6-K 1 hsba201111096k4.htm HSBC USA INC. 3Q 2011 RESULTS hsba201111096k4.htm
FORM 6-K
 
SECURITIES AND EXCHANGE COMMISSION
 
Washington, D.C. 20549
 
 
 
Report of Foreign Private Issuer
 
Pursuant to Rule 13a - 16 or 15d - 16 of
 
the Securities Exchange Act of 1934
 
 
 
For the month of November
 
HSBC Holdings plc
 
42nd Floor, 8 Canada Square, London E14 5HQ, England
 
 
 
(Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F).
 
Form 20-F   X              Form 40-F ......
 
(Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934).
 
Yes.......          No    X
 
(If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82- ..............).
 
 

 

 
 
 

 


 

 
 
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM 10-Q
 
 
 
(Mark One)
R
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2011
OR
£
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                to                
 
Commission file number 1-7436
 
 
HSBC USA INC.
(Exact name of registrant as specified in its charter)
 
 
Maryland
13-2764867
(State of Incorporation)
(I.R.S. Employer Identification No.)
452 Fifth Avenue, New York
10018
(Address of principal executive offices)
(Zip Code)
 
(212) 525-5000
Registrant's telephone number, including area code
 
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x No o
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes x No o
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
 
 
Large accelerated filer o
Accelerated filer o
Non-accelerated filer x
Smaller reporting company o
   
(Do not check if a smaller reporting company)
 
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o No x
 
As of October 31, 2011, there were 712 shares of the registrant's common stock outstanding, all of which are owned by HSBC North America Inc.
 
                                                                                                                                  
HSBC USA Inc.
 
FORM 10-Q
 
TABLE OF CONTENTS
 
 
Part/Item No.
 
Page
Part I.
   
Item 1.
Financial Statements (Unaudited):
 
 
Consolidated Statement of Income
 
 
Consolidated Balance Sheet
 
 
Consolidated Statement of Changes in Shareholders' Equity
 
 
Consolidated Statement of Cash Flows
 
 
Notes to Consolidated Financial Statements
 
Item 2.
        Management's Discussion and Analysis of Financial Condition and Results of Operations:
 
 
Forward-Looking Statements
 
 
Executive Overview
 
 
Basis of Reporting
 
 
Balance Sheet Review
 
 
Real Estate Owned
 
 
Results of Operations
 
 
Segment Results - IFRSs Basis
 
 
Credit Quality
 
 
Liquidity and Capital Resources
 
 
Off-Balance Sheet Arrangements
 
 
Fair Value
 
 
Risk Management
 
 
Average Balances and Interest Rates
 
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
 
Item 4.
Controls and Procedures
 
Part II
   
Item 1.
Legal Proceedings
 
Item 6.
Exhibits
 
Index
 
Signature
 
 

 
 

 

 
 
PART I. FINANCIAL INFORMATION
 
Item 1. Financial Statements
 
CONSOLIDATED STATEMENT OF INCOME  (UNAUDITED)
 
 
 
Three Months Ended
September 30,
Nine Months Ended
September 30,
 
2011
2010
2011
2010
 
(in millions)
Interest income:
       
Loans
$456
$490
$1,346
$1,593
Securities
306
311
929
822
Trading assets
52
33
156
100
Short-term investments
35
26
104
83
Other
10
12
32
35
Total interest income
859
872
2,567
2,633
Interest expense:
       
Deposits
58
62
171
202
Short-term borrowings
10
22
31
62
Long-term debt
151
124
445
336
Other
12
-
97
-
Total interest expense
231
208
744
600
Net interest income
628
664
1,823
2,033
Provision for credit losses
78
10
171
(7)
Net interest income after provision for credit losses
550
654
1,652
2,040
Other revenues:
       
Credit card fees
31
33
95
93
Other fees and commissions
223
209
608
693
Trust income
26
26
82
79
Trading revenue
(107)
126
243
419
Net other-than-temporary impairment losses(1)
-
(4)
-
(45)
Other securities gains, net
49
37
105
59
Servicing and other fees from HSBC affiliates
50
42
152
111
Residential mortgage banking revenue
34
11
48
(106)
Gain on instruments designated at fair value and related derivatives
379
89
440
317
Other income
(18)
29
19
201
Total other revenues
667
598
1,792
1,821
Operating expenses:
       
Salaries and employee benefits
265
285
852
813
Support services from HSBC affiliates
413
306
1,094
960
Occupancy expense, net
73
65
208
201
Other expenses
170
167
590
511
Total operating expenses
921
823
2,744
2,485
Income from continuing operations before income tax expense
296
429
700
1,376
Income tax expense
120
144
249
464
Income from continuing operations
176
285
451
912
Discontinued Operations (Note 2):
       
Income from discontinued operations before income tax expense
211
211
653
562
Income tax expense
76
79
231
203
Income from discontinued operations
135
132
422
359
Net income
$311
$417
$873
$1,271

 
 

 

 
 
 
(1)
During the three and nine months ended September 30, 2011 there were no other-than-temporary impairment ("OTTI") losses on securities recognized in other revenues and no OTTI losses in the non-credit component on securities were recognized in accumulated other comprehensive income (loss). During the three and nine months ended September 30, 2010, OTTI losses on securities available-for-sale and held-to-maturity totaling $4 million and $45 million, respectively, were recognized in other revenues and losses in the non-credit component recognized in accumulated other comprehensive income (loss) were not significant.
 
The accompanying notes are an integral part of the consolidated financial statements.
 

 
 

 

CONSOLIDATED BALANCE SHEET  (UNAUDITED)
 
 
 
September 30,
2011
December 31,
2010
 
(in millions)
Assets(1)
   
Cash and due from banks
$1,585
$1,576
Interest bearing deposits with banks
21,291
8,202
Federal funds sold and securities purchased under agreements to resell
5,095
8,236
Trading assets
40,443
32,402
Securities  available-for-sale
52,758
45,523
Securities held-to-maturity (fair value of $2.4 billion and $3.4 billion at September 30, 2011 and December 31, 2010, respectively, and includes $881 million at December 31, 2010 collateralizing short-term borrowings)
2,123
3,190
Loans
49,600
49,809
Less - allowance for credit losses
749
852
Loans, net
48,851
48,957
Loans held for sale (includes $364 million and $1.3 billion designated under fair value option at September 30, 2011 and December 31, 2010, respectively)
3,602
2,390
Properties and equipment, net
460
549
Intangible assets, net
261
424
Goodwill
2,228
2,626
Other assets
9,305
7,099
Other branch related assets held for sale
440
-
Assets of discontinued operations
20,824
22,639
Total assets
$209,266
$183,813
Liabilities(1)
   
Debt:
   
Deposits in domestic offices:
   
Noninterest bearing
$15,823
$23,045
Interest bearing (includes $9.6 billion and $7.4 billion designated under fair value option at September 30, 2011 and December 31, 2010, respectively)
73,675
72,808
Deposits in foreign offices:
   
Noninterest bearing
1,759
1,263
Interest bearing
26,632
23,502
Deposits held for sale
14,952
-
Total deposits
132,841
120,618
Short-term borrowings
19,131
15,187
Long-term debt (includes $4.2 billion and $5.4 billion designated under fair value option at September 30, 2011 and December 31, 2010, respectively, collateralized by available-for-sale securities)
18,585
17,080
Total debt
170,557
152,885
Trading liabilities
13,024
10,528
Interest, taxes and other liabilities
5,864
3,007
Other branch related liabilities held for sale
11
-
Liabilities of discontinued operations
1,408
660
Total liabilities
190,864
167,080
Shareholders' equity
   
Preferred stock
1,565
1,565
Common shareholder's equity:
   
Common stock ($5 par; 150,000,000 shares authorized; 712 shares issued and outstanding at September 30, 2011 and December 31, 2010)
-
-
Additional paid-in capital
13,824
13,785
Retained earnings
2,354
1,536
Accumulated other comprehensive income (loss)
659
(153)
Total common shareholder's equity
16,837
15,168
Total shareholders' equity
18,402
16,733
Total liabilities and shareholders' equity
$209,266
$183,813

 
 

 

 
 
 
(1)
The following table summarizes assets and liabilities related to variable interest entities ("VIEs") as of September 30, 2011 and December 31, 2010 which are consolidated on our balance sheet. Assets and liabilities exclude intercompany balances that eliminate in consolidation.
 
 
 
September 30,
2011
December 31,
2010
 
(in millions)
Assets
   
Interest bearing deposits with banks
$106
$759
Securities  held-to-maturity
-
881
Loans, net
-
1,220
Other assets
523
512
Assets of discontinued operations
7,801
11,908
Total assets
$8,430
$15,280
Liabilities
   
Short-term borrowings
$-
$3,022
Long-term debt
55
55
Interest, taxes and other liabilities
159
112
Liabilities of discontinued operations
1,090
431
Total liabilities
$1,304
$3,620
 
The accompanying notes are an integral part of the consolidated financial statements.
 

 
 

 

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED)
 
 
Nine Months Ended September 30,
2011
2010
 
(in millions)
Preferred stock
   
Balance at beginning and end of period
$1,565
$1,565
Common stock
   
Balance at beginning and end of period
-
-
Additional paid-in capital
   
Balance at beginning of period
13,785
13,795
Capital contributions from parent
21
-
Return of capital on preferred shares issued to CT Financial Services, Inc.
-
(3)
Employee benefit plans and other
18
(6)
Balance at end of period
13,824
13,786
Retained earnings
   
Balance at beginning of period
1,536
45
Adjustment to initially apply new guidance for consolidation of VIEs, net of tax
-
1
Balance at beginning of period, as adjusted
1,536
46
Net income
873
1,271
Cash dividends declared on preferred stock
(55)
(55)
Balance at end of period
2,354
1,262
Accumulated other comprehensive income ( loss)
   
Balance at beginning of period
(153)
(228)
Adjustment to initially apply new guidance for consolidation of VIEs, net of tax
-
(246)
Balance at beginning of period, as adjusted
(153)
(474)
Net change in unrealized gains (losses), net of tax as applicable on:
   
Securities  available-for-sale, not other-than-temporarily impaired
797
881
Other-than-temporarily impaired securities available for sale(1)
1
56
Other-than-temporarily impaired securities held to maturity(1)
11
49
Adjustment to reverse other-than-temporary impairment on securities held-to-maturity due to deconsolidation of VIE
142
-
Derivatives designated as cash flow hedges
(141)
10
Unrecognized actuarial gains, transition obligation and prior service costs relating to pension and postretirement benefits, net of tax
2
(2)
Other comprehensive income, net of tax
812
994
Balance at end of period
659
520
Total shareholders' equity
$18,402
$17,133
Comprehensive income
   
Net income
$873
$1,271
Other comprehensive income, net of tax
812
994
Comprehensive income
$1,685
$2,265
 
 
 
(1)
During the three and nine months ended September 30, 2011 there were no OTTI losses on securities recognized in other revenues and no OTTI losses in the non-credit component on securities were recognized in accumulated other comprehensive income (loss). During the three and nine months ended September 30, 2010, OTTI losses on securities available-for-sale and held-to-maturity totaling $4 million and $45 million, respectively, were recognized in other revenues and losses in the non-credit component recognized in accumulated other comprehensive income (loss) were not significant.
 
The accompanying notes are an integral part of the consolidated financial statements.
 

 
 

 

CONSOLIDATED STATEMENT OF CASH FLOWS  (UNAUDITED)
 
 
Nine Months Ended September 30,
2011
2010
 
(in millions)
Cash flows from operating activities
   
Net income
$873
$1,271
Income from discontinued operations
422
359
Income from continuing operations
451
912
Adjustments to reconcile net income to net cash provided by operating activities:
   
Depreciation and amortization
220
215
Impairment of internally developed software
94
-
Provision for credit losses
171
(7)
Other-than-temporary impairment losses relating to credit
-
45
Realized gains on securities available for sale
(104)
(59)
Net change in other assets and liabilities
(920)
(770)
Net change in loans held for sale:
   
Originations of loans
(2,280)
(2,885)
Sales and collection of loans held for sale
3,106
3,017
Tax refund anticipation loans:
   
Originations of loans
-
(3,082)
Transfers of loans to HSBC Finance, including premium
-
3,086
Net change in trading assets and liabilities
(5,446)
(2,246)
Lower of cost or fair value adjustments on loans held for sale
44
(65)
Mark-to-market on financial instruments designated at fair value and related derivatives
(441)
(317)
Net change in fair value of derivatives and hedged items
(898)
(29)
Cash used in operating activities - continuing operations
(6,003)
(2,185)
Cash provided by operating activities - discontinued operations
1,056
1,724
Net cash used in operating activities
(4,947)
(461)
Cash flows from investing activities
   
Net change in interest bearing deposits with banks
(13,089)
4,400
Net change in federal funds sold and securities purchased under agreements to resell
3,141
(10,386)
Securities  available-for-sale:
   
Purchases of securities available-for-sale
(23,820)
(27,829)
Proceeds from sales of securities available-for-sale
17,423
13,083
Proceeds from maturities of securities available-for-sale
2,475
2,081
Securities held-to-maturity:
   
Purchases of securities held-to-maturity
-
(1,791)
Proceeds from maturities of securities held-to-maturity
470
934
Change in loans:
   
Originations, net of collections
(4,308)
72
Loans sold to third parties
304
2,054
Net cash used for acquisitions of properties and equipment
(18)
(41)
Other, net
(83)
78
Cash used in investing activities - continuing operations
(17,505)
(17,345)
Cash provided by investing activities - discontinued operations
1,960
3,434
Net cash used in investing activities
(15,545)
(13,911)
 
 
Nine Months Ended September 30,
2011
2010
 
(in millions)
Cash flows from financing activities
   
Net change in deposits
11,966
282
Debt:
   
Net change in short-term borrowings
6,571
13,534
Issuance of long-term debt
5,152
3,842
Repayment of long-term debt
(3,099)
(1,920)
Debt repayment related to structured note vehicle VIEs
-
(189)
Debt issued related to the sale and leaseback of 452 Fifth Avenue property
-
309
Repayment of debt issued related to the sale and leaseback of 452 Fifth Avenue property
(21)
(16)
Return of capital on preferred shares issued to CT Financial Services, Inc.
-
(3)
Other increases in capital surplus
18
(6)
Dividends paid
(55)
(55)
Cash provided by financing activities - continuing operations
20,532
15,778
Cash used in financing activities - discontinued operations
(148)
(1,626)
Net cash provided by financing activities
20,384
14,152
Net change in cash and due from banks
(108)
(220)
Cash and due from banks at beginning of period(1)
1,693
3,159
Cash and due from banks at end of period(2)
$1,585
$2,939
Supplemental disclosure of non-cash flow investing activities
   
Trading securities pending settlement
$99
$(707)
Transfer of loans to held for sale
$2,619
$1,209
 
 
 
(1)
Cash at beginning of period includes $117 million and $1,246 million for discontinued operations as of January 1, 2011 and 2010, respectively.
(2)
Cash at end of period does not include any amounts related to discontinued operations as of September 30, 2011 and 2010.
 
The accompanying notes are an integral part of the consolidated financial statements.
 

 
 

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
 
Note
 
Page
1
Organization and Basis of Presentation
 
2
Discontinued Operations
 
3
Branch Assets and Liabilities Held for Sale
 
4
Trading Assets and Liabilities
 
5
Securities
 
6
Loans
 
7
Allowance for Credit Losses
 
8
Loans Held for Sale
 
9
Intangible Assets
 
10
Goodwill
 
11
Derivative Financial Instruments
 
12
Fair Value Option
 
13
Income Taxes
 
14
Pension and Other Postretirement Benefits
 
15
Related Party Transactions
 
16
Regulatory Capital
 
17
Business Segments
 
18
Variable Interest Entities
 
19
Guarantee Arrangements and Pledged Assets
 
20
Fair Value Measurements
 
21
Litigation and Regulatory Matters
 
22
New Accounting Pronouncements
 
 
1. Organization and Basis of Presentation
 
HSBC USA Inc. is an indirect wholly owned subsidiary of HSBC North America Holdings Inc. ("HSBC North America" or "HNAH"), which is an indirect wholly owned subsidiary of HSBC Holdings plc ("HSBC"). The accompanying unaudited interim consolidated financial statements of HSBC USA Inc. and its subsidiaries (collectively "HUSI") have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X, as well as in accordance with predominant practices within the banking industry. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all normal and recurring adjustments considered necessary for a fair presentation of financial position, results of operations and cash flows for the interim periods have been made. HSBC USA Inc. and its subsidiaries may also be referred to in this Form 10-Q as "we," "us" or "our." These unaudited interim consolidated financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2010 (the "2010 Form 10-K"). Certain reclassifications have been made to prior period amounts to conform to the current period presentation.
 
The preparation of financial statements in conformity with U.S. GAAP requires the use of estimates and assumptions that affect reported amounts and disclosures. Actual results could differ from those estimates. Interim results should not be considered indicative of results in future periods. Unless otherwise noted, information included in these notes to the consolidated financial statements relates to continuing operations for all periods presented. See Note 2, "Discontinued Operations" for further details.
 
As of March 31, 2011, we no longer had a controlling financial interest in Bryant Park Funding LLC ("Bryant Park") and as a result, we no longer consolidated this variable interest entity. See Note 18, "Variable Interest Entities," for further details and related impact.
 
During the third quarter of 2011, we adopted a new Accounting Standards Update which provided additional guidance to determine whether a restructuring of a receivable meets the criteria to be considered a troubled debt restructuring for purposes of the identification and reporting of troubled debt restructurings as well as for recording impairment. This new Accounting Standards Updated also made effective new disclosure requirements for troubled debt restructurings. See Note 22, "New Accounting Pronouncements," for further details and related impacts and Note 6, "Loans" for additional disclosures regarding troubled debt restructurings.
 

 
 

 

2. Discontinued Operations
 
Sale of Certain Credit Card Operations to Capital One On August 10, 2011 HSBC, through its wholly-owned subsidiaries HSBC Finance, HSBC USA Inc. and other wholly-owned affiliates entered into an agreement to sell its Card and Retail Services business, which includes both its U.S. credit card and private label operations, to Capital One Financial Group ("Capital One"). This sale includes our GM and UP credit card receivables as well as our private label credit card and closed-end receivables, all of which were purchased from HSBC Finance. At September 30, 2011, we have classified these receivables as held for sale as a component of Assets of discontinued operations on our balance sheet. The total consideration paid to HSBC may be paid in cash or a combination of cash and common stock to a maximum of $750 million of common stock (to be priced at $39.23 per share) at the option of Capital One. Based on balances at September 30, 2011, the total consideration for these receivables that would be allocated to us is approximately $20.0 billion. We recorded a lower of amortized cost or fair value adjustment of $159 million on these receivables in the third quarter of 2011 which is reflected in other revenues in the table below. This fair value adjustment was largely offset by held for sale accounting adjustments in which loan impairment charges and premium amortization are no longer recorded. The sale to Capital One does not include credit card receivables associated with HSBC Bank USA's legacy credit card program and, therefore, are excluded from the table below, however a portion of these receivables are being sold to First Niagara Bank N.A. and HSBC Bank USA will continue to offer credit cards to HSBC Bank USA's customers. We anticipate this transaction will close during the first half of 2012. No significant closure costs are expected to be incurred as a result of exiting these portfolios.
 
Because the credit card and private label receivables being sold have been classified as held for sale and the operations and cash flows from these receivables will be eliminated from our ongoing operations upon disposition without any significant continuing involvement, we have determined we have met the requirements to report the results of these credit card and private label card receivables being sold as discontinued operations and have included these receivables in Assets of discontinued operations on our balance sheet for all periods presented. The results for these receivables were previously reported in the Retail Banking and Wealth Management segment.
 
The following summarizes the results of our discontinued credit card operations for the periods presented:
 
 
 
Three Months Ended
September 30,
Nine Months Ended
September 30,
 
2011
2010
2011
2010
 
(in millions)
Interest income
$519
$533
$1,437
$1,751
Interest expense(1)
61
106
199
359
Net interest income
458
427
1,238
1,392
Provision for credit losses(2)
106
235
404
919
Net interest income after provision for credit losses
352
192
834
473
Other revenues(3)
28
188
331
601
Operating expenses
169
183
511
540
Income from discontinued operations before income tax
$211
$197
$654
$534
 
 
 
(1)
Interest expense was allocated to discontinued operations in accordance with our existing internal transfer pricing policy. This policy uses match funding based on the expected lives of the assets and liabilities of the business at the time of origination, subject to periodic review, as demonstrated by the expected cash flows and re-pricing characteristics of the underlying assets.
(2)
For periods following the transfer of the receivables to held for sale, the receivables are carried at the lower of amortized cost or fair value. As a result, we no longer record provisions for credit losses, including charge-offs, for these receivables.
(3)
Included in other revenues in the three and nine months ended September 30, 2011 was a $159 million lower of amortized cost or fair value adjustment.
 

 
 

 

The following summarizes the assets and liabilities of our discontinued credit card operations at September 30, 2011 and December 31, 2010 which are reported as a component of Assets of discontinued operations and Liabilities of discontinued operations in our consolidated balance sheet. The assets and liabilities of discontinued operations are considered held for sale at September 30, 2011.
 
 
 
September 30,
2011
December 31,
2010
 
(in millions)
Loans, net(1)(2)
$19,982
$21,942
Other assets
842
578
Assets of discontinued operations
$20,824
$22,520
Deposits in domestic offices - noninterest bearing
$35
$33
Long-term debt(1)
-
150
Other liabilities
1,369
463
Liabilities of discontinued operations
$1,404
$646
 
 
 
(1)
At September 30, 2011 we did not have any outstanding securities backed with private label credit card or credit card receivables issued under conduit credit facilities with commercial and investment banks. At December 31, 2010, credit card and private label credit card receivables of $233 million were used to collateralize $150 million of funding transactions structured as secured financing under these funding programs. The facilities were terminated in April 2011 as such facilities were no longer considered to be a cost-effective source of funding.
(2)
At September 30, 2011, the receivables are carried at the lower of amortized cost or fair value. At December 31, 2010, loans were carried at amortized cost net of credit loss reserves which totaled $1,318 million.
 
Troubled debt restructurings represent receivables for which the original contract terms have been modified to provide for terms that are less than what we would be willing to accept for new receivables with comparable risk because of deterioration in the borrower's financial status. At September 30, 2011, our discontinued credit card and private label operations had loans which qualified as troubled debt restructurings ("TDR Loans") with an outstanding principal balance of $392 million. The additional credit card and private label card TDR Loans reported in the third quarter of 2011 as a result of the adoption of the new Accounting Standards Update was not significant. At December 31, 2010, our discontinued credit card and private label operations had TDR Loans with an outstanding principal balance of $477 million. During the three and nine months ended September 30, 2011, credit card and private label credit card and closed-end TDR Loans of $11 million and $54 million, respectively, which were classified as TDR Loans during the previous 12 months became sixty days or greater contractually delinquent.
 
Banknotes Business In June 2010, we decided that the wholesale banknotes business ("Banknotes Business") within our Global Banking and Markets segment did not fit with our core strategy in the U.S. and, therefore, made the decision to exit this business. This business, which was managed out of the United States with operations in key locations worldwide, arranged for the physical distribution of banknotes globally to central banks, large commercial banks and currency exchanges. As a result of this decision, we recorded closure costs of $14 million during 2010, primarily relating to termination and other employee benefits. No significant additional closure costs are expected to be incurred. At June 30, 2011, the liability associated with these costs had been substantially utilized.
 
As part of the decision to exit the Banknotes Business, in October 2010 we sold the assets of our Asian banknotes operations ("Asian Banknotes Operations") to an unaffiliated third party for total consideration of approximately $11 million in cash. As a result, during the third quarter of 2010 we classified the assets of the Asian Banknotes Operations of $23 million, including an allocation of goodwill of $21 million, as held for sale. Because the carrying amount of the assets being sold exceeded the agreed-upon sales price, we recorded a lower of amortized cost or fair value adjustment of $12 million in the third quarter of 2010. As the exit of our Banknotes Business, including the sale of our Asian Banknotes Operations, was substantially completed in the fourth quarter of 2010, we began to report the results of our Banknotes Business as discontinued operations at that time.
 

 
 

 

The exit of our Banknotes Business was completed in the second quarter of 2011 with the sale of our European Banknotes Business to HSBC Bank plc in April. The table below summarizes the operating results of our Banknotes Business for the periods presented.
 
 
 
Three Months Ended
September 30,
Nine Months Ended
September 30,
 
2011
2010
2011
2010
 
(in millions)
Net interest income and other revenues
$-
$28
$19
$84
Income (loss) from discontinued operations before income tax (benefit) expense
-
14
(1)
28
 
The following summarizes the assets and liabilities of our Banknotes Business which are reported as a component of Assets of discontinued operations and Liabilities of discontinued operations in our consolidated balance sheet.
 
 
 
September 30,
2011
December 31,
2010
 
(in millions)
Cash
$-
$117
Other assets
-
2
Assets of discontinued operations
$-
$119
Other liabilities
$4
$14
Liabilities of discontinued operations
$4
$14
 
3. Branch Assets and Liabilities Held for Sale
 
On July 31, 2011, we announced that we had reached an agreement with First Niagara Bank, N.A. ("First Niagara") to sell 195 retail branches, including certain loans, deposits and related branch premises, primarily located in upstate New York. The agreement includes the transfer of approximately $15.0 billion in deposits and $2.6 billion in loans as of September 30, 2011, as well as related branch premises, for a premium of 6.67 percent of the deposits, representing $1.0 billion based on current deposit levels which will result in a gain upon closing of the transaction, net of allocated goodwill. Branch premises will be sold for fair value and loans and other transferred assets will be sold at their book values. The all-cash transaction is expected to close in early 2012, subject to regulatory approvals, including approval by the acquirer's regulator. As a result of this transaction, the assets and liabilities related to the branches being sold have been classified as held for sale in our consolidated balance sheet at September 30, 2011.
 
The following summarizes the assets and liabilities classified as held for sale at September 30, 2011 in our consolidated balance sheet related to the announced agreement to sale certain retail branches.
 
 
At September 30,
2011
 
(in millions)
Loans held for sale(1)
$2,619
Other branch assets held for sale:
 
Properties and equipment, net
42
Goodwill allocated to retail branch disposal group
398
Total other branch assets held for sale
440
Total branch assets held for sale
$3,059
Deposits held for sale
$14,952
Other branch liabilities held for sale
11
Total branch liabilities held for sale
$14,963
 
 
 
(1)
Loans held for sale includes $539 million of commercial loans, $1.5 billion of residential mortgages, $415 million of credit card loans and $170 million in other consumer loans.
 

 
 

 

4. Trading Assets and Liabilities
 
Trading assets and liabilities are summarized in the following table.
 
 
 
September 30,
2011
December 31,
2010
 
(in millions)
Trading assets:
   
U.S. Treasury
$1,035
$1,874
U.S. Government agency
140
62
U.S. Government sponsored enterprises(1)
4
632
Asset-backed securities
997
1,148
Corporate and foreign bonds(2)
12,495
5,897
Other securities
40
52
Precious metals
17,035
16,725
Fair value of derivatives
8,697
6,012
 
$40,443
$32,402
Trading liabilities:
   
Securities sold, not yet purchased
$487
$212
Payables for precious metals
6,704
5,326
Fair value of derivatives
5,833
4,990
 
$13,024
$10,528
 
 
 
(1)
Includes mortgage-backed securities of $4 million and $598 million issued or guaranteed by the Federal National Mortgage Association ("FNMA") at September 30, 2011 and December 31, 2010, respectively, and $34 million issued or guaranteed by the Federal Home Loan Mortgage Corporation ("FHLMC") at December 31, 2010.
(2)
There were no foreign bonds issued by the governments of Portugal, Ireland, Italy, Greece or Spain at either September 30, 2011 or December 31, 2010.
At September 30, 2011 and December 31, 2010, the fair value of derivatives included in trading assets has been reduced by $5 billion and $3.1 billion, respectively, relating to amounts recognized for the obligation to return cash collateral received under master netting agreements with derivative counterparties.
 
At September 30, 2011 and December 31, 2010, the fair value of derivatives included in trading liabilities has been reduced by $8.1 billion and $5.8 billion, respectively, relating to amounts recognized for the right to reclaim cash collateral paid under master netting agreements with derivative counterparties.
 
5. Securities
 
The amortized cost and fair value of the securities available-for-sale and securities held to maturity are summarized in the following tables.
 
 
 
 
 
 
September 30, 2011
 
 
 
Amortized
Cost
Non-Credit
Loss
Component of
OTTI
Securities
 
 
 
Unrealized
Gains
 
 
 
Unrealized
Losses
 
 
 
Fair
Value
 
(in millions)
Securities  available-for-sale:
         
U.S. Treasury
$17,664
$-
$530
$(178)
$18,016
U.S. Government sponsored enterprises:(1)
         
Mortgage-backed securities
41
-
1
-
42
Direct agency obligations
2,465
-
359
(1)
2,823
U.S. Government agency issued or guaranteed:
         
Mortgage-backed securities
15,096
-
719
(1)
15,814
Collateralized mortgage obligations
6,670
-
193
-
6,863
Direct agency obligations
2
-
-
-
2
Obligations of U.S. states and political subdivisions
568
-
29
(1)
596
Asset backed securities collateralized by:
         
Residential mortgages
13
-
1
(3)
11
Commercial mortgages
472
-
7
(1)
478
Home equity
397
-
-
(104)
293
Student loans
24
-
-
(1)
23
Other
116
-
-
(21)
95
Corporate and other domestic debt securities(2)
600
-
4
-
604
Foreign debt  securities(2)(6)
6,992
-
42
(79)
6,955
Equity securities(3)
130
-
13
-
143
Total available-for-sale securities
$51,250
$-
$1,898
$(390)
$52,758
Securities held-to-maturity:
         
U.S. Government sponsored enterprises:(4)
         
Mortgage-backed securities
$1,485
$-
$205
$-
$1,690
U.S. Government agency issued or guaranteed:
         
Mortgage-backed securities
83
-
14
-
97
Collateralized mortgage obligations
313
-
46
-
359
Obligations of U.S. states and political subdivisions
68
-
3
-
71
Asset backed securities collateralized by:
         
Residential mortgages
174
-
10
(1)
183
Total held-to-maturity securities
$2,123
$-
$278
$(1)
$2,400
 
 
 
 
 
 
December 31, 2010
 
 
 
Amortized
Cost
Non-Credit
Loss
Component of
OTTI
Securities
 
 
 
Unrealized
Gains
 
 
 
Unrealized
Losses
 
 
 
Fair
Value
 
(in millions)
Securities  available-for-sale:
         
U.S. Treasury
$19,336
$-
$139
$(378)
$19,097
U.S. Government sponsored enterprises:(1)
         
Mortgage-backed securities
47
-
-
(1)
46
Direct agency obligations
2,115
-
79
(9)
2,185
U.S. Government agency issued or guaranteed:
         
Mortgage-backed securities
11,237
-
252
(27)
11,462
Collateralized mortgage obligations
7,566
-
160
(52)
7,674
Direct agency obligations
19
-
-
(1)
18
Obligations of U.S. states and political subdivisions
571
-
13
(5)
579
Asset backed securities collateralized by:
         
Residential mortgages
13
-
-
(2)
11
Commercial mortgages
537
-
17
(2)
552
Home equity
464
(1)
-
(111)
352
Student loans
29
-
-
(2)
27
Other
120
-
1
(17)
104
Corporate and other domestic debt securities(2)
676
-
7
-
683
Foreign debt  securities(2)(6)
2,552
-
53
-
2,605
Equity securities(3)
126
-
2
-
128
Total available-for-sale securities
$45,408
$(1)
$723
$(607)
$45,523
Securities held-to-maturity:
         
U.S. Government sponsored enterprises:(4)
         
Mortgage-backed securities
$1,586
$-
$151
$-
$1,737
U.S. Government agency issued or guaranteed:
         
Mortgage-backed securities
94
-
15
-
109
Collateralized mortgage obligations
327
-
36
-
363
Obligations of U.S. states and political subdivisions
111
-
4
(1)
114
Asset backed securities collateralized by:
         
Residential mortgages
191
-
8
(3)
196
Asset-backed securities (predominantly credit card) and other debt securities held by consolidated VIE(5)
1,034
(153)
-
-
881
Total held-to-maturity securities
$3,343
$(153)
$214
$(4)
$3,400
 
 
 
(1)
Includes securities at amortized cost of $26 million and $30 million issued or guaranteed by the FNMA at September 30, 2011 and December 31, 2010, respectively, and $15 million and $17 million issued or guaranteed by FHLMC at September 30, 2011 and December 31, 2010, respectively.
(2)
At September 30, 2011, other domestic debt securities included $575 million of securities at amortized cost fully backed by the Federal Deposit Insurance Corporation ("FDIC") and foreign debt securities consisted of $2.4 billion of securities fully backed by foreign governments. The remainder of foreign debt securities represents foreign bank or corporate debt. At December 31, 2010, other domestic debt securities included $676 million of securities at amortized cost fully backed by the FDIC and foreign debt securities consisted of $2.2 billion of securities fully backed by foreign governments. The remainder of foreign debt securities represents foreign bank or corporate debt.
(3)
Includes preferred equity securities at amortized cost issued by FNMA of $2 million at September 30, 2011 and December 31, 2010. Balances at September 30, 2011 and December 31, 2010 reflect cumulative other-than-temporary impairment charges of $203 million.
(4)
Includes securities at amortized cost of $610 million and $622 million issued or guaranteed by FNMA at September 30, 2011 and December 31, 2010, respectively, and $875 million and $964 million issued and guaranteed by FHLMC at September 30, 2011 and December 31, 2010, respectively.
(5)
Relates to securities held by Bryant Park Funding LLC, a variable interest entity which was consolidated at December 31, 2010. See Note 18, "Variable Interest Entities" for additional information.
(6)
There were no foreign debt securities issued by the governments of Portugal, Ireland, Italy, Greece or Spain at September 30, 2011 and December 31, 2010.
 
A summary of gross unrealized losses and related fair values as of September 30, 2011 and December 31, 2010, classified as to the length of time the losses have existed follows:
 
 
 
One Year or Less
Greater Than One Year
 
 
September 30, 2011
 
Number of
Securities
Gross
Unrealized
Losses
Aggregate
Fair Value
of Investment
 
Number of
Securities
Gross
Unrealized
Losses
Aggregate
Fair Value
of Investment
 
(dollars are in millions)
Securities  available-for-sale:
           
U.S. Treasury
20
$(178)
$6,628
-
$-
$-
U.S. Government sponsored enterprises
6
-
76
17
(1)
9
U.S. Government agency issued or guaranteed
36
(1)
489
2
-
4
Obligations of U.S. states and political subdivisions
5
(1)
28
2
-
19
Asset backed securities
-
-
-
50
(130)
428
Foreign debt securities
11
(79)
4,245
-
-
-
Equity securities
1
-
-
-
-
-
Securities  available-for-sale
79
$(259)
$11,466
71
$(131)
$460
Securities held-to-maturity:
           
U.S. Government sponsored enterprises
20
$-
$-
3
$-
$-
U.S. Government agency issued or guaranteed
681
-
2
5
-
-
Obligations of U.S. states and political subdivisions
10
-
4
7
-
3
Asset backed securities
-
-
-
4
(1)
14
Securities  held-to-maturity
711
$-
$6
19
$(1)
$17
 
 
 
One Year or Less
Greater Than One Year
 
 
December 31, 2010
Number
of
Securities
Gross
Unrealized
Losses
Aggregate
Fair Value
of Investment
Number
of
Securities
Gross
Unrealized
Losses
Aggregate
Fair Value
of Investment
 
(dollars are in millions)
Securities  available-for-sale:
           
U.S. Treasury
43
$(378)
$10,034
-
$-
$-
U.S. Government sponsored enterprises
14
(9)
131
13
(1)
10
U.S. Government agency issued or guaranteed
70
(80)
4,409
2
-
2
Obligations of U.S. states and political subdivisions
27
(3)
127
5
(2)
36
Asset backed securities
3
-
-
51
(133)
506
Corporate and other domestic debt securities
3
-
200
-
-
-
Foreign debt securities
1
-
84
1
-
25
Securities  available-for-sale
161
$(470)
$14,985
72
$(136)
$579
Securities held-to-maturity:
           
U.S. Government sponsored enterprises
21
$-
$-
1
$-
$-
U.S. Government agency issued or guaranteed
570
-
2
2
-
-
Obligations of U.S. states and political subdivisions
14
-
7
12
(1)
14
Asset backed securities
-
-
-
6
(3)
44
Securities  held-to-maturity
605
$-
$9
21
$(4)
$58
 
Gross unrealized losses decreased and gross unrealized gains increased within the available-for-sale portfolio overall in the first nine months of 2011 primarily due to decreases in interest rates since December 31, 2010, particularly during the third quarter due to market conditions. In addition, rates rose significantly toward the end of 2010 driven by inflationary fears and uncertainty about the quantity and timing of the Federal Reserve's bond buying program. We have reviewed the securities for which there is an unrealized loss in accordance with our accounting policies for other-than-temporary impairment. During the three and nine months ended September 30, 2011, none of our debt securities were determined to have either initial other-than-temporary impairment or changes to previous other-than-temporary impairment estimates relating to the credit component and changes in the non-credit portion for the nine month period ended September 30, 2011 represent a reversal of a portion of previously recorded impairment losses that were recognized in other comprehensive income. During the three and nine months ended September 30, 2010, 5 and 38 debt securities were determined to have either initial other-than-temporary impairment or changes to previous other-than-temporary impairment estimates. The credit loss component of the applicable debt securities totaling $4 million and $45 million was recorded as a component of net other-than-temporary impairment losses in the accompanying consolidated statement of income for the three and nine months ended September 30, 2010, respectively, while there was no significant losses in the non-credit component of such impaired securities reflected in accumulated other comprehensive income (loss) and changes in the non-credit portion for the nine month period ended September 30, 2010 primarily represent a net reversal of a portion of previously recorded impairment losses recognized in other comprehensive income.
 
Except as noted above, we do not consider any other securities to be other-than-temporarily impaired as we expect to recover the amortized cost basis of these securities and we neither intend nor expect to be required to sell these securities prior to recovery, even if that equates to holding securities until their individual maturities. However, additional other-than-temporary impairments may occur in future periods if the credit quality of the securities deteriorates.
 
On-going Assessment for Other-Than-Temporary Impairment On a quarterly basis, we perform an assessment to determine whether there have been any events or economic circumstances to indicate that a security with an unrealized loss has suffered other-than-temporary impairment. A debt security is considered impaired if its fair value is less than its amortized cost at the reporting date. If impaired, we assess whether the unrealized loss is other-than-temporary.
 
An unrealized loss is generally deemed to be other-than-temporary and a credit loss is deemed to exist if the present value of the expected future cash flows is less than the amortized cost basis of the debt security. As a result, the credit loss component of an other-than-temporary impairment write-down for debt securities is recorded in earnings while the remaining portion of the impairment loss is recognized, net of tax, in other comprehensive income provided we do not intend to sell the underlying debt security and it is more-likely-than-not that we would not have to sell the debt security prior to recovery.
 
For all securities held in the available-for-sale or held-to-maturity portfolio for which unrealized losses have existed for a period of time, we do not have the intention to sell and believe we will not be required to sell the securities for contractual, regulatory or liquidity reasons as of the reporting date. As debt securities issued by U.S. Treasury, U.S. Government agencies and government sponsored entities accounted for 83 percent and 89 percent of total available-for-sale and held-to-maturity securities as of September 30, 2011 and December 31, 2010, respectively, our assessment for credit loss was concentrated on private label asset-backed securities. Substantially all of the private label asset-backed securities are supported by residential mortgages, home equity loans or commercial mortgages. Our assessment for credit loss was concentrated on this particular asset class because of the following inherent risk factors:
 
 
The recovery of the U.S. economy remains sluggish;
The continued weakness in the U.S. housing markets with high levels of delinquency and foreclosure;
A lack of significant traction in government sponsored programs in loan modifications;
A lack of refinancing activities within certain segments of the mortgage market, even at the current low interest rate environment, and the re-default rate for refinanced loans;
The unemployment rate remains high and consumer confidence remains low compared to historical levels;
The decline in the occupancy rate in commercial properties; and
The severity and duration of unrealized loss.
 
In determining whether a credit loss exists and the period over which the debt security is expected to recover, we considered the following factors:
 
 
The length of time and the extent to which the fair value has been less than the amortized cost basis;
The level of credit enhancement provided by the structure, which includes but is not limited to credit subordination positions, over collateralization, protective triggers and financial guarantees provided by monoline wraps;
Changes in the near term prospects of the issuer or underlying collateral of a security such as changes in default rates, loss severities given default and significant changes in prepayment assumptions;
The level of excess cash flows generated from the underlying collateral supporting the principal and interest payments of the debt securities; and
Any adverse change to the credit conditions of the issuer, the monoline insurer or the security such as credit downgrades by the rating agencies.
 
We use a standard valuation model to measure the credit loss for available-for-sale and held-to-maturity securities. The valuation model captures the composition of the underlying collateral and the cash flow structure of the security. Management develops inputs to the model based on external analyst reports and forecasts and internal credit assessments. Significant inputs to the model include delinquencies, collateral types and related contractual features, estimated rates of default, loss given default and prepayment assumptions. Using the inputs, the model estimates cash flows generated from the underlying collateral and distributes those cash flows to respective tranches of securities considering credit subordination and other credit enhancement features. The projected future cash flows attributable to the debt security held are discounted using the effective interest rates determined at the original acquisition date if the security bears a fixed rate of return. The discount rate is adjusted for the floating index rate for securities which bear a variable rate of return, such as LIBOR-based instruments.
 
The amortized cost and fair value of those asset-backed securities with unrealized loss of more than 12 months for which no other-than-temporary-impairment has been recognized at September 30, 2011 and December 31, 2010 are as follows:
 
 
 
Balance as of September 30, 2011
 
 
Amortized Cost
Unrealized Losses for
More Than 12 Months
 
Fair Value
 
(in millions)
Available-for-sale:
     
Asset-backed securities:
     
Residential mortgages
$10
$(3)
$7
Commercial mortgages
24
(1)
23
Home equity loans
397
(104)
293
Student loans
24
(1)
23
Other
103
(21)
82
Subtotal
558
(130)
428
Held-to-maturity classification:
     
Asset-backed securities:
     
Residential mortgages
15
(1)
14
Total
$573
$(131)
$442
 
 
 
Balance as of December 31, 2010
 
 
Amortized Cost
Unrealized Losses for
More Than 12 Months
 
Fair Value
 
(in millions)
Available-for-sale:
     
Asset-backed securities:
     
Residential mortgages
$3
$(1)
$2
Commercial mortgages
39
(2)
37
Home equity loans
457
(112)
345
Student loans
29
(2)
27
Other
103
(16)
87
Subtotal
631
(133)
498
Held-to-maturity classification:
     
Asset-backed securities:
     
Residential mortgages
47
(3)
44
Total
$678
$(136)
$542
 
Although the fair value of a particular security is below its amortized cost for more than 12 months, it does not necessarily result in a credit loss and hence other-than-temporary impairment. The decline in fair value may be caused by, among other things, the illiquidity of the market. To the extent we do not intend to sell the debt security and it is more-likely-than-not we will not be required to sell the security before the recovery of the amortized cost basis, no other-than-temporary impairment is deemed to have occurred.
 
For the nine months ended September 30, 2011 there were no other-than-temporary impairment losses recognized related to credit loss. At September 30, 2011, there are no remaining non-credit component unrealized loss amounts recognized. The excess of amortized cost over the present value of expected future cash flows recognized during the nine months ended September 30, 2010 on our other-than-temporarily impaired debt securities, which represents the credit loss associated with these securities, was $45 million. The excess of the present value of expected future cash flows over fair value, representing the non-credit component of the unrealized loss associated with all other-than-temporarily impaired securities, was $154 million at December 31, 2010. Since we did not have the intention to sell the securities and had sufficient capital and liquidity to hold these securities until a full recovery of the fair value occurs, only the credit loss component was reflected in the consolidated statement of income. The non-credit component of the unrealized loss was recorded, net of taxes, in other comprehensive income (loss).
 
The following table summarizes the roll-forward of credit losses on debt securities that were other-than-temporarily impaired which were recognized in income:
 
 
 
Three Months Ended
September 30,
Nine Months Ended
September 30,
 
2011
2010
2011
2010
 
(in millions)
Credit losses at the beginning of the period
$1
$47
$36
$81
Credit losses related to securities for which an  other-than-temporary impairment was not previously recognized
-
-
-
20
Increase in credit losses for which an other-than-temporary impairment was previously recognized
-
4
-
25
Reduction of credit losses previously recognized on sold securities
-
(25)
(4)
(75)
Reduction of credit losses previously recognized on held to maturity securities due to deconsolidation of VIE
-
-
(31)
-
Reductions of credit losses for increases in cash flows expected to be collected that are recognized over the remaining life of the security
-
(1)
-
(26)
Ending balance of credit losses on debt securities held for which a portion of an other-than-temporary impairment may have been recognized in other comprehensive income (loss)
$1
$25
$1
$25
 
At September 30, 2011, we held 76 individual asset-backed securities in the available-for-sale portfolio, of which 23 were also wrapped by a monoline insurance company. The asset-backed securities backed by a monoline wrap comprised $373 million of the total aggregate fair value of asset-backed securities of $900 million at September 30, 2011. The gross unrealized losses on these monoline securities were $124 million at September 30, 2011. We did not take into consideration the value of the monoline wrap of any non-investment grade monoline insurers as of September 30, 2011 and, therefore, we only considered the financial guarantee of monoline insurers on securities for purposes of evaluating other-than-temporary impairment with a fair value of $126 million. One security wrapped by a below investment grade monoline insurance company with an aggregate fair value of $1 million was deemed to be other-than-temporarily impaired at September 30, 2011.
 
At December 31, 2010, we held 78 individual asset-backed securities in the available-for-sale portfolio, of which 24 were also wrapped by a monoline insurance company. The asset-backed securities backed by a monoline wrap comprised $437 million of the total aggregate fair value of asset-backed securities of $1.0 billion at December 31, 2010. The gross unrealized losses on these securities were $127 million at December 31, 2010. We did not take into consideration the value of the monoline wrap of any non-investment grade monoline insurers as of December 31, 2010 and, therefore, we only considered the financial guarantee of monoline insurers on securities for purposes of evaluating other-than-temporary impairment with a fair value of $156 million. Two securities wrapped by below investment grade monoline insurance companies with an aggregate fair value of $5 million were deemed to be other-than-temporarily impaired at December 31, 2010.
 
As discussed above, certain asset-backed securities have an embedded financial guarantee provided by monoline insurers. Because the financial guarantee is not a separate and distinct contract from the asset-backed security, they are considered as a single unit of account for fair value measurement and impairment assessment purposes. The monoline insurers are regulated by the insurance commissioners of the relevant states and certain monoline insurers that write the financial guarantee contracts are public companies. In evaluating the extent of our reliance on investment grade monoline insurance companies, consideration is given to our assessment of the creditworthiness of the monoline and other market factors. We perform both a credit as well as a liquidity analysis on the monoline insurers each quarter. Our analysis also compares market-based credit default spreads, when available, to assess the appropriateness of our monoline insurer's creditworthiness. Based on the public information available, including the regulatory reviews and actions undertaken by the state insurance commissions and the published financial results, we determine the degree of reliance to be placed on the financial guarantee policy in estimating the cash flows to be collected for the purpose of recognizing and measuring impairment loss.
 
A credit downgrade to non-investment grade is a key but not the only factor in determining the credit risk or the monoline insurer's ability to fulfill its contractual obligation under the financial guarantee arrangement. Although a monoline may have been down-graded by the credit rating agencies or have been ordered to commute its operations by the insurance commissioners, it may retain the ability and the obligation to continue to pay claims in the near term. We evaluate the short-term liquidity of and the ability to pay claims by the monoline insurers in estimating the amounts of cash flows expected to be collected from specific asset-backed securities for the purpose of assessing and measuring credit loss.
 
The following table summarizes realized gains and losses on investment securities transactions attributable to available-for-sale and held to maturity securities.
 
 
 
Gross
Realized
Gains
Gross
Realized
(Losses)
Net
Realized
Gains (Losses)
 
(in millions)
Three months ended September 30, 2011:
     
Securities  available-for-sale
$73
$(24)
$49
Securities held to maturity
-
-
-
 
$73
$(24)
$49
Three months ended September 30, 2010:
     
Securities  available-for-sale
$78
$(44)
$34
Securities held to maturity
-
(1)
(1)
 
$78
$(45)
$33
Nine months ended September 30, 2011:
     
Securities  available-for-sale
$213
$(108)
$105
Securities held to maturity
-
-
-
 
$213
$(108)
$105
Nine months ended September 30, 2010:
     
Securities  available-for-sale
$148
$(130)
$18
Securities held to maturity
-
(4)
(4)
 
$148
$(134)
$14
 
The amortized cost and fair values of securities available-for-sale and securities held-to-maturity at September 30, 2011, are summarized in the table below by contractual maturity. Expected maturities differ from contractual maturities because borrowers have the right to prepay obligations without prepayment penalties in certain cases. Securities available-for-sale amounts exclude equity securities as they do not have stated maturities. The table below also reflects the distribution of maturities of debt securities held at September 30, 2011, together with the approximate taxable equivalent yield of the portfolio. The yields shown are calculated by dividing annual interest income, including the accretion of discounts and the amortization of premiums, by the amortized cost of securities outstanding at September 30, 2011. Yields on tax-exempt obligations have been computed on a taxable equivalent basis using applicable statutory tax rates.

 
 

 

 
 
   
After One
After Five
 
 
Within
But Within
But Within
After Ten
Taxable Equivalent Basis
One Year
Five Years
Ten Years
Years
as of September 30, 2011
Amount
Yield
Amount
Yield
Amount
Yield
Amount
Yield
 
(dollars are in millions)
Available-for-sale:
               
U.S. Treasury
$503
1.55%
$6,443
1.00%
$6,226
2.04%
$4,492
3.49%
U.S. Government sponsored enterprises
-
-
-
-
2,029
3.92
477
3.58
U.S. Government agency issued or guaranteed
-
-
1
5.13
36
4.26
21,731
3.65
Obligations of U.S. states and political subdivisions
-
-
1
4.60
309
4.24
258
4.52
Asset backed securities
38
5.79
15
4.18
5
1.46
964
3.16
Corporate and other domestic debt securities
559
1.53
16
0.61
-
-
25
3.90
Foreign debt securities
2,126
2.78
4,855
2.01
11
4.93
-
-
Total amortized cost
$3,226
2.41%
$11,331
1.44%
$8,616
2.57%
$27,947
3.62%
Total fair value
$3,249
 
$11,327
 
$8,953
 
$29,086
 
Held-to-maturity:
               
U.S. Government sponsored enterprises
$-
-%
$15
7.95%
$2
7.00%
$1,468
6.15%
U.S. Government agency issued or guaranteed
-
-
-
-
5
7.66
391
6.52
Obligations of U.S. states and political subdivisions
8
5.00
18
5.66
15
4.48
27
4.96
Asset backed securities
-
-
-
-
-
-
174
6.19
Total amortized cost
$8
5.00%
$33
6.72%
$22
5.64%
$2,060
6.20%
Total fair value
$8
 
$37
 
$23
 
$2,332
 
 
Investments in Federal Home Loan Bank ("FHLB") stock and Federal Reserve Bank ("FRB") stock of $133 million and $483 million, respectively, were included in other assets at September 30, 2011. Investments in FHLB stock and FRB stock of $119 million and $477 million, respectively, were included in other assets at December 31, 2010.
 
6. Loans
 
Loans consisted of the following:
 
 
 
September 30,
2011
December 31,
2010
 
(in millions)
Commercial loans:
   
Construction and other real estate
$7,773
$8,228
Business banking and middle markets enterprises
9,752
7,945
Large corporate(1)
11,164
10,745
Other commercial
2,923
3,085
Total commercial
31,612
30,003
Consumer loans:
   
Home equity mortgages
2,618
3,820
Other residential mortgages
13,842
13,697
Credit cards
788
1,250
Other consumer
740
1,039
Total consumer
17,988
19,806
Total loans
$49,600
$49,809
 
 
 
(1)
Includes $1.2 billion of commercial loans at December 31, 2010 related to a VIE which was consolidated.
 
Net deferred origination costs, excluding credit card annual fees net of direct lending costs, totaled $54 million and $66 million at September 30, 2011 and December 31, 2010, respectively. Credit card annual fees are netted with direct lending costs, deferred and amortized on a straight-line basis over one year.
 
At September 30, 2011 and December 31, 2010, we had net unamortized premium on our loans of $63 million and $75 million, respectively. We amortized $10 million and $38 million of net premiums on our loans for the three and nine months ended September 30, 2011, respectively compared to $14 million and $4 million for the three and nine months ended September 30, 2010, respectively.
 
Age Analysis of Past Due Loans The following table summarizes the past due status of our loans at September 30, 2011 and December 31, 2010 for continuing and discontinued operations. 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 may be affected by customer account management policies and practices such as re-age or modification.
 
 
 
Days Past Due
     
At September 30, 2011
1 - 29 days
30 - 89 days
90+ days
Total Past Due
Current
Total Loans
 
(in millions)
Continuing operations:
           
Commercial loans:
           
Construction and other real estate
$46
$80
$254
$380
$7,393
$7,773
Business banking and middle market enterprises
494
69
83
646
9,106
9,752
Large corporate
353
20
74
447
10,717
11,164
Other commercial
70
116
20
206
2,717
2,923
Total commercial
963
285
431
1,679
29,933
31,612
Consumer loans:
           
HELOC and home equity mortgages
190
50
92
332
2,286
2,618
Other residential mortgages
120
515
774
1,409
12,433
13,842
Credit cards
40
20
17
77
711
788
Other consumer
13
7
32
52
688
740
Total consumer
363
592
915
1,870
16,118
17,988
Total loans - continuing operations
$1,326
$877
$1,346
$3,549
$46,051
$49,600
Discontinued credit card and private label operations(1)
$775
$391
$355
$1,521
$18,461
$19,982
 
 
 
Days Past Due
     
At December 31, 2010
1 - 29 days
30 - 89 days
90+ days
Total Past Due
Current
Total Loans
 
(in millions)
Continuing operations:
           
Commercial loans:
           
Construction and other real estate
$72
$200
$433
$705
$7,523
$8,228
Business banking and middle market enterprises
367
84
66
517
7,428
7,945
Large corporate
902
90
74
1,066
9,679
10,745
Other commercial
63
77
14
154
2,931
3,085
Total commercial
1,404
451
587
2,442
27,561
30,003
Consumer loans:
           
HELOC and home equity mortgages
327
83
93
503
3,317
3,820
Other residential mortgages
123
538
900
1,561
12,136
13,697
Credit cards
37
23
24
84
1,166
1,250
Other consumer
12
6
32
50
989
1,039
Total consumer
499
650
1,049
2,198
17,608
19,806
Total loans - continuing operations
$1,903
$1,101
$1,636
$4,640
$45,169
$49,809
Discontinued credit card and private label operations(1)
$767
$466
$533
$1,766
$21,494
$23,260
 
 
 
(1)
At September 30, 2011, discontinued credit card and private label credit card operations represent our GM and UP credit card loans as well as our private label credit card and closed-end loans which are included as held for sale and carried at the lower of amortized cost or fair value. At December 31, 2010, these discontinued credit card and private label credit card loans were carried at amortized cost and as such, are not directly comparable to the current period balances.
 
Nonaccrual Loans Nonaccrual loans totaled $1.8 billion and $2.0 billion at September 30, 2011 and December 31, 2010, respectively. Interest income that would have been recorded if such nonaccrual loans had been current and in accordance with contractual terms was approximately $30 million and $89 million for the three and nine months ended September 30, 2011, respectively, compared to $29 million and $111 million for the three and nine months ended September 30, 2010, respectively. Interest income that was included in interest income on these loans was approximately $7 million and $16 million for the three and nine months ended September 30, 2011 compared to approximately $3 million and $17 million for the three and nine months ended September 30, 2010, respectively. For an analysis of reserves for credit losses, see Note 7, "Allowance for Credit Losses."
 
Nonaccrual loans and accruing receivables 90 days or more delinquent for continuing and discontinued operations are summarized in the following table:
 
 
 
September 30,
2011
December 31,
2010
 
(in millions)
Nonaccrual loans:
   
Continuing operations:
   
Commercial:
   
Real Estate:
   
Construction and land loans
$152
$70
Other real estate
441
529
Business banking and middle markets enterprises
69
116
Large corporate
147
74
Other commercial
35
12
Total commercial
844
801
Consumer:
   
Residential mortgages, excluding home equity mortgages
774
900
Home equity mortgages
92
93
Total residential mortgages
866
993
Other consumer loans
8
9
Total consumer loans
874
1,002
Nonaccrual loans held for sale
122
186
Total nonaccruing loans - continuing operations
1,840
1,989
Discontinued credit card and private label operations(1)
-
-
Total nonaccruing loans
1,840
1,989
Accruing loans contractually past due 90 days or more:
   
Continuing operations:
   
Commercial:
   
Real Estate:
   
Construction and land loans
-
-
Other real estate
10
137
Business banking and middle market enterprises
22
47
Large corporate
-
-
Other commercial
1
2
Total commercial
33
186
Consumer:
   
Credit card receivables
17
24
Other consumer
24
23
Total consumer loans
41
47
Total accruing loans contractually past due 90 days or more - continuing operations
74
233
Discontinued credit card and private label operations(1)
355
533
Total accruing loans contractually past due 90 days or more
429
766
Total nonperforming loans
$2,269
$2,755
 
 
 
(1)
At September 30, 2011, discontinued credit card and private label credit card operations represent our GM and UP credit card loans and our private label credit card and closed-end loans which are included as held for sale and carried at the lower of amortized cost or fair value. At December 31, 2010, these discontinued credit card and private label credit card loans were carried at amortized cost and as such, are not directly comparable to the current period balances.
 
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 Troubled debt restructurings 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.
 
During the third quarter of 2011 we adopted a new Accounting Standards Update which provided additional guidance for determining whether a restructuring of a receivable meets the criteria to be reported as a troubled debt restructuring ("TDR Loan"). Under this new guidance, we have determined that all consumer loans modified as a result of a financial difficulty for periods greater than three months, including all modifications with trial periods regardless of whether the modification was permanent or temporary should be reported as TDR Loans. Additionally, we have determined that for residential mortgage loans purchased from HSBC Finance, all re-ages except first-time early stage delinquency re-ages where the customer has not been granted a prior re-age since the first quarter of 2007 should be considered a TDR Loan. Exclusion of these first-time early stage delinquency re-ages from our reported TDR Loans was not material. As required, the new guidance was applied retrospectively to restructurings occurring on or after January 1, 2011 and has resulted in the reporting of an additional $51 million of residential mortgage loans as TDR Loans at September 30, 2011 with credit loss reserves of $10 million associated with these loans. The incremental loan loss provision recorded for these loans using a discounted cash flow analysis was $7 million which also includes the impact of changes in market conditions during the quarter. For our HSBC Bank USA credit card portfolio, we have reported an additional $1 million of credit card loans as TDR Loans at September 30, 2011 with credit loss reserves of less than $1 million associated with these loans. The incremental loan loss provision recorded for these loans using a discounted cash flow analysis was not material. The TDR Loan balances and related credit loss reserves for consumer loans reported as of December 31, 2010 use our previous definition of TDR Loans as described in our 2010 Form 10-K and, as such, are not comparable to the current period balances. The new guidance did not impact our reporting of TDR Loans for commercial loans. See Note 2, "Discontinued Operations," for a discussion of TDR Loans included in our discontinued credit card and private label operations.
 
Modifications for consumer and 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. A substantial amount of our modifications involve interest rate reductions which lower the amount of finance 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 either based on the present value of expected future cash flows discounted at the loans' original effective interest rate which generally results in a higher reserve requirement for these loans or in the case of certain secured commercial 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.
 
The following table presents information about receivables which were modified during the three and nine months ended September 30, 2011 and as a result of this action became classified as TDR Loans.
 
 
 
Three Months Ended
September 30, 2011
Nine Months Ended
September 30, 2011
 
(in millions)
Commercial loans:
   
Construction and other real estate
$27
$40
Business banking and middle market enterprises
-
6
Large corporate
-
-
Other commercial
-
-
Total commercial
27
46
Consumer loans:
   
Residential mortgages
56
189
Credit cards
2
5
Total consumer
58
194
Total
$85
$240
 

 
 

 

The following tables present information about our TDR Loans and the related credit loss reserves for TDR Loans:
 
 
 
September 30,
2011
December 31,
2010
 
(in millions)
TDR Loans(1)(2):
   
Commercial loans:
   
Construction and other real estate
$328
$397
Business banking and middle market enterprises
96
88
Large corporate
-
-
Other commercial
38
49
Total commercial
462
534
Consumer loans:
   
Residential mortgages
571
402
Credit cards
22
27
Total consumer
593
429
Total TDR Loans(3)
$1,055
$963
 
 
 
September 30,
2011
December 31,
2010
 
(in millions)
Allowance for credit losses for TDR Loans(4):
   
Commercial loans:
   
Construction and other real estate
$18
$44
Business banking and middle market enterprises
5
8
Large corporate
-
-
Other commercial
-
1
Total commercial
23
53
Consumer loans:
   
Residential mortgages
93
53
Credit cards
7
9
Total consumer
100
62
Total allowance for credit losses for TDR Loans
$123
$115
 
 
 
(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 TDRs which totaled $691 million and $593 million at September 30, 2011 and December 31, 2010, respectively.
(2)
The TDR Loan balances included in the table above reflect the current carrying amount of TDR Loans and includes all basis adjustments on the loan, such as unearned income, unamortized deferred fees and costs on originated loans and premiums or discounts on purchased loans. The following table reflects the unpaid principal balance of TDR Loans:
 
 
 
September 30,
2011
December 31,
2010
 
(in millions)
Commercial loans:
   
Construction and other real estate
$372
$429
Business banking and middle market enterprises
150
120
Large corporate
-
-
Other commercial
41
52
Total commercial
563
601
Consumer loans:
   
Residential mortgages
636
443
Credit cards
22
26
Total consumer
658
469
Total - continuing operations
$1,221
$1,070
 
 
 
(3)
Includes balances of $322 million and $255 million at September 30, 2011 and December 31, 2010, respectively, which are classified as nonaccrual loans.
(4)
Included in the allowance for credit losses.
 
The following table presents commercial loans which were classified as TDR Loans during the previous 12 months which became 90 days or greater contractually delinquent (for consumer loans 60 days or greater contractually delinquent) during the three and nine months ended September 30, 2011:
 
 
 
Three Months Ended
September 30, 2011
Nine Months Ended
September 30, 2011
Commercial loans:
   
Construction and other real estate
$-
$48
Business banking and middle market enterprises
-
-
Large corporate
-
-
Other commercial
-
-
Total commercial
-
48
Consumer loans:
   
Residential mortgages
4
9
Credit cards
1
3
Auto finance(1)
-
-
Total consumer
5
12
Total
$5
$60
 
Additional information relating to TDR Loans is presented in the table below.
 
 
 
Three Months Ended
September 30,
Nine Months Ended
September 30,
 
2011
2010
2011
2010
 
(in millions)
Average balance of TDR Loans
       
Commercial loans:
       
Construction and other real estate
$330
$315
$360
$242
Business banking and middle market enterprises
87
104
88
67
Large corporate
-
-
-
-
Other commercial
44
52
47
52
Total commercial
461
471
495
361
Consumer loans:
       
Residential mortgages
550
328
529
264
Credit cards
23
25
24
22
Auto finance(1)
-
16
-
38
Total consumer
573
369
553
324
Total average balance of TDR Loans
$1,034
$840
$1,048
$685
Interest income recognized on TDR Loans
       
Commercial loans:
       
Construction and other real estate
$2
$1
$7
$2
Business banking and middle market enterprises
-
-
-
-
Large corporate
-
-
-
-
Other commercial
1
1
4
4
Total commercial
3
2
11
6
Consumer loans:
       
Residential mortgages
5
3
15
8
Credit cards
-
1
1
1
Auto finance(1)
-
-
-
2
Total consumer
5
4
16
11
Total interest income recognized on TDR Loans
$8
$6
$27
$17
 
 
 
(1)
In August 2010, we sold auto finance loans with an outstanding principal balance of $1.2 billion at date of sale, and other related assets to Santander Consumer USA ("SC USA").
 

 
 

 

Impaired commercial loans Impaired commercial loan statistics are summarized in the following table:
 
 
 
 
Amount with
Impairment
Reserves
Amount
without
Impairment
Reserves
 
Total Impaired
Commercial
Loans(1)(2)
 
 
Impairment
Reserve
 
(in millions)
At September 30, 2011
       
Construction and other real estate
$337
$370
$707
$103
Business banking and middle market enterprises
102
53
155
15
Large corporate
147
-
147
107
Other commercial
18
126
144
4
Total
$604
$549
$1,153
$229
At December 31, 2010
       
Construction and other real estate
$378
$377
$755
$84
Business banking and middle market enterprises
113
39
152
26
Large corporate
103
2
105
72
Other commercial
26
89
115
6
Total
$620
$507
$1,127
$188
 
 
 
(1)
Includes impaired commercial loans which are also considered TDR Loans as follows:
 
 
 
September 30,
2011
December 31,
2010
 
(in millions)
Construction and other real estate
$328
$397
Business banking and middle market enterprises
96
88
Large corporate
-
-
Other commercial
38
49
Total
$462
$534
 
 
(2)
The impaired commercial loan balances included in the table above reflect the current carrying amount of the loan and includes all basis adjustments, such as unamortized deferred fees and costs on originated loans and any premiums or discounts. The unpaid principal balance of impaired commercial loans included in the table above are as follows:
 
 
 
September 30,
2011
December 31,
2010
 
(in millions)
Construction and other real estate
$751
$782
Business banking and middle market enterprises
209
184
Large corporate
147
105
Other commercial
147
118
Total
$1,254
$1,189
 

 
 

 

The following table presents information about average impaired commercial loan balances and interest income recognized on the impaired commercial loans:
 
 
 
Three Months Ended
September 30,
Nine Months Ended
September 30,
 
2011
2010
2011
2010
 
(in millions)
Average balance of impaired commercial loans:
       
Construction and other real estate
$703
$732
$745
$721
Business banking and middle market enterprises
156
143
157
145
Large corporate
111
93
100
216
Other commercial
123
146
116
172
Total average balance of impaired commercial loans
$1,093
$1,114
$1,118
$1,254
Interest income recognized on impaired commercial loans:
       
Construction and other real estate
$1
$-
$5
$2
Business banking and middle market enterprises
1
1
3
4
Large corporate
-
-
-
6
Other commercial
1
1
2
2
Total interest income recognized on impaired commercial loans
$3
$2
$10
$14
 
Commercial Loan Credit Quality Indicators The following credit quality indicators are monitored for our commercial loan portfolio:
 
Criticized asset classifications These classifications are based on the risk rating standards of our primary regulator. Problem loans are assigned various criticized facility grades. We also assign obligor grades which are used under our allowance for credit losses methodology. Criticized assets for commercial loans are summarized in the following table:
 
 
 
Special Mention
Substandard
Doubtful
Total
 
(in millions)
At September 30, 2011
       
Construction and other real estate
$1,180
$1,131
$162
$2,473
Business banking and middle market enterprises
411
341
-
752
Large corporate
103
375
123
601
Other commercial
48
133
4
185
Total
$1,742
$1,980
$289
$4,011
At December 31, 2010
       
Construction and other real estate
$1,324
$1,230
$115
$2,669
Business banking and middle market enterprises
465
504
5
974
Large corporate
260
386
74
720
Other commercial
235
140
8
383
Total
$2,284
$2,260
$202
$4,746
 
Nonperforming The status of our commercial loan portfolio is summarized in the following table:
 
 
 
 
Performing
Loans
 
Nonaccrual
Loans
Accruing Loans
Contractually Past
Due 90 days or More
 
 
Total
 
(in millions)
At September 30, 2011
       
Commercial:
       
Construction and other real estate
$7,170
$593
$10
$7,773
Business banking and middle market enterprise
9,661
69
22
9,752
Large corporate
11,017
147
-
11,164
Other commercial
2,887
35
1
2,923
Total commercial - continuing operations
$30,735
$844
$33
$31,612
At December 31, 2010
       
Commercial:
       
Construction and other real estate
$7,492
$599
$137
$8,228
Business banking and middle market enterprise
7,782
116
47
7,945
Large corporate
10,671
74
-
10,745
Other commercial
3,071
12
2
3,085
Total commercial - continuing operations
$29,016
$801
$186
$30,003
 
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 September 30, 2011
     
Construction and other real estate
$2,745
$5,028
$7,773
Business banking and middle market enterprises
4,458
5,294
9,752
Large corporate
7,134
4,030
11,164
Other commercial
1,098
1,825
2,923
Total commercial
$15,435
$16,177
$31,612
At December 31, 2010
     
Construction and other real estate
$1,900
$6,328
$8,228
Business banking and middle market enterprises
2,866
5,079
7,945
Large corporate
6,808
3,937
10,745
Other commercial
787
2,298
3,085
Total commercial
$12,361
$17,642
$30,003
 
 
 
(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 monitored 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 for both continuing and discontinued operations:
 
 
 
September 30, 2011
December 31, 2010
 
Dollars of
Delinquency
Delinquency
Ratio
Dollars of
Delinquency
Delinquency
Ratio
 
(dollars are in millions)
Continuing operations:
       
Consumer:
       
Residential mortgage, excluding home equity mortgages(1)
$1,205
8.06%
$1,272
8.68%
Home equity mortgages
175
4.98
183
4.79
Total residential mortgages
1,380
7.47
1,455
7.88
Credit card receivables
25
2.08
34
2.70
Other consumer
33
3.36
32
2.86
Total consumer - continuing operations
1,438
6.96
1,521
7.30
Discontinued credit card and private label operations(2)
510
2.55
726
3.31
Total consumer
$1,948
4.79%
$2,247
5.25%
 
 
 
(1)
At September 30, 2011 and December 31, 2010, residential mortgage loan delinquency includes $720 million and $852 million, respectively, of loans that are carried at the lower of amortized cost or fair value less cost to sell.
(2)
At September 30, 2011, discontinued credit card and private label credit card operations include our GM and UP credit card loans and our private label credit card and closed-end loans which are included as held for sale and carried at the lower of amortized cost or fair value. At December 31, 2010, these discontinued credit card and private label credit card loans were carried at amortized cost and as such, are not directly comparable to the current period balances.

 
 

 

Nonperforming The status of our consumer loan portfolio for both continuing and discontinued operations is summarized in the following table:
 
 
 
 
Performing
Loans
 
Nonaccrual
Loans
Accruing Loans
Contractually Past
Due 90 days or More
 
 
Total
 
(in millions)
At September 30, 2011
       
Continuing operations:
       
Consumer:
       
Residential mortgage, excluding home equity mortgages
$13,068
$774
$-
$13,842
Home equity mortgages
2,526
92
-
2,618
Total residential mortgages
15,594
866
-
16,460
Credit card receivables
771
-
17
788
Other consumer
708
8
24
740
Total consumer - continuing operations
17,073
874
41
17,988
Discontinued credit card and private label operations(1)
19,393
-
345