479
Global banking:
Investment grade	319		1,363		1,013		802		141		3,299		10,386		—		17,323		12,981
Non-investment grade	59		469		488		40		442		1,138		4,182		—		6,818		4,934
Total global banking	378		1,832		1,501		842		583		4,437		14,568		—		24,141		17,915
Other commercial:
Investment grade	76		431		247		163		96		300		4,217		—		5,530		4,649
Non-investment grade	61		46		88		22		52		84		233		—		586		667
Total other commercial	137		477		335		185		148		384		4,450		—		6,116		5,316
Total commercial:
Investment grade	1,141		3,797		2,962		1,584		828		6,548		19,828		91		36,779		29,991
Non-investment grade	398		3,837		2,822		1,247		779		3,888		11,213		283		24,467		18,220
Total commercial	$	1,539	$	7,634	$	5,784	$	2,831	$	1,607	$	10,436	$	31,041	$	374	$	61,246	$	48,211

Consumer Loan Credit Quality Indicators The following credit quality indicators are utilized to monitor our consumer loan portfolio:

Delinquency The following table summarizes dollars of two-months-and-over contractual delinquency for our consumer loan portfolio, including a disaggregation of the loans by year of origination as of March 31, 2020:



	2020		2019		2018		2017		2016		Prior		Revolving Loans		Total at Mar. 31, 2020		Total at Dec. 31, 2019
	(in millions)
Residential mortgages⁽¹⁾⁽²⁾	$	—	$	11	$	10	$	15	$	13	$	315	$	—	$	364	$	350
Home equity mortgages⁽¹⁾⁽²⁾	—		—		—		—		—		26		—		26		25
Credit cards	—		—		—		—		—		—		39		39		34
Other consumer	—		1		—		—		—		4		2		7		7
Total consumer	$	—	$	12	$	10	$	15	$	13	$	345	$	41	$	436	$	416


⁽¹⁾	At March 31, 2020 and December 31, 2019, consumer mortgage loan delinquency includes $249 million and $256 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 March 31, 2020 and December 31, 2019, consumer mortgage loans include $135 million and $142 million, respectively, of loans that were in the process of foreclosure.

Nonperforming The following table summarizes the nonperforming status of our consumer loan portfolio, including a disaggregation of the loans by year of origination as of March 31, 2020:



	2020		2019		2018		2017		2016		Prior		Revolving Loans		Total at Mar. 31, 2020		Total at Dec. 31, 2019
	(in millions)
Residential mortgages:
Performing loans	$	1,032	$	2,968	$	1,799	$	2,049	$	2,359	$	7,457	$	—	$	17,664	$	17,420
Nonaccrual loans	—		8		6		13		12		331		—		370		381
Total residential mortgages	1,032		2,976		1,805		2,062		2,371		7,788		—		18,034		17,801
Home equity mortgages:
Performing loans	14		54		44		41		53		570		—		776		807
Nonaccrual loans	—		—		—		—		—		38		—		38		46
Total home equity mortgages	14		54		44		41		53		608		—		814		853
Credit cards:
Performing loans	—		—		—		—		—		—		1,272		1,272		1,381
Accruing loans contractually past due 90 days or more	—		—		—		—		—		—		28		28		24
Total credit cards	—		—		—		—		—		—		1,300		1,300		1,405
Other consumer:
Performing loans	41		63		1		2		4		125		96		332		278
Accruing loans contractually past due 90 days or more	—		—		—		—		—		—		2		2		5
Total other consumer	41		63		1		2		4		125		98		334		283
Total consumer:
Performing loans	1,087		3,085		1,844		2,092		2,416		8,152		1,368		20,044		19,886
Nonaccrual loans	—		8		6		13		12		369		—		408		427
Accruing loans contractually past due 90 days or more	—		—		—		—		—		—		30		30		29
Total consumer	$	1,087	$	3,093	$	1,850	$	2,105	$	2,428	$	8,521	$	1,398	$	20,482	$	20,342

Troubled debt restructurings The following table summarizes TDR Loans in our consumer loan portfolio, including a disaggregation of the loans by year of origination as of March 31, 2020:



	2020		2019		2018		2017		2016		Prior		Revolving Loans		Total at Mar. 31, 2020		Total at Dec. 31, 2019
	(in millions)
Residential mortgages	$	—	$	—	$	—	$	—	$	1	$	560	$	—	$	561	$	580
Home equity mortgages	—		—		—		—		—		32		—		32		32
Credit cards	—		—		—		—		—		—		4		4		4
Total consumer	$	—	$	—	$	—	$	—	$	1	$	592	$	4	$	597	$	616

Concentration of Credit Risk At March 31, 2020 and December 31, 2019, our loan portfolios included interest-only residential mortgage and home equity mortgage loans totaling $3,366 million and $3,362 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.