Loans

Loans consisted of the following:



At December 31,	2015		2014
	(in millions)
Commercial loans:
Construction and other real estate	$	10,000	$	10,300
Business and corporate banking	19,116		17,819
Global banking⁽¹⁾	29,969		26,387
Other commercial	3,368		3,581
Total commercial	62,453		58,087
Consumer loans:
Residential mortgages	17,758		16,661
Home equity mortgages	1,600		1,784
Credit cards	699		720
Other consumer	407		489
Total consumer	20,464		19,654
Total loans	$	82,917	$	77,741

⁽¹⁾

Represents large multinational firms including globally focused U.S. corporate and financial institutions and U.S. dollar lending to multinational banking customers managed by HSBC on a global basis. Also includes loans to HSBC affiliates which totaled $4,815 million and $4,821 million at December 31, 2015 and 2014, respectively. See Note 21, "Related Party Transactions," for additional information regarding loans to HSBC affiliates.

We have loans outstanding to certain executive officers and directors. The loans were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons and do not involve more than normal risk of collectibility. The aggregate amount of such loans did not exceed 5 percent of shareholders’ equity at either December 31, 2015 or 2014.

Net deferred origination fees totaled $62 million and $34 million at December 31, 2015 and 2014, respectively. At December 31, 2015 and 2014, we had a net unamortized premium on our loans of $16 million and $10 million, respectively.

Aging Analysis of Past Due Loans The following table summarizes the past due status of our loans, excluding loans held for sale, at December 31, 2015 and 2014. The aging of past due amounts is determined based on the contractual delinquency status of payments under the loan. An account is generally considered to be contractually delinquent when payments have not been made in accordance with the loan terms. Delinquency status is affected by customer account management policies and practices such as re-age, which results in the re-setting of the contractual delinquency status to current.



	Past Due				Total Past Due 30 Days or More
At December 31, 2015	30 - 89 Days		90+ Days		Total Past Due 30 Days or More		Current⁽¹⁾		Total Loans
	(in millions)
Commercial loans:
Construction and other real estate	$	31	$	33	$	64	$	9,936	$	10,000
Business and corporate banking	36		25		61		19,055		19,116
Global banking	—		—		—		29,969		29,969
Other commercial	—		6		6		3,362		3,368
Total commercial	67		64		131		62,322		62,453
Consumer loans:
Residential mortgages	397		781		1,178		16,580		17,758
Home equity mortgages	15		50		65		1,535		1,600
Credit cards	10		9		19		680		699
Other consumer	7		7		14		393		407
Total consumer	429		847		1,276		19,188		20,464
Total loans	$	496	$	911	$	1,407	$	81,510	$	82,917



	Past Due				Total Past Due 30 Days or More
At December 31, 2014	30 - 89 Days		90+ Days		Total Past Due 30 Days or More		Current⁽¹⁾		Total Loans
	(in millions)
Commercial loans:
Construction and other real estate	$	25	$	22	$	47	$	10,253	$	10,300
Business and corporate banking	32		9		41		17,778		17,819
Global banking	—		—		—		26,387		26,387
Other commercial	15		6		21		3,560		3,581
Total commercial	72		37		109		57,978		58,087
Consumer loans:
Residential mortgages	390		931		1,321		15,340		16,661
Home equity mortgages	21		56		77		1,707		1,784
Credit cards	11		10		21		699		720
Other consumer	9		9		18		471		489
Total consumer	431		1,006		1,437		18,217		19,654
Total loans	$	503	$	1,043	$	1,546	$	76,195	$	77,741


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

Contractual Maturities Contractual maturities of loans were as follows:



	At December 31,
	2016		2017		2018		2019		2020		Thereafter		Total
	(in millions)
Commercial loans:
Construction and other real estate	$	3,892	$	1,022	$	1,436	$	1,685	$	1,090	$	875	$	10,000
Business and corporate banking	7,441		1,954		2,745		3,220		2,084		1,672		19,116
Global banking	11,665		3,064		4,303		5,048		3,267		2,622		29,969
Other commercial	1,311		344		484		567		367		295		3,368
Consumer loans:
Residential mortgages	1,349		421		426		478		441		14,643		17,758
Home equity mortgages⁽¹⁾	520		372		262		160		99		187		1,600
Credit cards⁽²⁾	—		699		—		—		—		—		699
Other consumer	186		218		2		1		—		—		407
Total	$	26,364	$	8,094	$	9,658	$	11,159	$	7,348	$	20,294	$	82,917


⁽¹⁾	Home equity mortgage maturities reflect estimates based on historical payment patterns.


⁽²⁾	As credit card receivables do not have stated maturities, the table reflects estimates based on historical payment patterns.

As a substantial portion of consumer loans, based on our experience, will be renewed or repaid prior to contractual maturity, the above maturity schedule should not be regarded as a forecast of future cash collections. The following table summarizes contractual maturities of loans due after one year by repricing characteristic:



	At December 31, 2015
	Over 1 But Within 5 Years		Over 5 Years
	(in millions)
Receivables at predetermined interest rates	$	4,606	$	4,750
Receivables at floating or adjustable rates	31,653		15,544
Total	$	36,259	$	20,294

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



At December 31,	2015		2014
	(in millions)
Nonaccrual loans:
Commercial:
Construction and other real estate	$	53	$	65
Business and corporate banking	167		74
Global banking	44		—
Other commercial	1		—
Commercial nonaccrual loans held for sale	26		43
Total commercial	291		182
Consumer:
Residential mortgages^(1)(2)(3)	814		847
Home equity mortgages⁽¹⁾⁽²⁾	71		68
Consumer nonaccrual loans held for sale	3		4
Total consumer	888		919
Total nonaccruing loans	1,179		1,101
Accruing loans contractually past due 90 days or more:
Commercial:
Business and corporate banking	1		1
Total commercial	1		1
Consumer:
Credit cards	9		10
Other consumer	7		10
Total consumer	16		20
Total accruing loans contractually past due 90 days or more	17		21
Total nonperforming loans	$	1,196	$	1,122


⁽¹⁾	At December 31, 2015 and 2014, nonaccrual consumer mortgage loans include $768 million and $817 million, respectively, of loans that are carried at the lower of amortized cost or fair value of the collateral less cost to sell.


⁽²⁾	Nonaccrual consumer mortgage loans include all receivables 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 ("GNMA"). Repayment of these loans are predominantly insured by the Federal Housing Administration and as such, these loans have different risk characteristics from the rest of our consumer loan portfolio.

The following table provides additional information on our nonaccrual loans:



Year Ended December 31,	2015		2014		2013
	(in millions)
Interest income that would have been recorded if the nonaccrual loans had been current in accordance with contractual terms during the period	$	85	$	96	$	107
Interest income that was recorded on nonaccrual loans and included in interest income during the period	22		23		23

Impaired Loans A loan is considered to be impaired when it is deemed probable that not all principal and interest amounts due according to the contractual terms of the loan agreement will be collected. Probable losses from impaired loans are quantified and recorded as a component of the overall allowance for credit losses. Commercial and consumer loans for which we have modified the loan terms as part of a troubled debt restructuring are considered to be impaired loans. Additionally, commercial loans in nonaccrual status, or that have been partially charged-off or assigned a specific allowance for credit losses are also considered impaired loans.

Troubled debt restructurings TDR Loans represent loans for which the original contractual terms have been modified to provide for terms that are less than what we would be willing to accept for new loans with comparable risk because of deterioration in the borrower’s financial condition.

Modifications for consumer or commercial loans may include changes to one or more terms of the loan, including, but not limited to, a change in interest rate, extension of the amortization period, reduction in payment amount and partial forgiveness or deferment of principal, accrued interest or other loan covenants. A substantial amount of our modifications involve interest rate reductions which lower the amount of interest income we are contractually entitled to receive in future periods. Through lowering the interest rate and other loan term changes, we believe we are able to increase the amount of cash flow that will ultimately be collected from the loan, given the borrower’s financial condition. TDR Loans are reserved for either based on the present value of expected future cash flows discounted at the loans’ original effective interest rates which generally results in a higher reserve requirement for these loans or in the case of certain secured loans, the estimated fair value of the underlying collateral. Once a consumer loan is classified as a TDR Loan, it continues to be reported as such until it is paid off or charged-off. For commercial loans, if subsequent performance is in accordance with the new terms and such terms reflect current market rates at the time of restructure, they will no longer be reported as a TDR Loan beginning in the year after restructuring. During the years ended 2015, 2014 and 2013 there were no commercial loans that met this criteria and were removed from TDR Loan classification.

The following table presents information about loans which were modified during 2015, 2014 and 2013 and as a result of this action became classified as TDR Loans:



Year Ended December 31,	2015		2014		2013
	(in millions)
Commercial loans:
Construction and other real estate	$	4	$	5	$	59
Business and corporate banking	216		16		4
Global banking	13		—		51
Other commercial	—		10		—
Total commercial	233		31		114
Consumer loans:
Residential mortgages	168		157		225
Home equity mortgages	4		4		5
Credit cards	4		5		2
Total consumer	176		166		232
Total	$	409	$	197	$	346

The weighted-average contractual rate reduction for consumer loans which became classified as TDR Loans during 2015, 2014 and 2013 was 1.74 percent, 1.64 percent and 1.94 percent, respectively. The weighted-average contractual rate reduction for commercial loans was not significant in either the number of loans or rate.

The following table presents information about our TDR Loans and the related allowance for credit losses for TDR Loans:



	December 31, 2015				December 31, 2014
	Carrying Value		Unpaid Principal Balance		Carrying Value		Unpaid Principal Balance
	(in millions)
TDR Loans⁽¹⁾⁽²⁾:
Commercial loans:
Construction and other real estate	$	94	$	106	$	186	$	201
Business and corporate banking	227		240		24		51
Global banking	44		44		—		—
Total commercial	365		390		210		252
Consumer loans:
Residential mortgages⁽³⁾	1,060		1,233		972		1,139
Home equity mortgages⁽³⁾	23		50		20		44
Credit cards	5		5		6		6
Total consumer	1,088		1,288		998		1,189
Total TDR Loans⁽⁴⁾	$	1,453	$	1,678	$	1,208	$	1,441
Allowance for credit losses for TDR Loans⁽⁵⁾:
Commercial loans:
Construction and other real estate	$	—			$	4
Business and corporate banking	24				5
Global banking	—				—
Total commercial	24				9
Consumer loans:
Residential mortgages	33				43
Home equity mortgages	1				2
Credit cards	1				2
Total consumer	35				47
Total allowance for credit losses for TDR Loans	$	59			$	56


⁽¹⁾	TDR Loans are considered to be impaired loans. For consumer loans, all such loans are considered impaired loans regardless of accrual status. For commercial loans, impaired loans include other loans in addition to TDR Loans which totaled $88 million and $85 million at December 31, 2015 and 2014, respectively.


⁽²⁾	The carrying value of TDR Loans includes basis adjustments on the loans, such as unearned income, unamortized deferred fees and costs on originated loans, partial charge-offs and premiums or discounts on purchased loans.


⁽³⁾	At December 31, 2015 and 2014, the carrying value reflected above includes $881 million and $763 million, respectively, of loans that are recorded at the lower of amortized cost or fair value of the collateral less cost to sell.


⁽⁴⁾	At December 31, 2015 and 2014, the carrying value reflected above includes $676 million and $485 million, respectively, of loans which are classified as nonaccrual.


⁽⁵⁾	Included in the allowance for credit losses.

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



Year Ended December 31,	2015		2014		2013
	(in millions)
Average balance of TDR Loans:
Commercial loans:
Construction and other real estate	$	136	$	224	$	349
Business and corporate banking	102		24		44
Global banking	18		10		20
Other commercial	—		7		28
Total commercial	256		265		441
Consumer loans:
Residential mortgages	1,017		942		902
Home equity mortgages	21		19		20
Credit cards	6		8		11
Total consumer	1,044		969		933
Total average balance of TDR Loans	$	1,300	$	1,234	$	1,374
Interest income recognized on TDR Loans:
Commercial loans:
Construction and other real estate	$	4	$	10	$	12
Business and corporate banking	3		1		—
Other commercial	—		—		3
Total commercial	7		11		15
Consumer loans:
Residential mortgages	37		36		32
Home equity mortgages	1		1		1
Credit cards	—		—		1
Total consumer	38		37		34
Total interest income recognized on TDR Loans	$	45	$	48	$	49

The following table presents loans which were classified as TDR Loans during the previous 12 months which for commercial loans became 90 days or greater contractually delinquent or for consumer loans became 60 days or greater contractually delinquent during the years ended December 31, 2015 and 2014:



Year Ended December 31,	2015		2014
	(in millions)
Commercial loans:
Construction and other real estate	$	2	$	12
Business and corporate banking	10		2
Total commercial	12		14
Consumer loans:
Residential mortgages	36		34
Home equity mortgages	1		—
Total consumer	37		34
Total	$	49	$	48

Impaired commercial loans The following table presents information about impaired commercial loans and the related impairment reserve for impaired commercial loans:



	Amount with Impairment Reserves⁽¹⁾		Amount without Impairment Reserves⁽¹⁾		Total Impaired Commercial Loans⁽¹⁾⁽²⁾		Impairment Reserve		Unpaid Principal Balance
	(in millions)
At December 31, 2015
Construction and other real estate	$	2	$	108	$	110	$	1	$	125
Business and corporate banking	168		124		292		52		342
Global banking	—		44		44		—		44
Other commercial	1		6		7		1		8
Total commercial	$	171	$	282	$	453	$	54	$	519
At December 31, 2014
Construction and other real estate	$	18	$	179	$	197	$	5	$	224
Business and corporate banking	72		18		90		24		122
Global banking	—		—		—		—		—
Other commercial	2		6		8		1		8
Total commercial	$	92	$	203	$	295	$	30	$	354


⁽¹⁾	Reflects the carrying value of impaired commercial loans and includes basis adjustments on the loans, such as partial charge-offs, unamortized deferred fees and costs on originated loans and any premiums or discounts on purchased loans.


⁽²⁾	Includes impaired commercial loans that are also considered TDR Loans which totaled $365 million and $210 million at December 31, 2015 and 2014, respectively.

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



Year Ended December 31,	2015		2014		2013
	(in millions)
Average balance of impaired commercial loans:
Construction and other real estate	$	151	$	241	$	422
Business and corporate banking	151		48		63
Global banking	18		13		37
Other commercial	7		18		64
Total average balance of impaired commercial loans	$	327	$	320	$	586
Interest income recognized on impaired commercial loans:
Construction and other real estate	$	4	$	10	$	13
Business and corporate banking	4		2		—
Other commercial	—		—		5
Total interest income recognized on impaired commercial loans	$	8	$	12	$	18

Commercial Loan Credit Quality Indicators The following credit quality indicators are monitored for our commercial loan portfolio:

Criticized loans Criticized loan classifications presented in the table below are determined by the assignment of various criticized facility grades based on the risk rating standards of our regulator. These criticized facility grades, however, are not used for determining our allowance for credit losses. Under our methodology for determining the allowance for credit losses, loans are assigned obligor grades which reflect our internal assessment of the credit risk of the loans. While the regulatory criticized facility grades are directionally aligned with our internal obligor grades, each changes based on its respective underlying criteria. As a result, changes in regulatory classifications will not necessarily result in corresponding changes to our allowance for credit losses.

The following table summarizes criticized commercial loans:



	Special Mention		Substandard		Doubtful		Total
	(in millions)
At December 31, 2015
Construction and other real estate	$	239	$	187	$	—	$	426
Business and corporate banking	941		690		52		1,683
Global banking	1,069		2,300		12		3,381
Other commercial	1		37		1		39
Total commercial	$	2,250	$	3,214	$	65	$	5,529
At December 31, 2014
Construction and other real estate	$	310	$	230	$	7	$	547
Business and corporate banking	1,001		238		22		1,261
Global banking	1,770		202		—		1,972
Other commercial	1		6		—		7
Total commercial	$	3,082	$	676	$	29	$	3,787

Nonperforming The following table summarizes the status of our commercial loan portfolio, excluding loans held for sale:



	Performing Loans		Nonaccrual Loans		Accruing Loans Contractually Past Due 90 days or More		Total
	(in millions)
At December 31, 2015
Construction and other real estate	$	9,947	$	53	$	—	$	10,000
Business and corporate banking	18,948		167		1		19,116
Global banking	29,925		44		—		29,969
Other commercial	3,367		1		—		3,368
Total commercial	$	62,187	$	265	$	1	$	62,453
At December 31, 2014
Construction and other real estate	$	10,235	$	65	$	—	$	10,300
Business and corporate banking	17,744		74		1		17,819
Global banking	26,387		—		—		26,387
Other commercial	3,581		—		—		3,581
Total commercial	$	57,947	$	139	$	1	$	58,087

Credit risk profile The following table shows the credit risk profile of our commercial loan portfolio:



	Investment Grade⁽¹⁾		Non-Investment Grade		Total
	(in millions)
At December 31, 2015
Construction and other real estate	$	8,487	$	1,513	$	10,000
Business and corporate banking	10,373		8,743		19,116
Global banking	23,111		6,858		29,969
Other commercial	1,883		1,485		3,368
Total commercial	$	43,854	$	18,599	$	62,453
At December 31, 2014
Construction and other real estate	$	7,820	$	2,480	$	10,300
Business and corporate banking	8,835		8,984		17,819
Global banking	23,400		2,987		26,387
Other commercial	1,873		1,708		3,581
Total commercial	$	41,928	$	16,159	$	58,087


⁽¹⁾	Investment grade includes commercial loans with credit ratings of at least BBB- or above or the equivalent based on our internal credit rating system.

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

Delinquency The following table summarizes dollars of two-months-and-over contractual delinquency and as a percent of total loans and loans held for sale ("delinquency ratio") for our consumer loan portfolio:



	December 31, 2015				December 31, 2014
	Delinquent Loans		Delinquency Ratio		Delinquent Loans		Delinquency Ratio
	(dollars are in millions)
Residential mortgages⁽¹⁾⁽²⁾	$	858	4.83	%	$	1,013	6.07	%
Home equity mortgages⁽¹⁾⁽²⁾	56		3.50		62		3.48
Credit cards	13		1.86		14		1.94
Other consumer	11		2.26		14		2.52
Total consumer	$	938	4.56	%	$	1,103	5.59	%


⁽¹⁾	At December 31, 2015 and 2014, consumer mortgage loan delinquency includes $793 million and $936 million, respectively, of loans that are carried at the lower of amortized cost or fair value of the collateral less cost to sell.


⁽²⁾	At December 31, 2015 and 2014, consumer mortgage loans include $567 million and $658 million, respectively, of loans that were in the process of foreclosure.

Nonperforming The following table summarizes the status of our consumer loan portfolio, excluding loans held for sale:



	Performing Loans		Nonaccrual Loans		Accruing Loans Contractually Past Due 90 days or More		Total
	(in millions)
At December 31, 2015
Residential mortgages	$	16,944	$	814	$	—	$	17,758
Home equity mortgages	1,529		71		—		1,600
Credit cards	690		—		9		699
Other consumer	400		—		7		407
Total consumer	$	19,563	$	885	$	16	$	20,464
At December 31, 2014
Residential mortgages	$	15,814	$	847	$	—	$	16,661
Home equity mortgages	1,716		68		—		1,784
Credit cards	710		—		10		720
Other consumer	479		—		10		489
Total consumer	$	18,719	$	915	$	20	$	19,654

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

Concentration of Credit Risk At December 31, 2015 and 2014, our loan portfolio included interest-only residential mortgage loans totaling $3,645 million and $3,531 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.